Header graphic for print
Triage Healthcare reform winners & losers

David Moore v. John Deere Health Care Plan Inc.: The Mostly Right Way for Managed Care Organizations to Terminate an Incompetent Network Provider

Posted in Payer/Insurance Reform, PPACA

When facing an incompetent network health care provider and angry members, a managed care organization (MCO), such as a health maintenance organization (HMO), a preferred provider organization, or a physician-hospital organization, must take action to protect its members.  How can the MCO terminate the provider’s contract without becoming liable to that provider for damages?

In Moore v. John Deere Health Care Plan, the Sixth Circuit provides an almost perfect road map for MCOs to follow when terminating either an incompetent provider or a provider responsible for other incompetent providers.  The court found that both federal and state law provided an HMO with immunity from damages resulting from the HMO’s termination of a provider contract after the HMO received numerous complaints by members about the quality of the provider’s services.

As an owner, director and officer of a health care clinic that was staffed by four doctors and five nurse practitioners, Dr. David L. Moore had contracted with the HMO, John Deere Health Care Plan, Inc., as a network provider.  After receiving numerous complaints regarding the quality of care provided at the clinic, John Deere’s Knoxville Quality Improvement Committee (QI committee) reviewed the complaints and decided to terminate the contracts with Dr. Moore.

As required by law, John Deere submitted an Adverse Action Report to the Healthcare Integrity and Protection Data Bank (HIPDB).  The report documented that Dr. Moore’s contracts were terminated due to member complaints.  The U.S. Department of Health and Human Services allowed Dr. Moore to add a comment disputing the report, but ordered that the report remain in the HIPDB.

Having exhausted John Deere’s internal appeals, Dr. Moore brought a number of state law claims.  John Deere filed a motion for summary judgment asserting immunity under the federal Health Care Quality Improvement Act (HCQIA) and a parallel state law, both of which provide qualified immunity from damages for those who participate in peer review activities.  The district court granted the motion.  On appeal, the Sixth Circuit affirmed the district court.

In obtaining immunity under HCQIA, John Deere demonstrated the right way to terminate an incompetent provider, although its procedures were far from perfect.

  • Use a Proper Professional Review Body:  John Deere’s professional review body that conducted the PRA was its formal QI committee.  Although other courts have previously found informal or ad hoc committees to be professional review bodies for HCQIA purposes, the use of formal committees, such as John Deere’s QI committee, leaves an MCO less open to an attack on that ground.
  • Act Only Following a Professional Review Action (PRA):  The court found that the QI committee’s termination of Dr. Moore’s contracts constituted a PRA under HCQIA.  Although a PRA does not include an action based “primarily” on “a physician’s association with, supervision of, delegation of authority to, support for, training of, or participation in a private group practice with, a member or members of a particular class of health care practitioner or professional,” the court found that (1) Dr. Moore had treated at least one of the complaining HMO members; and (2) even though he was not the treating physician in all of the complaints, “his decision to staff his clinics with other practitioners and then inadequately supervise them bears upon his professional conduct.”  Because the HMO members’ complained about the quality of care, the court also observed that the decision to terminate Dr. Moore’s contracts improved patient care.  Therefore, the QI committee’s termination of the contracts constituted a PRA under HCQIA.
  • Ensure that the PRA Meets HCQIA’s Reasonableness Test:  The PRA was presumed to satisfy HCQIA’s four-factor reasonableness test for immunity; although, here is where John Deere almost misstepped.  A PRA is presumed to satisfy the test unless rebutted by a preponderance of evidence.  The court easily concluded that the PRA met three of the criteria, including that the PRA was taken: (1) in the reasonable belief that the action was in furtherance of quality health care; (2) after a reasonable effort to obtain the facts of the matter; and (3) in the reasonable belief that the action was warranted by the facts known after such reasonable effort to obtain facts and after meeting the requirement for adequate notice and hearing procedures. 

However, it was the fourth criterion – to have adequate notice and hearing procedures – that left John Deere open to attack.  Nevertheless, despite the QI committee’s failure to comply with HCQIA’s requirements to provide Dr. Moore with (1) a letter informing him that it intended to review the complaints and (2) the minimum 30 days’ notice on a couple of occasions, the court noted that HCQIA does not require strict adherence to its procedural requirements.  Rather, HCQIA requires that, by the preponderance of the evidence, the hearing procedures be “adequate.”  In such case, despite the deviations from HCQIA’s procedural requirements, Dr. Moore did not rebut the presumption that the PRA met the reasonableness test.

While Moore v. John Deer Health Care Plan provides an example of an MCO successfully obtaining immunity under HCQIA when terminating an incompetent provider, it also serves as a warning for other MCOs.  The Sixth Circuit could have found that the QI committee’s deviations from HCQIA’s procedural requirements caused the committee’s procedures to be inadequate.  In such case, John Deere would have been at risk of losing its immunity.  Further, when terminating a contract with a provider, based, at least in part, on the actions of other providers, MCOs must carefully consider the relationship between the contracted provider and those other providers.

This case also serves as a clear warning to health care providers.  Even if a provider has not directly provided incompetent health care services, the provider must carefully supervise any other provider for whom the provider is responsible.  HCQIA may limit the provider’s legal options if an MCO terminates the provider’s contracts as a result of another provider’s incompetent services.