Magazine article Risk Management

How to Transplant Organ Transplant Risk

Magazine article Risk Management

How to Transplant Organ Transplant Risk

Article excerpt

David Crosby admits he lived the stereotypical rock and roll lifestyle for 25 years, pushing his body far beyond normal healthy limits. Last November, the musician became a liver transplant recipient after a four-month wait, putting a recognizable face on the procedure and bringing media attention to the need for donors.

In June, baseball legend Mickey Mantle also became a liver transplant recipient. When doctors decided the transplant was necessary, Mr. Mantle's name was entered into the United Network for Organ Sharing's computer bank--a long-shot bet that a suitable organ would be found before his life expired. Mr. Mantle's luck played out--he was in the right place at the right time. The liver was implanted despite some ethical concerns about performing a transplant for a liver cancer patient.

These noted examples have increased public awareness of organ transplants. Most the attention has focused on the medical benefits of transplants, but there is also growing controversy--and litigation--about who should pay for these procedures. BCS estimates that U.S. insurance companies will pay between $3 billion and $4.5 billion in transplant claims in 1995.

Although comprehensive organ and bone marrow transplant coverage is usually part of a quality benefits package, risk managers who assume that stop-loss or network coverage adequately covers organ transplants may expose their employee benefits health plan to unpredictable and potentially catastrophic risk.

POTENTIAL LIABILITIES

The cost of transplant claims can overwhelm a risk manager's carefully charted financial planning goals. For example, the average cost for a liver transplant is $175,000, but actual costs can range from $100,000 to $1 million, depending on potential complications and the length of hospital stay. The patient will also incur treatment costs for the illness that makes the transplant necessary and for a lifetime regimen of prescription drugs to prevent transplant rejection. Table 1 illustrates the tremendous variation in transplant costs.

TABLE 1
TRANSPLANT COSTS
(Costs in thousands)
             Average       Minimum         Maximum
Heart          112            32            491
Heart/Lung     189            70            893
Liver          173            74           1000
Pancreas        74            42            188
Source: BCS

Given the inherent unpredictability of transplants, simple mathematical formulas are ineffective in predicting a specific group's transplant experience. As demonstrated in Table 2, unpredictability may be the only trend. For example, one client experienced transplant loss ratios of 276 percent in 1992, 190 percent in 1993 and 83 percent in 1994.

TABLE 2
LOSS RATIO
(BCS client experience, shown in percentages)
Company          1992       1993         1994
1                 276       190           83
2                 101        39           26
3                  99       112            7
4                  21       107           80
5                  65        63           81
6                 123       147          120
7                 158         0           57
8                  43       120          149
9                  58       120          149
Source: BCS

Paying for transplants is expensive, but not paying for them may result in lawsuits and negative public relations. In January 1994, a jury awarded the family of breast cancer patient Nelene Fox an initial judgment of $89 million against Healthnet, a California HMO, because Healthnet refused to pay for a $130,000 bone marrow transplant. (The case was later settled out of court.)

In cases like these, an employer may be held liable for damages resulting from the negligent selection of providers; cost containment incentives that may conflict with medical necessity; or breach of contract. Companies may also face vicarious liability lawsuits for alleged negligent acts of their agents. …

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