¹ See, e.g., Arnold S. Relman, Foreword to ANNE M. STOLINE & JONATHAN P. WEINER, THE NEW MEDICAL MARKETPLACE at vii-ix (rev. and updated ed. 1993) (describing the social, political, and legal forces that are affecting the practice of medicine as a “revolution” that has taken most of the medical profession by surprise); Business Coalition Urges Congress to Pass Targeted Reform Bill in 1995, Daily Rep. for Executives (BNA) No. 14, at G-6 (Jan. 23, 1995) [hereinafter Business Coalition] (describing a business coalition's effort to have Congress pass a targeted reform bill in 1995 that would, for example, provide full deductibility of insurance premiums, medical savings accounts, and portability of insurance coverage); Employers Cut Health Costs in 1994, Shift to Managed Care, Survey Finds, Daily Rep. for Executives (BNA) No. 30, at A-20 (Feb. 14. 1995) (indicating that employee enrollment in managed care plans increased to 63% of all covered employees in 1994 from 52% in 1993); Milt Freudenheim, Doctors, on Offensive, Form H.M.O. ‘s, NY. TIMES, Mar. 7, 1995, at Dl, D7 (reporting that numerous physicians have formed both large groups offering services directly to employers as well as their own health maintenance organizations (HMOs)).

² See generally Yarmolinsky, Adam, Sounding Board: Supporting the Patient, 332 NEW ENG. J. MED. 602, 602 (1995)CrossRefGoogle Scholar.

³ See sources cited supra note 1.

⁴ See Yarmolinsky, supra note 2, at 602 (arguing that with consolidations in the health care industry, physicians become subject to the direction and control of entities that have not taken the Hippocratic Oath, for which stock prices and earnings per share may matter more than patient welfare).

⁵ See TORT LAW AND THE PUBLIC INTEREST: COMPETITION, INNOVATION, AND CONSUMER WELFARE 13-15 (Peter H. Schuck ed., 1991). These concerns are manifest in many ways, and include the development of quality standards in licensing and credentialing, reimbursement, regulations, and rules, as well as the enactment and development of laws that govern the quality of medical and health care treatment.

Health care providers is an all-inclusive term and will be used to include physicians, hospitals, managed care networks, allied health professionals, and all other medical and health professionals and organizations that provide health care services.

⁶ See generally ASSOCIATION OF ACADEMIC HEALTH CTRS., HEALTH CARE DELIVERY: CURRENT ISSUES AND THE PUBLIC POLICY DEBATE 89-111 (Ronald Kaufman et al. eds., 1991) (observing that quality is now a “buzzword” in health care, and that quality measurements for medical services as well as the new attention on clinical outcomes are overdue, welcomed, and essential).

⁷ See Rodwin, Marc A., Conflicts in Managed Care, 332 NEW ENO. J. MED. 604, 604 (1995)CrossRefGoogle Scholar.

⁸ See generally Health Care Quality Improvement Act of 1986, 42 U.S.C. §§ 11101-11152 (1988); H.R. REP. No. 903, 99th Cong., 2d Sess., pt. 1, at 2-3 (1986) (stating that the Health Care Quality Improvement Act is needed to deal with incompetent and unprofessional physicians).

⁹ See, e.g., David Nather, Malpractice Awards Would Be Limited in House-Approved Product Liability Bill, Daily Rep. for Executives (BNA) No. 48, at A-3 (Mar. 13, 1995); Ross Ramsey, House OKs Malpractice Claim Limits, HOUS. CHRON., Apr. 13, 1995, at 32A. See generally Benefit Plan Participants May Pursue Vicarious Liability Claim Against HMO, [Jan.-June] Health L. Rep. (BNA) Vol. 4, at 53-54 (Jan. 12, 1995) (discussing the case of Stroker v. Rubin and how courts are divided on the issue of whether malpractice liability claims apply to certain defendants).

¹⁰ See infra notes 114-26 and accompanying text.

¹¹ See infra notes 90, 97-101, 114-26 and accompanying text.

¹² The predominant form of MCO is the HMO. SHERYL TATAR DACSO & CLIFFORD C. DACSO, MANAGED CARE ANSWER BOOK 1-13 (1995). “HMOs are organized health care systems that are responsible for both the financing and delivery of health care services to an enrolled population.“ Id. at 3-5. Generally, HMOs exist in one of five forms: the staff model, where the HMO employs physicians; the group practice model, where the HMO contracts with a multi-specialty physician group practice; the network model, where the HMO network contracts with several group practices for medical services; the independent practitioner association (IPA) model, where the HMO contracts with an IPA with which independent practitioners contract to allow the IPA to act on their behalf as an intermediary between the physicians and the HMOs; and the direct contract model, where the HMO contracts directly with individual practitioners for their medical services. Id. at 3-5 to 3-6.

Other forms of MCOs include IPAs, preferred provider organizations (PPOs), point of service (POS) plans, and physician hospital organizations (PHOs). Id. at 3-6 to 3-7. IPAs act as intermediaries between a number of physicians, who contract with the IPA, and various HMOs. Id. at 3-6. PPOs are organizations which contract with employee health benefit plans and health insurance companies to provide medical services through participating providers, generally on a discounted fee-for-service basis. Id. PPOs’ members are not limited to the plan's participating providers. Id. at 3-7. Exclusive provider organizations (EPOs) are structured very similarly to PPOs, but limit subscriber choice of providers, as do HMOs. Id. POS plans are “hybrids” of both PPOs and HMOs, offering subscribers access to primary care gatekeepers, paid on a capitation basis, and coverage for some services provided by nonparticipating physicians. Id. at 3-7 to 3-8. Finally, PHOs are organizations created for the purpose of acting as vehicles for negotiating contracts between a hospital and physicians or physician groups and MCOs. Id. at GL-24.

¹³ See infra notes 75-83 and accompanying text.

¹⁴ See infra notes 127, 132-35, 149 and accompanying text.

¹⁵ Employee Retirement and Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001-1461 (1988).

¹⁶ 29 U.S.C. §§ 1001(a)-1001(c) (1988).

¹⁷ 29 U.S.C. § 1144(a) (1988) (“preemption clause“); 29 U.S.C. § 1144(b)(1) (1988) (“saving clause“); 29 U.S.C. § 1144(b)(2) (1988) (“deemer clause“).

¹⁸ See infra notes 268-84 and accompanying text.

¹⁹ See, e.g., Kearney v. U.S. Healthcare, Inc., 859 F. Supp. 182, 187-88 (E.D. Pa. 1994) (finding that the selection of physicians “relates to” the manner in which employee benefit plans are administered or provided and is thus preempted by ERISA); .see infra notes 291-305 and accompanying text; but cf infra notes 268-84 and accompanying text.

²⁰ See infra notes 306-07 and accompanying text.

²¹ Foreword to NATIONAL COMM. FOR QUALITY ASSURANCE, STANDARDS FOR THE ACCREDITATION OF MANAGED CARE ORGANIZATIONS (1995) [hereinafter NCQA] (stating that compliance with the NCQA standards “indicates that a managed care organization is committed to principles of quality and is continuously improving the clinical care and services it provides“).

²² See infra notes 27-69 and accompanying text.

²³ See infra notes 70-152 and accompanying text.

²⁴ See infra notes 153-307 and accompanying text.

²⁵ See infra notes 327-37 and accompanying text.

²⁶ See infra notes 341-46 and accompanying text.

²⁷ See Peter R. Kongstvedt, Primary Care in Open Panels, in THE MANAGED HEALTH CARE HANDBOOK 43, 49-50 (Peter R. Kongstvedt ed., 2d ed. 1993).

²⁸ Congressional Budget Office, Rising Health Care Costs: Causes, Implications, and Strategies 36-40 (1991), reprinted in KENNETH S. ABRAHAM, INSURANCE LAW AND REGULATION: CASES AND MATERIALS 372, 372-74 (2d ed. 1995).

²⁹ Rodwin, supra note 7, at 604.

³⁰ Id.

³¹ NCQA, supra note 21, at Foreword.

³² THE MANAGED HEALTH CARE HANDBOOK, supra note 27, at 502.

³³ Id. Closed-panel MCOs are growing in number around the country, especially in California, and may in the future become the dominant form of MCOs.

³⁴ THE MANAGED HEALTH CARE HANDBOOK, supra note 27, at 506.

³⁵ Id.

³⁶ Id. at 502.

³⁷ Id. at 504. Capitation is a system of payment by which providers are paid on a per-capita basis negotiated prior to the provision of care. STOLINE & WEINER, supra note 1, at 64. In a capitated system MCOs accept the financial risk for a set population of subscribers, paying the providers a fixed monthly fee for all “covered lives.” Getting the Most from Managed Care, DRUGS IN THE WORKPLACE, May 1995, at 1-2. Under capitation, primary care physicians have little or no incentive to refer to specialists. STOLINE & WEINER, supra note 1, at 64. Providers also tend to focus more on length of stay and quick patient turnover since essentially patients under such a system are “worth” the same no matter how long he or she stays in the hospital or how much resources are used. Id.

³⁸ THE MANAGED HEALTH CARE HANDBOOK, supra note 27, at 508.

³⁹ Id. at 503.

⁴⁰ Id. at 501.

⁴¹ See infra notes 43-63 and accompanying text.

⁴² See generally NCQA, supra note 21, at 27-31. While essentially fulfilling the same function, credentialing by open- and closed-panel MCOs differs in how credentialing is carried out. Peter. Kongstvedt, Primary Care in Closed Panels, in THE MANAGED HEALTH CARE HANDBOOK, supra note 27, at 35-36; Peter Kongstvedt, Primary Care in Open Panels, in THE MANAGED HEALTH CARE HANDBOOK, supra note 27, at 49-50. Open-panel credentialing, where the MCO requires the physician to furnish all necessary documentation, which the MCO reviews to assess the physician's competency, is the more common type of credentialing. THE MANAGED HEALTH CARE HANDBOOK, supra note 27, at 502. Hospitals work in much the same way. See infra notes 62-63 and accompanying text. In a closed-panel MCO, the responsibility for acquiring the necessary documentation falls on the MCO. THE MANAGED HEALTH CARE HANDBOOK, supra note 27, at 502.

⁴³ See, e.g., JOINT COMM'N ON ACCREDITATION OF HEALTHCARE ORGS., 1995 ACCREDITATION MANUAL FOR HOSPITALS: VOL. 1: STANDARDS 172 (1994) [hereinafter JCAHO] (defining credentialing as “[t]he process of granting authorization by the governing body to provide specific patient care and treatment services in the hospital, within defined limits, based on an individual's license, education, training, experience, competence, health status, and judgment“).

⁴⁴ See NCQA, supra note 21, at Foreword. NCQA was established in 1990 under the auspices of the Group Health Association of America and the American Managed Care and Review Association as an accrediting organization for MCOs under a grant from the Robert Wood Johnson Foundation and matching funds from MCOs. DACSO & DACSO, supra note 12, at 8-12. Unlike standards established by JCAHO, standards established by NCQA have not yet been incorporated into federal or state law or used by courts to establish a standard of care for MCOs. NCQA defines credentialing as,

NCQA, supra note 21, at 46.

⁴⁵ See supra note 21.

⁴⁶ NCQA, supra note 21, at 19-24.

⁴⁷ Id. at 25-26.

⁴⁸ Id. at 33-38.

⁴⁹ Id. at 39-40.

⁵⁰ Id. at 41.

⁵¹ Id. at 27-32.

⁵² Id. CR 1.0-3.0, at 27.

⁵³ Id. at 27-32. Written policies and procedures ensuring the quality of the health delivery organizations with which the MCO intends to contract are also required of all MCOs. Id. CR 9.0-9.4, at 29. Health delivery organizations include, but are not limited to, hospitals, nursing homes, home health agencies, and free-standing surgical centers. Id. All MCOs must also conduct, as part of their credentialing process, on-site visits to provider offices. Id. CR 13.0-13.2.3, at 30. During such visits the MCO is to review not only the medical record-keeping practices of the physician, but also the overall operational structure of the site. Id. Also all primary care physician, OB/GYN, and high volume specialist offices should be visited according to the standards. Id. There is also a requirement of set procedures for the reduction, suspension, or termination of practitioner privileges. Id. CR 14.0-14.2, at 31. Along with these procedures regarding privileges must exist procedures enabling persons to report serious quality deficiencies. Id. These procedures must provide for an appeals process. Id. The MCO is also required to oversee those activities that have been delegated to contractors. Id. CR 15.0-15.3, at 31. There must be a written record of the delegated activities and of the accountability of the delegatee for these activities. Id. The MCO must also retain the right to approve, suspend, or terminate providers and sites. Id. The effectiveness of the delegatee's credentialing and reappointment or recertification processes must be reviewed by the MCO at least once a year. Id.

⁵⁴ The physician must have a current valid license to practice medicine. Id. CR 5.0-5.7, at 27- 28. The physician's primary hospital must have granted him or her clinical privileges. Id. The physician must have a current and valid Drug Enforcement Agency (DEA) or Controlled Dangerous Substance (CDS) number allowing the prescription of narcotics. Id. The doctor must have completed both medical school and a residency program, or must be board certified. Id. The MCO must also verify that the physician has malpractice insurance. Id. Finally the doctor's work history and professional liability history must be reviewed. Id.

⁵⁵ Id. CR 6.0-6.2, at 28. The applicant must state any reasons that might make it impossible for him or her to carry out the essential functions of the position for which the applicant is applying. Id. He or she must attest to a lack of present illegal drug use. Id. The applicant must also disclose any and all history of licensure actions and/or felony convictions. Id. Loss or limitation of staff privileges or disciplinary action must also be disclosed. Id.

⁵⁶ Id. CR 7.1-7.2, at 28. The National Practitioner Data Bank (NPDB) was provided for through the Health Care Quality Improvement Act. 42 U.S.C. § 11134 (1986). Each state has its own board of medical examiners which licenses and monitors physicians who practice or want to practice in the state.

⁵⁷ Id. CR 7.3, at 28.

⁵⁸ Id.CR 10.0-13.0, at 29-30.

⁵⁹ Id. CR 10.1, at 29.

⁶⁰ Id. CR 10.2-10.2.6, at 29. In their application for renewal of appointment or privileges, the physician must attest to his or her physical and mental condition, as well as to a lack of chemical dependency or substance abuse. The recredentialing process also must include requests for information regarding the physician from the monitoring organizations mentioned above. Id. CR 10.3-11.3, at 30.

⁶¹ Id. CR 12.0-12.4, at 30.

⁶² See generally JCAHO, supra note 43.

⁶³ Id. at 73-84. Hospitals are required to ensure that there is a single organized medical staff— made up of fully licensed physicians who have clinical privileges and who are subject to review— that oversees the quality of the professional services provided. The medical staff organization must establish mechanisms governing the appointment or reappointment of doctors, as well as the grant or denial of clinical privileges based on the physician's licensure, experience, specific training, and competency. Id. MS 2-2.4.1.3.1, at 74-75. Obtaining information from the various data banks and monitoring services is also strongly encouraged. Id. MS 2.4.1.3.2, at 75. Under the Health Care Quality Improvement Act of 1986 (HCQIA), which set up the NPDB, hospitals are required to query the NPDB at the time of initial appointment and granting of clinical privileges as well as at least once every two years thereafter. If a hospital fails to check the data bank, it is presumed to have knowledge of those facts of which it could have learned through an inquiry. 42 U.S.C. § 11135 (1986). Much is left to the hospital's bylaws, rules, and regulations in which the JCAHO requires that provisions providing for the disclosure of any licensure or registration (state, district, or DEA), clinical privilege, or professional liability action be included. JCAHO, supra note 43, MS 2.5, at 75. In addition, hospitals must appraise, by seriously considering peer recommendations, the doctor's professional performance, judgment, and clinical and technical skills to determine whether to reappoint a physician or renew his or her staff privileges. Id. MS 2.7-2.8, at 75-76.

⁶⁴ Michael F. Anthony & Lawrence E. Singer, Hospitals: The Business Environment, in THE NATIONAL HEALTH LAWYERS ASS'N, 3 HEALTH LAW PRACTICE GUIDE 32-1 to 32-5 (Marilou King ed., 1994).

⁶⁵ Id. a t 32-15 to 32-17.

⁶⁶ Id. Basic or standard credentialing fails to allow the hospital to measure objectively the quality of care provided within the hospital and also fails to take into account the financial implications of the hospital physician's treatment decisions. Id. at 32-16.

⁶⁷ Id. at 32-17.

⁶⁸ Id.

⁶⁹ Id. For a general analysis of economic credentialing, see Blum, John D., Economic Credentialing: A New Twist in Hospital Appraisal Processes, 12 J. LEGAL MED. 427 (1991)Google Scholar.

⁷⁰ PAUL STARR, THE SOCIAL TRANSFORMATION OF AMERICAN MEDICINE 145-79 (1982).

⁷¹ Id.

⁷² Id. at 145-62.

⁷³ See, e.g., id. at 331-34, 374-78, 393-96.

⁷⁴ See infra notes 84-90, 96-101, 109-26 and accompanying text.

⁷⁵ STOLINE & WEINER, supra note 1, at vii-viii.

⁷⁶ Id. at 176; Rodwin, supra note 7, at 604-05.

⁷⁷ Rodwin, supra note 7, at 605.

⁷⁸ DACSO & DACSO, supra note 12, at 1-2 to 1-3, 1-8 to 1-10.

⁷⁹ Id. at xv.

⁸⁰ See STOLINE & WEINER, supra note 1, at 130-31.

⁸¹ See infra notes 153, 156.

⁸² See infra notes 90-95, 102-08, 127-52 and accompanying text.

⁸³ See generally Chittenden III, William A., Malpractice Liability and Managed Health Care: History and Prognosis, 26 TORT & INS. L.J. 451, 453 (1991)Google Scholar.

⁸⁴ W. PAGE KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS § 69 (5th ed. 1984); RESTATEMENT (SECOND) OF AGENCY § 219 (1958) [hereinafter AGENCY RESTATEMENT].

⁸⁵ Stern, Joanne B., Malpractice in the Managed Care Industry, 24 CREIGHTON L. REV. 1285, 1287 (1991)Google Scholar.

⁸⁶ See generally Chittenden, supra note 83, at 453-64; ARTHUR F. SOUTHWICK, THE LAW OF HOSPITAL AND HEALTH CARE ADMINISTRATION 542-78 (2d ed. 1988).

⁸⁷ See infra notes 88-89 and accompanying text.

⁸⁸ See infra note 89 and accompanying text.

⁸⁹ AGENCY RESTATEMENT, supra note 84, § 219.

⁹⁰ At first, courts were hesitant to apply respondeat superior to medical malpractice cases. Chittenden, supra note 83, at 454. This was due in large part both to the notion that hospitals could not control the acts of the physicians, who had the medical training, skill, and education, and to the fact that hospitals did not practice medicine. Id. But in 1957, in Bing v. Thunig, the New York Court of Appeals established that the relationship of physicians to hospitals would be subject to the same analysis as that of any principal-agent relationship. 143 N.E.2d 3, 8 (N.Y. 1957). Liability based on respondeat superior thus depends on whether the physician is determined to be an employee of the hospital or an independent contractor. Chittenden, supra note 83, at 454; SOUTHWICK, supra note 86, at 542-46. In determining whether a physician is an employee or independent contractor, courts generally take into consideration a number of factors, such as the manner in which the physician was chosen or selected, the amount of control the hospital has over the physician, the doctor's skill, the method of payment for the physician's services, the right to discharge, and ownership of the plant and/or equipment. See, e.g., Schleier v. Kaiser Found. Health Care Plan, 876 F.2d 174, 177 (D.C. Cir. 1989) (citing LeGrand v. Insurance Co. of N. Am., 241 A.2d 734, 735 (D.C. 1968)) (setting out factors to determine the status of a physician/HMO relationship); Stewart v. Midani, 525 F. Supp. 843, 849 (N.D. Ga. 1981) (citing Harris v. City of Chattanooga, 507 F. Supp. 365 (N.D. Ga. 1980)) (setting out factors for determining the physician/hospital relationship); Mduba v. Benedictine Hosp., 384 N.Y.S.2d 527, 529 (N.Y. App. Div. 1976) (nonsalaried doctor under contract with hospital to run emergency room held to be an employee of the hospital as a matter of law). See generally AGENCY RESTATEMENT, supra note 84, § 251 (discussing the principal's liability).

⁹¹ Chittenden, supra note 83, at 455 (noting that the organizational structure of a hospital will be considered in addition to the determination of the physician's status as an employee). Generally, the transfer of control over medical decisionmaking from a physician to a corporation may raise problems with the corporate practice of medicine prohibition enforced in many jurisdictions. DACSO & DACSO, supra note 12, at 4-10 to 4-11. This corporate practice of medicine doctrine or bar prohibits corporations and individuals who do not have a license to practice medicine from employing licensed physicians, receiving payment for physicians’ services, or controlling or influencing physicians' medical decisionmaking. Id. at 4-11. Texas and California are two states which enforce this prohibition rigorously. Id. at 4-12 to 4-13; see, e.g., Garcia v. Texas State Bd. of Medical Examiners, 384 F. Supp. 434, 437 (W.D. Tex. 1974), aff'd, 421 U.S. 995 (1975); Parker v. Board of Dental Examiners, 14 P.2d 67, 71-72 (Cal. 1932); California Ass'n of Dispensing Opticians v. Pearle Vision Ctr., 191 Cal. Rptr. 762, 768 (Ct. App. 1983); Flynn Bros. v. First Medical Assocs., 715 S.W.2d 782, 784 (Tex. Ct. App. 1986), writ ref'd n.r.e.; see also CAL. Bus. & PROF. CODE §§ 2052, 2265, 2400 (West 1990 & Supp. 1995); TEX. REV. CIV. STAT. ANN. art. 4495b, § 1.02(9) (West Supp. 1995).

Even with the existence of this prohibition however, MCOs, particularly HMOs, are often shielded from the corporate practice of medicine bar by statutes which carve out exceptions to the bar for specific types of health care entities. See, e.g., CAL. HEALTH & SAFETY CODE §§ 1206(i), 1349.2(a), 1395(b) (West 1990 & Supp. 1995); TEX. REV. CIV. STAT. ANN. art. 4495b, § 1.02(9) (West Supp. 1995). Without such specific exceptions to the doctrine, other MCOs are subject to the bar against the corporate practice of medicine, where the jurisdiction has such a prohibition. DACSO & DACSO, supra note 12, at 4-13 to 4-14.

⁹² DACSO & DACSO, supra note 12, at 4-13 to 4-14.

⁹³ 516 N.E.2d 1104 (Ind. Ct. App. 1987). In holding the HMO liable, the court based its decision largely on the issue of control. Id. at 1109. The HMO had employment contracts with its physicians which provided that the physicians could not have an independent practice; physicians were paid an annual salary; and physicians were to adhere to the policies regarding the provision of medical services, which were the responsibility of the HMO's medical director. Id. at 1105-06. The court focused on the requirement that the physicians adhere to the policy regarding the provision of medical services and held the HMO liable. Id. at 1109. Because the HMO's medical director was a physician and had authority to make decisions as to the appropriateness of medical procedures, the HMO was found to be the employer of the physician and, thus, could be held liable for the doctor's negligence. Id.

⁹⁴ 876 F.2d 174 (D.C. Cir. 1989). The District of Columbia Circuit Court of Appeals—after applying the employee/independent contractor analysis to a consultant physician's relationship with the HMO—held that the defendant staff model HMO was liable for the consultant physician's negligence because the consultant had been engaged by an employee-physician of the HMO. Id. at 177. As in Sloan, the HMO had some control over the physician by requiring that the physician answer to the HMO's medical director, who was a physician and not a layperson. Id. In finding liability, Schleier strengthened the argument that respondeat superior could be used against other forms of MCOs. Chittenden, supra note 83, at 456.

⁹⁵ Chittenden, supra note 83, at 457; see also Williams v. Good Health Plus, Inc., 743 S.W.2d 373, 378 (Tex. Ct. App. 1987) (affirming in part a grant of summary judgment in favor of the HMO because HMO control over the physician could not be established).

⁹⁶ See Coleman, Daniel R., Managed Care—Managing the Potential Legal Liability, 7 BENEFITS L.J. 291, 299 (1994)Google Scholar.

⁹⁷ Janulis, Diane M. & Hornstein, Alan D., Damned If You Do, Damned If You Don't: Hospital Liability for Physicians’ Malpractice, 64 NEB. L. REV. 689, 696, 701-02 (1985)Google Scholar; RESTATEMENT (SECOND) OF TORTS § 429 (1965) [hereinafter TORTS RESTATEMENT].

⁹⁸ Janulis & Hornstein, supra note 97, at 697; AGENCY RESTATEMENT, supra note 84, § 267. For a selection of fairly well cited cases in which courts held hospitals liable under the agency by estoppel theory, see for example, Vanaman v. Milford Memorial Hosp., 272 A.2d 718, 722 (Del. 1970) (hospital could be held liable if representing doctor as an employee); Schagrin v. Wilmington Medical Ctr., Inc., 304 A.2d 61, 64 (Del. Super. Ct. 1973) (holding that emergency room doctor may be agent of hospital depending on the amount of control the hospital has over the physician, the method of payment to the physician, and the degree to which patients rely on the hospital in comparison to the physician); Grewe v. Mount Clemens Gen. Hosp., 273 N.W.2d 429, 432-33 (Mich. 1979) (upholding jury finding that no doctor/patient relationship existed and stating that if a patient looks to a hospital for medical treatment, agency by estoppel could apply); Hannola v. City of Lakewood, 426 N.E.2d 1187, 1190 (Ohio Ct. App. 1980) (holding that agency by estoppel could be found if the hospital held itself out to the public as a provider of emergency care or if the hospital's governing board had control over physician appointment and quality).

⁹⁹ See, e.g., Jackson v. Power, 743 P.2d 1376, 1380 (Alaska 1987) (holding that a hospital could be held liable because patient did not have a choice of physicians); Smith v. St. Francis Hosp., Inc., 676 P.2d 279, 282 (Okla. Ct. App. 1983) (holding hospital liable for negligence of independent contractor due to lack of a physician/patient relationship); see also Chittenden, supra note 83, at 459.

¹⁰⁰ Chittenden, supra note 83, at 460.

¹⁰¹ See, e.g., Jackson, 743 P.2d at 1382 (holding hospital liable because of lack of patient choice as to physicians, but leaving, to the jury, the question of whether ostensible or apparent agency applies to emergency room physicians); Barrett v. Samaritan Health Servs., Inc., 735 P.2d 460, 468 (Ariz. Ct. App. 1987) (finding ostensible agency because hospital provided plant, equipment, nursing staff, and selected the physician to perform the procedure); Richmond County Hosp. Auth. v. Brown, 361 S.E.2d 164, 167 (Ga. 1987) (liability arises for hospital if it represents emergency room physician as employee); Strach v. St. John Hosp. Corp., 408 N.W.2d 441, 450 (Mich. Ct. App. 1987) (finding that jury could conclude that an ostensible agency exists through physician's control over hospital employee); Martell v. St. Charles Hosp., 523 N.Y.S.2d 342, 350 (Sup. Ct. 1987) (patient's reliance on hospital as provider makes hospital liable for emergency room physician's negligence); Shepard v. Sisters of Providence, 750 P.2d 500, 506 (Or. Ct. App. 1988) (holding that a resident assisting physician in surgery could create ostensible agency); Thompson v. Nason Hosp., 535 A.2d 1177, 1181 (Pa. Super. Ct. 1988), aff'd, 591 A.2d 703 (Pa. 1991) (holding that physicians with independent contracts with a hospital may be found to be ostensible or apparent agents to the patient); Capan v. Divine Providence Hosp., 430 A.2d 647, 649 (Pa. Super. Ct. 1980) (adopting apparent or ostensible agency to hold the hospital liable even if the physician was an independent contractor); Pamperin v. Trinity Memorial Hosp., 423 N.W.2d 848, 858 (Wis. 1988) (holding hospital liable for negligence of independent contractor hired to provide radiology services).

¹⁰² See, e.g., Boyd v. Albert Einstein Medical Ctr., 547 A.2d 1229, 1234-35 (Pa. Super. Ct. 1988).

¹⁰³ See, e.g., Chittenden, supra note 83, at 462-64. In Boyd, the defendant HMO was a medical insurance provider that gave individuals an alternative to signing with the Blue Cross/Blue Shield plan. Boyd, 547 A.2d at 1229-30. The decedent, Boyd, was covered by the defendant HMO because her husband was a member of the plan through his employer. Id. at 1230. Both primary and specialist care physicians were selected and strictly limited by the HMO. Id. Referred to a specialist at Albert Einstein Medical Center in accord with the plan's policies and guidelines on referrals, the decedent subsequently suffered a left hemothorax resulting from the perforation of her chest wall she sustained during a biopsy of her breast tissue. Id. Boyd was released from the hospital, but returned due to severe chest pain, vomiting, and stomach and back irritation. Id. She subsequently died from myocardial infarction. Id.

¹⁰⁴ Boyd, 547 A.2d at 1230-31 (citing Capan v. Divine Providence Hosp., 430 A.2d 647 (Pa. Super. Ct. 1980) and Thompson v. Nason Hosp., 535 A.2d 1177 (Pa. Super. Ct. 1988), aff'd, 591 A.2d 703 (Pa. 1991)).

¹⁰⁵ Id. at 1234.

¹⁰⁶ Id.

¹⁰⁷ Factors that the court considered relevant to finding ostensible agency include the fact that the patient had a contract with the HMO and not with the physician, the limitation on the patient's choice of physicians, the HMO's cost and quality control procedures, and the provision in the HMO's group master contract which stated that the HMO would provide “health care services and benefits to Members in order to protect and promote their health.” Id. at 1235 (citation omitted).

¹⁰⁸ Chittenden, supra note 83, at 464; see also Decker v. Saini, No. 88-361768 NH, 1991 WL 277590 (Mich. Cir. Ct. Sept. 17, 1991) (holding that an HMO may be held vicariously liable if its representations would lead a patient to reasonably believe that the physician was an employee); but see, e.g., Chase v. Independent Practitioner Ass'n, 583 N.E.2d 251, 252-53, 255 (Mass. App. Ct. 1991) (finding no liability because IPA did not have the right to control the professional activities of its member physicians, did not represent the doctors as employees, and did not select the member physicians); Raglin v. HMO Illinois, Inc., 595 N.E.2d 153, 158 (III. App. Ct. 1992) (no agency relationship existed where IPA did not review the quality of care rendered by its physicians and did not hold itself out as providing anything more than insurance). PPOs need not worry so much about ostensible agency since their “members” have greater freedom in the selection of physicians, the patient is not billed by the PPO, and the PPO does not supply the physical plant, facilities, or equipment. Chittenden, supra note 83, at 464. PPOs are plans that contract with independent medical providers for discounted services, usually have some type of utilization review system, and may have some risk-bearing. THE MANAGED HEALTH CARE HANDBOOK, supra note 27, at 507.

¹⁰⁹ See, e.g., Abraham, Kenneth S. & Weiler, Paul C., Enterprise Medical Liability and the Choice of the Responsible Enterprise, 20 AM. J.L. & MED. 29 (1994)Google Scholar [hereinafter Abraham & Weiler, Responsible Enterprise]; Abraham, Kenneth S. & Weiler, Paul C., Enterprise Medical Liability and the Evolution of the American Health Care System, 108 HARV. L. REV. 381 (1994)Google Scholar; Cunningham, Joel D., The Hospital-Physician Relationship: Hospital Responsibility for Malpractice of Physicians, 50 WASH. L. REV. 385 (1975)Google Scholar; Miller, Frances H. & Harrison, Anthony, Malpractice Liability and Physician Autonomy, 342 LANCET 973, 973-75 (1993)CrossRefGoogle Scholar.

¹¹⁰ Abraham & Weiler, Responsible Enterprise, supra note 109, at 30.

¹¹¹ Enterprise liability is based on the premise that health care plans, which control the actions of health care providers, should take responsibility for the negligence of their medical personnel. Glenn, Sharon M., Tort Liability of Integrated Health Care Delivery Systems: Beyond Enterprise Liability, 29 WAKE FOREST L. REV. 305, 315 (1994)Google Scholar.

¹¹² Jackson v. Power is a key case for the application of the nondelegable duty theory to health care institutions. 743 P.2d 1376, 1383 (Alaska 1987). The court held that medical care or treatment provided in an emergency room was an inseparable part of the business of being a community hospital. Id. at 1383-85. Likening this duty to provide emergency room physicians to the duty owed to passengers by a common carrier and focusing on the heavy amount of regulation in the health care industry, the Alaska Supreme Court found the hospital liable for the plaintiffs injury. Id.

¹¹³ Chittenden, supra note 83, at 465.

¹¹⁴ See infra notes 116-52 and accompanying text.

¹¹⁵ DACSO & DACSO, supra note 12, at 4-18.

¹¹⁶ Such a requirement had been set out by the JCAHO as necessary for accreditation, but these rules carried no legal duty with them. See supra notes 43, 62-63 and accompanying text.

¹¹⁷ Id.

¹¹⁸ 211 N.E.2d 253, 257-58 (111. 1965), cert. denied, 383 U.S. 946 (1966).

¹¹⁹ Id. at 257. The basis for finding liability was the hospital's grant of clinical privileges and subsequent failure to review the physician's clinical competence over thirty years. Darling v. Charleston Community Memorial Hosp., 200 N.E.2d 149, 163-66 (III. App. Ct. 1964), aff'd, 211 N.E.2d 253 (111. 1965), cert. denied, 383 U.S. 946 (1966). Also significant in the court's decision was the court's admission of medical bylaws, JCAHO standards, and state licensure board standards for jury determination of negligence. Id. at 170-71; see also Jeddeloh, Norman P., The Ostensible Agency Doctrine: More to the Point than Darling, 20 HOSPITAL L. 49 (1987)Google Scholar.

¹²⁰ See, e.g., Purcell v. Zimbelman, 500 P.2d 335 (Ariz. Ct. App. 1972); Elam v. College Park Hosp., 183 Cal. Rptr. 156 (Ct. App. 1982); Gonzalez v. Nork, No. 228566 (Cal. Super. Ct. Sacramento County 1973), reprinted in LIABILITY AND QUALITY ISSUES IN HEALTH CARE 25 (Barry R. Furrow et al. eds., 1991), rev'd on other grounds, 131 Cal. Rptr. 717 (Ct. App. 1976): Joiner v. Mitchell County Hosp. Auth., 186 S.E.2d 307 (Ga. Ct. App. 1971), affd, 189 S.E.2d 412 (Ga. 1972); Blanton v. Moses H. Cone Memorial Hosp., 354 S.E.2d 455 (N.C. 1987); Johnson v. Misericordia Community Hosp., 301 N.W.2d 156 (Wis. 1981).

¹²¹ 186 S.E.2d at 308-09. The court held that the hospital had acted in bad faith and should be liable for negligence where the hospital allowed its medical staff to give clinical privileges to a physician who was known or should have been known to be incompetent. Id. at 309.

¹²² Purcell, 500 P.2d at 341, 343.

¹²³ No. 228566, reprinted in LIABILITY AND QUALITY ISSUES IN HEALTH CARE, supra note 120, at 25.

¹²⁴ Liability was placed on the hospital, even though the hospital had no actual or constructive knowledge of the physician's incompetence, simply because the hospital lacked a system sufficient to guard against physician malpractice. Id. at 27.

¹²⁵ Johnson v. Misericordia Community Hosp., 301 N.W.2d 156, 174 (Wis. 1981). This duty required an analysis of four corporate negligence elements. SOUTHWICK, supra note 86, at 572. First, there must exist a duty to exercise reasonable care in the selection of physicians and the granting of staff privileges. Id. Whether a hospital owes this duty to a patient depends on the fore seeability of risk to the patient if the hospital fails to properly credential its doctors. Id. Second, courts are to apply a standard of ordinary care in determining if the hospital has breached its duty of care owed to the patient. Id. at 573-74. Causation, requiring that the hospital's act or omission be merely a substantial factor leading to the plaintiffs injury, is the third essential element. Id. at 574. Finally, the plaintiff must prove damage, harm, or injury in order to be successful. Id.

¹²⁶ Elam v. College Park Hosp., 183 Cal. Rptr. 156 (Ct. App. 1982).

¹²⁷ See supra notes 21, 44-52 and accompanying text.

¹²⁸ See supra notes 52-61 and accompanying text.

¹²⁹ See supra notes 114-26 and accompanying text.

¹³⁰ See supra notes 118-26 and accompanying text.

¹³¹ No. WD 39809, 1989 Mo. App. LEXIS 577, at *12-13 (Ct. App. Apr. 25, 1989). Total Health Care, Inc. was organized as a not-for-profit corporation for the purpose of furnishing prepaid medical services, or reimbursement for services provided to its members or subscribers. Id. at *3-4. Members paid premiums to Total Health Care for which they were to receive medical care when they needed it. Id. Such medical care was provided by and almost exclusively limited to physicians on Total Health Care's preferred provider list. Id. at *4-5. Members of the plan were strictly limited to a listed primary care physician and had the option of choosing a specialist not on the list of approved specialists that was given to the primary care physicians. Id. at *4-5. However, Total Health Care had no obligation to pay for the nonlisted specialist's services, regardless of the patient's membership in the plan. Id. at *5. The members were essentially restricted from choosing physicians that were not on Total Health Care's preferred provider list because Total Health Care—by not guaranteeing payment to nonlisted doctors—left the responsibility of payment up to the subscriber, which was the very thing the subscriber joined the plan to avoid.

¹³² Id. at *20.

¹³³ Harrell v. Total Health Care, Inc., 781 S.W.2d 58, 61 (Mo. 1989) (en banc).

¹³⁴ Id. at 62.

¹³⁵ Harrell, 1989 Mo. App. LEXIS 577, at * 12-13.

¹³⁶ Id. at *6-7.

[R]eview was based on whether the doctor was interested in primary care or specialist practice. In the case of the former, review was by a credentialing committee of six doctors who accepted applications appearing regular in content. If anything of an unusual nature appeared on the form, further inquiry was made. A further check was made in all cases of primary care physicians when the doctor admitted his first Total Health Care patient to a hospital.

In the case of specialist care physicians, the review of applications was by a three member Provider-Professional Relations Committee. That committee was concerned only to determine if the applicant was licensed to practice medicine, that he had admitting privileges to hospitals and could dispense narcotics. No personal interview was conducted, no check was made of references listed and no inquiry was made as to the applicant's standing in the medical community.

Id. at *6 (emphasis added).

¹³⁷ Id. at *14-15.

¹³⁸ Id.

¹³⁹ Id. at *3.

¹⁴⁰ Id. In a separate suit specifically against the doctor, the court found that Dr. Witt treated Harrell negligently. Harrell v. Witt, 755 S.W.2d 296 (Mo. Ct. App. 1988).

¹⁴¹ Harrell, 1989 Mo. App. LEXIS 577, at *2.

¹⁴² Id. at *15. The court, while holding that Total Health Care was immune from liability due to Missouri law, stated that Total Health Care had a common law duty to thoroughly inquire about its participating physicians, largely because of the strict limitations Total Health Care placed on the subscribers. Id. at * 12-13.

¹⁴³ Id. The court cited Blanton v. Moses H. Cone Memorial Hosp., Inc., 354 S.E.2d 455, 457 (N.C. 1987) and Johnson v. Misericordia Community Hosp., 301 N.W.2d 156, 165 (Wis. 1981), as its basis for applying the corporate negligence doctrine. Id. at *9-10; see also supra note 125 and accompanying text; Chittenden, supra note 83, at 469-73; Hinden, Richard A. & Elden, Douglas L., Liability Issues for Managed Care Entities, 14 SETON HALL LEGIS. J. 1, 36-37 (1990)Google Scholar; Tiano, Linda V., The Legal Implications of HMO Cost Containment Measures, 14 SETON HALL LEGIS. J. 79, 92-93 (1990)Google Scholar; Stern, supra note 85, at 1285, 1290-91.

¹⁴⁴ McClellan v. Health Maintenance Org. of Pa., 604 A.2d 1053, 1059 (Pa. Super. Ct. 1992). Marilyn McClellan was employed as a teacher by the School District of Philadelphia, which provided health benefits to its employees, including Mrs. McClellan, through Health Maintenance Organization of Pennsylvania (HMO PA). Id. at 1054. Noticing that a mole on her back had changed substantially in size and color, McClellan sought the medical advice of Dr. Hempsey, a primary care physician provided by HMO PA, whom Mrs. McClellan had selected from HMO PA's list of approved primary care physicians. Id. at 1055. Dr. Hempsey, while having knowledge of the mole's drastic changes, obtained neither a biopsy nor any other histological examination of the mole tissue. Id. Subsequently, Mrs. McClellan died from cancer. Id. Her husband, the appellant, filed suit against Dr. Hempsey, claiming that his wife's death was a direct result of Dr. Hempsey's failure to diagnose and/or treat the melanoma. Id. The decedent's husband later brought suit against HMO PA for negligently selecting and retaining Dr. Hempsey, for breach of contract or warranty, and for intentional misrepresentation or fraud. Id.

¹⁴⁵ Id. at 1058-62 (citing DeGenova v. Ansel, 555 A.2d 147 (Pa. Super. Ct. 1988) and Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983)).

¹⁴⁶ Id. at 1054-56.

¹⁴⁷ Id. at 1055.

¹⁴⁸ 591 A.2d 703, 707 (Pa. 1991).

¹⁴⁹ McClellan, 604 A.2d at 1059 (citation omitted). The court, however, stated that the corporate negligence doctrine—at least in Pennsylvania and in those other states that have adopted Restatement (Second) of Torts section 323—need not be extended to reach IPA-model HMOs. Id.; see also TORTS RESTATEMENT, supra note 97, § 323. According to the court, section 323 is enough to find a nondelegable duty to select and retain competent physicians. McClellan, 604 A.2d at 1059. This does not mean that the corporate negligence doctrine should not or could not be extended to reach MCOs. The court's statement may simply be construed as stating that such extension is not necessary in those states that have adopted section 323 because section 323 essentially imposes the same duty that would be imposed through the extension of the corporate negligence doctrine. A plaintiff's complaint stating a cause of action against an HMO under Restatement (Second) of Torts section 323 “must contain factual allegations sufficient to establish the legal requirement that the HMO has undertaken

1. (1)To render services to the plaintiff subscriber,

2. (2)which the HMO should recognize as necessary for the protection of its subscriber,

3. (3)that the HMO failed to exercise reasonable care in selecting, retaining, and/or evaluating the plaintiffs primary care physician, and

4. (4)that as a result of the HMO's failure to use such reasonable care, the risk of harm to the subscriber was increased.“

Id.

¹⁵⁰ See supra notes 91, 95, 102-13 and accompanying text.

¹⁵¹ See supra notes 33-61 and accompanying text.

¹⁵² See supra notes 118-26 and accompanying text.

¹⁵³ 29 U.S.C. §§ 1001-1461 (1988).

¹⁵⁴ See supra notes 132-52 and accompanying text.

¹⁵⁵ Coleman, supra note 96, at 307 (commenting that “the protective shield of ERISA preemption is under attack” and that “employers should view any cost-containment mechanism through the lens of potential liability“); see infra notes 291-304 and accompanying text.

¹⁵⁶ Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983) (citation omitted). ERISA was enacted by the U.S. Congress with the stated purpose of “assuring the equitable character of … [employee benefit] plans and their financial soundness.” 29 U.S.C. § 1001(a). At the time of ERISA's enactment, employee benefit plans were regulated, if at all, by a patchwork of nonconforming and limited federal and state laws. Id. One concern posed by the lack of regulations governing employee benefit plans as well as the lack of uniformity and strength among existing federal and state laws was the danger that loosely regulated or ungoverned employee benefit plans might be financially unstable. Id. This in turn placed the pension and welfare benefits of millions of American workers at risk, which might inevitably require federal financial assistance in the event employee benefit plans flounder. Id. The rapid growth of employee benefit plans added to the urgency of devising a plan to ensure that employee benefit plans were protected against insolvency and mismanagement. Id. Supporting ERISA's enactment were congressional findings that employee benefit plans had grown sufficiently to the level of interstate and national public interest that a federal scheme to govern the establishment, operation, and administration of employee benefit plans was required. Id.; James D. Hutchinson & David M. Ifshin, Federal Preemption of State Law Under the Employee Retirement Income Security Act of 1974,46 U. CHI. L. REV. 23, 23-30 (1978) (providing a historical overview of the diverse body of law pertaining to the regulation of pension and welfare benefit plans before the enactment of ERISA).

The significance of casting the issue of employee benefit plan stability as one of national dimension— closely interwoven with interstate commerce—is that any resulting federal legislation dovetails with the power of Congress to legislate in matters affecting interstate commerce under Article I of the U.S. Constitution. U.S. CONST, art. I, § 8, cl. 3 (“Commerce Clause“); LAURENCE H. TRIBE, AMERICAN CONSTITUTIONAL LAW 479-81 (2d ed. 1988). Once the federal government has chosen to legislate within a given field under its Commerce Clause powers, Article VI of the U.S. Constitution ensures that such laws supersede any state law operating in the same field. Id.; Katzenbach v. McClung, 379 U.S. 294, 300, 304 (1964) (finding that a restaurant that refused to serve “Negroes” conducted sufficient interstate commerce to fall within the purview of Title II of the Civil Rights Act such that the restaurant's conduct was impermissibly discriminatory).

¹⁵⁷ 29 U.S.C. § 1002(1).

¹⁵⁸ Id. § 1144(a).

¹⁵⁹ Id.

¹⁶⁰ See infra notes 268-84 and accompanying text.

¹⁶¹ See, e.g., infra note 310.

¹⁶² NCQA, supra note 21, at Foreword.

¹⁶³ Id. CR 1.0-15.0, at 27-31.

¹⁶⁴ See infra notes 165-340 and accompanying text.

¹⁶⁵ Hutchinson & Ifshin, supra note 156, at 42, 52-75, 80; Howe, Danlias F., ERISA Preemption and the Health Care Industry, 7 BENEFITS L.J. 457, 476-77 (1994-95)Google Scholar.

¹⁶⁶ 29 U.S.C. § 1144(a) (1988) (emphasis added).

¹⁶⁷ Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 138-39 (1990); 29 U.S.C. § 1144(c)(1); Howe, supra note 165, at 459.

¹⁶⁸ Cf. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739 (1985) (observing that the ERISA preemption provisions, “while clear enough on their face[], perhaps are not a model of legislative drafting“).

¹⁶⁹ Bobinski, Mary Anne, Unhealthy Federalism: Barriers to Increasing Health Care Access for the Uninsured, 24 U.C. DAVIS L. REV. 255, 274-78 (1990)Google Scholar (attributing extensive ERISA litigation to the opaque interaction of ERISA's preemption, saving, and deemer clauses). See New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 115 S. Ct. 1671, 1671-72 (1995) (deciding the most recent appeal on the question of whether a state law—here a New York State surcharge on hospital bills for employee benefit plan participants—“relates to” employee benefit plans and is therefore preempted by ERISA).

¹⁷⁰ 29 U.S.C. § 1144(a) (1988).

¹⁷¹ Id. § 1144(b)(2)(A).

¹⁷² Id.; Metropolitan Life Ins. Co., 471 U.S. at 733.

¹⁷³ 29 U.S.C. § 1144(b)(2)(B).

¹⁷⁴ Id.; Metropolitan Life Ins. Co., 471 U.S. at 733.

¹⁷⁵ Metropolitan Life Ins. Co., 471 U.S. at 739-43, 747; Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97-98 (1983).

¹⁷⁶ 463 U.S. at 85.

¹⁷⁷ Id. at 88-89, 92.

¹⁷⁸ Id. at 96-101.

¹⁷⁹ See id.

¹⁸⁰ Id. at 96-99. The breadth of ERISA's preemption provision is evidenced, the Court reasoned, by the limited exemption from preemption of state criminal laws, as well as by earlier legislative rejection of a preemption provision that included preemption of state laws that only dealt specifically with employee benefit plans. Id. at 98.

¹⁸¹ Id. at 96-97 (footnote omitted).

¹⁸² Id.

¹⁸³ Id. at 100 n.21 (citation omitted).

¹⁸⁴ Id. (emphasis added).

¹⁸⁵ Id.

¹⁸⁶ Id.; Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 145 (1990).

¹⁸⁷ 486 U.S. 825 (1988).

¹⁸⁸ Id. at 827-28, 830. The Georgia statute read, in relevant part, that “[f]unds or benefits of a pension, retirement, or employee benefit plan or program subject to the provisions of the federal Employee Retirement Income Security Act of 1974, … shall not be subject to the process of garnishment.“ Id. at 829 n.29.

¹⁸⁹ Id. at 831-32.

¹⁹⁰ Id. at 833-34.

¹⁹¹ Id.

¹⁹² Id. at 833.

¹⁹³ Id.

¹⁹⁴ Id.; see also Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990).

¹⁹⁵ Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 833 (1988).

¹⁹⁶ 115 S. Ct. 1671 (1995).

¹⁹⁷ See infra notes 228-29 and accompanying text.

¹⁹⁸ 115 S. Ct. 1671 (1995).

¹⁹⁹ Id. at 1677-80.

²⁰⁰ See, e.g., Ingersoll-Rand Co., v. McClendon, 498 U.S. 133 (1990); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987); Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985); Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983).

²⁰¹ Travelers, 115 S. Ct. at 1679-80, 1683.

²⁰² Id. at 1673 (citing N.Y. PUB. HEALTH LAW § 2807-c (McKinney 1993)).

²⁰³ See id. at 1674 (citing N.Y. PUB. HEALTH LAW §§ 2807-c(l)(b), 2807-c(2-a)(a) to (2-a)(e) (McKinney 1993)).

²⁰⁴ Id.

²⁰⁵ Id. at 1678.

²⁰⁶ Id. at 1675.

²⁰⁷ Id. (quoting 813 F. Supp. 996, 1003 (S.D.N.Y. 1993)).

²⁰⁸ Id. at 1675.

²⁰⁹ District of Columbia v. Greater Wash. Bd. of Trade, 506 U.S. 125 (1992), Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990), and Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) noted in Travelers, 115 S. Ct. at 1675-76 (citing 14 F.3d 708, 719 (2d Cir. 1993)).

²¹⁰ Travelers, 115 S. Ct. at 1676; Ingersoll-Rand Co., 498 U.S. at 139.

²¹¹ Travelers, 115 S. Ct. at 1676 (quoting 14 F.3d at 719).

²¹² Id. at 1679, 1683.

²¹³ Id. at 1679.

²¹⁴ Id. at 1678.

²¹⁵ Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 108 (1993); FMC Corp. v. Holliday, 498 U.S. 52, 65 (1990); Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 526 (1981). 216 New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 115 S. Ct. 1671, 1678 (distinguishing Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97 (1983)).

²¹⁷ Id. (distinguishing FMC Corp. v. Holliday, 498 U.S. 52, 60 (1990)).

²¹⁸ Id. (distinguishing Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 521 (1981)).

²¹⁹ Id. at 1679.

²²⁰ Id.

²²¹ Id.

²²² Id.

²²³ Id. (citing Bobinski, Mary Anne, Unhealthy Federalism: Barriers to Increasing Health Care Access for the Uninsured, 24 U.C. DAVIS L. REV. 255, 267 & n.44 (1990))Google Scholar.

²²⁴ Id.

²²⁵ Id.

²²⁶ State laws applicable to negligent selection and retention of physicians would likely fit within the umbrella or scope of quality standards and control. Claims for negligent selection and retention are aimed directly at the heart of the quality control issue, for ensuring quality medical care as benefits begins with ensuring that the providers, the physicians, are competent.

²²⁷ New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 115 S. Ct. 1671, 1679 (1995) (Travelers).

²²⁸ See id. at 1678-79. While plan administrators may be compelled, simply to minimize exposure to liability for negligent selection and retention, to impanel or contract with physicians who survive credentialing scrutiny, plan administrators are not prohibited from selecting any physician for staff privileges or plan participation. Thus, similar to the surcharges at issue in Travelers, payouts of negligent selection and retention claims are presumably passed on to purchasers of plan benefits, constituting no more than an indirect economic influence on employee benefit plans. Id. at 1678.

²²⁹ See, e.g., id. at 1679-80.

A law relates to an ERISA plan if it is designed to affect such plans, singles them out for special treatment or predicates rights or obligations on the existence of such plans, impairs their ability to function simultaneously in different states or effectively restricts such plans with regard to their structure, administration, reporting requirements or choice of benefits.

That a state law may increase the costs of operating a benefit plan does not result in preemption or such plans would enjoy ‘a charmed existence that never was contemplated by Congress.’ If cost were determinative, employee benefit plans would be exempt from liability for virtually all state law torts and they are not. Kearney v. U.S. Healthcare, Inc., 859 F. Supp. 182, 186 (E.D. Pa. 1994) (citing United Wire Metal & Mach. Health & Welfare Fund v. Morristown Memorial Hosp., 995 F.2d 1179, 1192-93 (3d Cir.), cert. denied, 114 S. Ct. 382 (1993) and Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 833 (1988)).

²³⁰ See, e.g., infra notes 231-40 and accompanying text.

²³¹ See supra notes 176-91 and accompanying text.

²³² See Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 733 (1985).

²³³ Id. (citing 29 U.S.C. § 1144(b)(2)(A)).

²³⁴ Id. (citing 29 U.S.C. § 1144(b)(2)(B)).

²³⁵ Id. at 729-30, 744.

²³⁶ Id. at 739.

²³⁷ Id. at 742-43.

²³⁸ Id. at 743.

²³⁹ Id. (citations omitted).

²⁴⁰ Id.

²⁴¹ 481 U.S. 41,48-51 (1987).

²⁴² Id. at 57.

²⁴³ Id. at 47-48.

²⁴⁴ Id. at 51, 57.

²⁴⁵ Id. at 50.

²⁴⁶ Id. at 51.

²⁴⁷ Id.

²⁴⁸ Id. at 52.

²⁴⁹ Id. at 54.

²⁵⁰ Id. (citation omitted).

²⁵¹ See supra note 1 and accompanying text.

²⁵² See infra notes 253-340 and accompanying text.

²⁵³ Purcell v. Zimbelman, 500 P.2d 335, 340-41 (Ariz. Ct. App. 1972); Mitchell County Hosp. Auth. v. Joiner, 189 S.E.2d 412, 414 (Ga. 1972); Darling v. Charleston Community Memorial Hosp., 211 N.E.2d 253, 257 (111. 1965), cert. denied, 383 U.S. 946 (1966); Johnson v. Misericordia Community Hosp., 301 N.W.2d 156, 164-71, 174-75 (Wis. 1981) (citations omitted).

²⁵⁴ Johnson, 301 N.W.2d at 164.

²⁵⁵ See, e.g., Harrell v. Total Health Care, No. WD 39809, 1989 Mo. App. LEXIS 577. at *I3 (Ct. App. Apr. 25, 1989); McClellan v. Health Maintenance Org. of Pa., 604 A.2d 1053, 1059 (Pa. Super. Ct. 1992).

²⁵⁶ See supra notes 131-43 and accompanying text.

²⁵⁷ Harrell, 1989 Mo. App. LEXIS 577, at *13-15. In Harrell, however, the defendant HMO was found not liable. Id. at * 12-13.

²⁵⁸ 604 A.2d 1053 (Pa. Super. Ct. 1992).

²⁵⁹ Id. at 1058-59; see also supra notes 144-49 and accompanying text.

²⁶⁰ McClellan, 604 A.2d at 1059 (citing RESTATEMENT (SECOND) OFTORTS § 323 (1965)).

²⁶¹ Harrell v. Total Health Care, No. WD 39809, 1989 Mo. App. LEXIS 577, at * 12-13 (Ct. App. Apr. 25, 1989); McClellan, 604 A.2d at 1059.

²⁶² See cases cited supra note 261.

²⁶³ See supra notes 127-49 and accompanying text.

²⁶⁴ See infra notes 268-84 and accompanying text.

²⁶⁵ See infra notes 268-305 and accompanying text.

²⁶⁶ 29 U.S.C. §§ 1001(a)-1001(c), 1144(a).

²⁶⁷ See infra notes 268-305 and accompanying text.

²⁶⁸ Rubin, Stroker v., No. 94-5563, 1994 WL 719694, at *6 (E.D. Pa. Dec. 22, 1994); Visconti ex rel. Visconti v. U.S. Health Care, 857 F. Supp. 1097, 1101 (E.D. Pa. 1994); Butler v. Wu, 853 F. Supp. 125, 129 (D.N.J. 1994); Altieri v. CIGNA Dental Health, Inc., 753 F. Supp. 61, 64 (D. Conn. 1990)Google Scholar.

²⁶⁹ See supra notes 166-67, 176-89 and accompanying text.

²⁷⁰ Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 44 (1987) (citing 29 U.S.C. § 1001(b)).

²⁷¹ Id. at 54.

²⁷² Id.

²⁷³ See infra notes 275-84 and accompanying text.

²⁷⁴ See id.

²⁷⁵ No. 94-5563, 1994 WL 719694, at *1 (E.D. Pa. Dec. 22, 1994).

²⁷⁶ Id. at *6.

²⁷⁷ Id.

²⁷⁸ Id.

²⁷⁹ 857 F. Supp. 1097 (E.D. Pa. 1994).

²⁸⁰ Id. at 1101.

²⁸¹ Id. (citations omitted).

²⁸² Corcoran v. United Healthcare, Inc., 965 F.2d 1321, 1334 (5th Cir.), cert. denied, 113 S. Ct. 812(1992).

²⁸³ Id.

²⁸⁴ New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 115 S. Ct. 1671, 1674, 1678-79, 1683 (1995); Stroker v. Rubin, No. 94-5563, 1994 WL 719694, at *6 (E.D. Pa. Dec. 22, 1994); Corcoran, 965 F.2d at 1334; Visconti ex rel. Visconti v. U.S. Health Care, 857 F. Supp. 1097, 1101 (E.D. Pa. 1994); see supra notes 275-81 and accompanying text.

²⁸⁵ 57 F.3d 350 (3d Cir. 1995).

²⁸⁶ 848 F. Supp. 39, 43 (E.D. Pa. 1994) (holding that ERISA preempted plaintiffs claims against her deceased husband's HMO, U.S. Health Care, alleging malpractice under a theory of ostensible agency vicarious liability and negligent selection and retention of incompetent physicians). The District Court held that the plaintiffs negligent selection and retention claim was preempted based on the fact that such claims “involve examination of how the plan is operated: how [the HMO] chooses its doctors and hospitals, … decides with which doctors and hospitals it will affiliate, whether the doctors are employees of [the HMO] subject to [the HMO]'s control or independent contractors.” Id. at 42 n.4. Other courts, though, have clearly stated that merely looking to the plan is not enough of a relation to bring the state-law claim within ERISA's “relate to” language of its preemption section. See, e.g., Haas v. Group Health Plan, Inc., 875 F. Supp. 544, 548-49 (S.D. III. 1994) (“The mere fact that a claim requires examination of a plan to resolve a contractual issue does not alone justify preemption.“); Jackson v. Roseman, 878 F. Supp. 820, 826 (D. Md. 1995); Kearney v. U.S. Healthcare, Inc., 859 F. Supp. 182, 186 (E.D. Pa. 1994).

Moreover, as a basis for its holding that ERISA preempted the plaintiffs negligent selection and retention claim, the Court stated that such claims arise out of the circumstances of the medical treatment provided under the plan and require the benefits provided to be measured against the promises of the plan. 848 F. Supp. at 43. This reasoning, though, is overbroad. “If literally all claims involving ‘the circumstances of medical treatment’ under a plan were preempted, … a plan beneficiary could not even sue [the] treating participating physician for his malpractice.” Kearney, 859 F. Supp. at 186; see also Haas, 875 F. Supp. at 549; Jackson, 878 F. Supp. at 825.

²⁸⁷ 29U.S.C. § 1132(a) (1988).

²⁸⁸ Dukes v. U.S. Healthcare, Inc., 57 F.3d 350, 357 (3d Cir. 1995) (citing Travelers, 115 S. Ct. at 1678-79).

²⁸⁹ Travelers, 115 S. Ct. at 1678-79.

²⁹⁰ Id.

²⁹¹ Kohn v. Delaware Valley HMO, Inc., Civ. No. 91-2745, 1992 U.S. Dist. LEXIS 1092, at *5 (E.D. Pa. Feb. 5, 1992); Independence HMO, Inc. v. Smith, 733 F. Supp. 983, 988 (E.D. Pa. 1990).

²⁹² 733 F. Supp. at 983.

²⁹³ Id. at 988 (citation omitted).

²⁹⁴ Id.

²⁹⁵ Id.

²⁹⁶ Id. at 989 (citing Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 833 (1988)).

²⁹⁷ ld.

²⁹⁸ Kohn v. Delaware Valley HMO, Inc., Civ. No. 91-2745, 1992 U.S. Dist. LEXIS 1092, at *1 (E.D. Pa. Feb. 5, 1992).

²⁹⁹ Id. at *6; see also Painters of Phila. Dist. Council No. 21 Welfare Fund v. Price Waterhouse, 879 F.2d 1146, 1152-53 (3d Cir. 1989) (holding that ERISA does not generally preempt state professional malpractice actions and stating that state law has traditionally prescribed the standards of professional liability). The court stated that “in the absence of clear indicia in the [ERISA] act or legislative history, we are reluctant to ascribe to Congress an intention to intrude in this area.” Id. at 1152-53. On this basis, the court concluded that ERISA does not generally preempt state professional malpractice actions. Id. at 1153 & n.7.

³⁰⁰ Kohn, 1992 U.S. Dist. LEXIS 1092, at *6.

³⁰¹ Id. at *6-7, 13.

³⁰² 604 A.2d 1053 (Pa. Super. Ct. 1992).

³⁰³ Id. at 1062 (citing DeGenova v. Ansel, 555 A.2d 147, 150 (Pa. Super. Ct. 1988)). The court indicated that,

[w]hile the statutory scheme provides the government with broad powers to regulate employee pension plans, ‘ERISA is not all encompassing.’ The test to determine if a cause of action is preempted by ERISA remains whether or not the action ‘relates to' ERISA, and is not merely remotely related to the act.

Id. (citations omitted).

³⁰⁴ Id.

³⁰⁵ See New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 115 S. Ct. 1671, 1681 (1995) (discussing that surcharges do not exert influence on plan administrators to select a specific benefit level when designing plan benefit packages); see also supra notes 291-304 and accompanying text.

³⁰⁶ See supra notes 268-305 and accompanying text.

³⁰⁷ Coleman, supra note 96, at 296.

³⁰⁸ See infra notes 309-19 and accompanying text.

³⁰⁹ See supra notes 291-305 and accompanying text.

³¹⁰ See, e.g., McClellan v. Health Maintenance Org. of Pa., 604 A.2d 1053, 1059 (Pa. Super. Ct. 1992) (observing that “[i]t is reasonable … to require that an … HMO ‘select and retain only competent physicians’ and ‘formulate, adopt, and enforce adequate rules and policies to ensure quality care for [its subscribers]'” (citation omitted)); Independence HMO, Inc. v. Smith, 733 F. Supp. 983, 988 (E.D. Pa. 1990) (stating that the defendant's suit against the HMO for negligently selecting physicians has nothing to do with a denial of plan rights); cf. Corcoran v. United Health- Care, Inc., 965 F.2d 1321, 1333, 1338 (5th Cir.) (observing in dicta that imposing liability on the defendant HMO “might have the salutary effect of deterring poor quality” care, and that “[w]ith liability rules generally inapplicable, there is theoretically less deterrence of substandard medical decisionmaking“), cert. denied, 113 S. Ct. 812 (1992).

³¹¹ See supra notes 268-84 and accompanying text.

³¹² Id.

³¹³ Kearney v. U.S. Healthcare, Inc., 859 F. Supp. 182, 187 (E.D. Pa. 1994).

³¹⁴ Id. at 187-88.

³¹⁵ See, e.g., Corcoran v. United HealthCare, Inc., 965 F.2d 1321, 1333 (5th Cir.) (stating that the acknowledged absence of a remedy under ERISA does not alter the conclusion that ERISA preempts a state law), cert. denied, 113 S. Ct. 812 (1992).

³¹⁶ Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 833 (1988); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 100 n.21 (1983).

³¹⁷ Mackey, 486 U.S. at 833; Shaw, 463 U.S. at 100 n.21.

³¹⁸ See supra notes 268-305 and accompanying text.

³¹⁹ Shaw, 463 U.S. at 105 (citation omitted).

³²⁰ See supra notes 268-305 and accompanying text.

³²¹ See, e.g., Kearney v. U.S. Healthcare, Inc., 859 F. Supp. 182, 185 (E.D. Pa. 1994); Stroker v. Rubin, No. 94-5563, 1994 WL 719694, at *6 (E.D. Pa. Dec. 22, 1994); Visconti ex rel. Visconti v. U.S. Health Care, 857 F. Supp. 1097, 1101 (E.D. Pa. 1994); Corcoran v. United HealthCare, Inc., 965 F.2d 1321, 1334 (5th Cir.), cert. denied, 113 S. Ct. 812 (1992).

³²² See New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 115 S. Ct. 1671, 1677 (1995) (analyzing, in the context of ERISA, which claims “relate to” employee benefit plans); Kohn v. Delaware Valley HMO, Inc., CIV. No. 91-2745, 1992 U.S. Dist. LEXIS 1092, at *6-7 (E.D. Pa. Feb. 5, 1992).

³²³ See infra notes 324-25 and accompanying text.

³²⁴ See infra note 331 and accompanying text.

³²⁵ See supra notes 167-68, 176-220 and accompanying text.

³²⁶ Iglehart, John K., Physicians and the Growth of Managed Care, 331 NEW ENG. J. MED. 1167, 1167-68 (1994)Google Scholar.

³²⁷ See infra notes 328-31 and accompanying text.

³²⁸ 29 U.S.C. § 1144(b)(2)(B).

³²⁹ Id. § 1144(b)(4).

³³⁰ Id. § 1144(b)(5).

³³¹ Id. § 1144(b)(7); Budget Reconciliation Act, Pub. L. No. 103-66, tit. IV, subtit. D, § 4301(c)(4), 107 Stat. 377 (1993).

³³² Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 833 (1988).

³³³ See supra notes 165-75 and accompanying text.

³³⁴ See infra notes 335-37 and accompanying text.

³³⁵ 29 U.S.C. § 1144(d). Section 1144(d) of ERISA provides that “[n]othing in this title shall be construed to alter, amend, modify, invalidate, impair, or supersede any law of the United States … or any rule or regulation issued under any such law.” Id. (emphasis added); see also Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 105 (1983).

³³⁶ See supra notes 268-305 and accompanying text.

³³⁷ See, e.g., Shaw, 463 U.S. at 105 (citing statement of Sen. Williams that Congress intended— by enacting ERISA—that the regulation of employee benefit plans would not be impaired by conflicting or inconsistent state and local regulation).

³³⁸ See supra notes 176-220 and accompanying text.

³³⁹ See supra notes 268-305 and accompanying text.

³⁴⁰ Amending ERISA, while done in the past, will still be difficult given efforts by lobbying groups to strengthen federal preemption of state laws at the congressional level. Business Coalition, supra note 1, at G-6 (reporting that a coalition of over 600 businesses, trade associations, and chambers of commerce, which has lobbied Congress, has as at least one principle the federal preemption of state mandates on insurance policies and anti-managed care laws).

³⁴¹ See supra notes 131-49 and accompanying text.

³⁴² See supra notes 268-84 and accompanying text.

³⁴³ Id.

³⁴⁴ 115 S. Ct. 1671 (1995).

³⁴⁵ Id.; see supra notes 291-304 and accompanying text.

³⁴⁶ See supra notes 275-304 and accompanying text; see also supra note 153.