Integration of Health Care Delivery Systems: Potential Tort Liability
| Publication year | 1994 |
| Pages | 1807 |
1994, August, Pg. 1807. Integration of Health Care Delivery Systems: Potential Tort Liability
In structuring a comprehensive provider network, or "integrated delivery system" ("IDS"), providers and their attorneys must consider the expanding web of potential tort and related liabilities inherent in integration and should act to minimize that risk wherever possible. This article focuses on the potential tort and related liabilities associated with the operation of an IDS, specifically liability arising from alleged injuries to persons receiving health care services pursuant to an agreement between the IDS and a payor.
It is currently impossible to predict the shape legislative reform of the nation's health care system will ultimately take. However, it is clear such reform will require health care providers, including hospitals, health care service facilities, physicians and other service providers (collectively, "providers"), to prepare for further reductions in overall payment, increased pressure from health care purchasers to accept managed-care payment arrangements using capitation and other risk-sharing formulae, and increased regulation of the financing and structure of the health care delivery system. In addition, providers must expect a continued shift in emphasis from impatient to primary or preventive care, an increased focus on cost-effective care provided in appropriate care settings, and a demand for accountability for the quality and value of health care service in the form of outcomes data and other information.
As the debate over legislative health care reform continues, many industry "players" are taking a proactive stance to position themselves for success (they hope) in a post-reform world. To meet the challenge posed by managed competition to offer cost-efficient, high-quality, appropriate health care services to the communities they serve, providers are forming strategic alliances, including IDSs, through which providers will offer a complete package of health care and related services to health care purchasers, including third-party payors, self-insured employers and the government (collectively, "payors").
The IDS concept requires industry players to take on roles and functions they have not traditionally undertaken. For example, in addition to traditional medical services, an IDS may provide a variety of managed care functions and administrative services, including peer review, utilization review ("UR") and quality assurance programs, as well as claims management services in connection with a managed care health benefit plan ("plan") designed and marketed by the IDS itself, a third party or the payor. As a result, traditional tort doctrines and theories of liability are being stretched and molded by the courts as they struggle to assess and appropriately allocate responsibility associated with negligent delivery, management and denial of health care services in a managed care context.(fn1)
No two IDSs will be organized and operated in precisely the same manner. Accordingly, tort liability concerns will vary, depending on a particular IDS's organizational structure (highly integrated "single entity" model or partially integrated "multiple entity" model), the specific functions it takes on (limited versus full range of managed care services), and the degree to which the IDS designs and markets its own plan and contracts directly with payors.
In general, however, liability risks can be divided into three areas: (1) liability associated with malpractice of IDS providers, (2) liability arising from the management of care, particularly cost control systems, and (3) liability arising from managed care plan contracts. There are
several legal theories on which such IDS liability could rest. Certain legal theories would impose "indirect" liability on an IDS based on its relationship to plan providers or UR personnel. Other legal theories would impose "direct" liability on an IDS for its role in influencing medical decisions affecting plan beneficiaries.
An IDS may be subject to indirect liability based on various theories of vicarious liability. For example, under the doctrine of respondeat superior, an employer may be held vicariously liable for the negligent acts of its employees and other agents acting within the scope of their employment or engagement. Thus, a highly integrated network that owns or controls its service facilities and directly employs its physicians and other health care providers risks broad exposure to liability for the negligent acts of its provider employees.
In Colorado, the corporate practice of medicine doctrine has, with certain exceptions, prohibited the employment of physicians and other licensed medical providers by a corporation other than a professional association. Recent state legislation has begun to erode this prohibition,(fn2) and it is likely that federal health reform will further dismantle the doctrine. As IDSs in Colorado have an increasing ability to employ health professionals directly, it is likely that claims based on a theory of respondeat superior also will increase.
Generally, vicarious liability has not extended to situations involving independent contractors. However, many courts have found "independent contractor physicians" to be agents of hospitals and HMOs and have imposed vicarious liability on the hospitals and HMOs for the negligent acts of these physician-agents.(fn3) Plaintiffs have succeeded on an agency theory in three basic situations: (1) when a hospital or HMO exerts direct control over the patient's choice of physician or the physician's method of practice,(fn4) (2) where the hospital or HMO makes "salary-like" payments to a physician(fn5) and (3) based on an "apparent agency" theory,(fn6) which relies on the finding that a patient reasonably believed that the services provided by a physician were provided as an agent of the hospital or HMO, usually because the hospital or HMO "held out" the physician as its agent.(fn7)
Vicarious liability through agency principles could similarly be applied to an IDS, depending on the extent of the IDS's control over a plan beneficiary's choice of provider, the kind of controls placed by the IDS on provider referrals and other methods of practice, the method by which the IDS pays for provider services and, perhaps most importantly, the manner by which the IDS promotes its plan to payors and plan beneficiaries.
The corporate negligence theory imposes direct liability on an entity for the negligent acts of individuals (such as physicians and UR personnel) over whom the entity exerts some control. In the health care context, this theory of liability is typically applied in cases involving hospitals and their staff physicians(fn8) or HMOs and their staff or contract physicians.(fn9) In these cases, courts have found that hospitals and HMOs have an independent duty to their patients to investigate adequately and review the competence of staff physicians and panel providers. This theory of liability is often based on a public policy observation that hospitals and HMOs are in a much better position than their patients to supervise a provider's performance and provide overall quality control. This policy would apply equally to an IDS.
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