MCO Direct Liability Some Theories • 1. Duty to use reasonable care in selection & retention of network MDs – Staff HMO clearly has this duty – Probably IPA; split re PPO • 2. Duty to fulfill promises to provide competent or better care. – Goal? Raise standard of care/avoid need to prove elements of vicarious liability for MDs. – Not much success so far More Theories • 3. Duty to use reasonable care in design and administration of the plan – too many patients per MD=unreasonable and harmful delay? – Inappropriate treatment guidelines • discharge newborns with 24 hours? – Negligent failure to authorize payment for covered care. More Theories • 3. Duty to use reasonable care in design and administration of the plan – too many patients per MD=unreasonable and harmful delay? – Inappropriate treatment guidelines • discharge newborns with 24 hours? – Negligent failure to pre-authorize payment for covered care. • ER visit really did call for immediate admission to hospital. Negligent to send home. Negligent Utilization Review • Disputes are over Plan’s duty – to pre-authorize payment, or – in case of HMO, to provide care for free • Duty turns on terms of plan – is the treatment “experimental”? – “medically necessary”? • Much litigation • Stakes are higher with PROSPECTIVE review than with retrospective. Why? Wickline v State (1986) • Medicaid authorized 10 days in hospital and then, on request for 8 more, granted 4. • P alleges that 2d decision was negligent. • HELD: – no MCO liability • So why a Pyrrhic Victory for Managed Care? Pyrrhic Victory for MCOs? • Court said plans could be liable if P cd prove negligent design or administration • c/a here if? – 1. P had shown treatment was “medically necessary” under medical standard of care • ct treats the two as identical – 2. (maybe) also need to show Insurer had contemporaneous opportunity to decide Why Sue inTort? • No liability if treatment is not covered by insurance policy • Erroneous failure to pay=breach of contract! – Advantage: Contract law=strict liability • No need to prove negligence--just error! • Some Ps now plead this, too – Disadvantage: Hadley (damages) • Most lawyers treat as negligence action. – Negligent breach of contract! The Aftermath • state cts allow c/a: typical allegations – erroneous interpretation of coverage – unreasonable delay in approval • controversial – pro: police MCO’s – con: drive up health care costs & make insurance unaffordable; pay for exper’l cures. • preempted by ERISA if employer-provided health insurance? Better Solution in Non- emergencies • Statutory requirement that plan allow appeal to “independent” panel – 40 states now require in some cases – not many appeals to panels so far • Patients win 1/2 • Again, the state attempt to regulate the MCO may be pre-empted by ERISA – Circuits are split Still more direct liability theories • excessive financial incentives – analogy to Domino’s 30 minute delivery – courts are split • would need to show it caused negligent care • failure to disclose financial incentives? – split re cause of action (source of duty?) – tough causation issues • Remember, direct liability may be preempted by ERISA Newest Theories-Class Actions • Post-tobacco target of BigTime P’s Bar • Violations of ERISA itself – excessive financial incentives--NO C/A – duty to disclose incentives • 8th Cir only. No useful remedy. • RICO violation misrepresenting benefits – financial incentives that violate fiduciary duty – still early in litigation. Duty of MDs? • Negligent failure to recommend treatment=traditional malp c/a • If MD recommends, but insurer declines, does MD have any “patient advocacy” duty? – Duty to renew request at end of 4 days? – Duty to appeal denial? – No law recognizing such a duty • Duty to treat now-uninsured patient? – Little case-law so far. Next: ERISA preemption Statutory Direct Liability • Several managed care reform statutes now now authorize suits against HMO. – each has its own language; not yet construed – EXAMPLE: Texas HMO = liable when HMO exercises “influence or control which result in the failure to exercise ordinary care [by MD]”. Tex Civ. Prac. Code § 88.000 et seq. Duties of MD - 2 • Duty to inform patient of treatments that MCO won’t fund? – no appellate decisions yet – traditional informed consent law presumably does impose a disclosure obligation if: • customary to disclose this treatment (or material to ordinary patient) • reasonable person would decline the treatment offered to get the undisclosed treatment (self-pay, appeal); and • the undisclosed treatment would have cured P. • UPHILL BATTLE!