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Health Care Quality, Licensing & Liability
Wayne State University Law School
Hammer, Peter J.

FALL 2013
Introduction p. 1-2
·         Cost, quality, access and choice are the chief concerns of the health care system and have a dynamic, complex, interrelated relationship.
Regulation or Competition p. 2-7
·         Health care is a “regulated industry”
·         State and Federal controls:
o    Physician licensure
o    Accreditation of hospitals and other facilities
o    Supervision of provider behavior by government payers
o    Regulation of insurance industry practices
o    Certificate of need regulation
·         Competition is still there/Market improving regulations:
o    Spread of HMOs and insurance products that promote choice
o    Removing regulatory barriers to competition through antitrust enforcement (no monopolies)
o    Regulating health insurance to encourage transparency and choice
o    Limiting providers’ ability to take advantage of their position through self-referral practices or accepting kickbacks
·         Why regulation?
o    Market imperfections:
§  Imperfect agency relations
§  Information gaps and asymmetry
§  Moral hazard
§  Monopoly
o    Asymmetry of information:
§  Patients v. provider
§  Providers v. patients v. payers
o    Agency Relationships
§  Ex: People “purchase” health care through multiple assistants
·         Get from employer à ER chooses insurer à physicians guide choices
§  “imperfect agents”: subject to conflicts of interest or do not fully understand the needs of consumers/patients
o    Moral Hazard
§  Ex: Overuse of medical care because insurance lowers cost of each purchase for insured individuals.
§  Strong incentive to engage in “favorable risk selection”
o    Monopoly
§  Healthcare markets for hospital services, physician specialty services and commercial insurance are highly concentrated
§  Regulatory barriers inhibit entry into hospital and physician services markets
·         Competition v. Regulation are complementary
o    Above market imperfections call for regulations that help fix other problems
o    ACA is designed to improve competitiveness by imposing a host of regulations
What is Illness?: p. 7-20
·         WHO: “a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity” – Definition of health
·         Other definitions p. 8-9
·         Notion of illness is socially constructed
o    Theoretical notion: the opposite of disease
o    Practical/mixed ethical notion: The opposite of illness
·         Concept of illness is highly contextual
o    Sometimes can excuse you from legal liability
o    Sometimes entitles you to certain preferences/benefits/rights
o    Insurances covers “illness” and not things that are “not illness”
Illness affects individuals
Illness affects society
–          Relieves responsibility
–          Loss of control
–          Costs money in lost time and medical expense
–          Economic effects
–          Obligation to pay
·         Katskee v. Blue Cross/Blue Shield of Nebraska [10] o    Facts: Coverage denied for precautionary surgery to remove female anatomy because genetic condition is not considered an illness that is “medically necessary”
o    Holding: Definitional approach: Condition constitutes illness within meaning of insurance policy
o    Reasoning: Court’s approach to illness: Plaintiff’s condition is a deviation from what is considered a normal, healthy state of physical state or structure
Problem: The Couple’s Illness (infertility) [19]  
Arguments on behalf of couple
Arguments for insurance
Definition of “illness”:
–          Normal state is childbearing; inability to bear children is an impairment of normal state
–          Inherent generic defect
Definition of “illness”
–          Medically necessary
–          Excludes reproductive capacity
–          Affects ability to function
Definition of “treatment”: treatment is not treating the condition.
No manifest symptoms or signs – nothing active
From Defining Quality to Regulating Patient Safety p. 20-64, 122
Two Sides to Doctor-Patient Relationship
Trust Relationship
Market place transaction
·         Buying info: Autonomy involves making a decisions
·         Clinical: Trust improves outcome because it improves compliance
·         Exchanging understandings and obligations
·         Doctor has no obligation until he/she enters into K
Three Dimensions Used to Measure and Police Quality (Donabeedian method)
Structure: How entity is organized
Process: How is info shared
Outcome: Measuring “better”
·         Nurse-patient ratio
·         Latest generation of PET scan
·         Among professionals: info technology
·         Hand-offs within system
·         Supervisory roles
·         Mortality
·         Infections in hospital
·         Years added to life
·         Patient satisfaction
Different Approaches to quality:
·         Donabeedian: T

Policy Points:
·         Licensing of Professionals
o    Off-label prescribing
o    Delegation vs. Collaborative Model
·         Regulation of Health Care Entities
o    JHACO
·         Liability of Health Care Professionals
o    Standard of Care
o    Consent
o    Locality Rule
o    Doctor-Patient Relationship
·         Liability of Health Care Orgs
o    Vicarious Liability
o    Control Test
o    Non-Delegable Duty
o    Tort Reform
Chapter 2: Quality Control Regulation: Licensing of Health Care Professionals
Introduction p. 65-68
State Law: controls licensure of health care professionals under police power
·         State Licensing Statutes:
o    Govern entry into licensed professionals
o    Regulate health care series that licensed professionals may provide
o    Prohibit unlicensed people from providing services reserved for licensed professions
o    Monitors quality of care provided by licensees
o    Penalized or removes incompetent practitioners from practice
Professional Self-Regulation
·         Boards: implement applicable statutes
o    Dominated by members of the licensed profession
o    Operate formally as state administrative agencies
§  Government entities even though private, sometimes non-paid professionals
§  Make administrative rules and decisions, policies, guidance
o    Subject to judicial review
o    Governed by procedures/standards set in state’s licensing statute and administrative procedures act
Legal Regimes that ensure quality
·         Licensing
·         Regulations
·         Torts/Malpractice System
ACA: pushes stronger scientific evidence of effectiveness and outcomes as the measure for quality
·         Fosters expanded roles for nurses and PAs as health care system is reorganized to emphasize continuity of care, accessible preventive care, and management of chronic illness at a lower cost.
·         Activities of licensing boards in restricting work of these professionals is coming under scrutiny