Mary E. O'Byrne


Given this scale of investment, the centrality of information systems to the success of an HMO, the obligation of regulatory compliance, plus the attention now focused on the year 2000 "millenium bug" problem, information systems are clearly a major area of concern and oversight by corporate directors. This paper analyzes the role of information systems in HMOs and the nature of the HMO directors' duty of care in monitoring the integrity of the information systems to determine when directors may be held personally liable for losses suffered by the corporation when the systems collapse. Section I addresses in general the nature of the corporate director's duty of care to monitor business performance. Section II considers the requirements of finding a director liable for negligence in failing to meet this duty. Section III gives an overview of the HMO industry's dependence on information systems. Section IV focuses specifically on the recent experience of the Oxford Health Plan. Section V discusses the potential liability of an HMO's board in light of the events at Oxford and applicable legal standards for the director's duty of care in monitoring. Section VI concludes with observations on the limits to directors' liability.