Changes in the delivery of health care are inevitable and are being brought about by medical spending unacceptable to payors and the public. Industry and government demands for cost containment are precipitating a transformation of the medical environment from one characterized by unlimited budgets, fee-for-service reimbursement, and free choice to one of global budgets, prepayment, and substantial limits placed on patients' and physicians' choices. Such a transformation will increase liability risks for practicing pediatricians.
This article provides information that may be helpful for pediatricians practicing in a managed care environment. It begins by discussing why uncontrolled spending is promoting a transition to managed care and how managed care systems seek to influence physician behavior. In addition, information is presented concerning health maintenance organization (HMO) contract language that may place pediatricians at increased risk and how plan incentives may affect practice and relationships with patients and colleagues in ways that promote malpractice claiming.
Since 1947, inflation in medicine as measured by the consumer price index (CPI) has exceeded the rate of inflation in the general economy.1 The net effect has been a steady increase in the proportion of our national productivity directed toward paying the health-care bill. In I960, the United States had a gross domestic product (GDP) of $513 billion, of which $27.1 billion (6% of total) was directed to health care. By 1993, the bill reached $884 billion or 13.9% of the GDP.2 Estimates suggest that medical spending may exceed 18% of the GDP by the year 2000.2
Coupled with increasing per capita expenditures for health has been a fundamental change in who is directly responsible for paying the bill.1 In 1929, the average American spent about $26 per year on health, of which 88% came directly from his or her pocket. By 1993, costs exceeded $2,900 per person per year with 80% paid for directly by someone else, government (federal and state, 43.1% of total), business and industry (33%), or charitable and philanthropic sources (3.8%).
Growth in medical spending has created problems for those who pay the bill. Payments for health care have played a role in Congress's inability to balance a budget. Federal expenditures for health increased from $2.9 billion (3.1% of total) in 1960 to 18.6% of a $1.5 trillion 1993 federal budget.3 Even more alarming are projections that, based on the aging of the population, spending on health may exceed 37% of the federal budget by Z040.2 Only once in our history ( 1942-1945) have we spent such a large percentage of the federal budget on a single program.
Expansion of Medicaid eligibility in the late 1980s created budget crises for states as well.4 Unlike the federal government, which can print and borrow money, most states are, by their own constitution, required to balance their budgets. In Tennessee, Medicaid expenditures rose from $902 million in 1987 to almost $2 billion by 1991.4 Even though two thirds of Tennessee's Medicaid dollars come from federal sources, required state contributions threatened to break the state's budget. To cover the impending budget deficit, the governor was faced with a number of unpleasant alternatives, including instituting a state income tax, reducing plan benefits, or reducing eligibility- Instead, he opted to create a statewide managed Medicaid program: TennCare.4
Business leaders also are facing health cost-related problems. Falling profit margins, work stoppages, and declining international competitiveness often are traced to the cost of paying for the health care of employees and their dependents.1 In 1991, employers, through third-party intermediaries, spent more than $277 billion on health.3 Over the past decade, the health cost for auto manufacturers' employees have exceeded the costs of all metals purchased to manufacture cars and the size of dividends paid to stockholders. The "hidden health-care tax" assessed on each automobile produced has posed a serious threat to an industry with international competitors who can produce models for less due to lower per capita health spending and alternative methods of financing medicine.
As influential Americans recognized that health costs were affecting budgets, profits, and competitiveness, a powerful coalition of government, business, and industry leaders emerged demanding an end to uncontrolled spending. Because this group is most directly responsible for paying the bill, physicians and other health professionals are going to witness a fundamental revolution in the US health delivery system.
MANAGED CARE WILL PROMOTE CHANGE
Managed care represents a system integrating both the financing and delivery of care. Defining a precise topology for variations on the managed care theme is difficult, but by and large, most plans embody several features that influence how care is delivered.
First, resources are finite. This may represent the single most powerful force for change. In a market characterized by indemnity coverage and fee-for-service reimbursement, patients seek care whenever and wherever they choose, physicians submit bills, and no one really knows what will be spent until after the fact. In managed care, budgets for various services are prospectively determined, and providers of care, whether generalists, specialists, or hospitals, are expected and required to live within spending limits.
Living within a fixed budget is encouraged by "risk contracting." Risk contracting is intended to deflect financial risia from the purchaser of care (government and business) to someone else, generally a medical care organization. Medical care organizations accept risk for cost overruns based on the belief that they can provide services to a managed population for fewer dollars than the payments received. They in turn seek to spread risk to others: physician groups and hospitals. Physicians and hospitals worried about competition and excess bed capacity frequently are willing to accept risks to protect or acquire market share.
After accepting "risk," most physician groups encourage individual providers to think about costs by linking payments with performance. Methods used include periodic performance evaluations, group discipline, and creation of risk pools and incentives to reward cost-cutting behaviors. Primary physicians may be offered a stake in downstream cost reduction. In such a model, physicians receive a monthly payment for each enrolled patient, as well as a share of specialty and hospital savings. Such features promote change in practice behavior, but also may create misunderstandings among generalists, specialists, and patients.5 The implications of this potential conflict will be discussed later.
Finally, patients lose free choice and have their care "managed" by a primary "gatekeeper." The ability to identify a "gatekeeper" for each patient allows plans to ensure accountability from the individual physician. Regulation often occurs through an authorization process for care outside the primary physician's office. In addition, patients may face significant financial penalties if they use physicians and hospitals who are not members of their health plan.
In theory, managed care encourages cost containment through the promotion of health and use of only che most appropriate and necessary services. Many argue that such a system provides incentive to skimp on services, although the desire to maintain large patient panels and fear of litigation may prevent flagrant abuses.6 Overall, managed systems provide a clear message to physicians. Resources are finite, and as gatekeepers, physicians will be held accountable for the care their patients receive and the financial integrity of the health plan.
Using premiums in the 1980s as a proxy for cost, medical care organizations experienced a rate of "inflation" for their patients only one half of that experienced by patients with conventional coverage and feefor-service physicians.7 Reasons included lower hospital admission rates,8-9 shorter lengths of stay,8 and reduced use of procedures, tests, and treatments.10 As a result, government, business, and industry leaders are likely to continue turning to the managed care option when selecting health plans for employees and recipients of government financed care.
CONTRACT LANGUAGE AND MALPRACTICE RISK
Within the managed environment, new or heightened liability concerns will arise. Many relate to contract language defining plan indemnification, changes in practice standards, constraints imposed on referral decisions, and gag clauses. Other contract-related concerns relate to heightened physician responsibilities for care coordination and patient advocacy.
Before providing care for patients enrolled in a medical care organization, physicians should obtain and carefully review all contracts. In many cases, it is wise to seek professional help. Contract review is a part of the negotiation process. Health maintenance organizations need pediatricians and may be flexible concerning the size of payments, services included under the primary cap, and certain aspects of contract language.
One provision included in most contracts is the "hold harmless" or "indemnification clause." Such language requires physicians to defend and hold a medical care organization harmless from all liability arising out of the care of enrolled patients. In the event of a suit, the primary pediatrician might be obligated at his or her own expense (or the expense of his or her malpractice carrier) to retain a lawyer to defend him- or herself and the plan, and cover all losses arising from the claim. Some malpractice carriers exclude such risk from coverage and defense. Pediatricians should determine whether their carrier will accept this contractually assumed liability. If not, they should seek to negotiate away such a provision, encourage their malpractice carrier to expand protection, find another malpractice carrier, or refuse the HMO contract.
Physicians should be alert to language that might be interpreted as imposing a practice standard other than the applicable legal one. Some contracts refer to the physician's responsibility to deliver "the most economical" or "highest quality care." The meaning of these phrases is not clear, and questions remain about whose interpretation will control. Physicians have a duty to deliver care consistent with that expected of a reasonable physician, which in some states may vary depending on locality and specialty. Almost nothing will allow the physician to deliver care that falls below the standard as new contracts with patients that purport to permit their physician to deliver substandard care generally are not enforceable. Physicians should also resist language that adds more responsibilities than they already have. The physician should seek to substitute language that refers only to the applicable legal standard.
Contracts often include lists of services that the plan expects the generalist to provide. Physicians should examine these lists and assess whether they have the skills to perform each task or whether the list includes items beyond the scope of their training and experience. If pediatricians believe they do not have adequate skills, several steps should be taken. First, they should specify to representatives of the plan which tasks they are unable to perform. In such cases, the medical care organization may choose not to contract with the physician or may choose to adjust the size of the capitation payments. In some circumstances, plans may pay for these services out of specialty payment accounts if arrangements can be negotiated up front. Physicians should remember that they can always seek to add skills through appropriate continuing medical education programs or apprenticeships with colleagues.
Some physicians may be induced by subtle and not so subtle incentives to provide services beyond the scope of their ability. Although patient need is generally the single greatest predictor of physician decisionmaking, financial incentives may exert powerful pressures to alter practice behavior including decisions to refer. Generalists may evaluate and manage problems formerly referred to specialty colleagues, and specialty physicians may see patients outside of their expertise. Physicians are remarkably unaware of the impact of such economic incentives on their actions.11 Pediatricians should recognize when they are uncomfortable and need to seek help. In addition, they should examine cases with less than optimal outcomes seeking to identify factors including financial incentives that may have contributed to the results. In the case of the specialty physician seeing patients outside the scope of his routine practice, both the specialist and the referring physician may be at risk in the event of an adverse outcome. The specialist may be found liable for deviation from the standard of care, and the primary physician for allegation of a negligent referral.
Patient care coordination in the managed care environment poses new problems. Many medical care organizations require physician gatekeepers to be intimately involved in coordinating all aspects of care delivery. Primary care physicians assume heightened responsibilities in such circumstances. Medical care organizations provide coverage for emergencies, but families, emergency department physicians, and medical care organization reviewers often differ in their definition of what constitutes an emergency. To minimize the risk that patients will be asked to bear the cost of care later deemed nonemergent, primary physicians are often asked to assist in tnaging patients who present for care to the emergency department. Pediatricians who have a long-term relationship with patients are well situated to perform this function, but this gatekeeping requires 24-hour accessibility and careful follow-up to ensure that patients receive appropriate care without undue hassles.
General pediatricians serving as care coordinators must assess all recommendations made by consultants and act to approve and schedule recommended services, or document why a specific recommendation was not followed. General pediatricians may be held responsible for outcomes when patients get "lost" between their offices and specialists. Pediatricians should examine their office structure to be sure that they have adequate information systems to support their roles as case managers including the ability to track outcomes of patient referrals. In addition, they must ask whether they have personnel who can efficiently process requests for care. In the end, some pediatricians may find themselves unable to serve as patient care coordinators.
Physicians always have a responsibility to advocate for their patients' needs. This responsibility is heightened in a managed care environment. Primary or specialty physicians may recommend services only to discover that the HMO medical affairs office has denied authorization, stating or implying that services are unnecessary or represent noncovered benefits. If physicians believe that prescribed services fall within the community standard, they have a clearly defined legal responsibility to advocate. Advocacy includes understanding all procedures for appealing disputed decisions and documenting compliance with this process in the patient's medical record. Physicians must know how to package appeals and access medical care organizations' medical directors. In circumstances where appeals are denied and where state law directs, pediatricians should know how to request arbitration. Some plans enlist physicians who are not plan employees to review disputed decisions and provide recommendations concerning needed care. In some states, these decisions are binding on the medical care organization.
Although this process is burdensome, case law obligates the physician to advocate for patients in dealing with utilization constraints or coverage limitations. Analysis of the decision in Wicldme v State of California provides guidance regarding the legal requirements for advocacy.11 Lois Wickline was diagnosed with arteriosclerosis obliterane with occlusion of the abdominal aorta. She required a bypass graft. Postoperatively, Ms Wickline developed complications and required a thrombectomy and lumbar sympathectomy. Based on need for additional surgery, the treating physician requested a continued hospital stay of 8 additional days. Ms Wickline's HMO denied the request and authorized only 4 more days at which time she was discharged. Following discharge, Ms Wickline developed gangrene and required amputation of her right leg.
Ms Wickline filed suit against Medi -Cal, the thirdparty carrier, alleging that her early discharge resulted in the amputation. She did not file a claim against any of her treating physicians. The jury rendered a verdict against Medi-Cai. The verdict was overturned, however, because her insurer was able to convince the California Court of Appeals that it was the physician, and not the plan, who discharged the patient. Although no recovery was possible from her treating physicians, the court offered the following observation, "The physician who complies without protest with the limitations imposed by a third-party payer, when his medical judgment dictates otherwise, cannot avoid ultimate responsibility fot his patient's care."1 ' Although this statement was dictum and so is not a binding legal authority, the message is clear. Physicians who deliver inadequate care are likely to have a difficult time attempting to transfer responsibility to someone else.
Physicians also have the duty to share plan decisions with patients/parents, as well as to suggest alternative treatments if available. Patients should be provided, where permitted by law, with the option of paying for services directly or be assisted in identifying alternative funding sources. When patients choose not to obtain the prescribed services, their informed refusals should be documented in the medical record.
Pediatricians should review contracts for clauses that might affect what they can say. Paraphrased examples include: "do not discuss proposed treatments with plan members prior to receiving authorization"; "physicians shall take no action nor make any communication which could undermine the confidence of enrollees, employers, or the public in the quality of care which enrollees receive." Such clauses should be struck through and initialed. Pediatricians should be wary of HMOs that attempt to curtail any aspect of parent-physician communication. Not only is communication the most important predictor of good rapport, lack of full disclosure may prevent a family from making an informed decision. In the event of an adverse outcome, the resulting award against the physician could be substantial and include punitive damages if the jury decides that the treating physician withheld information in bad faith in response to plan directives or financial incentives.
A comment concerning physician reimbursement is in order. In a fee-for-service market, the public understands how physicians are paid- Incentives in fee for service tend to promote the delivery of services, and physicians are not penalized for obtaining tests or prescribing treatments. In such a system, patients have little reason to fear that physicians might skimp on care. The public is concerned, however, that in a "managed" environment, incentives designed to reduce cost might lead some providers to withhold therapy that might make a difference. Such fear places the physician and the medical care organization at heightened risk. In the event of an adverse outcome, families may believe that some procedure was not performed just to save money.12 In these circumstances, families may be more likely to file and juries more likely to seek to teach a lesson.
Perhaps an example of such "teaching" is the case of Adams v the Kaiser Health Plan of Georgia. James Don Adams, III, a 6-month-old infant with fever, was taken to his regular pediatrician, a member of the Kaiser Network. His physician diagnosed an upper respiratory infection and recommended symptomatic treatment only. The next day, the child's condition deteriorated. His mother telephoned an emergency line staffed by Kaiser nurses. She reported that James had a fever of 104°, vomiting, panting respirations, and seemed groggy. The nurse who received the call contacted the on-call pediatrician and then recommended that James be taken to a regional children's hospital 42 miles from the family's home. An hour later, the family departed for the hospital. After traveling 30 miles, the child experienced a cardiorespiratory arrest. The family pulled off the interstate and proceeded to a community hospital where the child was resuscitated. Within another hour, the child was being transferred to the regional children's hospital. James was diagnosed with meningococcemia and, as a result of ischemie necrosis, required amputation of both hands and feet. He did not, however, experience any neurodevelopmental sequelae.
The Adams suit only named the Kaiser Plan of Georgia. Their claim alleged that the phone call was mishandled by Kaiser employees. At trial, the plaintiff's counsel portrayed Kaiser as being primarily in the business of making money. They introduced evidence of a contract between Kaiser and the children's medical center in which the latter provided discounted charges. By implication, the plaintiff contended that the reason the patient was referred to the children's facility and not to a closer hospital was for cost saving alone. The question of causation centered on whether a 30 to 60 minute delay in receiving medical care "caused" the amputations. The jury awarded the family $45 million.
Families should be educated about the cost reduction goals of medical care organizations and their methods of physician reimbursement. The American Medical Association has declared that:
Physicians must disclose any financial inducements or contractual agreements that may tend to limit the diagnostic and therapeutic alternatives that are offered to patients or restrict referral or treatment options. Physicians may satisfy their disclosure obligations by assuring that the managed care plan [author's emphasis] makes adequate disclosure to patients enrolled in the plan.13
Furthermore, primary pediatricians should think long and hard about their willingness to participate in plans offering large potential payments from hospital or specialty risk pools for cost savings. Many of these plans substantially increase the work load of physicians and office staff, and compensation fot such effort may seem justified. However, even the slightest impression that a physician has withheld treatment to make money will be exceedingly detrimental to the defense in the case of an adverse outcome. Pediatricians might be well advised to negotiate payments that are not so dependent on "bonus dollars."
CHANGES IN RELATIONSHIPS MAY PROMOTE LITIGATION
In addition to risks posed by contract language, changes in relationships brought about by managed care are likely to increase overall malpractice claiming as well. To understand why, it is important to review what is known about families' decisions to file suit.
Studies of malpractice claiming revealed that the quality of the patient (or family)/physician relationship influences many decisions to file suit.14'16 Physicians who are perceived to be interested in their patients and who are willing to communicate are much less likely to be sued than clinicians who are perceived to be unconcerned, rushed, and rude.
The extent to which good relationships protect against litigation is suggested by studies that examine the incidence of medical negligence and resultant litigation.17,18 Extensive chart review studies suggest that approximately 1 % of all inpatient stays are associated with adverse outcomes caused by deviations from the standards of care. Only 4% to 6% of injured patients, however, currently file malpractice claims. Of course, decisions about filing are complex and relate to a multitude of factors other than just bad outcomes and poor patient/physician rapport. Some families whose children experience a medical injury never become suspicious that the outcome was caused by medical neglect. Other families might like to file, but are unable to identify attorneys who will take their claims, perhaps because of attorneys' fear that potential financial recoveries will be modest at best. On the other hand, some families are just "lumpers," that is, they experience bad outcomes but simply walk away without taking action.13 Yet studies seeking to determine why litigation risk varies so among physicians reveal that doctors who never attract a claim are far more likely than high malpractice risk clinicians to be viewed as concerned, nonrushed, and willing to communicate, especially in the face of an adverse outcome-14
Since many decisions are related to the quality of relationships, the question is how will transition to managed care affect patient/physician rapport and as a result, risk of litigation? Many features of the changing medical market will negatively impact rapport. Redirection of patients from existing providers to new ones, restrictions on the ability to change primary physicians, especially in the face of a dispute, limitations placed on access to specialty physicians, and the required authorization process are all likely to have a negative affect. A greater concern, however, is that patients and society in genetal will view the change in the physician's role from "advocacy" to "advocacy and allocation" in a negative light. Will physicians who fail to acquiesce to patient demand be viewed by families as having done so based solely on sound medical judgment or based on the desire to save/make money?
A possibly greater influence on the incidence of litigation is the potential for managed care plans to affect relationships among medical professionals. Studies of malpractice claims reveal how often families are prompted to file based on the declarations of "influential others" - most often members of the medical profession. Many families who have filed reveal that they had never even suspected that an outcome was related to problems with the care delivered until a subsequent treating physician told them, sometimes directly, more often through implication or body language. In a managed environment marked by a surplus of specialists and plan incentives to reduce referrals, relationships among colleagues are likely to suffer. In the worse case scenario, generalist and specialist physicians might come to see themselves as adversaries. Knowing what we know about physicians' propensity to criticize the care provided by others, it is not hard to imagine that generalists might complain to families about difficulties in working with specific consultants while the consultants might be inclined to tell patients "If only the primary physician had referred your child sooner." Such statements in the face of an adverse outcome will increase risk of litigation.
Movement to managed care will increase liability risks for practicing pediatricians. Physicians should learn to recognize contract language that may place them at increased risk for claiming. They should be careful to understand the process by which care will be delivered and must constantly strive to ensure that their practices conform with community standards. No physician should engage in a conspiracy of silence in the event of adverse outcomes, but neither should physicians rush to judgment when they lack full information. Despite all of the changes that will occur, however, physicians will still be able to protect themselves from nonmeritorious suits by providing medical care consistent with professional standards as well as by demonstrating concern for patients and families.
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