To be sure, most state courts and legislatures have yet to be heard from. But judging from what has happened in Arizona, California and Texas, there does appear to be a legal trend in the making to hold health plans and medical directors accountable for coverage decisions.
The latest deliberative body to weight in on this issue was the Arizona Supreme Court. On January 21, 1998, it denied a motion for review, and by so doing the 1997 decision of an Arizona Appeals Court which led that a medical director's coverage decision qualified as the "practice of medicine" and therefore brought it under the jurisdiction of the Arizona Board of Medical Examiners.
The decision in question involved a laparascopic cholecystectomy. Both the patient's surgeon and primary care physician strongly recommended it. The plan's medical director, on other hand, concluded that it was medically unnecessary and, therefore not covered.
The Appeals Court ruled that the medical director was engaged in the "practice of medicine" because he decided the appropriateness of a procedure based on a member's symptoms in conjunction with the community standards for such symptoms and diagnosis. And in what was hailed as a victory for consumers, the Arizona Supreme Court affirmed that the medical director's decision to deny pre-certification "was a 'medical decision" because he substituted his own medical judgement of the patient's physician's.
The court ruled, in effect, that the medical director was playing doctor.
This is not to say that all of the courts that have so far ruled on this issue have weighed in against the medical directors. In Washington, D.C., most notably, an appeals court held that a health plan's medical director, who participated in the peer review committee that made post-payment treatment recommendations did not engaged in the "practice of medicine" because he "took no part in the deliberations of the committee and had no vote on its recommendations." However unlike in the Arizona case, the peer review committee - not the D.C. health plan medical director - made the ultimate decision of whether a medical procedure was covered.
Meanwhile, in California, there are no fewer than four bills pending on this matter. Under Senate Bill 977, for example, it is stipulated that providing comprehensive healthcare services or any physician services constitute the "practice of medicine." It is also stipulated that health plans compensating medical providers on a capitated basis be subject to the requirements of the California Medical Practice Act to the same extent as individual physicians; that health plans be directly liable for the medical mal practice of their employees, officers and agents; and that health plans be subject to malpractice liabilities similar to other providers.
Two other bills, SB 324 and 557, would revise the definition of the "practice of medicine" to include any decision regarding the medical necessity or appropriateness of a diagnosis or treatment. If passed, health plans would have to be licensed not only by the Department of Corporations, but also the California Medical Board.
And finally, there's Assembly Bill 332, which would require medical necessity decisions that result in the denial of care to be made only by state-licensed practitioners.
How than in this volatile environment can health plans can limit their liability? One possible strategy is for them to hire non-physician directors - state law permitting. This, however, may be unwise from a public relations standpoint. After all, consumers might reasonably argue that these coverage decisions are being delegated to unqualified people.
In addition to the legal consequences, physicians and health plans should also be cognizant of the potential economic effect of legislation requiring coverage decisions to be rendered by state-licensed physician medical directors. If health plans currently hire out-of-state physician medical directors, legislation such as AB 332 may artificially reduce the number of state-licensed applicants for medical directorship positions, further increasing already fierce competition, and decreasing compensation.
Although the consequences of such legislation and judicial decision-making remain to be seen, we will undoubtedly see a proliferation of judicial decisions and state bills seeking to hold health plans and medical director liable for practicing medicine.
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