Professor Watson
Professor Watson Fall 1999
Health Law
I. An Introduction to Issues in Health Care Law
A. Health Law Issue Triad:
Quality of Care
Access to Care Cost of Care
B. Why is studying health law important?
1. One in every six dollars spent in this country is spent on healthcare. Medicare is the largest or second largest (only to education in some states) expense in each state.
2. Law, science, and policy are applicable to health care.
C. The role of law with respect to the health care delivery system and medical
professionalism:
Three Concepts:
1. Professional Autonomy: To empower and authorize physicians. The role of law is simply to set up the structure in which professional self-regulation can occur.
2. Regulation: 1960s: Statutes and Administrative Agencies; Medicare and Medicaid; Federal and State regulation to monitor quality, access, and cost.
3. Markets: People looked to the marketplace to control costs of healthcare. Healthcare is no longer exempt from anti-trust regulation. This concept is evidence of increased faith in the market. The role of law is to allow for market competition to control quality and costs (access is irrelevant here).
D. Law and American Health Care Delivery
II. Promoting Quality
A. Defining and Encouraging Quality Care
1. Quality Control Mechanisms
| | |PROFESSIONAL AUTONOMY/ REGULATION/ MARKET|
|MECHANISM |PUBLIC/PRIVATE | |
| | | |
|OSHA – Public Health |PUBLIC |REGULATION |
| | | |
|Professional Licensing |PUBLIC |PROFESSIONAL AUTONOMY |
| | | |
|Credentialing – Staff Privileges | | |
| |PRIVATE |PROFESSIONAL AUTONOMY |
| | | |
|Risk Management | | |
| | | |
|(Concern: Whose fault was it; |PRIVATE |PROFESSIONAL AUTONOMY |
|Historically, not with respect to | | |
|physician conduct) | | |
| | | |
|Quality Assurance (Patient Focus) | | |
| |PRIVATE |PROFESSIONAL AUTONOMY |
| | | |
|JCAHO Accreditation |PRIVATE |REGULATION |
| | | |
|TQM |PRIVATE |PROFESSIONAL AUTONOMY |
| | | |
|Efficiency/ | | |
|Skills Test/ |PRIVATE |PROFESSIONAL AUTONOMY |
|Certification | | |
| | | |
|Board Certification (Similar to | | |
|Accreditation; Little Public |PRIVATE | |
|Oversight) | | |
| | | |
|Outcomes Data (Mortality/ | | |
|Morbidity Rates) & Structure (Inputs),| | |
|Patient Satisfaction | | |
| | | |
| | | |
|Malpractice Litigation | | |
|not for small injuries | |PROFESSIONAL AUTONOMY – expert witness |
|works best with infant cases | |required |
| |PUBLIC (CTS) | |
| | |MARKET – costs $, competition (choose |
| | |plan that does better job) |
| | | |
|Practice Guidelines |PRIVATE |PROFESSIONAL AUTONOMY |
| | | |
|Managed Care | | |
|pay out Medicare & Medicaid | | |
|quality concern (or is it really a | | |
|cost concern?) |PRIVATE |MARKET |
|theory: market compet. between MCOs | | |
|improves quality | | |
| | | |
| | | |
| | | |
| | | |
| | | |
2. Misconceptions About Medical Care
a. Doctors should know what condition the patient has and prescribe the right treatment.
• Medical care is uncertain…a set of symptoms can be associated with several diseases.
• No clear links between treatment and outcome.
b. For any given condition, there is a “best” treatment, and any other treatment rendered constitutes unnecessary surgery, fraud, or underservice.
• Surgeon’s judgment (based on skill and resources) and patient’s values (needs, preferences, lifestyle) ought to be considered.
• Physicians reject “cookbook medicine”.
c. Medicine is an exact science. Standard treatments are supported by scientific proof of efficacy.
• Randomized clinical trials (RCT) to prove beyond a reasonable doubt that a medical treatment is effective. Practical difficulties, however, make RCTs the exception, not the rule.
• No national standards of care established by government because of fear of imposing unsubstantiated treatments or freezing them into current practice.
d. Medical care consists of standard products, measurable in units such as “inpatient days”, “outpatient visits”, or “doctor office visits”.
• Legitimate human needs are tended to; personal interactions are involved.
• Controlling costs cannot be achieved by simply making fees standard – severity of illness, length of stay, services provided all differ among individual patients.
• QUALITY OF CARE: Accessibility, Convenience, Style, Effectiveness all come into play. Public-utility regulators frustrated because they want standard units.
e. Much of medical care is a matter of life and death or serious pain or disability.
• Most medical care is not in search of a complete cure, but an improvement on “quality of life”.
• Such a distinction makes “necessary” and “unnecessary” treatment difficult to define.
f. More medical care is better than less care.
• Bias in favor of more care is unfounded.
• In a study comparing patients in a coronary care unit versus home care, it was found that there was no discernible benefit to the more costly hospital care.
• No connection between health resources and health status.
• More care harmful in instances of “iatrogenic” diseases.
3. Why Financial Incentives Make a Difference in Quality of Care
a. Free care to patients results in a desire for more than less care.
b. Fees for physician care in fee-for-service payment situations has led to the rapid inflation in health care costs over the past two decades.
c. Studies indicate that physicians’ incentives dominate decision making on the use of surgery.
d. “Health care is a right” = “money is no object”: Society cannot afford and will not support such a generous assertion.
4. Assessing Quality
5. Improving Quality
6. Harvard Study of 1990
7. Remedying quality problems of health care services
a. Origins of clinical standards of practice
b. Strategies for reducing medical error
8. Problem: Manage Care
B. Licensing of Health Care Professionals
1. Licensing is the ultimate form of public control…
• Entry regulating who is let in.
• Disciplinary Actions.
• Scope of Practice.
• Licenses preventing unlicensed people from practicing.
• Professional autonomy is at play in regard to the members of a licensing board, but the seat is a public office, and the Board is a creature of state law, subject to judicial review.
2. Discipline
a. In re Williams SC of Ohio 1991
FACTS: Ohio State Medical Board charges Dr. Williams with a violation of R.C. 4731.22(B) by prescribing amphetamines as part of a long-term weight loss program without “reasonable care”. At a hearing before a board examiner, it was stipulated that the drugs were used from seven months to several years. The Board introduced evidence that the PDR recommends that the drugs only be used for a “few weeks” to treat obesity (no witnesses). Dr. Williams had two expert witnesses who testified that although they themselves supported the majority view, there was a minority view that supervised long-term use was acceptable. The board examiner suspended Dr. William’s license and prohibited him from prescribing controlled substances.
Ohio Statute R.C. 4731.22(B):
The board, pursuant to an adjudicatory hearing shall to the extent permitted by law, discipline the holder of a certificate to practice medicine for one or more of the following reasons:
(2) Failure to use reasonable care, discrimination in the administration of drugs, or failure to employ acceptable scientific methods in the selection of drugs or other modalities for treatment of disease.
(3) Selling, prescribing, giving away, or administering drugs for other than legal and legitimate therapeutic purposes.
(6) A departure from, or the failure to conform to minimal standards of care.
COURT: A decision by a medical board must be supported by substantial, reliable, and probative evidence, and it must be in accordance with the law. The Board relied on Arlen v. Ohio State Medical Bd., in which the court said that a medical board is not always required to produce expert witnesses b/c board members themselves are generally experts. The court here distinguishes this case b/c in Arlen the Dr. was violating a statute. If there is an applicable statute, expert testimony cannot trump it. In this case, there was no statute.
DISSENT: Board members are experts and do not need outside experts to tell it what constitutes acceptable medical practice unless outside their expertise.
CLASS:
- If statute is vague, should experts be required to clarify?
- Perhaps the government should set standards for acceptable medical practice concerning dangerous drugs/controversial treatments so that medical boards do not reach widely different results concerning controversial treatments.
- Procedure: licensing agency issues charge, physician can challenge charge through administrative agency, medical board makes ultimate decision (possibly a hearing officer recommendation in between), right to judicial review.
- Agency: decision to go forward, trier of fact, and judge…FAIR?
- Scope of Judicial Review:
• Question of Law = de novo review
• Question of Fact = deferential review
• In re Williams = substantial evidence test review
b. Hoover v. The Agency for Health Care Administration DIST CT of APP Fla. 1996
FACTS: The Agency for Health Care Administration filed an administrative complaint against Dr. Hoover for excessively prescribing controlled substances. Dr. Hoover denied the charges and requested a hearing at which the Agency provided 2 experts as witnesses. The experts had not examined any patient or patient record; the sole basis of their testimony was from pharmacy records. Dr. H testified in great detail about her diagnosis and courses of treatment, with physician testimony to corroborate the appropriateness of certain medications. The hearing officer recommended that the complaint be dismissed. The Agency filed exceptions to the recommended findings of fact and conclusions of law as to 5 of the 7 patients. The Board of Medicine set aside the hearing officer’s findings and penalized Dr. H.
COURT: A Board of Medicine must give substantial weight to a hearing officer’s findings before supplanting the findings and revoking a license to practice medicine. So long as an administrative officer bases findings on competent substantial evidence, there are no grounds to set aside the officer’s findings. In this case, the hearing officer weighed the detailed and extensive testimony of Dr. H against the opinions of the 2 experts who had not so much as read a single patient file. After examining federal guidelines (for cancer, but CT said appropriate to reference because no standards for treatment of chronic pain with controlled substances), subsequent legislation in the state, and all the evidence in the proceeding, the hearing officer made a reasonable recommendation to the Board of Medicine.
CLASS:
- Hearing officer probably dismissed the complaint b/c Dr. H appeared to be actually relieving the pain of the patients…the Board is only concerned with abusive prescriptions of controlled substances. To avoid such reviews that could lead to license revocation, most physicians simply do not prescribe medication, leading to undermedication of patients suffering from pain.
- Undermedication is what probably leads to assisted suicides…Need reforms so that Drs. are not afraid to prescribe.
- National Practitioner Data Bank: To prevent doctors with disciplinary histories in one state from moving to another and practicing until detected, if ever.
c. Hypothetical
ER Physician gives his son and his son’s friends pot and other drugs so that they would not do them on the streets.
• Violation of Ohio Statute? Yes, Section (3).
• What kind of evidence does the Board need? No expert witnesses because statute violation.
• What sanctions are appropriate? Should sanctions be determined based on professional competence or just ordinary judgment?
2. Alternative or Complementary Medicine
a. Homeopathy v. Alleopathy
• Homeopathic licensure was pushed by alleopathics to keep homeopaths from practicing.
• Allopathics fear treating “like with like” because basically treating patients with diluted poisons.
b. In Re Guess SC of NC 1990
FACTS: Dr. Guess’s medical license was revoked based on a violation of a NC statute stating that the practice of homeopathic medicine “departs from and does not conform to the standards of acceptable and prevailing medical practice in this State, irrespective of whether or not a patient is injured thereby”, thus constituting unprofessional conduct. CT of App decided against the Board because homeopathic medicine was not harming the public.
COURT: A court of law must affirm the decision of a medical board if that decision is based on a reasonable interpretation of the statute. While the legislature may only act to protect the public from harm, the plain language of the statute indicates that a risk to public health is inherent in any practice that fails to conform to the majority standard. The Board’s decision adhered to the statute and was supported by evidence that homeopathy is not the standard practice in NC.
DISSENT: All of the evidence tended to show that Dr. Guess was a competent and qualified physician who used homeopathic remedies only as a last resort when standard medicine failed. The legislature could hardly have intended to censure such practitioners.
CLASS:
- After the In re Guess decision, NC amended the statute to prevent the Board from revoking the license solely because the person’s practice was
“experimental, nontraditional, or that departs from acceptable and prevailing medical practice” unless competent evidence shows that the “safety risk is greater than the prevailing treatment or that the treatment is generally not effective”.
• Board needs empirical evidence, clinical trials, must commission research to exclude a practice, etc…
• NC took a difficult standard for Drs. to meet and turned it into a virtually impossible standard for the Board to meet.
3. Unlicensed Providers
a. The state administrative board supervises the licensure of physicians. The prohibition of unauthorized practice of medicine by unlicensed providers is enforced by criminal sanctions. A physician who aids and abets an unlicensed practitioner may also face criminal charges.
b. State medical practice acts define the practice of medicine quite broadly to prohibit unlicensed providers from engaging in any such activities.
c. State Board of Nursing and State Board of Healing Arts v. Ruebke SC of Kansas 1996
FACTS: Various nursing and medical groups sought injunction against Ruebke for the practice of lay midwifery.
COURT: The practice of lay midwifery does not constitute the practice of nursing and medicine for the purpose of statutory professional regulation. The Kansas legislature never addresses midwives directly in its healing arts act. Pregnancy and delivery, if without major complication, are merely a change in or continuation of normal human conditions. Although the acts are not constitutionally vague, the lay midwife practicing medicine here falls under the “supervision by a licensed practitioner” exception.
CLASS:
- Pregnancy and homeopathy are related to changes in health, not illness.
- Question of State Police Power: How do In re Guess and Ruebke address this issue? Why do these cases not deal with sound scientific evidence instead of a reliance on history?
- Leigh (Mass. 1985):
• Rejects argument that a state permitting the practice of certified nurse midwives shows legislative intent to prohibit the practice of lay midwives.
• “Ordinary assistance in the normal cases of childbirth” is not the practice of medicine. Where lay midwives use “obstetrical instruments and print prescriptions or formulas”, they are practicing medicine.
- Nurse midwives (as opposed to lay midwives): educational requirements, practical experience.
- State regulation of home births: informed consent requirements, etc.
- Ruebke statute is a strict liability statute b/c it does not require proof that the D actually knew that he or she was violating the statute.
4. Scope of Practice Regulation
a. Hierarchy
1. M.D. – Physician
2. P.A. – Physician’s Assistant
3. A.P.N. – Advanced Practice Nurse
4. R.N. – Registered Nurse
5. L.P.N. – Licensed Practicing Nurse
6. N.A. – Nurse’s Aid
b. Licensed nonphysician health care providers cannot legally practice medicine, but practices that fall within their own licensure are not considered to be the practice of medicine. If a nurse exceeds the services authorized in the nurse practice act, the nurse could be guilty of violating the prohibition against the unauthorized practice of medicine.
c. National Health Services Corps (NHSC) and early HMOs expanded the scope of practice for nurses and physician assistants for underserved areas and cost-containment efforts.
d. Sermchief v. Gonzales SC of MO 1983
FACTS: The Missouri State Board of Registration for the Healing Arts threatened to cite the nurses for unauthorized practice of medicine and the physicians at the clinic for aiding and abetting. The nurses acted pursuant to standing orders and protocols signed by appellant physicians.
COURT: A nurse may perform certain medical procedures without having engaged in the unauthorized practice of medicine.
• § 334.010 of Mo.’s revised statutes prohibits unauthorized medical practice. § 334.155 exempts nurses lawfully performing their professional duties.
• The court refuses to define the line between practicing medicine and the practice of professional nursing of influx of malpractice cases that would result and hindrance to the delivery of health services to the general public.
• The legislature expanded the scope of legitimate nursing duties with the Nursing Practice Act of 1975. This revision removed the “physician’s direct supervision” requirement, provided an open-ended definition to professional nursing, removed the “services” in the care of the sick limitation, and used language “included, but not limited to” to give the scope of practice. The nurses acted well within the scope of this revised statute.
CLASS:
- Different medical boards do challenge each others’ regulations.
- P.A. – practice medicine through physician delegation of tasks under the supervision of physicians; R.N. – independent practitioners who collaborate with physicians.
- Jacobs – useof pre-signed prescription pads by P.A.’s – appropriate delegation or is supervision necessary?
- Defining “supervision” – presence in the building, review and approval of examinations, etc.
5. Problem: Physicians, Physician Assistants, and Nurses
C. Regulation of Institutions
1. Institutional health care providers are regulated by a state agency only under the agency’s statutory authority. If there is no legislative authorization for the regulation of a specific institution, the state may not reach that entity.
a. Mauceri v. Chassin SC, Albany County, NY 1993
FACTS: Mauceri operated a business from her home which consisted of providing patients and their families with the names of home health aides. She did not investigate the qualifications of the aides, create any care plans, or maintain medical records. Subsequent to a complaint that Mauceri was arranging medical services without a license, the Department of Health rules that Mauceri would have to receive a license pursuant to Article 36 of the Public Health Law. Mauceri contends that her services fell outside the statutory definition.
COURT: The provision of names of home health aides constitutes the arranging of home health services as defined by statute. The construction given to a statute by the agency charged with implementing it should be upheld if not irrational. In this case, the Dept. of Health has determined that the statute, which requires licensing to arrange “home health aide services”, applies directly to Mauceri. The fact that Mauceri does not herself provide or supervise the services does not mean that she is not arranging them for clients. The Department’s interpretation is completely rational, and, as a result, Mauceri must be licensed to operate her service.
CLASS:
- The NY statute (Public Health Law) provides the statutory definition of “home care services agency” as referred to in this case. Pages 111-112.
- Institutional health care providers as defined by Illinois Public Health and Safety Code. Page 110.
2. Regulatory Systems
a. Differences Among Institutions
• Nursing Homes
- Responsible for the complete and total environment of their residents over a very long time.
- Intensive health care treatment through nurses.
- Direct day-to-day patient care.
- Chronically rather than acutely ill patients.
- In suits for poor care or abuse, causation is often difficult to prove.
- From “mom and pop” enterprises to real estate investments (for-profit).
- No private accreditation system of their own…JCAHO offers accreditation though.
- 1993: 60% of N.H. care paid for by Medicaid, while 10% paid for by Medicare.
- Nursing home reform legislation under the Omnibus Budget Reconciliation Act (OBRA) – focus on outcome standards. AAHSA (organization for not-for-profit nursing homes) asserts that these regulations are now outdated and are barriers to genuine quality and efficiency.
• Home Health Care
- Can include high tech medical procedures.
- More independence and better recovery, but sometimes inadequate care.
- Litigation is uncommon b/c of causation problems (care provided by professionals and family members), multiple providers from a variety of agencies, and professional-agency relationship.
- Private accreditation began in the 1980s and has expanded in reach.
- Concern of applying outcome standard to measure quality of care because these patients are healthier than hospital patients to begin with.
b. Licensure and Medicare/Medicaid
• For statutes enacted under the state police power, courts will uphold the legislation if its contribution to health, safety or general welfare is at least fairly debatable.
• Nursing homes are the institutions that receive the most state policing power as to standards and sanctions.
• Federal government authority arises through Medicaid/Medicare financing…may impose requirements that reach beyond Medicaid and Medicare (Ex. EMTALA right to ER care).
c. The Regulatory Process
STANDARD SETTING
1. In re the Estate of Michael Patrick Smith v. Heckler 10th Circ.
1984
FACTS: A class of nursing home patients challenged the Secretary of Health and Human Service’s (Heckler) practice of enforcing compliance with the Medicaid Act by focusing on the nursing home’s facilities rather than patient care (facility-oriented survey v. patient-oriented survey).
COURT: The Department of Health and Human Services Secretary has a duty to enforce compliance with the Medicaid Act by focusing on patient care. P contends that looking only to the facilities renders a theoretical [“paper compliance”- SSA-159 Form] capability to provide quality care. P further asserts that the Secretary has violated her duty to ensure the substantive standards of the Medicaid Act (namely, high quality medical care and rehabilitative services). While the state of Colorado is responsible for developing and enforcing standards of care, the Secretary has a duty under the “look behind” provision [more than a mere permitted authority] to enforce patient-oriented care. The Secretary’s failure is arbitrary and capricious.
CLASS:
- The Feds defend this suit because of fear of costs of changing the system and cost of figuring out what to change about it.
- QUALITY:
Structure/Input----Process----Output
• Secretary was erroneously focused upon structure/input.
• The difficulties arise in defining output (number of deaths, etc.)
• JCAHO is shifting to looking more at process and output for hospitals, nursing homes, etc.
- P standards of care: Medicaid Act, Federal Regulations (HHS), State Plan, State Guidelines (Pages 117-118).
- Medicaid:
• Voluntary for states to participate.
• Must submit state plan to the Secretary to participate.
• States must comply with the Federal Regulations (HHS).
• § 1983: Subject to judicial proceedings for violations.
- Should Medicaid be an entitlement (suit by individiuals for violations?) Governors say no.
- Ps did not contest the statute…assert that the form is inconsistent with the Federal Regulations (require that you look to the plan of care). The standard of review was to uphold the form so long as it was not arbitrary and capricious. The court decided the form was not arbitrary and capricous
- Forms, transmittals, guidelines, letters = “Quasi-law” materials.
- Should form be promulgated as regulations?
- Some argue that a strong potential for an adverse effect is enough for noncompliance with quality standards. Actual harm is not always needed.
SURVEY AND INSPECTION
2. Southern Health Facilities, Inc. v. Somani CT of APP OH 1995
FACTS: Southern Health Facilities ran a nursing home in Ohio. ODH was the “State Survey Agency” charged with reviewing Medicare and Medicaid participants. ODH inspected SHF and cited it for several deficiencies. P claims that ODH violated state and federal law by not communicating the nature of the surveyor’s impressions during an exit interview, thereby not allowing the nursing home to question or provide additional documentation. P claims this is a violation of due process
COURT: A state agency charged with certifying Medicare and Medicaid participants must provide procedural safeguards to comply with due process requirements. Federal regulations require certain safeguards such as an exit interview before terminating a Medicare/Medicaid participant. These safeguards give a provider a chance to discuss findings and remove the need for a formal hearing. SHF received no such protection, and assuming the allegations in the complaint are true, SHF has a constitutional right to certain protections against arbitrary rulings from state regulators.
CLASS:
- Substantial compliance with survey procedures may be enough so long as the P does not suffer substantial prejudice to its interests (EPI 1996).
- Beverly California Corporation (1996): Secretary did not exceed her statutory look-behind authority in conducting a federal survey without giving reason as to why the state survey was inadequate. The court stated that the facility was one of a sample selected to test the state survey process.
- Surveyors prefer “documentable” citations to those involving outcomes and patient-focused survey techniques.
- Should surveys be advisory or adversarial?
- P in this case brings a process charge as opposed to a charge that the factual determinations were wrong because a procedural dispute is a Q of law, whereas a decision that a facility violated standards by the ODH is given deference. The standard of review for the latter involves a showing that:
1. The agency had the authority to act, and
2. The agency decision was supported by competent and substantial evidence.
- “Survey & Certification” for Federal Medicare and Medicaid: The law that governs is from the HHS and Constitutional requirements.
SANCTIONS
3. 3. Thompson v. Division of Health of Missouri CT of APP MO
1980
FACTS: The Division of Health of Missouri suspended Thompson’s license to operate her nursing home based on deficiencies in dietary service, patient care, fire safety, and sanitation.
COURT: Where a state inspection reveals no grave deficiencies, substantial compliance with listed deficiencies has occurred, and there is no reinspection to determine if total compliance has been reached, there is not competent and substantial evidence to support suspension of a nursing home license. Neither a lengthy elapse of time between citation and suspension nor an intervening license renewal estops the DOH from inquiring into past violations upon application for a subsequent license renewal. However, the DOH lacked evidence to support suspension of Thompson’s license. Neither DOH inspectors nor the hearing examiner considered the deficiencies grave: inspectors found a 45-day delay nondetrimental to patients, and the examiner delayed his suspension orders until January 1979. Thompson showed that after she purchased the property she had corrected the problems and was in substantial compliance with the listed deficiencies. On these facts, to support the suspension order with competent and substantial evidence, the DOH needed to reinspect the nursing home before January 1979 to show that Thompson was not in compliance on that date.
CLASS:
- No court can substitute judgment for a administrative agency decision. Courts can only determine whether:
1. The agency had the authority to act, and
2. The agency decision was supported by competent and substantial evidence.
- Should the penalty for violations emphasize correction or punishment?
- Before the 80s, state and federal government had only license revocation or suspension as the penalty, resulting in residents being out on the streets (due process claims arose, and consequently, pre-termination cases).
1987: OBRA provided “intermediate sanctions” for enforcement of Medicare and Medicaid standards. List on page 134.
Congress has also provided these for enforcement of standards for tax-exempt status.
Could an intermediate sanction have been levied in Thompson?
3. Private Accreditation of Health Care Facilities
Private accreditation is a nongovernmental, voluntary activity typically
conducted by not-for-profit associations. Accreditation simply means
that the institution earned a seal of approval for meeting the standards
of an external organization.
a. a. The Joint Commission on Accreditation of Healthcare Organizations
b. (JCAHO)
• Accreditation programs for hospitals, nursing homes, home health, and other facilities.
• Linked to government regulation of health care facilities because of size and influence of the program:
- Reliance on accreditation for Medicare/Medicaid certification
* “Deemed Status”: Under the Medicare statute, JCAHO-
accredited hospitals are “deemed” to have met the
requirements for Medicare certification.
^ Reagan Administration suggested extending
“deemed status” to nursing homes, but the idea
was vigorously opposed by consumer advocates.
^ Why support “deemed status”?
1. Private accreditation encourages voluntary
compliance, eliminating a government
conducted “prosecutorial” inspection program.
2. The cost of inspections is shifted to private
organizations.
^ Home Health Agency “Deemed Status” with
limitations and requirments (1993): The
Department of Health and Human Services may
withdraw recognition of JCAHO accreditation of
HHAs at any time if they determine that JCAHO
accreditation does not continue to provide
reasonable assurance that Medicare conditions of
participation are met.
- Standard incorporated into state hospital licensure standards
- JCAHO substitutes for routine government surveillance processes.
• Governance and policymaking is dominated by physician organization members (AMA, etc.)
b. The National Committee on Quality Assurance (NCQA)
• Accreditation programs for health maintenance organizations.
D. Promoting Quality through Malpractice
1. Health Care Professionals
a. Hall v. Hilburn SC of Miss. 1985
FACTS: Dr. Hilburn, practicing in a small Miss. town, is sued for malpractice/wrongful death. Hall, at trial, sought to introduce the testimony of a Cleveland doctor, but the trial court excluded the testimony because he was not familiar with the local standard. Dr. Hilburn offered an expert who had just recently moved from Cleveland to the Miss. town who testified to differences in equipment, not to differences in medical knowledge, skill, and competence.
COURT: A physician’s duty of care to a patient is to be judged by national, not local standards. As far as resource-based judgment, a modified locality (not from that exact community, but from a similar one) standard applies. Locality rule has become obsolete as medical practice has become “nationalized”. Cleveland doctor for Hall should be able to testify.
CLASS:
| | | |
| | | |
|STANDARD |WHO CAN BE AN EXPERT |WHAT EXPERT MUST TESTIFY TO |
| | | |
|Local |Practicing in same community |Custom in the same community |
| | | |
|Modified Local |Practicing in a similar community |Custom in a similar community|
| | | |
| | |“National” custom |
| | | |
| | |Turns on “reasonable” care |
| |Practicing anywhere nationwide |provided by the “minimally” |
|National | |competent |
| | |(Jury Qs) |
- Problem with the locality rule is the “conspiracy of silence”.
- Problem with modified locality is that a lot of money is spent on arguing whether communities are similar or not.
- Hall Test:
1. Competence = national standard
2. Resource limitation = modified locality standard…expert must be educated about the local resources.
- Hall dicta: not liable for errors in medical judgment, only for falling below minimal standards of care. Other cases have said that physicians should not be completely freed from liability just because they adhered to acceptable practices.
- Standard of care should be in compliance with the technology available at the time of the treatment.
- Clinical practice guidelines and pathways for standard of care. MEDLINE.
- Who can be an expert?
• Normally must be in the same specialty unless physician has knowledge in that field.
• Look to the laws of the individual states.
• Hall: If expertise of medical knowledge, skill, experience, etc. will assist in understanding the evidence, and the expert is independent and lacks bias.
- In light of telemedicine, should rural doctors be allowed to apply the locality rule?
- Who may qualify to be an expert?
• Must be familiar with the resources available, but otherwise, only knowledge, skill, etc. is important.
• Cannot say “This is how I do it”…CUSTOM IS THE STANDARD.
• D will often try to argue “The medical school I went to taught this”…customs in the doctor’s community are relevant (room for differentials in practice), but not determinative. This is a jury question.
b. Duties to Contest Reimbursement Limits
1. Duty of Physician With Respect to Reimbursement Constraints
• Doctor must be aware of the reimbursements constraints so that he can properly advise the patient or direct him to an appropriate institutional office for further information.
• There is no “duty to rescue” in the sense of A doctor’s financial obligation to pay out of pocket for a patient’s treatment.
• Wickline: A physician operating within a constrained reimbursement structure and an institutional bureaucracy is expected to be familiar with limits on payment.
2. Utilization Review and Payment Systems
Utilization reviews are in place in hospitals for Medicare to ensure cost-containment and quality assurance.
• Retrospective Utilization Review Process: After the fact….if deemed to be not medically necessary, payment is denied by the third party payor.
• Prospective Utilization Review Process: Before the fact…authority for the rendering of health care services must be obtained before medical care is rendered.
Risk: Patient may not get the care needed. Potential quality compromise.
Cost-containment: Cuts costs.
• Fee-For-Service: Provides financial incentive for too much care.
• Prospective Payment System: Payment contingent on the service or number of people. Rates and payment are decided in advance.
Capitated Payments: One fee per person for all services regardless of the diagnosis.
Diagnosis Related Group (DRG) Payment: One fee per service. Each service has a pre-assigned rate.
* Fear that doctors may provide too little care.
* Can work in tandem with prospective utilization review
process…if no approval, no prospective payment.
3. Wickline v. State Calif. 1986
FACTS: Dr. Polonsky, Wickline’s doctor, recommended that she remain hospitalized for a remaining 8 days, filling out a Medi-Cal form 180 requesting approval of the extension. The request was extended only by 4 days, and Dr. Polonsky did not challenge the finding although an appeal mechanism was in place. Wickline was discharged after 4 days, and experts testified that the discharge was reasonable given the current standards of medical practice. Wickline’s leg was amputated later, and suit was filed against Medi-Cal for N interference with a doctor’s discretion.
COURT: Since a patient’s health care payor is not responsible for discharge determinations, liability will not attach to the payor for a N discharge. The court does state in dicta that the payor may be liable for defects in the design or implementation of cost containment mechanisms. When an appeal route exists, and the physician is in a better position to determine “medically necessary”, the doctor cannot shift responsibility to the payor. While Dr. Polonsky’s decision to discharge met the standard of care applicable at the time, the error in medical judgment should not be the payor’s responsibility given the ability to challenge.
CLASS:
- Lesson: Go through the bureaucratic motions to avoid liability.
- Malpractice for failing to request extension with further forms so long as the doctor has met the standard of care.
- There are companies that go to patients and see if they qualify for Medicaid or other funding. Hopitals happy to pay them because otherwise the care comes out of the uncompensated care fund.
- Georgia has provided advocates to call to consumers and doctors in the event that utilization review turns you down.
- Medical malpractice for failure to advise patients of Medicaid eligibility is rare, as is liability for financial consequences of a misdiagnosis. A physician may be required to know state law.
- Wilson v. Blue Cross: Doctor and Payor jointly liable for tortious conduct for denial of care.
- Wilson v. Chesapeake: Dr. liable for not knowing about the Maryland Medical Assistance Program…not even for just failing to inform.
- Ferguson: Dr. should advocate for the patient and have “full knowledge of the scope of the insured’s coverage”.
- Murphy: Dr. duty to complete insurance forms, but not if just examining a person for purposes of employment.
2. Hospitals – From Immunity to Vicarious Liability
a. Charitable and Other Immunities
Bing v. Thunig NY 1957
FACTS: A hospital raised the “charitable immunity” defense when sued for the negligence of its medical personnel.
COURT: The rule of charitable immunity does not immunize a hospital against liability for the negligence of its employees. Like any employer, a hospital, whether charitable or profit-making, must be liable under the rule of respondeat superior for the negligent acts of its employees committed within the scope of employment. Traditionally, charitable immunity was upheld because donations could not be diverted, doctors and nurses were independent contractors, and a fear existed that negligence awards would destroy a hospital and discourage charitable donations. Today, hospitals are like businesses, doctors and nurses are hospital employees, hospitals are insured, and patients expect that a hospital will cure, not that the doctors and nurses will act on their own responsibility.
CLASS:
• Charitable immunity has been abandoned by most states. Some states have it, but impose statutory ceilings on recoverable damages, or up to available insurance coverage, or as to charity care.
• Government immunity is still widely enjoyed…protects state hospitals.
• A hospital may be for profit, not-for-profit (charitable, tax-exempt), or public.
b. Vicarious Liability Doctrine
• The Captain of the Ship Doctrine has dwindled away because of the loss of charitable immunity. It states that the doctor who exercises control and authority over nurses and health care professionals should be liable for their negligence.
• A physician may be vicariously liable for the negligence of medical students and residents.
• Stretching Vicarious Liability Doctrine
General Rule
Strict Liability: If the N actor is an employee of the hospital, the hospital is vicariously liable.
Schlotfeldt v. Charter Hospital of Las Vegas Nev. 1996
FACTS: Schlotfeldt, an alcoholic, suicidal drug abuser, checked into Charter where she was examined by Dr. Desmarais who was filling in for another doctor. Dr. D was not employed by Charter. He only had staff privileges there. Dr. D had his own private practice. Schlotfeldt filed a suit for false imprisonment because Dr. D refused to release her until after 60 hours.
COURT: A hospital may no be held vicariously liable for a doctor’s actions without a finding of fact as to whether an agency relationship exists. There must be an employment arrangement; staff privileges are not sufficient. There was no evidence of an employment relationship, and evidence of the private practice tends to dispel any agency relationship as well. The question of an agency relationship is a question of fact for a jury.
CLASS:
• Most physicians are not employees…merely have staff privileges that allow them to admit and discharge their private patients to the hospital and to use the hospital’s facilities.
• A hospital medical staff governs the hospital’s provision of medical services, operating under its own bylaws, electing its own officers, and appointing its own committees.
The Control Test
Berel v. HCA Health Services of Texas, Inc. TX 1994
FACTS: The Berel family was admitted to a hospital for treatment of emotioal disturbances by Dr. Robinson. The family filed several N claims against the doctor and the hospital for N failure to supervise and regulate. Dr. Robinson was an independent contractor.
COURT: Although independent contractors normally transmit no liability to the hospital, if the hospital retains the right to control the details of the work to be performed by the contracting party, an agency relationship exists, and the hospital is liable. Dr. Robinson provided testimony as to the role of the hospital’s “quality assurance person” that raised a question of fact as to the hospital’s level of control.
CLASS:
• Utilization review provides a Catch 22 for institutions because the more control they exercise, the more likely they are liable for the acts of the independent contractors.
• Evidence of an employee or control relationship: THE CONTRACT: Does the K control the doctor’s choice of patients? Does the hospital furnish equipment?
The “Ostensible Agency” Test
Sword v. NKC Hospitals, Inc. Indiana 1996
FACTS: During labor, Dr. Luna, an independent contractor anesthesiologist at the hospital, administered an epidural anesthetic. The Swords filed suit against the hospital for the negligence of Dr. Luna.
Ostensible/Apparent Agency – R. 2d Torts § 429 – No reliance element, No holding out.
Estoppel Agency – R. 2d Torts § 267 – Reliance element, but Illustration 3 and most jurisdictions do not require it.
Indiana law –
• Principal may be held liable by a third party for the negligence of one whom the principal holds out as its agent.
• Reliance element.
• A reasonable person must think they are an agent or employee.
• No liability if the patient knows or should have known it was an independent contractor.
COURT: If hospital communications would lead a reasonable person to conclude that a health care professional was an employee or agent of the hospital, and if the person reasonably relied on the representations, then the hospital can be liable for the professional’s negligence under the doctrine of apparent agency. It is reasonable for a patient to conclude that doctors in a hospital work for the hospital. If a patient relies on the agency relationship, the hospital is not insulated from liability. The Swords relied on the hospital’s aggressive advertisements as to the specialists available in every field of pediatrics and surgery. The question of fact is whether a reasonable person would rely on these representations.
CLASS:
• Come into ER unconscious = no reliance.
The Inherent Function Test
Beeck v. Tucson General Hospital SC of Ariz. 1972
FACTS: Dr. Rente, and independent contractor, and his colleagues were the only doctors authorized to perform X-ray work for the hospital. The equipment belonged to the hospital, and the hospital had the right to control the doctor’s standard of performance. Beeck had no choice but to use the radiologists that the hospital provided (monopoly).
COURT: Under the inherent function doctrine, an employee-employer relationship exists between a hospital and a doctor who performs any function without which the hospital could not achieve its purpose. Without a radiology department, a hospital could not meet its responsibility to preserve and protect the health and lives of its patients. All the radiology facilities, instruments, and administrative services were provided by the hospital. Respondeat superior exists under the inherent function test (a function without which the hospital could not properly achieve its purpose.
CLASS:
• Similar to the nondelegable duty rule of corporate negligence.
• Could apparent agency have worked just as well in this case? If no holding out, inherent function test is often used. Also, control test may have worked in this case. All the tests tend to overlap.
• Control test – K and actual relationship focus; Vicarious liability – Expectations of the patient focus.
c. Corporate Negligence
The courts effectively made the medical personnel who used the hospital part of the “enterprise”, whether they were staff employees or independent contractors.
DUTY TO PROTECT PATIENTS FROM MEDICAL STAFF NEGLIGENCE
1. Darling V. Charleston Community Memorial Hospital Ill. 1965
FACTS: Dr. Alexander set and cast Darling’s leg. The next day, his toes turned dark and blue, and the leg eventually had to be amputated. Darling sued Dr. Alexander and the hospital.
COURT: A hospital may be liable for the negligence of its staff. Hospitals today provide facilities and employ large staffs for providing services at a fee. Patients are reasonable to expect treatment. Dr. Alexander was N for the procedures he utilized, and the nursing staff was N in its post-procedure follow-ups.
CLASS:
• Vicarious Liability Claim for Nurse.
• Direct Liability Claim for Failure to Staff a Sufficient Number of Trained Nurses.
• Corporate Negligence for Failure to Oversee the Doctor.
• Courts will not hold hospitals liable for N per se (in the absence of a good excuse). Courts must have affirmative evidence of corporate N (example: JCAHO can serve as evidence for a permissive inference of N)…custom is not determinative as the standard as with doctors. The question is what is the appropriate standard of conduct to satisfy the duty.
• Albain – Malpractice does not create a presumption that the hospital negligently granted staff privileges. Hospitals only have a duty to remove the incompetent, not to second-guess Drs. constantly.
• Thompson – Hospital must have actual or constructive knowledge of the medical procedure used by the Dr. to be N.
• Duty to properly select and retain medical staff:
Johnson – A hospital has an obligation to its patients to investigate the qualifications of medical staff applicants. The investigation should include information related to:
1. Information from the applicant’s peers
2. Current state licensure in the state in which he is applying and whether that licensure is being challenged.
3. History of adverse malpractice action.
The standard for the investigation is one of ordinary care.
• In light of HCQIA’s national database, hospitals are held to have constructive knowledge of any information about a physician it may have gotten from an inquiry.
• Hospitals can be found N in maintaining facilities.
- Minimum facilities and support systems for any procedures they offer.
- Short staffing can be N.
- Equipment must be adequate, although does not have to be state of the art (Std.= similar hospital with similar resources)…May have a duty to transfer to a hospital with the correct equipment.
• Hospital may be liable for inadequate and defective systems for ER care.
• A hospital’s internal rules and regulations for medical procedures may be offered as evidence for standard of care.
DUTY TO PROTECT NON-PATIENTS
2. Pedroza v. Bryant SC Wash. 1984
FACTS: Pedroza’s decedent, who was under the care of Dr. Bryant in his private practice away from the hospital, suffered from a pregnancy related toxemia and was admitted to the hospital. She died at the hospital, and the suit is brought for malpractice against Dr. Bryant and for wrongful death for allowing Dr. Bryant staff privileges (corporate negligence) against the hospital.
COURT: A hospital is not liable for the malpractice of its staff physicians working in private practice away from the hospital. A hospital does not hold itself out to oversee and supervise the private office practices of its staff members. Bright-line Test: A hospital’s duty of care under the doctrine of corporate negligence extends only to those who are patients within the hospital.
CLASS:
• Acts of malpractice committed outside the hospital are relevant only where the hospital fails to take action after actual or constructive notice of such acts.
• Copithorne – Hospital liable for a Dr. with staff privileges who raped a patient at her home. The hospital had actual notice of 2 prior sexual assault incidents, and the patient relied on the doctor’s reputation within the hospital as a good neurosurgeon. The risk to the patient was within the foreseeable consequences of continuing the doctor’s staff privileges.
3. The Move Towards Integrated Delivery Systems
a. The Birthing Center
4. Managed Care and Integrated Delivery Systems
a. Vicarious Liability
Boyd v. Albert Einstein Medical Center SC of Penn. 1988
FACTS: HMO of Penn. operated a healthcare provider system in which members could choose their primary physicians from a list who could in turn refer them to specialists. The P is suing the hospital for the doctor’s malpractice.
COURT: A HMO may be liable for the malpractice of its doctors even though they are independent contractors. The HMO contracts with its member to provide quality care, limits the choice of physicians, screens the doctors, and pays them directly. This makes the doctors ostensible agents of the HMO.
CLASS:
• Capitated fee plan with 80% to doctors and rest in a pool for specialty referrals and hospitalizations. The remaining portion of the specialty pool goes back to the doctor, while the hospitalization remains go back to the IPA, which keeps 50% and reserves 50% in a fund for losses from unanticipated doctor costs.
• A holding out is not an element of ostensible agency.
• Doctors generally contract with 5-7 HMOs to reduce their financial risk. So why is there still reasonable reliance on the part of the patient? Because the reliance is on the fact that the HMO provides quality care.
• HMO vicarious liability cases are fact sensitive.
• HMO can include in the K a statement that the physicians are not their employees, but this creates a Catch-22 because the HMOs need to advertise quality care and screening, etc.
• Vicarious liability provides an incentive to seek physicians with the best credentials for the HMOs.
b. Direct Institutional Liability
Systems that are alleged to be N…for prescribing medicine, protocol in the ER, drug formularies, limits on stays for certain treatments, etc.
Bush v. Dake Mich. 1989
FACTS: Mr. Bush was a participant in an HMO plan provided by his employer. His wife was covered by the policy, and was not diagnosed with uterine cancer by Dr. Dake in time. She claims that the HMO has a system that effectively maximizes the amount a doctor makes by encouraging fewer referrals to specialists. In addition, certain diagnostic procedures were not reimbursed to primary care physicians. Pap smears were one such procedure.
COURT: An HMO medical provision system is not invalid as contrary to public policy. It is not for the courts to determine whether an HMO represents sound social policy. Since the Michigan legislature specifically authorizes the implementation of an HMO system of medical provisions, the courts will not second-guess the legislature. Whether or not the system contributed to the malpractice is a jury question.
CLASS:
• MCOs have 3 features from a liability perspective:
1. Select a restricted group of health care professionals.
2. Accept a fixed payment per subscriber, leading to a search for methods to minimize costs.
3. Use strategies for cost-effective care – physician incentives, utilization review, gatekeeper functions.
• Narrow protection for HMOs to get statutory authorization to set up systems, but then be liable for treatment naturally arising from that system. As a result, some states have granted HMOs immunity from tort liability.
• For P to show that the system contributed to the malpractice, the P must show causation…the doctor did not order the pap smear because there was no financial incentive to do so.
EVIDENCE:
- Ordered for one patient, but not the other.
- Referral pool low, but the problem is that the N was in the failure to order the pap smear, not in a failure to refer.
**Duty to Disclose Financial Incentives: Compromise between duty to disclose incentive plans and belief that the information is proprietary and protected by the Freedom of Information Act.
- Stark Amendments: Prohibit an HMO with Medicaid contracts from “knowingly making a payment, directly or indirectly, to a physician as an inducement to reduce or limit services provided with respect to Medicare and Medicaid beneficiaries.
- Informed Consent as a related disclosure theory.
- “Gag” clauses in HMO/physician contracts prohibiting physicians from communicating in any manner which undermines the confidence of the enrollee in the HMO’s coverage.
c. Corporate Negligence
Shannon v. McNulty Penn. 1998
FACTS: The Shannons sue Dr. McNulty for medical malpractice, and sue HealthAmercia for corporate N for the N failure to supervise Dr. McNulty’s care and its lack of appropriate procedures and protocols (as to triage nurses) when dispensing telephonic medical advise to subscribers.
COURT: Corporate N may apply to an HMO where the HMO breaches the duty to oversee all persons who practice medicine within its walls as to patient care. Although Thompson is a hospital case, the duties of care as to facilites, selection and retention of competent physicians, supervision within its walls, and formulation of adequate rules and policies apply to HMOs as well. Despite the laudatory purpose of containing health care costs, HMO decisions limit access to treatment, and must pass the test of medical reasonableness.
CLASS:
• With corporate N, the allegation is that the doctors’ and nurses’ decisions were N, not that the system was N as with direct liability.
d. The ERISA Issue
Employee Retirement Income Security Act of 1974 (ERISA)
• Established uniform national standards of employee benefit plans and broadly preempted state regulation of these plans.
• Allows companies to have benefit plans that can be used nationwide.
• 29 USCA §1132: §502: The exclusive remedy for claims to recover benefits due or to enforce or clarify under the terms of the employee benefit plan (EBP).
• 29 USCA §1144(a): §504: ERISA supersedes state laws to the extent that they “relate to any employee benefit plan” covered by ERISA.
• State and federal government employees, churches, etc. are not covered by ERISA.
Estate of Frappier v. Wishnov Fla. 1996
FACTS: The estate of Frappier charged the HMO with direct negligence in selecting the two doctors and vicarious liability for the negligent acts of doctors. Before the Florida court can conclude that the applicable ERISA federal preemption statute divests it of subject matter jurisdiction, it must be proven that the HMO was an ERISA plan.
COURT: Where an ERISA is implicated by a complaint for failing to provide, arrange for, or supervise qualified doctors to provide the actual medical treatment for plan participants, federal preemption is inappropriate because they are too remotely related to ERISA. The direct liability, corporate N, and implied contract claims are preempted under 502 because they relate to the administration of the plan. This is all contingent upon a finding that the HMO plan is an ERISA plan.
CLASS:
• Courts are not drawing as distinct lines as in this case where VL means no preemption and DL and corporate N equate to preemption.
• 502 provides only equitable relief, no punitive damages. There is no jury trial, and attorney fees are available.
• Plaintiffs have the right to bring suit in either federal or state court.
• 502 claims are federal. Defendants can seek removal to federal court.
• “Well Pleaded Complaint Rule” – The federal complaint must appear in the P’s complaint. A defense based on federal law is insufficient.
• The Exception to the Well Pleaded Complaint Rule is when Congress has federalized the area so that any claim necessarily raises federal issues even though federal law is only raised in the answer is called the “Complete Preemption Rule” because state law is extinguished by federal preemption of it.
• The usual course is that the P alleges breach of K or tort claim. The D claims 502 and seeks removal. The case may be preempted to federal court, where the court decides if it is covered by 502 or not.
Moscovitch v. Danbury Hospital Conn. 1998
FACTS: Plaintiffs are suing their health care plan (PHS), which is an EBP, for depriving the decedent of appropriate mental health insurance benefits because of cost-containment considerations. Ps are suing the hospital for N care and treatment of the decedent. Ps later amended the original complaint, dropping the claim that benefits were denied.
COURT: The complaint is remanded to state court because the P’s allegations against PHS assert claims for medical malpractice (quality) which do not fall within the scope of ERISA §502(a). The amended complaint is considered because there was no forum manipulation on the part of the P. Since the amended compliant dropped the denial of benefits (quantity) claim, the complaint falls outside of 502, alleging only medical negligence. Such vicarious liability claims are generally related to quality of care.
CLASS:
• Dukes: A claim about the quality of a benefit received is not a claim under ERISA 502 to recover benefits due under the terms of the plan.
• ERISA-qualified managed care plans could devise contracts that set the quality standard for the provision of health care services, thus forcing the subscriber to opt out of the state law.
• This court does not want to undermine the Well Pleaded Complaint Rule.
• Travelers: Defines “relates to” without overruling prior cases: For 504 issue.
• Pappas: Negligence laws have only a “tenuous, remote, or peripheral connection with ERISA covered plans”, and therefore, are not preempted.
III. Organizing the Health Care Enterprise
A. Professional Relationships
1. Hospital Medical Staff:
• Hold staff privileges
• Operate within the hospital and medical staff by-laws
• Substantial authority over the hospital’s internal quality assurance system and credentialing process
• Today, in light of corporate liability, cost containment, etc. hospitals exert more control over its physicians. – shift from independent contractors to employees.
2. Rao v. St. Elizabeth’s Hospital Ill. 1986
FACTS: Dr. Rao sought court-ordered reinstatement of hospital staff privileges. An ad hoc committee did not give him written notice of the hearing, but he had been informed orally and attended. He was not provided the evidence they would use in advance of the meeting, but Dr. Rao agreed at the meeting to review it then.
COURT: A decision to revoke staff privileges at a private hospital is not subject to judicial review, unless the revocation process was contrary to established by-laws. The substance of the rule will not be reviewed, only whether the hospital followed its own procedures. Dr. Rao contends that the hospital violated its own procedures in three respects. First, he claims that he was not given written notice as required. The court notes, however, that he attended and raised no objection at the meeting. Second, he contends that no member of the Executive Committee was present to give the hospital’s side of the story, thereby making the hearing committee both “prosecutors and jury”. The court states that even if he was not present, this is an advantage to Dr. Rao. Finally, Dr. Rao states that summary suspension is appropriate only when there is immediate patient harm. Since the committee is allowing Dr. Rao to practice until he discharges patients he is currently seeing, there is no immediate patient harm. The court says this is a hospital judgment for which the court will not substitute its own.
CLASS:
• This case demonstrates the narrow scope of review with respect to the decisions of private hospitals. The scope is broadening in NJ, NM, and AZ.
• Standards: “arbitrary, capricious or irrational”, “substantial evidence”, “fundamental fairness”.
• Staff privileges that involve state action must meet due process standards.
• No case law governing hospital procedures. Must look to:
1. JCAHO
2. “Fundamental Fairness”
3. HCQIA: grants hospitals limited immunity (damages only) for staff privileges decisions if the hospital meets the procedural standards established in the Act; National Data Base for a professional review.
4. Physician’s own sense of what is correct.
• The decision is pro-physician despite the narrow scope of review because substantial internal procedures are judged and enforced by physicians…peers judging peers. Judicial review does raise the stakes b/c hospitals know someone is looking over their shoulder.
3. Mateo-Woodburn v. Fresno Community Hospital Cal. 1990
FACTS: Prior to 1985, Fresno Community Hospital had an “open” system for staffing its anesthesiologists, meaning that the various doctors worked out their schedules among themselves. FCH became concerned that the system resulted in inefficient resource utilization and substandard patient care. To solve the problem, FCH contracted with Dr. Hass to go to a “closed” system, giving Dr. Hass the right to regulate the hours of any physician with which it may wish to contract. Some of the anesthesiologists refused to sign the K, stating it infringed on some of their vested professional rights.
COURT: A hospital may regulate departmental staffing through an exclusive arrangement with one or more doctors. A hospital may make a decision to enter into an exclusive K for the provision of a set of medical services. As long as the decision was rationally (not “arbitrary, capricious, or irrational”) based on a legitimate concern with the providing of medical services, the decision is not subject to judicial review. FCH was concerned with the inadequate provision of anesthesia services by its unregulated anesthesiologists. The exclusive K was a rational response to the concern.
CLASS:
• Ps argue that the hospital did not follow its own procedures in amending the bylaws because of appointments, but the court says the doctors are still part of the medical staff. Watson: The privileges changed dramatically under the Hass K though.
• There was no hearing in this case because it was a management decision. The decision to enter the exclusive K had nothing to do with the character, competency, or qualifications of any particular anesthesiologist. Also, no one asked for a hearing.
• Broad standards of review to allow judicial review:
1. Substance of bylaw – Rationally related to patient care. The flip-side is arbitrary, capricious, irrational.
2. Substantial evidence - Was the hospital decision supported by substantial evidence (similar to arbitrary and capricious administrative law principles).
3. Adherence to own procedures or bylaws – Most courts only require this.
4. Volcjak v. Washington County Hospital Association Maryland 1999
FACTS: Dr. Volcjak sues WCHA because the hospital terminated his clinical privileges in anesthesiology without providing him a hearing when it entered an exclusive K with a group of anesthesiologists. The “Plan of Action” for reorganization stated that Dr. Volcjak’s clinical privileges would be terminated unless he was selected as the exclusive provider or became employed by the provider. Dr. Volcjak requested an adverse action hearing due to him under the bylaws, but WCHA denied the request.
COURT: A hospital is required to provide the contractual hearing for adverse actions because “business decisions” often impinge upon the professional qualifications of the doctor, and the doctor should be afforded due process. WCHA claims that it does not have to provide a hearing when the termination is the result of a decision to enter into an exclusive K, and not because of accusations of professional misconduct. The court distinguishes the binding precedent of O’Brien which WCHA relies on. O’Brien held that termination of privileges when the exclusive radiology K expired, and the hospital was unable to reach an agreement on a new exclusive K, does not require a hearing. The court notes that O’Brien obtained his privileges pursuant to the exclusive K, whereas Dr. Volcjak had not. WCHA wants to characterize the O’Brien holding as applying to all “business decisions”. As in Strauss, the “business decision” impinged upon the professional qualifications of the doctor, because had it not been for substandard care, the reorganization would not have been required in the first place.
CLASS:
• Judicial review: Must comply with bylaws.
• Dr. Volcjak may have been better off with no hearing. He would be terminated either way, and now the HCQIA Data Base has a record of an adverse action hearing.
• Is Volcjak consistent with Mateo-Woodburn? Address different issues because no request for a hearing in M-W…retained staff privileges despite exclusive K. But in M-W, the privileges were “effectively” reduced.
• What role should medical staffs play in the decision to enter exclusive Ks or limit access to privileges?
• Economic credentialing – hospital makes privileges decision based on factors unrelated to quality.
5. Harper v. Healthsource New Hampshire, Inc. New Hamp. 1996
Managed Care Contracts for Professional Services
FACTS: Dr. Harper had a ten-year relationship with an HMO that re-enrolled him as a primary care physician and not as a surgeon. The K between the two stated that termination was allowed without cause upon 6 months written notice or with cause immediately upon written notice.
COURT: Public interest and fundamental fairness demand that a HMO’s decision to terminate its relationship with a particular physician provider must comport with the covenant of good faith and fair dealing and may not be made for a reason that is contrary to public policy. The fundamental fairness and not contrary to public policy standard of judicial review applies to for and without cause terminations. Dr. Harper’s termination affects his patients, and therefore, is against public policy.
CLASS:
• California: Advocating for medically appropriate health care is a public policy of the state, and physicians may not be penalized by HMOs for such activities,
• Delta Dental: Fundamental fairness applies to MCO and physician contracts because the plan had a “quasi-public significance” and controlled important economic functions.
• State legislation in this area of MCO and physician contracts may be preempted by ERISA if part of a self-insured employee benefit plan.
6. Wright v. Shriners Hospital For Crippled Children Mass. 1992
Labor and Employment: Employment-at-will: Employment relationship can be terminated without cause at the will of either the employer or the employee.
FACTS: Wright, a nurse, was fired from Shriner’s Hospital for criticizing the hospital’s internal practices. Wright had an employment-at-will contract.
COURT: A public policy exception to the rule of at-will employment does not exist for nurses who make internal criticisms of hospital practices. A violation of a well-defined public policy, such as firing for refusing to break the law, is an exception to the doctrine of employment-at-will. Despite the interest in reporting patient care issues, there is no law to make internal criticisms – only for health care providers to inform public authorities of dangers to patients. Even if Wright had reported them to public authorities, the problems did not rise to the level of abuse or neglect.
DISSENT: A public policy to encourage employees to identify problems with care must exist. Otherwise, employers could deter such reporting by threatening their jobs.
CLASS:
• “Implied Ks” can take a relationship out of the at-will category.
• “Whistleblower” statutes may protect employees who report wrongdoing, but usually applied narrowly by the courts.
• The disruptive nature of speech may outweigh any First Amendment rights that would constitute a public policy violation.
• The public policy exception is a narrow exception because the policy must be either mandated or entitled (worker’s comp filing) by law.
7. Wall v. Firelands Radiology, Inc. et. al. Ohio 1995
Practice Agreements
FACTS: Dr. Wall, a radiologist, entered a contract with Firelands Radiology with a restrictive covenant prohibiting Dr. Wall from taking employment for three years within twenty miles of the two hospitals in which Firelands provided services. The contract was terminated over a dispute and Dr. Wall challenges the enforceability of the covenant.
COURT: Restrictive covenants against medical practice may be enforced if the restraint is no greater than required to protect the employer, does not impose undue hardship on the employee, and is not injurious to the public. The protection of the contracts is a legitimate business interest because Firelands is the only radiology group in the geographic region and the contracts are its only source of revenue. The restrictive covenant, therefore, was designed to protect this interest and is no greater than required. Dr. Wall claims undue hardship to herself because the distance between her community and other hospitals and her child with motor skill difficulties. She cites Lewis, which the court distinguishes because Dr. Wall she was no hindered from securing other employment and entered the K with attorney advise. Finally, Dr. Wall claims public injury. The court notes that Dr. Wall has no subspecialty as the physicians in other cases.
CLASS:
• The concern with non-compete covenants is greater with MCOs because patient choice is restricted.
• Covenants are more frequently enforced than set aside. Some states prohibit the enforcement of non-competition clauses by injunction, but not by liquidated damages, while others prohibit both. Liquidated damage clauses enforce non-competition clauses by forcing physicians to pay a certain amount for each enrollee of the MCO who disenrolls and continues with the physician. Liquidated damages discourage continuing existing doctor/patient relationships –against public policy say some states.
• Non-competition clauses must take telemedicine developments into consideration when drafting.
8. Berlin v. Sarah Bush Lincoln Health Center Ill. 1997
FACTS: Dr. Berlin entered an employment K with SBLHC, a corporation and licensed hospital, with a restrictive covenant not to compete by providing health services within a 50 mile radius for 2 years after the employment agreement ends. Dr. Berlin wants the covenant declared unenforceable. The issue is whether a “Corporate Practice of Medicine Doctrine" prohibits corporations which are licensed hospitals from employing physicians to provide medical services. The rationale behind the doctrine is that only human beings can sustain the education, training, and character-screening which are prerequisites to receiving a professional license. The danger of lay control over professional judgment is a concern (Allison: violation of Dental Practice Act).
COURT: The Corporate Practice of Medicine Doctrine does not apply to licensed hospitals that are statutorily authorized to provide medical services, and employing physicians serves that end. Different jurisdictions have different views on the issue: 1. Not practicing medicine, merely making medical treatments available. 2. Corporate practice of medicine doctrine does not apply to charitable institutions. 3. Hospitals are authorized by other laws to provide medical treatments to patients, so employing physicians is acceptable. Legislative enactments clearly authorize and even mandate licensed hospitals to provide medical services, and employing physicians to serve that purpose is implied. The lay control concern is alleviated in a licensed hospital because of medical staff responsibility over quality.
DISSENT: Previous interpretation of the statutes by the same court bar the corporate practice of medicine by hospitals. The hospitals can serve the end of providing medical services by granting staff privileges or hiring supervised physician assistants instead of employing physicians.
CLASS:
• Analysis:
1. Are you in a state with a Corporate Practice of Medicine Doctrine?
2. Who does it apply to? Hospitals, MCOs, other entities?
3. If applies, do not hire physicians, simply independent K with them. If worried about details and oversight, include them in the K.
• Professional groups are usually exempt from the Corporate Practice of Medicine Doctrine.
B. Organizational Structures and their Legal Consequences
1. Forms of Business Enterprises and Their Legal Consequences: Choice of Entity
State law generally governs the principal legal relationships among participants in these organizational forms. Drafted agreements or modifications, however, may alter the legal relationships.
• For-profit Corporations
• Not-for-profit Corporations – surpluses must go the entity’s charitable, religious, or other public purposes. 501(c)(3).
• Professional Corporations
• Partnerships
• Limited Partnerships
• Limited Liability Companies and Limited Liability Partnerships
2. Integration and New Organizational Structures: The Changing Structure of the Modern Health Care Enterprise
Integrating Organizations
• Independent Practice Organizations (IPA)
• Physician-Hospital Organization (PHO)
• Group Practice
• Group Practice Without Walls (GPWW)
• Management Services Organization (MSO)
• Hospital-Owned Medical Practice
• Integrated Delivery System (IDS)
- foundation model system
- staff model system
- equity model system
3. Tax-Exempt Health Care Organizations
a. Not-for-profit Hospitals:
- For-profit-hospitals enjoy greater access to capital through the stock market. Not-for-profit hospitals do not enjoy this advantage, and federal dollars are unavailable lately.
- No profits to be made in not-for-profit hospitals…Religious denominations ran them for the poor.
- Corporate status = Not-for-profit. Incorporated as such because the purpose fit the state statute requirements (charitable, educational, etc.)
- Tax status = Exempt, although not all not-for-profits are tax-exempt. The exemption is also for the donor.
b. Charitable Purposes: Hospitals
Utah County v. Intermountain Health Care, Inc. SC of Utah 1985
FACTS: IHC operated two hospitals that were classified as nonprofit. The hospitals were funded almost exclusively through insurance, government assistance, and fees; very little income came from gifts. Income exceeded expenses, and free services amounted to less than 1% of the revenues. Utah denied IHC tax-exempt status.
COURT: A hospital may be considered nonprofit and still not be entitled to a tax exemption. Under the Utah constitution, an entity is entitled to a property tax exemption only if it is a charitable institution. A “nonprofit” designation does not necessarily mean it is charitable. The workings of the institution must be analyzed as to:
1) Whether the entity provides services without expectation of material reward.
2) The extent to which it is supported by donations.
3) The extent to which recipients are expected to pay for services.
4) Whether income exceeds expenses.
5) Restrictions upon beneficiaries.
6) Whether financial benefits are available to those involved.
A gift involves a substantial imbalance between the exchange of the charity and the recipient of its services OR a lessening of a government burden through the charity’s operation. In this case, free services were minimal, few donations, patients were charged, indigents were discouraged from seeking treatment, and independent contractors were often utilized. There was no lessening of a government burden because the hospital was a Medicare and Medicaid recipient. No tax-exemption for IHC is appropriate.
DISSENT: The legal concept of a charity does not require that an institution incur a deficit. As the evidence shows that not one cent of revenues went towards paying employees, officers, or directors, IHC should receive tax-exempt status.
CLASS:
• Should the IRS and states require that not-for-profit hospitals provide indigent care? This is a good entity to put the responsibility on as opposed to county clinics, etc.
• EMTALA requires indigent care by for-profit hospitals if they are Medicare participants.
• Is the for-profit/not-for-profit distinction important? Other than to demand certain behavior from certain hospitals?
• “Organizational” and “Operational” tests for 501(c)(3) status.
• Not-for-profit health insurance companies, hospitals, and HMOs have converted to for-profit status to merge with, be acquired by, or joint venture with for-profit entities.
IV. Access to Care
A. A Legal Duty to Treat
1. Physician’s Duty to Treat
General Rule: No duty to provide uncompensated care. Legal obligations on the part of providers to furnish care operate as exceptions to this general rule.
a. Ricks v. Budge SC of Utah 1937
FACTS: Ricks was treated for four days by Dr. Budge for an infected hand. On the fifth day, he presented himself again, with symptoms. Dr. Budge sent him to another hospital, where the doctor refused to treat him because his account was past due. Ricks went to another facility where he was treated, but eventually, part of his hand had to be amputated.
COURT: A physician may not unilaterally cease treating a patient due to lack of payment. A physician, upon undertaking to treat a patient, must continue to care for the patient until such time as the care is no longer needed. The obligation ceases at the cessation of the necessity that gave rise to the relationship, discharge of the physician by the patient, or if the physician wishes to withdraw from care, for which he must give sufficient notice to allow the patient to seek alternative treatment. The jury must decide whether the doctors continued care and then ceased without sufficient notice.
DISSENT IN PART: There was evidence that the Budges abandoned Ricks but insufficient evidence for a jury to conclude that Ricks was damaged thereby.
b. Childs v. Weis TX 1969
FACTS: Childs, seven months pregnant, was away from her residence in Dallas. She began having labor pains and went to the ER. A nurse telephoned Dr. Weis who suggested that Childs call her regular doctor. The nurse apparently misrelayed the message, telling her to go to her doctor in Dallas. The baby was born in transit and did not survive. Childs sued Dr. Weis for malpractice.
COURT: A physician who does not undertake to treat a patient cannot be liable for malpractice. The doctor-patient relationship is dependent upon contract. A doctor has no duty to respond to the call of patient, even if the need for care is urgent, without a contract agreement. Dr. Weis never agreed to treat Childs. The nurse’s mistake in no way affected Dr. Weis’s position.
CLASS:
• Some states do have “Good Samaritan” laws, relieving doctors who treat accident or emergency victims from civil liability absent recklessness.
c. Hiser v. Randolph Ariz. 1980
FACTS: Mrs. Hiser went to the hospital complaining of diabetic complications. The ER nurse determined that she needed the care of a doctor, and called Dr. Randolph, who was under contract to cover the graveyard shift on an “on call” basis. Dr. Randolph refused to come to the hospital to treat Mrs. Hiser, and although another physician was found, she died the next morning. Her husband is suing for wrongful death, claiming that the delay caused her death.
COURT: An “on call” hospital physician may not refuse to treat a patient. When a doctor contracts with a hospital (agrees to bylaws, receives payment, etc.) to provide emergency room services, he is under a duty to treat patients admitted thereto, even if he has no such agreement with the patient himself.
CLASS:
• Dr. Randolph claimed that the patient’s condition was beyond his expertise, which would have been upheld had the issue been one of contract and not breach of duty. There was evidence that the refusal was because of animosity.
2. Hospital’s Duty to Provide Treatment
Wilmington Gen. Hospital v. Manlove: Even though a hospital has no obligation to have an ER, if it does, it has an obligation to provide emergency care to a person who relies on the presence of an emergency room in coming to the hospital.
• If the hospital puts a sign up in the ER saying “We require $200 deposit before treatment”, the hospital can refuse treatment to those who do not pay this because it is not customary to receive care without money.
• The custom must be known, whether it is the hospital custom or a local custom.
New Biloxi Hospital: The hospital has a duty to exercise reasonable care once treatment was undertaken. The patient was in the ER and recorded as a patient.
Thompson: The state hospital regulations and the JCAHO required state hospitals to have an ER and certain staff. A breach of duty to provide an ER is N per se. No other state has adopted a N per se rule for not having an ER in a state hospital.
The federal Emergency Medical Treatment and Labor Act (EMTALA) was enacted in response to “patient dumping” (patients transferred from one hospital’s ER to another’s for admission.
EMTALA applies only to:
• Hospitals that accept payment from Medicare and
• Operate an emergency department.
EMTALA does not preempt state or federal law. The statute requires Medicare and not Medicaid participation because when budgetary concerns come into play, hospitals generally drop Medicaid participation since Medicare covers a high percentage of the hospital’s total care.
a. Baber v. Hospital Corporation of America 4th Circ. 1992
FACTS: Baber came to the ER nauseated and possibly pregnant. She was given several drugs to relieve her hyperactivity and agitation. Later, she fell in the ER and lacerated her scalp. Although a CT scan was requested, the doctors decided to transfer her to a hospital with a psychiatric ward. She began to have a grand mal seizure, and she was transferred back to the original hospital because they did not have the facility or staff to treat serious neurological problems. P argues that EMTALA was violated in that there was no “appropriate medical screening” and no “stabilization”.
COURT: “Appropriate” is not a national standard, but rather requires hospitals to apply their standard screening procedure for identification of an emergency medical condition uniformly to all patients with similar complaints. The standard for “stabilization” is one of having actual knowledge that the patient was transferred unstabilized. For “appropriateness” under this subjective standard, ER doctors in the hospital must be deposed as to their customary procedures (difficult to get in writing because charts are confidential). For an objective standard, Baber has the option to sue for malpractice.
CLASS:
• Under EMTALA, the same damages are available as under state law. Strict Liability applies…there is no need to prove negligence.
• The government can invoke administrative proceedings against the hospital and revoke Medicare.
• The government can proceed against the doctor, but there is no private action available against the doctor for damages.
• Baber had insurance and the money to pay for care. She was not the kind of patient EMTALA was designed to protect, but economic motive is irrelevant.
• For stabilization, the “should have known” not stable standard does not apply. This reasonable person standard has its remedy in malpractice litigation.
b. Howe v. Hull Ohio 1994
FACTS: An HIV patient was taken to a small community ER where the doctor claimed that the patient has TEN, a condition beyond the treatment capabilities at the hospital. The hospital sought to transfer the patient based on this condition.
COURT: Under EMTALA, “stabilized” means that to a reasonable degree of medical probability, no material deterioration of the patient’s condition is likely to result from or occur during the transfer (§1395dd(c)(3)(A)). The reasonable degree of medical probability is based upon the objective standards of experts. Whether or not the patient was stabilized is ultimately a jury question.
CLASS:
• Screening has a subjective standard, while stabilization has an objective standard under EMTALA.
• Delivery = liability. No “reasonable” test here. Delivery during a transfer is evidence of no stabilization?
c. Roberts v. Galen of Virginia, Inc. SC 1999
FACTS: Plaintiff claims that the transfer violated EMTALA §1395dd(b). Plaintiff does not show that her transfer caused by improper motive (indigency, race, or sex of the patient).
COURT: §1395dd(b) contains no express or implied “improper motive” requirement.
CLASS:
• The lack of a requirement for improper motive is why EMTALA is often characterized as a strict liability statute.
• EMTALA:
1. Ability to go to federal court – combining with malpractice claims.
2. Narrow because it only deals with ER patient dumping cases.
• Negligent misdiagnosis v. EMTALA claims: Could proof of motive be useful in distinguishing between the two?
• Does a private insurer’s refusal to authorize payment provide a defense for hospitals under EMTALA?
B. Access as a Civil Rights Issue: A Legal Duty Not to Discriminate
ADA §504
Title VI
1. Howe v. Hull ND Ohio 1994
FACTS: Plaintiff alleges that he was transferred from a small community hospital to another on the basis that he was HIV positive. Plaintiff alleges an American Disabilities Act violation, which prohibits discrimination by public accommodations.
COURT: A prima facie case of discrimination under the ADA requires a showing that the P has a disability, that the Ds discriminated against the P, and that the discrimination was based on the disability. Although a D can avoid liability by establishing that it was unable to provide the medical care that the patient required, this court has already concluded that a reasonable jury could decide that the TEN diagnosis was a pretext, and that P was denied treatment solely on the basis of his disability.
CLASS:
• If the doctor had said he refused to treat because these cases were too expensive, ADA does not apply because there is no disability discrimination.
• Initially, the ADA prohibited “thoughtless” adverse impact discrimination. Now, intentional discrimination, including economic consideration, is also prohibited. This serves to put an incentive on the entity to avoid discrimination.
• Baby K: The ADA required a hospital to provide resuscitation and ventilator support for an anencephalic child when brought to the hospital’s ER. The hospital states that the treatment was denied because her anencephaly was considered a disability, giving her poor long-term prospects for living. The court stated that Baby K would be “otherwise qualified” for treatment, and therefore, to not treat would be an ADA violation.
• Mooreim: “Discriminatory” Decisions:
1. Where the decision is based on “inaccurate facts” resulting from presumptions or prejudices against persons with the patient’s medical condition.
2. Where the decision is irrational, as for example where a surgeon decides not to perform surgery because of the high risk of mortality, even though it is the patient’s only hope of survival.
3. Where the decision is based on “inappropriate values” such as a conclusion that certain persons are by race or gender inherently inferior.
• Hill-Burton Act of 1946: Facilities receiving funding under the Act were required to assure that they would make the federally financed facility “available to all persons residing in the territorial area of the applicant” (the “community service obligation”) and would provide in the financed facility “a reasonable volume of services to persons unable to pay therefor”. The free care obligation has expired, though the community service obligation remains indefinitely.
2. Bragdon v. Abbott SC 1998
FACTS: Sidney Abbott, and HIV patient, was informed by her dentist of a policy against filling cavities of HIV-infected patients. The dentist offered to perform that at a hospital for no added fee for his services, but she would have to pay for the cost of suing the hospital’s facilities. The question is whether HIV is an ADA disability when the infection has not progressed to a symptomatic phase, and whether there is sufficient evidence to show that the HIV posed no direct threat to the health and safety of her treating dentist.
COURT: A mental or physical impairment (disability) is one which substantially limits one or more major life activities. Public health officials assist in assessing whether or not the care is a “significant risk”. The HIV infection substantially limits (danger to public health, economic, and legal consequences) the person’s ability to reproduce, which is a major life activity. CDC Guidelines suggest that routine dental care for HIV patients is safe.
CLASS:
• Asymptomatic HIV: At the time of Bragdon, it was thought that HIV has a latency periods. It is now known that HIV is in the lymph nodes at the asymptomatic stages.
• Historically, because the effects of HIV are so devastating, it was considered a per se disability. Courts are now reluctant to characterize HIV as such.
• Dissent: Reproduction is not a major life activity because it is not everyday and repeatedly engaged in.
• The concern with linking inability to reproduce with disability is that it opens the door for labeling infertility, genetic disorders, etc. as disabilities.
• The court did not decide if a person who never thought of having children could characterize inability to reproduce as a disability.
• For the threat to the health and safety of the dentist issue, look to the information and guidelines present at the time of the alleged discrimination, not at the time of litigation.
- No deference to the dentist’s subjective opinion.
- Public health authorities AND the courts decide “significant risk”. Public health opinions are given weight, but are not conclusive. This counters the irrational fears of judges with knowledge of the risk of transmittal, and provides a check on overly politicized public health authorities.
- Professional Dentist Groups may deal more with professional matters than risk assessment.
3. Linton v. Tennessee Commissioner of Health and Environment Tenn. 1990
FACTS: Linton and Carney seek to enjoin a TN policy through which only a portion of the beds in Medicaid participating nursing homes are certified to be available for Medicaid patients. Linton was downgraded and forced to transfer as a result of the policy. Carney could not find a nursing home willing to take her as a Medicaid patient. Ps alleges a Title VI violation.
COURT: Limiting the number of beds available to Medicaid patients is in violation of Title VI Regulations because of the disproportionate adverse impact on African Americans. The TN policy allows nursing homes to give preference to private pay patients. While the state can no longer reserve beds exclusively for private pay patients, it can close beds to Medicaid patients. The statistical disparity is that while blacks make up 39.4% of the Medicaid population, they account for only 15.4% of the Medicaid patients who have been able to gain access to Medicaid-covered nursing home services. TN states that the non-discriminatory justification is that Blacks do not like to use the same nursing homes as whites (“self-selection preferences”).
CLASS:
• Title VI: Coverage expanded in 1965 to most hospitals and clinics because of the passage of Medicare and Medicaid.
• The “separate, dual track” of white and blacks is still alive partly because of the preference of blacks to go to institutions that serve primarily blacks with black physicians.
• ADA wanted unconscious bias to be covered. Title VI covers unintentional discrimination through its regulations that prohibit a disproportionate adverse impact. Such a violation must be brought under the Regulations and not Title VI itself.
1. A specific practice causes a statistically valid racial disparity – P.
2. Non-discriminatory justification – D.
3. Less discriminatory alternative to accomplish D’s justification – P.
* A dramatic statistical disparity is generally needed because judges
do not understand statistics.
• Ps did not sue the nursing home because would need statistics for that particular nursing home instead of for the whole state. The nursing home would use the fact that Medicaid patients pay less than private patients for their non-discriminatory justification. This is an economic justification, but it still leads to a disparate racial impact.
• HOT TOPICS:
1. Is the “self-selection preference” due to policy of because of history of discrimination?
2. Managed Care and Minority Access: Blacks tend to be more sick, so do not hire black doctors or sickle cell specialists. Market to white collar jobs. Facilities are located in white neighborhoods, etc. No Title VI can be brought because private entity. Would having separate panels for private and MC/MA with different doctors be Title VI discrimination?
3. Physician Treatment Decisions: Private patients can bring claims for different levels of treatment.
• Guardians Ass’n: If the discrimination is intentional, damages may be awarded. If it is only a disparate racial impact, then only an injunction and possibly attorney fees.
• Agency regulations can redress unjustifiable disparate impacts.
• Watson Article: Collecting core data sufficient for hospitals to develop meaningful information about minority medical access and treatment.
V. Access Through Insurance – Paying for Care
A. Private Insurance
1. Insurance Marketing and Selection
• “First Dollar Coverage”: How much do you have to pay out (deductible) before the first dollar of coverage kicks in.
• “Experience Rating”
• “Community Rating”
• “Adverse Selection”: The tendency of persons with poorer than average health expectations to apply for, or continue, insurance to a greater extent than do persons with average or better health expectations. Insurers seek to limit adverse selection by carefully selecting where they market and to whom they sell a policy.
• The Problem with Health Care Cost and Access: The Policy Context.
• Choosing a Health Plan.
B. Regulation of Private Health Insurance Under State Law
State law covers:
• individual health insurance plans
• group insurance covering church employees or employees of state and local government
• no-fault auto insurance
• uninsured motorist policies
• workers’ compensation
1. Common Law Contractual Obligations
Lubeznik v. HealthChicago, Inc. Ill. 1994
FACTS: Lubeznik suffered from State III ovarian cancer, and all conventional therapies had failed to arrest the cancer. A specialist determined that autologous bone marrow transplant and high-dose chemotherapy would provide the best chance. In 21 other cases, the specialist had a 75% success rate of complete remission. The specialist sought pre-certification of payment from HC, which HC denied under the exclusion clause for experimental procedures. HC had no evidence from the expert medical boards that the procedure was still experimental.
COURT: If an insurance provider attempts to exclude a new procedure from coverage as experimental under an exclusion clause, the terms of the clause will be construed as liberally as possible in favor of the insured to maximize coverage. This is because of the disparity in bargaining power between the two. L had no other choice, and HC was predisposed to find the procedure experimental since it did not contact experts at the appropriate medical boards (clause in K). This is failure to comply with its own contract.
CLASS:
• The P is not trying to argue that the coverage is not experimental, but that the clause is ambiguous, and therefore, should be construed in favor of the P.
• Illinois statute: Experimental or investigational, for organ transplantation procedures, must be supported by a determination of the HHS Office of Health Care Technology Assessment in order to deny reimbursement.
- ABMT/HDC = organ transplantation?
- Deny reimbursement is not the same as denying pre-certification.
• D argues that HC has a financial obligation to insureds not to pay for procedures that are experimental or not medically necessary because it causes premiums to go up.
• These decisions are often emotional and hinge on letting the patients live. Hanging their hats on the flimsy “ambiguous” clause.
• Should private insurance, MC, MA be allowed to refuse treatment? If the patient is going to die shortly, MA can pay for the care for many for the cost of one transplant.
• There is controversy over who makes the decision and over the time limits for making the utilization review decisions.
• Watson: Insurance companies should tie their hands and require the determination to be made by outside entities. This makes the terms unambiguous, and immune to judicial review. If the outside entity is for consultation purposes only, and the final determination is made by the insurer, can it survive judicial review?
• If an insurer acts egregiously in failing to honor its contractual obligations, it may be subject to tort liability in some states.
2. State Regulation of Health Insurance and Managed Care
State Mandates
a. Mandated-benefit laws
Examples: Alcoholism treatment, maternity services, mental health benefits (Mass.: Due to adverse selection and state and MA have to bear the costs otherwise – for example, with coverage of newborns, state laws mandate that it start at birth, no tone month or one week later b/c otherwise, the state picks up the costs under MA).
Insurance companies do not fight these state mandates because they do not turm away people from the ER and most of these laws are preempted by ERISA.
The policy argument against these mandates is that they
increase premiums. Healthy people oppose these mandates because they would rather have the money in their pockets.
b. Mandated-provider laws
Examples: Dentist, Chiropractors
c. Mandated-coverage laws
Note: Rates are usually not mandated by the states.
Managed Care
Types of Regulation of HMOs
a. Solvency Issue
An HMO goes bankrupt and the consumer (loses premium) has no health insurance. Providers are caught in the middle without payments made. The state regulates with the following:
1. Solvency Accounts: Pools of money in the case of crisis.
2. HMO Guaranty Fund: All HMOs pay into one fund in case any HMO goes bankrupt. Problem: Same as S&L crisis…no incentive for HMOs to stay out of bankruptcy.
3. “Hold Harmless” clauses in Ks. If the HMO is insolvent, the hospital provider cannot go after the enrollee or employer except for co-payments and deductibles. This protects the patient at the cost of the provider.
b. Consumer Protection Issue
1. Mandated-benefit laws: Laws that are in response to the horror stories of drive-through labor and mastectomies, ER care, etc… “Body Part” legislation: one by one, a total benefit package.
2. Access requirements for managed care:
- Patient-physician ratios
- Rules about appointment times: one week for non-emergencies, 12-24 hours for emergencies.
- Geography: max drive times from provider to patient
- Specialist requirements
3. Grievance procedures: internal or external review: time limits for review, etc.
Preferred Provider Organizations (SLU Plans)
a. Access not regulated so much.
b. “Any willing provider”: If a provider is willing to sign the PPO K, the PPO cannot turn the provider away.
- PPO argues that they lose bargaining ships other than what they pay them…lose quality control mechanisms. Answer: Build the quality control mechanisms in to the K – reviews, grounds for termination, etc.)
- PPO argues can negotiate a lower rate if able to restrict the number on the panel.
Provider Sponsored Networks
a. Owned by doctors or hospitals.
b. Minimally regulated by states.
Utilization Review
a. A utilization review agent under the TX statute is “an entity that conducts utilization review”. Can an employee of the MCO be an entity/agent? TX assumed that the entity would always be a 3rd party.
C. ERISA
1. Metropolitan Life Insurance Co. v. Massachusetts SC 1985
FACTS: Massachusetts statute requires that specified minimum mental-health care benefits be provided a Massachusetts resident who is insured under a general insurance policy or an employee health-care plan that covers hospital and surgical expenses. The issue is whether the law is preempted by ERISA.
COURT: The law is not preempted because under the savings clause, ERISA preemption does not apply to state laws that “regulate insurance”. The insurance company argues that mental health is a health law, not an insurance law. The court, however, says that a law is saved from preemption as “regulating insurance” if it passes a common sense test or the McCarran-Ferguson Act test of regulating insurance. The M-F test includes:
“Business of Insurance”:
1. Whether the practice has an effect of transferring or spreading the policyholder’s risk.
2. Whether the practice is an integral part of the policy relationship between the insurer and the insured.
3. Whether the practice is limited to entities within the insurance industry.
The court concludes that the risk was spread because by requiring all to buy mental health coverage, the cost is spread to all insureds. It is integral to the relationship because it spells out the benefits. Finally, the court states that the practice is limited to the insurance industry because of the language of the statute (and has never been enforced against a self-insured employer). The deemer clause does not apply because it is not for a self-insured employee benefit plan.
CLASS:
• Large employers and employers that cross state lines generally sel-insure so that they do not have to comply with the state laws of several different states. The check on these plans is through employee unions.
• Shaw v. Delta Airlines: “relates to” a benefit plan “in the normal sense of the phrase, if it has a connection with or reference to such a plan”.
2. New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Co. SC 1995
FACTS: A NY statute requires hospitals to collect surcharges from patients covered by a commercial insurer but not from patients insured by a Blue Cross/Blue Shield plan, and it subjects certain HMOs to surcharges that vary in the number of MA recipients each enrolls. The question is whether ERISA preempts the state provisions for surcharges on bills of patients whose commercial insurance coverage is purchased by employee health-care plans, and for surcharges on HMOs insofar as their membership fees are paid by an ERISA plan.
COURT: The provisions for surcharges do not “relate to” employee benefit plans within the meaning of § 514(a),and therefore, are not preempted. The court rejects the Shaw plain language approach and looks to the underlying purpose of ERISA preemption – to have uniformity of plan for large and cross-state employers. A “connection with” must serve this purpose. An indirect economic benefit is not sufficient, as the HMO argued that the surcharges get passed on to the EBPs through increased premiums. The law may not mandate a benefit structure, plan administration, or require enforcement mechanisms different from ERISA.
CLASS:
• Any-willing provider laws and laws regulating HMOs are generally not saved by the savings clause.
• Self-insured employers are decreasing because of the cost advantages of purchasing health care insurance through HMOs.
3. Corporate Health Insurance Inc., Et. Al. V. texas Department of Insurance, Et. Al. SD TX 1998
FACTS: A Texas Act allows an individual to sue a health insurance carrier, HMO, or other managed care organization for damages proximately caused by the entity’s failure to exercise ordinary care when making a health care treatment decision.
COURT: The law is not saved as “regulating insurance” because MCOs and PPOs are not entities within the insurance industry. “Refers to” is not met because there is nothing express in the statute concerning EBPs.
CLASS:
• A state legislature wants to write the statutes broadly and include definitions of “insurance” to include HMOs, PPOs, and other MCOs so that the law falls under the savings clause.
• M-F Test: All three factors do not have to be met. It can be a balancing test where 2 out of the 3 are sufficient to “regulate insurance”. This means this case may not be affirmed on appeal.
• The statute in question here does not really provide anything not already covered by institutional liability claims. The only difference from common law is the independent review process for adverse benefit determinations. The Act also provides that a provider cannot be removed for advocating medically necessary treatments. It also states that health insurance entities cannot K for indemnification or hold harmless clauses for themselves.
• A law cannot be saved unless it is “related to”!
• Court rejects CIGNA case that stated that La.’s any willing provider statute was preempted by ERISA because preferred provider contracts are agreements between providers and group purchasers which included EBPs.
• EBP terminology in the statute is not sufficient for relates to. This is why “connection with” is important. States should write EBPs out of the definition in the statutes.
• Dillingham: “refers to” means “acts immediately and exclusively upon ERISA plans”. Need more that terminology here as well.
• Corcoran: A tort action for wrongful death was preempted by ERISA because the utilization review provider to the EBP was allegedly negligent. This was a 502 quantity of benefits case where ERISA still provided a remedy. P should have argues quality of care to avoid preemption.
• No preemption if the state law affects the EBP in “too tenuous, remote, or peripheral a manner to warrant a finding that the law “relates to” the plan. (Travelers).
• States cannot define “medically necessary” because it mandates plan administration and will be preempted by ERISA.
4. Bechtold v. Physicians Health Plan 7th Circ. 1994
The ERISA insurance pot is only so big.
FACTS: Bechtold sought coverage of a bone marrow transplant under her ERISA-governed benefit plan, but she was denied coverage. PHP listed bone marrow transplants as experimental in its list of covered procedures, and the plan’s contract terms specified that experimental procedures, as defined in the plan, were not covered. B appealed, but a review panel denied the claim. After exhausting all administrative remedies, B filed suit.
COURT: A claim for benefits under an ERISA-governed health plan is a matter of contract interpretation. ERISA does not specify what medical benefits are to be provided. Thus, whether a procedure is covered becomes a matter of K interpretation alone. In this case, PHP clearly defined bone marrow transplants as experimental. The benefits K specified that experimental Ks were not covered. So, while B’s medical condition is tragic, the ERISA-governed plan is not required to pay for her treatment.
CLASS:
• P wants de novo review, which according to the court, applies UNLESS “the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan”. P then wants to argue ambiguous because of the “right to change” provision.
• If the authority is under a conflict of interest, the arbitrary and capricious standard is granted less deference according to the weight of the conflict. Note that there is always potential for a financial conflict of interest.
• D wants arbitrary and capricious. D says it is not ambiguous because the HCFA Medicare Coverage Issues Manual provides that ABMT is experimental. P argues that reliance on one agency is not sufficient. MC coverage reliance may not be appropriate for a younger individual. P says the plan is ambiguous because it says it is experimental if it says so, but then says it has the right to change which are experimental. To be unambiguous, they must say they will only consider agency classifications.
• The court says it will not decide whether to apply DN or AC b/c even under a de novo review, they feel the D properly denied coverage.
• HealthChicago: Did not bind themselves to an outside authority. There was no ambiguity because the plan determines what is covered.
• For de novo, decide whether ambiguous or unambiguous. For AC, determine whether they have discretion and how the discretion was used.
• 502: P loses damages (get attorney fees), and get only equitable releif. Could get more with K or tort law. The idea is that the one pot reduces benefits to other beneficiaries if large damage awards are given out.
• P also loses b/c of the AC standard, although it is often watered down with c of i.
• No expedited review. Must exhaust all administrative remedies before judicial review (90 days and then 60 days), at which time if the P had to pay out of pocket for the treatment, recovering benefits in court is prohibitive. Proposed regulations that 15 days for plan review, and 15 days for non-emergency judicial review. 72 hours for emergency judicial review.
• Internal appeals require new internal person reviewing the case with the appropriate medical background.
D. Federal Initiatives to Expand Private Insurance Coverage
1. HIPAA
2. COBRA
3. ADA
Winslow v. IDS Life Insurance Co. Minn. 1998
FACTS: Winslow was denied long-term disability insurance by IDS due to her current history of treatment for a mental health condition. The request was denied based on the company’s policy of automatically denying long-term disability insurance to applicants who report having received treatment for a mental or nervous condition, regardless of seriousness, within twelve months prior to application. It further allows the applicants to be reconsidered for long-term disability insurance after a year has passed since their treatment for a mental or nervous condition. Winslow files suit for an ADA violation, and the issue is whether an insurance company that sells insurance is a public accommodation (Title III). Does a public accommodation reach only the physical place, or the terms of the policy/contents also.
COURT: IDS has violated the ADA because the denial of coverage was for a disability-based distinction, for which they had no “not a subterfuge” defense because of no actuarial data as to mental treatments. The P argues that the “goods and services” of the insurance company are the terms of the policy. The ADA does reach the terms of the plan.
CLASS:
• 1. Title I and Title III – Does ADA reach the terms of the plan?
2. What is discrimination? It must be a “disability-based distinction”.
EEOC – Broad distinctions which apply to treatment of a multitude of dissimilar conditions and which constrain individuals both with and without disabilities, are not distinctions based on disabilities.
Ex. If physical and mental disabilities are not covered, no DBD. If there is an AIDS cap, there is a DBD. No prescription drugs, no DBD.
3. Defense: Not a “subterfuge”
• complies with state law, unless ERISA preempted.
• Statistically and actuarially based - Must show that the cost is more than all other diseases – something more than based on fear.
• John Doe v. Mutual of Omaha: ADA could not reach AIDS caps because the ADA cannot reach the contents of the policy, only whether or not coverage of some sort is provided.
E. Reimbursement for Care
F. Medicare
G. Medicaid
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