Patient care vs. economics: How liable are physicians and facilities in this environment

Two examples of case law point out that defining the complex relationship between practice and profits can play a role in malpractice legislation.

There is an uncomfortable alliance in the United States between the health care system and the free-market economy. Our economy is inextricably linked to the inner workings of our health care system, yet the practice of medicine at times seems to defy the natural laws of the free market.

As the federal government considers health care reforms, there is a growing debate whether the delivery of health care should remain “private” or if a government-dominated single-payer system should be substituted.

In a free market, when the supply increases prices go down. In medicine, studies have shown that when there is a higher concentration of physicians and surgeons relative to the patient population, physician and surgical fees increase rather than decrease. Some say these distortions are created by government funding of health care which leads to inflationary pressures and perverse incentives.

Profit motive is an article of faith in American democracy and the citizens are comfortable with the notion of an individual working hard, achieving success, and creating nearly limitless profits in the process. But, trying to calibrate the for-profit incentives in the medical industry with the need to protect patients’ health interests has led to medicine becoming a highly regulated industry.

B. Sonny Bal

Lawrence H. Brenner

Regulations emanate from the party that pays the bills in most cases, namely the federal government. One manifestation of this regulation is represented by the recent actions of the Department of Justice with regards to consulting agreements and other business incentives offered to surgeons.

Conflicts of interest

It is hard to imagine a prohibition on the amount of money spent to entertain a client in any other American industry other than medicine. Yet, that is where our profession finds itself, where even the minor exchange of “something of value” to a physician is frowned upon. The rationale for such onerous restrictions is that providing gifts or other value-added benefits to physicians creates a conflict of interest that is unacceptable in matters dealing with the delivery of health care, specifically when it is paid for by the government.

However, this premise ignores the fact that most medical and surgical decisions are fraught with conflicts of interest in a fee-for-service system. Every time a surgeon recommends surgery a financial benefit accrues to the surgeon.

Our society is willing to entrust physicians with this inherent conflict of interest, but society is increasingly unwilling to extend this trust to the business dealings of physicians. The result has been complex and incomprehensible regulation.

The complex interplay between profit, medical judgment and third-party payer pressure can also have an impact on malpractice litigation. Two classic cases, Wickline v. The State of California and Muse v. Charter Hospital of Winston-Salem, are examples.

Physician responsibility

In the 1986 Wickline case, a patient, Lois Wickline, sued the State of California alleging that the Medi-Cal state insurance program caused her to be discharged her prematurely from a hospital resulting in a leg amputation. She had vascular insufficiency of her extremities and was admitted to undergo a major revascularization procedure. Medi-Cal approved a 10-day hospital stay. The patient endured a stormy recovery and her surgeon requested an additional 8 days of hospitalization. Medi-Cal granted only 4 additional days, and she was released from the hospital at the end of those 4 days.

Wickline was readmitted to the hospital 9 days later with blood clotting in the leg and an infection. After unsuccessful attempts to save the leg, it was amputated. She filed an action against the Medi-Cal program, claiming that the failure to extend the hospitalization benefits was the cause of her amputation.

The California Court of Appeals rejected her claim. However, in its opinion the court strongly suggested that the physician should be liable for discharging her when he knew it was dangerous to do so, regardless of what the insurance company had decided.

The court wrote, “If, in his medical judgment, it was in his patient’s best interest that she remain in the acute care hospital setting for an additional 4 days beyond the extended time period originally authorized by Medi-Cal, Dr. Polansky should have made some effort to keep Wickline there … Medi-Cal was not a party to that medical decision and therefore cannot be held to share in the harm resulting if such decision was negligently made.”

While subsequent judicial decisions have overturned the portion of the case that limited Medi-Cal’s liability, the point of this litigation is that a physician/surgeon is still responsible for negligently discharging a patient even if the financial benefits related to the hospital stay have been exhausted.

Wickline also seems to suggest that a physician can be negligent for not acting more aggressively as a patient’s advocate with third-party payers.

Hospital liability

The Muse case focused on hospital liability. In the 1995 case, a psychiatrist admitted a 16 year-old patient with depression and suicidal ideation to a private psychiatric hospital. The physician requested that the patient remain hospitalized for 2 days beyond the time limit provided by the patient’s insurance.

The hospital disagreed with the physician, and the patient was discharged with a referral for outpatient treatment at a county mental health facility: 2 weeks later, the patient committed suicide.

In the ensuing litigation, the hospital claimed that the decision to discharge the patient had nothing to do with the patient’s health benefits or assets. While there was no formal policy at the hospital to discharge patients when their benefits were exhausted, the estate of the deceased patient presented expert testimony that an informal policy existed to expedite such discharges.

After examining patterns of patient discharges from that hospital, the experts, offered the opinion that there was a de facto policy to release patients when their benefits ran out. The jury returned a substantial verdict awarding both compensatory and punitive damages.

In a provocative dissent, one of the judges wrote, “Since the hospital was not responsible for the limits of the Muse family’s insurance coverage, one might ask whether it was made a scapegoat for the faults of those who selected or designed that coverage or for the circumstances that resources, societal as well as individual, are tragically scarce.”

Does the Muse case represent the actions of a greedy, insensitive and over-reaching hospital that cared less about the health of its patients than it did about its own profits, or did the hospital have the right to make prudent business decisions including the decision not to provide extended free care to its patients?

While the majority and dissenting opinions suggests differing answers to these questions, the ethical and legal tensions arising from the Muse case represent the inherent dilemmas created by medicine as a for-profit enterprise. As long as these inherent tensions exist, it is inevitable that the law will substantially impact the practice of medicine.

We will continue to update you on legal developments that impact your practice so you can make legally sound clinical and business decisions. As with many of the provocative issues that arise at the intersection of medicine and the legal environment, these defy easy answers.

What do you think?

Would you hold the physician liable in the Wickline case for discharging the patient if in his or her judgment it would endanger the patient’s health?

Would you hold the hospital liable in the Muse case if it had a formal policy to discharge patients when their benefits were exhausted and so advised patients before their admission?

For more information:

• B. Sonny Bal, MD, JD, MBA, is associate professor of hip and knee replacement in the department of orthopedic surgery, University of Missouri School of Medicine.
• Lawrence H. Brenner, JD, is on the faculties of orthopedics at Yale University and the University of Southern California and practices in Chapel Hill, N.C. Address all correspondence to Brenner at lb@lawrencebrennerlaw.com.