THE
CHANGING LIABILITY LANDSCAPE FOR MANAGED CARE PLANS (CON'T)
By Brock D. Phillips
The above noted examples are common features of many managed care schemes. Each of these restrictions or guidelines has the potential to directly effect the management of a patient's care in a way which can be relevant to a claim of malpractice. Plaintiffs' attorneys are recognizing the possibility that plan policies may have directly dictated the treatment provided to the claimant, or that plan financial incentives may have influenced the selection of the care ultimately provided.
It is interesting to note that the California governor's managed care task force chaired by Alain C.
Enthoven, Ph.D. which was tasked with examining managed care and recommending legislative or regulatory action concluded that managed care plans definitely practice medicine. The task force was deadlocked on recommending how to address potential liability for plan malpractice but it had no trouble concluding that plans, by managing care definitely effect the nature and quality of care provided.
While there is little precedential case law on the theory of plan malpractice (aside from cases addressing ERISA preemption, see below), claims of direct liability for "management" of care by plans are turning up in trial courts and are based on traditional tort principles of duty of care, breach of the duty, and harm flowing from the breach. One of California's major malpractice insurance carriers issued a loss study trend report for 1995. The study found managed care issues of the type outlined above in 7 California cases broken down as follows:
- failure to provide needed treatment (2 cases);
- failure to refer to a more appropriate specialist for treatment (2 cases);
- failure to diagnose conditions because of communications breakdowns related to multiplicity of providers (2 cases); and
- failure to follow up on an abnormal test result (1 case).
The same study cited several non-California civil suits involving claims against managed care plans, including a Georgia case in which an HMO required a family with a sick infant to drive 42 miles to get to a hospital with which the plan had a discounted rate when other facilities were closer. The infant arrested enroute and ultimately suffered partial amputation of all four limbs due to
meningococcemia. A jury awarded $45,000,000 against the HMO and a medical group involved in the incident.
Humana was hit in 1998 by a Kentucky jury for 13 million dollars in damages for failing to provide a requested hysterectomy to a woman with cervical cancer who later died. Reports from the trial indicated Humana wanted to pay for a cheaper, less invasive procedure. A physician testified for the plaintiffs that the denied procedure might have saved the patient's life and said the disputed treatment was medically necessary. The jury deliberated only 2 hours, before awarding $14,000 for the uncompensated procedure and $13 million in punitive damages for bad faith.
When plan policies directly dictate or influence the nature and quality of the care provided, and a malpractice claim arises, the plan will likely find itself named as a defendant along with the physicians who provided the care. Further even if the plaintiff does not name the plan as a defendant, if the providers who are named as defendants believe that plan policies dictated or influenced the care, they may cross claim against the plan as part of their defense.
In some instances, plans have argued that they cannot be sued for medical malpractice because they are not licensed to practice medicine in the states in which they operate. This argument was advanced on several occasions in Texas and inspired the Texas legislature to enact a law specifically holding that managed care plans making decisions which effect the availability or quality of medical care can properly be sued for malpractice. Multiple plans challenged the statute in federal court, claiming it conflicts with ERISA's preemptive sweep. In June of 2000 the 5th Circuit issued its decision in the case, upholding the liability portion of the Texas statute. The court concluded that ERISA does not preempt the state's traditional control over issues like negligence and malpractice and its power to regulate the quality of health care. The court dryly commented that a suit for malpractice against a physician is not preempted by ERISA simply because those services were arranged by an HMO for whom the doctor acted as an agent. It further concluded that the Texas statute does not expose managed care plans to state law claims concerning coverage decisions (which would be preempted by ERISA) but is confined to treatment issues.
In so holding, the 5th Circuit candidly acknowledged, "We have repeatedly struggled with the open-ended character of the preemption provisions of ERISA and
FEHBA." It went on to cite the recent trilogy of Supreme Court cases in which the Supreme Court itself acknowledged there must be more finite limits to the "relate to" clause of ERISA, i.e. Travelers, Dillingham Construction, and Dubuono (see discussion of these three cases above). The 5th Circuit observed that the Supreme Court itself now appears to be retreating from its formerly limitless interpretation of the sweep of ERISA preemption.
Finally to this point, the Illinois Supreme Court has approved direct negligence claims against managed care plans in Jones
v. Chicago HMO Ltd. In Jones the HMO solicited Medicaid patients in a door-to-door marketing campaign in which potential members were told the HMO was superior to Medicaid. Enrollees were led to believe the plan would provide all their medical care. The enrollee sought pediatric care from the only HMO pediatrician in her area. She was advised by the pediatrician over the telephone to give her three-month old infant castor oil. The next day the enrollee took the infant to the emergency room where it was quickly diagnosed with bacterial meningitis, resulting in permanent brain damage. Plaintiff sued the HMO on theories of direct negligence, vicarious liability for the conduct of the physician, and breach of contract. An intermediate appellate court upheld plaintiff's right to pursue a claim for vicarious liability, but rejected the possibility of seeking a direct negligence claim against the HMO. The Illinois Supreme Court reversed on the issue of direct liability, expressly authorizing such claims against managed care plans. The court analogized such claims to institutional negligence claims against hospitals and said that HMOs have undertaken a sufficiently expansive role in providing health care services that the same theories should apply to such entities. Specifically in Jones the court felt the plaintiff adequately pleaded a question about whether the plan assigned too many patients to the physician in question for that provider to be able to adequately treat all those under his care. Interestingly, the HMO's medical director had testified that the maximum number of patients that should be assigned to any one primary care physician was 3,500, while the evidence was that the physician in question had 4,500 patients assigned to him by the HMO (and a total case load of over 6,000).
B. Direct Liability of Plan for Failure to Properly Credential Panel Providers
Darling v. Charleston Community Memorial Hospital established the principle that a hospital can be directly liable for negligent failure to properly credential members of the medical staff. In brief, the theory requires a hospital to conduct an appropriate "due diligence" on the credentials and abilities of an applicant for new or renewed membership. Where serious shortcomings of the physician would have been revealed by appropriate and conscientious credentialing, the institution may be liable for any patient harm caused by the substandard clinician who slipped through the credentialing process. Elam v. College Park Hospital.
The application of this same standard to managed care plans has been adopted by a number of courts and should come as no surprise. Two decisions which support this theory of liability include Harrell v. Total Health Care Inc. ; and McClellan v. Health Maintenance Organization of Pennsylvania.
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