Deselection suits likely to increase, attorney says

If your organization has any close relationships with physician group practices — and whose doesn’t? — you may have a new form of trouble brewing in the form of "deselection" litigation filed by physicians who were dismissed from the group.

There are reasons to believe that deselection litigation will increase in the near future, says Dan Groszkruger, JD, MPH, CHE, an attorney with Chapin, Fleming, McNitt, Shea & Carter in San Diego. Hospitals and other organizations are at risk even if they do not directly own the physician groups.

Groszkruger spoke on deselection at the recent meeting of the American Society for Healthcare Risk Management in Chicago, telling attendees that the health care industry should learn from the recent deselection case involving Thomas Self, MD, a physician in San Diego. The case illustrates the risks faced by health care providers and suggests some protective measures, he says.

"A lot of observers have predicted that deselection litigation is bound to increase, given the oversupply of physicians in certain areas and the cost-containment imperatives of managed care," he says. "It is very likely that your own organization is facing the same or similar circumstances that gave rise to the Self litigation. The Self litigation represents just one variation on the broader conflicts between quality and costs under capitated managed care."

Groszkruger, who also is a San Diego Superior Court judge, watched the case closely. He suggests that risk managers should study the Self case and then look for similar situations within their own organizations. The Self case involved a dispute between the pediatrician and his former medical group, Children’s Associated Medical Group (CAMG). Self claimed that he was forced out of the medical group for refusing to place corporate profits above the welfare of his patients. He sued the physician group, claiming that he was wrongfully "deselected" from participating in the group. CAMG officials denied the allegations and said the deselection was purely a business decision.

The trial gained attention in the San Diego area, largely because the doctor was portrayed in the media as having been pilloried for his devotion to his patients. A jury determined that CAMG had acted with malice when it dismissed Self and that he had been defamed by disparaging comments made when his patients asked where he was. The jury awarded the doctor $1.75 million in the compensatory damages phase on theories of wrongful termination, improper retaliation against a physician for advocating appropriate care, and defamation. Before the jury could discuss punitive damages, CAMG settled the case for $2.5 million.

Self had argued that he was fired for spending too much time with patients, ordering too many tests (especially tests that did not generate a profit), and for refusing to perform unnecessary surgery. Groszkruger says there was no proof during the trial that any harm had come to patients, but "the jury must have concluded that CAMG placed profits above patient care."

Self had been with the practice for 12 years. CAMG defended itself by claiming that Self was terminated because he was difficult to work with, inflexible, and demanding. CAMG officials acknowledged that managed care plans had complained about Self’s performance.

Groszkruger tells Healthcare Risk Management that the Self lawsuit demonstrated how deselection cases can draw in unsuspecting provider organizations. Even though the pediatrician was employed by the medical group, a local children’s hospital was named as a defendant.

"You just don’t know how little things along the way will affect your involvement," he says. "In the Self case, the hospital had provided staff to the medical group to field calls and take messages, and they got dragged into the suit because those messages were supposedly part of the defamation. I’m sure administrators at the hospital never thought they were exposing themselves to that when they agreed to provide support to this closely aligned medical group."

Any health care organization is at risk for inclusion in such a lawsuit "if you’re involved in capitated managed care even a little bit," he says.

Outcome doesn’t bode well for future

Regardless of whether you accept the jury’s verdict as the final word on what really happened in the Self case, Groszkruger says the case might be reason to fear such cases involving your own organization. In particular, he says the case shows that juries will be sympathetic to a physician plaintiff who says he was punished for trying to protect his patients. The defendant may see the situation very differently, of course, but a jury may be predisposed to believe the physician. That is partly the result of negative media coverage of managed care organizations, he says.

Many jurors will believe that "rationing" of health care is common in order to improve profits, he says, and they often assume that delays and denials of necessary treatment are common.

"This case was deliberately designed to play to the negative perceptions held by the public about managed care. Dr. Self was described throughout this case as the only member of CAMG who really cared about patients. CAMG and its president were portrayed as money-hungry and eager to put profits above patients," he says. "Juries will punish health care providers who appear to place their own financial interests above the health and safety of their patients. The verdict sends a clear message that the public will believe that physicians and other health care providers deny necessary care to save a buck and that patients are shortchanged in the pursuit of corporate profits."

As a preventive measure, Groszkruger suggests that risk managers investigate any affiliated physician groups or physician arrangements with the hospital, seeking out any disputes that might benefit from risk management intervention before a lawsuit is filed. Remind those responsible for dismissing physicians that juries will not look favorably on any allegations that the dismissal was prompted by concerns over profitability.

"The place to start is the contractual relationships that almost all provider entities are increasingly becoming involved in," he says. "If there’s a typical situation, it’ll be that you’re a hospital or medical group that is involved in a contractual arrangement to provide services under a health plan. These risks should have been addressed in the due diligence phase of entering into the contract, but they probably weren’t because you concentrated on the financial issues."

Groszkruger emphasizes that you must look at all types of partners who might have such a dispute brewing, because a deselection lawsuit can draw in anyone who has even the most tangential relationship with the physician group. If it appears that such disputes are present, risk managers should take steps to defuse them or at least to distance their organizations from the fight.

In trying to avoid lawsuits similar to the Self case, it is not enough for the practice officials to satisfy themselves that the dismissal is legitimate, Groszkruger notes. Risk managers should emph asize that any case with even a hint of a dispute like that in the Self case should be brought to the attention of the risk manager immediately, and the dismissal must be supported with better-than-average documentation showing that the decision was made for legitimate reasons.

"If there used to be some positive presumptions that accompanied physicians and health care providers into the courtroom, they are unlikely to survive in the face of adverse financial motives," he says. "Allegations of greed and cost-cutting at the patient’s expense appear to be quite effective at canceling out any positive image enjoyed by health care providers."


o Dan Groszkruger, 501 W. Broadway, 15th Floor, San Diego, CA 92101-3541. Telephone: (619) 232-4261.