External review systems are the HMO industry’s reform of choice, because they permit bureaucratic maneuvers by HMOs that an ill patient has neither the time nor capacity to defend against.

• Most patients have a very short window of opportunity to get the care they need. Only the legal threat of damages against an HMO, should that patient not get appropriate care, will compel the time-sensitive hospital admission or treatment approval that can save
  
  a life. A cardiac patient who arrives in an intensive care unit, for example, does not have the time or capacity to appeal a care denial for external review.

A private review system (one in which the third-party reviewer is not a public entity) keeps the control with HMOs and doctors, rather than shifting the balance of power directly to the patient.

• President Clinton in a letter to Sen. Trent Lott from September 1, 1998, claims, “The external appeals process provision in the Senate Republican Leadership bill makes the appeals process meaningless by allowing the HMOs themselves, rather than informed health professionals, to define what services are medically necessary. This loophole will make it very difficult for patients to prevail on appeals to get the treatment doctors believe they need.”¹
  

• Physicians must recommend appeals, even though the HMOs put doctors financially at risk for treatment costs. Other doctors must decide appeals based, often, on less than perfect notes from treating physicians. Charles Inlander of the People’s Medical Society, which intervenes on behalf of Medicare recipients appealing HMO denials, says that in 90% of such cases, treating doctors have supplied only half of the story. For patients to win an appeal, says Inlander, their doctors must be 100% on their side and involved.² This belies corporate medicine’s pitting of doctors against patients and the frantic HMO pace where physicians must see another patient every five minutes.
  

• In the recent Supreme Court decision, Engalla v. Kaiser, the Court ruled that Kaiser controlled an external review “system in which delay for their benefit and convenience was an inherent part, despite express and implied contractual representations to the contrary.”³

There is no way to ensure a private, third party reviewer’s independence. Existing, so-called “independent,” external review systems purport to give patients facing delays and denials, by their HMOs, an appeal, but increasing evidence shows that they are often hardly independent of the HMO that contracts for them.

• After going through an HMO arbitration procedure, following his mother’s death, David C. Hobson, DDS, MS, recalls, “The party arbitrator’s vote is a foregone conclusion. They are paid by the respective parties to be advocates for their position. The ostensibly neutral arbitrator, however, is supposed to be unbiased. In actual fact, though, arbitrators know that [the HMO] “blackballs” individuals who award economic damages commensurate with the offense. A retired judge has very understandable reservations about ‘biting the hand that feeds’ him about $2000 per day in fees for services.”⁴ Dr. Hobson’s comments highlight the fact that “neutral” third parties in external review procedures are typically paid by the HMO for their services. These reviewers are keenly aware that too many decisions against the HMO puts the future of their external review contracts in jeopardy.
  

• Medical Care Management Corporation (MCMC) of Bethesda, Maryland, one of two initial applicants up for independent reviewing certification status in California, boasts in its marketing materials that it “can save payors millions of dollars a year on just a few cases. Our expert physicians affirm the high cost, high-risk procedures submitted for review in one-half to two-thirds of cases, depending on the type of disease and the patient’s profile. If you are paying for 100 such cases now, inadvisable treatments may be costing you over $6 million.”⁶ MCMC’s disturbing marketing claims suggest that the company is biased towards helping tailor the structure and outcome of the review to the HMO’s needs, even helping to win lawsuits in the HMO’s favor.

External review systems only work well in conjunction with HMO liability, when companies know that if they don’t play fair they will pay large damage awards.

• Mark Machiz, California’s Department of Labor Solicitor, recently told the ERISA Industry Council that in addition to grievances processes under ERISA, he believed that consumers needed both an independent review process and new legal remedies to address the “pathetic armamentarium of remedies” ERISA now provides.

Independent review was struck down by U.S. District Court Judge Vanessa D. Gilmore in her September 18, 1998 decision upholding the landmark Texas liability law. The Court ruled that the process of appealing treatment denials to a third-party, independent review panel is preempted by ERISA, because it deals with determinations of coverage disputes. The Court wrote the Texas law “addresses the quality of benefits actually provided…ERISA simply says nothing about the quality of benefits received.”⁷