16. FN16. Paul R. Torrens, Historical Evolution
and Overview of Health Services in the United States, in INTRODUCTION TO
HEALTH SERVICES 3, 3 (Stephen J. Williams & Paul R. Torrens eds., 1980).
17. FN17. See William L. Dowling & Patricia
A. Armstrong. The Hospital, in INTRODUCTION TO HEALTH SERVICES 125, 127
(Stephen J. Williams & Paul R. Torrens eds., 1980).
18. FN18. Moderate-sized cities had almshouses,
which were also called poorhouses. These institutions primarily provided
food and shelter for the homeless. Medical care was generally only a secondary
function. Pesthouses operated as quarantine stations for persons with contagious
illness. Usually, mentally ill persons received care at home, at the almshouse,
or at the jail. See, e.g., id. at 126-28.
19. FN19. Among the first voluntary hospitals were
Pennsylvania Hospital, opened in Philadelphia in 1751; New York Hospital,
New York City in 1773; Massachusetts General Hospital in 1816. Id. at 128.
During the same time, governmental agencies established city, county, and
state mental health hospitals, including ones at Williamsburg, Virginia
in 1773; Lexington, Kentucky in 1817; and at Columbia, South Carolina in
20. FN20. Id. at 127-28. Voluntary hospitals were
run as private charities. They were generally crowded and dirty. Most of
the persons using them had contagious diseases, and nurses were usually
former patients. Unpaid physicians worked out of a mixed sense of charity
and the opportunity to practice their cures. Doctors charged medical students
for medical training, and the students worked without pay, practicing and
learning on the poor. Steven R. Owens, Pamperin v. Trinity Memorial Hospital
and The Evolution of Hospital Liability: Wisconsin Adopts Apparent Agency,
1990 WIS. L. REV. 1129, 1131-32.
21. FN21. Dowling & Armstrong, supra note 17,
22. FN22. Id.
23. FN23. See SYLVIA A. LAW, BLUE CROSS: WHAT WENT
WRONG? 6 (1974); see also Dowling & Armstrong, supra note 17, at 131.
24. FN24. The hospital industry developed the model
state legislation necessary to create local nonprofit, tax-exempt corporations
for prepayment of hospital services. See LAW, supra note 23, at 6-9; Dowling
& Armstrong, supra note 17, at 131.
25. FN25. See PAUL STARR, THE SOCIAL TRANSFORMATION
OF AMERICAN MEDICINE, 215-16 (1982) (describing organized medicine's resistance
to health insurance because of the potential for insurers to place themselves
between patients and physicians).
26. FN26. Id.
27. FN27. Id. at 216-17.
28. FN28. Id. at 306-09.
29. FN29. In 1980, the Blue Cross and Blue Shield
plans provided surgical coverage to 74 million individuals while all other
companies insured about 101 million. In 1984, commercial insurers collected
$43.6 billion in premiums and paid $33.3 billion in claims. During the
same period, the Blue Cross and Blue Shield plans had $39.9 billion in
subscription income and paid $35.7 billion in claims. Therefore, the commercial
insurers paid 76.3 cents in claims of each dollar they collected in premiums.
The Blue Cross and Blue Shield plans paid 90 cents of each dollar. Sylvia
A. Law & Barry Ensminger, Negotiating Physicians' Fees: Individual
Patients or Society? (A Case Study in Federalism), 61 N.Y.U. L. REV. 1,
7-8 n.31 (1986).
30. FN30. See Minutes of the Eighty-Fifth Annual
Session of the American Medical Association, 102 JAMA 2191, 2201 (1934)
(recommending that there be "no restrictions on treatment or prescribing
not formulated and enforced by the organized medical profession").
31. FN31. See J. LUNDY, HEALTH INSURANCE: THE PRO-COMPETITION
PROPOSALS 4 (Congressional Research Service Report No. 81046, 1984). As
part of employees' fringe benefits, most labor contracts now routinely
include health care insurance. William B. Schwartz & Henry J. Aaron,
Hospital Cost Control: A Bitter Pill to Swallow, HARV. BUS. REV., Mar-Apr.
1985, at 160-61 (describing development of health care "payment system
expressly designed to shield patients and providers from the cost of hospital
32. FN32. STARR, supra note 25, at 313-15.
33. FN33. An indemnity benefit pays patients directly.
The insurance company sets premiums based on risk experience, allowing
it to charge lower premiums to groups of reasonably healthy people.
34. FN34. Blue Cross plans negotiated payment rates
with participating hospitals. To the subscriber, the plans charged a single
community-wide premium rating (community rating). The hospitals were guaranteed
payments for the provision of selected services to the subscribers (service
35. FN35. STARR, supra note 25, at 331-34.
36. FN36. Congress established Medicare to provide
medical care to the elderly. The patient's ability to pay was irrelevant.
Social Security Amendments of 1965, Pub. L. No. 89-97, 79 Stat. 286 (codified
as amended in scattered sections of 42 U.S.C.); see S. REP. NO. 404, 89th
Cong., 1st. Sess. 4 (1965), reprinted in 1965 U.S.C.C.A.N. 1943, 1945-46.
37. FN37. Medicaid, a cooperative state-federal
program, provides health insurance to income-eligible individuals and families.
42 U.S.C. s 1396 (1988).
38. FN38. Social Security Act, 42 U.S.C. s 13951(a)
(1988). Reasonable charges are the lesser of the actual billed charge,
the individual physician's customary charge, or the prevailing charge in
the community. 42 C.F.R. s 405.502(a) (1993).
39. FN39. 42 U.S.C. s 1302 (1988). The states' Medicaid
payment levels to physicians may not exceed Medicare's reasonable charges.
See Johnson's Professional Nursing Home v. Weinberger, 490 F.2d 841 (5th
Cir. 1974) (upholding limitation of Medicaid payments to Medicare standard
of reasonable costs). Regulations require physician reimbursement to be
"sufficient to enlist enough providers so that services under the plan
are available to recipients at least to the extent that those services
are available to the general population." 42 C.F.R. s 447.204 (1993).
40. FN40. Law & Ensminger, supra note 29, at
13. Under a fee schedule, Medicaid sets the fees that it will pay. Relevant
to the range of physician fees, schedules can be set high, by using the
higher physician fees, or low, by using the lower physician fees. States
can adjust fees to account for the patient's diagnosis; the service provided;
the physician's training, experience, and specialty; and whether the care
was given in a hospital or an ambulatory setting. Id. at 12.
41. FN41. Id. at 13. Charge-based reimbursement
bases the payment to the provider on recent historical charges by the individual
provider and her colleagues. Private insurance calls this "usual, customary,
and reasonable reimbursement (UCR)," and Medicare calls it the "customary,
prevailing, and reasonable charge method (CPR)." Id. at 12. When insurance
pays charge-based reimbursement, it pays the least of the provider's actual
billed charge, the median amount that she customarily charges for that
procedure, or some percent of customary community charges for the medical
specialty and geographic locality. Id.
42. FN42. See generally Medical Technology Assessment:
Hearings on H.R. 5496 Before the Subcomm. on Health and the Environment
of the House Comm. on Energy and Commerce, 98th Cong., 2d Sess. 544 (1984)
[hereinafter Hearings on H.R. 5496] (statement of Raymond Dross, M.D.,
on behalf of Health Insurance Association of America); OFFICE OF TECHNOLOGY
ASSESSMENT, U.S. CONGRESS, MEDICAL TECHNOLOGY AND COSTS OF THE MEDICARE
PROGRAM 45-61 (1984) [hereinafter COSTS OF THE MEDICARE PROGRAM].
43. FN43. COSTS OF THE MEDICARE PROGRAM, supra note
42, at 23.
44. FN44. GEORGE J. ANNAS ET AL., AMERICAN HEALTH
LAW 131 (1990).
45. FN45. The fee-for-service system, euphemistically
called the "free lunch" system, has delivered medical care without regard
to cost containment and sometimes without regard to medical necessity.
Under the fee-for-service system, third-party payers pay health care providers
for each discrete item of service. In 1980, 50% of active physicians were
compensated by fee for service, approximately 20% were salaried, and the
remaining 30% received a mixed form of compensation. Sunny Yoder, Physician
Payment Methods: Forms and Levels of Physicians Compensation, in REFORMING
PHYSICIAN PAYMENT: REPORT OF A CONFERENCE 87, 88 (1984).
46. FN46. Under cost-based or charge-based reimbursement,
third-party payers reimburse providers for most of the costs or charges
incurred in treating covered patients.
47. FN47. Alexander M. Capron, Ethical Implications,
Containing Health Care Costs: Ethical and Legal Implications of Changes
in the Methods of Paying Physicians, 36 CASE W. RES. L. REV. 708, 715 (1986).
48. FN48. When insurance induces a person to use
more medical care than she would use if she were paying for the services
directly, then the insurance is a "moral hazard" with respect to the person's
indifference to cost. MARK A. HALL & IRA MARK ELLMAN, HEALTH CARE LAW
AND ETHICS 8 (1990).
49. FN49. "Experience rating" means that the annual
recalibration of premiums will reflect each insured group's actual claims
experience for the prior period. Mark A. Hall & Gerald F. Anderson,
Models of Rationing: Health Insurers' Assessment of Medical Necessity,
140 U. PA. L. REV. 1637, 1671 n.131 (1992). With experience rating, the
insurer has less incentive to refuse payment because all amounts it pays
are recouped in next year's premium increases.
50. FN50. See Capron, supra note 47, at 710-11 (stating
that the payment system offers incentives for excessive intervention with
51. FN51. Kartell v. Blue Shield, 582 F. Supp. 734
(D. Mass. 1984) (testimony of John Larkin Thompson, president of Massachusetts
Blue Shield); Law & Ensminger, supra note 29, at 14.
52. FN52. See supra notes 45-49 and accompanying
53. FN53. See supra notes 48-52 and accompanying
54. FN54. Corporate employers face increasing difficulty
when competing in the international marketplace because of spiraling health
care costs. Max W. Fine & Jonathan H. Sunshine, Malpractice Reform
Through Consumer Choice and Consumer Education: Are New Concepts Marketable?,
LAW & CONTEMP. PROBS., Spring 1986, at 213-14; Kenneth R. Wing, American
Health Policy in the 1980's, 36 CASE W. RES. L. REV. 608, 672-75 (1986).
55. FN55. The spiraling health care costs are pushing
governmental programs to the brink of disaster. For example, it is predicted
that by the mid-1990s Medicare will face bankruptcy. Board of Trustees
Report, A Proposal for Financing Health Care of the Elderly, 256 JAMA 3379,
3379 (1986). State Medicaid programs consume excessive portions of limited
state funds. Morreim, supra note 3, at 1720.
56. FN56. See Jon Gabel et al., The Emergence and
Future of PPOs, 11 J. HEALTH POL. POL'Y & L. 305 (1986). In 1989, private
insurance and other private payers paid 37% of health care bills, government
programs paid 42%, individuals paid 37% (premiums), and business paid 30%
of the bills. HEALTH LAW. NEWS REP., supra note 3, at 3. During that year,
39% of the money went to hospitals, 19% to physicians, and 8% to nursing
57. FN57. Harold L. Bischoff, Utilization Review
and Health Maintenance Organizations (HMOs) (1989) (unpublished fellowship
thesis, American College of Healthcare Executives, on file with the University
of Puget Sound Law Review).
58. FN58. See Alexander M. Capron & Bradford
H. Gray, Between You and Your Doctor, WALL ST. J., Feb. 6, 1984, s 1, AT
24; see also infra note 60 and accompanying text.
59. FN59. But see Tim Healy, High Stakes-For the
Self-Insured- Health Costs Push Small Employers to Seek Alternatives, SEATTLE
TIMES, Feb. 4, 1991, at B1.
60. FN60. Medicare classifies each patient's hospital
admission into one of 468 diagnostic groups. Medicare then multiplies the
average price and "weight" of the procedure to predetermine the reimbursement
the hospital will receive for the care given the patient. Michael Tichon,
Current Issues in Reimbursement: Medicare and Medicaid, 6 WHITTIER L. REV.
851, (1984). From that payment, the hospital keeps, as profit, moneys not
spent on patient care; alternatively, the hospital absorbs any loss. On
the positive side, diagnosis-related groups limit hospitalization and the
use of costly technologies. See Bruce C. Vladeck, Medicare Hospital Payment
by Diagnosis-Related Groups, 100 ANNALS INTERNAL MED. 576 (1984). However,
profit or loss potential creates an incentive for hospitals to discharge
patients earlier and perform fewer interventions. Some providers have begun
to stabilize the effect by "unbundling" care. See generally Arnold M. Epstein
& David Blumenthal, Physician Payment Reform: Past and Future, 71 MILBANK
Q. 193 (1993).
61. FN61. Bischoff, supra note 57, at 3.
62. FN62. Id. at 4.
63. FN63. Eliminating first-dollar coverage has
had limited effect on most patients. In general, unless the deductible
is very high, the patient merely incorporates into her decision making
only that portion of health costs that she is required to bear. Thus, if
the patient must bear the first $300, only that amount affects her overall
health care decision making. Such behavior is rational and predictable.
Consider how our eating habits would differ if we had to pay only one fifth
of our food costs.
64. FN64. Despite the historical opposition by providers
to risk shifting, the position of physicians and hospitals has been weakened
by the current economic situation. One third of total hospital capacity
is permanently idle, and patient days dropped from 280 million in 1980
to 240 million in 1984. By the mid-1990s, it is predicted that the number
will drop to 120 million. There are now 2.2 physicians per 1,000 persons,
1.2 physicians more than needed. By the year 2000, it is predicted that
we will have 1.5 more physicians than needed. Galen D. Powers, Allocation
of Risk in Managed Care Programs, in MANAGED HEALTH CARE: LEGAL AND OPERATIONAL
ISSUES FACING PROVIDERS, INSURERS, AND EMPLOYERS, at 279 (PLI Commercial
Law and Practice Course Handbook Series No. 393, 1986), available in WESTLAW,
65. FN65. Carolyn M. Clancy & Bruce E. Hillner,
Physicians as Gatekeepers: The Impact of Financial Incentives, 149 ARCHIVES
INTERNAL MED. 917, 917 (1989).
66. FN66. See infra part III.B.
67. FN67. The gatekeeping role is not new to physicians.
They have used their position in several ways. For instance, physicians
have used their authority as health care gatekeepers to resist hospitals'
and insurers' efforts to influence medical treatment. Furthermore, they
have generally used their role to obtain more services for the patient,
not fewer. Now, however, they use their position to save money for third-party
payers by ordering fewer services. See STARR, supra note 25 at 26-27; Capron,
supra note 47, at 747. Thus, the fundamental change in the basic ethical
concern of the system is revolutionary-from the "best interest of the patient"
to "cost containment."
68. FN68. Ossario, supra note 3, at 198; see Marc
P. Freiman, Cost Sharing Lessons from the Private Sector, HEALTH AFF.,
Winter 1984, at 85, 86.
69. FN69. For instance, insurance carriers increasingly
attempt to identify inappropriate medical interventions. See, e.g., Capron,
supra note 47, at 715.
70. FN70. Essentially, third-party payers reduce
provider pay by refining current payment methods, using explicit fee schedules,
or bargaining for prices. Refining current payment methods, because it
involves only modifying the calculation of the fee paid, provides the least
radical change in third-party payer reimbursement. Explicit fee schedules
have been used for basic medical expenses, and use of the schedules for
provider pay would merely extend their current use. The third-party payer
pays the lesser of the actual fee or the scheduled amount for the service.
Under an explicit fee schedule, the provider is paid directly. Id. at 718.
71. FN71. Third-party payers attempt to limit their
payment for medical services by "bundling" services for reimbursement purposes.
By using this payment method, third-party payers attempt to avoid the present
excessive incentives to overtreat. Id. at 722.
72. FN72. See Bischoff, supra note 57, at 4-5.
73. FN73. DOUGLAS D. BRADHAM, HMO AND PPO OVERVIEW:
HISTORY, DEVELOPMENT AND DEFINITIONS (Florida Bar 1989). There are five
models of HMOs. The staff HMO model delivers services by a physician group
that is employed by the HMO, with the hospital usually owned by the HMO
plan. The group HMO model delivers services through an outside physician
group under contract. Hospital services are usually contracted for as well.
While the primary care network HMO model has multiple contracts with physicians,
it is the primary care physician who controls all specialty referrals.
The Individual Practice Association (IPA) HMO model delivers services through
independent practices. These practices can be solo or group practices that
have organized to pool the financial risk. The open-ended HMO allows enrollees
to select services outside the HMO provider staff, network, or IPA, but
coverage is at the traditional indemnity rate and is typically less comprehensive
and more expensive than the HMO's standard package. Id. at 1.5-1.6. Methods
of payment to a provider are based on the model used. Staff models use
salary-based payment almost exclusively; IPA models use both capitation
and fee for service; network models use capitation; group models are split
among all three. See id.
74. FN74. Id. at 1.2.
75. FN75. Id. at 1.1. But see Sarah Glazer, The
Failure to Contain Medical Costs, 2 EDITORIAL RES. REP. 510, 511 (1988)
(giving Dr. Michael A. Shadid the credit for establishing the first prepaid
group practice in 1927, also in Oklahoma).
76. FN76. BRADHAM, supra note 73, at 1.1. The Ross-Loss
Health Plan is the oldest HMO still in existence. Milton H. Lane, Legal
Relationships and Responsibilities in HMOs, HEALTH CARE MGMT. REV., Fall
1983, at 53.
77. FN77. BRADHAM, supra note 73, at 1.1.
78. FN78. Glazer, supra note 75, at 511 (quoting
STARR, supra note 25, at 302).
79. FN79. For instance, in the 1930s, in response
to a shortage of medical facilities for construction workers, Kaiser Health
Foundation Plan originated an HMO in connection with the construction of
an aqueduct near Los Angeles, California. The HMO started as a series of
capitation agreements with area physician groups under which the group
was paid $1.50 per month for each covered employee. As of March 1988, it
was the largest prepaid plan in the United States with 4,904,768 members
in five states. Jack F. Monahan & Michael Willis, Special Legal Status
for HMOs: Cost Containment Catalyst or Marketplace Impediment?, 18 STETSON
L. REV. 353, 359 n.21 (1989).
80. FN80. Health Maintenance Organization Act of
1973, 42 U.S.C. ss 300e- 300aaa (1988). An HMO is defined under the legislation
as an organization that provides health services to members in specific
geographic areas in return for periodic, fixed prepayment. Id. s 300e.
The prepayment is fixed without regard to frequency, kind, or duration
of service. Id. s 300e(b)(1). An HMO must (1) assume full financial risk
on a prospective basis for the services provided to its members; (2) maintain
a "fiscally sound operation"; (3) protect its members from liabilities
of the organization; and (4) provide commercial members a comprehensive
package of health services, which was specifically prescribed in the legislation.
Id. s 300e. Until the HMO Amendments of 1988, Pub. L. No. 100-S17, 102
Stat. 2578 (1988), HMOs were required to use community rate premiums for
commercial members. Since 1988, however, HMOs are permitted to develop
premiums on the basis of their revenue requirements for providing services
to individuals and families of a group. 42 U.S.C. ss 300e-300q (1988);
42 C.F.R. s 417.104 (1992). Finally, the HMO Amendments of 1988 require
employers to make an equal contribution to HMO and other health benefit
options and forbid employers to financially discriminate against employees
who enroll in an HMO. 42 U.S.C. s 300e-9 (1988). Nothing, however, prevents
an employer from financially discriminating against an employee who does
not enroll in a managed care product.
81. FN81. Monahan & Willis, supra note 79, at
82. FN82. The number of HMOs rose from 290 to 648
between 1983 and 1988, and enrollment expanded from 13.7 million to 31
million members, averaging a 25% increase per annum. Id. at 360 n.27.
83. FN83. Barry R. Furrow, The Changing Role of
the Law in Promoting Quality in Health Care: From Sanctioning Outlaws to
Managing Outcomes, 26 HOUS. L. REV. 147, 151 n.16 (1989).
84. FN84. Health Maintenance Organization Act of
1973, Pub. L. No. 93-222, 87 Stat. 924 (codified as amended at 42 U.S.C.
s 300e (1988)). This Act delineates the requirements an HMO must meet to
become federally qualified according to organizational structure, health
care benefits, and the manner of conducting business. Though federal qualification
is not intended to represent that the HMO is financially viable, qualification
is necessary to receive federal subsidies under the Act. Compliance also
serves as a means to demonstrate publicly that the HMO has complied with
a federally uniform standard.
85. FN85. While the approach to legalizing HMO authority
varied, some states required insurance providers to have a license to market
their services. E.g., TEX. INS. CODE ANN. ss 20A.03-20A.06 (West 1993);
WIS. STAT. ANN. s 609.01(2) (West Supp. 1993). Other states required licensing
to solicit members and operate. E.g., Knox-Keene Health Care Service Plan
Act, CAL. HEALTH & SAFETY CODE ss 437.02, .12 (West 1990). All states
have generally exempted HMOs from state restrictions regarding the corporate
practice of medicine. But see Williams v. Good Health Plans, Inc., 743
S.W.2d 373, 378 (Tex. Ct. App. 1987) (noting no liability for IPA because
it could not practice medicine in Texas).
86. FN86. Robert B. Friedland, Introduction and
Background: Private Initiatives to Contain Health Care Expenditures, in
THE CHANGING HEALTH CARE MARKET 15 (Frank B. McArdle ed., 1986).
87. FN87. Monahan & Willis, supra note 79, at
88. FN88. See generally Cheralyn E. Schessler, Liability
Implications of Utilization Review As a Cost Containment Mechanism, 8 J.
CONTEMP. HEALTH L. & POL'Y 379 (1992).
89. FN89. Greg de Lissovoy et al., Preferred Provider
Organizations: Today's Models and Tomorrow's Prospects, 23 INQUIRY 7, 7-8
(1986). Monetary incentives to the patient effectively obviate freedom
of choice. If a patient is unable to pay the difference, she will have
no choice but to utilize the preferred provider. Approximately 20 states
have attempted to resolve this issue by passing laws that limit the reimbursement
differential between PPO and non-PPO utilization. It is unclear whether
such limitations protect freedom of choice, as the protection limits the
effectiveness of managed care products. Norman Payson, A Physician's Viewpoint
on PPOs, 6 WHITTIER L. REV. 699, 699-705 (1984).
90. FN90. Peter Boland, Myths and Misconceptions
About Preferred Provider Arrangements, in THE NEW HEALTH CARE MARKET 500,
501 (Peter Boland ed., 1988).
91. FN91. Nine states (California, Florida, Indiana,
Louisiana, Michigan, Minnesota, Nebraska, Virginia, and Wisconsin) have
laws that permit prepaid health plans that limit choice of provider. Fifteen
states have pending legislation. Congress is also considering legislation
that would override state laws inhibiting managed care health plans. Capron,
supra note 47, at 721 n.39.
92. FN92. De Lissovoy et al., supra note 89, at
93. FN93. Of the 51 jurisdictions, only 20 states
have a regulatory scheme for PPOs. E.g., LA. REV. STAT. ANN. ss 40:2201-40:2205
(1992); NEB. REV. STAT. s 44-4106 (1988); N.C. GEN. STAT. s 58-65-1 (1991).
Some states have indirectly regulated managed care products. For example,
Indiana enacted a law that forbids an insurer from unreasonably discriminating
against providers not willing to meet the terms of the agreement offered
to them. IND. CODE s 27-8- 11-3 (1992). California forbids exclusion from
membership based on the category of the license. CAL. INS. CODE s 10133.6
94. FN94. A 1986 national survey of PPOs classified
them as (1) hospital sponsored (including corporate hospital chains and
joint sponsorships by hospitals and physicians); (2) physician sponsored
(including physician groups); (3) commercial insurance sponsored; (4) Blue
Cross/Blue Shield sponsored; (5) investor (entrepreneurial) sponsored;
and (6) sponsored by other entities, such as union trusts. Cathy L. Burgess,
Comment, Preferred Provider Organizations: Balancing Quality Assurance
and Utilization Review, 4 J. CONTEMP. HEALTH L. & POL'Y 275, 277 (1988).
95. FN95. Powers, supra note 64, at 290-91.
96. FN96. Id. at 290; see infra part III.B.
97. FN97. Initially, managed care products were
perceived as a combination of providers offering discounts from customary
charges and retrospective utilization review programs for medical procedures
and ancillary testing. Richard A. Hinden & Douglas L. Elden, Liability
Issues for Managed Care Entities, 14 SETON HALL LEGIS. J. 1, 2 (1990).
Although a significant portion of the marketplace still views managed care
as discount medicine, today's managed care products have evolved into entirely
different entities where the organization actively sets the parameters
of medical practice. Id. at 2-3.
98. FN98. Robert G. Stevens, Managed Care Plans
and Participating Provider Agreements 3 (1991) (unpublished manuscript,
on file with the University of Puget Sound Law Review).
99. FN99. Id.
100. FN100. One author has commented with dismay
on the number of "inexperienced people" entering the "business" of managed
care. Ossario, supra note 3, at 198
101. FN101. Richard Blacker, Preferred Provider
Organizations, 6 WHITTIER L. REV. 691, 692 (1984).
102. FN102. Id. at 692-93. The fact that physicians
control the managed care organization does not change the underlying analysis
regarding liability. The underlying purpose to control cost remains and
the physician's behavior will be essentially the same as other owners.
103. FN103. Id. at 693.
104. FN104. Id.
105. FN105. Id.
106. FN106. For example, on legal and operational
issues facing providers, insurers, and employers, one commentator noted
that changing physician practice patterns is more important than thwarting
outliers. Joseph J. Martingale, Cost Containment Mechanisms: The Tools
of the Managed Health Care Revolution, in MANAGED HEALTH CARE: LEGAL AND
OPERATIONAL ISSUES FACING PROVIDERS, INSURERS, AND EMPLOYERS (PLI Commercial
Law and Practice Course Handbook Series No. 393, 1986), available in WESTLAW,
TP-All File. Outliers are services or patterns of practices that fall outside
established norms. In general, outliers are statistical observations that
are so far away from the rest of the sample that they should be disregarded
in statistical calculations. See THOMAS H. WONNACOTT & RONALD J. WONNACOTT,
INTRODUCTORY STATISTICS 417 (1972).