The Patient, The Doctor & The HMO - Malpractice In Managed Care

27 Jul 2007

Americans have come to expect that legal liability for medical malpractice should depend on whether or not the doctor or company was responsible for the substandard medical care that caused the unnecessary injury to the patient. It seems just that the doctor or company that wrongfully injures another should respond by compensating the victim for the injury and damages sustained.

Careless drivers are regularly held accountable in the American system of justice for the harm they inflict on the public. Likewise, a corporation that manufactures a dangerous product is required to pay for the injuries caused during the anticipated use of the product. These circumstances have served the public well in safer driving and safer products. The same benefit exists when doctors and corporations providing medical care that breaches the accepted standard of care are held accountable in our legal system.

Into this instinctively fair and beneficial basis for legal liability has stepped the HMO. What is the just liability law for a managed care company, a Health Maintenance Organization? Should an HMO be held accountable in legal damages for the harm that it causes by its control over medical care provided to an individual patient?

Before the development of the HMO concept the physician determined the course and scope of medical diagnosis and treatment. He was aided by persons and institutions of his choosing, such as the local hospital or the local laboratory. The doctor and each person or company involved in the process was independently responsible for any injury caused by its breach of the accepted standard of care.

Everyone involved in providing medical care fully understood that any substandard conduct that resulted in injury was potentially a basis for a civil action for compensation. As a result, prudent providers of care sought to provide only quality care that met or exceeded the minimum accepted standards.

In the era of managed care the physician is obviously sharing the decision-making process for any particular patient with the employees of HMO's and HMO policies and procedures. It is difficult today to know exactly who is calling the shots when a physician decides on a course of treatment or declines to obtain an expensive test. Under the guise of cost control and benefit determination the HMO influences many of the medical decisions made by the physician faced with an injured or ill patient.

There are tools used by HMO's for supposedly good purposes that actually amount to the assumption of treatment authority over the patient. At times these tools appear to be purely administrative, but the impact upon the patient is to lessen medical choices and, usually, to diminish the quality of care.

From the perspective of the HMO it is necessary to have control over the use of heathcare facilities. This control is exercised via what is called benefits administration. Recognizing when benefits administration steps into or becomes a corporate form of medical practice is sometimes difficult. However, there can be no doubt that today's HMO's are practicing medicine to the detriment of the patient.

Whenever the independent judgment of the treating physician has been molded or limited by the corporate policies of an HMO to the extent that it is no longer free to operate in the best interests of the patient, the HMO is practicing medicine. Worse, it is practicing poor medicine.

The primary tool used by HMO's in benefits administration is case management or utilization review. This is especially true in the complicated or costly medical situations. The case manager, who is employed by the HMO, is inserted into the decision-making process whenever treatment options are being planned.

The case managers, who are frequently nurses, monitor care and place it in the context of the benefits plan language and the financial bottom line. They become a permanent member of the decision-making team even though they are rarely seen by the patient. They chime in with so-called coverage opinions whenever they perceive one is necessary. The treating doctor, therefore, is regularly interacting with the case manager nurse to determine the treatment options that will even be presented to the patient.

In other instances, those in charge of managed care operations simply issue edicts that impact entire groups of patients. An example is the crafting of payment structures to participating doctors that encourage cheaper care and discourage more expensive care. An individual patient does not know that the doctor guiding his medical care has powerful incentives to avoid prescribing or recommending options that happen to be on the costly side of the ledger.

Whenever corporate policies or corporate employees cause doctors to narrow their choices of treatment options for a patient, an HMO is clearly practicing medicine in a very real sense. The corporate tools used to encourage or accomplish this narrowing vary somewhat from HMO to HMO, but they are generally working to the detriment of the patient.

In the face of a serious injury resulting from misconduct by a doctor and HMO, is there any remedy through the civil court system?

Every state permits medical malpractice claims, with certain limitations and restrictions, against the treating doctor. These claims can generally still be made against the doctor who happens to participate in a managed care plan, such as an HMO. It is necessary to prove that the physician provided care that was below the accepted standard of care for similar healthcare providers under the circumstances.

The more difficult question to answer is in regard to the managed care company or HMO itself.

In a landmark case of Wickline v. California the patient's surgeon felt she needed 8 additional days of hospitalization following surgery but was only able to obtain authorization for 4 days from MediCal. She was discharged after 4 days and developed gangrene that resulted in the amputation of her leg. The patient filed suit against MediCal claiming that the early discharge was the cause of the gangrene and amputation. Although the patient won at trial the case was overturned on appeal.

Even though the patient lost, largely because of some unusual provisions of the California law, the case contained some important language concerning the responsibilities of the doctor and the third party payor (essentially, a managed care situation), MediCal.

According to the court in Wickline:

"The physician who complies without protest with the limitations imposed by a third-party payor, when his medical judgment dictates otherwise, cannot avoid his ultimate responsibility for his patient's care."

"Third party payors of health care services can be held legally accountable when medically inappropriate decisions result from defects in the design or implementation of cost-containment mechanisms, as, for example, when appeals made on a patient's behalf for medical or hospital care are arbitrarily ignored or unreasonably disregarded or overridden....It is essential that cost limitation programs not be permitted to corrupt medical judgment."

A 1990 decision, Wilson v. Blue Cross of Southern California, strengthened the Wickline opinion when it held that an organization that substantially shapes the course of patient care can be held liable for the quality of the care actually delivered.

In 1992, McClellan v. Health Maintenance Organization of Pennsylvania went a step further and held that a managed care organization could be held liable for injuries that are caused by a poor selection of doctors as members of the HMO network of supposedly independent practitioners. The court reasoned that the HMO had what is called a nondelegable duty to select and retain only competent primary care providers.

Cases such as these demonstrate that the evolving cases in the state courts systems, if left to develop without federal restrictions, would have the same beneficial effects as the cases against the manufacturers of dangerous products.

Unfortunately, there is a major obstacle to this developing caselaw in the federal ERISA law. This law was originally intended as a means to protect retiree pension plans from certain abuses. It also applies to self-funded employee health plans--plans that do not involve insurance but use their own funds to pay employee medical bills. The latter aspect of the law has created the obstacle to holding HMO's accountable in state courts for substandard medical care.

ERISA creates a federal preemption of all state laws that impact self-funded employee health plans. Sadly, in the place of the effective state law that would hold HMO's accountable, the federal statute provides very restricted rights for injured patients. For example, an injured patient is not able to seek compensation for future lost wages or emotional distress. And, under ERISA there is no right to a trial by jury.

There have been efforts by the Democrats in Congress to pass a Patient's Bill of Rights that would correct the problem with ERISA by providing a guaranteed right to court access and a traditional malpractice remedy in a case of substandard care provided by an HMO. So far these efforts have failed.

In the meantime, some courts have tried to carve out a niche in the present law that would permit court access when the question is purely one of the quality of the care and not a determination of benefits. There are certain steps that a patient could take that would improve the chances for a recovery of full compensation from an HMO. There are also steps that would diminish the chances. For these reasons, it is critical that an experienced attorney provide guidance at an early stage when disputes arise with managed care organizations.

No organization should be granted immunity from the consequences of its misconduct, especially not organizations that control the medical care provided to most Americans