On October 31, 1994, it was announced that a confidential settlement had been reached in Doe v. Kohn, Nast & Graf, P.C., et al. (No. 93-4510 (E.D. Pa. filed Aug. 19, 1993), 862F. Supp. 1310 (E.D. Pa. 1994)). The settlement in ths widely publicized AIDS discrimination case came three weeks after the trial began in the District Court for the Eastern District of Pennsylvania (“Philadelphia Lawyer Settles AIDS Discrimination Claims Against Firm,” Daily Lab. Rep. (BNA), Nov. 2, 1994, at 10).

Plaintiff Doe, an associate employed at Kohn, Nast & Graf, a prominent law firm in Philadelphia, filed an AIDS discrimination case under the Americans with Disabilities Act (ADA) against his employer claiming that the firm fired him in March 1993 because he was HIV-positive. Doe's complaint also cited claims under ERISA and other Pennsylvania employment laws.

Even with thirty years of academic experience under his belt, nothing could have prepared the medical school department chairman for the unexpected and protracted course of events that would follow his allegations of scientific misconduct against an associate professor in his department. In this actual case of scientific misconduct whistleblowing, the university allowed the accused professor to resign, but the chairman persisted in seeking a full investigation of the matter. Under the direction of the Office of Scientific Integrity (OSI) of the Department of Health and Human Services (DHHS), the institution eventually reopened the investigation, and concluded that the accused professor had fabricated and falsified data, and had plagiarized the unpublished method of other investigators. Thereafter, the professor agreed to a voluntary exclusion from receiving federal funds for a period of three years.

Despite the fact that the chairman's allegations proved true, his involvement as a “whistleblower” entailed consequences that censured rather than encouraged his behavior.

Within the health care industry, the move from regulatory cost controls to market competition has generated rapid and dramatic restructuring of providers. To enhance their competitive positions in the evolving market, many health care organizations are pursuing the ownership and integration of all elements and stages of health care delivery and payment, with the goal of increasing access to capital and lowering costs through administrative efficiencies and economies of scale. As of July 1994, 24 percent of hospitals were members of an integrated delivery system (IDS), and 47 percent were involved in IDS development.

IDSs pose a singular challenge to the Internal Revenue Service (IRS). The IRS recognizes that its traditional policies for granting tax exempt status are not flexible enough for the competitive and rapidly changing health care market. In recent years, the IRS has taken a more active role in scrutinizing emerging health care institutions seeking taxexempt status.

Hanlester Network v. Shalala (51 F.3d 1390 (9th Cir. 1995)) marks the first test of the application of the Medicare-Medicaid anti-kickback statute to physician self-referral joint ventures. The most recent development in this ongoing litigation was the April 6, 1995 decision of the Ninth Circuit Court of Appeals, holding the Hanlester Network vicariously liable for its marketing vice president's knowing and willful violation of the antikickback statute. The vice president had offered to pay physician-investors in order to induce their referrals of program-related business.

The Hanlester Network was a California general partnership comprised of corporations, clinical laboratories, and individual investors. In April 1987, it entered into a management agreement on behalf of the clinical laboratories with SmithKline BioScience Laboratories (SKBL).

On April 26, 1995, the United States Supreme Court limited the reach of the preemption provision of ERISA in New York State Conference of Blue Cross & Blue Shield Plans v. Tavelers Insurance Co. (115 S. Ct. 1671 (1995)). In Travelers, the Supreme Court upheld the validity of a New York statute requiring hospitals to collect surcharges from patients covered by commercial insurers and requiring health maintenance organizations (HMOs) to pay a surcharge to the state's general fund that varies depending on the number of Medicaid-eligible HMO members enrolled. Neither patients insured by Blue Cross/Blue Shield plans nor the plans themselves are similarly charged under the statute. Several commercial insurers and HMOs claimed the surcharges should be preempted under ERISA because they are levied on patients whose insurance or HMO membership premiums are purchased by an ERISA plan.

The ERISA preemption clause means that federal regulation, or lack thereof, supersedes state regulation that is related to employee pension and benefit plans. This preemption clause prevents states from changing health care and benefit law for a significant portion of state residents.

On April 3, 1995, the Fourth Circuit upheld the right of a Maryland hospital to terminate a surgeon who was HIV-positive (John Doe v. University of Maryland Medical System Corp. (50 F.3d 1261 (4th Cir. 1995)). A resident in the University of Maryland Neurosurgical Training Program was dismissed when hospital administrators learned of his infection with HIV. The resident, known as Dr. Doe, claimed that his termination violated federal laws protecting persons with disabilities. The court upheld the hospital's actions as lawful and affirmed the trial court's grant of summary judgment for the hospital.

Dr. Doe charged that his dismissal from the training program violated the Rehabilitation Act and the Americans with Disabilities Act (ADA).

On December 7, 1994, the U.S. District Court of the Northern District of Illinois ruled that ERISA preempts a participant in an ERISA plan from suing the plan's administrator under a state common law theory of respondeat superior (Rice v. Panchal, 875 F. Supp. 471 (N.D. Ill. 1994)) (see, “Recent Developments in Health Laws,” Journal of Law, Medicine & Ethics, 23 (1995): at 208). On September 12, 1995, the Seventh Circuit of the U.S. Court of Appeals reversed this decision and ordered that the case be tried in state court (Rice v. Panchal, 65 F.3d 637 (7th Cir. 1995)). The court held that the case had been improperly removed to federal court. The court of appeals stated that the federal court did not have jurisdiction because the plaintiff's claim did not fall within ERISA's provisions.

In this case, plaintiff David Rice brought a medical malpractice suit against two doctors who provided treatment to him in accordance with his ERISA insurance plan.

On September 18, 1995, the U.S. Court of Appeals for the Seventh Circuit handed down a decision in Blue Cross & Blue Shield United of Wisconsin v. Marshfield Clinic (65 F.3d 1406 (7th Cir. 1995)) that sets two important precedents regarding the status of health maintenance organizations (HMOs) under antitrust law. Chief Judge Posner, writing for the court, concluded that HMOs do not constitute a market separate from the general market for medical services and that agreements, between HMOs in a region, to operate in separate areas constitute a prohibited form of market splitting.

This case primarily involves two HMOs in north central Wisconsin: one a subsidiary of Blue Cross, the other a subsidiary of the Marshfield Clinic. The Blue Cross HMO claimed that the Marshfield HMO had an illegal monopoly in the region's HMO market and therefore violated the Sherman Act (15 U.S.C. § 2 (1990)).