Race, Health Care and the Law 
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Prelude
MANAGED CARE, UTILIZATION REVIEW, AND FINANCIAL RISK SHIFTING: 
COMPENSATING PATIENTSFOR HEALTH CARE COST CONTAINMENT INJURIES

Vernellia R. Randall
17 U. Puget Sound L. Rev. 1 (Fall 1993)
Copyright (c) 1994 by Vernellia R. Randall



 
The delivery of health care services is an intensely personal activity. Patients necessarily place their physical well-being in the hands of other persons, either physicians or other providers. Because health care technology and the science of medicine(1) have progressed so swiftly over the past hundred years, the focus and direction of the relationships among the parties involved in the delivery of health care have changed dramatically. As technology and science developed, the cost of transferring skills and services from the provider to the patient grew geometrically. In the days when the physician-patient relationship was considered more art than science, delivery consisted of a one-to-one transfer of skills. The physician looked at the patient, listened to a description of the patient's symptoms, conducted a few very simple tests, prescribed drugs or conduct that the physician believed might help, and promised to return later to see if, in fact, she had helped. Today, as medicine moves more toward science and technology, the physician is likely to use looking and listening only as a starting point. She then refers the patient for sophisticated machine testing of many varieties and for more looking and listening by other providers having narrow specialties. The end result is a final diagnosis that takes into account the expertise of perhaps dozens of people. 

As these changes have made the practice of medicine more and more complex, the cost of health care delivery has increased and has become a national concern. At some point, the cost becomes greater than the benefit. We are now involved in a search for a new means of determining when, to whom, and how much of such services we, as a nation, should provide. This search has been characterized as the need for cost containment. It is being carried out in many ways and in many areas of the health care industry. One view of acceptable limitations on the delivery of health care is called "managed care." But managed care, like other programs in the past, has become so focused on the problem of cost that it may very well be losing sight of what should be the overriding purpose of health care-the well-being of the patient. After all, the patient is the raison d'etre for the entire system. The patient's well-being is not directly aided by cost containment, but the patient's well-being is the focus of other important health care issues, such as quality of care and access to care. The manner in which cost containment, quality of care, and access to care interact and the priorities given to them will determine the future structure of our nation's health care system. 

We now seem to be entering into a new phase of health care delivery. A hundred years ago, the physician-patient relationship was the core of the health care system. That relationship remained central to any health care delivery changes taking place until around 1970. Even with the introduction of third-party payers in the form of insurance plans, the physician-patient relationship remained unaffected. The physician determined what services would be delivered to the patient; the patient received the services, having paid premiums (or having premiums paid for his benefit) to the third-party payer; the third-party payer either reimbursed the patient or paid the physician directly. The third-party payer simply had no right to affect the physician- patient relationship and, in fact, did not affect that relationship. 

After 1970, however, a new triangle of relationships came into being. In this triangle, the third-party payer not only contracts with the patient to finance the patient's health care needs, it also contracts with physicians and other providers to provide those health care needs. Two problems arise from this second contractual relationship. First, through "utilization review," the third-party payer assumes the right to direct the means and methods of providing the health care services. Second, through its contracts with providers, the third-party payer induces compliance with utilization review by means of financial rewards and penalties, or financial "risk shifting." 

These two new aspects of health care relationships, utilization review and financial risk shifting, create the possibility  that patients may be injured in totally new ways. Before the new relationships were created, the only way a patient could be medically injured was through the physician's conduct. With the advent of the new relationships, patients may be indirectly medically injured because decisions may be made based on some statistical norm, not on the patient's individual condition. Further, the patient may be medically injured by conduct of the physician, not because of the physician's own decision, but because of a third-party payer's guidelines, with which the physician is trying to comply. For example, consider the cases of Kim, Brad, and Barbara. 

Kim needs an operation on her knee. Through her employer, Kim has health insurance with a preferred provider organization (PPO). One doctor, a member of the PPO, recommends an operation. Another doctor recommends a procedure that is more expensive but will require less healing time. Kim cannot go to the second doctor, who is not a member of the PPO, because she cannot afford to pay for the operation herself. When she has the operation recommended by the PPO doctor, she takes two months longer to heal than if she had the more expensive operation. 

Brad, a teenager, is suicidal. Through their employer, Brad's parents have insurance for him. His doctor wants to admit Brad to a psychiatric hospital. The insurance company, however, requires preapproval of any nonemergency hospital admission and denies approval. Because Brad's parents cannot afford the twenty-one day proposed hospital stay, they decide to have him treated as an outpatient. Five days later, Brad commits suicide. 

Barbara, a single mother, is pregnant. She works for minimum wage, but qualifies for government health insurance. Because the government health insurance pays doctors significantly less than what they would receive from other patients, there is no doctor in her immediate community who will accept her health insurance. The nearest doctor is one hour and two bus transfers away. Because of the three or four hours she would have to miss from work, Barbara does not receive adequate prenatal care. Her baby is born premature and has a low birth weight. 

These three hypotheticals illustrate situations in which individuals may have adequate insurance but may not have adequate health care. As illustrated by the above stories, private insurers and government health insurance programs ration care by restricting choice, denying services, and decreasing availability. They perform utilization review and financial risk shifting through managed care products such as health maintenance organizations and preferred provider organizations. Prior to the advent of the new triangle of relationships, none of the problems illustrated above would have arisen in exactly the same way they now arise. 


Go to: Introduction



Endnotes 

1. FN1. As opposed to the art.

.
 
Related Pages:
Home ] Up ] [ Prelude ] Introduction ] Historical Background ] Cost Containment Measures ] Traditional Theories of Liability ] ERISA as a Barrier ] Medical Injury Compensation Fund ] Conclusion - Managed Care ]
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Home ] Managed Care and African Americans ] Managed Care and Minorities ] Cost Containment Injuries ]
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Contact Information:
Professor Vernellia R. Randall
Institute on Race, Health Care and the Law
The University of Dayton School of Law
300 College Park 
Dayton, OH 45469-2772
Email: randall@udayton.edu

 

Last Updated:
 03/10/2010

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