POTENTIAL
EXPOSURE FOR CREDENTIALING, QUALITY ASSURANCE, UTILIZATION MANAGEMENT AND MEDICAL
MALPRACTICE (CON'T)
Brock D. Phillips
It is noteworthy that this is the same appellate court that had ruled the reverse in the Raglin case six years earlier. In Petrovich the court distinguished Raglin on the grounds that the HMO in Petrovich (a) conducted a quality assessment program which was designed to monitor for substandard medical care; and (b) included language on its member handbook which could be interpreted as holding out its network physicians as agents of the HMO.
A third Illinois case, Jones v. Chicago HMO Ltd. of Ill. , held as a fact question for the jury whether advertising created ostensible agency between HMO and physician provider. In Jones, the Illinois appeals court ruled that the doctrine of vicarious liability may be used to hold an HMO responsible for treatment provided by physicians who are independent contractors when 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. The court held that the marketing strategy may have created the appearance that the physician was the HMO's agent. The Illinois Supreme Court later also ruled that the HMO could be held liable on theories of direct institutional negligence (see discussion above).
Case law to date strongly suggests that in most jurisdictions, courts are likely to permit plaintiffs to pursue claims against IPA style managed care plans under the doctrine of ostensible agency when the facts demonstrate representations to the plan members about the selective nature of the plan's provider panel. plan counsel should presume that marketing of this type carries with it a high risk of ostensible agency liability.
7. Suits by Providers Against Plans for Wrongful Exclusion or Expulsion
All of the above comments relate to the risk managed care plans are now encountering concerning malpractice claims from plan members. An entirely separate problem arises out of credentialing activities in the form of risk of litigation brought by disappointed providers who are excluded or expelled from a plan. A few of these cases have begun appearing around the country and the frequency is certain to increase.
Generally, claims by providers against plans for exclusion or expulsion are framed on antitrust or due process grounds. Claims of this type are strongly analogous to medical staff credentialing litigation and the courts are certain to rely on that body of law in addressing similar litigation against plans. While there is presently very little appellate law on this issue, four cases warrant consideration.
In the 1996 case of Napoletano v. CIGNA , the Connecticut Supreme Court considered companion suits, one brought by a group of physicians who had been removed from CIGNA's provider network, and a second suit brought by CIGNA plan members complaining of the same action. The Connecticut Supreme Court concluded that these claims were not preempted by ERISA and could proceed in to trial under Connecticut law. In finding no preemption by ERISA, the Connecticut Supreme Court focused on the U.S. Supreme Court's recent decision in New York State Conference of Blue Cross & Blue Shield Plans
v. Travelers Ins. Co. . In that decision the Supreme Court elaborated on the scope of ERISA preemption and its language has provided support for those courts seeking to narrow the preemptive scope of ERISA.
Connecticut's neighbor New Hampshire also considered the issue of provider exclusion litigation in 1996. In its decision in Harper
v. Healthsource New Hampshire, Inc. the New Hampshire Supreme Court held that a physician could maintain a claim for wrongful termination of his provider status on the ground that the termination violated public policy. The application of the public policy doctrine to an exclusion case was a creative and somewhat unexpected approach. It's success warrants careful consideration.
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.
There are at least two interesting trial court decisions on this issue of interest. Neither case produced a published decisions (at least so far). There is also a noteworthy settlement in this area.
The first trial court case is Self v. Children's Associates Medical Group. Dr. Self is a pediatric gastroenterologist who was a member of a large (77 members) pediatric group in San Diego. There were long standing tensions between Dr. Self and the group which erupted when he was finally terminated in 1995. Dr. Self claimed he was terminated because he was an advocate for patient care that did not always meet the cost goals of the group. Dr. Self sued the group primarily under a California statute (Business and Professions Code §2056) that forbids any entity to take action against a physician for patient advocacy. At the trial, Dr. Self successfully portrayed himself as a patient advocate while his former partners failed in their efforts to characterize him as an undisciplined physician who practiced inefficient medicine.
