Legal Risks
Physicians who practice in MCOs with limited benefits face increased liability because the courts have not accepted the idea that a plan’s failure to pay for care completely absolves the physician from liability for not providing the care. In Wickline v. State of California, [ Wickline v. State of California, 228 Cal. Rptr. 661 (Cal. App. 1986).] a leading case that arose from the California Medi-Cal program, the intermediary denied coverage for additional days in the hospital. The physician contested the denial, but then discharged the patient. The patient was harmed by the premature discharge and sued the physician and Medi-Cal. The plan defended by claiming that it did not discharge the patient, the treating physician did. Accordingly, this was a case of malpractice by the treating physician.
Although the court opined that a health plan could be liable for the adverse consequences of improper cost control decisions, it found that, in this case, it was the treating physician who made the decision to discharge the patient. Conceding that the physician was intimidated by Medi-Cal, it still held that the physician should have done more to keep the patient in the hospital if he thought it was necessary. Thus, the physician should have aggressively appealed the denial of authorization of care. The court was silent regarding what the physician should have done if the appeal ultimately was unsuccessful, but implied that he should have not have discharged the patient from the hospital.
In a subsequent case involving a utilization review contractor for a health plan, the court clarified its ruling in Wickline to make clear that a negligent decision to deny treatment by the treating physician would not automatically absolve the health plan and its contractors from liability. The court found that the insurer’s decision to deny coverage for additional inpatient hospitalization was a substantial factor in the decedent’s suicide:
In the present case, there is substantial evidence that Western Medical’s decision not to approve further hospitalization was a substantial factor in bringing about the decedent’s demise. It was Western Medical which conducted the concurrent utilization review and directed that no further benefits be paid.… Once the insurance benefits were terminated, there were no other funds to pay for the decedent’s hospitalization. The sole reason for the discharge, based on the evidence adduced in connection with the summary judgment motion, was that the decedent had no insurance or money to pay for any further in-patient benefits. Dr. Taff, the decedent’s treating physician, believed that had the decedent completed his planned hospitalization there was a reasonable medical probability that he would not have committed suicide. The foregoing constitutes sufficient evidence to raise a triable issue of material fact as to whether Western Medical’s conduct was a substantial factor in causing the decedent’s death. [Wilson v. Blue Cross of So. Cal., 271 Cal. Rptr. 876, 833 (Cal. App. 1990).]
California courts have gone on and allowed substantial awards against MCOs for breaching their duty to treat patients fairly. A jury awarded $89,000,000 in damages, including punitive damages, against a plan that delayed the patient’s receiving what was then considered an experimental treatment. [ Fox v. Health Net of Cal., Cause No. 219692 (Cal. Super. Ct., Riverside Cty., Dec. 23, 1993).] Although the decision language would indicate that plans can be liable for the consequences of their reimbursement decisions, this is not the case for more than half of the total insured lives in the United States, the lives that are insured in health plans subject to the Employee Retirement Income Security Act (ERISA). [Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 (1996).] Had Wilson or Wickline been ERISA plans, the ruling of the courts on potential liability for denying coverage may have been very different.