Amy L. Cralam


The impact of physician incentive programs is at the heart of the recent Supreme Court case Herdrich v. Pegram. In Herdrich, the patient, Cynthia Herdrich, challenged the use of a common incentive structure that allowed physicians to profit from decreased utilization of expensive medical procedures.' Ms. Herdrich alleged that the use of these incentive programs created a conflict of interest for her treating physician and that conflict of interest caused a misdiagnosis of her appendicitis." The Seventh Circuit Court of Appeals agreed with Ms. Herdrich but was later overruled by the Supreme Court. This article suggests that Herdrich v. Pegram was wrongly decided. It will be shown that the case should have been remanded to the District Court for further review. In Section IVA., this article suggests that a fiduciary duty exists between the HMO and it's membership. Even under an ERISA standard a fiduciary duty could be perceived.