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The Evolution of Physician Credentialing into Managed Care Selective Contracting

Published online by Cambridge University Press:  24 February 2021

John D. Blum
John D. Blum*
Affiliation:
Loyola University Chicago School of Law
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Extract

In a field littered with analogies, health care in the mid-nineties is best characterized as an enterprise caught in the violent cross winds of a tropical storm known as managed care. Like a series of hurricanes, managed care has reshaped the landscape of health care delivery in drastic and unpredictable ways. While the forces of managed care have increasingly altered more health care markets, others are only beginning to feel the winds of change. As managed care overtakes fee-for-service (FFS) medicine, profound alterations in health delivery are occurring which affect every aspect of American health care.

Particularly noteworthy is the use of capitation as a primary method of reimbursement. The ramifications of capitated health care are broad and warrant exploration from several vantage points. One basic concern in capitated health plans and managed care is the effect of new payment incentives on physician evaluation for purposes of credentialing. This Article focuses on managed care credentialing—the process of appointing, reappointing, and delineating clinical privileges—from a legal perspective. While the Article centers on the link between capitation and credentialing, it has broader applicability in that the same physician evaluation mechanisms in capitated settings are found in discounted FFS arrangements as well. The piece provides a brief overview of capitation and credentialing, and a discussion of trends that have altered hospital medical staff credentialing processes.

Type
Articles
Information
American Journal of Law & Medicine , Volume 22 , Issue 2-3: Health Care Capitated Payment Systems , 1996 , pp. 173 - 203
Copyright
Copyright © American Society of Law, Medicine and Ethics and Boston University 1996

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59 486 U.S. 94 (1986) (holding that the state-action doctrine does not protect physicians from federal antitrust liability for their activities on hospital peer review committees); 42 U.S.C. § 11101 (1994). As credentialing is a peer review type function, it is covered under HCQIA.

60 Ill. Ann. Stat. ch. 225, para. 60/5 (Smith-Hurd 1993).

61 McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973); see, e.g., Fla. Stat. Ann. § 768.40(4) (West 1981).

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81 See Patel v. Scotland Memorial Hosp., No. 3:94CV00284, 1995 U.S. Dist. LEXIS 5258, at *5-6 (M.D.N.C. Mar. 31, 1995).

82 867 P.2d 1057 (Kan. 1994).

83 30 Cal. Rptr. 2d 603, 608 (Ct. App. 1994).

84 Id.

85 For example, see Gonzales v. San Jacinto Methodist Hosp., 880 S.W.2d 436 (Tex. Ct. App. 1994).

86 Ill. Ann. Stat. ch. 210, para. 85/10.4 (Smith-Hurd Supp. 1996).

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93 Id. at 4-5.

94 Id. at 4; John D. Blum, Evaluation of Medical Staff Using Fiscal Factors: Economic Credentialing, J. Health & Hosp. L., Mar. 1993, at 65, 68-69.

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101 The HPO is in fact very close to a PHO, except that the hospital partner may exert more control over the arrangement. An MSO is an organization that leases facilities, equipment, etc. or provides management services to a physician entity. A PO is a physician organization that is fairly generic in nature and can pursue single or multiple activities, but is physician-owned and -operated.

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106 Mitka, supra note 96, at 16. A book of business means that a physician has patients he or she can bring into the managed care entity.

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122 Id. CR 5.0, at 27; see also National Comm. for Quality Assurance, 1996 Review Guidelines 73 (1996).

123 Id. CR 8.0, at 28.

124 Id. CR 8.1, at 28.

125 Id. CR 10.0, at 29.

126 Id. CR 15.0, at 31.

127 Shapiro, supra note 119, at 32.

128 Id.

129 Id.

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131 Id.

132 Id.

133 45 C.F.R. §60.2(1995).

134 42 U.S.C. § 11111(a)(1).

135 Physician Payment Review Comm'n, supra note 111, at 344.

136 Id.

137 604 A.2d 1053, 1059 (Pa. Super. 1992).

138 781 S.W.2d 58, 59 (Mo. 1989).

139 See Schleier v. Kaiser Found. Health Plan, 876 F.2d 174, 178 (D.C. Cir. 1989); see also Howard v. Sasson, Civ. A. No. 95-0068, 1995 U.S. Dist. LEXIS 14373 (E.D. Pa. Oct. 3, 1995).

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142 See McClellan v. Health Maintenance Org., 604 A.2d 1053 (Pa. Super. 1992); Elsesser v. Hospital of Phila. College of Osteopathic Medicine, 795 F. Supp. 142 (E.D. Pa. 1992).

143 See Dunn v. Praiss, 656 A.2d 413, 416 (N.J. 1995).

144 McGraw, Deven C., Financial Incentives to Limit Services: Should Physicians Be Required to Disclose These to Patients?, 83 Geo. L.J. 1821, 1828-29 (1995).Google ScholarPubMed

145 Plaintiff’s Third Amended Complaint, Ching v. Gaines, No. 137656, at 5-6 (Cal. Super. Ct. Apr. 5, 1995).

146 Id. at 6.

147 See 42 C.F.R. § 417.124(b) (1994).

148 Cal. Health & Safety Code § 1363 (West Supp. 1990).

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151 MASS. gen. L. ch. 176B, § 7 (Supp. 1996); id. ch. 176G, § 6; id. ch. 1761, § 2; Bass, Alison, New Law Bans Gag Rules on Doctors: Health Insurers’ Contracts at Issue, Boston Globe, Jan. 23, 1996, at 1.Google Scholar

152 For example, see Wickline v. State, 239 Cal. Rptr. 810 (Ct. App. 1986); E. Haavi Morreim, Cost Containment and the Standard of Medical Care, 75 Calif. L. Rev. 1719 (1987); Rachel Kreier, Playing the Liability Lottery, Am. Med. News, Apr. 15, 1996, at 11.

153 No. CIV.A.94-5052, 1995 WL 605483, at *1 (E.D. Pa. Oct. 13, 1995).

154 Id.

155 See Gadson v. Newman, 807 F. Supp. 1412, 1415 (CD. Ill. 1992); see also Johnston v. Anchor Org., 621 N.E.2d 137 (Ill. App. Ct. 1993).

156 Fraud: Underutilization in Managed Care New Target of Joint Fraud Efforts, 4 Health L. Rep. (BNA) No. 47, at 1809 (Dec. 7, 1995).Google Scholar

157 29 U.S.C. §§ 1001-1461 (1994).

158 Id. § 1132(a)(1)(B).

159 Id.; see also id. § 1144(a).

160 965 F.2d 1321 (5th Cir.), cert. denied, 113 S. Ct. 812 (1992).

161 Id. at 1321.

162 Id.

163 See Dukes v. U.S. Healthcare, Inc., 57 F.3d 350, 357 (3d Cir. 1995).

164 See Warner v. Ford Motor Co., 46 F.3d 531, 535 (6th Cir. 1995). Typically medical malpractice cases filed against an ERISA-qualified plan are brought in state courts. Defendants generally seek to remove these actions to the federal courts arguing that a complete preemption of state law is mandated by ERISA’s § 502, and that the federal district court has original subject matter jurisdiction. In order for a claim to be removable, the well-pleaded complaint rule must generally be satisfied. This rule requires that a federal question be presented on the face of the plaintiff’s complaint. Clearly, a plaintiff who seeks a state remedy will not be apt to argue the presence of a federal question, and even the inclusion of anticipatory defenses to the defendant’s likely preemption argument does not create a federal question. In Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1986), the Supreme Court established an exception to the well-pleaded complaint rule, holding that state common law claims are to be treated as federal claims provided that the claim falls within the bounds of the civil enforcement actions outlined in § 502 of ERISA. Id. at 64-65. It is clear from Metropolitan Life that a state claim cannot be automatically removed to federal court by a general argument that such claims are inherently federal in nature. Id.

165 29 U.S.C. § 1132(a)(1)(B).

166 29 U.S.C. § 1144(a). For recent analysis of the impact of ERISA’s § 514(a), see Pacificare of Okla., Inc. v. Burrage, 59 F.3d 151 (10th Cir. 1995).

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168 57 F.3d 350 (3d Cir. 1995).

169 Id. at 352.

170 Id.

171 Id. at 355.

172 Id.

173 Id.

174 Id. at 357-58.

175 Id. at 357.

176 Id. at 359-61.

177 Id. at 356.

178 29 U.S.C. § 1144(a).

179 Pacificare of Okla., Inc. v. Burrage, 59 F.3d 151, 154-55 (10th Cir. 1995) (providing extensive citations to cases that have interpreted § 514(a) preemption).

180 See Kerney v. U.S. Healthcare, Inc., 859 F. Supp. 182 (E.D. Pa. 1994).

181 Pacificare of Okla., Inc., 59 F.3d at 154 (citing Schachter v. Pacificare of Okla., Inc., No. CIV-94- C-203 (N.D. Okla. Mar. 16, 1995)).

182 Id.

183 Under ERISA, health plans have a fiduciary duty to act solely in the interests of the participants and beneficiaries. In a recently filed New York case, a plaintiff alleges that Aetna Health Plans violated its fiduciary duty by switching its physician contracts from FFS to capitation. The plaintiff alleges that her children’s pediatrician refused to accept Aetna’s capitated arrangement, and informed his patient of sixteen years that he would not be able to continue treating her children under the HMO plan. The plaintiff is asking a federal court to enjoin Aetna from interfering with physician contracts, and to drop the use of physician incentive arrangements. The suit is a novel one which faces an uphill battle, in that the change to capitation may inconvenience the beneficiary, but it is not a denial of coverage or an action that excludes the practitioner. Kazel, Robert, Suit Questions Legality of Aetna’s Capitation, Bus. Ins., Jan. 15, 1996, at 37.Google Scholar There may be situations in which changes in reimbursement policy will result in large practitioner defections from a plan to an extent where such a policy shift could be characterized as a breach of fiduciary duty.

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187 It is interesting to consider whether a property right argument could be mounted by a plan member physician if the MCO switches reimbursement from FFS to capitation, hurting the physician who is unable to adjust. Chances are, the MCO contract would allow for change in reimbursement, but in the event such change violated the practitioner agreement, the breach may be the basis of a property rights argument.

188 NCQA Standards, supra note 118, at 31.

189 Mutual Release and Settlement Agreement, Medical Soc'y of the Dist. of Columbia v. Blue Cross and Blue Shield Ass'n, Civ. A. No. 94-1426, at 3 (June 12, 1995) [hereinafter Settlement Agreement].

190 Capital Blues, D.C. Medical Society Settle Selection, Quality Issues Dispute, 4 Health L. Rep. (BNA) No. 24, at 914 (June 15, 1995).Google Scholar

191 Settlement Agreement, supra note 189, at 3-5.

192 Id. at 8.

193 Id. at 4.

194 194Id. at 5.

195 Under New Jersey law, hospitals are treated as quasi-public entities, thus allowing physicians who have been adversely affected by hospital credentialing decisions to bring due process type actions. In order for that right to be extended to the managed care arena, MCOs would have to be viewed by the courts as quasi-public in nature. Perhaps MCO entities which are licensed could be thought of as quasi-public, but those that are just financial conduits may not be.

196 See Delta Dental Plan v. Banasky, 33 Cal. Rptr. 2d 381, 384 (Ct. App. 1994).

197 See Ascherman v. St. Francis Memorial Hosp., 119 Cal. Rptr. 507 (Ct. App. 1975).

198 33 Cal. Rptr. 2d at 385.

199 Id.

200 674 A.2d 962, 964 (N.H. 1996).

201 Id. at 963.

202 Id.

203 Id. at 964.

204 Id. at 965-66.

205 Id.

206 Id. at 966-67.

207 See generally Increasing Antitrust Challenges Will Parallel HMO Growth, Experts Say, 3 Health L. Rep. (BNA) No. 16, at 513 (Apr. 21, 1994)Google Scholar (asserting that antitrust litigation will target HMOs more and more as they increase their market share).

208 Id. at 514.

209 Greaney, Thomas L., Managed Competition, Integrated Delivery Systems and Antitrust, 79 Cornell L. Rev. 1507(1994).Google ScholarPubMed

210 Id. at 1537-43.

211 No. 95 av. 6631 (S.D.N.Y. filed Aug. 21, 1995).

212 Id.

213 Id.

214 Greaney, supra note 209, at 1541.

215 See Carter, supra note 186, § 10[a], at 877-78.

216 Id.

217 Id. § 10[b], at 879.

218 Jacobsen, Patricia, Prohibition Against Corporate Practice of Medicine: Dinosaur or Dynamic Problem, in Health Law Handbook 67, 67-68, 78-98 (1993).Google Scholar

219 Federal HMO Act, 42 U.S.C. § 300e (1994); see also Medical Practice Act of 1987, Ill. Ann. Stat. ch. 225, paras. 60/1-60/4 (Smith-Hurd 1993).

220 42 U.S.C. §§ 11101-11152 (1994); 42 U.S.C. §§ 12101-12213 (1994).

221 Any Willing Provider Bills Proliferate at State Level, 3 Health L. Rep. (BNA) No. 46, at 1683 (Dec. 1, 1994).Google Scholar

222 Hudson, Terese, State Laws: A Stumbling Block for System Integration, Hosp. & Health Networks, Apr. 20, 1994, at 40, 40.Google Scholar

223 Any Willing Provider Bills Proliferate at State Level, supra note 221, at 1683.

224 Id. at 1684.

225 See Any Willing Provider Provisions and Laws (Resolution 718, A-93), in AMA Proceedings, supra note 88, at 25.

226 995 F.2d 500, 505 (4th Cir.), cert. denied, 114 S. Ct. 579 (1993).

227 Id. (citing Blue Cross and Blue Shield v. St. Mary’s Hosp. of Richmond, Inc., 426 S.E.2d 117, 121 (Va. 1993)).

228 883 F. Supp. 94, 104 (M.D. La. 1995).

229 S. 2196, 103d Cong., 3d Sess. (1994); H.R. Rep. no. 4527, 103d Cong., 2d Sess. (1994); AMA Proposal Requires Health Plans to Give Consumers Coverage, Cost Data, 3 Health L. Rep. (BNA) No. 21, at 698 (May 26, 1994).

230 S. 2196, 103d Cong., 2d Sess. § 4(5)-(6).

231 Id. § 4(6)(B).

232 Id. § 4(6)(B)(II).

233 N.J.A.B. 1393, 207th Leg., 1st Annual Sess. (1996).

234 Texas Admin. Code tit. 28, §§3.3703, 3.3705, 11.1601 (1996).

235 Id. § 11.1601(a).

236 Id. §§3.3705(4), 11.1601(b).

237 Id. §3.3703(1).

238 Id. § 11.1601(a) (unless otherwise prohibited by Texas Insurance Code art. 21.52B).

239 Recently a group of five Houston physicians sued Aetna Life Insurance Company arguing that they were unfairly dropped from the insurer’s PPO. The U.S. District Court for the Southern District of Texas ruled that it had no jurisdiction in the case because Texas law does not provide a private cause of action to enforce PPO regulations. According to the Fifth Circuit, only the Texas Department of Insurance has the authority to enforce PPO rules. Texas Medical Ass'n v. Aetna Life Ins. Co., 80 F.3d 153 (5th Cir. 1996).