Ask Our Lawyer: The Standard of Care is Not Established by Health Plans or Insurers

Question:

The recent legislative hearings on bills to regulate prior authorization have me wondering whether health plans and insurers are changing the standard of practice.  When a health plan or insurer requires/denies prior authorization for a prescription or other treatment are they establishing the standard of practice (i.e. that the recommended prescription or other treatment is not necessary to comply with the standard of care)?  Will the fact that prior authorization was required and denied be a defense in a malpractice case or licensing action alleging that I failed to act within the standard of care?

Answer:

No.  The standard of practice that must be met in all cases is established by physicians not health plans, insurers or anyone else.  In every patient encounter you will be held to the standard of what a physician of ordinary learning, judgment or skill would do or would not do under the circumstances.  The standard of practice does not take into account or change based on  the requirements and judgements of the patient's health plan or insurer.  It is based solely on the relationship between the physician and the patient and is focused exclusively on what the physician should or should not have done. 

In a malpractice case, whether the standard of practice was met would be decided by a judge/jury after being supported/opposed by expert witnesses for the plaintiff and the defendant (who must be physicians).  In licensing actions where the State of Michigan is alleging negligence, expert witnesses are not legally required but most often are retained for their opinions as to whether this same standard of practice has been met.  It will not be a defense in either case that the treatment you failed to recommend was not (or was no longer) covered by the patient’s health plan or insurance or that prior authorization was required and denied.  Instead, a prior authorization requirement and denial will be disregarded and you will be judged solely based on whether a physician of ordinary learning, judgment and skill under the circumstances would have ordered the prescription or other treatment. 

It is critical that you carefully document in the medical record that all recommendations for necessary prescriptions and other treatment have been made.  Whether the patient’s health plan provided coverage, requires prior authorization and whether it has been granted or denied should also be documented. 

Obtaining a patient’s informed consent for refusing recommended treatment due to a prior authorization denial is just as important as obtaining a patient’s informed consent for treatment.  If you recommend treatment that is not covered by the patient’s health plan and the patient refuses to obtain the treatment because he/she cannot afford to pay for it out of pocket, this must be carefully documented in the patient record.  You cannot fail to recommend treatment because you know or suspect that it will not be covered by the patient’s health plan.  Instead, you should ignore the fact that the treatment is not covered and make a full explanation and recommendation to the patient. This must all be documented.

The standard of care cannot be changed by a health plan or insurer.  Their decisions regarding what will be paid for and when are based on their own criteria (which are unknown to physicians and others).  These criteria may or may not reflect the standard of care that you will be judged by.