First District Court of Appeal Decides that Health Care Service Plans May Be Independently Liable for Negligent Care of Patients
In Futterman v. Kaiser Foundation Health Plan, Inc. (2023) 91 Cal.App.5th 656, the California Court of Appeal, First District, recognized that health care service plans may be independently responsible and liable for negligent and/or neglectful care that patients receive from their health care providers. This decision opens the door to lawsuits directly against providers who fail to provide necessary nursing or medical services that the resident was entitled to receive under the terms of the managed care plan.
In Futterman, the plaintiffs sued the Kaiser Plan for injunctive relief under the Unfair Competition Law (“UCL,” Business and Professions Code § 17200) based on allegations that the Kaiser Plan violated the California Mental Health Parity Act (“Parity Act”) (Health & Saf. Code § 1374.72) by failing to provide coverage for all medically necessary treatment of severe mental illness. The plaintiffs also sought statutory penalties under the Unruh Civil Rights Act (Civ. Code § 51) based on allegations that the Kaiser Plan intentionally discriminated against members with mental disabilities by treating them differently than members with physical disabilities.
The Kaiser Plan is a nonprofit health care service plan subject to the Knox-Keene Health Care Service Plan Act of 1975 (Health & Saf. Code § 1340 et seq.). Under the Knox-Keene Act, a health care service plan “undertakes to arrange for the provision of health care services to subscribers or enrollees, or to pay for or to reimburse any part of the cost for those services, in return for a prepaid or periodic charge paid by or on behalf of the subscribers or enrollees.” (Health & Saf. Code § 1345(f)(1).) Consistent with the provisions of the Knox-Keene Act, the Kaiser Plan contracts with the Permanente Medical Group (TPMG) in Northern California and the Permanente Medical Group in Southern California (SCPMG) to provide health care services to its members. (Health & Saf. Code § 1345(f)(1).)
The Parity Act requires, inter alia, that every health care service plan contract that provides hospital, medical, or surgical coverage, shall also provide coverage for the diagnosis and medically necessary treatment of severe mental illness under the same terms and conditions applied to other medical conditions. (Health & Saf. Code § 1374.72(a); see also, Rea v. Blue Shield of California (2014) 226 Cal.App.4th 1209, 1238 [the Parity Act requires “treatment of mental illnesses sufficient to reach the same quality of care afforded physical illnesses”].)
Plaintiffs alleged that the Kaiser Plan violated the Parity Act by denying or deterring members from obtaining one-on-one mental health therapy without making individualized determinations as to the medical necessity of such therapy; by requiring and/or encouraging group therapy without making individualized determinations as to the medical necessity or suitability of group therapy for that member; by assigning members to one-size-fits-all group-based programs without making individualized medical determinations tailored to the member’s individual needs; and by doing these things with respect to persons suffering from mental health illnesses where similar policies and practices were not followed for the treatment of physical health conditions. Plaintiffs alleged that the Kaiser Plan intentionally discriminated against persons with mental disabilities or conditions by treating them differently from people with physical disabilities or conditions.
The trial court granted summary judgment for the Kaiser Plan, but the court of appeal reversed. The court of appeal held that there were triable issues of fact as to whether the Kaiser Plan knowingly failed to provide treatment for mental health issues comparable to the treatment available for other types of illnesses. Among other things, plaintiffs presented evidence that the Kaiser Plan had an “integrated model” with the medical groups such that the medical groups receive their budgets and funds from the health plan and the health plan oversees the quality of care provided. Plaintiffs presented evidence that the way in which the Kaiser Plan schedules patients makes return or repeat appointments virtually impossible, and that it provides staff at levels that are insufficient to allow for frequent, individual therapy for patients who need it. Plaintiffs presented evidence from providers that, in making treatment plans for patients, the providers were severely limited by the availability of appointments and treatment modalities within the Kaiser Plan’s integrated, closed system.
The Futterman decision is important because the court of appeal recognized that health care service plan companies can be held directly liable for the terms and conditions of their respective service plans. As stated by the Futterman court: “[Plaintiffs] emphasize that they do not seek to hold the Plan vicariously liable for independent acts of the medical providers. Rather, they argue that the manner in which the Plan arranges and pays for mental health treatment limits patients’ access to individual therapy thereby undermining the promised coverage. We agree.”
The Futterman decision recognizes the role that managed care plans often play with respect to the services that patients ultimately receive from providers. The Futterman decision recognizes that the quality of care that a patient receives – or whether a patient receives certain care at all – may be determined and influenced by the health care service plan of which the patient is a member. In many cases where the patient is a member of a health care service plan, the care that the patient receives is directed, in whole or in part, by the terms and conditions of the health care services plan. The Futterman decision expressly recognizes that – in some cases – it is the health care service plan that dictates and influences treatment decisions and that – in those cases – the health care services plan can be held directly liable. Likewise, if a provider is aware of necessary nursing or medical services that should be available to the patient/resident under the plan – that have not been ordered – then the provider can be liable as well.
Based on the Futterman decision, when a lawsuit is filed against a health care provider or long-term care facility based upon the care provided to a patient who is a member of a health care service plan, the provider or facility may be able to apportion fault and liability – in whole or in part – to the health care service plan.