Managed Care Systems and Physician Liability

By Jerome W. Bettman Sr., MD, and Byron H. Demorest, MD

[Argus, October, 1993]

Cost-cutting efforts by managed care systems pose a number of potential risks to the high quality care that careful and concerned ophthalmologists traditionally have given their patients. The result is increased liability for all physicians, who are involved in managed care plans.

Three major problem areas in managed care systems may lower the level of care to ophthalmic patients:

• Denial of care by primary care physicians or utilization review personnel;
• Erroneous or missed diagnosis byline “gatekeepers” within the managed care system;
• Treatment by general ophthalmologists of conditions that ordinarily would be assigned to subspecialists.

Managed Care Utilization Review

The most frustrating and perilous situations under managed care arise from substandard utilization review or failure by a primary care physician (PCP) to refer initially. The objective of capitation or utilization-containing costs-can lead to denial of surgical treatments that an ophthalmologist deems necessary on the basis that they are “cosmetic.”

Corrective surgery may be denied for children with ptosis, even though they may develop astigmatism if not treated. Adults with strabismus may not be approved for surgery despite their difficulty in obtaining employment because of their “evil eye.” Senile patients with severe blepharochalasis, or patients with early cataracts who suffer from severe glare problems also may be denied corrective surgery. The psychological and practical problems experienced by these patients all too often are overlooked in an effort to contain costs by the insurance carrier or to shift money to the PCP of the capitated group.

An ophthalmologist whose patient is denied treatment should take the following steps and document these actions:

• Clearly inform the patient of the medical problems that may result from denial of the recommended treatment.
• Appeal the denial in writing and insist on the best interests of the patient.
• Do not give up and ignore the situation if the appeal is denied. Help the patient find an appropriate alternative.
• Tell the patient that he or she may be liable for the cost of any treatment that was denied.

The Role of the Gatekeeper in Managed Care

Erroneous diagnosis or misdiagnosis currently accounts for approximately 25% of all claims brought against physicians. Managed care could potentially increase that number by shifting responsibility for eye care to PCPs or optometrists who may not be qualified to diagnose and treat certain diseases of the eye.

Pediatric ophthalmologists are seeing children whose treatment under managed care has not followed what ophthalmologists consider to be the standard of care. For instance, early onset or infantile esotropia patients may be seen first by an optometrist who tries low power plus lenses for patients with no accommodative factor. Meanwhile, referral to the ophthalmologist is delayed past the two-year “window of opportunity” for successful surgery. By demanding that the patient first see a gatekeeper, instead of going directly to an ophthalmologist for diseases of the eye, the managed care system increases the likelihood that certain diseases either will be misdiagnosed or missed entirely.

The pressure to contain costs is omnipresent and adversely affects the PCP, who may delay referrals beyond the optimum time to avoid high specialists’ fees. When patients finally are referred for consultation, there is a shared responsibility for care of that patient between the ophthalmologist and the PCP.

In a recent case of shared care, a patient with a pseudomonas keratitis was seen by a PCP and treated with a sulpha drop. By the time the patient was referred to an ophthalmologist three days later, there was a severe corneal ulcer with visual loss. The consultant-ophthalmologist was unable to return the vision to 20/20 and was held responsible, along with the PCP, for the patient’s vision loss.

Assuming Subspecialty Care

Within ophthalmology, general ophthalmologists practicing under managed care or capitated programs may be asked to assume care that should be assigned to subspecialists, particularly in retina, glaucoma, pediatric ophthalmology or neuro-ophthalmology. Depending on whether the third-party payer is an IPA, HMO or PPO, there may be a contractual obligation to provide care for all patients referred by the managed care organization. One member of a group eye practice may be designated the “pediatric specialist” for the group even though that ophthalmologist may not have completed a fellowship or had any special training in pediatric ophthalmology.

Whether you are the referring or the consulting physician, you will be held responsible for the care of a patient who is under your treatment. To safeguard your patient’s health and to minimize your risk of liability, take the following steps to communicate with other physicians treating the patient:

• Develop a plan for coordinating total patient care.
• Agree on who has primary responsibility for total patient care, adjusting primary responsibility as the patient’s condition dictates.
• Agree on who has primary responsibility for providing the patient and family with information.
• Keep the patient fully advised of all these decisions.

(From Risk Management Principles and Commentaries for the Medical Office, American Medical Association/Specialty Society Medical Liability Project, Chicago. 1990.)

When Managed Care Systems Want Your Patient Records

By Joe R. McFarlane Jr, MD, JD

[Argus, August, 1994]

Complying with quality assurance provisions in managed care contracts can put ophthalmologists at risk of violating the physician-patient privilege. A typical contract provision states:

Quality of covered services: Provider shall be solely responsible for the quality of services Provider renders to enrollees, which services shall meet professionally recognized standards of medical practice. HMO’s professional review and credentialing committees shall monitor the quality of covered services rendered. Provider shall cooperate and comply with HMO’s internal quality management system and decisions of the medical director. Provider and Provider’s staff shall abide by HMO’s policies and procedures for utilization review and management, quality management and prior authorization.

Ophthalmologists may be asked to cooperate with quality assurance activities by providing copies of patient records. Does this violate the physician-patient privilege?

What the Privilege Entails

A physician has a legal and ethical duty to protect a patient’s right to confidentiality. Managed care subscribers often sign blanket authorizations to release information so the company can determine eligibility for coverage and decide whether the services provided or recommended are covered and medically necessary. A blanket authorization may not sufficiently protect against assertions that the physician-patient privilege was violated when the ophthalmologist released the patient’s records.

Patients may not be aware that their care is being reviewed retrospectively and may have legitimate objections. Furthermore, reviewing the care received before the patient was covered by the plan would fall outside the parameters of a blanket authorization. Deleting the patient’s name or otherwise attempting to conceal the person’s identity does not protect confidentiality or reduce the risk of an ophthalmologist who permits unauthorized disclosure of medical records. Regardless of the validity of the patient’s authorization, federal and state laws require specifically worded authorizations when HIV or chemical dependence information is involved.

Violation of the Privilege

Violating the physician-patient privilege subjects the ophthalmologist to civil and administrative penalties. In most states a physician may be held civilly liable for breach of confidentiality and/or invasion of privacy for disclosing patient information without the person’s authorization or as otherwise permitted by law. In addition, in most states violating the privilege is grounds for disciplinary action by the state board of medical examiners.

To guard against violating the physician-patient privilege when a managed care organization requests copies of a patient’s records, ophthalmologists should:

• Request a copy of the patient’s authorization from the insurer;
• Contact the patient directly to confirm that he or she authorizes the release of this information;
• Determine if the records requested fall within the time period when the patient was a subscriber. If not, provide only information that falls within that time frame;
• Deny requests from insurers to review the medical records of nonmember patients unless the patients consent.

Computerized Patient Records

Managed care has stimulated rapid computerization of medical records, facilitating access to information. But the downside is that unauthorized persons and groups can more easily acquire confidential information.

To ensure confidentiality of computerized patient records and to control access to personal computers and networks, ophthalmologists should institute the use of passwords in all networks and adopt the following guidelines:

• Staff should not share passwords;
• Change passwords often;
• Avoid obvious passwords such as the user’s name or the word “password.”

To ensure physical security of the computer system, install network servers in a secure room and make sure network cabling is not easily accessible. Limit supervision of the network to a single staff person. These precautions are also recommended for portable computers.

Minimize the Risks of Patient Co-Management in Managed Care Plans

[Digest, Fall, 1994]

The role of an ophthalmologist within the managed care system is usually that of a secondary provider. According to the managed care contract, the primary care physician (PCP) is the gatekeeper and is responsible for referring the patient to secondary providers. Utilization protocols of the plan may be in place limiting the ophthalmologist’s ability to directly refer patients to other providers. The following scenario is an example of how problems can develop within this type of system.

Retinal Detachment in a Referred Patient

It is Friday afternoon and an ophthalmologist sees a patient who has been referred for flashers, floaters, and an inferonasal veil O.D. The ophthalmologist contacts the patient’s PCP to request a referral to a particular retinal specialist. The PCP agrees; however, according to the plan contract, the PCP has to see the patient before the referral can be made. The patient is sent back to the PCP’s office. The ophthalmologist calls the retinal specialist at home and gives him a complete description of the patient’s partial detachment.

Meanwhile, the PCP’s secretary calls the retinal specialist’s office and is told that the doctor has left for the day and will return on Monday. Unaware of the urgency of the situation, the PCP’s secretary makes an appointment for the patient on Monday. The ophthalmologist is not informed of the delay in treatment, and the patient suffers a complete detachment the next day.

Referral Form Could Avert Treatment Delay

The referral policies of some managed care organizations create needless bottlenecks, which greatly increase the possibility that a patient will not be seen and effectively treated by the proper health care provider in a timely manner.

A referral note to the patient stating the urgency of the referral might have avoided the delay in treatment and subsequent retinal detachment suffered by the patient in this scenario. (See sample referral note on next page.) A referral note should be printed on NCR paper; the original should be given to the patient and a copy put in the patient’s chart. In addition to communicating information such as the name and phone number of the proper health care provider, the referral note should instruct the patient to contact the referring physician if the appointment is not made in a timely manner.

While it may be difficult in a managed care setting to ensure that patients are always seen and treated in a timely manner, using a referral note shows the secondary provider was concerned enough to take that extra step on behalf of the patient.

Referral Form for Managed Care Patients

Date _________________

Dr. ____________________ has referred you to Dr. ______________________

Phone ______________________________

This referral is:

___ Emergency

___ Urgent (24-48 hours)

___ Timely (1-2 weeks)

___ When convenient

This appointment will have to be made for you by your primary care physician, Dr. _____________________________, who has been notified. If there are any problems scheduling this appointment, please contact this office.

For office use only:

Outcome ___________________________________

(Original to patient. Copy to chart.)

Pressure for Early Discharge? Case History Points to Physician Liability

By Kimberly A. Neely, MD, PhD

[Argus, March, 1995]

Physicians treating patients who require IV medications may be pressured by hospital administrators to discharge patients at the earliest possible time and to continue IV therapy at home. Early discharge and home management expose the patient and the physician to new risks and responsibilities, as illustrated in the following case history.

Endophthalmitis Resulting From Foreign Body

A 20-year-old woman was mowing her lawn and suddenly felt a foreign body in her left eye. She saw an ophthalmologist the next morning because her left eyelid was swollen shut and the eye had become painful. Examination revealed visual acuity in the left eye of hand motions, a corneal ring infiltrate, no hypopyon, and dense vitritis preventing examination of the posterior segment. B-scan ultrasonography revealed the retina was flat. Computed tomographic studies of the orbits revealed a linear metallic foreign body approximately 11mm long in the left globe. The diagnosis was endophthalmitis secondary to intraocular foreign body.

The patient was referred to a university hospital the same day where a vitreous biopsy followed by intravitreal injection of antibiotics was performed immediately. Computed tomography was repeated to better localize the foreign body. Pars plana vitrectomy was performed utilizing a temporary keratoprosthesis with autograft. At vitrectomy, the retina was found to be white, necrotic, and indistinguishable from the purulent vitreous. The eye was retained, but no vision was salvaged. Vitreous cultures grew Bacillus cereus.

The patient remained in the hospital postoperatively for IV antibiotic therapy. The utilization review team raised the issue of outpatient therapy 24 hours later. The physician believed the patient did not have the intellectual capacity to administer the IV antibiotics at home and wrote this on the hospital chart.

The home IV therapy company that contracted with the hospital and the patient’s insurance company was asked to evaluate the patient. The nurse who did the evaluation concurred with the physician’s assessment but believed the patient’s mother and another family member could learn to safely administer the medications. The physician did not object and specified the dosages of medications and duration of therapy to be given at home. The patient was discharged approximately 36 hours after her vitrectomy. The family members were to administer the midnight doses, and a home IV therapy nurse was to see the patient the next morning.

Early the next morning, the company’s nurse called the physician, reporting that at midnight the family had given the patient four doses of each of three different antibiotics, one of which was gentamicin. The physician instructed the nurse to confiscate the remaining medications and to send the patient back to the hospital immediately. She was readmitted and continued to receive IV antibiotics except for gentamicin. Fortunately, the patient had sustained no renal toxicity or ototoxicity and was discharged several days later on oral antibiotics.

Risk Management Issues That May Arise

If pressured by hospital administrators to discharge the patient early, the physician should thoroughly document the conditions requiring continued hospitalization to help reassure the utilization review team that the patient should remain in the hospital for valid (and reimbursable) reasons. When faced with administrative pressures, the physician must exert his or her best medical judgment.

Inability to safely continue the patient’s treatments at home is a valid reason for continued hospitalization, at least until skilled home nursing assistance can be arranged. The physician may disagree with hospital administrators or the home IV therapy company regarding the ability of the patient or the family to administer home therapy. He or she should document the reasons in the chart and refuse to discharge the patient until alternative solutions such as skilled home nursing assistance can be arranged. The physician must consider what is best for the patient and not compromise the patient’s safety.

The physician should become familiar with the services offered by the home IV therapy company, its system of evaluating the patients’ and families’ abilities to safely administer IV medications, and the extent of patient support and surveillance offered.

In this case, the decision that family members could give the midnight doses of antibiotics on their own proved to be a mistake. The patient was exposed to possible hazards of renal toxicity or ototoxicity, and the physician, who bears ultimate legal responsibility for the treatment, was exposed to a significant malpractice risk.

Risk Management Issues in the New Managed Care Environment

By Jerome W. Bettman Sr., MD, Byron H. Demorest, MD, and E. Randy Craven, MD

[Digest, Spring, 1996]

If the goal of managed care is to keep health care costs as low as possible, it follows that referrals to “expensive” specialists and costly laboratory and diagnostic radiographic tests will be kept to a minimum. Unfortunately, it also follows that patients who receive a hasty examination will go away angry and confused because their physician no longer has time to talk to them. Both situations encourage patients to seek the advice of an attorney when response to treatment is suboptimal.

Under capitated care plans, which pay the same overall fee per patient regardless of the services rendered, and reduced fee-for-service plans, which encourage physicians to see high volumes of patients, there are greater opportunities for mis-diagnosis, denial of treatment, and loss of doctor-patient rapport, all of which increase a physician’s exposure to malpractice claims. The following scenarios point out some of the health and liability risks raised when cost cutting takes priority over patient welfare:

• Ancillary medical personnel assuming patient care responsibilities beyond the scope of their training. Improper screening can delay timely and effective treatment for patients with sight-threatening problems, while inappropriate treatment can result in a poor therapeutic response.
• Primary care optometrists or physicians diagnosing and treating complex ocular problems, which may delay the correct diagnosis and treatment beyond the optimal time for referral to an ophthalmologist.
• Sharing responsibility for patient care between primary physicians and ophthalmologists or between optometrists and ophthalmologists. Under some plans, only one visit to the ophthalmologist may be authorized. If a patient’s ocular condition deteriorates while being followed by a primary physician and there is a poor outcome, any ensuing malpractice action is likely to name the ophthalmologist as well as the primary physician. Shared responsibility translates into shared and increased risk.
• Denial of care by the managed care organization, particularly for perceived nonemergency problems, leading to serious complications and visual debility.

Courts Define Physician’s Duty

What should a physician do if the elements of proper care are denied, whether in the form of denial of hospitalization, a shorter than optimal confinement, or refusal to use consultants or order certain diagnostic tests? A physician’s first duty is to the patient, not to an insurance company, HMO, or PPO. At the same time, over-utilization may result in a physician being dropped from a plan’s provider list. While physicians find themselves caught in the middle of these conflicting obligations, a series of court decisions has redefined the scope of a physician’s duty to the patient, as noted below.

Wickline v. State of California¹ – A Medi-Cal (California Medicaid program) patient was approved for a 10-day hospital stay for vascular surgery. The patient, a diabetic, developed post-surgical complications necessitating additional surgery. The patient’s physician and two surgeons filed the appropriate paperwork to request an eight-day extension from Medi-Cal, but only a four-day extension was approved. Although they disagreed with Medi-Cal’s decision, the physicians discharged Mrs. Wickline after the approved four-day extension. The patient subsequently lost her leg and sued. Stressing that the ultimate responsibility for medical decisions belongs to the physician, the court stated: “While we recognize, realistically, that cost consciousness has become a permanent feature of the health care system, it is essential that cost limitation programs not be permitted to corrupt medical judgment.” Interestingly, the court also stated that third party payers are responsible for defects in cost containment mechanisms, but a physician who does not protest on behalf of a patient cannot avoid ultimate responsibility.

Wilson v. Blue Cross² – A physician recommended extended hospitalization for a depressed suicidal drug abuser. When the HMO reviewer certified only three days additional hospitalization, the psychiatrist protested and carefully documented his protest as the patient was being discharged. The patient committed suicide and the family sued the Blue Cross utilization review group and won on appeal when the court accused the group of bad faith benefit denial. Unlike the Wickline case, which placed the burden of responsibility on the physician, in Wilson, the court made it clear that liability is shared by the HMO.

Fox v. Health Net of California³ – A patient with breast cancer won a $90 million jury award after she was denied treatment with high dose chemotherapy and an autologous bone marrow transplant. This case reinforced the fact that cost containment will not be tolerated by juries when it is based solely on corporate economic interests, and it asserted that medical denials must be black and white, not gray.

Hughes v. Blue Cross⁴ – The court found in favor of the family of a 21-year-old hospitalized schizophrenic patient after Blue Cross authorized only $6,500 in coverage toward payment of a hospital bill exceeding $23,000. The court stated that the utilization review was not based upon the standard of care and that Blue Cross was responsible for seeking all relevant information before denying a claim.

Physicians Obligated to Appeal Denial of Care

As these cases indicate, the courts will not allow a defense based upon cost containment whether it is at the hands of a physician or managed care organization. Economic constraints must not determine what should be done for the patient. When an HMO, PPO, or capitated group denies care, it is the physician’s duty to protest and attempt to change the decision. Verbally and in writing, the physician should clearly state the reasons for the recommended therapy, the consequences of denial, and provide supporting literature to demonstrate the standard of care. A copy of the letter should be sent to the patient and all protestations documented in the chart.

Since the Wickline decision, physicians are required under California Law to appeal a plan’s decision to deny care. Such appeals must be made carefully, as many agreements between physicians and the HMO include a so-called “gag rule” where the physician agrees not to criticize the HMO to the patient. In California, physicians who advocate for their patients are now legally protected from retaliation by health care organizations, and if a physician is dropped from a plan because of patient advocacy, damages may be recovered. Gag clauses are banned in Massachusetts, and legislative efforts are under way to eliminate them in other states, including California.

Additionally, so-called “hold harmless” clauses, which attempt to shift responsibility for economic harm or liability from one party to another, are no longer permitted in health care contracts in California,⁵ where both the physician and medical plan are held equally responsible for damages.

Interestingly, the legal profession has allied itself with physicians on the issue of securing proper care under managed care contracts. There have been many more claims brought against managed care organizations than the ones cited in this article. In Texas alone, there are 17 medical negligence cases in the courts naming an HMO as a defendant. In some cases, insurance companies and health maintenance organizations are settling out of court to avoid precedent-setting court decisions that will open the door to other claims involving significant financial loss. Several recent cases suggest that a financial compensation scheme may violate the standard of care. The following case is illustrative of this trend:

Bush v. Dake⁶ – An HMO that had eliminated PAP testing to reduce costs was sued by a woman who had clinical signs of cervical carcinoma. The patient sued her primary care physician, her gynecologist, and the HMO alleging that the HMO’s capitated gatekeeper arrangement violated the standard of care when it deferred referral for consultations and procurement of indicated laboratory procedures. The cost control provisions at issue included: (1) that participants were required to see a primary care physician before referral to a specialist could be made and (2) that a financial incentive system encouraged HMO physicians not to refer patients to specialists. Prior to trial, the court determined that the plaintiff offered sufficient evidence supporting an allegation that the cost control system had contributed to a delayed diagnosis of cervical cancer and inadequate treatment. The case quickly settled out of court under a protective order.

Clearly, an HMO is exposed to the risk of potentially enormous damages when a jury is confronted with testimony and evidence that an HMO’s “cost control measures” contributed to or caused a patient’s injury. In the Bush v. Dake case, the HMO probably believed an appeal would have risked setting a bad precedent and decided to settle out of court before matters got worse.

Risk Management Recommendations

Always act in the patient’s best interest. A physician’s duty is to the patient, not to the HMO. Adverse decisions and denial of care should be protested vigorously but honestly. Such protests should involve the patient and be carefully documented. If proper care is denied, help the patient find other avenues to secure treatment. Do not abandon the patient! Cost containment should never reduce a physician to substandard practice. Remember that in the courts, the “dollar defense” is no defense.

Notes:

1. Wickline v. State of California. 192 Cal App 3d 1630 (1986).
2. Wilson v. Blue Cross. 222 Cal App 3d 660 (1990).
3. Fox v. Health Net of California. California Superior Court, Riverside County, No. 219692.
4. Hughes v. Blue Cross. 215 Cal. App. 3d 832.
5. Prohibition of “Hold Harmless” clauses in Health Plans. California AB 1840.
6. Bush v. Dake. Michigan Circuit Court, Saginaw County, No. 86:25767-NM
   (April 27, 1989)