Liability exposure for managed care organizations has shifted during the past nine years, and new legislation and initiatives -- from pay-for-performance and consumer directed programs – will bring additional challenges in the future, according to a published report by One Beacon Professional Partners.

Additionally, large organizations are no longer the sole targets for these potential lawsuits, and defending these claims can be very costly, no matter the size of the organization or the final outcome of the claim.

According to Timothy Curry, Vice President and legal counsel for One Beacon, “Today, even a mid-sized or smaller organization is a potential target for financially crippling business practices litigation, typified by time-consuming discovery and extensive expert testimony. And MCO “victories” on such cases often result in seven figure legal bills, as reflected in the significant growth of defense expenses associated with MCO claims.”

While emotional litigations arising from traditional errors and omissions claims continue to be the most devastating liability risks, there is also a growing trend towards liability claims arising from managed care business practices.

Traditionally, utilization review exposures, negligence and vicarious liability accounted for the vast majority of law suits against managed care organizations, but according to a report published by One Beacon, the frequency and severity of losses from business practices litigation have dramatically increased. These business practice cases – mostly class actions, anti-trust -- account for 88 percent of dollars since 2000.

In a sample anti-trust claim published by One Beacon, a regional health plan in states without “any willing provider” statutes entered into a non-exclusive contract with a hospital-based health system for inpatient and certain outpatient services, including rehabilitation therapies. The owners of two free-standing occupational/physical therapy facilities applied to the health plan to be network providers. The health plan denied the application because the network already had enough providers to meet the needs of its members. The applicants sued the health plan and the health system alleging illegal tying arrangements, monopoly and boycott in violation of state antitrust statutes. Although the health plan ultimately prevailed, they incurred more than $1.2 million in defense expenses.

The future also promises to infuse new liability risks into the mix, with new legislation, new interpretations of existing laws, new initiatives such as pay-for- performance and consumer directed health programs, as well as HIPAA and electronic medical records.