For the sake of discussion we are going to wrap up these forms of healthcare organizations into the term Managed Network (MN) to include all forms of providing healthcare as a group where the following criteria apply.

  1. Healthcare providers and/or healthcare facilities that may or may not be clinically or financially integrated but band together to gain an advantage in the healthcare market.
  2. The group holds themselves out to a prospective user of healthcare that they are either qualified or set apart as to their trade
  3. The managers of the group have a financial interest in a patient of healthcare using their group, i.e. steerage.
  4. The group ultimately has the decision to allow or disallow participation in the group.

“What’s in a name?”

At its core, an MN is about being a part of something.  That something has to have a name and a means by which to be included, or excluded.  This means of inclusion gives the MN boundaries by which it can be further defined.


As the managed care environment continues to reinvent itself…again, the credentialing process has raised questions of liability for all involved.  Credentialing is typically known as the means by which a health care organization, e.g. a hospital, health plan, IPA, narrow network, etc. verifies a provider’s credentials and qualifies him/her for acquiring the privilege to practice within the organization.  Credentialing is the process to manage the liability of engaging with a healthcare provider to provide healthcare in a joint venture.  However, as health care evolves, credentialing is assuming a larger role as one of many mechanisms by which an MN provides quality care while controlling health care costs or marketing to the public. In doing so, they are exposing themselves to liability they would not otherwise experience.

“It’s a bunch of red tape, I’m already credentialed by the Hospital”


The MN’s failure to do its own credentialing creates a litigation loophole. Suppose the physician commits malpractice and the patient sues. The patient’s attorney, heeding litigation’s golden rule “look for all deep pockets “ then digs deeper and sees that the MN did no credentialing, relying on the Hospital’s credentialing.  Now, the physician and the network are each on the hook. The organization’s failure to inspect credentials exposes it to liability separate from the physician’s malpractice. It has a duty to ensure that competent physicians render care to the ultimate user of the healthcare, and its failure to screen the physician, the plaintiff’s’ lawyer will say, allowed an “incompetent” physician to provide care. The MN may be negligent or its conduct may be a breach of the fiduciary duty the group owes the patient.  Even worse, if the MNs advertising materials extol its physicians as “skilled,” “qualified” or the like, it may be guilty of misrepresentation, potentially exposing itself to punitive damages or even regulatory sanction.


“But what about an indemnification clause?”


It doesn’t apply. The MN committed its own misconduct and the clause only insulates it from the physician’s misdeeds. It is then left to explain why it didn’t credential the negligent physician, fighting the plaintiff attorney’s contention that the MN network let administrative cost cutting and marketing prevail over the necessity of weeding out an “incompetent” physician.  If you still don’t agree, ask yourself, why does Blue Cross credential every physician in its network?


Credentialing is a deep layer of liability that lawyers will use to test the limits of cost conscious medicine. Like managed care liability generally, credentialing liability is gaining a foothold in law and its popularity is growing among plaintiff’s attorneys.

The History Lesson

Although credentialing has its origins outside managed health care, it quickly evolved as managed care organizations (MCOs) became more prevalent in the 1980’s and as control was exerted with greater potential for liability. Additionally, MCOs inherited greater responsibilities for their credentialing activities. As such, credentialing began to take on a new meaning.   Prior to MCOs, It was simply the responsibility of the credentialing facility to verify that the provider maintained current credentials. In the closed provider panels, on the other hand, it is the plan’s responsibility to obtain the credentials for the provider so that s/he can practice within the group.

As managed health care matured, plan liability became a major issue as litigation became more clearly defined within managed care. No longer could a plan accept the credentialing from a hospital or other health care facility in place of its own. Additionally, thinking that the MCOs contract with a provider would serve as protection from liability due to indemnification was found to be incorrect and failure to provide credentialing activities by a MCO could well create a litigation hot bed.

At one point, MCOs were protected from liability and any attempts at filing law suits were met with great difficulty because of ERISA, the Employee Retirement Income Security Act, which was originally developed to protect employee retirement funds and had become instrumental in protecting MCOs from the liability of negligence. ERISA preempts state law and affects all those whose health care benefits are provided by their employer. However, as managed care penetrated our country more deeply, protection from the ERISA law lessened. It has been noted, as in cases involving managed care organizations such as US Health and Total Health Care, that the ERISA law does not protect against general liability in which it is felt that the MCO was liable for negligence in credentialing activities.

Litigating lawyers love loopholes, and managed care has gigantic loopholes that have led to big-dollar cases.  And because managed care emphasizes cost cutting, cost shifting, and steering patients, some lawyers seized on the economic incentives inherent in the system, finding ways to turn them back on their makers and on physicians, too, as evidence in liability suits on behalf of patients.  The malpractice frenzy of the 1980s evolved into the managed care feast of the ’90s. Managed care shifts the balance of power, altering the face of malpractice, creating more and potentially deeper pockets, promoting litigation and creating new applications for decades-old doctrines.


As managed care penetration grows, so has the need for the development of standards and quality assurance for the consumer. As a result, the National Committee for Quality Assurance (NCQA) was developed. The NCQA is an independent, not-forprofit organization dedicated to assessing and reporting on the quality of managed care plans, including health maintenance organizations (HMOs). The NCQA is governed by a Board of Directors consisting of representatives from employers, consumers, labor groups, health plans, quality experts, regulators and organized medicine with activities that focus on accreditation and HMO performance measurements.

The NCQA accredited its first managed care organization in 1991. In order for an MCO to obtain and maintain NCQA accreditation, it must display comprehensive management of all aspects of the health delivery service with policy that demonstrates an interest in continued improvement of care and service to its members.

Among the NCQA’s standards are for the credentialing of panel providers. The standards for credentialing and recredentialing consist of 13 separate standards.

Simply Put…

If the organization can show that the physician’s record was clean when he was credentialed and until the mishap, there’s a reasonable chance that a judge will dismiss the lawsuit against the organization.


Fifth Avenue Healthcare Services (2016)

1209 S. Frankfurt Avenue, Suite 400

Tulsa, Oklahoma  74120 918.392.7880