Options are limited for participating providers dismissed by insurance carriers

October 1, 2007

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Several months ago, three patients filed complaints against him with one of these insurance carriers. He knows of the complaints, but does not know the details. Subsequent to the complaints, this major insurance plan cancelled his contract. This has not only led to a significant loss of income, but because of the small community in which he lives, it has also had a direct effect on his personal reputation. What can he do?

All physicians' participating provider relationships are established through a written agreement, commonly referred to as a participating provider agreement. A typical participating provider agreement requires the provider to accept pre-negotiated payments for specified services. In turn, the insurance entity agrees to pay the participating provider for services provided to the insurance company's subscribers.

Procedure for termination

When terminating a participating provider, an insurance entity must follow any termination procedures contained in the subject participating provider agreement. Such agreements typically contain provisions relating to the termination of the agreement, such as notice requirements and the right for the provider to request a hearing prior to termination.

In general, many states require that an insurance entity give the provider written notice of termination at least 90 days prior to the termination of the agreement. That written notice must also specify that the provider has the right to request a hearing - often within a week or two from the date of notice - before a panel appointed by the insurance entity.

If the hearing is requested, the insurance entity must hold the hearing within 30 days from the date of the provider's request. The panel is then often required to issue a written opinion with its recommendation within 30 days from the date of the hearing unless an extension is requested. If the proper termination procedures are not followed, the attempted termination could be overturned, and it could expose the insurance entity to a breach of contract claim. The only usual exceptions to the notice and hearing requirements are in issues that involve: (a) the nonrenewal of a participating provider agreement; (b) a determination of fraud; (c) a provider breach of contract; or (d) the opinion of the insurance entity's medical director that the provider poses an imminent danger to his or her patient or the health, safety and welfare of the public.

In addition, if an insurance entity terminates a participating provider agreement based on fraud, the insurance entity usually is required to report the fraud to the appropriate administrative agency.

Finally, in matters involving imminent danger to patients and/or the public, the insurance agency will have a duty to report the threat to the State Board of Medical Examiners.

Legal action

It goes without saying that termination of a participating provider agreement can impact the practice of a provider in many ways, including loss of patients and loss of respect for the physician in the community. Thus, even if all the proper procedures are followed in terminating the provider, the provider may still pursue a lawsuit against the health insurance entity.

Such legal action may include claims of defamation and interference with the ability to make a living. Unfortunately for the physician, most states have immunity statutes whose sole purposes are to encourage the reporting of healthcare professionals who may be engaged in conduct that is deemed harmful to the public.

In the end, it would appear that Dr. Provider is clearly entitled to know why the insurance provider has terminated him. However, his chances at legal remedy may be somewhat limited.

Dr. Goldberg is the director of SkinLaser & Surgery Specialists of New York and New Jersey; director of Mohs surgery and laser research, Mount Sinai School of Medicine; and adjunct professor of law, Fordham Law School.