Credentialing in managed care.

Just as hospitals were redefined as "potentially liable health care entities," rather than "charitable hotels," in the 1965 landmark court case of Darling v. Charleston Memorial, the insurance industry has now been cited as being legally responsible to the public the care for which it pays.

For the past 25 years, a growing body of case law has consistently upheld the corporate liability theory to protect the public from the "foreseeable risk and harm" of incompetent medical professionals and dangerous health care facilities. Within the area of professional incompetency - with specific reference to the actions of the medical staff - hospitals have been found liable and negligent in the credentialing function and the periodic assessment and ongoing monitoring of medical staff performance quality. The courts have further upheld that medical staff members are the same entity as the hospital, even though they are mostly a group of independent contractors.

Over the years, media horror stories have blared that 20 percent of health care workers are substance abusers; that 15 percent of physicians embellish their credentials on medical staff applications; and that 15,000 practicing physicians may have purchased their medical school diplomas. Ralph Nader's publication 7,000 Questionable Doctors, gleaned from state medical board computer dumps of sanctioned physicians, has further added to the public's paranoia and demands for justice in medical cases that turned out badly.

In 1989, the first two cases regarding the HMO's responsibilities to the public emerged. The first was a Pennsylvania case, Boyd v. A. Einstein Medical Center, wherein the HMO's independent contract provider was found to be an ostensible agent of the HMO. A more significant case, Harrell v. Total Health Care. Inc., occurred in Kansas City, Mo., where the HMO was held liable for negligent credentialing of an independent contract specialist provider.

The courts in these cases determined that HMOs do have the responsibility to know the quality of their providers, even though they are not employees, and deemed this a reasonable extension of the corporate liability theory. It was further found that a patient's lack of choice regarding physicians and financial inability to circumvent the system were additional reasons for the HMO to assume responsibility for the actions and quality of its contract providers.

Corporate clients also have a keen interest in quality management issues from the managed care entities that provide their employees with health care benefits. Some employer groups are concerned about the potential of extended liability for care from a health care provider under an employee benefit program. Employer groups have numerous motivations for demanding high quality in health care benefits, including good management of benefit funds, healthy employees, and an edge on recruitment and retention by offering employees competitive incentive packages.

More and more resources are being expended, therefore, to appropriately credential and monitor the ongoing care quality of providers among the emerging alternative delivery systems. In the past year, the National Committee for Quality Assurance (NCQA), a major accrediting association currently surveying the quality of managed care plans, has implemented four pages of standards for initial and recredentialing activities in the managed care setting. These standards basically follow the same guidelines as JCAHO, with a few that are pertinent to managed care. JCAHO surveys some staff- and group-model HMOs under its ambulatory care standard.

The HMO "gate-keeper" model is particularly vulnerable to liability. This plan design requires participants to first see a "primary care" provider designated by the plan. The primary care provider then determines the necessity of the patient's seeing a specialist and makes the referral within the contracted network or employed group (in the case of a group model.) These referrals typically come from a "network directory" listing of provider specialists. This type of referral has been found to imply approval of the physicians listed in the directory. The financial burden on the patient who wishes to circumvent the system creates strong steerage into the "network," and the courts have held the HMO accountable.

Hospitals, medical schools, graduate training programs, state boards of medical examiners, the Federation of State Medical Boards, the American Board of Medical Specialties, the American Medical Association, and the National Practitioner Data Bank are now all being queried by managed care companies about references, verifications, and the histories of potential providers. Today, the entire arena of quality in health care delivery has become everyone's business, as liability issues continue to ripple from traditional to less traditional types of delivery systems.