Fourth-Party Audit Organizations: Practical and Legal Considerations

See Herzlinger R.E. Schwartz J. , How Companies Tackle Health Care Costs: Part I, Harvard Business Review 63(4): 69 (July/August 1985); Herzlinger R.E. , How Companies Tackle Health Care Costs: Part II, Harvard Business Review 63(5): 108 (September/October 1985).

Richards G. , Business Spurs UR Growth, HOSPITALS 58(5): 96 (March 1, 1984);American Hospital Association, Cost Quality Interface, Hospital Utilization and the Private Sector (1985).

See, Utilization Review Program Saves Thousands of Dollars, Health Law Vigil 8(26): 7 (Dec. 27, 1985); Intracorp, Control over Health Care Dollars (news release, 1985).

The information provided to employees will ordinarily contain a statement such as: “Patient is responsible for notifying by toll-free telephone his or her Benefits Management Coordinator, who will evaluate proposed services against the benefit plan and the approved criteria for such services. Physician's office may provide confirmation call.”

2) “Hospital and [employer] shall use their best efforts to amicably resolve any dispute or controversy between [employer] and hospital arising under or relating to this Agreement. If the dispute or controversy is not resolved by hospital and [employer] it shall be submitted to arbitration using the American Arbitration Association and its rules in effect at the time of arbitration.”

Hospital Council of Western Pennsylvania, Management Considerations: Fourth Party Audit Organizations (1985).

This [program] will hold our insured harmless for those charges. We would appreciate your consideration in reducing your bill since the patient is obviously not to blame for the unnecessary confinement.

42 U.S.C. §1320c-1-1320c-10.

20 A.L.R.3d 1109, 1114 annot. (1968).

Alberts v. Devine, 479 N.E.2d 113 (Mass. 1985).

Schaffer v. Spicer, 215 N.W.2d 134 (S.D. 1974).

MacDonald v. Clinger, 446 N.Y.S.2d 801 (N.Y. App. 1982).

Confidentiality of Alcohol and Drug Abuse Patient Records, 42 C.F.R. §§2. 1–67 (1985).

Physicians & Surgeons, 70 C.J.S. §68 (1951).

Nursing Care v. Dobbs, 380 So.2d 516 (Fla. App. 1980); see Lozier v. Leonard, 327 S.E.2d 815 (Ga. App. 1985).

410 N.E.2d 821 (Ohio Mun. 1979).

Id. at 823, citing Ohio Rev. Code §1739.06.

431 A.2d 883 (Pa. 1981); see D'Amelia v. Blue Cross of Lehigh Valley, 500 A.2d 1137 (Pa. Super. 1985).

See Zaslow J. , Third Party Actions Against Physicians, Journal of Legal Medicine 3(9): 37, 37–38 (October 1975). Albert Einstein Medical Center v. Lipoff et Lipoff, Blue Cross of Greater Philadelphia and Eugene Brecher, M.D., No. 3872x (Phila. Court of Common Pleas, January 1972). This unreported case concerns a suit brought by a hospital against a patient and her health insurer (Blue Cross) in the Municipal Court of Philadelphia for nonpayment of a hospital bill after the insurer found the patient's admission medically unnecessary. The Municipal Court judge required that: the patient's physician be joined as an additional defendant. Thus, the suit was brought by the hospital against the patient, Blue Cross, and the physician. The judge held that the patient was liable to the hospital, and that the physician was liable to the patient for the amount due the hospital, because the patient was economically harmed as a result of the unnecessary hospitalization, having relied on her physician for the admission. The physician appealed the judgment to the Philadelphia Court of Common Pleas. The judge granted a summary judgment on the contract action because the physician was not a party to the contract between the patient and Blue Cross and, therefore, could not be liable. The case was, however, heard on the issue of whether the physician was negligent in admitting the patient to the hospital. The physician was found not to be liable for the patient's bill in this particular situation. Although the decision has no precedential value, the assertion that a physician can be held responsible, on a negligence theory, to pay a patient's hospital bill, even though he or she is not a party to the contract for the patient's hospitalization, might be made in future litigation.

42 U.S.C. §1395x (H) (1983).

Lemkin J. Rich J. , P.P.O.s: Utilization Review, in Attorneys and Physicians Examine Preferred Provider Organizations (ed. Wayman J.D. ) (1984) Springer E.W. , PSRO's: Implications for Legal Liability, Hospital Medical Staff 4(1): 31 (January 1975).

Truman v. Thomas, 165 Cal. Rptr. 308 (Cal. 1980).

For medical staff appointment decisions involving utilization issues, see Suckle v. Madison General Hospital, 362 F.Supp. 1196 (W.D. Wis. 1973); Knapp v. Palos Community Hospital, 465 N.E.2d 554 (Ill. App. Dist. 1984); Aval v. Hawthorne Community Hospital, 184 Cal. Rptr. 914 (Cal. App. 1982); Anton v. San Antonio Community Hospital, 140 Cal. Rptr. 442 (Cal. 1977).

Wickline v. California, NWC 606 72 Cal. Super. L.A. Cty. Judgment entered October 21, 1982; see Carlova J. , A Jury Lands a $500,000 Haymaker on Health Bureaucrats, Medical Economics 60(10): 80 (May 16, 1983).

Aetna Life & Casualty Co. v. Lavoie, 470 So.2d 1060 (Ala. 1984).

Id. at 1068–70.

Mordecai v. Blue Cross-Blue Shield of Alabama, 474 So.2d 95 (Ala. 1985).

Erickson v. Aetna Life & Casualty Co., 469 N.E.2d 679 (Ill. App. 1984).

See Richards, supra note 2.

For an article indicating projected business for FPAOs, see Private Review Agency Escalation Creates Urgent Need for Preparation, Hospital Peer Review (October 1985), 124–26.

Md. Health-Gen. Code Ann. § 19–319(d) (1985).

La. Rev. Stat. Ann. §22–657(c) (West 1985).