A recent California Supreme Court ruling has put a damper on the practice by managed-care plans of dropping physicians from their networks without cause.
In a 4-3 decision, the court found that arbitrary removal of a doctor by a health plan could significantly impair physicians' practices as well as deprive patients of physician relationships. Citing a common-law principle of fair procedure, the majority said such removals must be "both substantively rational and procedurally fair."
The case was originally filed in Los Angeles Superior Court in 1992 by Louis Potvin, M.D., since deceased. Potvin was an Orange County (Calif.) obstetrician/gynecologist taken off a preferred-provider list by Metropolitan Life Insurance Co. MetLife sold its health insurance business to United Healthcare in 1995.
"This decision applies across the board to health plans, IPAs, PPOs, insurers--any large healthcare entity that has an impact on a doctor's practice," says Henry Fenton, Potvin's Los Angeles-based lead counsel. "It's a logical extension of the fair-procedure law here in California that applies to medical staff privileges. For the same reasons, and even more, that it applied to hospitals, it applies to managed care, where if a doctor is arbitrarily terminated or excluded, he's basically put out of business."
The court affirmed several arguments made on the plaintiff's behalf in an amicus brief filed by the American Medical Association and the California Medical Association.
"We agree (with the court that) these managed-care organizations can be shown on occasion to be a monopoly and that their decision to remove a doctor could significantly impair the physician's ability to practice medicine," says Donald Palmisano, M.D., an AMA trustee who also holds a law degree. "Some insurance companies have such power in an area that they eliminate the opportunity for a level playing field. This ruling says physicians have a right to due process."
A spokesman for the California Association of Health Plans said the decision is not as negative for the industry as some think. Providers have to prove that a health plan controls significant market share, or that a doctor's removal from the network would cause substantial harm to the physician, Bobby Pena says.
"Those things won't always be easy to prove because in reality, a lot of health plans are competitive in most places," he says. "It's hard for any one plan to dominate a market." In fact, he claims, providers such as the large medical groups in Sacramento, Calif., and San Francisco enjoy a much greater percentage of market share.