THE
CHANGING LIABILITY LANDSCAPE FOR MANAGED CARE PLANS (CON'T)
By Brock D. Phillips
Finally California has recently seen three decisions relevant to this topic. In Delta Dental Plan
v. Banasky a California court of appeal held that due process requirements which historically applied to medical staffs and other professional associations also applied to expulsion from a managed care plan. In Ambrosino
v. Metropolitan Life Insurance Company , a federal judge determined that a plan's expulsion of a provider on charges of substance abuse was violative of the clinician's due process rights where a fair hearing procedure was not afforded the physician.
Most significantly the California Supreme Court recently decided the case of Potvin
v. Metropolitan Life. In that case Dr. Louis Potvin, an obstetrician and gynecologist, sued Metropolitan Life over his expulsion from a managed care provider panel. Potvin had been a member of MetLife's panel for approximately four years when his status was reviewed under new criteria. When Potvin challenged his expulsion and demanded an explanation, MetLife gave different explanations at different times, finally admitting that the expulsion was based upon criteria which Metlife had established for malpractice history. Potvin had four claims from a number of years previously, three of which had been dropped and one of which had been settled despite Dr. Potvin's claim that he had done nothing wrong.
Dr. Potvin's claim was dismissed by the trial court on a motion for summary judgment filed by MetLife, but he took the matter up on appeal. Dr. Potvin won in the court of appeal and more recently in a long awaited decision by the California Supreme Court. The Supreme Court relied on a number of prior California decisions which established the common law principle that whenever a private association is legally required to refrain from arbitrary action, the association's action must be both substantively rational and procedurally fair. The Court observed that the underlying rationale of the earlier cases is that certain private entities possess substantial power either to thwart an individual's pursuit of a lawful trade or profession, or to control the terms and conditions under which it is practiced. The Court concluded that this line of authority applies to a private entity when it's conduct effects the public interest.
In so ruling, the Court quoted with approval the Harper decision from New Hampshire in finding that third party payors in the health care system exercise responsibilities heavily imbued with public interest particularly by limiting public access to physicians. However, the Court limited it's holding by noting that the obligation to provide due process arises only when the insurer possesses power so substantial that the removal significantly impairs the ability of an ordinary, competent physician to practice medicine or a medical specialty in a particular geographic area, thereby affecting an important, substantial economic interest. How a plan is to determine whether its deselection will have such an effect at the time it is making it's decision was not addressed by the court. Finally, the Court ruled that a "without cause" termination clause in MetLife's contract with Dr. Potvin was unenforceable as against public policy.
Each of these decisions reflects angst within the medical community and the public over the control which managed care plans hold over the link between patients and providers. It seems probable that due process requirements which now exist for medical staff credentialing will be grafted on to procedures for exclusion or expulsion from managed care panels at least in circumstances where the expulsion is not for purely economic reasons. The extent to which even more novel and aggressive arguments on grounds like public policy will take hold remains to be seen.
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