Race, Health Care and the Law 
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Conclusion - Managed Care

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Vernellia R. Randall
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 Conclusion

MANAGED CARE, UTILIZATION REVIEW, AND FINANCIAL RISK SHIFTING: 
COMPENSATING PATIENTSFOR HEALTH CARE COST CONTAINMENT INJURIES[FNa]

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

 
The health care system is undergoing drastic changes. One major change is in the relationships among physicians, patients, and third-party payers. Third- party payers are finding an increasing amount of their profit going to health care costs. As health care costs increase, third-party payers are  seeking ways to introduce cost containment into the equation. One way that managed care organizations effect cost containment is by shifting the risk of overutilization to the physician, thus inducing the physician to order fewer medical services and to refuse to treat high-risk patients. 

The Hippocratic oath requires that the physician do no harm.(426) Patients expect physicians  to act in the patients' best interest.(427) Third-party payers (particularly managed care products) now contract with physicians to act as gatekeepers to health care services, to avoid providing services that are minimally beneficial, and to protect the wealth of the third- party payers. 

This new relationship between third-party payers and physicians introduces a new and different risk into the health care delivery system: A patient may be injured because a physician failed to provide services because of the financial pressures of third-party payers. Under this arrangement, third-party payers, as the new rule makers, are in the best position to promote safety and prevent injury. Thus, it is important that as the health care system changes, new systems of compensation or means of risk placement be developed based on the new relationships between physician, patient, and third-party payer. 

Traditionally, third-party payers have not been held liable for the actions of health care providers. That standard was developed because no contractual relationship existed between the third-party payers and the health care providers. Now, third-party payers have contractual relationships with health care providers that require the physician to act as an agent for the third- party payer. These new contractual relationships obligate providers to provide care within the guidelines of the managed care products. Thus, third-party payers, not providers, set the standard of care. Yet, when patients are injured because of the standard of care, the third-party payers are insulated from liability. Thus, third-party payers unfairly avoid paying for injuries that their managed care activities cause, and patients are left with uncompensated injuries. 

The legal system must apportion liability based on the risk that an actor has created. Managed care actors have introduced  risks that individuals will be injured as providers are pressured to deny access to beneficial services. If cost containment is important to society, the injuries that result from lower health care costs should be spread throughout society. The injured patient should not be required to bear the cost alone, nor should the provider. The appropriate party to assume the risk is the entity that created the risk-the third-party payer. Thus, a medical injury compensation fund is a fair quid pro quo for cost containment measures that run the risk of increasing uncompensated medical injuries. It assures compensation for those injured, while spreading the cost to those generating the risk. Thus, a medical injury compensation fund can solve the problem of managed care cost containment injuries

 



 






 


Endnote


426. FN426. Curley Bonds, The Hippocratic Oath: A Basis for Modern Ethical Standards, 264 JAMA 2311 (1990); see also Donald Konold, Codes of Medical Ethics: History, in ENCYCLOPEDIA OF BIOETHICS 162 (Warren T. Reich ed., 1978). 

427. FN427. See supra notes 168-171 and accompanying text. 

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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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