REPORT OF THE BOARD OF TRUSTEES

B of T Report 18 - I-00

Subject:	HMO Liability Policy
(Resolution 218, I-99)	

Presented by:	
D. Ted Lewers, MD, Chair	

Referred to:	
Reference Committee B	
	(David T. Hannan, MD, Chair)	

At the 1999 Interim Meeting, our AMA House of Delegates referred Resolution 218 to the Board of Trustees.  Introduced by the California delegation, the resolution asks “(1) that our AMA adopt policy reflecting the following guiding principles relating to HMO and professional liability: (a) patients should be protected from harm; (b) patients injured as a result of negligence should be fully compensated for their economic damages; (c) resources for the provision of health care services should be conserved and maximized for patient care; (d) only physicians licensed in the state in which the HMO is operating should be allowed to make medical decisions in that state; (e) the term “medical decision” is defined as a decision about the necessity, appropriateness or timeliness of care rendered to individual patients; (f) non-physician employees and/or non-physician policy-making bodies of managed care organizations should be barred from making medical decisions; (g) medical directors of managed care organizations should be physicians licensed in the state of operation and subject to the same exposure and protection of medical licensing board enforcement authority, and the same exposure to liability for medical decision-making as any other physician in that state; (2) that the AMA sponsor or support a system for the independent review of medical decisions which should be administered independently from the system’s funding source and should assure the timely provision of necessary treatment.  The decision of the independent review shall be binding on the HMO; (3) that the AMA develop model state legislation that would create, enhance, or expand administrative, civil, and criminal penalties for the unlicensed practice of medicine; (4) that the AMA recognize the right of health insurance plans to limit benefit coverage in their purchase contracts; (5) that the AMA adopt as policy that medical directors acting on behalf of health insurance plans or physician organizations are themselves engaged in the practice of medicine and as such must be licensed in their respective states; and (6) that the AMA adopt as policy that the AMA believes in principle that entities or individuals not themselves involved in nor responsible for the medical decision making process should not be held liable for the acts or omissions of licensed physicians acting within their legitimate areas of expertise.” 

The following report, which reflects the input of the Councils on Legislation and Medical Service, describes pending legislative proposals on HMO liability; summarizes the comprehensive AMA policy database on managed care and professional liability; discusses why establishing new policy at this time would conflict with extensive long-standing AMA policy and would undermine AMA efforts to promote “dual” responsibility for both managed care organizations and medical directors; and concludes that current AMA policy should be retained.

PENDING FEDERAL LEGISLATIVE PROPOSALS ON HMO LIABILITY

Congress has been considering three different approaches for promoting HMO accountability.  The first approach, embodied in the AMA-endorsed “Bipartisan Consensus Managed Care Improvement Act of 1999,” provides for a targeted removal of the Employee Retirement Income Security Act of 1974 (ERISA) preemption.  This approach would enable patients to bring state law causes of action in state courts against their health plans that have caused them injury or death through their negligent actions.  

Underlying this approach is the theory that when health plans make coverage decisions or decide whether a prescribed treatment is medically necessary, they are controlling access to health care and frequently making medical decisions.  If a plan acts negligently when fulfilling its obligations and a patient is harmed as a direct result, then the plan should be held responsible for the patient’s injuries or death.  Simply put, ERISA should not preempt state laws and prevent HMOs from being held accountable for their actions. The AMA has been wholly supportive of this concept. 

A second approach, presented in the Senate Republican “Patients’ Bill of Rights Plus Act,” would create a narrow and exception-laden federal cause of action against the plan-appointed “designated decision-maker.”  Under this bill, the injured patient or the patient’s estate could sue the designated decision-maker if he or she fails to exercise ordinary care in “approving coverage pursuant to the written determination of an independent medical reviewer” and that failure proximately causes harm to or the death of the patient.  

Supporters of this legislation reason that, since health plans are currently governed by federal law, and ERISA presently creates a limited remedy for health plan participants, albeit a wholly inadequate one, any new remedy should arise under ERISA.  Moreover, according to this theory, the alternative to allowing injured patients to sue in state courts would undercut one of the intended purposes of ERISA, that being uniform legal and regulatory requirements, and would unnecessarily expose health plans to broad legal liability.  

A recently developed third approach found in drafts of the “Bipartisan Consensus Managed Care Improvement Act of 2000,” being proposed by Reps. Charlie Norwood (R-GA) and John Dingell (D-MI), would create a bifurcated state/federal cause of action for injured patients.  This hybrid approach would allow patients to bring a federal cause of action against their health plans for injuries resulting from negligent denials of or improper delays in authorizing covered benefits.  If the plan’s decision involves the evaluation of medical facts or turns on whether the proposed treatment is medically necessary or appropriate or whether it is experimental or investigational in nature, then the injured patient or the patient’s estate could bring a cause of action in state court.  

Supporters of this latter approach feel that it appropriately balances the concerns and interests of those who endorse the two alternative approaches.  For example, when the practice of medicine is implicated, the injured patient may bring a suit under state law, which has historically regulated the practice of medicine.  Under all other circumstances, which would typically involve challenges to the administration of benefits under the plan documents, the injured patient would be restricted to a federal cause of action with more limited remedies.  This approach, according to its supporters, would keep a “lid” on plan liability while appropriately segregating state and federal causes of action according to the plans’ misconduct.  Moreover, it preserves the states’ right to regulate the practice of medicine while promoting uniformity in the administration of employee benefits under ERISA.
As the 106th Congress was coming to a close, advocates of managed care reform recognized that a compromise needed to be reached on HMO liability for a bill to be passed.  At the time this report was written, proponents of the bipartisan House approach, which would allow for a targeted removal of ERISA preemption, had been unable to win a majority of supporters in the Senate.  To attract some of the supporters of the federal cause of action approach, they proposed the state-federal bifurcated approach.  With little time left when this report was being composed, this latter approach appeared to be the most viable.  

AMA POLICY AND RESOLUTION 218 (I-99)

Our AMA has extensive policy addressing all aspects of HMO and professional liability.  Moreover, the AMA several policies which already reflect the “guiding principles” sought in the first section of Resolution 218.  One of the guiding principles of medicine, for instance, remains, “do no harm.”  A corollary, stated in various ways throughout AMA policy, states that patients should be protected from harm.  Whether the context involves treating a patient for drug abuse (Policies H-95.954 and H-95.956, AMA Policy Database), obtaining the patient’s informed consent (Policy H-140.989), ensuring patient access to emergency services (Policy H-130.970), protecting patients from potential imminent harm if a physician is impaired (Policy H-275.940), or a patient is being treated in a nursing home (Policy H-280.961), AMA policy already clearly and extensively states that patients should be protected from harm.

Similarly, our AMA has numerous policies supporting the concept that patients injured as a result of negligence should be fully compensated for their economic damages.  One of the current impediments to fulfilling this principle, however, is the preemption provision of ERISA.  ERISA presently prevents injured patients from recovering from health plans operating under ERISA.  The AMA’s policy on ERISA, articulated in a variety of ways throughout the policy database, states that the AMA will seek, through amendment of the ERISA statute, through enactment of separate federal patient protection legislation, through enactment of similar state patient protection legislation that is uniform across states, and through targeted elimination of the ERISA preemption of self-insured health benefits plans from state regulation, to require that such self-insured plans be legally accountable for harm to patients resulting from negligent utilization management policies or patient treatment decisions through all available means, including proportionate or comparative liability, depending on state liability rules. (Policy H-165.883)  Policy H-285.998 further indicates that all health plans utilizing managed care techniques should be subject to legal action for any harm incurred by the patient resulting from application of such techniques.  The AMA clearly supports compensating patients appropriately for their economic damages.

Further, our AMA believes that the resources for the provision of health care services should be conserved and maximized for patient care.  Policy H-155.998 clearly states that physicians should be cost conscious and should exercise discretion, consistent with good medical care, in determining the medical necessity for hospitalization and the specific treatment, tests and ancillary medical services to be provided a patient.  Recognizing the potential scarcity of health care services for patients, the AMA has further expressed support in Policy H-165.940(3) for the allocation of health services through a decentralized working of the market, coupled with incentives for effective individual choices, as the preferred alternative to centralized prioritization of services or decisions about coverage for such services.  Policy H-370.982 notes that when difficult decisions have to be made regarding the allocation of organs and other scarce medical resources, the AMA believes that only ethically appropriate criteria relating to medical need should be considered, that the allocation procedures should be disclosed to the public, and physicians should continue looking for innovative ways to increase the availability of and access to scarce medical resources, so that, as much as possible, beneficial treatments can be provided to all who need them.
Resolution 218 also seeks to narrowly define the term “medical decision” as a “decision about the necessity, appropriateness or timeliness of care rendered to individual patients.”  Defining this integral term in such a narrow fashion is a cause for concern as it will create conflict in current AMA policy and advocacy efforts.  Notably, our AMA already has established a definition of medical necessity (Policy H-320.953).  In addition, the resolution seeks to identify several requirements for those who make medical decisions on behalf of managed care organizations.  According to the resolution, non-physicians, for instance, should be barred from making medical decisions, which should be reserved only for physicians licensed in the state in which the HMO is operating.  Medical directors should be physicians licensed in the state of operation and subject to the same exposure and protection of medical licensing board enforcement authority and the same exposure to liability as any other physician in that state.  

The resolution further states that medical directors should be considered as engaging in the practice of medicine.  Current AMA policy, such as Policy H-285.939, directs the AMA to seek legislation that would subject medical directors of managed care organizations to state medical licensing requirements, state medical board review, and disciplinary actions, and that would ensure that medical directors of insurance entities be held accountable and liable for medical decisions regarding contractually covered medical services.  Further, in Policy H-285.987, the AMA maintains as guidelines for medical director qualifications principles that medical directors be physicians who hold an unlimited current license to practice medicine in one of the states served by the managed care organization, and that meet credentialing requirements equivalent to those met by plan providers.  Implicit in these current policies is the belief that medical directors are in fact engaging in the practice of medicine.

To prevent non-physicians from being able to make medical decisions, Resolution 218 asks the AMA to develop model state legislation that would create, enhance, or expand administrative, civil and criminal penalties for the unlicensed practice of medicine.  Current AMA policy already adequately expresses the salient provisions of this request.  Policy H-275.986 expressly states that the AMA opposes the enactment of new legislation which would authorize the independent practice of medicine by individuals who are not licensed to practice medicine and surgery in all of its branches; and supports the enactment of amendments to restrict current statutes which authorize the independent practice of medicine by individuals who are not licensed to practice medicine and surgery in all of its branches.  

In addition, Resolution 218 proposes that the AMA recognize the right of health plans to limit benefit coverage in their purchase contracts.  While the AMA does not presently have a policy specifically recognizing this health plan “right,” many AMA policies implicitly recognize the legal principle that businesses have a right to contract.  AMA policies that acknowledge this principle frequently do so in the negative; that is, they identify specific circumstances in which health plans should not deny or limit coverage.  Policy H-185.972, for instance, expresses the AMA belief that health insurance providers should be prohibited from using genetic information, or an individual’s request for genetic services, to deny or limit any health benefit coverage or establish eligibility, continuation, enrollment or contribution requirements.  Policy H-285.935 states that during the sale or merging of health plans, the health plan emerging from such transaction, including the sale of covered lives, should be required to abide by the original contract provisions addressing health benefits coverage and access to physicians.  Several AMA policies, such as Policy H-165.920, also state that the AMA will work to ensure that health insurance plans provide a basic level of health care, and that coverage include minimum benefit requirements.  The AMA has acknowledged the principle that health plans have the ability to limit benefit coverage in their purchase contracts, but has stopped short of articulating this principle as a general “right.”
Similarly, the last part of Resolution 218 seeks to adopt as AMA policy the principle that entities, presumably managed care organizations, or individuals that are not involved in nor responsible for the medical decision-making process, should not be held liable for the act of omissions of licensed physicians acting within their legitimate areas of expertise. The basic concern underlying this request appears to be that managed care entities and other individuals should not be held legally accountable for acts for which they have no responsibility and do not commit.  However, the concept as currently worded in the resolution is highly ambiguous, and open to a variety of interpretations.  If adopted as policy, this concept could essentially require the AMA to advocate for immunity for managed care organizations or individuals (including medical directors) who are responsible for, or involved in, the medical decision making process.  Within the managed care setting, however, medical directors or health plan administrators may have no responsibility for the medical decision making process, but may participate actively in the utilization review process.  As such, these medical directors or health plan administrators could improperly and negligently deny or delay coverage for medically necessary health benefits, which in turn could injure or kill patients, and, under the concept expressed in Resolution 218, could not be held responsible under most interpretations of current ERISA law. 

DISCUSSION

The Board of Trustees notes that testimony before the Reference Committee on this resolution was protracted and somewhat divisive, and that the Reference Committee itself recommended reaffirmation of several current AMA policies discussed above in lieu of the entire resolution.  The Board strongly supports the patient protections contained in the resolution, including requirements for external review mechanisms and the licensure of medical directors.  However, it is concerned about the resolution’s provisions that would insulate from liability those entities and individuals that claim not to make medical determinations. 

The Board believes that current AMA policy recognizes that both managed care organizations and medical directors participate in the medical decision-making process and need to be held accountable for properly fulfilling their respective responsibilities.  Within the managed care setting, for instance, health plans and health insurance issuers establish policies and protocols which affiliated physicians must follow.  Whether those policies establish drug formularies or articulate required pre-authorization procedures, they strongly influence or mandate how medical treatment is provided.  For their role in the treatment of patients, those organizations must be held responsible.

Similarly, medical directors frequently and directly influence the medical treatment of the plan’s enrollees.  With their oversight responsibilities and authority to approve or deny care, medical directors can often direct how individual patients will be treated.  Under AMA policy, because of their authority, medical directors must hold an unlimited current license to practice medicine in at least one of the states served by the managed care organization and have a current license in each state in which they will be making clinical decisions or be involved in peer review (H-285.987).  Our AMA policy further states that medical directors must be familiar with local medical practices and standards in the plan’s service area, and have adequate experience.  Recognizing that medical directors frequently make decisions that constitute the practice of medicine, directors should not be able to avoid under ERISA accountability for their medical decisions.

The Board considers it imperative to retain this “dual track” of responsibility—for both managed care organizations and individuals within those organizations.  Under managed care, each group retains significant authority in determining how medicine is practiced.  Consequently, neither group should be absolved of its respective responsibilities through legal immunity under ERISA.   
Due to the importance of retaining “dual” responsibility and because of the delicate balancing of political concerns and interests, the Board believes that the AMA should not inject into the patients’ bill of rights debate any support of provisions that would offer new immunity to individuals or entities that claim they lacked responsibility or involvement in any medical decision making process.  Our AMA has always supported legislation that covers such contingencies when they legitimately arise.

RECOMMENDATIONS

The Board of Trustees recommends that the following be adopted in lieu of Resolution 218 (I-99) and that the remainder of this report be filed:

1.	That our AMA reaffirm Policy H-165.918, which states that our AMA will support health system reform plans that: (1) provide universal access free from rationing, including patient responsibility for their own health care choices and behavior; (2) are not biased toward managed care and include a true fee-for-service option; (3) allow physicians and patients choice of plans and physicians; (4) alleviate regulatory hassles and preserve high quality care; (5) provide meaningful antitrust relief; (6) provide true tort reform; (7) provide significant insurance market reforms; and (8) recognize the physician’s responsibility and authority in medical decision making and treatment in conjunction with the patient. (Reaffirm HOD Policy).

2.	That our AMA reaffirm Policy H-285.939, which states that utilization review decisions to deny payment for medically necessary care constitute the practice of medicine; that our AMA seeks to include in federal and state patient protection legislation a provision subjecting medical directors of managed care organizations to state medical licensing requirements, state medical board review, and disciplinary actions; that medical directors of insurance entities be held accountable and liable for medical decisions regarding contractually covered medical services; and that our AMA continue to undertake federal and state legislative and regulatory measures necessary to bring about this accountability. (Reaffirm HOD Policy).

3.	That our AMA reaffirm Policy H-285.945, which states that our AMA supports changes in federal law to prohibit the exemption from liability of managed care organizations, including ERISA plans, for damages resulting from their policies, procedures, or administrative actions taken in relation to patient care. (Reaffirm HOD Policy).