Under Scrutiny

Many risk managers are still waiting to see what effect healthcare reform will have on their jobs. One certainty is that it is already influencing provider liability. HRMR investigates.

In the midst of healthcare reform initiatives, hospitals, healthcare systems, physicians and other providers are coming under much closer scrutiny as reimbursement becomes linked to the value of patient services rendered rather than on the volume of tests and procedures performed.

Private payors started the ball rolling by introducing ‘pay for performance standards’ whereby providers get paid more (in the form of bonuses and higher rates of reimbursement) if they achieve certain outcomes and follow certain protocols. The government followed suit, having realized that Medicare/Medicaid expenses were rising fast.

The new rules have far-reaching implications. Now, for instance, billing for ‘never events’ is deemed to be fraudulent, and if a patient is readmitted within 30 days there is a reduction in reimbursement. To be approved as an accountable care organization (ACO) you have to comply with certain quality metrics. Across the board, quality controls are tightening and becoming more closely tied to reimbursement.

“More and more we’re seeing lists of metrics and standards being developed by all the payors and those lists are going to continue to grow as the government and the payors get more and more data about good and bad practices,” says Michael Callahan, a partner with law firm Katten Muchin Rosenman LLP.

The data can be an effective means to assess how a particular doctor is performing in comparison with his or her peers, in terms of everything from cost per patient visit to outcomes. It can make it easier to compare hospitals too, and may affect a hospital’s ability to be included, for example, in a managed care program.

Risk managers are by no means immune to these changes. “Where their focus has been on slips and falls, on adverse events, on the implications on liability and insurance, and on tracking claims, there are now reimbursement implications which they’ve never really had to focus on before,” says Callahan.

“Risk managers have to be aware of this movement and how their role and responsibilities can affect how, and if, a hospital is paid. They should be part of the team that’s helping to keep people on track as well as monitoring how this connection with metrics or compliance affects the risk management equation.”

Increased scrutiny

In particular, risk managers need to be aware that the liability landscape is changing—especially for those physicians who jump to embrace healthcare reform. Thomas McNeill, healthcare specialist for the Keane Insurance Group, says that these physicians will find themselves confronting more rules, regulations, standards and expectations than before. 

“Each of these areas will put expectations on the physicians that—should they fail to meet them—will introduce exposures to liability,” he says. He says the most glaring of these exposures occurs when a physician participates in an ACO or similar organization where the care provided is being monitored in order to make sure that cost efficiencies are being met. 

“Should any of the expectations not be met during the provision of care then an exposure is encountered. Or should the expectation not comply with the accepted standard by the medical profession then an exposure occurs. Either way, physicians will find they are vulnerable to potential liabilities.”

Callahan agrees that physicians will feel under increased scrutiny and pressure. “The licensing bodies, the Department of Justice, the accrediting bodies such as The Joint Commission—everyone is coming out with these quality expectations,” he says.

He adds that a doctor could now be excluded from employment, medical staff membership or participation in an ACO if a review of the facts and figures relating to his or her work (for instance, outcomes, length of patient stay and number of referrals) indicates that while not guilty of negligence, they fall short of fulfilling the new metrics that have to be met in order for the hospital to be fully reimbursed, or to avoid being penalised.

“If decisions are being made not to include, or to terminate or exclude people there’s going to be some litigation fallout there,” he warns.

Stretched resources

Healthcare reform is designed to provide care to more people with the same or fewer resources than before, and by its design it creates the opportunity for additional exposure to liability, says McNeill.   

“The impact that it will have on the number of physicians will be one important point to monitor,” he adds. “Some physicians will not play. The number of new physicians coming into the system could decline due to the changes put on the system that might not allow individuals to meet their professional goals. 

“Meanwhile the aging population along with more individuals with coverage will flood the system at the primary care level. The increased pressure on the system will impact wait times for appointments, and delays in necessary testing and diagnosis—clearly all of these increase the liability facing physicians.  

“If physicians embrace the use of mid-level providers then they will face the additional liability exposures of supervising their care and outcomes,” he says.

Absorbing risk

Issues around quality and performance measures affecting employability will undoubtedly become more prevalent as healthcare reform drives the formation of clinically integrated networks that are directly employing physicians. This means that issues of negligence, for instance, can become the system’s risk rather than stopping at the physician.

“Plaintiffs can get to the deep pockets of the hospital if they can say that the hospital did not properly credential the physician, or if they can argue that he’s been an outlier for two years and the hospital has done nothing about it. They may argue that had the hospital properly monitored the physician, he would not have harmed the patient,” says Callahan.

In other words, a negligence case that might have named only the physician as a defendant can become a corporate negligence claim against a hospital, health system or ACO.

“We should anticipate that the increase in employment of physicians by entities will enlarge the potential legal challenges that medicine may face. Often individuals may be hesitant to find fault with their physicians but they are not so disinclined if it is the big organization,” agrees O’Neill.

“Greater scrutiny of organizations as to the training and supervision of the physicians along with any policies and procedures that they initiate (and whether the physician did or did not follow them) will be opportunities for legal challenges.”

Access to data

In an environment where more and more data are being generated regarding the performance of hospitals and their staff, risk managers need to consider who can access the data and how it might be used in litigation.

“If value and better outcomes can be shown then they will have a positive impact on physicians and liability will be reduced,” says McNeill, “but the ability to measure value and outcomes and to convey this measure to individuals can be difficult. If you are not effective at this process then you will open the door to additional scrutiny of care provided and additional liability exposure. So how this is handled and communicated is very important.”

Callahan emphasizes the importance of making sure that all the quality data being generated and the reports and analyses being conducted are kept confidential under state and/or federal law.

“You need to carry out peer review processes, reports and analyses in such a way that sensitive information as to why a particular doctor keeps having problems remains privileged and confidential—otherwise you’re essentially creating a paper trail that a plaintiff or a federal agency can come in and gain access to.”

Protecting providers

In May 2013, Georgia took an important step to tackling this issue by becoming the first state to adopt a new law based on the American Medical Association’s (AMA) model state bill, the Provider Shield Act, which serves to clarify language in the Affordable Care Act (ACA) by providing that a physician’s failure to comply with, or a breach of, any federal statute, regulation, program, guideline or other provision shall not:

1. Be admissible;

2. Be used to determine the standard of care; or

3. Be the legal basis for a presumption of negligence.

“The AMA commends Georgia lawmakers for enacting legal protections for physicians engaged in quality and delivery improvement initiatives included in the federal healthcare reform law. This first-of-its-kind legislation reinforces the concept that medical decisions are made based on a patient’s unique medical needs,” says AMA board member Dr Patrice Harris.

“Georgia’s Physician Shield Act is based on model legislation developed by the AMA Advocacy Resource Center to make it clear that federal standards or guidelines designed to enhance access to high-quality healthcare cannot be used to invent new legal actions against physicians.”

She says that the decisive action of Georgia lawmakers holds the line against medical liability abuse and helps avert more civil actions against physicians, which increase medical liability insurance premiums and reduce access to healthcare for Georgia’s residents.

“The AMA worked closely with the Medical Association of Georgia to turn our model legislation into vital legal protections for physicians, which helps preserve access to care for patients,” she says.

Defensive medicine

While healthcare reform is generating unprecedented amounts of data on staff performance, it is also promoting a reduction of the amount of diagnostic tests carried out on patients. The threat of litigation has long nurtured the practice of ‘defensive medicine’ but healthcare reform seeks to cut the waste of resources that this approach encourages.

“It is too early to know if the practice of defensive medicine will truly be reduced by the changes that will be a part of the healthcare reform,” says McNeill. “Any reduction in defensive medicine will translate to a reduction in the cost of medical care. 

“But to achieve a reduction in defensive medicine you must be able to show physicians that they are not putting their careers at risk to a time-consuming and emotionally draining legal battle.”

Their anxiety may be soothed, he suggests, by the parallel push towards adoption of electronic health records (EHRs).

“If the systems that are being established have EHRs in place to make previous testing and results available to physicians then this will have a positive impact on the cost of defensive medicine. Two keys to this being effective are the ability to provide them in a timely manner and for the physicians to have confidence in their quality.”

McNeill warns that EHRs that have established protocols increase the potential liability if they are not completed or at least acknowledged by the physician. However, if the established protocols follow the accepted standard of care and it is documented that they are followed then they provide protection that may not have existed in the old written charts. 

“Likewise the new EHRs allow all of a patient’s records to be available to the treating physician. This means that treatment decisions are made with full knowledge of the patient’s history and so continuity should improve and the opportunity for improved health status exists. If the treating physician fails to check the patient’s records in the system and provides treatment that is counter-indicated then it will increase the exposure to liability.”

From the new focus on efficacy of care to the adoption of EHRs, reform is making ever more detailed information available: information that can be the friend—or the downfall—of the provider, depending on how it is treated.

As McNeill puts it: “Information is great—as long as you use it appropriately.”