Managed Care Litigation

An Overview

Healthcare litigation in the managed care setting can take many forms, can involve a wide array of parties, and can arise in connection with most techniques that are employed as part of a managed care program. One of the most commonly-litigated managed care techniques, however, is utilization review. Utilization review litigation cases typically involve a member or members of a health insurance plan suing their insurance company and the utilization review subcontractor for limiting the members’ access to medical care by allegedly improperly and unfairly denying pre-treatment insurance authorizations (which is often required by healthcare providers as a prerequisite for treatment). Insurance and utilization review companies usually defend these suits by claiming that they properly denied pre-treatment authorization because the medical care the plaintiffs requested was either not covered by the health plan or was not “medically necessary” under the agreed-upon plan criteria. These cases pose significant challenges for both parties because they are almost always highly fact-specific and require the parties to, first, retrace the precise steps and documents that led to each particular denial of authorization, and, second, recreate the factual environment in which the decisions were made so they can be reevaluated by a judge or jury.

Representative Matter: For over 15 years, DBS has served as outside general counsel to a behavioral health managed care entity that is considered a national leader in managed care innovation.

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In addition to member-initiated litigation over insurance and utilization review determinations, healthcare litigation cases in the managed care setting can also arise over:

• Subscriber claims of unfair business practices in connection with managed care organizations’ marketing and billing practices;
• Managed care organization-provider disputes concerning the timing and amount of payments;
• Healthcare provider claims that certain techniques employed by managed care organizations constitute unfair business practices under state law;
• Subscriber claims of insurer and/or reviewer fraud in the form of systematic misapplication of managed care review criteria; and
• Corporate liability premised on the alleged negligent implementation of utilization review and other managed care cost-containment techniques.

Although managed care programs are being used more and more frequently, managed care remains a developing industry and one that can be particularly prone to complicated legal disputes. When managed care litigation cases do inevitably arise, they are almost always highly fact-specific and they can, therefore, quickly become quite expensive to both defend and prosecute. Given the complexity and breadth of these cases, individuals embroiled in managed care disputes should engage legal counsel early in the process who has experience as a litigator but who has also worked with health insurers and managed care organizations and who, therefore, starts the case with a base-line level of understanding concerning the special goals of a managed care program and the processes that are employed to achieve those goals.