Can the Texas Board of Medical Examiners
Discipline Medical Directors for Denial of Care?

By Ronald L. Scott
Health Law & Policy Institute

A federal judge in Dallas ruled Sept. 18, 2000 that the Texas Board of Medical Examiners ("Board") lacked authority to discipline Dr. David Ellis, a medical director who had denied treatment to 13 year-old David Wiser even though the boy’s physician believed such treatment was medically necessary. The court ruled that the medical director’s decision was based on whether the proposed treated was covered by the health plan, that he had not been practicing medicine when he refused the treatment, and that discipline by the Board over coverage determinations is pre-empted by the federal Employee Retirement Income Security Act ERISA). For a discussion of ERISA preemption, see ERISA Preemption Plagues Courts and Individuals: the Need for Congressional Action at managed/980723erisa.html.

Court decisions are split on whether medical directors performing utilization review for insurance companies and other health care plans are "practicing medicine." See Are Medical Directors Performing Utilization Review "Practicing Medicine"? at MedicalProfessionals/991014Are.html.

The Board takes the position that the determination of medical necessity or appropriateness of proposed care so as to effect the diagnosis or treatment of a patient constitutes the "practice of medicine." Consistent with such position, and based on statutory requirements for out-of state licensure contained in section 151.056 of Texas Occupations Code, the Board requires physicians to have a Texas medical license before engaging in such determinations, a typical duty of medical directors for HMOs. See the Board's policy statement titled Unlicensed Practice of Medicine at

The Board’s policy also provides that its licensure requirement "applies to those individuals and entities, both inside and outside the state of Texas, who engage in determining the need or appropriateness of any medical evaluation or care in regard to a Texas patient." Finally, the Board cautions that participants in such misconduct will be referred for criminal prosecution and civil action (in the case of unlicensed practice) or subject to disciplinary action (in the case of properly licensed Texas physicians who fail to exercise independent medical judgment "to the greatest extent possible"). The Board admonishes utilization reviewers, insurers, medical directors, and managed care gatekeepers to "be particularly conscientious in allowing physician providers to exercise independent medical judgment.…"

A particularly troubling issue not addressed by the Board’s policy is how to distinguish coverage issues from determinations of medical necessity. Some cases are fairly clear. For example, if a health insurance policy has a lifetime benefit cap of $1,000,000 that has been exhausted by payments for a series of costly transplants, a subsequent request for approval of another transplant could be denied on coverage grounds, even if the medical director believed the transplant operation to be "medically necessary." Similarly, a health plan might exclude coverage for "lifestyle" drugs such as Viagra even where a treating physician finds the prescription medically necessary.

The Board had earlier ruled that Dr. Ellis did not meet the "appropriate standard of care" when he denied home nursing care to Wiser, who then suffered respiratory failure, spent five weeks in the hospital, and later died of a brain aneurysm. The Board determined that Dr. Ellis should pay a $5,000 fine, take 12 hours of ventilator education courses, receive a public reprimand, and comply with the terms of a two-year probated suspension. Under the Board’s rules, Dr. Ellis could have rejected the Board’s determination and received a hearing before an administrative law judge. The Board’s disciplinary actions were stayed pending determination of the lawsuit brought against the Board by Dr. Ellis’ employer, UnitedHealthcare.

Dr. Ellis’ victory was largely procedural rather than substantive. In any event, the disciplinary process is not an appropriate forum to decide the underlying question of how to distinguish between coverage and medical necessity determinations.