New deep pocket: managed care entity liability for alleged improper denial of access.

• Author: Robinson, William T., III
• Position: The New Perils of Health Care Law

Managed health care has grown exponentially in recent years. The for-profit tempo of changes in the managed care field and the inter-relationship of organizations and professionals providing medical care services in and through organizations have an overriding or dominant rhythm that seems, like the rhythm of the business world, to permeate all decisions. One can increasingly detect the growing resentment in the media and the public for the supposed substitution of economics and accounting for the Hippocratic oath that historically has served as the cornerstone of medical care. This has not escaped the notice of the plaintiffs' bar, which has used this theme, with varying degrees of success, in an attempt to expand traditional liability concepts. The targets have been the managed care entities.

MANAGED CARE ENTITIES

1. Vicarious Liability

   The empirical evidence suggests that managed care patients do not fare any worse than other patients and, at times, do even better. Six recent studies concluded that managed care patients generally undergo more preventive testing and examinations than patients covered by traditional indemnity insurance policies.(1) Another survey concluded that managed care plan members generally have better access to regular health care and preventive services.(2)

   Nevertheless, the public, fed by the media and physicians frustrated by new constraints under managed care, often casts a critical eye at the escalating growth of managed medical care in contemporary society. At first, plaintiffs' attorneys focused their attention on ways to impute alleged medical malpractice directly to the managed care entities, drawing on case law in which patients attempted to hold hospitals vicariously liable for the alleged negligence of emergency room physicians. In those cases, courts often looked beyond whether the physician was an employee or independent contractor. As increased competition in the health care industry spawned more advertising and promotional literature, this tended to create a widespread public perception that the hospitals themselves, as well as the treating physicians, were responsible for the care of patients.

   In Thompson v. Nason Hospital,(3) the Pennsylvania Supreme Court concluded that "the corporate hospital of today has assumed the role of a comprehensive health center" and therefore may be liable under respondeat superior, ostensible agency, or corporate negligence. Going even further, a Texas Court of Appeals in Sampson v. Baptist Memorial Hospital System imposed a nondelegable duty on hospitals for the standard of care of the hospitals' emergency room physicians, stating: "At a time when hospitals are engaged in sophisticated managed care structuring and advertising in an effort to induce patients and insurance companies to use their services, we contend that hospitals must accept the responsibility that attaches to the services it undertakes to generate revenues."(4)

   Attempts to draw on and expand vicarious liability to managed health care entities have met with varied success. An Illinois Appellate Court concluded that health maintenance organizations could not be vicariously liable for the alleged malpractice of physicians where (1) they were independent contractors, (2) the HMO did not retain the right to control professional decisions and did not advertise as having that control, and (3) there was no detrimental reliance by the plaintiff on the HMO for the quality of physician care.(5)

   But other courts have viewed the vicarious liability theory more favorably for plaintiffs. In Decker v. Saini,(6) a Michigan trial court held that a HMO could be vicariously liable not only for the alleged negligence of a member physician, but also for the alleged negligence of a non-member physician to whom the member-physician referred a plan participant. The court concluded that the plaintiff had alleged the necessary elements of ostensible agency. Similarly, in Schleier v. Kaiser Foundation Health Plan of the Mid-Atlantic States Inc.,(7) the District of Columbia Circuit held that a HMO was vicariously liable for the negligence of a consulting physician because it had some ability to control the conduct of the consulting physician brought in by a participating physician.

2. Denial of Access to Care

   The latest strategy of the plaintiffs' bar is to sue for denial of access to health care, and again it has drawn on existing case and statutory law to go after the managed care industry. In virtually every state, whether by statutory or common law, hospitals may not deny access to emergency care based on the patient's inability to pay. On the federal level, the Emergency Medical Treatment and Active Labor Act of 1986 (EMTALA), 42 U.S.C. [sections] 1395 et seq., contains much the same requirements.

   A recent case is representative of the new approach. Fleming v. HCA Health Services of Louisiana Inc.(8) involved an individual who, accompanied by a relative, went to the defendant hospital's emergency room. There was a conflict in testimony as to what happened next, but the plaintiff contended that she talked with a nurse who, discovering that the plaintiffs decedent had no insurance, money or job, referred him to another facility. The plaintiff's decedent became agitated during the lengthy wait, left the hospital, and leaped to his death from a highway overpass. A Louisiana statute requires every hospital to provide emergency services regardless of ability to pay.

   The Louisiana Court of Appeals that the defendant hospital violated the statute. The court also reviewed the hospital's advertising, which suggested that the hospital would provide the public "all the care you need," "an adult psychiatric program," "psychiatric intensive care unit" and "24-hour admissions." The hospital advised the public, "Please Call for Free Assessment." The court held that the hospital knew or should have known that the plaintiffs decedent presented...