Health Care Management Papers

Document Type

Journal Article

Date of this Version

6-2001

Publication Source

The Journal of Legal Studies

Volume

30

Issue

S2

Start Page

661

Last Page

668

DOI

10.1086/342339

Abstract

Managed care organizations (MCOs), as insurance entities, should be liable under contract for inappropriate denial of coverage, whereas treatment errors should be conventional malpractice claims against physicians. Most MCOs are loose networks of independent practices that lack the requisite information or technology to improve care. Holding such MCOs vicariously liable for their physicians’ negligence would lead to increased “false positive” claims and distort deterrence. Integrated MCOs already contractually assume responsibility for the negligence of their salaried physicians, which appears to be efficient. Maintaining the distinction between medical error and coverage denial requires that treatment decisions be evaluated relative to a standard of care that recognizes common MCO control strategies. Class actions against MCOs are based on the false premise that MCO cost control strategies harm patients. Charges that enrollees were led to expect more coverage than they actually received imply, if true, that HMOs should have realized supernormal profits, for which there is no evidence.

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Date Posted: 27 November 2017

This document has been peer reviewed.