MCOs held accountable for patient-care denials
MCOs held accountable for patient-care denials
Juries favor injured patients
By Elizabeth E. Hogue, Esq.
Elizabeth Hogue, Chartered
Burtonsville, MD
From the perspective of many agencies, managed care organizations (MCOs) have a great deal of power yet few limitations on how they operate. Home care managers may be relieved to learn that the pendulum has begun to swing the other way and that there is increasing recognition of the limits and boundaries applicable to MCOs.
A key area in which limitations on the operations of MCOs are being defined involves denials of payment for care needed by patients. Specifically, courts are increasingly willing to find MCOs and members of their staffs liable when patients are injured as a result of inappropriate payment decisions.
This is an important issue for hospital-based home care agencies that fear being held legally or fiscally responsible for failure to provide care that is not authorized for payment by MCOs. In fact, many managers of hospital-based agencies want to take action to ensure that MCOs are responsible for any harm to patients as a result of a payer case manager’s unwillingness to pay for care that agency staff think is necessary and appropriate.
Hospital-based agencies can refer to the following examples of recent suits in which MCOs were held responsible for injuries to patients:
• In Fox v. HealthNet, for example, Nilene Fox had breast cancer. Her physicians ultimately recommended a bone marrow transplant. When Fox requested authorization for payment of a bone marrow transplant, her MCO denied her requests on the basis that the treatment was experimental.
The plaintiff’s repeated requests for authorization were eventually granted, and she received a bone marrow transplant. But the period of time in which the transplant would have been beneficial had passed, and she died.
Her family sued the MCO. During the jury trial the family’s attorney showed that, as the MCO denied payment for a bone marrow transplant to Fox, the MCO approved payment for such treatment for one of its own employees in the same clinical condition as Fox. This information so enraged the jury that it awarded the plaintiff’s family $89.2 million. The MCO appealed the verdict, and the family settled out of court for an undisclosed, but presumably sizable, sum.
• In a similar case, Joyce Ching, a member of a health maintenance organization (HMO) in Agoura, CA, went to a doctor and complained of abdominal pains. Her family claimed that she immediately asked for a referral to a gastroenterologist.
It took three months of badgering her physician before she was referred to a specialist. By then, the cancer of her digestive system was terminal.
Following her death, Ching’s family sued the physician group, Simi Valley Family Practice, for malpractice. It claimed that Ching’s physician delayed making a referral to an appropriate specialist because the contract with the HMO included incentives to limit referrals to such specialists.
Simi Valley denied these allegations. The physician in the group alleged that Ching did not ask to see a gastroenterologist until the last visit to the group.
But in November 1995, the jury awarded the Ching family $2.95 million. The jury believed the family and sent a clear message to MCOs and physicians who contract with MCOs that payment denials for care from specialists that result in injuries to patients will not be tolerated.
• In another recent case, a woman in Fairburn, GA, won a $45 million jury award against her MCO. An MCO staff member insisted that the woman’s son had to be transported to a hospital 42 miles from her home where that MCO’s patients received a discount. There was a hospital just 20 miles away that had no contract with the MCO.
En route to the hospital, the infant went into cardiac arrest. Although he was successfully revived, all four limbs were amputated because the blood flow to them had been severely compromised during the arrest.
Based upon concerns about such large damage awards, MCOs may try to settle cases before they get to a judge or a jury. For example, in December 1995, the Sisters of Providence Good Health Plan in Portland, OR, paid $1 million to settle a suit initiated by Alice Thomas, a patient denied authorization for payment for surgery to relieve pressure on a nerve. As a result of this denial, Thomas suffered permanent loss of control in one hand.
In cases that go to court, patients base their arguments on the fact that MCOs’ denial of benefits violate the terms of their contracts for coverage. It is true that few contracts between MCOs and their members include specific language regarding the type of case management and utilization review that MCOs routinely rely on to deny authorization for payment.
Instead, MCOs often point to general language in their contracts that says the MCO is only required to pay for medically necessary and appropriate care. Judges and juries more readily disagree with MCOs about what care is required by such a subjective standard.
Some patients may claim that MCOs’ failure to authorize payment for needed care constitutes negligence on the part of MCOs. Specifically, they argue that the staff at MCOs have a duty to make a reasonable payment decision. They claim that MCOs fail to fulfill this duty when authorization for a requested treatment is denied. When such denials result in physical injury or damage to patients, they have met all requirements to prove their suits based upon the negligence of MCOs.
The cases described above are only the tip of the proverbial iceberg. There is likely to be increasing willingness on the part of courts and legislatures to hold MCOs liable for wrongful denials of payment. Providers should recognize that this willingness may result in a helpful corrective to a system that, at least form the point of view of providers, has placed too much power in the hands of MCOs.
This means that now is the time for practitioners to educate themselves about the limitations on the operations of MCOs as they emerge so that practitioners can assist in the application of such boundaries, where appropriate. If providers are right that this is a necessary corrective to a system that is badly out of balance, their participation in this process can only help to ensure quality of care for their patients.
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