Spurred by President Ronald Reagan's 1986 Executive Order seeking to establish a drug-free workplace and by the growing empirical data purporting to show a loss of time, money and productivity due to the adverse effects of substance abuse, employers in both the public and private sector have implemented drug testing programs on an unprecedented scale. Today, employers subject an estimated thirty million workers to some type of employer-sponsored drug and alcohol testing in the workplace. A 1996 survey by the American Management Association reports that eighty-one percent of all major corporations now employ some type of drug testing program, a fourfold increase in nine years.

While drag testing in the health care sector is rising, it still lags behind other industries. When a hospital does test, it often exempts a crucial job classification—physicians. This Article's thesis centers on the potential liability hospitals face by failing to include drug testing in its hiring and credentialing process.

As the delivery of health care continues to be driven by the search for an effective means of reducing costs and delivering quality care to the greatest number of people, the industry’s most beloved buzzword, perhaps ironically, has a root suggestive of a focus on the individual: capitation. Capitation is widely regarded as a method of realigning economic incentives to produce fair prices, real value, reasonable profits and predictable growth in costs. Beyond being a mere payment mechanism, though, capitation represents a philosophical shift to an accountability approach for health care delivery, whereby focus is increasingly directed on prepayment of capitated amounts to risk-bearing delivery systems. Theoretically, the premise makes a great deal of sense: to achieve optimal levels of care delivered and costs expended, incentivize persons or entities with the capacity to affect such levels so that economic reward follows effective management of resources.

Placing, for the moment, faith in the innovative capacities of the marketplace to seek out new and improved ways of delivering health care, the evolution of the capitated arrangement indicates that what makes sense in theory may also make sense in practice.

Accompanying its expansive growth over the last fifteen years, the health maintenance organization (HMO) industry transformed from collections of HMOs in local markets into an increasingly national system under the control of centralized corporations. During that time, HMOs established national chains in an effort to capture market share. The move toward nationalization of the HMO industry suggests the need for a critical analysis of the current HMO regulatory structure to determine whether it effectively safeguards the proper functioning of HMOs. As national and regional HMOs compete among themselves and with local HMOs, the need for unified, consistent financial protections with respect to HMOs and similar entities becomes acute. Competition from national HMOs creates increased financial risk for the smaller HMOs whose regional markets were previously insulated from broad-based competition. The need for preventative rules to offset this added risk, as well as a means by which to adjudicate consistently cases of HMO and insurance insolvency, became sufficiently acute that in March 1993 the U.S. House of Representatives sought to regulate federally the solvency of insurance companies by proposing a Federal Insurance Solvency Commission. In addition, to deal effectively with these problems, various industry participants and regulatory entities currently seek other remedies and attempt action of varying degrees.

Dr. Julia Green is a primary care physician (PCP) licensed to practice medicine in the Commonwealth of Massachusetts. On October 1, 1994, Dr. Green signed a one-year, renewable contract with Allcare Health Plan (AHP). Pursuant to the terms of the contract, on January 1, 1995, AHP placed her on its select list of PCPs available to its 100,000 covered lives (“enrollees”). Dr. Green provided for all primary care and specialist referrals for those enrollees who chose her as their physician. AHP paid her on a fee-for-service (FFS) basis for all preapproved procedures and treatments.

Dr. Green felt that this contract might decrease her autonomy slightly; however, she also felt that it would increase her patient pool significantly and lessen the burden of collecting fees directly from patients. Dr. Green knew that choosing not to sign the contract would preclude AHP enrollees from making her their PCP because AHP only covered treatment provided by its own physicians. She further feared that as enrollment in managed care organizations (MCOs) increases, and more of her colleagues sign managed care contracts, her pool of potential patients would decrease drastically.