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© 1997 American Association of Health Plans. All rights reserved.

by Thomas G. Goddard, JD, MA

Topics do not get any hotter than the quality of health care delivered in a managed care environment. Within that domain, there is nothing more topical than the legal issues relating to the quality of care under managed care.

Doubters can glance at this short sampling of issues: If an HMO does not cover care recommended by a doctor, should it be liable for the patient’s injuries? Are there legal incentives for an HMO to not collect data on quality of care? If the structure of an HMO’s network means that a member drives many miles to a facility rather than to an emergency room two miles away, is the HMO liable under federal fraud and abuse laws? Can an HMO so powerfully incentivize its providers that it violates federal fraud statutes? Should legislators decree specific clinical protocols, such as minimum lengths of inpatient stays or required diagnostic tests?

In the second volume of Faulkner & Gray’s Quality in Managed Care Series, Alice Gosfield’s Guide to Key Legal Issues in Managed Care Quality has touched a raw nerve. Legislative hearings do not get more emotional than those in which the issues that make up Gosfield’s book are the topic. Voices rise, arms wave, faces redden, and tears flow when law, policy, health care, and managed care are on a committee’s agenda. There is no question the topic is ripe.

Neither is there a question about the pedigree of the author. Gosfield is among the most articulate health lawyers in the nation, a must-see on the health law lecture circuit, particularly if you are lucky enough to catch her in a debate format. She has spent the last 24 years ranging from the micro-level of provider contracting to the macro-level of the National Academy of Sciences, the National Committee for Quality Assurance, and the presidency of the National Health Lawyers Association. All that remains, then, is whether the book is useful, and, if so, for whom? The introductory chapter tells us that the book is intended to serve as a focused guide, primarily for non-lawyers, to the essential features of the law directly influencing quality in managed care programs. Its reach may indeed be even broader.

The book’s opening chapter seeks to level the reader’s playing field by combining Managed Care 101 with primers in health care quality and the American legal system. Veterans of the health plan arena need only skim the managed care review, but should slow down for the sections on quality and law. This reviewer would have preferred a more thorough taxonomy of the varied indicia of quality than Gosfield provided in her haste to get to the legal issues.

However, she is particularly good in noting some of the more strained definitions of quality.

For example, some providers argue that the selective nature of the provider network itself is an impingement on quality. Physicians who aren’t part of a health plan’s network often charge that disruption of their longstanding relationships with patients who join that plan is poor quality. In contrast, it is the selective nature of the network that plans tout as a quality enhancement. Evaluating the credentials of providers who work for a health plan is a fundamental safeguard of quality.

As one might imagine, however, the meat of this nine-course meal is much more formidable than the appetizer. Chapter 2 launches directly into the issue that physicians, trial lawyers, and HMO general counsels are talking about most: "Who’s Responsible? Liability in Managed Care Caselaw." Gosfield does an artful job of outlining the major theories of plan liability – respondeat superior, corporate negligence, and ostensible agency – as well as those activities of plans that can create liability. The value of this section cannot be overstated. While it will not replace the analysis of corporate counsel, it will be of great value to the non-lawyers running the plan to understand just what the general counsel is telling them.

For too long, despite the warnings of health lawyers, plan executives have assumed that the federal Employee Retirement Income Security Act (ERISA) would protect health plans from any and all tort liability. This book is sufficiently timely to acknowledge recent legal developments that should disabuse any health plan executive of this dated notion.

The chapters on federal quality controls sort out the various sources of federal oversight of health plan quality, particularly the federal HMO Act, federal laws governing Medicare and Medicaid, and federal fraud and abuse laws. This is no dry recitation of federal law, however, but a critical analysis of the impact of the federal regulatory environment on health plan quality. Of particular interest is contributor Robert Roth’s exploration of new notions of fraud prosecution as developed by federal prosecutor Jim Sheehan. Health plan executives should be aware of his view of federal fraud laws as applied to medical necessity, marketing techniques, and enrollment practices.

Also of particular utility is Gosfield’s timely treatment of the Health Care Financing Administration’s new regulation on physician incentive plans (PIP). These regulations require disclosure of plans’ physician incentive mechanisms, and require that plans take certain actions if those systems place physicians at substantial financial risk. Gosfield’s treatment of the PIP regulations, the subject of the liveliest recent discussions among health lawyers, is about as deep as one dare go in explaining this technical issue to the lay reader.

The section of the book that explains the various external accreditation programs is a useful, if brief, synopsis. Again, the book’s timeliness shows up in its reporting of the development of the American Accreditation HealthCare Commission’s (formerly Utilization Review and Accreditation Commission) new network accreditation program and recent trends toward linking accreditation status with regulatory requirements.

Contributor Roth takes up the spicier issue of the growing tendency of state legislatures to use the issue of quality as a hammer against health plans’ most basic management tools. Roth has the substantive advantage of having served in both the administrative and legislative branches of the government of Maryland, a hotbed of anti-managed care legislation over the last several years.

Refreshingly, he is clear-eyed enough to distinguish those efforts he believes are truly rooted in quality concerns – whether valid or not – from those based in the economic motives of other stakeholders in the health care system. He is also savvy enough to note the movement from early, coarse efforts to advantage provider groups with any willing provider laws to the more refined efforts in the second generation of anti-managed care laws. In this latter category he includes mandated point-of-service offerings, disclosure of physician incentives, elimination of so-called "gag clauses," and bills targeting plans’ utilization review practices.

It is surprising that any book could make it to print fast enough to capture the fast-changing scenery in the state legislatures without being hopelessly out of date. The only failing of this chapter is that it tends to overlook the increasingly important role that the National Association of Insurance Commissioners is playing in the development of both health plan standards and mechanisms for the regulation of new risk-bearing health care entities.

I found myself particularly interested in the chapter entitled "What’s the Deal? Contractual Terms Aimed at Quality Control and Risk Management." As Gosfield points out, the basic legal relationship between providers and health plans is set forth in the provider contract, which makes provider/health plan contracts the agreements with the greatest potential impact on quality. The breadth of Gosfield’s understanding shines through in her discussion of such contractual issues as credentialing, peer review, access and availability, medical management system compliance, payment for quality performance, and access to information. As she does throughout the book, Gosfield pays extra attention to the most timely aspects of the issue: so-called gag clauses and without-cause termination clauses.

It is a good thing that this book is interesting and accessible. If it were a tougher read, few people would get to Gosfield’s treatment of medical guidelines and the quantification of quality. That would be a pity, because this is a very important and poorly understood aspect of this subject. Not only does she address the more obvious intersections between law and quality, such as performance measures and report cards, but she also explains less understood subjects such as whether the use of clinical practice guidelines raises or lowers the risk of health plan liability.

In the final chapter, Gosfield becomes Nostradamus and casts her eyes to the next century. As one would hope for in such a chapter, Gosfield unleashes sharp critiques against nearly every player in the health system.

Her targets include the health plan industry, federal and state legislators and regulators, the employer-based American health system itself, and purchasers of health coverage. Health plan executives ignore Gosfield’s admonitions about responsibility at their own risk: "As I say to my teenage son as well as to managed care industry groups when I speak to them, adolescence means taking responsibility. Until fairly recently, the resistance of these organizations to step up to the plate in responding to care gone wrong has been, to me at least, surprising," says Gosfield.

"If health plans are about managing care, their core purpose is to change clinical behavior to a new model. If this management is supposed to produce altered behavior, then the way in which the management is exercised and the behavior it engenders seems to me ineluctably the responsibility of those who are selling their product as a new and better mousetrap."

These are not words of comfort. Yet, they are not words to ignore. Indeed, along with the rest of the book, they are must-read words for CEOs, COOs, CFOs, medical directors, and even for plan lawyers, regardless of their experience.