Health Net Settles Lawsuit Over Denial of Cancer Treatment : Medicine: The HMO agrees to pay less than the $89 million a jury awarded to the family of patient.

Health Net, the state’s second-largest health maintenance organization, said Wednesday it agreed to settle a case in which a Riverside County jury ordered the HMO to pay $89 million for denying a costly, experimental treatment to a woman with breast cancer.

Both sides agreed not to disclose the financial terms of the settlement, which does not include an agreement by Woodland Hills-based Health Net to change its policy of denying payment for procedures that it considers experimental or investigational. And the financial settlement may be considerably less than the jury award. Without stating a specific figure, Health Net, a unit of $2-billion-a-year company, said reserves set aside for the lawsuit are sufficient to cover its settlement costs. Analysts put the reserves at $5 million.

While the settlement ends this case, which drew nationwide attention because of the extraordinary amount of the jury award, scores of similar lawsuits against Health Net and other health plans are pending over the same issue. The Riverside County jury award was the largest ever levied against an insurer for refusing to provide health coverage benefits, and it underscored the growing conflict over medical cost containment, particularly as more people join cost-conscious managed-care plans like HMOs.

The Riverside lawsuit was brought by the late Nelene Fox, who asked Health Net to pay for a bone marrow transplant to treat her breast cancer. She obtained the treatment with $212,000 in donated funds after Health Net refused. Fox died at age 40 last April, eight months after she underwent the treatment.

Her husband, Jim Fox, pursued the lawsuit on her behalf, and last December a Riverside jury awarded the Fox family $77 million in punitive damages and $12 million in compensatory damages. In the trial, Fox’s attorney argued that Health Net refused to pay for the procedure to save money and that the delay lessened Fox’s chance of survival.

Mark Hiepler, the Fox family lawyer, said the settlement was made because “we didn’t want it to be tied up in appellate court for several years.” Hiepler said that since the jury’s verdict last December, other insurers that initially refused to pay for bone marrow transplants for about 65 women whom Hiepler represented have changed their minds. “The legacy of Nelene Fox is that the jury spoke and because of this case many people are being helped.”

Health Net had filed a motion for a new trial in the Fox case, but the company said the Riverside judge in the case strongly urged the two sides to settle.

“The folks at Health Net feel it’s a fair settlement for all parties, and we are pleased that this case has been put behind us,” said Health Net spokesman Don Prial.

Health Net officials declined to say how many other lawsuits are pending over the same issue of denial of treatment. But Hiepler said he currently represented two other women who have health insurance through Health Net, including one in Riverside, who sought but were denied bone marrow transplants.

While health insurers have denied other experimental procedures, no procedure has stirred as much debate or lawsuits as bone marrow transplants for breast cancer patients.

Such transplants can cost about $150,000, and the procedure carries high risk to the patient because it involves the drainage of bone marrow followed by massive chemotherapy. Some doctors say that the transplants offer as much as a 20% chance of survival, but 5% or more of the patients die from the treatment itself.

Roger Greaves, Health Net’s president, defended the company’s decision in the Fox case. In a memo to employees Wednesday, Greaves said, “We maintained, and still do, that the procedure in question would have potentially done more harm than good to the patient.”