1 See Daniel M. Fox, Physicians Versus Lawyers: A Conflict of Cultures, in AIDS and the Law: A Guide for the Public 210, 210 (Harlon L. Dalton et al. eds„ 1987) [hereinafter AIDS and the Law].

2 See generally James C. Mohr, Doctors and the Law: Medical Jurisprudence in Nineteenth-Century America (1993) (discussing the practice of medicine in early America).

3 See Fox, supra note 1, at 211 (observing that “the conflict between physicians and lawyers, though it is rooted in the modern history of the two professions, has become more intense in recent years as the authority most people accord to physicians has diminished").

4 Norman Daniels and James Sabin have been developing a similar approach, albeit in a different context. See generally Norman Daniels & James E. Sabin, The Ethics of Accountability in Managed Care Reform, Health Aff., Sept. 1998, at 50 (discussing a movement in managed care reform to increase accountability to consumers); Norman Daniels & James E. Sabin, Last Chance Therapies and Managed Care: Pluralism, Fair Procedures, and Legitimacy, Hastings Center Rep., Mar.-Apr. 1998, at 27 (discussing how greater fairness in the decision-making process is needed when health plans are expanding experimental and last chance procedures); Norman Daniels & James E. Sabin, Limits to Health Care: Fair Procedures, Democratic Deliberation, and the Legitimacy Problem for Insurers, 26 Phil. & Pub. Aff. 303 (1997) (discussing the shift of authority over medical care from the patients to private organizations).

5 See Robert Cooter & Bradley J. Freedman, The Fiduciary Relationship: Its Economic Character and Legal Consequences, 66 N.Y.U. L. Rev. 1045, 1048 (1991); see also Maxwell J. Mehlman, Fiduciary Contracting: Limitations on Bargaining Between Patients and Health Care Providers, 51 U. Pitt. L. Rev. 365, 365 (1990) (discussing the rules of fiduciary contracting); Marc A. Rodwin, Strains in the Fiduciary Metaphor: Divided Physician Loyalties and Obligations in a Changing Health Care System, 21 Am. J.L. & Med. 241, 242 (1995) (examining the “metaphor of physicians as fiduciaries").

6 Cooter & Freedman, supra note 5, at 1048.

7 See David Mechanic, The Functions and Limitations of Trust in the Provision of Medical Care, 23 J. Health Pol., Pol'y & Law 661, 669 (1998).

8 See generally Clark C. Havighurst, Health Care Choices: Private Contracts as Instruments of Health Care Reform (1995) (arguing that private contracts can be used to specify the legal rights of patients in relation to health care providers); Marc A. Rodwin, Medicine, Money, And Morals (1993) (examining the relationship between professional ethics and economic interests in determining medical behavior); M. Gregg Bloche, Clinical Loyalties and the Social Purposes of Medicine, 281 Jama 268 (1999) (reviewing the conflicts between the ethic of “loyalty to patients and pressure to use clinical methods and judgment for social purposes and on behalf of third parties”); Mark A. Hall & Robert A. Berenson, Ethical Practice in Managed Care: A Dose of Realism, 128 Annals of Internal Med. 395 (1998) (examining the ethics of medical practice under managed care).

9 This section is adapted from Peter D. Jacobson & Neena M. Patil, Managed Care Litigation: Legal Doctrine at the Boundary of Contract and Tort (unpublished manuscript, on file at Medical Care Research and Review).

10 See Jacobson, Peter D., Legal Challenges to Managed Care Cost Containment Programs: An Initial Assessment, Health Aff., July-Aug. 1999, at 69, 76-83Google Scholar.

11 See Havighurst, supra note 8, at 1-10; Patricia M. Danzon, Tort Liability: A Minefield for Managed Care?, 26 J. Legal Stud. 491, 492 (1997) (noting that various experiments offering low-cost, low-benefit plans have not succeeded in the market).

12 See Havighurst, supra note 8, at 1-10.

13 Paul H. Rubin, Treatment Decisions: Tort or Contract?, Regulation, Winter 1999, at 25, 27.

14 See id.

15 See Morreim, E. Haavi, Moral Justice and Legal Justice in Managed Care: The Ascent of Contributive Justice, 23 J.L. Med. & Ethics 247, 256-58 (1995)Google Scholar.

16 See Catherine G. McLaughlin & Paul B. Ginsburg, Competition, Quality of Care, and the Role of the Consumer, 76 Milbank Q. 737, 739 (1998) (stating that consumers lack the information and knowledge to judge the quality of services).

17 P.S. Atiyah, Medical Malpractice and the Contract/Tort Boundary, 49 Law and Contemp. Probs. 286, 295(1986).

18 See Jacobson & Patil, supra note 9.

19 See, e.g., Richard A. Epstein, Mortal Peril: Our Inalienable Right to Health Care? 382-83 (1997); Danzon, supra note 11, at 518-19; Havighurst, Clark C., Making Health Plans Accountable for the Quality of Care, 31 GA. L. Rev. 587, 645-46 (1997)Google Scholar; George L. Priest, The Current Insurance Crisis and Modern Tort Law, 96 Yale L.J. 1521, 1525 (1987); Rubin, supra note 13, at 29-30. The evidence that tort law actually increases health care costs is sparse. Atiyah argues that the proper response is to reform the tort system and not allow contracting for lower than reasonable standards of care. See Atiyah, supra note 17, at 287-303.

20 Wendy K. Mariner, Standards of Care and Standard Form Contracts: Distinguishing Patient Rights and Consumer Rights in Managed Care, 15 J. Contemp. Health L. & Pol'y, Fall 1998, at 1, 27.

21 See William M. Sage et al., Enterprise Liability for Medical Malpractice and Health Care Quality Improvement, 20 AM. J.L. & Med. 1, 6 (1994) (illustrating the tension between the individual patient's well-being and the general population's well-being).

22 Some scholars have proposed strategies that would bridge tort and contract. For example, Havighurst and Sage argue that enterprise liability is most appropriate, while Brewbaker argues in favor of a breach of warranty standard. See Havighurst, supra note 19, at 587; Sage et al., supra note 21, at 1-2. But see Health Care Corporate Law: Managed Care § 6.2.5.2 (Mark A. Hall & William S. Brewbaker, III eds., 1996) (discussing theories of managed care liability, including contractual obligations. For example, some courts will find that the insurer breached an implied covenant of good faith and fair dealing). In addition, Mariner and Morreim propose standards that would combine elements of tort and contract. For details, see Jacobson & Patil, supra note 9.

23 29 U.S.C. §§ 1001-1461 (1999).

24 See Cooter & Freedman, supra note 5, at 1046.

25 See Varity Corp. v. Howe, 516 U.S. 489, 504 (1996) (“Indeed, the primary function of the fiduciary duty is to constrain the exercise of discretionary powers which are controlled by no other specific duty imposed by the trust instrument or the legal regime.”).

26 See George T. Bogert, Trusts 334 (6th ed. 1987).

27 V See id. at 341.

28 See id. at 336; see also id. at 334-35, 342 (stating that the lack of good judgment or improper motivation triggers a breach of fiduciary duty).

29 See id. at 335.

30 See id. at 335-36 n.17.

31 See ;rf. at 341.

32 Cf. William M. Sage, Physicians as Advocates, 35 Houston L. Rev. 1529 (1999) (presenting a case for doctors providing lawyer-like advocacy).

33 See Marc A. Rodwin, Strains in the Fiduciary Metaphor: Divided Physician Loyalties and Obligations in a Changing Health Care System, 21 Am. J.L. & Med. 241, 256 (1995) (“[T]he fact that physicians have obligations to third parties does not mean that they cannot be fiduciaries for patients. Obligations to third parties may merely limit the scope of fiduciary obligation. . . .”)·

34 See, e.g., McGraw v. Prudential Ins. Co. of America, 137 F.3d 1253, 1259 (10th Cir. 1998) (holding that a decision to deny benefits is arbitrary and capricious if it is not a reasonable interpretation of the plan's terms).

35 See, e.g., Peter D. Jacobson et al., Defining and Implementing Medical Necessity in Washington State and Oregon, 34 Inquiry 143, 143 (1997).

36 See Jacobson, supra note 10, at 69-70.

37 See Peter D. Jacobson & C.J. Rosenquist, The Introduction of Low-Osmolar Contrast Agents in Radiology: Medical, Economic, Legal and Public Policy Issues, 260 Jama 1586, 1586 (1988).

38 See Varity Corp. v. Howe, 516 U.S. 489, 514 (1996).

Id.

39 This section is adapted from Peter D. Jacobson & Scott D. Pomfret, Erisa Litigation and Physician Autonomy, 283 Jama 921, 921-26 (2000).

40 29 U.S.C. §§ 1001-1461 (1999).

41 Id. § 1104(a)(1).

42 See Peter D. Jacobson & Scott Pomfret, Form, Function, and Managed Care Torts: Achieving Fairness and Equity in Erisa Jurisprudence, 35 Houston L. Rev. 985, 987 (1998); E. Haavi Morreim, Benefits Decisions in Erisa Plans: Diminishing Deference to Fiduciaries and an Emerging Problem for Provider-Sponsored Organizations, 65 Tenn. L. Rev. 511,512 (1998).

43 See Reilly v. Blue Cross & Blue Shield, 846 F.2d 416, 423 (7th Cir. 1988). But see Kyle Railways, Inc. v. Pacific Administration Servs., 990 F.2d 513, 516-17 (9th Cir. 1993). It is agreed that MCOs and employers are not considered fiduciaries with regard to establishing or changing the terms of the plan. See id.

44 See Tire, Firestone & Bruch, Rubber Co. v., 489 U.S. 101, 107-08 (1989)Google Scholar.

45 See McGraw v. Prudential Ins. Co., 137 F.3d 1253, 1259 (10th Cir. 1998); Morreim, supra note 42, at 520.

46 See Mark A. Hall & Gerald F. Anderson, Health Insurers' Assessment of Medical Necessity, 140 U. PA. L. Rev. 1637, 1669 n.124 (1992).

47 See, e.g., Adams v. Freedom Forge Corp., 204 F.3d 475, 491 (3d Cir. 2000); Seales v. Amoco Corp., 82 F. Supp. 2d 1312, 1322 (M.D. Ala. 2000).

48 See England v. John Alden Life Ins. Co., 846 F. Supp. 798, 801 (W.D. Mo. 1994).

49 See, e.g., Hall & Anderson, supra note 46, at 1670.

50 See Killian v. Healthsource Provident Administrators, Inc., 152 F.3d 514, 521 (6th Cir. 1998).

51 Another safeguard, ex post oversight of the fiduciary's decisions, is legal rather than structural in nature and is discussed infra Part IV.C.

52 That issue is central to the Supreme Court's upcoming consideration of Herdrich v. Pegram, 154 F.3d 362 (7th Cir. 1998), reh'g denied, 170 F.3d 683 (7th Cir. 1999), cert, granted, 120 S. Ct. 10(1999).

53 See Clifford A. Cantor, Fiduciary Liability in Emerging Health Care, 9 Depaul Bus. L.J. 189, 190(1997).

54 See Varity Corp. v. Howe, 516 U.S. 489, 506 (1996).

55 Cf. Hall & Anderson, supra note 46, at 1669 (“[T]he only conflict the [self-insuring] employer faces is that between a single claimant and a pool of beneficiaries, the very conflict that should be foremost in the insurer's mind when assessing medical appropriateness.”).

56 See Morreim, supra note 42, at 524-28 (1998).

57 154F.3d362.

58 Herdrich v. Pegram, 170 F.3d 683, 687 (7th Cir. 1999) (Easterbrook, J., dissenting from denial of rehearing en banc).

59 See Bogert, supra note 26, at 343 n.l 1.

Id.

60 137 F.3d 1253, 1258-59 (10th Cir. 1998).

61 Id. at 1258.

62 Id. at 1259.

63 See supra Part I1I.B. For a discussion of this issue at greater length see infra section IV.C.

64 A full discussion of disclosure is beyond the scope of this article. For such a discussion, see generally Sage, William M., Regulating Through Information: Disclosure Laws and American Health Care, 99 Colum. L. Rev. 1701 (1999)Google Scholar. See also Mark A. Hall, A Theory of Economic Informed Consent, 31 GA. L. Rev. 511, 516-20 (1997).

65 710 N.E.2d 418 (111. App. 2d 1999).

66 Id. at 427.

67 107 F.3d 625 (8th Cir. 1997).

68 Id. at 628 (quoting Eddy v. Colonial Life Ins. Co., 919 F.2d 747, 750 (D.C. Cir. 1990)).

69 Cf. Muse v. Charter Hosp. of Winston-Salem, Inc., 452 S.E.2d 589, 594 (N.C. Ct. App. 1995) (holding that a “hospital has the duty not to institute policies . . . which interfere with the doctor's medical judgement.”).

70 See generally articles cited supra note 4 (offering an extended analysis).

71 63 Cal. Rptr. 2d 202, 207 (1997) (quoting Delta Dental Plan v. Banasky, 27 Cal. App. 4th 1598, 1607 (1994)), affd, 2000 Lexis 3717 (Cal. Sup. Ct. 2000).

72 See id. at 208-09.

73 See Bogert, supra note 26, at 335; M. Gregg Bloche, Fidelity and Deceit at the Bedside, 283 Jama 1881, 1881-84 (2000).

74 For an example of a case where a court decided, rightly in our view, that no such medical justification supported the decision to deny care, see McGraw v. Prudential Ins. Co., 137 F.3d 1253 (10th Cir. 1998). In McGraw, the medical director charged with reviewing the decision to deny coverage did not even undertake to review the patient's medical records. Relying in part on this “egregious” failure, the court found the ultimate decision to deny coverage to be arbitrary and capricious. See id. at 1262-63. Under our model, the failure to review medical records would automatically preclude any ability to show a medical justification for the decision at the time the decision was made and would therefore amount to a per se breach of fiduciary duty.

75 29U.S. C § 1104(1994).

76 See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101,111 (1989).

Varity Corp. v. Howe, 516 U.S. 489, 514-15 (1996).

77 See Sara Rosenbaum et al., Who Should Determine When Health Care is Medically Necessary?, 340 New Eng. J. Med. 229, 232 (1999).

78 See Morreim, supra note 42, at 551-52.

79 See Hall & Anderson, supra note 46, at 1698-1705.

80 This phrase has been used as a legal term of art in a variety of situations. See, e.g., Swint v. Chambers County Comm'n, 514 U.S. 35, 51 (1995); Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 345 (1990). In the context of Erisa preemption of state law claims, courts have held that the “essential inquiry” is whether allegedly negligent medical advice or care was inextricably intertwined with administration of plan benefits. See, e.g., Schmid v. Kaiser Foundation Health Plan, 963 F. Supp. 942, 944-45 (D. Or. 1997). Thus here, as elsewhere, there is a rough correlation (though by no means congruence) between our fiduciary analysis and the Erisa regime.

81 As Hall and Anderson note, models of judicial review based on fiduciary duties share similarities with models of review under administrative law, constitutional law and the law of arbitration. See Hall & Anderson, supra note 46, at 1696 (noting that fiduciary, administrative and arbitration models of judicial review are “somewhat competing and somewhat overlapping”)- Space constraints prevent a thorough analysis of the similarities and differences of the results under our proposed standard of review as opposed to these other models, but we think the analogy to rational-basis review under constitutional law, though inexact, is useful.

82 See Daniel R. Mandelker, Housing Issues, in AIDS and the Law, supra note 1, at 142, 148.

83 See id.

84 See, e.g., Milner v. Apfel, 148 F.3d 812, 816 (7th Cir. 1998) (explaining that in some instances a more searching “active” standard of review is used).

85 At least one federal court of appeals has read the Supreme Court's decision in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), to impose such a requirement on Erisa trustees. See Cox v. Mid-America Dairymen, Inc., 965 F.2d 569, 574 (8th Cir. 1992).

86 See. e.g., Herdrich v. Pegram, 170 F.3d 683, 686 (7th Cir. 1999) (Easterbrook, J., dissenting from denial of rehearing en banc) (arguing that “[fiduciary duties are vital when contracts are incomplete, but when a contract fully specifies proper behavior, then even a full-fledged trustee need not (indeed, must not) depart from the contractual provisions that the settlor established.”); Turner v. Fallon Community Health Plan, Inc., 127 F.3d 196, 200 (1st Cir. 1997) (noting that “[t]he notion that there is a fiduciary duty on Fallon's part to expend funds for treatment explicitly excluded from the plan would be quite a stretch").

87 See Bloche, supra note 8, at 268.

88 Id. at 272.

89 See Bogert, supra note 26, at 549-50.

90 See id. at 289.

91 See Restatement (Second) of Torts § 874 (1979). 9 2 See, e.g., Restatement (Second) of Agency § 13 (1958) (explaining the fiduciary responsibilities of an agent).

93 Two commentators that have considered this approach are E. Haavi Morreim and Maxwell Mehlman. See generally Morreim, supra note 42; Mehlman, supra note 5 (discussing imposing the obligations of a fiduciary upon health care organizations for the purposes of patient-related decisionmaking and judicial review). Cf. Hall & Anderson, supra note 46, at 1697-98 (discussing, but quickly dismissing, the possibility of a “trust law model” for judicial review of decisions).

94 See supra Part III.B.

95 See Varity Corp. v. Howe, 516 U.S. 489, 497 (1996).

96 See United States v. Nova Scotia Food Products Corp., 568 F.2d 240, 252-53 (2d Cir. 1977) (deciding that where the FDA did not cite reasons for its regulation, the regulation was arbitrary and invalid).

97 See Bloche, supra note 8, at 268-74; Mechanic, supra note 7, at 661.

98 For an excellent and comprehensive history of this transformation, see generally Paul Starr, the Social Transformation of American Medicine (1982).

99 See David C. Hadorn, Emerging Parallels in the American Health Care and Legal-Judicial Systems, 18 Am. J.L. & Med. 73, 75-76 (1992) (highlighting similarities in decisionmaking that the legal and medical systems use, including structural and procedural aspects).

100 See id. at 79.

101 See Marc A. Rodwin, Medicine, Money, and Morals 159 (1993); Bloche, supra note 8, at 269.