Deselection ruling requires fair procedure’

MCO officials predict flood of hearing requests

Exactly how theLouis E. Potvin v. Metropolitan Life Insurance Companycase will affect physician deselection across the country is not yet clear, but experts believe it will likely have some noticeable impact on contractual language right away.

"Firing without cause is the master gag clause," says Louis Potvin, MD, the plaintiff in the case. The fear of termination has an absolute chilling affect across the board, he says.

The question will remain for some time as to whether a change in contractual language will actually make a difference in physicians’ often embattled relationships with managed care organizations, but most experts agree some atmospheric change is on the way.

"This is a wonderful case from the doctor’s standpoint," says Henry F. Fenton, JD, the Los Angeles attorney who represented Potvin. "It extends the law that applies to medical staff privileges with hospitals and says the same sort of principles apply to managed care organizations." Traditionally, hospitals cannot drop a physician’s admitting privileges without formal process and documented, credible reasons. The same will be true for managed care organizations (MCOs), Fenton predicts.

Ultimately, contractual language that cites termination without cause won’t hold up, Fenton says.

Case affects IPAs as well

Other health care law experts, such asLowell Brown, JD, an attorney with Foley, Lardner, Weissburg, & Aaronson in Los Angeles, are less impressed with the case’s importance. Also, some physicians who are starting their own MCOs may not favor the ruling. It will apply to independent practice associations (IPAs) as well, says Brown. Doctors who run IPAs will likely believe that the case is "not good for doctors and bad for health plans," he says.

Despite its controversial nature, Brown and colleagues makes these predictions about the impact of the case upon insurers in the firm’s May 14 newsletter to clients:1,2

• The ruling is troubling for insurers because it potentially invalidates the "termination with or without cause" provision. Many health care organizations — even those owned by physicians — rely on these provisions to support their freedom to terminate contracts with physicians as they wish.

• It requires a "fair procedure," which is flexible in that it requires at minimum giving the physician notice of the reasons for the proposed termination and an opportunity to present his or her side of the issues prior to termination.

While the court does not specify exactly what "fair procedure" entails, many other California cases suggest that the degree of formality depends on each case’s circumstances. Health care organizations that contract physicians now are likely to consider adopting a fair-hearing policy. For example, you may see language in contracts that would allow for a fair procedure but which limits that procedure to allowing the physician to submit written arguments against the termination, and in other cases, allowing for a hearing.

The firm’s principals note the following key points of the case, as well as making a few recommendations:

Potvin will probably result in a flood of requests for hearings from physicians whose participation in a health care organization was terminated without cause.

• An appeal to the California Supreme Court could delay, reverse, or modify the appeal court decision.

• Don’t overreact, but at the same time, carefully analyze each case to determine whether a proposed termination could be deemed a substantial economic interest of the aggrieved physician.

• If the appeal court decision stands, the fair-procedure requirement will likely be much less than the formal hearing process. This is a good time to explore minimum standards for fair procedures in your state.

• If you have minimum standards for malpractice history, articulate these standards, and provide supporting rationale.

• If you receive a request for a hearing, obtain legal advice.

Even though he wagered most of his savings and a second mortgage, Louis Potvin, MD, says it was worth it.

"The only thing you take with you in your life is your reputation," he says. "I spent 10 years in active [military] duty, was president of the medical association, on the board of directors of the Red Cross, and served on the Orange County Planning Commission. I took a lot of time away from home doing what was right in the community." He felt strongly about standing up against any party whose actions could tarnish that public track record overnight.


1. 97 Daily Journal D.A.R. 1997; May 2:5552-5557.

2. Foley, Lardner, Weissburg & Aaronson. Law Watch. May 14, 1997.