In a managed care world fraught with liability risks, most professional liability policies and Directors & Officers policies exclude coverage for managed care administrative activities. SCPIE’s MCO policy can protect organizations and their employees from tort liabilities associated with the operations of MCOs.
SCPIE’s policy is specifically designed to cover the exposures of provider medical groups and management groups. These include Independent Practice Associations (IPAs), Physician Practice Management Organizations (PPMs) and Management Service Organizations (MSOs).
A medical group’s primary professional liability coverage does not have to be through SCPIE in order for the group to purchase this policy.
The policy covers the main areas of risk facing MCOs:
Credentialing
MCOs are responsible for evaluating their healthcare providers’ qualifications by answering questions such as: Have the providers received the necessary education? Do they have the proper medical and drug licensure? Are they competent in their area of practice? Have they complied with continuing educational requirements?
Patients can sue for the alleged failure to properly credential physicians; on the other hand, physicians who are prohibited from continuing to practice for the MCO, and those who are disallowed in the first place, can sue as well.
Utilization Review
Utilization management decisions are increasingly being delegated to provider groups, which are now conducting utilization reviews to examine the type of care requested, whether the requested care is necessary and whether other methods could offer the same or better results at a reduced cost.
MCO contracts and marketing materials are often unclear on such issues, leading to confusion and unrealistic expectations among consumers. If patients do not receive the treatment they need —r the treatment they think they need—they may sue, especially if they believe the denial is based on their MCO’s bottom line.
Another frequent bone of contention: patients’ requests to avail themselves of a specific type of physician or a facility not part of the MCO’s network.
Vicarious Liability
Vicarious liability arises from the performance or nonperformance of medical services by a healthcare provider—in the MCO context, usually from ancillary patient treatment not directly administered by a primary care physician.
For example, if a medical group picks a particular laboratory to send patients to, and the laboratory makes mistakes when performing tests, the medical group may be swept into the stream of potential litigation.
The problem is intensified by the fact that in many managed care systems, primary care physicians refer patients to a limited group of specialists and ancillary healthcare providers. The liability risk for a physician making referrals is heightened because patients cannot choose any specialist or provider they want.
There doesn’t even have to be an actual contractual relationship for vicarious liability to exist. The legal concept of “ostensible agency” recognizes patients’ “reasonable expectations and beliefs” that certain physicians are affiliated with each other. As a source of lawsuits against MCOs and their affiliated medical groups, ostensible agency is just one of a number of legal theories being utilized by plaintiffs’ attorneys.
Healthcare Management
The policy also covers healthcare management, which encompasses:
- quality-of-care review
- quality assurance
- peer review
- claims processing
- adjusting for benefits or coverage under healthcare plans
- enrollment
- marketing and advertising services
- educational and promotional services
- triage counseling services
- confidentiality of information.
Both medical and nonmedical personnel—including executive officers, medical directors, group administrators, stockholders and members of respective boards of directors, trustees and governors—are covered under the policy.
SCPIE’s MCO policy includes automatic coverage for subsidiaries (as defined in the policy) and their employees. Its definition of “insured persons” includes the officers or managers of third-party management organizations under written contract with the MCO. It also covers authorized volunteers acting at the direction of the MCO.
Coverage is on a claims-made and –reported basis. It is a duty-to-defend policy, which means that within the limit of liability, SCPIE has the right and duty to defend any claim alleging a wrongful act, even if the claim is groundless, false or fraudulent.
The policy’s limit options vary to accommodate the actual risks faced by specific MCOs in their operations. The policy has an annual aggregate limit of up to $10 million; higher limits are available with special approval. It should be noted that defense costs are part of—not separate from—the insured limits of the MCO policy.
To receive additional information and a free, no-obligation premium estimate, call SCPIE at 800/717-5333 or click here.
