Repercussions still shake insurers after court ruling; provision of experimental care remains controversial issue.

Provision of experimental care remains controversial issue

Repercussions continue to rock the health insurance industry after a Riverside County Superior Court jury a few weeks ago slapped Woodland Hills-based Health Net with what is believed to be the largest U.S. judgment ever handed down for denial of a medical procedure.

The case involved Nelene Fox, a 39-year-old Temecula housewife, who died last April of breast cancer after Health Net refused to fund an "autologous" bone marrow transplant recommended by Fox's physician. An autologous transplant is one in which a patient's bone marrow is removed, the patient is treating with intense chemotherapy, then the bone marrow is reinserted into the patient. In contrast, "allogenic" transplants involve inserting a donor's bone marrow into the patient.

Insurance coverage for Fox's transplant was disallowed by Health Net because the autologous transplant was deemed to be an "experimental" procedure.

Local health care observers said the sheer size of the Fox award, $89 million in compensatory and punitive damages, could have far-reaching ramifications on the way business is conducted by insurance companies and HMOs in California and elsewhere.

Alan Bloom, vice president and general counsel for Los Angeles-based Maxicare Health Plans Inc., said that the 300,000-member HMO has reviewed its procedures in the wake of the Fox decision and added, "Everyone did."

Various medical experts testified on behalf of both Health Net and the Fox family, arguing for and against the usefulness of bone marrow transplants as a cancer-fighting technique. Fox eventually did undergo the procedure, to no avail, after she and her family had raised $210,000 in charitable contributions. Bloom said the Fox case "foreshadows what we're going to see nationwide, because we're talking about the scope of health insurance, and the possibility of people suing the government for better coverage."

Mark Kiepler, Nelene Fox's brother and the attorney who won the unanimous jury verdict against Health Net, said the decision has caused at least a half dozen insurance companies and HMOs to re-examine their medical review procedures, both on an overall basis and specifically regarding treatments authorized for breast cancer.

Kiepler said that six individuals -- including the legal counsels and executives of two large, national insurance companies and four HMOs -- called to inform him after the jury verdict to say they had reviewed their procedures "within 24 hours of the verdict," because they "don't want to get caught like Health Net." Kiepler declined to name the companies. But the impact of the verdict helped 25 of Kiepler's clients "get the coverage they believed they deserved," he said, calling these coverage approvals "the legacy of Nelene Fox."

In addition to bone marrow transplants, Kiepler's other cases involved "experimental" treatments such as lung transplants, which typically cost between $100,000 and $300,000, and kidney transplants, which usually run $45,000 to 60,000.

Kiepler said "experimental" is a euphemism used by HMOs to refer to treatments deemed too expensive.

He further asserted that the structure of HMOs as brokers of medical services puts "profits over patients." He said profit-sharing "risk pools" encourage primary care physicians to deny patient referrals for expensive medical treatments to increase their net profits, a charge HMO officials vigorously denied.

"It's a very emotional situation when a person wants to live and her family wants her to live. In situations like these, people will do virtually anything to keep a loved one alive. This was a very difficult and painful case," said Kathleen Barco, a spokeswoman for Kaiser Permanente, California's largest HMO. "When it's a new procedure, we don't do it lightly. These are very difficult 'gray areas' for health care organizations."

Dr. William Weil, vice president and medical director for Maxicare added, "Obviously, the decision made every HMO in America take a good look at their quality assurance procedures."

Weil said he believes the jury rendered its gargantuan verdict because Health Net was inconsistent -- approving the procedure for some of its members, one a former Health Net employee, and not for others, such as Fox.

Like many HMOs, Maxicare's procedures rely on the recommendations of a physician, with grievance procedures established for patients who feel a decision is incorrect or unfair. The opinion of a third-party medical expert with no financial interest in the company is sought to resolve differences of opinion, Weil explained.

"The fact that Mrs. Fox died probably supports the contention that the bone marrow transplant would not be productive," Weil added, noting that Mrs. Fox did receive the transplant within a few weeks after being denied by Health Net. "The Nelene Fox decision will not affect doctors," insisted Dr. Ben Shwachman, president of the Los Angeles County Medical Association, who is also a physician and an attorney who practices health law in Covina.

Shwachman said he believes the decision has thrown a new measure of culpability onto the health insurance companies, which since 1982 have had the power to select the pool of physicians from which California HMO members must choose. While insurance companies have contended they are merely economic units and don't practice medicine, Shwachman observed, insurers' entry into the decision-making process has made it legally possible for individuals like Fox to sue insurance companies for malpractice, just as physicians can be sued. "What the Nelene Fox decision says is that he who makes the decision -- whether it's the doctor or the designated company -- has to stand in court and be liable regarding the decision that was made on that patient," Shwachman said. "From a doctor's point of view, the decision says, if you try to do the right thing, you're fine."

However, Shwachman observed, insurance companies have an enormous amount of leverage over doctors because they regularly write contracts with doctors which state the doctor may be fired for "no cause." The result is a conundrum for physicians who all must work with insurance companies might pressure physicians' review boards in subtle ways to approve lower-quality, less-expensive treatments because of cost factors, Shwachman said.

Ever since the jury's verdict, Health Net officials have maintained that their procedures for determining which treatments to cover is legitimate and legal.

"The jury's decision was purely emotional," insisted Don Prial, a Health Net spokesman. Prial said Health Net is asking for a new trial based on the facts of the case and the size of the award, which he said exceeds the 10 to 15 percent of net worth -- which is the rule of thumb for punitive damages in California. Prial further said Health Net does in fact cover bone marrow transplants for patients in the earlier phases of breast cancer. He said the issue was one of "quality of care." Prial said that in Fox's case, her breast cancer was in what doctors call "stage four," meaning the cancer had spread to other parts of her body. Prial said autologous bone marrow transplants had not been proven to work in such cases, and was therefore classified as experimental or "investigational."

Prial said Health Net hasn't changed the way it operates in the wake of the Fox decision. Health Net remains a "network" model health maintenance organization, basically a health insurance company which collects premiums and contracts with some 21,000 California doctors and hospitals to provide health care for about 2,500 employer groups containing 1 million individuals.

Health Net pays out about $1 billion a year to health care providers, Prial said, and he denied Health Net was trying to cut costs by denying treatment to Fox.

"If we started cutting corners and cheapening our care, how long do you think we'd keep companies like Bank of America and Lockheed as clients?" Prial asked. "We have a very sophisticated review board, and top-notch doctors to advise us on these things. We are in the process of reviewing them all the time." Prial further noted that Health Net's membership had increased since the Fox decision was handed down.

Barco at Kaiser Permanente said the state's largest HMO has kept up with developments in the case. Kaiser insures about 15 percent of the entire population in Southern California, where it has a network of about 3,000 doctors and a network of hospitals to service 2.2 billion members. In California, Barco observed, managed care has been more widely accepted than in other parts of the U.S.

Barco said the Fox decision had no effect on Kaiser's review procedures.

"It's very hard to say we're doing something different today," Barco elaborated. "We're moving toward an era where people have greater access to health care and people sharing costs to some extent. So there's going to be attention brought to highly expensive procedures."

Barco contented that public attention has been on expensive medical procedures "for some time." Kaiser covers bone marrow transplants "when indicated," Barco said. In certain cases, Barco added, procedures like the one done on Fox can be "extremely toxic" if done when the breast cancer is in its final stages.

Kaiser has its own bone marrow transplant center in Hollywood, one of its "centers of excellence," which allows the company to better control the quality and costs of complicated or expensive procedures, such as heart and liver transplants, Barco said.

At CareAmerica Health Plans in Chatsworth, which has three plans, one of which is a 150,000-member HMO, Dr. Edward Regal, medical director, said, "Everyone tries to make this a financial decision, but I don't think decisions like this are made on that basis. Our position is that if there's no evidence that it's not effective, then we'll go ahead and cover it. We'd like to err on the side of our members. I don't think Nelene Fox will change the way we treat our patients."

Several studies, including one on heart attack patients conducted by RAND Corp., a Santa Monica-based think tank, concluded that the quality of care in an HMO setting is equal to or superior to care in a fee-for-service environment, Regal pointed out.