Chapter 18 Managed Care: Post-Termination Physician Strategy

INTRODUCTION

PHYSICIANS RECOMMENDED STEPS UPON TERMINATION

Read your contracts termination clause

Determine the reason for termination

Was the termination retaliatory

Reinstatement and reconsideration of the decision to exclude

Defamation

Termination rendering non-coverage of your specialty

SAMPLE LETTERS

Inadequate notice of termination

Request for a fair hearing

Requesting reason for termination

Requesting reinstatement

Termination due to malpractice claim

Termination due to quality of care advocacy

Unlawful discrimination

Explanation to patients

Letter for patient to send to the plan

Patient letter to his/her employer

Request to colleagues

Colleague letter to plan

Request for a retraction by the plan

Retraction of letter stating physician has retired

Explaining to the plan that they will lack physician specialty

PROPER PROCEDURE FOR TERMINATION OF A PHYSICIAN CONTRACT

CONSULT THE CONTRACT

Termination without cause

Reasons for termination & opportunity for hearing required

Termination with cause

Notice to patients

Bankruptcy could prohibit termination

RIGHT TO A HEARING UNDER FEDERAL LAW

ANTITRUST CHALLENGES TO THE TERMINATION OF PHYSICIANS

Antitrust laws and challenging exclusion from a plan

Differences between physician-controlled and non-physician controlled plans

Plans with too many physician providers may raise antitrust issues

Ability of the plan to prevent physician practice within a geographic market

Group boycott of the applicant physician

Exclusion from a referral agreement and antitrust consequences

Exhausting appeals

ANTITRUST DOCTRINE AND THE NON-PHYSICIAN CONTROLLED PLAN

SUMMARY OF ILLEGAL AND IMPROPER REASONS FOR TERMINATION

Termination due to unlawful discrimination

Termination for advocating patient care

Termination due to malpractice claims

Termination for lack of Board Certification

ACTION AVAILABLE TO THE PHYSICIAN WHO HAS BEEN EXCLUDED FOR LACK
OF BOARD CERTIFICATION

Address the credentialing committee directly

Enroll the aid of patients

Look to under-served areas

Sue

LEGAL CHALLENGES POSSIBLE

Challenge for lack of hearing

Challenge on unfair business practice grounds

Challenge for retaliation by managed care plans

What the law does not change

Documentation

PRACTICAL SUGGESTIONS TO ATTEMPT TO AVOID A LAWSUIT

Physicians

IPAs and other medical groups

INTRODUCTION

Due to various economic factors, some managed care plans have begun to decrease the number of physicians on their panels. As a result, an increasing number of physicians have begun receiving termination letters. These terminations can be disconcerting for physicians and their patients. The terminations interfere with the physician-patient relationship, disrupt patient care, and can be economically destructive to the physician. The following strategies provide the physician with concrete options for action if terminated by a managed care plan.

PHYSICIANS RECOMMENDED STEPS UPON TERMINATION

Read your contracts termination clause.

If the physician is being terminated without cause, that is, there is no allegation of wrongdoing, the physician should first review the termination clause of his contract. The termination clause should have a specific notice provision defining the amount of time the physician must be given prior to termination. If the termination violates the notice requirement, or any law pertaining to termination of the contract, the physician may consider utilizing his own modification of Letter #1 (below) to the administrator of the plan.

If the physician has been terminated for cause, due process protections are available. Termination for cause may be based on a wide range of reasons and will require case specific defenses. The physician who believes he may have been wrongly terminated for cause should consult a local attorney specializing in employment law before deciding on a course of action.

Determine reason for termination.

Nevada has no statutory requirement that the plan inform the physician of the reason for the termination. Review the contract to determine if there is a contractual obligation to give reason for the termination. A prudently written contract will provide that a physician may be terminated for no reason. This means the employer is not required to provide a reason for the termination. An employer utilizing this mode of termination correctly avoids the due process requirements of a termination for cause. Note that termination for no reason is not the same as termination for any reason. Any reason implies that some reason must be provided for the termination.

Was the termination retaliatory.

Retaliatory termination because the employee exercised his or her rights or obligations gives rise to a cause of action. The successful conclusion of such a lawsuit can result in back pay and other compensation plus the possibility of the award of punitive damages.

Reinstatement and reconsideration of the decision to exclude.

The physician should decide whether he/she wishes to seek reinstatement by having the decision to terminate the contract reconsidered. Some of the factors to consider before seeking reinstatement are: the number of patients that the termination may affect, the amount of revenue these patients represent, and the effect of the termination on professional relationships. The physician should also consider his/her satisfaction with the plan prior to the termination. If the physician decides that the plan was a valuable relationship, (s)he should seek reinstatement as quickly as possible. The following suggests an approach to seeking reinstatement:

a) First, determine if the plan has an appeal process. If the plan does have an internal appeal process, see if it has a written procedure. If there is a written procedure the physician should follow it and submit all necessary papers as quickly as possible. If there is no written procedure for reconsideration of termination, the physician may be able to proceed using the plans physician grievance procedures. If there is no appeal process or if the process is unfair, and if the termination is likely to have a significant financial impact on the physician, the physician may consider writing the plan and asking for a fair hearing. The physician may refer to Letter #2 for an example of how to word this request.
b) Discuss the termination with the plans medical director. The physician should explain to the director why the plan should reinstate him or her and be ready to support this explanation with reasonable arguments. The medical director may be able to reinstate directly or obtain a rehearing by the plans directorate.
c) The physician may consider writing the plan directly, requesting reinstatement. Letter #3 provides a template for this type of request.
d) The physician should consider involving patients who are members of the plan. The physician should contact these patients and ask them to write to the plan requesting the physician to be reinstated. Letter #4 is an example of the type of letter which a patient might send to the plan. In contacting patients, the physician should be sure to explain that the termination is not for cause, and is due to commercial goals of the plan directors, rather than any problems with the physicians practice. If the insurance plan is through the patients employer, the patients should also be asked to write to that employer. Nevada has no specific law requiring an insurance plan to allow the patient to continue with the physician, but there are some references to requirement of continuing care in certain high risk conditions. The physician may also consider asking colleagues who remain with the plan to write a letter supporting the reinstatement and indicating that the physician is a source of referral patients. Letter #5 suggests a sample of what may be written.
e) The physician may consider joining a physician group which is still under contract with the plan. Also, the physician may consider opening a satellite office in an area where the plan is under-served, in return for reinstatement or continuation of contract.
f) The contract may also have an arbitration clause which the physician should consider. If there is no arbitration requirement the physician should consider suing the plan in court. If the physician decides to pursue court remedies, (s)he should hire an attorney and proceed quickly to avoid problems of filing deadlines.
Defamation.

If the plan wrongfully states that the physician was terminated for cause, or makes other false statements regarding the physicians termination, these statements may ground a claim for defamation . Letter #6 may be used to request a retraction of false statements. If the plan refuses to retract the statement(s), the physician may wish to contact an attorney to pursue civil tort damages.

Termination rendering non-coverage of your specialty.

While Nevada law does not require any specific specialties be provided by a plan, there is a general requirement that a plan provide comprehensive health care. Nevada Revised Statutes 695C.060. If the termination of the physician results in a void in the plans coverage, the physician should write the plan notifying the plan of this fact. Letter #7 is an example of this type of letter.

SAMPLE LETTERS

The following letters are intended to be used as rough templates and should not be copied verbatim. The physician should read the model letters and consider which parts of each might be appropriate to that physicians situation, and then add, delete, or modify the language in the sample letter.

Letter #1- suggestion for letter by physician who received inadequate notice of termination.

Dear (enter name of plan administrator):

I have received notification that you are attempting to terminate my participating physician agreement. Under the terms of the contract you are required to give me _______ days advance notice of termination. As I did not receive the necessary notice, the termination action is invalid. Until the notification requirement is met I will assume my contract is still in effect.

Sincerely,

PHYSICIAN NAME

Letter #2 – request for a fair hearing

Dear Mr./Ms.________:

I have received notice that you have decided to terminate my participating physician contract with ________ health plan. I was not given an opportunity to appeal this decision, and am therefore, requesting an appeal and fair hearing by the (plans committee) regarding my termination.

Please notify me within five business days of receipt of this letter of your plans to conduct the hearing. Because the matter is of such importance, I request that the hearing be scheduled no later than_______ (15 days from the date of the letter),

Thank you for your cooperation.

Sincerely,

PHYSICIAN NAME

Letter #3A- requesting reason for termination

Dear Mr./Ms.______:

I have received your letter terminating my contract as a participating physician in the ______ Plan/Network. To date I have received no complaints from your plan regarding my practice, so I am concerned to know what has caused you to terminate my contract.

Many of my patients are insured through _________ and I have enjoyed our relationship over the past _____ years. Therefore, in the interest of myself and my patients I would like to remain a participating physician in your Plan/Network.

I would appreciate information on what specifically caused my termination, and what I can do to correct this situation so that I may continue to care for patients who are covered by your plan. Please respond as soon as possible, as this matter is of great concern to me.

Sincerely,

PHYSICIAN NAME

Letter #3B – requesting reinstatement

Dear Mr./Ms. ________:

I received your letter dated ____ terminating my contract as a participating physician in ________ Plan/Network. I am writing to request reinstatement of my contract. Although the contract allows you to terminate my services upon ____ days notice, I feel that this decision was reached capriciously. Such an arbitrary termination will have significant detrimental effects on my practice. Termination of our contract will destroy portions of the patient base which I have developed. Moreover, it undermines my physician-patient relationships. As you know, this is an extremely personal relationship, based on mutual trust and confidence. To require my patients to end this relationship for no good reason may adversely impact their welfare. My patients have grown attached to me and feel comfortable with my care. If you cancel our contract, my patients will be forced to find another physician and begin the relationship anew. This creates unnecessary stress in my patients and also reflects badly on ____ Plan/Network itself.

For these/this reason(s), I request that I be reinstated as a participating physician as soon as possible to the ___________ Plan/Network. Please contact me at your earliest convenience regarding this mater.

Sincerely,

PHYSICIANS NAME

Sample letter #3C – termination due to malpractice claim

Dear Mr./Ms. ________:

I received your letter dated ____ terminating my contract as a participating physician in ________ Plan/Network. I am writing to request reinstatement of my contract.

It appears that you have terminated my contract because a claim for malpractice was filed against me. This claim and the subsequent contractual termination have no relationship to the quality of patient care which I practice. It is well established that a claim for malpractice has no relationship to the quality of care provided by the named physician. The Harvard Medical Practice Study concluded that the filing of a malpractice complaint only justifies an investigation by entities in a relationship with the physician. (For more on this study please see Relation Between Malpractice Claims and Adverse Elements Due to Negligence Localio, R.A., J.D., M.P.H., M.S., et al. New England J. Med., July 25, 1991, 325:4, p. 245-251. See also, Malpractice Claims Data As a Quality Improvement Tool, Journal of the American Medical Association, Oct. 16, 1991, 266:15, pp. 2087-2097, in which the authors indicate the poor correlation between a malpractice claim and specific incidences of poor care.) These studies indicate that my termination was inappropriate. I am willing to meet with your quality assurance committee to discuss the facts of the case, with the proviso that anything discussed will be protected from discovery.

Sincerely,

PHYSICIAN NAME

(Caution should be taken before meeting with the quality assurance committee if the malpractice case is ongoing. The physician should consult with his/her attorney about protecting information exchanged at the meeting from discovery by the plaintiff in the case.)

California Medical Association 1999. Reprinted with permission.

Sample letter #3D- termination due to quality of care advocacy

Dear Mr./Ms. ________:

I received your letter dated ____ terminating my contract as a participating physician in ________ Plan/Network. I am writing to request reinstatement of my contract.

It appears that I am being terminated for continuing to challenge _______ Plan/Networks denial of (enter the patients name and the relevant procedure). Nevada law prohibits penalizing a physician for patient advocacy. Such a violation may result in disciplinary actions taken by the state against the plans license.

I am under a moral and legal obligation to seek the care which I deem necessary for my patients welfare. Termination for such advocacy is illegal in this state. As a citizen of this state I am also ethically and legally bound to report such a violation to the proper authorities.

Finally, a healthcare plan is obligated to base its utilization review decisions on quality care considerations. If it fails to do so, and the patients quality of care is affected, the plan may be liable for any ill effects suffered.

Sincerely,

PHYSICIANS NAME

Sample letter #3E – Unlawful Discrimination.

Dear _________ Plan/Network:

I received your letter dated ____ terminating my contract as a participating physician in ________ Plan/Network. I am writing to request reinstatement of my contract.

It is my understanding that under Nevada law all persons are equal, regardless of race, sex, religion, national origin, or disability. I feel that my termination as a provider physician for ______ Plan/Network is because I am (state the discriminatory basis). If true, the termination notification is a direct violation of Nevada law.

Sincerely,

Sample letter #4A – explanation to patients

Dear _____(Patient):

I am sorry to inform you that ___________(Plan/Network) has terminated its contract with me. As of _______ (exact date) I will no longer be a participating physician in their plan. The reason for this termination is (give the reason received from the plan or state that the plan has given no reason for the termination). I have appealed this decision because I believe that I have met the plans employment criteria and feel that the termination was unfair. I have enjoyed and would like to continue our relationship. I have contracts with the following plans (list), or I can see you as a private patient. Unfortunately, the cost to you will be higher because I will be considered a non-Plan/Network provider.

I am seeking to appeal the plans decision. If you would like to continue to see me under your current plan, I would appreciate your support for my appeal. I am enclosing two sample letters for your consideration. One asks your current plan to reinstate me as a participating physician. The other letters can be sent to your employer asking them to help get me reinstated.

I hope that my appeal will be successful, and look forward to continuing our relationship. If you have any questions, please contact me at my office. Thank you for your assistance and support.

Sincerely,

California Medical Association 1999. Reprinted with permission.

Sample letter #4B – letter for patient to send to the plan

Dear _________ (Network/Plan):

I have been informed that you have terminated your contract with my doctor, (NAME).

I have been a patient of his/hers for a number of years and am very satisfied with the care I have received. I would like to continue to see him/her under your plan. I do not want to change to another doctor in your nor do I want to have to change to another Plan/Network.

Please reconsider your decision and renew your contract with Dr. NAME.

Sincerely,

PATIENTS NAME

California Medical Association 1999. Reprinted with permission.

Sample letter #4C – patient letter to his/her employer

Dear Mr./Ms. ________ (employer):

I have just learned that my physician, Dr.(NAME), has been terminated by our healthcare insurer. I have been very satisfied with the care which Dr. (NAME) has provided. I do not wish to change doctors for the convenience of our insurance providers. Would you please contact (PLAN) and ask them to reinstate Dr. (NAME)? If they refuse to reinstate him/her, I request that you allow me to change my plan so that I may continue with the physician of my choice under the new plan.

Thank you for considering my request.

Sincerely,

PATIENTS NAME

California Medical Association 1999. Reprinted with permission.

Sample letter #5A – request to colleagues

Dear ______:

(PLAN/NETWORK) has informed me that they intend to terminate my contract as physician participant. This becomes effective on ________ (exact date). The termination notice states that I have been terminated because (give reason). I have appealed this decision, and would appreciate your help. I am enclosing a letter that I would like you to send to the plan/network. Please feel free to make any alterations which you feel appropriate.

Thank you for your help in this matter.

Sincerely,

California Medical Association 1999. Reprinted with permission.

Sample #5B – colleague letter to plan

Dear (plan director):

I have learned that my colleague (NAME) has been terminated from (PLAN/NETWORK). I understand that as of _______ (date of colleagues termination from plan/network), I will no longer be able to refer patients to Dr. (NAME) under your plan/network. I rely on Dr. (NAME) for (name specific services). The termination of his provider contract will make it difficult for me to provide care for my patients because (give specific reasons).

I am requesting that you reconsider your decision and renew your contractual relationship with Dr. (NAME). Thank you for your cooperation.

Sincerely,

COLLEAGUES NAME

California Medical Association 1999. Reprinted with permission.

Sample letter #6A – request for a retraction by the plan

Recently, plans have been sending letters to enrollees explaining the reason they have terminated a physician. Theses letters may contain untrue statements which may damage the physicians reputation or practice. If this happens, the physician may wish to send the plan the following letter, requesting the plan retract the untrue statement. If the plan refuses, the physician should consider speaking with an attorney to take further action.

Dear Mr./Ms.____:

I have received a copy of the letter which (PLAN) has sent to its enrollees regarding my termination. The letter reads, in part: (quote the untrue part of the letter verbatim).

This letter is untrue and defamatory. These statements indicate that I was terminated because I was providing substandard care. However, there is no evidence to support this conclusion. Your letter to me, dated ____, did not indicate that the quality of my care was an issue. Had competency been an issue, I would expect some form of hearing, which I did not receive. I request that the plan cease and desist from sending this letter to any other enrollees. I also request that you send a letter to the same persons who were sent the offending letter, informing them that I was terminated due to your attempt to reduce costs, rather than any reason relating to the quality of the care I provide.

Any patients that have been transferred to other physicians within the plan should be returned to me. If I do not retain all of the patients which I had prior to your letter, I will consider taking legal actions.

Sincerely,

California Medical Association 1999. Reprinted with permission.

Sample letter # 6B – retraction of letter stating physician has retired

Dear Mr./Ms. ______:

I have learned that your plan has sent a letter to its enrollees stating that I have retired from practice. The letter also informs the enrollees that they must select a new participating physician. This letter is defamatory, as I have not retired. Therefore, I request that your plan/network cease and desist sending this letter to any other enrollees. I also request that you send a letter to the same persons, informing them of your error and stating that I will remain their primary care physician.

Any patients that have been transferred to other physicians within the plan/network should be returned to me. If I do not retain all of the patients which I had prior to your letter, I will consider taking legal actions.

Sincerely,

California Medical Association 1999. Reprinted with permission.

Sample letter #7 – explaining to the plan that they will lack physician specialty

Dear (plan/network administrator):

I have received notice that my contract to provide care under your plan/network has been terminated effective ______. It is unclear if the remaining physicians on your panel will be able to take care of patients requiring (the specialty involved). Because Nevada requires that a healthcare provider plan/network offer comprehensive health care (NRS 695C.060), my termination may put the plan/network in violation of this statute.

Additionally, the Federal Balanced Budget Act contains language requiring Medicare+Choice organizations to provide a full range of specialties to its patients. These specialties must be available 24 hours a day, seven days a week. (Section 1825(d) Social Security Act).

Pursuant to the above laws, I request written information showing how your plan/network will provide adequate coverage in my specialty, in the geographic area where I currently practice. In the alternative, I request that the plan/network reinstate me as a contracted (name specialty). Thank you for your attention to this matter.

Sincerely,

PHYSICIANS NAME

PROPER PROCEDURE FOR TERMINATING A PHYSICIAN CONTRACT

There are many reasons for seeking to terminate a contract between physician and a medical group or healthcare plan. Such terminations should be done with caution and in a legal manner. The following discussion proffers how the managed care contract should be terminated.

CONSULT THE CONTRACT

The first step by the party wishing to terminate should be to re-read the participating physician contract (referred to as contract in future). The contract should define the procedures for termination. In signing the contract originally, both sides have agreed to follow the termination procedure described in the text. If either side terminates the contract in a way that is contrary to the described procedure, the termination may be ineffective and/or the terminating party may be liable for breach of the contract.

The following is a discussion of typical termination clauses, and the laws regarding managed care contract termination. If the contract does not have a termination clause, an attorney should be contacted to ensure that the proper procedures are followed.

a) Termination without cause

Contracts often specify that they may be terminated without cause, that is for no reason at all. These provisions generally specify that the terminating party need only give a certain number of days written notice to the other party. For this type of termination to be effective, the terminating party must state in writing that in the specified days time, the contract will terminate and the physician will no longer be providing services to the plans patients.

The contract often includes language describing the proper manner for giving written notice. The party should consult this part of the contract to determine where the notice should be sent, and whether the timing runs from the day sent or the day the party receives it. In any case, it is good practice to send the notice via certified mail, with return receipt requested. This ensures that the other party receives the notice and that the sending party has proof of the receipt. After the specified time has run, the physician no longer has a contractual relationship with the plan to see its patients.

In recent years healthcare plans and physician groups have been using the without cause clause with increasing frequency to terminate physician contracts. Usually the termination is due to a change in the economic situation of the plan. Because these terminations undermine the physician-patient relationship and may result in significant losses to the physician, the physician may want to consider negotiating the clause out of the contract or require a longer notice period. On the other hand, if the physician is not sure that (s)he will remain with the plan then (s)he may elect to agree to the clause but make sure that it is reciprocal.

b) Reasons for Termination/Opportunity for Hearing Required

When a plan terminates a providers contract for cause, that is over quality of care concerns, it generally must specify what those reasons are and offer a hearing. In non-quality cases Nevada does not require specification of a reason for the termination.

c) Termination with cause

Most contracts have a provision that the parties may terminate the contract in the event of a material breach or with cause. Termination for cause is a termination due to specific, substantial violation of the agreement.

The without cause clause, discussed above, can be used in cases of material breach but the with cause provision has the advantage of being a quicker way to terminate the contract because the notice requirement may be briefer. A material breach may occur when a party fails to perform as required by the contract and the failure substantially impacts what the other party bargained for. Material breach depends on the facts of the individual case. The key issue in determining if a breach is material is fairness. A physician who is uncertain if the action of the plan is a material breach should consult an attorney.

The individual contract will specify the amount of notice, if any, that is required in cases of material breach or for cause terminations. Most contracts require a certain amount of written notice even in serious cases of breach. If the contract specifies that notice must be given, the party is obligated to give the time specified, regardless of how unpalatable the continued relationship may be.

Some contracts require a party to give notice of the material breach, and then wait to see whether the breach may be cured within a specified period of time. If the breaching party does cure the breach, the contract remains in effect. This provision is generally beneficial to both parties and should be demanded by the physician before signing the contract. Curing a breach generally requires the party to modify a recently adopted practice (such as delayed payments by the plan to the physician) and is often easily accomplished.

Physicians should make sure that any contractual clauses relating to termination with cause are reciprocal to the contracting healthcare plan. Plans frequently try to limit the physicians options in cases of breach by the plan either to arbitration or to the without cause clause. Such limitations slow the physicians ability to respond to improper actions by the plan, by imposing longer notice requirements. Although it may be possible for the physician to invoke the for cause clause even without specific reciprocity, it is more difficult and time consuming and may entail more expense.

Some contracts specify that the contract may be terminated immediately in the event of a material breach. In this type contract there is no ability to cure or correct the breach. This type of contract is inefficient because it does not allow for corrections of what may be misunderstandings or relatively minor breaches and therefore ends otherwise beneficial relationships. Sometimes the contract will give the plan the right to immediately terminate the agreement in the event that it determines at its sole discretion that the physician has violated a requirement of the contract. This clause gives the plan the right to terminate the physician without notice for any violation, no matter how trivial. Physicians should avoid any contract which contains this type of language, or at least seek to modify the clause to require a material breach rather than any violation.

Notice to patients

Some states require that upon termination of a providers contract the plan must notify the enrollees of that medical group or IPA 30 days prior to the effective date of the termination. It is unclear whether Nevada law requires similar notification.

Some contracts require the physician to notify enrollees of the termination. Alternately, the contract may only require the plan to notify patients of the physicians terminated. In any case, the physician should insist on having a role in the patient notification procedure. If a form letter is to be used to notify the affected enrollees, the physician should such form letter(s) prior to signing the contract.

Ideally the letter should be attached to the contract as an exhibit which may only be amended upon consent of the parties. Statements in such form letters often interfere with the physician-patient relation and the patients right to keep the physician beyond the contract termination.

Healthcare plans and medical groups are advised to inform enrollees about how and where they can access the terminated physician. Lawsuits have occurred because medical groups have stonewalled patients over this information.

Patient abandonment is an issue that the physician should consider when entering into a contract with a healthcare plan. Beyond the legal formalities, a physician is ethically obligated to protect his/her patients interests despite termination of a provider contract.

Bankruptcy could prohibit termination

If a healthcare plan files for bankruptcy, bankruptcy law may prohibit the physician from terminating the service contract. Physicians who do not terminate their contracts for failure to receive payment before the bankruptcy are generally not permitted to terminate after the plans filing for bankruptcy.

Sample letter #8 – joint letter to patient

Dear ____:

This letter is to inform you that on _______ I will no longer be participating in the ____ health plan/network. It may not be necessary for you to seek another physician because I am also a member of the following plans:

(List)

You may ask your employer about the possibility of your signing up with one of these other plans. You may also continue to see me as a private/full pay patient. This may not be financially practical, as it entails substantially higher out of pocket expense.

You also have the option of continuing with your current health plan and they will see to it that you are transferred to another of their physicians. Please let me , your employer and the plan provider know, as soon as possible, which of these options is best for you. I have enjoyed being your physician.

Sincerely,

California Medical Association 1999. Reprinted with permission.

RIGHT TO A HEARING UNDER FEDERAL LAW

The federal Health Care Quality Improvement Act (HCQIA) does not require a plan/network to comply with its notice and hearing provisions. However, HCQIA does provide immunity protections for those who do comply. HCQIA also immunizes peer review action from state and federal liability, including antitrust violations, if the action is taken under the following conditions:

1) the action is taken in the reasonable belief that the action promotes quality health care;

2) it is taken after reasonable efforts have been made to obtain the facts;

3) it is taken in the reasonable belief that the action is warranted by the facts; and,

4) the physician involved receives adequate notice and a fair hearing

This fourth condition establishes a safe harbor or guarantee that the physician will receive notice and a fair hearing.

ANTITRUST CHALLENGES TO THE TERMINATION OF PHYSICIANS

The following is a discussion of antitrust laws which may prohibit HMOs and other managed care plans from excluding or terminating physicians who wish to participate and are qualified to do so. Physician have lobbied many states to legally require managed care plans accept any willing provider. Nevada law does not contain an any willing provider provision. Therefore, in Nevada, unless an exclusion violates some other statute, it is lawful.

There are three types of laws which do restrict the discretion of the managed care plan (plan) to exclude physician participation. These are the laws which prohibit unlawful discrimination, the laws which prohibit retaliation by the plans, and antitrust laws.

Antitrust laws and challenging exclusion from a plan

Antitrust laws are unlikely to provide relief for exclusion from managed care plans. The government and the courts believe that keeping provider panels small is a reasonable method of cost containment and therefore is unlikely to violate antitrust law or policy. In rare cases where the plan is large enough to set prices and bar physician entry into the geographic area, antitrust laws may be invoked. Should the plan be large enough to consider such an action it will be necessary to consult an attorney to pursue such a course.

Federal antitrust began with the Sherman Act, which was enacted in 1890. The Act was intended to prevent anti-competitive behavior by prohibiting acts which interfere with free trade. The Act consists primarily of two parts, one prohibits monopolization attempts by companies and the other prevents unreasonable restraints of trade by separate persons. The facts determine which section governs the case.

If the plan is over-inclusive and brings together too many providers, it may run afoul of the Clayton Act which prevents illegal mergers, group boycotts, and other concerted efforts which negatively impact competition. Excluding a physician provider may result in a suit claiming that the plan is engaging in just such a group boycott, or claiming the plan is denying access to an essential facility, which is a violation of Section 2 of the Sherman Act.

Differences between physician-controlled and non-physician controlled plans

Exclusion of physicians by a non-physician controlled plan are generally analyzed under Section 2 of the Sherman act. The contract, conspiracy, or combinationelement of Section 1 of the Sherman Act may be invoked when physician controlled plans, composed of individually competing physicians, act in concert to exclude an applying physician. Thus, the restraint of trade and anti-competitive behavior of the physicians may be analyzed under both Section 1 and 2 of the Sherman Anti-trust Act.

Plans with too many physician providers may raise significant antitrust issues

Over-inclusive physician-controlled plans run the highest risk of violating antitrust provisions. The concern is that the members will use a physician-dominated board to prevent competition by price setting and boycotting nonmember physicians. The plan may escape liability if sufficiently integrated as to constitute a limited joint venture. The plans must also not be so large as to preclude other plans from competing in the same geographic area.

Charles Rule, the Assistant Attorney General, Antitrust Division has stated that the Department of Justice (DOJ) is specifically concerned with cartel behavior and over-inclusion in particular healthcare plans. The DOJ recognizes that even well integrated plans may violate antitrust laws if they grow too large. A large plan which prohibits participating physicians from joining other/emerging plans may well constitute a group boycott or barrier to entry in violation of the Sherman and Clayton Acts.

Concerns for potential violations by the healthcare industry prompted the DOJ and the Federal Trade Commission to publish a joint statement of policy in 1994. In this statement they created safety zones for a number of healthcare activities, such as formation of physician joint ventures. This safety zone permit physician joint ventures (IPAs or PPOs) which are comprised of 20% or less of the physicians, or in a non-exclusive physician network joint venture, 30% or less of the physicians in each specialty with active hospital staff privileges who practice in the relevant geographic market and share substantial financial risk.

The federal agencies have since commented that the exclusion of an individual physician in a geographic market which contains multiple provider plans will not raise antitrust issues. The analysis of antitrust issues does not focus on the effect on the individual physician provider but of the effect of the plans on competition within the relevant geographic area. Thus, where exclusionary behavior on the part of a plan enhances competition within the area, no anti-trust violation will be found.

The plans market power as shown by its market share is the key factor in a successful antitrust suit. Where the plan enjoys a large market share, there is a greater likelihood that an antitrust action will be successful. If there are many competing plans in the geographic area, the chances of a successful antitrust action are remote.

Ability of the plan to prevent physician practice within a geographic market

If membership in a specific plan is truly necessary to compete in the relevant market, an exclusion of the physician from the plan may be a violation of Section 2 of the Sherman Act. This is on the theory that the competitor is being denied access to an essential facility. The essential facilities doctrine requires that a party in control of an something that is required to compete in the relevant market must make the essential facility available to competitors within the relevant geographic market, at a reasonable terms. The basis of this doctrine is from the United States Supreme Court decision United States v. Terminal Railroad Assn, 224 U.S. 383 (1912). The Ninth Circuit has taken the position that control of the facility carries with it the power to eliminate competition in the downstream market. Alaska Airlines v. United Airlines, Inc.,948 F.2d 536 (1991). Essentially, this case implies that unless the entity has the power to eliminate the competition through denial of its facility, there will not be an antitrust violation. As a further limitation on the essential facility doctrine the federal courts have held that the law does not require the sharing of an essential facility if such a sharing is impractical or will be detrimental to the partys own customers. Hecht v. Pro-Football Inc., 570 F.2d 982 (D.C.Cir. 1977). The physician who is trying to establish an antitrust claim under the essential facilities doctrine will need to show:

1) that the plan has monopoly control over the essential facility,
2) that he/she cannot reasonably create his/her own facility
3) that the plan has denied him/her access to the essential facility, and 4) that the plan could have provided access at no detriment to itself.

Additionally, if the plan can show that there are pro-competitive justifications for the denial, the suit will fail. But if the physician is able to establish that the above factors exist and that there is no pro-competitive rationale supporting the denial of access, the court may find that the plan has violated antitrust law and may enjoin the plan from continuing to deny the physician access to the network.

Group boycott of the applicant physician

Group boycott suits require the complaining physician first to demonstrate that there was a contract, combination or conspiracy to restrain trade. The complaining physician must show that the plans structure is such that the plans physicians are separate individuals acting in concert through the contract, combination, or conspiracy. If the plans organization integrates participating physicians into a single entity, there can be no contract, conspiracy of combination. A single entity cannot conspire within itself.

Generally, group boycott claims based on exclusion from a plan have been unsuccessful. It is difficult to prove that the exclusion is a result of the plans physicians acting in concert as individuals, and the plaintiff has the burden of showing that the boycott has had a material effect on competition within the market. Showing that the exclusion has effected more than just the excluded physician can be extremely difficult.

Exclusion from a referral agreement and antitrust consequences

The above principles apply to exclusions from referral agreements as well as exclusion from provider plans. Again, the court looks specifically at the anti-competitive effects of the plans behavior. In at least one case, a court held that such behavior does not threaten competition in the relevant market. See Retina Associates P.A. v. Southern Baptist Hospital of Florida, 105 F.3d 1376 (11^th Cir.1997).

Exhausting appeals

Because Nevada law does not give a physician much protection against termination by a healthcare plan, the physician should attempt to negotiate reasonable appeal procedures in the terms and conditions of the contract. If there is an appeals process in the contract, the physician should pursue the procedure to its end

ANTITRUST DOCTRINE AND THE NON-PHYSICIAN-CONTROLLED PLAN

Section 2 of the Sherman Act prohibits monopolization behavior and attempts to monopolize. It applies specifically to unilateral actions by single entities. Suits brought under Section 2 require the plaintiff to establish two elements: the possession of market power by the individual entity, and the willful acquisition or maintenance of the monopoly. Because non-physician plans do not entail activities by the practitioners acting in concert, but rather the independent actions of an individual entity, these cases are analyzed under Section 2.

Non-physician plans are considered healthcare buyers/purchasers, where physicians are considered healthcare sellers. Antitrust law generally holds that buyers may purchase goods or services from any source they choose. Buyers only raise antitrust concerns when they take actions which are designed to achieve market power or price control in the downstream or resale market. An example of this would occur if a healthcare plan predicated its fee schedule offer to a particular business on the business enrolling a larger percentage of its members than the plan would have gotten through pure competition. Findings of antitrust violations in the purchasing of services are extremely rare.

SUMMARY OF ILLEGAL/IMPROPER REASONS FOR TERMINATION

Termination due to unlawful discrimination

Nevada Revised Statute 613.330 declares it illegal to refuse employment to a person based on race, creed, sex, national origin, or disability. If the physician believes that the exclusion or termination was based on discriminatory practice he/she should consult an attorney.

Termination for advocating patient care

Nevada law prohibits managed care plans from punishing a contract physician for advocating in public or private on behalf of his/her patients. This includes retaliatory measures taken for seeking reconsideration of a plans decision not to provide certain services for a specific patient. Nevada Revised Statutes 695G.250. Violation of this provision may lead to state action against the plan up and including revocation of licensure.

Termination due to malpractice claims

Several studies have shown that the filing of a malpractice claim against a physician is a poor indication of the physicians quality of care. Because of this it is not recommended that the plan accept such a filing as grounds for termination. Whether the plan may do so will be based solely on the language of the provider contract, as Nevada law is silent on the issue.

Termination for lack of Board Certification

Some managed care plans are excluding non-board certified physicians because many employers require that the HMOs be accredited by the National Committee for Quality Assurance (NCQA). The NCQA does not require certification but it does create report cards for each HMO using a device called the Healthplan Employer Data Information Set (HEDIS). One element of this device is the percentage of certified physicians on the given plan. Plans with higher numbers of certified physicians are seen as being of higher quality. Many plans also use certification as a marketing tool.

There is no requirement under Nevada law that a plan have any specific percentage of certified physicians. The only requirements are that the physicians all be duly licensed and that the plan provide comprehensive services.

Several state medical associations have opposed the use of board certification as a reason for excluding a physician from a provider plan. Moreover, in a report to the Chairman of the Committee on Labor and Human Resources , U.S. Senate and Health Care Reform, the General Accounting Office stated that research has not shown conclusively that board-certified physicians furnish better care than non-certified physicians.

Despite this pressure not to consider lack of certification as grounds to exclude an otherwise qualified physician, there is no legal consequence for the plan to do so.

ACTION AVAILABLE TO THE PHYSICIAN WHO HAS BEEN EXCLUDED FOR LACK OF BOARD CERTIFICATION

Address the credentialing committee directly

The physician should approach the credentialing committee and seek a one on one meeting with the person in charge of credentialing and/or seek to speak directly with the medical director of the plan. The physician may need to use the plans appeal procedure to obtain the meeting. The physician should take as much data as possible to the meeting, which will prove his or her value to the plan. The physician should consider such things as; length of time in practice, awards, patient letters of thanks, letters from hospital credentialing and quality committees, any articles published, etc. The physician should bring in any studies that show that certification is not the sole criteria for competence. Thusly armed, the physician should be ready to argue that (s)he should not be excluded merely for lack of certification.

Enroll the aid of patients

If the physicians patients write to their employers requesting the physician by name, the benefit manager will often listen and pass on the request to the plan director. This may encourage the plan to overlook the lack of certification.

Look to under-served areas

The physician may discuss the possibility of opening a satellite office in an under-served area in return for the waiver of the certification requirement.

Sue

As a last resort the physician may wish to bring a legal action against the plan. The physician should keep in mind that litigation of this type is expensive and time consuming. Under current Nevada law, such a lawsuit is unlikely to be successful.

LEGAL CHALLENGES POSSIBLE

Challenge for lack of hearing

California has a recent case (Potvin v. Metropolitan Life Insurance Co., 54 Cal.App.4th 936 (1997)) that suggests that the managed care plans may not dismiss a physician for arbitrary or capricious reasons. If this case remains law, it will likely act to limit a plans right to terminate without cause. However, California law is not binding on Nevada courts and Nevada cases show no indication of adopting this policy.

Challenge on unfair business practice grounds

In a case from New Hampshire, a health plan attempted to dismiss a physician for cause but was found to have based its dismissal decision on evidence which the plan had manipulated to its own advantage. When the plan realized this, it terminated the physician under its without cause clause. The court found that this practice was so egregious as to violate state policy of fair business practice. Harper, M.D. v. Healthsource New Hampshire, Inc. 674 A.2d 962 (1995). Again, this case is not binding on the Nevada courts, but it does illustrate that claims against companies using without cause provisions to terminate physicians can be successfully challenged.

Challenge for retaliation by managed care plans

Physicians who advocate appropriate care for their patients either publically or privately are protected from retaliatory measures by the offended health plan. Nevada Revised Statutes 695G.250. Violation of this statute is grounds for damages actions by the physician, and administrative discipline of the plan which may include revocation of the plans license.

What the law does not change

Although the law prevents retaliation for advocating specific care for the patient, the law does not require the plan to reimburse the physician for care which its utilization review committee has/does not approve. Also the law does not prevent the plan from conducting either peer reviews of the physicians decisions, or from the plans utilization committee from reviewing patient care decisions.

Documentation

Physicians trying to show that termination without cause is in reality retaliation for patient advocacy will fight an uphill battle because the burden of proof is on the plaintiff (physician). This burden of proof requires the physician to convince a judge and/or jury that the principal reason for the termination was in retaliation for the physicians patient advocacy. The physician must maintain scrupulous and detailed records of any interactions with the utilization review committee or the plans director regarding patient care issues to have a reasonable chance of meeting the burden of proof.

PRACTICAL SUGGESTIONS TO ATTEMPT TO AVOID A LAWSUIT

Physicians

Individual physicians should learn early to keep scrupulous records of all relevant communications with the plan. Additionally, the physician should document all oral communications as soon after the conversation takes place. This type of record keeping will help contradict charges of overutilization

IPAs and other Medical Groups

Medical groups have at least as large a need to keep good records as does the individual physician. These records will work to counter any physician generated claims that terminations are based on illegal retaliation, if the termination is in fact due to overutilization. Additionally, the group would be well advised to speak directly with a physician who is beginning to overutilize resources. By giving warnings and/or discussing the trend with the individual physician, the group may prevent a problem while at the same time laying a reasonable foundation for termination on grounds of inappropriate utilization of resources.

STATUTES AND REGULATIONS

Chapter 17