The Law of Healthcare Administration

You have learned about the liability of MCOs (managed care organizations) such as HMOs (health maintenance organizations) and PPOs (preferred provider organizations). Thinking about the information in Chapter 6 on

Title: The Law of Healthcare Administration

Edition: 8th (2017)

Author: Showalter

Publisher: Health Administration Press Book

ISBN: 978-1567938760

where does the liability lie for the managed care organization when the MCO personnel make decisions about insurance coverage for hospital stays?

Please do not limit your analysis to length of stay, but consider other scenarios associated with MCO decision making such as approval or denial of medically necessary treatment (or limitations of treatment) as well, and share your scenarios with the class. Defend your response thoroughly and include the potential liability implications. Lastly, discuss the options, if any, MCO or PPO plan members have when denied coverage for medically necessary care.

In two different paragraph with no less than 100 words give your personal opinion to and Marivette Bedoya

Sharon Buchanan

Since the mid-1990s, forty-seven states have established a patient bill of rights that attempt to protect against managed care abuses. One of the primary obstacles to federal enactment has been uncertainty over the consequences of increasing MCOs’ liability exposure (Mariner, 2016).  State’s statutes on managed care liability are not consistent or clear about which forms of direct or vicarious liability are included. The statutes give an individual the right to sue MCOs for wrongful actions that cause personal injury, however these statutes target narrower or broader ranges of managed care activities. Most statutes are not clear about which forms of direct or vicarious liability they might include.  Direct liability is when the MCO is the primary wrongdoer and vicarious liability holds MCOs secondary liable for errors made mostly by treating physicians.  Managed care liability statutes also vary in the preconditions for bringing suit. California, Georgia, New Jersey and Washington limit suit to patients with serious injuries and California, Georgia, New Jersey and Texas require that external review channels be pursued prior to suing for damages (Mariner, 2016).

The Employee Retirement Income Security Act (ERISA) shields managed care organizations from liability when they are part of an employee group health plan governed by ERISA. Unlike patients with other types of insurance, patients in ERISA health plans do not have a malpractice remedy for a managed care organization’s negligence. ERISA prohibits negligence claims against ERISA health plans for injuries resulting from denial of plan benefits, failure to use qualified physicians, utilization review, or improper plan administration. Attorneys are unwilling to file suits based on coverage denials because leading ERISA preemption rulings have not yet been overruled (Hall & Agrawal, 2003).

When denied coverage for medically necessary care, MCO or PPO plan members must go through levels of appeals, which are reviewed by their insurance company. After the appeal process, the member can take his case to an independent review board and/or litigation.  The review board is a group of medical professionals who are not affiliated with insurance companies, nor do they have any fiscal bias as to whether or not claims are paid or denied. Generally, this is where medical necessity denials appeals are given the full, fair, and objective review that families and patients deserve; and conversely, where we see the most denials overturned (2019).


Hall, M. A., & Agrawal, G. (2003). The Impact of State Managed Care Liability Statutes. Retrieved from

Mariner, W. K. (2016, June). Liability for managed care decisions: The Employee Retirement Income Security Act (ERISA) and the uneven playing field. Retrieved from

Medical Necessity Criteria: Denials Management. (2019, January 21). Retrieved from

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