The California Supreme Court will issue a ruling this month that will determine whether managed care organizations can terminate physicians without cause. The decision also will effect IPA-physician relations.
Physician terminations from managed care plans have been a source of conflict because the decisions often seem arbitrary and based more on the HMO's business needs than physicians' performance.
The case, Potvin vs. Metropolitan Life Insurance Co., dates back to 1992, when Louis Potvin, M.D., an OB/GYN in Mission Viejo, was terminated without cause from a Met Life HMO. The HMO made up a majority of Potvin's business.
According to Potvin's attorney, Henry Fenton, Potvin tried for months to find out why he had been terminated. Finally, the HMO told him it was because of his history of malpractice suits. Potvin, a 30-year veteran, had been sued four times over the course of his career. Three cases were dismissed and one was settled, but Potvin admitted no liability in the settlement. After Potvin was terminated, he had trouble joining other HMOs because he could not explain the termination, Fenton says.
Potvin sued the insurer, seeking damages for the loss of business and charging that he was entitled to a hearing to defend himself.
The trial court rejected his claim. In 1997, however, the Second District Court of Appeals sent the case back, saying "there is at least a triable issue of fact as to whether . . . (Potvin) was deprived of his common-law right to due process and a fair procedure by an arbitrary delistment." The appeals court also recognized managed care's dominance in the marketplace, stating that individuals are entitled to a fair hearing before exclusion from private organizations that control "important economic interests."
California courts have repeatedly ruled that hospitals and medical societies cannot terminate physicians without a fair hearing because not having those privileges interferes with a physician's ability to practice medicine. Fenton says managed care companies have such a stranglehold on the California marketplace that termination from an HMO is akin to being expelled by the medical society, which would destroy a doctor's ability to practice.
Met Life appealed the decision, and in July 1997 the state Supreme Court agreed to hear the case. Potvin died in 1997, but his estate is pursuing the case, and a number of heavy hitters have lined up on both sides.
The California Medical Association and the AMA filed amicus briefs in support of Potvin. In oral arguments before the high court earlier this year, retired Supreme Court Justice Joseph Grodin, representing Potvin's estate, warned that ruling in favor of Met Life would permit health plans to deselect physicians at will and would destroy physician-patient relationships.
"If our physician is eliminated from a plan, it is generally not economically feasible to maintain that relationship. And for the relationship to be severed, especially in the case of persons with serious illnesses, can be devastating," he argued.
Meanwhile, the American Association of Health Plans and the National IPA Coalition filed amicus briefs in support of Met Life. IPAs are concerned that a ruling in favor of Potvin will restrict their actions .
"IPAs fear that this will make it difficult to function as efficient economic organizations," says Lowell Brown, an IPA attorney in the Los Angeles office of Foley & Lardner. "Right now, you can run a lean and mean IPA, you can add and drop people as you need them to meet your business demands. If your community requires more OBs to get the right contracts with the right payers and hospitals, you can add more OBs. If you need less, you can thin out the OBs. Similarly, physicians can walk away from one IPA and join another."
If Potvin is upheld, adding and dropping physicians would become a very difficult process, he says.
A similar case was recently decided by California's Sixth Appellate Court in favor of the physician. In Castellanos vs. Coastal Providers of San Luis Obispo, the court ruled that physicians are entitled to notice and hearing rights when an IPA terminates physician contracts, regardless of whether the termination is based on a "without cause" contract provision.
The case could be negated by the Supreme Court's decision, but if it stands, it will be a heavy burden on IPAs, says Paul Stewart, an attorney in the San Francisco office of Foley & Lardner, which represents Hill Physicians Medical Group, a Northern California IPA.
"It makes it hard for IPAs to structure their panels appropriately and drives up their costs of staying in business," he says.