Question: Can a hospital or pharmacy be held legally liable for refusing to dispense drugs or provide treatment based on an HMO’s approved tariff, especially where the tariff does not reflect current market realities?
Case scenario
A community pharmacy in Lagos receives a prescription for a patient enrolled under an HMO plan. Upon reviewing the HMO tariff, the pharmacist discovers that the reimbursement price is significantly below the cost price of the medication due to recent inflation and supply chain issues. The pharmacy declines to dispense the drug under the HMO arrangement and asks the patient to make an out-of-pocket payment or return to the HMO.
The patient later files a complaint, alleging denial of care and threatening legal action against the pharmacy for refusal to honour the HMO tariff. Can the pharmacy – or a hospital in a similar position – be sued successfully?
Legal perspective
Under Nigerian law, the relationship between healthcare providers and HMOs is primarily contractual, not clinical. Unlike emergency medical care, which is governed by professional and ethical obligations, HMO arrangements are commercial agreements subject to the general principles of contract law.
Key legal considerations include:
Existence of a valid contract – Is there a binding service agreement between the healthcare provider and the HMO?
Scope of obligations – Does the contract mandate compulsory service delivery at the stated tariff regardless of cost fluctuations?
Patient’s legal standing – Is the patient a direct party to the contract, or merely a beneficiary of the HMO–provider agreement?
Regulatory framework – Compliance with NHIA, state health insurance schemes, and relevant professional guidelines.
In most cases, Nigerian courts recognise that a patient cannot enforce a contract to which they are not a direct party, except where the contract expressly grants such rights.
Determining liability
When disputes arise, courts are likely to assess:
Contractual terms: Whether the provider expressly agreed to the tariff and any price review mechanisms.
Notice and communication: Whether the provider properly informed the HMO or patient of its inability to honour the tariff.
Nature of the service: Whether the refusal involved routine care or an emergency situation.
Good faith: Whether the refusal was arbitrary or based on genuine commercial and operational constraints.
Liability is more likely where a provider unilaterally refuses care without contractual justification, especially in emergency or life-threatening situations.
Defences available to hospitals and pharmacies
Absence of privity of contract – The patient is not a contracting party to the HMO agreement.
Contractual limitation or exit clauses – The agreement permits refusal where tariffs become commercially impracticable.
No emergency situation – The refusal did not amount to denial of urgent or life-saving care.
Regulatory compliance – The provider acted within NHIA or state scheme guidelines.
Economic impossibility – Performance at the stated tariff would result in undue hardship or loss.
Practical advice
Always review and renegotiate HMO contracts regularly to reflect market realities.
Avoid verbal HMO arrangements; insist on clear written terms.
Communicate tariff disputes promptly and professionally to both HMOs and patients.
Document refusals carefully, stating commercial – not clinical – reasons.
Develop a clear internal policy for handling HMO-related disputes.
Closing insight
Healthcare is a service, but HMO relationships are a business. While compassion remains central to medical practice, Nigerian law recognises that healthcare providers are not legally bound to operate at a loss under commercial insurance arrangements. Clarity of contracts, transparency, and timely communication remain the strongest shields against liability.
