MCO Medical Director Held Responsible for 'Medical Decision'

"In an important suit, Murphy v. Board of Medical Examiners, the court decided that John F. Murphy, Medical Director for Blue Cross/Blue Shield of Arizona, made a "medical decision" when he overruled a patient's phyicians and denied precertification for treatment.

On December 29, 1992, Dr. Murphy refused to pre-certify a patient's laparoscopic cholecystectomy (gallbladder surgery). Dr. Murphy opined that the surgery was 'not medically necessary.' His decision contradicted the advice of the patient's surgeon and her referring physician , Dr. Johnson. The surgery was performed despite Blue Cross's refusal to pre-certify.

Dr. Johnson registered a complaint with the Board of Medical Examiners, and in February of 1993 the Board sent Dr. Murphy a copy of Dr. Johnson's complaint and requested a response. Dr. Murphy returned the letter, questioning whether the Board of Medical Examiners could review his action because he was 'not involved in patient care and not involved in the practice of medicine.' He provided the requested information 'as a courtesy' and to avoid 'a claim of unprofessional conduct.' In October 1993, the Board ordered an investigation and subpoenaed Blue Cross documents concerning 20 cases in which Dr. Murphy denied pre-certification. Blue Cross objected to the subpoena and said that the Board lacked jurisdiction because Dr. Murphy worked for an insurance company and that he was not practicing medicine.

The Court ruled that although Dr. Murphy was not engaged in the traditional practice of medicine, to the extent that he renders medical decisions his conduct is reviewable by the Board of Medical Examiners. The Court found that Dr. Murphy substituted his medical judgment for that of the patient's physicians and determined that the surgery was "not medically necessary." The Court ruled that such decisions were not insurance decisions but, rather, medical decisions because they required Dr. Murphy to determine whether the procedure was 'appropriate for the symptoms and diagnosis of the condition,' whether it was to be 'provided for the diagnosis, care or treatment,' and whether it was 'in accordance with standards of good medical practice in Arizona.'" [Hall R., Psychiatric Practice & Managed Care, No. 5, September/October 1998, p. 5]