A seemingly benign request for prior approval of gall bladder surgery has turned into a protracted legal battle over the liabilities of health plans' medical directors.
The Arizona case, which dates to 1992, has reached the state Supreme Court and has begun to draw attention from HMOs on the national level. It concerns the right of Arizona's Board of Medical Examiners to investigate complaints arising from a health plan medical director's denial of care.
Blue Cross and Blue Shield of Arizona medical director John Murphy, M.D., denied authorization of gall bladder surgery for an enrollee in 1992. His decision was based on her past history of digestive problems and a negative ultrasound. Murphy recommended that an outside consultant examine the patient's records and render a second opinion.
The patient's physician ordered surgery anyway. The Blues later agreed to pay for the procedure based on post-surgical pathology reports supporting gall-bladder removal.
But the patient's surgeon, David C. Johnson, filed a complaint with the Board of Medical Examiners. He accused Murphy of incompetence and damaging a physician-patient relationship.
The board voted in 1994 to place a "letter of concern" in Murphy's file citing "an inappropriate medical decision which could have caused harm." Board spokeswoman Donna Nemer said the letter would be made available to the public and medical boards if Murphy applied for a license in other states.
The board apparently is the first medical licensing authority to exercise jurisdiction against a physician executive. Nemer said she thought such actions would continue to be rare.
That hasn't satisfied the Blues plan.
"If what (a medical director) does constitutes the practice of medicine, then any decision made by a medical director would have medical malpractice liability attached to it," said John Hannan, a senior vice president at the Arizona Blues, one of the state's largest insurers with more than 700,000 covered lives, including 150,000 in its HMO.
The Blues sued to block placement of the letter. It initially prevailed in state Superior Court, but the decision was reversed last month by an appeals court.
Hannan said the decision has been appealed to the Arizona Supreme Court. The health plan is waiting for the court to set a hearing date.
Should the Blues plan lose its case, major changes could be in store.
"(A negative ruling) would heighten the physician's awareness of getting maybe the . . . indemnification for decisions made during the job," said John Tiscornia, who heads the West Coast healthcare practice of consulting firm Arthur Andersen.
The American Association of Health Plans also expressed concern. "It would appear (the case) may raise implications for utilization review for HMOs, and we currently are reviewing the particulars," AAHP spokesman Don White said.