Third Party Payers and the Psychiatrist
The increasing role that insurers play in determining the type of treatment patients receive has increased the complexity of the psychiatric–legal interface. A major public policy issue in this area is whether, and to what extent, insurance companies may be held responsible when a denial of coverage results in harm to a patient. Health care providers are faced with difficult legal and ethical decisions when their professional judgment calls for provision of a particular service in the face of an insurance company denial. The law in this area is evolving; whereas early cases seemed to cloak managed care payers with a great deal of protection, later cases and some statutory changes are increasing their exposure.
The 1987 case, Wickline v. the State of California, illus-trates the relationship between the treating physician and the third party payer in a relatively early stage of the development of this area of law. The message of the case is that a denial of coverage does not obviate a physician’s duty to render treatment to the appropriate standard of care. Where coverage is denied, physicians are nonetheless obligated to exercise their medical judgment, and, where necessary, to challenge the denial through whatever mechanisms are available.
Three years later, the same California court made it clear that insurance companies may indeed share liability with physi-cians when the denial of benefits results in harm to the patient. In the case of Wilson v. Blue Cross of California (1990), the patient, Wilson, was admitted to a hospital in Los Angeles, suf-fering from depression, substance dependence and anorexia. His treating physician determined that he required 3 or 4 weeks of inpatient care, but on his 10th day in the hospital his insurance company stated that it would not pay for any further hospital care. When the family made it clear that they could not afford to pay for the hospitalization, the patient was discharged; 20 days later he committed suicide. Although the treating physician did not ap-peal the denial of coverage, he later testified that he was reason-ably sure that Wilson would not have committed suicide had he been permitted to remain in the hospital. The court ruled that the insurance company’s denial of coverage might have been a proxi-mate cause of Wilson’s suicide, and it permitted the case to go to trial where the plaintiff would have had to prove the elements of negligence to a jury. The intersection of the demands of confiden-tiality with those of managed care presents a second major area of complexity. At the beginning of therapy, the psychiatrist should outline the scope of utilization review and should obtain the con-sent of the patient before releasing any information to the review-ing companies. Once a patient gives consent for a psychiatrist to speak to a utilization review committee, the psychiatrist should give only the minimal amount of information necessary to facili-tate the utilization review decision. Patients should also be made aware of the possibility that payment for recommended services may be denied by the insurance company. The treatment agree-ment between the patient and psychiatrist should make clear the patient’s financial responsibilities in the event of such a denial. However, a psychiatrist may face liability for failure to provide, or arrange for, necessary care in the community, just as in the hospital setting, even when coverage is denied.
Finally, there is a potential for conflict and liability when health care providers sign contracts with managed care companies. Whether the contract is based on a capitated scale or fee for service, providers often have a financial incentive to limit the care they provide (just as they have a financial incen-tive to inflate costs under traditional indemnity arrangements). In addition, some managed care companies are making an effort to transfer their financial liability for treatment denials to their psychiatrists by having them sign “hold harmless’’ or “indem-nification’’ agreements. Psychiatrists must be aware that such arrangements may have an impact on their relationships with their patients, and must guard against the possibility that their clinical judgment may be influenced thereby.