Medicine and the Law – Part 6: Third Party Liability

Our series on Medicine and Law is starting to wind down. We’ve covered lots of topics including contract and consent, malpractice, causation, informed consent, and abandonment. Now we will talk about third-party liability.

Third party liability means exactly what it says — that a different party other than the physician or the patient hold liability for an outcome. The most common form of third party liability in the medical profession is when a patient is denied coverage by the insurance company for a recommended procedure. I’m sure many of you have seen the Matt Damon movie where he plays a lawyer and represents a patient with cancer whose insurance company repeatedly denied a bone marrow transplant. That movie summarizes the main issues with third party liability.

Many states now have laws that guarantee the right to appeal an insurance company decision in the form of an independent review. Often times physicians wonder if they should get involved in a patient’s fight with his insurance company to get a needed procedure. I feel that physicians should encourage their patients to pursue every avenue of appeal and to document the entire appeal process.

There is however controversy about the extent a physician is legally or ethically obligated to be involved in the appeal process. One example is when a physician must discharge a patient from the hospital because the insurance company will no longer pay for inpatient stay. Some states have found doctors negligent for in that type of situation. Other states have found that doctors have no legal obligation to advocate for the patient.

One reason that a physician may not want to advocate for a patient against an insurance company or managed care organization is for the fear of retaliation by the insurer. If the insurance company were to drop that physician from its list of approved carriers it could harm the physician’s practice. Some states have passed laws that explicitly protect physicians from retaliation. However, not every state has such policies.

As you can see, when a third party is involved in liability, the physician-patient relationship can be tested significantly. Not every state has the same laws and thus if you are a physician you should know what view your state holds. Similarly, if you are patient, it is important to know this information as well to get a better idea of how your physician may or may not be able to help.