Appeal from the Circuit Court of Kane County. No. 94--L--0478 Honorable Timothy Q. Sheldon Judge, Presiding.
The opinion of the court was delivered by: Justice Rapp
IN THE COURT OF APPEALS OF THE STATE OF ILLINOIS
(Dreyer Health Maintenance Organization, a/k/a Dreyer Health Plan, Defendant-Appellee).
Plaintiff, Wendy Hinterlong, as independent administrator of the estate of her deceased mother, Dorothy Wollin, appeals from summary judgment entered in favor of defendant Dreyer Health Maintenance Organization (Dreyer HMO), a/k/a Dreyer Health Plan. Plaintiff contends the trial court improperly concluded that her state law claim for medical malpractice based upon a theory of vicarious liability was preempted by section 514(a) of the Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. §1144(a) (1994)). We vacate and remand.
In December 1993, while undergoing surgery to correct coronary artery disease, Dorothy suffered a massive heart attack. She died shortly thereafter. At the time of her death, Dorothy was a member of Dreyer HMO, later known as Dreyer Health Plan.
In June 1994, plaintiff, as independent administrator of Dorothy's estate, brought an 18-count complaint in the circuit court of Kane County against numerous parties for negligent medical treatment that resulted in Dorothy's death. Counts XVII and XVIII were directed against defendant for wrongful death and survival actions and were premised upon a theory of vicarious liability.
Defendant is structured as an "Independent Practice Association" or "IPA model" health maintenance organization (HMO). An IPA, as opposed to a "staff model" HMO, is an entity that arranges and pays for health care for its members by contracting with independent medical groups, clinics, or physicians, instead of providing health care through its own salaried employees. Defendant contracted with the Dreyer Clinic (clinic) to provide medical services to defendant's members. The clinic was a corporate entity that wholly owned defendant.
The contract between the clinic and defendant provided for a system of managed care known as global capitation. Under this system, defendant paid the clinic premiums obtained from an employer, less a 10% administrative fee and a percentage for pharmacy expenses. In exchange, the clinic assumed the financial risks of providing complete medical care for defendant's members. This included the expense of treatment by specialists employed by the clinic, specialists not employed by the clinic, and hospitalization when necessary. If the total cost of care provided to all defendant's members was less than the total amount of premiums received, the clinic kept the profit. If the opposite was true, the clinic had to absorb the excess. When the clinic made a profit from its relationship with defendant, the physicians employed by the clinic received bonuses.
In 1989, defendant entered into a contract with Dorothy's employer, AT&T, to arrange for health care services for eligible employees who enrolled with defendant. In exchange, AT&T paid a portion of the premiums for employees who chose defendant as its health care provider. Defendant was only one option in AT&T's comprehensive employee welfare benefit plan. Defendant entered into similar contracts with numerous other employers. Pursuant to AT&T's employee welfare benefit plan, Dorothy enrolled with defendant.
Defendant required each member to chose a primary care physician (PCP) who was responsible for providing primary medical care to the member and, if necessary, making written referrals to specialists and recommending hospitalization. If a member's PCP recommended hospitalization, final approval would have to be given by the clinic's utilization review department. Defendant did not conduct independent utilization review of a PCP's recommendation. Instead, under the global capitation agreement, defendant created financial incentives for the clinic, vis à vis the physicians, to keep hospitalization and nonclinic specialist referrals to a minimum.
From April 1991 through December 1993, Dorothy sought treatment from the clinic physicians for a heart condition. In her complaint, plaintiff contended that the care Dorothy received was negligent. Specifically, plaintiff cited a failure to timely diagnose and aggressively treat Dorothy's life-threatening condition, to timely refer her to a specialist, and to timely hospitalize her. Plaintiff further alleged Dorothy's treating physicians were agents of defendant and stated 12 reasons why defendant was vicariously liable for Dorothy's death. Soon after plaintiff filed her complaint, defendant petitioned for removal to federal court and subsequently moved for dismissal or summary judgment based upon the preemption provision of section 514(a) of ERISA (29 U. S. C. §1144(a) (1994)). After a hearing on the merits of defendant's preemption claim, the United States District Court for the Northern District of Illinois denied the petition for removal and remanded the case to the trial court. In its summary order denying removal, the district court relied on its earlier ruling in Smith v. HMO Great Lakes, 852 F. Supp. 669 (N.D. Ill. 1994), in holding that plaintiff's claims for medical malpractice and wrongful death were not preempted by ERISA. Defendant did not appeal this ruling to the federal appeals court.
Instead, upon remand, defendant filed an answer to plaintiff's complaint in which it denied each and every allegation of negligence and further denied that Dorothy's treating physicians were its agents, real or apparent. Defendant also raised three affirmative defenses, including ERISA preemption, which it had already raised and fully litigated in the district court. Following a lengthy discovery period, defendant moved for summary judgment based upon both ERISA preemption and the substantive merits of the complaint. In a detailed written order the trial court, in spite of the earlier ruling by the district court, granted summary judgment based upon ERISA preemption but stated that summary judgment would be inappropriate based upon the merits of the complaint because it determined that a genuine issue of material fact existed as to the agency relationship between defendant and the treating physicians. The trial court made findings pursuant to Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a)), and plaintiff timely appealed.
This case presents a first for an appellate court in this state. We must decide whether, under the facts of this case, the broad statutory shield known as ERISA (29 U. S. C. §1001 et seq. (1994)) preempts a state law medical malpractice action based upon a theory of vicarious liability brought against an IPA-model HMO that contracted to arrange for health care services as part of a comprehensive employee benefits package ...