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HMO and Managed Care Law

Suing physicians for negligent misrepresentation of MCO conflicts of interest - Shea v. Esensten, 208 F.3d 712 (8th Cir. (Minn.) 2000)

This is the second appeal in the Shea saga. In Shea (I) - Shea v. Esensten, 107 F.3d 625 (8th Cir.) (Shea I), cert. denied, 522 U.S. 914 (1997) - the 8th circuit found that physicians and health plans have a duty to disclose information about physician incentives that a patient would consider as material in evaluating the objectivity of the physician's decisionmaking. (Shea (I) was reviewed in the June 1997 issue of LMP.) The case was then remanded to the state court for trial. Plaintiff then moved to amend her complaint to include Fairview, the corporate owner of the clinic where the treating physician worked. Fairview then removed the case back to the federal district court and moved for dismissal because of the running of the statute of limitations. The physician and MCO defendants moved for partial dismissal of the plaintiff's claims as preempted by ERISA, which the court granted. The plaintiff is appealing the dismissal of her claims based on misrepresentation against the physicians. After the partial dismissal, the federal district court remanded the plaintiff's remaining negligence claim against the physicians to state court. (In the subsequent state court trial, the judge excluded all evidence of financial incentived and past disciplinary actions against the physician, and the jury found against the plaintiff - Shea v. Esensten, 622 N.W.2d 130 (Minn.App. 2001))

Plaintiff's medical negligence was tried while this appeal was pending. The jury found no negligence treatment and the defendants urge the court that this mandates the dismissal of the misrepresentation claims because these were predicated on the patient being negligently treated and because they are barred by ERISA. Plaintiff claims the defendant physician, through his silence about the incentive contract with the MCO, represented that he did not have any conflicts of interest in treating plaintiff's decedent. This was a misrepresentation because he did have substantial conflicts of interest in ordering a specialty referral. Defendants' argue that since this contract concerned a plan of insurance covered by ERISA, that plaintiff's claims should be barred. The appeals court disagreed, finding that plaintiff's claim did not seek to modify or affect the plan of insurance, only to assure that physicians do not lie about the terms of their relationship with patients: "The Minnesota courts have held that 'a physician's advice about treatment options should be free from self-serving financial considerations, [and] any cause of action based on that conduct necessarily flows from the therapeutic relationship' or 'the process of rendering medical treatment.' D.A.B., 570 N.W.2d at 172. Mrs. Shea's claim stems from 'the process of rendering medical treatment,' id., and therefore, it would not affect the structure, administration or economics of the ERISA plan." The court further held that defendant's physician potential misrepresentation was separate from any accompanying medical malpractice and thus that plaintiff could proceed with her claim for possible damages from the misrepresentation. While the court is silent on these damages, plaintiff might be able to argue that even through defendant's treatment was within the standard of care for non-specialists treating cardiac disease, that plaintiff's decedent was denied the chance for better treatment from another physician.

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