Controlling Costs and Changing Patient Care? The Role of Utilization Management (1989) / Chapter Skim
Currently Skimming:
Appendix A - Legal Implications of Utilization Review
Appendix A - Legal Implications of Utilization Review
Pages 169-204
The Chapter Skim interface presents what we've algorithmically identified as the most significant single chunk of text within every page in the chapter.
Select key terms on the right to highlight them within pages of the chapter.
From page 169... ...
The recent decade has seen a dramatic increase in the use of utilization review (UR) programs in an effort to stem the tide of rising health care costs.
|
From page 170... ...
Because these programs can directly affect the medical care of the patient, they increase the potential for harm and, consequently, the potential for liability arising out of the UR program. Prospective and concurrent UR decisions also pose dilemmas for the treating physicians and hospitals.
|
From page 171... ...
It denied coverage based on two policy exclusions: first, an exclusion for hospitalization that is primarily diagnostic, and second, an exclusion for nonmedically necessary services. The California Supreme Court upheld Blue Shield's right to challenge the medical necessity of hospitalization, even though the patient had relied on the recommendation of the treating physician.
|
From page 172... ...
The Elusive Concept of Medical Necessity A UR decision invariably turns on whether a treatment or service is "medically necessary." This term is not only difficult to define but it also is frequently confused with other terms or limitations of the insurance policy. Failure to isolate the "medical necessity" aspects of a decision can easily result in wrong decisions, and hence potential liability for the reviewer.
|
From page 173... ...
. as are reasonably intended, in the exercise of good medical practice, for the treatment of illness or injury."7 Other policies provide more lengthy criteria.8 Regardless of the definition, a determination of medical necessity is always a judgment call, and the reviewer must be careful not to apply an overly restrictive standard.9 An independent review organization is generally able to limit its decisions to whether something is "medically necessary." Where the review is conducted in-house by an insurance company or HMO, there may be more of a tendency to confuse a medical necessity determination with other coverage decisions.
|
From page 174... ...
Aside from these factors, the outcome of any liability case against a UR organization is likely to be influenced by the inherent sympathies of the jury, as illustrated by the Wickline case. That is, an injured individual generally will evoke more sympathy than the corporate review organization or insurance company.
|
From page 175... ...
For these reasons, the role of the jury cannot be ignored in any assessment of utilization review liability. Negligence Negligence is likely to be the principal cause of action against both a payer and an independent review organization for a UR decision.
|
From page 176... ...
Second, even if the organization's procedures were adequate, the duty of care may be breached if the decision on medical necessity did not meet proper standards. The standard of care for the procedural aspects of a UR decision is likely to be based on the standards followed by review organizations generally, that is, the standard of care in the community of consultants in the same business.
|
From page 177... ...
The UR organization, through its individual physician and nurse review consultants, will likely be held to a professional standard of care. In other words, a UR consultant should authorize treatment if a physician applying the community standard of care would recommend this procedure as medically necessary.l9 Many review organizations use standardized criteria to determine the appropriate treatment and length of hospitalization.
|
From page 178... ...
As long as the criteria are limited to quantitative considerations, such as statistical determinations of lengths of stay or lists of procedures ordinarily done on an outpatient basis, the criteria serge a useful purpose. However, a too sweeping exclusion may result in the denial of services that are medically necessary and, therefore, that are covered under the basic policy.22 Causanon The third issue in a negligence action against a review organization is whether the denial of coverage proximately caused the patient's injury.
|
From page 179... ...
When the payer performs UR in-house, an improper review decision that results in nonpayment is a direct breach of contract. When the payer delegates UR to an independent review organization and improperly denies benefits based on the UR decision, a contract remedy against the payer would still be available to the patient, even though the utilization review was undertaken by the independent review organization.26 The absence of a contractual relationship between the patient and the UR organization does not insulate the payer from contract liability for the UR organization's actions.27 In addition, the patient may assert a contract claim directly against the independent entity if the patient is a third-party beneficiary of the contract between the UR entity and the payer.
|
From page 180... ...
When the payer ratifies the reviewer's decision, or leaves the decision primarily in the reviewer's hands, the courts are likely to hold the payer responsible to the plaintiff for the reviewer's mistakes.34 Whether the independent review organization is directly liable for insurance bad faith is a more complicated question. The legal basis for bad faith liability is unique because it contemplates a tort the breach of a duty of care arising from a special contractual relationship.
|
From page 181... ...
In addition, there is a possibility that an independent reviewer could be sued for conspiracy with the insurer to breach the implied covenant of good faith and fair dealing.37 As a practical matter, a plaintiff is likely to seek the punitive damages available for bad faith liability from the "deep pocket," which is the insurer, rather than the independent reviewer. However, there is a definite risk that an independent reviewer would be exposed to such liability or forced to defend against such claims.
|
From page 182... ...
negligent conduct by the review organization, (2) severe emotional distress suffered by the patient, and (3)
|
From page 183... ...
. Whenever a UR program informs a patient that the treating physician rendered, or proposes to render, treatment which is not medically necessary,
|
From page 184... ...
However, a few points are worth noting. For the review organization that does medical necessity determinations, antitrust is a relatively lesser threat than the other potential liabilities reviewed above are.
|
From page 185... ...
However, these statutes generally do not protect the physician consultants of independent review organizations. The statutes generally are limited to certain types of peer review, such as hospital review committees, medical society committees, and certain committees of HMOs; and they generally focus on peer review of quality of care rather than medical necessity determinations for private payers.54 The immunity
|
From page 186... ...
The legislation does not specie any detailed requirements for standards and procedures, and no regulations have been promulgated as of this writing. Minnesota also enacted in 1988 a provision requiring prospective utilization review decisions to be made within ten business days.
|
From page 187... ...
Supreme Court held that when insurance is provided through an ERISA plan, common law actions by an insured for bad faith denial of insurance coverage and related ,tate law tort claims are preempted by ERISN63 Most private employers' benefits plans are covered by ERISA64 Thus, many of the liability theories discussed above are subject to an ERISA preemption defense. However, the courts are still grappling with the scope of preemption, and there remain areas of uncertainty.65 When a utilization review case is brought directly against an ERISA payer based on a denial of benefits or mishandling of a claim, the action should be preempted.
|
From page 188... ...
Although these cases did not involve health insurance, similar allegations could arise in the health insurance context. LIABILITY OF THE EMPLOYER OR PAYER If utilization review is performed in-house, then the employer or payer is directly liable for the consequences of review decisions.74 This section .
|
From page 189... ...
The latter theory, negligent selection, is being increasingly recognized in a variety of fields.78 For this reason, a payer should inquire into the reputation of the independent review organization, inquire directly about any lawsuits or judgments, and document the results of its inquiry as evidence of the exercise of due care. Vicarious Liability A payer also may be found vicariously liable for the torts of the review entity under traditional principles of agency.
|
From page 190... ...
Indemnity The most important protection for a payer is to insist that the reviewer carry adequate liability insurance. Ideally, the payer will be named as an additional insured on the review entity's policy, and the insurance company will be required to notify the payer directly of any change in coverage or cancellation.
|
From page 191... ...
At the same time, by protesting the initial decision, the physician may have created substantial evidence that the treatment is medically necessary-evidence that will be used against the physician if he or she then withholds treatment and harm occurs. At some point, if the physician's appeal is strong enough, a court is likely to hold the review entity responsible for causing at least part of the harm.83 But the possibility of sharing liability with another defendant is little solace to the treating physician, who still remains a clear potential defendant if he or she withholds treatment.
|
From page 192... ...
The responsibility remains on the physician to provide care, or to keep the patient in the hospital, if the physician believes that the community standard would require such action.86 The physician also has increased exposure to claims of lack of informed consent.87 When a proposed treatment is denied, the physician must be careful to explain to the patient the options and the risks. The patient then must decide whether to go ahead with the treatment and pay for it out of his or her own pocket.
|
From page 193... ...
While such a system may suffice for retrospective review, in a prior or uncurrent review situation the patient's medical care is directly at stake. To ye effective, the appeal process must occur within a time frame consistent vith the patient's medical condition.
|
From page 194... ...
The concept is supported by the disparity in knowledge between the physician and patient regarding medical necessity.9i Theoretically, both the review organization and the treating physician should operate under the same standard of medical necessity, which, by definition, should be determined by the community standard of care. There is a danger, of course, that a review organization would apply a standard in the middle to low range of the community standard of care.
|
From page 195... ...
However, many of the issues raised in this paper may not be developed thoroughly for judicial review because of the broad sweep of ERISA preemption of common law actions. Moreover, in cases in which the allocation of UR liability arises in an HMO context, the issues are likely to be resolved by arbitration and never reach the courts because of the binding arbitration clauses that are frequently found in HMO consumer documents and physician contracts.
|
From page 196... ...
3. The court also concluded that Blue Shield acted in bad faith when it failed to inform the insured of his right to impartial review and arbitration as provided in the policy.
|
From page 197... ...
Blue Cross Blue Shield of Greater New York, 119 Misc.
|
From page 198... ...
The court nevertheless upheld liability for bad faith claims denial, noting that the letters sent to the treating physician did not explain the medical basis for denial and failed to advise what information the reviewer already had and what additional information would be useful.
|
From page 199... ...
26. The payer's liability for tort damages resulting from the negligent act of an independent review organization may be more complicated, depending on whether the UR entity is viewed as an independent contractor or an agent or employee of the payor (see Liability of the Treating Physician)
|
From page 200... ...
1985) (upholding cause of action against insurer for bad faith and emphasizing the weight to be given to treating physician's opinion)
|
From page 201... ...
Code Title 24-A, Section 2679. Maine also has legislation pending that, if enacted, would impose certain criteria on independent review organizations, such as requiring prospective UR decisions to be made within a set time.
|
From page 202... ...
When the plaintiff can show that one party retains control over the enterprise, benefits from it, selects the independent contractor, and is free to require indemnity and insurance from the contractor, that party may be found vicariously liable for the torts of its independent contractor. Also, when the plaintiff can demonstrate a "special relationship" giving rise to an affirmative duty of care owed by the defendant, vicarious liability may result.
|
From page 203... ...
Likewise, a review entity named in a Wckline type of case will consider cross-complaining against the treating physician.
|
From page 204... ...
204 APPENDIX A physician to add a new economic dimension to the physician's determination of medical necessity, which must be communicated to the patient.
|
Key Terms
This material may be derived from roughly machine-read images, and so is provided only to facilitate research.
More
information on Chapter Skim is available.