Insurance Company Faces Medical Malpractice Lawsuit for Denial of Prior Authorization

An appeal pending before the Second Circuit Court of Appeals has the potential to impact the practice of health insurers requiring prior authorizations for medical care. 

Sare Mills, J.D.

Written by
— Updated on August 16, 2022

Insurance Company Faces Medical Malpractice Lawsuit for Denial of Prior Authorization

Attorneys for the estate of Kathleen Valentini argue that her health insurer’s denial of a prior authorization for an MRI constitutes negligence and medical malpractice. Her doctors said the denial led to the amputation of over half of her lower body. Furthermore, the denial allegedly contributed to her eventual death. Her attorneys say the insurance company should be held accountable.

Background

When Kathleen Valentini’s hip began to hurt, she went to physical therapy and took pain medication. Her health insurer, Group Health Inc (GHI), covered this treatment. After six weeks of therapy, she was still experiencing excruciating pain. She was referred to an orthopedic surgeon, who asked GHI to authorize an MRI.

EviCore, the company GHI uses to do medical utilization reviews, determined that the MRI was not medically necessary unless Valentini completed six weeks of physical therapy. It is unclear why the company did not realize she had already completed the physical therapy. However, GHI did not reverse its decision for 40 days. When a sarcoma was discovered on the MRI, doctors needed to amputate her hip, pelvis, and leg. The cancer had also spread to her lungs. Her doctors said that if she had come in one month earlier, she could’ve been treated with chemotherapy only. The delay cost her half of her lower body and contributed to her early death.

Health insurers use prior authorizations to keep costs down and minimize fraudulent medical claims. Studies show that this practice shifts these costs to medical providers and their patients. On average, medical practices spend almost two business days dealing with prior authorization paperwork. 93% of doctors report patient care delays while waiting for prior authorizations. 34% say that a delayed prior authorization led to an avoidable hospitalization, disability, or death—like in Valentini’s case. And this scenario has become increasingly common over the past decade, as health insurers began requiring prior authorizations for more tests and treatments.

The Lawsuit

Valentini first sued GHI and eviCore in October 2020. Valentini alleged negligence, medical malpractice, prima facie tort, breach of contract, fraud, and conspiracy, among other claims. To support these claims, she argued that GHI and eviCore owed her a duty to act reasonably and use due care to ensure that she received necessary medical treatment.

In court papers, attorneys from the law firm Pollock Cohen LLP asserted that GHI and eviCore set themselves up as “gatekeepers and decision-makers” for access to essential medical tests. They cited a line of cases arising from Sommer v. Federal Signal Corp. (1992) to show that in some circumstances New York courts recognize that a contract may create a duty of care under tort law. To support this argument, they also emphasized the level of control GHI and eviCore exercised over Valentini’s access to medical care. They also pointed out the extensive revenue the companies collect in premiums.

Judge John Croning dismissed the lawsuit in December 2021. He held that the New York Insurance Law doesn’t create a right to bring tort claims under New York Law. The judge relied on a prior New York case, Logan v. Empire Blue Cross & Blue Shield (2000), which held that an insurer was not liable for denying a prior authorization for an experimental Lyme disease treatment. Valentini’s attorneys distinguished the case from Logan by noting that an MRI is not an experimental treatment. However, the judge rejected this distinction. He cited the language of the insurance policy on prior authorizations. The insurance policy gives GHI the right to determine whether any treatment is “medically necessary.” The Second Circuit is likely to issue an opinion on the appeal later this year.

Implications for Insurers, Medical Providers, and Patients

If the Valentinis are successful in their suit, the case would have far-reaching implications for health insurers, physicians, and patients. A decision in favor of the plaintiff, in this case, would certainly inspire similar lawsuits in other jurisdictions. Compliance and regulatory attorneys would also be put to work advising insurance companies on strategies for structuring prior authorization policies to avoid liability. Additionally, if health insurers did risk liability for delayed or negligent prior authorizations, they would be less likely to issue denials and delay treatment.

If the Valentinis lose their appeal, other legal challenges await health insurers over prior authorizations. Barbara McAneny, the past president of the American Medical Association (AMA), said the AMA has retained a law firm to work on litigation in New Mexico challenging prior authorizations in cancer cases. This lawsuit concerns so-called “fail first” policies. This requires physicians to start cancer patients on older drugs before authorizing newer, better treatments.

Will Legislators Turn Their Attention to Prior Authorizations?

Of course, litigation is an expensive and inefficient method for changing policy. After years of advocacy by the medical community, some state legislatures are passing new laws to speed up the prior authorization process. Attorneys and medical professionals have also called on Congress to address the issue on a federal level, which would simplify the current state-by-state patchwork.

Attorneys interested in the future of prior authorization practice by health insurers should watch the Valentini appeal for updates. Regardless of the outcome, this area is due for changes in the years ahead.

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