LIABILITY OF
MANAGED CARE PLANS FOR MEDICAL MALPRACTICE & CREDENTIALING/QA/UM EXPOSURE
by
Brock D. Phillips
Introduction
Theories of Malpractice
Liability Arising Directly Out of Plan Activities
Indirect or Vicarious
Liability of Plan For Malpractice of Panel Members
End of ERISA Preemption
for Claims of Malpractice
Liability Under ERISA
For Treatment Disincentives or Failure to Disclose Treatment Disincentives
Strategies to Reduce
Liability for Malpractice Claims
Suits by Providers
Against Plans for Wrongful Exclusion Expulsion
1. Introduction
Over the last 3-4 years managed care plans have been
increasingly threatened with the risk of claims from patients asserting liability on the
part of the plan for medical malpractice. Such claims may be based upon a theory that the
Plan itself was directly negligent in some respect, or that it is vicariously liable for
negligent acts of the involved health care providers. Liability for malpractice is a
relatively new phenomena for health plans.
In
a traditional indemnity arrangement, a Plan was sufficiently separated, both factually and
legally, from the provision of medical care that it had no liability for claims of alleged
malpractice. However, as the structure of managed care plans has blurred the distinction
between payor and provider, the legal liabilities which traditionally fell only on
providers are now being asserted against the Plans themselves.
This
paper will examine the legal theories now being asserted against Plans on the issue of
malpractice, including possible liability arising out of a Plan's performance of its
credentialing/QA/UM duties. ERISA preemption as a defense will be explored, as will
strategies for reducing risk of claims of this type.
Finally,
this paper will address the additional risk of litigation by excluded or expelled
providers which may arise out of Plan credentialing/QA/UM activities.
2. Theories of Malpractice Liability
Arising Directly Out of Plan Activities
Managed care plans are now being directly sued for
medical malpractice. These suits may include allegations that the Plan itself was actively
negligent in its discharge of its duties in a way which harmed a Plan member. Claims of
direct negligence asserted against a Plan typically fall into one of two categories:
A.
Plan action or failure to act directly effected the care provided to the claimant and
constituted medical malpractice;
B.
Plan failure to properly credential its health care providers caused the claimant to be
harmed by a provider that the Plan should have excluded from its panel.
Each
of these bases for potential liability is separately considered below.
A. Liability Claims Brought Against Plans Which
Allege that Plan Action or Inaction was Directly Negligent and Caused Harm to the
Claimant.
The more a Plan "manages" the care
available to its members, the greater the risk that it may be found directly liable for
malpractice. While Plans often argue that they play no role in care provided to their
members, many Plan activities contradict this assertion.
Some
of the most common methods by which Plans "manage" member care include the
following:
1.
Limiting access to specialists through gatekeepers and requiring primary care physicians
to handle many medical situations that previously would have resulted in a referral to a
specialist;
2.
Restricting lengths of stay in in-patient settings and lowering the level of intensity in
those settings;
3.
Establishing medical policies that dictate the availability or non-availability of certain
types of treatments for various injuries and illnesses;
4.
Requiring Plan physicians to limit drug prescriptions to Plan formularies.
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.
While
there is very little published law on theories of this type, 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 recently issued a
loss study trend report for 1995. It 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 last year 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.
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.
While
it is probably obvious that liability for negligent credentialing should apply to a staff
model HMO, the application of this standard to an IPA style managed care plan is more
controversial. Increasingly courts are holding even IPA style plans liable for negligent
credentialing, particularly when marketing materials extol the high quality of a Plan's
providers and either state outright or imply that the Plan is selective on the basis of
quality in the staffing of its panel members.
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