devised by Congress); Elsesser, 802 F. Supp. at 1290 (state law claims of vicarious liability against HMO not preempted); Kohn v. Delaware Valley HMO, Inc., 1991 U.S. Dist. LEXIS 18694, *13, 1991 WL 275609 at * 2 (E.D. Pa. Dec. 19, 1991) (same), recons. denied, 1992 U.S. Dist LEXIS 1092, 1992 WL 22241 (E.D. Pa. Feb. 5, 1992); Independence HMO, Inc. v. Smith, 733 F. Supp. 983, 988 (E.D. Pa. 1990) (same).
In Dukes, the plaintiffs brought a negligence action against USHC claiming that USHC was liable for the negligent acts of the HMO's participating doctors and hospitals. The court held that claims against an HMO on a theory of vicarious liability were preempted by ERISA. The court proffered two reasons to demonstrate that claims based on vicarious liability "relate to" an employer provided benefit plan. First, the court noted that a successful claim would have to establish that the doctors and hospitals were acting as agents for the HMO and, therefore, any agency claim would relate to a benefit plan because it would necessarily require an analysis of what the benefit plan provided. Second, the court found that a medical malpractice claim against an HMO, whether couched in direct or vicarious liability terms, would relate to a benefit plan because the analysis would require an examination of whether the HMO's agents measured up to the benefit plan's promised quality. See Dukes, 848 F. Supp. at 42, 1994 WL 86338 at * 2. I find the reasoning in Dukes to be persuasive.
Plaintiffs bring their claims against USHC on an agency theory, known in Pennsylvania as an "ostensible agency claim."
In Pennsylvania, to establish liability under such a theory, one must demonstrate, first, that there is a likelihood that patients will look to the institution rather than the individual physician for care, and second, that the HMO holds out the physician as its employee.
Boyd, 547 A.2d 1229, 1232. Holding out occurs "'when the [HMO] acts or omits to act in some way which leads the patient to a reasonable belief he is being treated by the [HMO] or one of its employees.'" Id. (quoting Capan v. Divine Providence Hospital, 287 Pa. Super. 364, 430 A.2d 647, 649 (1980) (emphasis in original)).
As the court noted in Boyd, a determination of whether participating physicians are the ostensible agents of an HMO requires an initial examination of "the arrangement between HMO and participating doctors and their relationship with HMO members." Id. In other words, as the court did in Boyd, to determine if an agency relationship exists, a court must inspect HMO brochures explaining the features of the program, the HMO directory of participating primary physicians, and the HMO contracts between the HMO, members and participating physicians. See id. It is apparent that the analysis of whether an HMO holds its physicians out as its employees relates to, has a connection with, and certainly requires reference to the employee benefit plan. Accordingly, causes of action that require such a determination, like those based on an ostensible agency theory, are preempted by ERISA. See Ricci, 840 F. Supp. at 317.
In addition, a vicarious liability claim against an HMO is necessarily related to a benefit plan because the requisite quantity and quality of services that are required of the doctors and the plan will be determined at least partly by the terms of the health benefit plan. When an individual enrolls in an HMO, he/she is "assured of medical services of a given extent and quality. A malpractice claim asserts [that] the services provided did not measure up to the benefit plan's promised quality. The question is one of relating plan performance to plan-promise, and is therefore pre-empted by ERISA."
Dukes, 848 F. Supp. at 41, 1994 WL 86338 at * 2 (emphasis added); see Rollo v. Maxicare of Louisiana, Inc., 695 F. Supp. 245, 248 (E.D. La. 1988) (ERISA preempts the plaintiff's claims since they all "have one central feature: the circumstances of [the plaintiff's] medical treatment under his employer's medical services plan for employees."); Ricci, 840 F. Supp. at 317 (same); Altieri, 753 F. Supp. at 64 (same).
My conclusion that Congress intended to preempt vicarious liability claims against HMO's is buttressed by the anomalous situation that would result where the liability of an HMO would be inversely proportional to the extent of the HMO's involvement in the provision of services. See Ricci, 840 F. Supp. at 318. HMO's that are directly negligent would be shielded from state law, while those that did not act improperly would be subject to liability because of the negligent conduct of their participating doctors. Because I do not believe Congress intended such a result, I conclude for this additional reason that vicarious liability claims against HMO's are preempted by ERISA.
In reaching this decision, I am aware that the result will be different than that reached by some other courts in this district. See Stratton, 1992 U.S. Dist. LEXIS 18050 at*8; Elsesser, 802 F. Supp. at 1290; Kohn, 1991 U.S. Dist. LEXIS 18694, *9, 1991 WL 275609 at * 2. These cases rely, at least in part, on the decision in Independence HMO, Inc., 733 F. Supp. at 988. In that case, the court held that a patient's medical malpractice action against an HMO brought under an "ostensible agency" theory was not preempted by ERISA. The court reasoned that state tort actions that impact upon ERISA in an indirect manner that are too tenuous or too remote are not preempted by ERISA. The court found that the suit brought by the patient had "nothing to do with any denial of her rights under the plan . . . 'The Congressional purpose underlying the breadth of ERISA's preemption provision--to secure uniform federal laws regulating employee benefit plans--is not advanced by preemption of state common law claims which are not premised on a violation of duties imposed by ERISA.'" Independence HMO, Inc., 733 F. Supp. at 988.
I do not agree with the reasoning expressed in Independence HMO, Inc. First, for the reasons stated earlier, I find that state law claims against an HMO brought on a theory of vicarious liability do affect the regulatory scheme devised by Congress. Second, no Supreme Court case interpreting the broad preemption clause provided in ERISA has limited that provision only to common law claims premised on the violation of duties imposed by ERISA. To the contrary, the Supreme Court has established a much lower standard for ERISA preemption, requiring only that state laws have a connection with or reference to a benefit plan. As a result, ERISA preemption does not only apply to a state law claim based on the express provisions of a benefits plan, it applies to state laws that merely affect the plan in a substantial way.
Pilot Life Ins. Co., 481 U.S. at 46-47; Metropolitan Life, 471 U.S. at 739.
Here, at a minimum, a state law that holds an HMO responsible for the acts of its participating doctors would affect the health benefit plan by requiring the health organization to carry additional insurance coverage to protect against claims brought against its doctors. This, ultimately, would result in an increase of costs to the end user. See Ricci, 840 F. Supp. at 318. Moreover, HMO's and doctors would inevitably be forced to redefine the relationship between all parties, either to enable the HMO to avoid liability or to compel it to come under the umbrella of responsibility. In any case, it is not the role of the courts to force such action in the face of such an extensive congressional scheme of rules and regulations as provided by ERISA. If Congress desires to alter the balance it has reached, it has the ability and resources to do so.
It is important to note that HMO's often perform functions akin to those of insurers. See Butler, 1994 U.S. Dist. LEXIS 5647, *13, 1994 WL 158825 at * 5. In fact, HMO's in Pennsylvania are subject to certain Pennsylvania insurance laws. See Pa. Stat. Ann. tit. 40, § 1560(b). In this case, defendant argues that it has not acted as a health care provider, rather it finances the health care delivered to the members for a fixed, prepaid fee. See defendant's motion at 4; see also Pa. Stat. Ann. tit. 40, § 1553 (defining "direct provider" as "an individual who is a direct provider of health care services under a benefit plan of a health maintenance organization or an individual whose primary current activity is the administration of health facilities in which such care is provided); 31 Pa. Code § 301.2 (defining "provider" as "[a] physician, hospital, or other person licensed and practicing within the scope of the license or otherwise authorized in this Commonwealth to furnish health care services."); Elsesser, 802 F. Supp. at 1290 ("Although an HMO is not usually liable for the negligence of the independent contractor physicians and health care providers that services the HMO members, an HMO may nevertheless be held liable if the health care provider is the 'ostensible agent' of the HMO."). It is not alleged and there is no suggestion in this record that USHC operates any facility, clinic, hospital or that it is licensed to do so. Accordingly, I conclude from this record that USHC is not a "direct provider" or a "provider" as defined under Pennsylvania law.
Plaintiffs do not dispute that their claims are not based upon the medical treatment actually provided by USHC, stating in their opposition papers that their claims are "premised on the ostensible agency theory by which USHC may be held vicariously liable for the negligence of the treating obstetrician." Plaintiffs' opp. at 2; see plaintiffs' opp. at 7 ("Plaintiffs are seeking to hold USHC vicariously liable for the negligence of the treating obstetrician under the ostensible agency theory."). Moreover, plaintiffs' reliance on cases that involve HMO's that do not perform direct medical services and plaintiffs' suggestion that those cases are similar to the instant case also confirm that plaintiffs' claims sound in vicarious liability and not in liability as a direct provider. See plaintiffs' opp. at 6. See also Dukes, 848 F. Supp. at 40, 1994 WL 86338 at * 1, * 3 (not treating United States Health Care Systems of Pennsylvania, Inc. as a direct provider of health care services); Elsesser, 802 F. Supp. at 1290 (describing United States Health Care Systems of Pennsylvania, Inc. as an HMO that hires independent contractors to serve as direct providers of health services); Kohn v. Delaware Valley HMO, Inc., 1991 U.S. Dist. LEXIS 18694, *5, 1991 WL 275609 at * 2 (E.D. Pa. Dec. 20, 1991) (U.S. Healthcare, Inc. was not the direct health care provider); McCarty v. U.S. Healthcare, 1990 U.S. Dist. LEXIS 9930, 1990 WL 107605 (E.D. Pa. July 26, 1990) (U.S. Health Care, The Health Maintenance Organization of New Jersey, Inc. treated in a manner similar to insurance company rather than direct provider).
Finally, in all five counts of the complaint, plaintiffs allege claims based on the negligence of USHC. See plaintiffs' opp. at 7 ("plaintiffs' complaint alleges only negligence claims against USHC." (emphasis in original)); see also Dukes, 848 F. Supp.,*41, 1994 WL 86338 at * 1 (plaintiff's survival and wrongful death actions are grounded on theories of direct and vicarious liability and, therefore, are preempted); Nealy, 844 F. Supp. at 973. Because I have concluded that claims of negligence against an HMO for its own negligence and for the negligence of its participating doctors are preempted by ERISA, and because plaintiffs have not alleged any federal claims under ERISA, USHC's motion to dismiss plaintiffs' complaint shall be granted.
Having concluded that this Court has jurisdiciton to consider whether plaintiffs' state law claims of medical malpractice are preempted, and having concluded that plaintiffs' state law claims are preempted by ERISA, and having found that plaintiffs have brought no federal claims under ERISA, and for the foregoing reasons, the motion of plaintiffs Linda and Ronald Visconti, individually, and as Administrators of the Estate of Serena Mary Visconti, Deceased, to remand shall be denied and the motion of defendant U.S. Health Care a/k/a The Health Maintenance Organization of Pennsylvania/NJ to dismiss the complaint shall be granted.
An appropriate Order follows.
[EDITOR'S NOTE: The following court-provided text does not appear at this cite in 857 F. Supp. 1097.]
AND NOW, this 8th day of June 1994, upon consideration of the motions of plaintiffs Linda and Ronald Visconti, individually, and as Administrators of the Estate of Serena Mary Visconti, Deceased, to remand pursuant to 28 U.S.C. § 1447(c)
(Document No. 4) and defendant U.S. Health Care a/k/a The Health Maintenance Organization of Pennsylvania/NJ to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6) (Document No. 3), and the responses thereto, and for the reasons stated in the attached memorandum, it is hereby ORDERED that the motion of plaintiffs to remand is DENIED, and the motion of defendant to dismiss the complaint is GRANTED. Accordingly, the complaint is DISMISSED with prejudice.
This is a final disposition of all claims.
LOWELL A. REED, JR., J.