Houston Chronicle

Consumer advocates are praising and managed care officials are criticizing a federal appeals court’s decision allowing a Houston woman to sue an HMO for damages in state court.

The decision by the 5th U.S. Circuit Court of Appeals in New Orleans came Friday in the case of Bridgett Giles, who claims her son Alex, 9, died because their doctor failed to diagnose her son’s heart problem.

“This is absolutely a win for consumers,” said Lisa McGiffert, a health policy analyst in the Austin office of Consumers Union, which publishes Consumer Reports.

But a local physician and HMO representatives said throwing the door open to lawsuits will only hurt the consumer because the costs of all lawsuits are invariably passed on.

“I truly believe in this situation everyone loses,” said Paul B. Handel, a former president of the Harris County Medical Society. “There will be higher premiums, and therefore more people will be left uninsured.”

Because of a 1974 federal law, state courts sent nearly all patient lawsuits against HMOs to federal court, where winning plaintiffs could recover their costs, but not damages.

Giles first sued NYLCare Health Plan, two doctors and the medical group that employed them in state court, contending the insurer did not properly screen or supervise Alex’s physician.

NYLCare attorneys argued that the 1974 federal law, the Employee Retirement Income Security Act, superseded state claims and the case was sent to federal court.

In three similar cases since 1992, the 5th Circuit did not allow. the lawsuits to be returned to state courts. But Friday’s ruling, affecting Texas, Mississippi and Louisiana, could change that.

The decision is part of a trend in federal courts to allow patients to sue HMOs in state courts, said Michael Horan, a San Francisco-based attorney for Epstein Becker & Green who often represents HMOs in such cases.

Jill Griffiths, a spokeswoman for NYLCare, said company attorneys were still reviewing Friday’s decision, and she could not comment on the case.

Several other local HMO officials were equally reticent to discuss a case that could spawn a wave of lawsuits.

“This is a tough one for us,” said a leading executive at a large Houston HMO, who spoke on the condition of anonymity.

The executive said HMOs should not be held liable for physicians’ actions they cannot control. He said one likely scenario is that doctor choice would plummet as HMOs tightened their credential process.

Additionally, he said costs would inevitably go up and be passed on to employers and consumers.

“In the end, a few may win but the majority will lose,” the executive said.

The Fort Worth attorney who tried the Giles case, George Parker Young, said the decision could also indicate the 5th Circuit will uphold Texas’ HMO liability law, the first of its kind in the nation.

Later this year, the 5th Circuit is set to rule on several HMOs’ challenge to the law, which was passed in 1997 and makes it easier for consumers to sue HMOs.

“The Giles case opens the door to lawsuits, we’ll learn how widely this fall,” Young said.

Consumers for Quality Care, an advocacy group based in Santa Monica, Calif., says 23 other states are considering similar legislation.

Its director, Jamie Court, said, “HMOs will just cave if they know patients have something like this in their arsenal.”