A sixteen-year-old girl, enrolled in a health care plan administered by Kaiser Foundation Health Plan, began experiencing mild back pain. Over the next several months, the pain became more severe. She visited her primary care physician (PCP). The girl’s mother informed the PCP that the girl's chiropractor believed an MRI was necessary. The PCP told the mother and daughter that although she agreed an MRI was necessary, she lacked the authority to authorize the procedure. The PCP prescribed a steroid medication and referred the girl to the medical group's physical medicine department, explaining that the physical medicine department had authority to request MRIs. The PCP's notes of the meeting failed to mention that the mother or daughter had requested an MRI.
Twelve days later the mother and daughter met with a physician in the medical group's physical medicine department. The daughter told the physician she was suffering from severe, unremitting lower back pain that made it difficult for her to sleep. She also stated she had tried numerous forms of treatment and all of them failed to alleviate her pain. The mother informed the physician they had been referred to the physical medicine department to obtain authorization for an MRI. The physician, however, stated she would not authorize an MRI unless the girl was undergoing back surgery. The physician recommended the girl treat her back with heat and ice packs, pain medication, and physical therapy. She also recommended the girl start exercising more frequently and improve her diet. They physician's notes of the meeting failed to indicate that the mother or daughter had requested an MRI.
About six weeks later, the mother called the physician in the medical group's physical medicine department and renewed her request for an MRI. She told the physician that her daughter's pain level had increased and that she had begun experiencing numbness in her foot. The physician, however, denied the request for the MRI and referred the girl to physical therapy. The girl attended physical therapy until she found the sessions too painful to continue. Her physical therapist told the mother that she agreed an MRI was necessary to determine the cause of the girl's pain.
About a month later the mother called the physician in the medical group's physical medicine department again to request an MRI. The physician denied the request and told the mother she could get a second opinion if she did not like what she was being told. Later, the mother contacted the PCP and reported that the physician in the medical group's physical medicine department had repeatedly refused to order an MRI. The PCP immediately approved an MRI.
The girl received an MRI about eleven months after her initial complaint to the PCP. Four days after the procedure, the PCP reported the MRI showed a growth on her pelvis. Subsequent testing revealed she had an aggressive form of bone cancer that resulted in the amputation of her right leg and a portion of her pelvis.
The girl filed a bad faith insurance action alleging Kaiser Foundation Health Plan provided improper economic incentives that induced her health care provider to deny a magnetic resonance imaging test (MRI). The girl further alleged the plan did not adequately inform her of right to appeal the denial of the MRI and violated the California Health and Safety Code by failing to provide medically necessary care in a timely manner.
The plan filed a motion for summary judgment. The plan argued that, under the Health and Safety Code, a health plan could not be held vicariously liable for improper medical decisions made by a care provider. The plan contended the parties' undisputed evidence showed: (1) the PCP and the physician in the medical group's physical medicine department were solely responsible for denying the girl's requests for an MRI; (2) the plan had no influence over the medical group's treatment decisions; (3) the plan was unaware the medical group had refused to authorize an MRI; and (4) the girl never contacted the plan to complain about the denial of the MRI. According to the plan, this evidence demonstrated it could not be held liable for insurance bad faith or breach of contract because it did not directly commit any act or omission contributing to delaying the girl’s MRI.
The medical group that employed the PCP and the physician in the physical medicine department, on the other hand, argued it was entitled to judgment on both of claims because: (1) only an insurer or health care service plan could be held liable for insurance bad faith; and (2) the girl's allegations against the PCP and the physician in the physical medicine department sounded in tort, thereby precluding a claim against the medical group for breach of contract.
In support of their motions for summary judgment, the plan and medical group filed affidavits stating that the plan and the medical group were separate entities who negotiated at arm’s length. Under their operating contracts, the plan was required to pay the medical group a pre-negotiated amount per member. The medical group, in turn, was solely responsible for providing patient care and determining how to spend its funds. No portion of physician compensation was tied to utilization of MRIs and all physicians were free to order MRIs for their patients based on their clinical judgment.
A person responsible for the plan's processing of subscriber complaints and grievances stated she had reviewed the girl's file and found no evidence that she or anyone on her behalf called to request that an MRI be authorized by the plan. She further stated there was no evidence the plan had received a complaint from the girl or anyone acting on her behalf regarding any alleged denial or delay of medical care or service.
The PCP and the physician in the physical medicine department stated that their decisions related to the girl’s care and treatment, including ordering an MRI, were based on their clinical judgment. Both physicians also stated they had never been told they lacked authority to order an MRI, or that they would be rewarded for denying an MRI.
The Los Angeles County Superior Court granted the motion and entered judgment in favor of the plan. After entering its order, the court permitted the girl to amend her complaint to add a medical malpractice claim against the medical group. The court then entered a judgment dismissing the plan from the action.
On appeal, the girl argued the trial court erred in granting judgment on her claim for breach of the implied covenant of good faith and fair dealing. She presented no argument regarding the other three claims the court dismissed in its order and judgment, which included breach of contract, negligent infliction of emotional distress, and intentional infliction of emotional distress.
The California Second District Court of Appeal, Division 7, affirmed. The court held that the trial court did not err in dismissing the plan from the action.
Health and Safety Code section 1371.25 stated that health plans and providers may be held liable only for their own acts or omissions. A plan and providers are each responsible for their own acts or omissions, and are not liable for the acts or omissions of, or the costs of defending, others. Any provision to the contrary in a contract with providers is void and unenforceable. Several courts have concluded section 1371.25 prevents a health care service plan from being held vicariously liable for a medical provider's treatment decisions.
The girl alleged a bad faith claim against the plan that was predicated on the medical group's delay in authorizing medical services. The plan delegated the utilization review function to the medical group, but permitted plan members to appeal denials of service to the plan. There was no evidence the girl or anyone acting on her behalf ever contacted the plan to complain about the medical group's repeated denials of the MRI, nor is there any evidence the plan had any knowledge the medical group had denied an MRI.
The girl’s arguments in opposition failed for three reasons. First, the Knox–Keene Act specifically permits the use of capitation agreements between health plans and providers. Second, the plan did not have a duty to train the medical group's physicians to advise the girl of her contractual rights to appeal the denial of the MRI. Third, section 1367, subdivision (e)(1) does not make health plans liable for providers' delay in authorizing medically necessary services.
The California Second District Court of Appeal, Division 7, affirmed the trial court’s dismissal of the health plan from the girl’s cause of action.
See: Rahm v. Kaiser Foundation Health Plan, Inc., Not Reported in Cal.Rptr.3d, 2014 WL 1599942, Nonpublished/Noncitable (Cal. Rules of Court, Rules 8.1105 and 8.1110, 8.1115) (Cal.App. 2 Dist., April 22, 2014)(not designated for publication).
See also Medical Law Perspectives, October 2012 Report: Mistakes in Diagnosing Cancer: Liability Concerns for Misdiagnosis, Failure to Diagnose, and Delayed Diagnosis
See also Medical Law Perspectives, June 2012 Report: Too Much, Too Little, Too Late: Injuries from Delays and Failures to Perform CT Scans or Overexposure to Radiation