Public Health Law Map - Beta 5 - Medical and Public Health Law Site

When a physician recommends unnecessary treatment, the patient must be apprised
of the indications for the treatment, the possible side effects, and the availability of
alternative treatments. This acts as a check on the physician’s financial interest in
providing unnecessary care. When treatment is denied due to regulations or
incentives provided by the MCO, the patient is not given a chance to balance the
risks and the benefits of the forgone treatment. The check provided by informed
consent is gone, and there is nothing to take its place. The physician is in a legally
dangerous position because failure to provide the care may be found to be medical
malpractice.
3. Legal Risks
Physicians who practice in MCOs with limited benefits face increased liability
because the courts have not accepted the idea that a plan’s failure to pay for care
completely absolves the physician from liability for not providing the care. In
Wickline v. State of California, [Wickline v. State of California, 228 Cal. Rptr. 661
(Cal. App. 1986).] a leading case that arose from the California Medi-Cal program,
the intermediary denied coverage for additional days in the hospital. The physician
contested the denial, but then discharged the patient. The patient was harmed by the
premature discharge and sued the physician and Medi-Cal. The plan defended by
claiming that it did not discharge the patient, the treating physician did. Accordingly,
this was a case of malpractice by the treating physician.
Although the court opined that a health plan could be liable for the adverse
consequences of improper cost control decisions, it found that, in this case, it was the
treating physician who made the decision to discharge the patient. Conceding that the
physician was intimidated by Medi-Cal, it still held that the physician should have
done more to keep the patient in the hospital if he thought it was necessary. Thus, the
physician should have aggressively appealed the denial of authorization of care. The
court was silent regarding what the physician should have done if the appeal
ultimately was unsuccessful, but implied that he should have not have discharged the
patient from the hospital.
In a subsequent case involving a utilization review contractor for a health plan, the
court clarified its ruling in Wickline to make clear that a negligent decision to deny
treatment by the treating physician would not automatically absolve the health plan
and its contractors from liability. The court found that the insurer’s decision to deny
coverage for additional inpatient hospitalization was a substantial factor in the
decedent’s suicide:
In the present case, there is substantial evidence that Western Medical’s
decision not to approve further hospitalization was a substantial factor in
bringing about the decedent’s demise. It was Western Medical which
conducted the concurrent utilization review and directed that no further
benefits be paid.… Once the insurance benefits were terminated, there were
no other funds to pay for the decedent’s hospitalization. The sole reason for
the discharge, based on the evidence adduced in connection with the
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