For The Defense, July 2010 - DRI Today

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M E D I C A L L I A B I L I T Y A N D H E A LT H C A R E L A Wwhether directly or through insurance.45 C.F.R. §61.3.• Exclusion or disqualification of any providerfrom federal of state health careprograms must be reported, regardlessof underlying findings or appeal. 45C.F.R. §61.10.• A catch-all category requires reportingof any and all actions and decisions thatCourts have consistentlyfound no private rightof action againstreporting entities forfaulty NPDB reporting.relate to the delivery, payment or provisionof health care and requiring reportingfor health care providers, suppliersand practitioners. This broadly statedprovision may also be implicated byNPDB- reportable licensure and privilegeactivity. 45 C.F.R. §61.11.32 n For The Defense n July 2010Section 1921The NPBD has been further modifiedunder the Medicare and Medicaid Patientand Program Protection Act of 1987 andthe Omnibus Budget Reconciliation Actof 1990. Under the authority of these acts,Congress added an additional provision,known as Section 1921, to the Social SecurityAct. See 42 U.S.C. §1396r-2. Section1921 became effective March 1, 2010. Thesection expands the scope of informationto be reported to the NPDB to includenegative licensure actions against organizationsand entities, and makes that informationavailable to federal or state agenciesadministering health care programs, Medicaidfraud units, and state and federalprosecutors.Section 1921 does not at this time requirereporting of malpractice payments madeon behalf of non- individual organizationsand entities. Further, the additional queriersunder Section 1921 listed above are notallowed access to medical malpractice paymentsor adverse clinical or society membershipactions. Fact Sheet on Section 1921,DHHS/HRSA, NPDB-00930.06.01, pp. 1–2,March 2010.GAO Review of the NPDBIn 2000, a United States General AccountingOffice (GAO) report identified accuracyand management problems with theNPDB that called into question its effectiveness.The GAO report identified a significanterror rate in reporting accuracy, aswell as inefficient quality control and correctionprocesses. Government AccountabilityOffice, National Practitioner DataBank: Major Improvements Are Neededto Enhance Data Bank’s Reliability, No.01-030 at 21 (2000). In addition to routineerrors in reports, the GAO recited severalspecific examples where the purpose ofthe data bank was undermined, and practitionerswere prejudiced, by inaccuracyand inefficiency. Each instance involveda practitioner whose NPDB report containedinaccurate information; however,upon notification of the error, the reportsremained uncorrected or still accessible inthe NPDB, to the detriment of the practitioner.National Practitioner Data Bank at25–26. On the other hand, the GAO alsoconcluded that medical malpractice paymentswere woefully underreported, andthat even where settlements were reported,reporting entities nearly universally submittedincomplete information. The GAOnoted that 95 percent of the medical malpracticereports it sampled failed to identifywhether there had been a determinationthat the physician or dentist had compliedwith the standard of care. Id. at 21.In seeking to address these insufficiencies,the GAO focused not on practitionersprejudiced by inaccurate reporting, but onits conclusion that malpractice paymentswere underreported. It recommended thatinsurers be required to report the names ofboth corporations and individuals namedin medical malpractice settlements or judgments,instead of merely reporting thenames of the physicians. It also recommended“permitting” peer review organizations,as opposed to reporting entities,to determine which practitioners in medicalmalpractice actions should be reported.Id. at 11–12. Neither of these recommendationshas been incorporated into law todate.Practical Issues in SettlingMedical Liability CasesConcerns for PractitionersThe natural concern for practitioners isthat any negative report in the NPDB willimpact the ability to change positions,move to another practice location, and/oracquire or maintain clinical privileges. Apractitioner subject to reporting for settlementof a medical malpractice claim islegitimately frustrated by a cloud on hisor her professional competence, which,as reflected in case law, is nearly impossibleto remove or contest. Courts have consistentlyfound no private right of actionagainst reporting entities for faulty NPDBreporting. See Hancock v. Blue Cross-BlueShield, 21 F.3d 373, 373–74 (10th Cir. 1994)and Caine v. Hardy, 715 F. Supp. 166, 170(S.D. Miss. 1989), rev’d on other grounds,905 F.2d 858 (5th Cir.), superseded by 943F.2d 1406 (5th Cir. 1991) (en banc) (affirmingthe district court), cert. denied, 503 U.S.936 (1992). Direct challenges to data bankreporting under the Administrative ProcedureAct have likewise been unsuccessful.See Simpkins v. Shalala, 999 F. Supp.106 (U.S. Dist. D.C. 1998) (rejecting physicianchallenge to database report on thegrounds that it was “arbitrary, capricious,an abuse of discretion, or otherwise not inaccordance with law”). Frustrated practitionershave also unsuccessfully pursuedprivate claims against hospitals and otherentities with NPDB reporting responsibilitiessounding in retaliatory discharge, defamationand other employment- relateddoctrines. E.g., Jenkins v. Methodist Hospitalsof Dallas, Inc., 478 F.3d 255 (5th Cir.2007), cert. denied, 552 U.S. 825 (2007)(summary judgment against physicianwho alleged racially discriminatory motivebehind reporting suspension to NPDB).These cases demonstrate practitioners’antipathy toward reporting and the permanentimpact of reporting on the practitioner’scareer.Concerns for ProfessionalLiability CarriersCompliance with Reporting RequirementsThe medical liability carrier’s foremostconcern relative to the NPDB is compliance.As demonstrated in the 2000 GAOstudy, HRSA and other agencies monitorthe adequacy and completeness of med-
ical malpractice reporting, and the regulationsprovide for enforcement againstreporting entities via the DHHS Office ofInspector General. Reporting must occurwithin 30 days of the first payment, andeach failure to report can result in a fine ofup to $11,000.Impact on Exercise of Right toConsent to SettlementThe NPDB can also impact an insurancecarrier where the medical liability policycontains a “consent- to- settle” clause, underwhich the insured practitioner has the rightto approve or reject settlement. While notuniversal, such clauses are not unusual inmedical liability policies. Courts have longheld that such clauses are enforceable andthat their breach entitles the practitionerto damage against the insurer. E.g., Brion v.Vigilant Ins. Co., 651 S.W.2d 183 (Mo. App.1983). Where the insurance policy containssuch a clause, the carrier can find itself ina situation in which a claim can be settledfor far less than the cost of continued litigation,but, due in no small part to theprospect of NPDB reporting, the insuredpractitioner will not authorize settlement.Impact on Insurer’s Duty of Good FaithEven where there is no “consent- to- settle”clause in the applicable policy, the requirementto report settlement payments to theNPBD potentially impacts an insurer’s dutyof good faith and fair dealing to the insuredpractitioner. Most jurisdictions holdthat insurance policies include an implicitduty of good faith on the part of the insuredwith respect to handling of claims and protectionof the insured’s interests. Generally,the duty of good faith obligates an insurancecarrier to act reasonably, to refrainfrom putting its own interests ahead of theinsured, and to protect the insured by settlinga covered claim when settlement canreasonably be accomplished within policylimits. Conventional wisdom amonginsurers is that settlement of a claim onthe insured’s behalf equals discharging theduty of good faith and fair dealing.Data bank reporting can upend this conventionalwisdom. Health care practitioners’interest in the preservation of theirprofessional reputations is directly threatenedby NPDB reporting of settlement payment.While settlement of a malpracticeclaim resolves the practitioner’s immediaterisk of financial liability, it can impairthe practitioner’s professional viabilityand options over the long term via NPDBreporting. Particularly where a claim issettled based on a cost- of- defense analysis—thatis, the insurer’s conclusion thatit can save money by paying a settlementrather than by continuing to fund litigationdefense costs—the insured practitionermay claim that the insurer put its owninterests ahead of the practitioner in decidingto settle.Practitioners insured under policies thatdo not contain a “consent- to- settle” provisionhave generally been unsuccessful inclaiming that settlement of a claim constitutedbad faith. E.g., Frankel v. St. Paul, 334N.J. Super. 353, 759 A.2d 869 (N.J. Super.2000) (insurer not liable for settling claimagainst dentist, where settlement resultedin increased liability insurance premiums);Mitchum v. Hudgens, 533 So. 2d 194 (Ala.1988) (insurer’s exclusive right under policyto settle claims is inconsistent withany obligation to seek the insured’s permissionbefore settling a claim); Shuster v.South Broward Hosp. Dist. Physicians’ Prof.Liab. Ins. Trust, 591 So. 2d 174 (Fla. 1992)(insurer not liable for failure to investigateclaims against physician which it unilaterallysettled).Similar claims have been broughtagainst liability insurers where a singlecarrier settled claims against multiple physiciansvia a single payment, then reportedto the NPDB based on the carrier’s internalallocation of liability. Such claims haveto date been successful. E.g., Babic v. PhysiciansProtective Trust Fund, 738 So. 2d 442(Fla. Dist. Ct. App. 1999) (physician whowas charged by his carrier with the entiresettlement on behalf of four physicians didnot state a claim for bad faith in challengingthe carrier’s decision and subsequentreport to NPDB).In Doe, M.D. v. South Carolina MedicalMalpractice Liability Jt. UnderwritingAss’n., 347 S.C. 642, 557 S.E.2d 670 (S.C.2001), a malpractice carrier insured multiplephysicians and caregivers arising outof the death of an intensive care patient.One caregiver offered testimony that suggestednegligence on Dr. Doe’s part. Theclaim was ultimately settled. After settlement,Dr. Doe and another defendantrequested that no portion of the settlementbe charged against their policies becausethey claimed immunity as “Good Samaritans.”557 S.E.2d at 673. After obtaininga legal opinion calling into question theapplication of the immunity as to Dr. Doe,the carrier concluded that one- seventh ofthe settlement would be charged againstDr. Doe’s policy, and reported the paymentunder Dr. Doe’s name to the NPDB. Id. Dr.Doe filed a lawsuit against the carrier seeking,among other relief, damages for breachof contract. Id. at 672.Consistent with the decisions in theFrankel, Mitchum and Shuster cases discussedabove, the South Carolina SupremeCourt in Doe concluded that Dr. Doe couldnot recover. Because at least one eyewitnesscaregiver testified to Dr. Doe’s possible negligence,because the carrier had obtaineda legal opinion suggesting that immunitydid not apply, and because the carrier hadcontractual authority to settle all claimsarising under the policy, there was insufficientevidence of bad faith associated withthe decision to charge Dr. Doe’s policy andreport to the NPDB.Significantly, however, the court agreedthat Dr. Doe could have recovered if hecould have shown that the decision regardingapportionment was done in bad faith,i.e., as a result of the carrier putting itsinterests ahead of his. Id. at 675. This suggeststhat courts may become more opento such claims as practitioners develop theargument that NPDB reporting threatenssubstantial impairment to the practitioner;and that insurers should take thatthreat into account in settling cases and inmaking decisions about how complex settlementswill be reported.Concerns for Defense CounselNPDB reporting requirements can exacerbatethe tension intrinsic to the “tripartite”relationship between a liability insurer, itsinsured, and the attorney engaged by theinsurer to defend the insured. The foregoingdiscussion demonstrates how thecompeting concerns of the insurer andthe insured can erupt into open conflict.Where the attorney is involved in makingsettlement recommendations and/or innegotiating settlement on behalf of a resistantclient, he or she can be swept into similarconflicts.For The Defense n July 2010 n 33
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