HMOs, hospitals: Brace for an onslaught of lawsuits from patients’ bill of rights

Patients’ rights will have a trickle-down effect

With the debate over the patients’ rights bills making its way through Congress, risk managers may find it easy to assume that the controversy only affects them from a distance. After all, the debate is about provisions that will enable or limit lawsuits against health plans. Hospitals and other health care providers are not directly affected, right?

Dead wrong, say risk managers and other experts. The patients’ rights bill, no matter which version is finally enacted into law, will result in a dramatic increase in lawsuits, they predict. The managed care organizations will be the most severely affected, but hospitals will feel the trickledown effect.

Brace now for the onslaught, warns Leilani Kicklighter, RN, ARM, MBA, DFASHRM, president of the Kicklighter Group consulting firm in Tamarac, FL, and a past president of the American Society of Healthcare Risk Management. "It is a mistake to say this is about managed care organizations and the patient and not our responsibility," she says. "Risk managers should be following this very closely to see what finally develops."

Bills in the homestretch

The House and Senate both have been debating patients’ rights bills for months, with critics alleging they would open the floodgates to trial lawyers seeking to sue health plans and employers for denial of service and other wrongs. The House passed patients’ rights legislation that included limitation on managed care organizations’ liability, and congressional leaders indicated that the House and Senate would soon work out a compromise bill that could become law.

Under the House version, all Americans with health insurance would be guaranteed coverage for emergency room care, treatment by medical specialists, and access to government-sponsored clinical trials. Patients denied coverage would be able to appeal the refusal to an outside, independent expert and be guaranteed a quick response. The bill also allows patients to sue for punitive damages only in cases in which the insurer disobeyed an appeals board ruling, and the award would be limited to $1.5 million.

Lawsuits would be brought in state courts but under federal rules. Democrats have argued that state courts should hear the cases under their own rules, but Republicans balked at that provision because state courts tend to be more favorable to plaintiffs than federal courts. The patients’ rights bill passed earlier by the Senate has similar protections for the patient but has no limit on monetary awards and does not impose federal rules on the state courts.

With passage of some version of the patients’ rights bill seeming inevitable, risk managers should start studying the possible scenarios and determining how they will affect their own hospital operations, Kicklighter says. Though providers are not specifically named as the responsible parties, she points out that the intertwining of providers and insurers these days make it impossible to separate their duties, she explains.

Where the concerns are

Much of the risk manager’s concern should be directed to the multiple state and federal requirements for patient’s rights, Kicklighter says. When a patient’s rights bill is finalized, it will be added to existing state requirements and other federal requirements in the Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration) Conditions of Participation and various other regulations that may apply to your organization, she says.

"Risk managers need to have someone designated to put all these requirements side by side and see just what you’re responsible for doing," Kicklighter says. "You have to compare the parts that are the same and see what your state requirements might require you to do other than what’s in the federal plan. You’ll find plenty to do in terms of educating patients about their rights, for instance," she says.

Be careful not to be thrown off by the wording that puts the responsibility on the insurer, she says. In the real world, the provider often is the insurer’s agent and will be held responsible by the courts for informing patients about their rights and remedies. You’re taking a big risk if you just say, "That’s the managed care organization’s job," and leave it at that.

"It’s just like the Wickline case in California when a case reviewer said the patient had met criteria for discharge, and the doctor discharged, but then the patient suffered complications," she says. "The court held that the practitioner was an independent practitioner and had a responsibility to keep the patient in the hospital. I think the same premise would hold here, and the court would say the provider had a responsibility to make sure the patient knew his or her rights regarding denial of service, for instance."

Informing patients about their rights is one major way in which hospitals may be involved in the patients’ rights requirements, Kicklighter says. And that leads to a slew of questions about how to provide that information to a multilingual, sometimes illiterate, population. "Years ago, we had patient relations personnel who greeted patients, but most places have done away with that," she says. "There will have to be accountability. You’ll have to have one person, even if it is the risk manager, who is accountable for making sure patients are notified of their rights."

Trial lawyers will find a way

A patient’s rights bill is almost certain to result in more lawsuits against providers, says Allan Morphett, JD, MA, CHSP, a risk management safety specialist with Farmers Insurance Health-care Professional Liability in Idyllwild, CA. "I understand the necessity for having the right to sue corporate entities when the patient thinks care is denied or improper, but I think people might run away with this as an opportunity they didn’t have before," he says. "There are going to be mistakes, and until there is a shift in people’s perceptions, any opening provided by the law will result in more lawsuits. We have to start teaching the public that every mistake doesn’t mean you’ve won the national lottery."

Any lawsuits aimed primarily at health plans are likely to include hospitals and other providers, says Mohit Ghose, an analyst at the American Association of Health Plans in Washington, DC. "The language in the bills may exclude physicians and facilities, but no matter what the language, you’re always going to be pulled into these cases. Trial lawyers already are fond of including everyone they can think of," he says. "This is going to create vicarious liability for everyone. This is not just a threat to health plans."

The malpractice industry

The patients’ rights bill will complicate and expand the medical malpractice industry, Ghose says, especially if the state court/federal rules provision makes it to the final version. He suggests that health care providers could see not just more lawsuits, but a different animal altogether.

"They’re creating a whole new type of lawsuit. Health plans are going to go on the defensive in a big way, with books about 500 pages long to explain explicitly what is excluded under their plans," Ghose says. "Some very innovative trial lawyers are at work already figuring out ways to capitalize on this, and I have no doubt that they will find ways to litigate a lot of cases. We’ve always maintained that there is the potential for lawsuits to absolutely explode and bankrupt the system."

Karen Ignagni, president of the American Association of Health Plans, says health plans may be hit hard by the first wave of lawsuits, but no one will be left unscathed. The patients’ rights bill "promises to unleash a Pandora’s box of liability that would leave no part of the health care system unaffected: Consumers, doctors, hospitals, employers, and health plans are all at risk," she says. "With respect to liability in this bill, we may well be looking at only the tip of the iceberg."

Hardly anyone is arguing that there won’t be an increase in lawsuits. Even the strongest advocates of the patients’ rights bills acknowledge that there will be more lawsuits; they just contend that the lawsuits are justified. Regardless, Ghose says the increase in activity will be felt across the board in health care. "We’ve already seen reports from some health plans that their malpractice insurance is going up 300%," he says. "We’re seeing colossal risks in insurance costs. Will the insurers leave premiums alone for doctors and hospitals? I doubt that."