Academic journal article Journal of Corporation Law

Health Maintenance Organizations and Physician Financial Incentive Plans: Should Physician Disclosure Be Mandatory?

Academic journal article Journal of Corporation Law

Health Maintenance Organizations and Physician Financial Incentive Plans: Should Physician Disclosure Be Mandatory?

Article excerpt


"In all my treatment I will strive so far as lies in my power for the benefit of the patients. And I will restrain myself from things which are injurious to them, or are likely in my opinion to do them harm."1 Physicians take this language quite seriously as it is a portion from the Hippocratic Oath that physicians pledge. This sacred vow is at the core of the medical profession. As the oath reveals, doctors have a duty to do no harm to their patients, but the problem is determining how much control over physicians' actions this oath actually has. Clearly, a doctor cannot intentionally prescribe harmful drugs or IMAGE FORMULA4

perform unneeded, injurious treatments. However, does this oath apply to a physician's actions beyond the administration of medical treatment itself? How does this relate to a physician's ability to make money and receive reimbursement for his services? It is likely that at the time Hippocrates wrote the oath for physicians, payment for services was not a primary issue.

Health care has evolved considerably since the era of Hippocrates. It is an everchanging field of science and law. Today's patients have high expectations when it comes to their health care. Patients expect they will have full information concerning the treatments a doctor performs or recommends. They expect to get well, and not be harmed. However, in the forefront of all of this is the issue of money. Patients expect the costs of health care to remain reasonable and not to completely wipe out their pocketbooks. Difficulties have arisen, however, in keeping costs down.

The onset of health maintenance organizations (HMOs) in the 1960s forever changed health care and brought about many new legal problems. HMOs originated to rescue the health care industry from rising insurance premiums.2 To contain health care costs, HMOs formed arrangements with physicians in which HMOs offered financial incentives to physicians. In return, physicians agreed to minimize the costs that HMOs would have to cover under the arrangement.3 Because of these agreements, HMOs have fewer health care costs to reimburse, thus, achieving the goal of lowering health care expenditures.

These arrangements, however, have not come without controversy. When doctors receive financial incentives, conflict of interest questions surface. The question of whether a physician owes a duty to his patients to disclose his financial incentive arrangement with an HMO consequently arises.

This Note addresses whether a physician should be legally bound to disclose information concerning the financial incentive arrangements in which the physician and the patient's HMO are involved. The Note also looks at the ramifications of making this disclosure a physician's legal duty. Part II provides an explanation of health maintenance organizations, how they function, and the financial incentive arrangements HMOs utilize to compensate physicians.4 This section also develops the concept of fiduciary law and how this relates to physicians.5 Part II concludes with a discussion of the physicianpatient relationship and the expectations of informed consent.6 Part III examines the potential impact of requiring physicians to disclose financial arrangements to the patient or allowing optional disclosure.7 Part IV recommends that there should be no legal duty IMAGE FORMULA8

mandating that physicians disclose to patients the financial incentive arrangements between physicians and HMOs.8


Understanding the basic framework of health maintenance organizations and their financial arrangements with physicians is useful to the analysis of this Note. This section defines these arrangements. Part II also explains the relationship between a physician and his patient and examines the fiducial qualities of the relationship.

A. Managed Care and Health Maintenance Organizations

Health care has evolved into something that many early American physicians would have never expected. …

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