Nancy S. Jecker


Are health maintenance organization (HMO) physicians obligated to act exclusively in the interest of the individual patient? Does the mere existence of financial incentives to limit patient care violate this obligation? To what extent are doctors responsible for the population of patients served by a health plan, or for promoting a fair distribution of health care among society as a whole? These questions come to the fore in the recent U.S. Supreme Court case, Pegram v. Herdrich. In Pegram, Herdrich claimed that the terms of the Carle HMO organization, rewarding its physician owners for limiting medical care, entailed an inherent or anticipatory breach of the physician's fiduciary duty under ERISA. Specifically, the terms of the HMO created "an incentive to make decisions in the physician's self-interest, rather than the exclusive interests of plan participants." Her claim rested on showing first, that treatment decisions made by the HMO, acting through its physician employees, were fiduciary acts under ERISA. Second, her claim required showing that the terms of the HMO violated fiduciary obligations under ERISA to act "solely in the interest of' plan participants and beneficiaries when providing benefits and defraying the reasonable expenses of administering the plan.