Right ruling on deselection

The California high court's ruling in Louis E. Potvin, MD, v. Metropolitan Life Insurance Co. establishes the right of physicians in that state to demand an explanation and a hearing when a doctor is dropped from a health plan.

Editorial. June 12, 2000.

"Deselection" is a euphemism that, when turned into action by managed care plans, has the potential to devastate physician practices and disrupt patient-doctor relationships. A recent ruling by the California Supreme Court treats deselection with the gravity that it deserves but seldom receives.

The California high court's ruling in Louis E. Potvin, MD, v. Metropolitan Life Insurance Co. establishes the right of physicians in that state -- at least when at the mercy of plans that dominate the local marketplace, as is often the case -- to demand an explanation and a hearing on why the doctor is being dropped from the plan. It is a major win for doctors and patients in California, and there is legitimate hope that this interpretation of the law and good public policy will resonate with courts in other states.

To drop a physician from a managed care plan's list of doctors under contract doesn't simply cut a medical practice off from a source of revenue. Oftentimes, because payment would now have to come out of patients' pockets, it can suddenly break down contact by that doctor with patients enrolled in the plan. The more the doctor relies on the plan to maintain a viable practice -- or, likewise, the more the patient has come to trust and depend on that specific doctor for care -- the greater potential for harm stemming directly from an arbitrary decision by a health plan.

Dr. Potvin filed his suit after MetLife deselected -- the plan's own euphemism is "delisted" -- him in 1992 over his malpractice history (four claims, three of which were dropped and the fourth settled for more than $700,000 -- all before he signed his MetLife contract).

Dr. Potvin claimed that once word was out, other plans dropped him and he was rejected by physician groups that depended on credentialing by MetLife. As a result, he said, his ob-gyn practice essentially collapsed. He demanded a hearing by MetLife to give his side of the story, but MetLife didn't respond.

The court's four-member majority, in sending the case back to a lower court for a final determination, rooted its decision in a well-established concept of California law that recognizes that certain private organizations can have substantial power over the economic livelihood of individuals. Those decisions can affect not only the individuals involved but also the public good. (It is the same legal thinking that years earlier prevented a union from excluding African-Americans as members and thereby barring them from a closed shop, and more recently has been applied by the court to situations involving medical and dental professionals).

In place of the typical standard of plans being able to drop physicians at will and on short notice, the court decreed that health plans with strong market presence will be held to a standard that a removal be "both substantively rational and procedurally fair." The AMA, through the AMA/State Medical Society Litigation Center, and the California Medical Assn. filed a friend-of-the-court brief in support of Dr. Potvin, which was cited by the court in its ruling. (Dr. Potvin didn't live to see his courtroom victory; he died in 1997. Also, defendant MetLife's California operations were taken over by UnitedHealthcare.)

The Potvin decision does not set a binding precedent outside California. It could reasonably be expected to influence other courts, however. Significantly, the majority of the California court looked to a New Hampshire Supreme Court ruling in a similar case that was also decided in favor of physicians. Certainly courts seeking guidance from a state with long experience with managed care would want to look to HMO-heavy California.

But the more immediate uncertainties are how the ruling will be applied in California itself. No doubt health plans are readying to fight the details of due process. (They can expect allies from IPAs and large group practices also affected by the ruing.) The Potvin ruling will require other courtroom wins before its potential can be fully operational.

However, the ruling by itself should chill the arbitrary impulses of managed care plans. At least now they must take deselection seriously, as physicians and patients have had to for too many years.