A price to pay: health plans are discovering accreditations bring the added responsibility of clinical outcomes and the possibility of medical malpractice claims.

Consider, if you will, a managed care organization that had recently earned a "seal of approval" from one of the national accrediting organizations. The managed care organization proudly began to market its new accreditation to existing and prospective clients and the public. Television commercials, marketing brochures, and even the health plan's Web site clearly told the public of the plan's success in achieving this industry recognition.

The National Committee for Quality Assurance and URAC, also known as the American Accreditation HealthCare Commission, are two examples of national accrediting organizations.

To continue this example of new liability facing managed care organizations, some months later, a health plan member, the insured, was discharged from a psychiatric hospital and the hospital's doctor prescribed follow-up care. The health plan's own guidelines stated the patient was to receive follow-up care within a certain number of days. In fact, the member did not receive the follow-up care the health plan itself advertised all members would receive when it touted its accredited status. Sadly, the member relapsed and subsequently died.

His estate filed a multimillion dollar lawsuit against the health plan, the case manager, the health-plan medical director, and a host of other individuals and organizations. Was the accredited health plan medically negligent for not assuring follow-up care?

It is likely that situations such as the one described will continue to occur, especially when one understands what the health plan was trying to gain when it paid for, and obtained accreditation status. The benefits for an accredited plan are many and include the ability to market to large employers, and some states even allow accreditation as a replacement for state regulation.

But along with marketing benefits comes the little-recognized fact that health plans are evaluated on their performance in certain areas, in particular their clinical outcomes activity. And it is this clinical component that has now put the majority of health plans in jeopardy. Medical malpractice, long the domain of doctors, nurses and hospitals, is now being charged against health plans, managed care organizations and insurance companies.

The Beginning

The Employee Retirement Income Security Act of 1974, although extremely complex and mainly focused on pension plans, also allows for the protection of insurance companies, benefit plans, and employers against certain lawsuits by benefit plan participants. Commonly referred to as the "ERISA exemption" or "pre-emption," the idea was that insurance companies were in the business of determining whether a particular benefit or medical treatment was covered by the insurance contract. As such, the insurance company was not making medical decisions but rather decisions concerning the insurance or benefit plan contract.

A by-product of ERISA has been the protection granted to insurance companies, employers, and managed care organizations against lawsuits based on their administration of health plans. The pre-emption never pertained to failures in medical care or malpractice in part because insurance companies were hot in the medical business.

However, the addition of medical business responsibility came with the explosive growth of managed health care and the organizations that finance, manage and deliver health care. It is the combination of health insurance with medical care.

The example of the health plan member who did not receive post discharge follow-up care is representative of a growing number of legal cases around the country. One of the foundations of managed care accreditation is adhering to standards established by the accreditation bodies. Over the years, managed care--a relatively new national social structure--has evolved and matured. Several clinical and HMO organizations focused their attention on managed health care in an attempt to measure, evaluate, and ultimately add credibility to the industry. Today these independent organizations routinely evaluate managed-care organizations that pay sizable fees to those very same organizations. A successful evaluation results in an "accredited" health plan.

The Physician and the Health Plan

The evaluation of a managed-care organization's health plan includes many items, all of which fall into either clinical or administrative systems. Within the clinical evaluation are specific outcome measures initially established to allow for objective evaluation of one health plan vs. another. Today, however, these objectives are routinely used to evaluate a health plan's ongoing clinical processes and establish minimum levels of medical care as standards. But by establishing standards that accredited health plans strive to meet or exceed, these accrediting bodies have de facto created a clinical standard that did not exist prior.

In the recent case of Nealy vs U.S. Healthcare HMO, an individual sued the health maintenance organization and the treating physician on several points, including the allegation that the physician's failure to comply with the referral process of the HMO contributed to the plaintiff's husband's death. After several trials, the New York Court of Appeals ruled that the case was not pre-empted by ERISA because the physician failed to take timely action to treat the patient. In other words, the HMO's physician was responsible for malpractice.

In the situation of an HMO with its own positive accreditation, based in part on clinical outcomes, it's only a matter of time until one argues that the accreditation status further implicates the HMO. For the past few years health plans have been held liable for their accreditation practices of network providers, as seen in Harrell vs Total Health Care Inc. But for a health plan itself, an accreditation status based on timely delivery of medical care such as post discharge follow-up care or immunizations for children, would further implicate both the HMO and treating physician for untimely care and its outcomes.

For example, a young health plan member of an accredited health plan failed to obtain the hepatitis B immunization. The child was exposed to, and developed, hepatitis B. While the child was undergoing painful diagnostic tests and starting her lifelong course of medical therapy, the health plan, the one with the "seal-of-approval," was advertising its accredited status including its rate of child immunizations. Unfortunately, no one informed the child's mother there was a way to prevent her daughter's illness. In fact, neither the health plan's pediatrician nor the health plan itself notified the child's mother of the immunization benefit. Is it logical to implicate the health plan and its nurse case manager in a multimillion-dollar medical malpractice suit?

The accreditation process is a useful, informative service. The tools to evaluate and compare physicians or hospitals with each other are long overdue, largely because self-regulation of the medical community has run its course. However, while it is appropriate to gather, and compare data on immunization rates of a pediatrician, or the psychiatric follow-up rates for post-inpatient care, these are issues between physicians and their patients, hot the insurance company.

Health Plan Members Not Patients

As the line between insurance administration and the practice of medicine blurs, insurance companies and managed care organizations are being subject to lawsuits that used to go around the ERISA pre-emption, but today shoot right through it.

What was borne out of a desire to provide the public with standardized administrative measures of managed-care organizations has developed into a national system of clinical guidelines, standards of medical care, credentialing of physicians, and more.

But health insurance plans should be evaluated also, evaluated on the basis of insurance issues such as claims payment turnaround, insured satisfaction, and benefit-cost ratios. So let's not make this a "us vs. them" argument. Rather, let's see public and objective insurance accreditation processes based on quality issues that pertain to insurance and a managed-care accreditation process based on clinical issues.

By combining these two distinct functions, clinical practice and insurance administration, the result has been public confusion, arcane legislation, increased costs of compliance, and more lawsuits. The growing number of lawsuits against managed care organizations is a trend line heading right to medical malpractice. Medical malpractice, the domain of the clinician, must now be part of a health insurance company's risk management strategy.

So stop calling health plan members "patients" because they are not patients to the health plan or health insurance company. They are insureds or members, beneficiaries or plan participants. But they are not patients.

Unintended Consequences

The health insurance sector has had the firewall of ERISA, rightly or wrongly for nearly 30 years. This preemption was certainly a means of protecting the industry. But looking back, the industry knew it could never sustain itself with the responsibility for its own liability and the liability of the medical profession. It was clear back then: insurance companies processed benefits and clinicians practiced medicine.

Today, the evolving health-care system known as managed care is beginning to show its shortcomings. As a means of controlling medical costs, it has had some success. As a means of improving population-based clinical outcomes, managed care is improving. But as a means of financing the health care of a nation, it has taken on a task it never should have accepted. Because with the mantle of financing the nation's healthcare, it has inadvertently shifted the clinical responsibility to the health insurance sector. And it has done so without fully understanding, or pricing for, the ramifications of poor clinical judgment, honest medical mistakes or its own reinsurance needs.

Managed Care Organization Accreditation Fact Box

Who does it? National Committee for Quality Assurance and URAC, also known as the American Accreditation HealthCare Commission

What is NCQA and URAC accreditation? NCQA assesses a health plan's core systems and processes and the results the plan achieves on key measures of care and service. URAC reviews policies and procedures and conducts an onsite visit to the applicant organization to determine if it is operating according to stated policies.

Who uses the accreditation information? Large employers such as General Motors, Xerox and IBM, according to NCQA

Source: NCQA and URAC

Hank Kearney is president of Fort Lauderdale, Fla.-based PHM International.