POTENTIAL
EXPOSURE FOR CREDENTIALING, QUALITY ASSURANCE, UTILIZATION MANAGEMENT AND MEDICAL
MALPRACTICE
Brock D. Phillips
1. Introduction
Liability issues for managed care plans can broadly be divided into two areas, the first being liability concerns that arise out of relationships with
insureds, the second being liability issues that arise out of relationships with providers of health care (independent contractor or employee physicians and other health professionals).
Generally, liability issues with insureds have generally taken one of two forms: (1) disputes over providing or reimbursing for services, i.e. bad faith claims, and (2) claims that the plan committed medical malpractice. A third emerging area is the filing of large class actions on behalf of insureds against plans, typically alleging breach of fiduciary duties and other ERISA violations, as well as RICO violations.
Liability issues with providers of heath care who have contractual or employment relationships with managed care plans typically involve issues of provider selection or
deselection.
This paper provides an overview of the legal theories now being asserted against plans for alleged malpractice of providers, as well as liability arising out of a plan's performance of its credentialing duties. The status of ERISA preemption as a defense will also be addressed.
Finally, the additional liability risk which may arise out of plan provider selection and deselection activities will be addressed, that is the danger of litigation brought by an excluded or expelled provider.
2. Definition of A Managed Care Plan
Uncertainty in the definition of what is a managed care plan lies at the heart of many disputes over the scope of plan liability. This author does not believe there is any clear consensus about what the term "managed care plan" means. Depending on who is advancing the definition, it probably has embraced everything from traditional indemnity plans on the reimbursement side to small physician IPAs on the provider side.
Because so many different types of entities consider themselves managed care plans, they bring dramatically different perspectives to the liability problems faced by managed care plans. Managers and counsel with backgrounds in indemnity tend to understand and accept the liability risks presented by denial of services (or reimbursement) because the bad faith doctrine is well understood by that community. But they have little experience with, and tend to rebel against, the notion that their activities might constitute medical malpractice. Similarly, they are often unfamiliar with the idea that they may have an affirmative duty to credential providers effectively and fairly. Conversely, those who come to the managed care arena with a background in direct patient care readily understand and accept malpractice and credentialing problems, but are entirely unfamiliar with claims processing issues which can turn into bad faith litigation.
This author believes that true managed care inevitably involves characteristics of both payors and providers. The term "plan" embraces the insurance or indemnity aspect of the product, while the term "managed" implies involvement in how care is provided. When a product truly offers managed care (or claims it does) it will be exposed to all of the forms of liability that adhere to both insurers and providers.
3. Theories of Malpractice Liability Arising Directly Out of Plan Activities
In traditional indemnity arrangements, health plans were sufficiently separated, both factually and legally, from the provision of medical care that they 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 plans themselves.
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 entitles a harmed plan member to seek damages from the plan. Claims of direct negligence asserted against a plan typically fall into one of two categories:
A. Plan action or failure to act directly affected 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.
Liability Claims Brought Against Plans Which Allege Plan
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 medical situations that previously would have been referred to a specialist;
2. Restricting lengths of stay in in-patient settings and lowering the level of intensity in those settings;
3. Limiting in-patient treatment to certain contracting facilities which may not be the most geographically convenient to the patient, or have particular expertise in the patient's needs;
4. Delaying admission or treatment because contracting facilities or providers are heavily scheduled with scarce availability;
5. Establishing medical policies that dictate the availability or non-availability of certain types of treatments for various injuries and illnesses;
6. 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. A particular hot item are cases where plans include a financial withhold to be distributed to providers at the end of a fiscal accounting period based upon funds not used up by hospitalizations or referrals to specialists. Care which appears inadequate in the face of such arrangements calls into question whether the financial incentives are so corrosive as to alter treatment decisions to the detriment of the patient.
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.
