Physician Liability and Managed Care: a Philosophical Perspective

• Publication year: 2010

Physician Liability and Managed Care: A Philosophical Perspective

Dionne Koller Fine

Introduction

Rapid and far-reaching changes in health-care delivery have reshaped the way the physician practices medicine. Often, the physician's legal and ethical obligations to provide care are in direct conflict with society's push to limit its cost.[1] On the one hand, the physician must adhere to the law and the medical profession's code of ethics, which generally dictate that the individual patient's needs should come first.[2] On the other hand, unlike the passive third-party payer of the past, managed care organizations (MCOs) seek to control health care costs by controlling physicians' utilization and provision of health care services.[3] The reality of a physician's participation with a managed care plan is that she simply must ration care.

The liability standards applied to physicians have largely remained unchanged despite the drastic change in the role of the third-party payer in the physician-patient relationship. Courts continue to rely on traditional formulations of physicians' duties in malpractice cases, and Congress and the states have focused on passing targeted legislation aimed at ensuring that MCOs' overriding interest in controlling costs does not subvert patient care.[4] The physician is caught in the middle, and this catch-22 presents a significant policy problem.

The specific policy problem grows out of this tension between the physician's legal and ethical obligations and the requirements imposed on the physician by managed health care. The problem manifests itself in two distinct ways. First, and most directly, the issue confronts the physician in the context of malpractice liability. Unlike the fee-for-service system, in which physicians enjoyed almost complete autonomy over patient care, MCOs now impose on physicians a significant amount of direct and indirect control over the way they practice medicine. This control often forces physicians to ration care. Although in many cases rationing at the bedside may result in eliminating arguably unnecessary health care, frequently it involves limiting care that may be beneficial and within the current standard of care. Such rationing subjects the physician to malpractice liability risks. Current medical malpractice law enhances this risk because the standard of care not only rejects the notion of rationing or cost-control as a defense, it also speaks frequently of the physician having a duty to resist being tainted by the pressures of managed health care and cost containment.

The second manifestation of the policy problem grows out of the first and involves physicians' vulnerability in their relationship with a managed care plan. Physicians' contracts with third-party payers have a central role in the way they practice medicine. Such contracts commonly provide that physicians who do not control costs in accordance with an MCO's cost-containment policies face deselection or termination from the plan. Such an outcome could seriously injure or even destroy physician practices.

This article examines these issues and potential solutions using a philosophical framework. Such an approach will demonstrate that significant ethical issues arise when physicians dispense managed health care within the current liability framework. The problems discussed here do not simply affect individual patients, but physicians and society at large. Such issues must not be ignored when policymakers craft health care reform initiatives.

Part I of this article describes the traditional fee-for-service model of health-care delivery and the current managed care system. Part II explains the legal framework in which physicians practice medicine. Part III of this article asserts that the law's failure to account for the change to managed care and the resulting change in the way physicians practice medicine has created a situation that is fundamentally unfair to physicians. The law holds the physician to a fee-for-service level of care, which generally rejects considerations of costs, while physicians' obligations to MCOs often require that they ration care. MCOs, with their market power and ability to set the terms of contracts with participating physicians, are able to terminate physicians who do not sufficiently contain costs, often with little notice. This section argues that the continued adherence to outdated principles of liability is deficient from a utilitarian perspective. The current legal framework does not further society's overall goal of lowering health care costs.

Finally, Part IV of this article discusses the possible solutions to this policy problem such as federal and state legislation that would impose greater liability on MCOs and leave physicians' legal obligations in place. This section evaluates proposed solutions and identifies the ethical strengths and weaknesses of each. The article concludes that the superior solution is one that relies on the profession itself to mitigate the unfairness and address the utilitarian concerns posed by the policy problem. This solution draws on existing legal rules, which give great deference to the medical profession to set its own standards in malpractice cases. The solution envisions a proactive role for the profession and suggests that such an approach is in fact morally required.

II. The Fee-for-Service and Managed Care Models

To understand the ethical implications of the physician's current role in delivering health care services, it is important to understand the fee-for-service and managed care models. Generally speaking, the fee-for-service model is based on principles of physician fidelity and patient autonomy. At its best, the model reflects the notion that every individual, at least every insured individual, is entitled to all medical care that could be beneficial, regardless of how much the care might cost.[5] Therefore, the physician's interest and patient's interest are aligned to provide as much health care as could possibly be of benefit.

The managed care model does not focus on what is best for individual patients, but instead on what is best for society. As society cannot support dramatically escalating health care costs, the managed care system draws its moral strength from its ability to control these costs and therefore ensure that health care remains affordable for the largest number of individuals. At its best, the model reflects the notion that much of the health care currently being delivered is wasteful and unnecessary. By weeding out the waste, the hope is that managed care will not only control costs, but also improve care.

A. The Fee-for-Service Model

The fee-for-service model is one where physicians are paid on a retrospective basis, and in full, for all "medically necessary" services provided to the patient.[6] Traditionally, the physician alone determined what services were medically necessary. Therefore, "physician income is directly proportional to the billing generated by services rendered to patients."[7] Third-party payers had no role in the physician-patient relationship.[8] As a result, no financial or other incentives in the model encourage physicians to limit care.[9] Significantly, critics noted that, because of the lack of any oversight over physicians, they had no incentive to consider the costs of the services they provided, and indeed, the system actually encouraged physicians to provide unnecessary or marginally beneficial care.[10] The fee-for-service model did not incorporate the view that doctors needed to or should control health-care costs.

1. Ethical Strengths and Weaknesses of the Fee-for-Service Model

The fee-for-service model is based on the ethical duty of absolute fidelity to the patient, which requires physicians to work in the interests of their patients first and foremost, even over their own personal interest.[11] Therefore, the physician's interests generally align with those of her patient. The fee-for-service system reinforced this ethic by "exclud[ing] outside influences from the doctor-patient relationship, enabling physicians to devote [their] full attention to patients."[12] Accordingly, the fee-for-service system isolated the treatment relationship from the workings of the market. Only physicians were subject to financial incentives, and the incentive was not to withhold care. It was traditionally held that physicians could counter this inducement with ethics.[13] The model draws moral strength from the egalitarian principle that individuals are entitled to the best care, regardless of its cost. At its best, the fee-for-service model honors the dignity of individuals and value of all human life because cost is generally not a consideration in determining the care that should be delivered.

However, the fee-for-service system is not without ethical weakness. The underlying assumption of the fee-for-service system is that "physicians are morally superior people."[14] In fact, the power the physician has over the patient, the nature of greater knowledge, and the ability to dictate the terms and course of treatment, provide the possibility the physician will "exploit patients' vulnerability."[15] Therefore, the fee-for-service model can encourage over-treatment, which aside from its costs, holds significant physical risks.

[I]t is a well-documented fact that the sanctity of the ideal patient-physician relationship in fee-for-service arrangements has been overestimated. Under that model, financial conflicts of interest among medical professionals also existed. However, doctors could more easily hide financially motivated behavior since their interests were often aligned with those of their patients.[16]

Perhaps the chief weakness of the fee-for-service system is that it overlooks society's need to control health care costs and instead focuses on providing individual patients with all treatment that could possibly be beneficial.[17] Because resources...