Not Just a Minimum Income Policy for Physicians: The Need for Good Faith and Fair Dealing in Physician Deselection Disputes

By Coppolo, Stephen D. | William and Mary Law Review, November 2006 | Go to article overview

Not Just a Minimum Income Policy for Physicians: The Need for Good Faith and Fair Dealing in Physician Deselection Disputes


Coppolo, Stephen D., William and Mary Law Review


TABLE OF CONTENTS

INTRODUCTION
I. THE PROBLEM OF PHYSICIAN DESELECTION
    A. Deselection Defined
    B. Common Bases for Physician Deselection
II. PUBLIC POLICY ARGUMENTS FOR AND AGAINST LEGISLATIVE
    AND JUDICIAL RESPONSES TO PHYSICIAN
    DESELECTION ABUSES
    A. Arguments Favoring Greater Legislative and
       Judicial Involvement
       1. The Impact of Deselection on Physicians
       2. Analogous Principles in the Employment Law Context
       3. Physicial Deselection Affects Patient Health
    B. Arguments Against Greater Legislative and
       Judicial Involvement
III. JUDICIAL RESPONSES TO PHYSICIAN DESELECTION
    A. Harper v. Healthsource
    B. New Jersey Psychological Ass'n
    C. Potvin v. Metropolitan Life Insurance Co.
IV. WHY HAS THE HARPER/POTVIN TREND FAILED TO
MATERIALIZE? AN ANALYSIS OF LEGISLATIVE AND
MARKET DEVELOPMENT
    A. Theories on the Failure of a Harper/Potvin
       Trend To Materialize
    B. Legislative Protections for Physicians
       Facing Deselection
       1. An Overview of State Statutes
       2. The New York Statute as a Model of a
           Comprehensive Protective Statute
    C. Market Forces Will Continue To Encourage MCOs
       To Deselect Physicians for Legitimate and Illegitimate
       Reasons
V. PROPOSED GUIDELINES FOR COURTS FACING PHYSICIAN
   DESELECTION LITIGATION
    A. Courts Should Use the Implied Covenant of
       Good Faith and Fair Dealing To Respond to
       Deselection Abuses
    B. Courts Should Provide Procedural, Not Substantive,
       Protections to Physicians Facing Deselection
    C. Specific Procedural Components Courts Should
       Require Under Good Faith and Fair Dealing
       1. Notice and a Reasonable Period of Time Prior to
       Termination Becoming Effective
       2. Some Ability for the Physician To Inspect the
       Insurer's Evidence
       3. A Hearing at Which the Physician Can Be
       Represented and Present a Defense
CONCLUSION

INTRODUCTION

Physician deselection has been described as a "very complex issue that lacks a complex history." (1) Essentially, a standard contract term that gave no physician pause in the "good old days" now causes significant heartburn for doctors living in the world of managed care. The term "physician deselection" generally refers to the process by which a managed care organization (MCO) terminates its relationship with an affiliated physician in its network, whether with cause or without cause. (2) The problem of physician deselection is a product of the transition of the U.S. health care delivery system from a fee-for-service insurance model to a managed care model.

In the era of fee-for-service health insurance, insurers would pay for the medical bills of their insured essentially without regard to who was the treating physician. (3) During the MCO revolution of the 1980s and 1990s, physicians' role with respect to insurers suddenly changed from something akin to independent contractors to something much closer to being true employees. Physicians now need to worry not only about treating patients, but also about providing their services in a "managed care compatible" fashion. (4) In 1996, when the Supreme Court of New Hampshire issued its decision in Harper v. Healthsource New Hampshire, Inc., (5) a state court of final jurisdiction for the first time held that deselections without cause and without the opportunity for review violate public policy. (6)

Though case law on physician deselection appears to have stagnated since the 2000 California Supreme Court decision in Potvin v. Metropolitan Life Insurance Co., (7) legislators and courts need to continue working to prevent deselection abuses. This Note will examine recent judicial and legislative attempts to provide procedural protections to physicians facing deselection. This Note will also analyze the current state of health insurance markets to assess whether they have stabilized to the point where improper deselections will no longer be a significant problem. …

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