Articles

LITIGATION TIPS FOR THE MANAGED CARE CASE

By: Theodore J. Leopold

For this inaugural article, I thought it would be helpful to give a background on managed care litigation and its various intricate components that can, and often do, lead to devastating results. 

I. Background

We live in a country in which ordinary life is made safe through our use of law to insure public protection. Imagine a world in which the manufacturers of cars, gas ranges, children's toys, even hair dryers, could not be held responsible for their products. Imagine a world in which a doctor, to whom you entrusted your life, could do whatever he or she wanted without concern for the consequences. Most of us cringe at the idea because we want the individuals and corporations who touch our lives to be accountable for what they know, what they do, the decisions they make, and the effects they have on our persons.

We all know that legal liability escalates as products become more dangerous. Makers of cars have more risks than makers of walking sticks. Liability also increases with degrees of preventable harm. In pre-managed care days of medicine, there was a clear distinction between persons who practiced medicine and persons who paid claims. But managed care merged the two-creating the notion of a "health plan"-whose new business is to control payment through its control of delivery. Health plans now "authorize" care and "manage utilization" -- euphemisms for telling patients what they can and cannot have, and telling physicians what they can and cannot do.

The managed care industry justifies its machinery of denial with claims of better care through coordination and continuity of services. Yet, managed care has in essence disrupted the continuity of care, segmenting patients into industrial parts. Health insurance companies view patients as widgets moving down an assembly line to be processed as economically and efficiently as possible. We might treat the building of motors this way, but not patients. Health and healing depend upon each of us receiving the best level of care by someone who knows us, and someone we trust and care foremost about us. Unfortunately, the health care industry has lost sight that medicine is a deliberative, personal process, whose success depends upon in-depth knowledge and a committed relationship between a patient and a doctor. Medicine is just not an objective activity in which any doctor will do. It is also a subjective association enriched by a particular physician's understanding of a particular patient.

Economic assessment in managed care comes from keeping numbers low. That means denials of surgeries, admissions to the hospital, additional days once there, x-rays, lab tests, and visits to specialists. The physician advisors, those employed by the health care companies who make daily decisions about life and death are employed by companies whose goals are to limit care and save money. Some of these decision makers even receive cash bonuses to encourage more aggressive cost cutting. Unfortunately, when corners are cut in patients' care it can lead to catastrophic consequences. The decisions rest solely with a doctor who has never met the patient, never cared for the patient and whose main goal is to get the patient out of a hospital setting as quickly as possible. They never have to look into the eyes of a frightened, suffering patient who's very life might depend upon a medical need which is withheld with the stroke of a pen.

II.   ERISA Exclusion

The health care industry acts with this callousness for they know they are shrouded with a cloak of never having their actions contested. For these companies know that they have the protection of Federal law.  They have a shield called ERISA, which applies to all insureds except those employed by a governmental agency.

ERISA refers to the misleading title, "Employee Retirement Income Security Act," a 1974 federal law that prevents nearly 125 million Americans from collecting damages for denial of medical treatment that results in death, injury, or economic loss. ERISA allows people to recover only the benefits they were entitled to in the first place. For example, if you were denied an MRI test that would have diagnosed your cancer, and then died for lack of treatment, your family would be entitled to sue only for the cost of the MRI. Little wonder then that health plans can, with no regard for affect on patients, send a patient to substandard facilities, or to an incompetent physician; deny or delay access to necessary specialists or treatment; write ill-founded medical guidelines and hire non-medical persons to apply them; and, pay physicians in ways that cause them to deny or limit care.

To continue to allow the HMOs to practice behind the ERISA shield is like giving manufacturers or physicians the freedom to do, or not do, whatever they want, with no recourse against them for our harm or death.   There is some goods news, however.  ERISA preemption never applies to insurance benefits provided to employees of governmental agencies, i.e., public employees: city, county, state or federal are exempt from the reach of ERISA.  In the meantime, those insured through a governmental agency can protect their rights by prosecuting common law causes of action against the health care provider.

III.   The HMO Lawsuit

With this background, it is clear to see how modern managed care companies have shifted the practice of medicine from physicians, bound to the patient's best interest by the Hippocratic Oath, to corporate managers bound to the bottom line.  Economics replaces clinical judgments.  Utilization reviewers who are not doctors replace individual physicians; the careful deliberative process of deciding how best to care for a patient is usurped by financial guidelines and profit-based statistical models. 

It is necessary to understand how the HMO denies care

Medical Necessity:

Managed care companies tell participants that their health care coverage is based on "medical necessity," a phrase that is broadly worded and open ended.  They explain that "medically necessary services" are provided when the "symptoms are appropriate with regard to standards of good medical practice."  In fact, coverage is based on undisclosed, cost-based criteria and financial incentives unrelated to and more restrictive than "medical necessity."  Care is too often "medically necessary" only if the corporate caregiver can make a profit providing it.  Otherwise it is denied.

Financial Incentives:

Managed care companies have set up internal policies and procedures that give direct cash bonuses and other financial incentives to claims reviewers who deny claims for services or limit hospital admissions and stays regardless of medical necessity.  For example, in 1995 and 1996, Humana instituted programs to deny patients access to hospitals.  Bonuses and incentives were awarded to case managers, nurses and physicians if they discharged patients from hospitals earlier than the recommendations of treating physicians.  These aggressive incentive programs are part of corporate efforts to cut costs and increase profits.

Disease Management Companies:

Managed care companies also pay third parties to review claims for some medical conditions.  These third parties use undisclosed criteria that are different and more restrictive than the "medical necessity" criteria used by managed care companies in making coverage decisions.  In fact, during a trial involving a women with cervical cancer who was denied a hysterectomy, it was learned that Value Health Services, which was paid by Humana to review claims, had a policy of denying one of every four requests for hysterectomies - regardless of the patient's real medical condition.  Value Health Services estimated that it saved its clients $67.5 million  a year.

Managed care companies also subcontract with third parties to care for high-cost patients, those who are catastrophically ill and require continuous care, expensive treatments and long hospital stays.  These companies, referred to as "carve out" companies, cap the care and treatment of these patients.  Managed care companies reason that if high-cost patients are closely monitored, the cost of treating them will go down and profits will go up.  However, when a managed care company decides to closely monitor one group of patients, they often times do so without adding new staff.  Instead they shift personnel away from other patients, who are then left to suffer. 

Hospitalists/Interventionists:

Denial of care is also accomplished by the managed care companies by the use of "hospitalists" or "interventionists."  These are physicians employed by for-profit managed care companies to oversee patients in local hospitals, nursing homes and rehabilitation centers.  Their primary mission is to discharge patients as quickly as possible to save money and increase profits.  They have had no prior contact with the individual patients, whose primary care physician no longer directs their care and treatment.

An understanding of the corporate structure of the HMO is important in deciding who to sue