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Privilege denied - hospital liability for credentialing.

Courts in at least 23 states now hold hospitals liable for the consequences of allowing incompetent physicians to practice. Liability rests on a fundamental duty to adhere to standards.

John Doe is rushed to his local hospital with severe abdominal pain. The emergency room physician recommends immediate surgery. Doe is then given a series of forms to sign, including one entitled "General Conditions of Admission and Treatment."

Buried in the fine print is this statement: "The undersigned understands that all doctors furnishing services to the patient are independent contractors and are not employees or agents of the hospital." Doe signs the form. Once he is admitted, Dr. Jones, another physician whom Doe has never met, is assigned as his attending physician. Dr. Jones fails to operate, and Doe dies.

Doe's widow hires an attorney, who discovers Dr. Jones (1) is woefully underinsured, (2) has been a defendant in several malpractice suits, and (3) has had his privileges revoked or suspended at several area hospitals. When confronted with this information, however, the hospital denies any liability, asserting Dr. Jones is an independent contractor and not a hospital employee or agent.

Until recently, attempts to impose liability on the hospital for Dr. Jones's negligence probably would have failed. Hospitals traditionally have been viewed as merely facilities where patients are treated, with no vicarious liability for doctors who are not employees. But the hospital's role in providing health care has evolved, resulting in a "perception of the modem hospital as a multi-faceted health care facility responsible for the quality of medical care and treatment rendered."(1)

Recognizing that the screening of staff physicians is now one of a hospital's primary functions,(2) courts in at least 23 states(3) and Puerto Rico have expressed a willingness to hold hospitals liable for the consequences of negligently allowing incompetent physicians to practice within their walls, even if those physicians are not hospital employees.

The old holdings that declined to impose vicarious liability have not been reversed--they have been bypassed. Liability for negligent credentialing and retention does not rest on respondeat superior. Rather, it rests on the recognition of a duty running directly from the hospital to the patient to adhere to certain standards in granting, delineating, and renewing staff privileges.

Although liability for negligent credentialing and retention has been widely recognized only within the past two decades, it is based on traditional legal principles. Some courts have likened it to negligent entrustment of a motor vehicle.(4) Others have considered it merely an extension of liability for negligent hiring.(5)

Others see its genesis in Restatement (Second) of Torts [sections]411, which recognizes liability for the negligent selection of a contractor.(6) Most courts have justified it as a matter of public policy, providing an incentive for hospitals to be diligent in enforcing credentialing standards. For all these reasons, every appellate court that has been asked to adopt this doctrine in the past 20 years has done 50.(7)

In selecting a staff, hospitals have long enjoyed the right to exclude physicians based on criteria of the hospital's choosing. The theory of negligent credentialing and retention merely holds hospitals liable for the results of that selection process.

Although courts have not established entirely consistent standards, they agree that a hospital must exercise reasonable care in granting only competent doctors the privilege of using its facilities. Hospitals do not guarantee competence, but they must exercise some degree of diligence in ascertaining each doctor's competence, both initially and periodically.

A hospital that has actual knowledge of a physician's incompetence will be liable for his or her malpractice.(8) Most courts have gone beyond that, however, to scrutinize the process by which hospitals grant or renew privileges.

Credentialing process

Physicians applying for appointment to the medical staff of a typical hospital are required to fill out a lengthy questionnaire eliciting information on their practices, education, internships and residencies, teaching appointments, medical licensures, and other hospitals where they have held privileges. Physicians must also identify their professional liability insurance carriers and answer questions regarding any adverse actions taken against their licenses and staff privileges. Typically, they must provide several references.

Applicants who seek clinical privileges entitling them to treat patients at the hospital must identify the specific procedures for which they seek approval and provide information demonstrating their competence to perform those procedures. Even experienced physicians must undergo "proctoring" and monitoring by other staff before receiving permission to perform new procedures.

This information is submitted to the hospital's credentialing committee, which makes a recommendation to the hospital's board of directors regarding each application. Although the committee's recommendations go directly to the board, the hospital's chief executive officer oversees the committee's operations to ensure compliance with procedures.

In verifying applicant qualifications, hospitals are generally held to "that degree of care, skill, and judgment usually exercised under similar circumstances by the average hospital."(9) More specific requirements come from a variety of sources.

In addition to statutory and regulatory requirements, the conduct of hospitals has been measured against standards adopted by professional organizations; the practice of similar hospitals in the same community; and, often, the hospital's own rules. The most frequently recognized criteria, however, are those established by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), formerly known as the Joint Commission on Accreditation of Hospitals.

JCAHO is a private organization founded by the American College of Physicians, American Hospital Association, American Medical Association, and American College of Surgeons. It has accredited hospitals since 1953 under standards spelled out in an accreditation manual.

Hospitals covet JCAHO accreditation not only because of its prestige, but also for financial reasons. Under federal law, JCAHO-accredited hospitals are deemed to be in compliance with most requirements for participation in Medicare and Medicaid.(10) So it is not surprising that more than 80 percent of U.S. hospitals, accounting for more than 90 percent of inpatient admissions, are JCAHO-accredited. It is also not surprising that courts have viewed a hospital's failure to comply with JCAHO standards as evidence of negligence, at least where the hospital purports to follow them.(11)

Shift in focus

In 1993, JCAHO's Accreditation Manual for Hospitals shifted its focus from measuring a hospital's capabilities to measuring its actual performance. Under JCAHO criteria, privileges are subject to renewal at least every two years.(12)

For initial appointment to a medical staff, the manual requires, at a minimum, "evidence of current licensure, relevant training and/or experience, current competence, and health status."(13) Those seeking appointment or reappointment must disclose all past or pending adverse actions affecting their licensure or privileges at other hospitals.(14) Involvement in malpractice suits, at least those resulting in judgments or settlements, also must be disclosed.(15)

Clinical privileges must be carefully delineated based on, among other things, the treatment results the applicant has attained in the past.(16) Further, information an initial applicant submits regarding licensure, specific training, experience, and current competence must be verified "from the primary source(s) whenever feasible."(17)

As one might expect, this system largely depends on the candor of applicants and the diligence of those charged with evaluating them. All too often, this "honor system" fails.(18)

In Rule v. Lutheran Hospitals & Homes Society of America, an applicant listed experience in performing breech deliveries of first-time mothers at three hospitals.(19) The parent of a child who suffered injuries during delivery later learned that the hospital had not contacted the three hospitals, the doctor lacked the necessary experience, and one hospital had permitted him to perform breech deliveries only with supervision.

In Park North General Hospital v. Hickman, a patient who underwent negligent reconstructive breast surgery discovered that the hospital had ignored repeated complaints that the surgeon was not competent to perform the procedure.(20)

The most astonishing report of negligent credentialing is Insinga v. LaBella.(21) After a patient died, it was discovered that the treater was not a physician but an international fugitive who had fraudulently obtained a medical license and hospital privileges by using a dead doctor's name.

Standards of proof

Proving negligent credentialing does not end counsel's work. The plaintiff must also show that "but for the hospital's lack of care in selecting the physician, the physician would not have been granted staff privileges and the plaintiff would not have been injured."(22) The claim fails where a reasonable investigation does not reveal information requiring a denial of privileges.(23)

Similarly, the plaintiff must prove the physician was negligent and that the negligence caused harm to the plaintiff.(24) In these circumstances, courts evidently presume that if another qualified physician would have acted the same way, the plaintiff has suffered no legal harm.

There are no reported decisions on whether the purported malpractice must relate to the grounds on which privileges should have been denied. Based on the cases to date, it may be sufficient for the plaintiff to show that the physician should have been denied privileges even if the act of malpractice (for example, prescribing the wrong medication) is completely unrelated to the putative grounds for denying privileges (for example, conviction for tax fraud).

Pre-trial preparation

In putting together these cases, selecting an expert and formulating discovery requests are critical. The ideal expert should have an appropriate academic background (such as a master's degree or MBA in healthcare administration) as well as senior executive experience at a hospital.

The expert should also be able to explain to the jury the relevant JCAHO standards and the roles of the hospital's chief executive officer, medical staff, and board of directors in implementing and enforcing those standards.

Discovery requests should include the hospital's bylaws and all other documents evidencing procedures for granting, delineating, and renewing privileges. Although, because of privilege issues, discovery of completed applications, questionnaires, and correspondence may be problematic, copies of the standard forms used should be discoverable.

It should be possible to discover whether any effort was made to verify an applicant's licensure, experience, and standing with other hospitals. Hospitals generally employ one or more credentialing secretaries to keep track of all the paperwork involved. Deposing them will provide a foundation for the admissibility of the documents that have been obtained.

The most formidable obstacles counsel is likely to encounter are peer review privilege statutes. These typically shield from discovery and render inadmissible the proceedings, records, and files of hospital peer review committees.(25)

Although courts so far have rejected arguments that privilege statutes implicitly preclude claims for negligent credentialing,(26) the privilege statutes may prevent proving these claims through direct evidence of committee deliberations.

Some courts have limited the impact of these statutes, however, by construing the privilege to encompass only documents that detail the committee decision-making process and not materials the committee reviewed.(27) In at least one instance, the files of a credentialing committee have been distinguished from those of a peer review committee.(28)

Even without access to credentialing committee files, a plaintiff can prove circumstantially what the committee knew or should have known based on sources such as

* court records from previous malpractice claims,

* administrative records or testimony about a physician's education and training,

* hospital general credentialing or review procedure policies,

* medical records available with the consent of a patient, and

* expert witness opinions regarding all the above.(29)

Although the theory of negligent credentialing has gained widespread acceptance in many states, the prudent practitioner should consider carefully before using it. If the negligent physician has adequate insurance, there may be little advantage in taking on an additional defendant and the difficult task of acquiring the necessary evidence. If the insurance coverage is inadequate, however, and the factual basis exists, a claim for negligent credentialing can be a powerful weapon for obtaining compensation from negligent physicians for malpractice victims.


(1.) Elam v. College Park Hosp., 183 Cal. Rptr. 156, 163 (Ct. App. 1982).

(2.) Ferguson v. Gonyaw, 236 N.W.2d 543, 550 (Mich. 1975).

(3.) Alabama, Arizona, California, Colorado, Florida, Georgia, Louisiana, Michigan, Nebraska, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, Tennessee, Texas, Vermont, Washington, Wisconsin, Wyoming.

(4.) Mitchell County Hosp. Auth. v. Joiner, 189 S.E.2d 412, 414 (Ga. 1972); Park N. Gen. Hosp. v. Hickman, 703 S.W.2d 262, 265 (Text App. 1985).

(5.) Rodrigues v. Miriam Hosp., 623 A.2d 456, 462 (R.I. 1993).

(6.) Albain v. Flower Hosp., 553 N.E.2d 1038, 1044 (Ohio 1990).

(7.) But see McVay v. Rich, 874 P.2d 641 (Kan. 1994) (partially rejecting this cause of action because of statutory immunity).

(8.) Joiner, 189 S.E.2d 412.

(9.) Johnson v. Misericordia Community Hosp., 301 N.W.2d 156,175 (Wis. 1981).

(10.) 42 U.S.C. [sections]1395bb(a) (West 1994).

(11.) Blanton v. Moses H. Cone Mem'l Hosp., 354 S.E.2d 455 (N.C. 1987); Coleman v. Bessemer Carraway Methodist Med. Ctr., 589 So.2d 703,706 (Ala. 1991).

(12.) JCAHO, 1995 Accreditation Manual for Hospitals, [sections]MS.2.13.

(13.) Id. [sections]MS.

(14.) Id. [subsections]MS.2.5.1 and MS.2.5.2.

(15.) Id. [sections]MS.

(16.) Id. [sections]MS.

(17.) Id. [sections]MS.

(18.) Rodrigues, 623 A.2d 456, 463.

(19.) 835 F.2d 1250 (8th Cir. 1987).

(20.) 703 S.W.2d 262 (Tex. App. 1986).

(21.) 543 So.2d 209 (Fla. 1989).

(22.) Albain, 553 N.E.2d 1038, 1045.

(23.) Rodrigues, 623 A.2d 456 (hospital will be charged with knowledge of any facts it would have acquired if it had exercised the requisite care); Ferguson, 236 N.W.2d 543.

(24.) Golden v. Autauga Med. Ctr., 675 So.2d 418, 419 (Ala. 1996); Trichel v. Claire, 427 So. 2d 1227 (La. Ct. App. 1983).

(25.) See, e.g., ARIZ. REV. STAT. [sections]36-445.

(26.) See, e.g., Greenwood v. Wierdsma, 741 P.2d 1079, 1087 (Wyo. 1987); Humana Hosp. v. Superior Ct., 742 P.2d 1382, 1388 (Ariz. Ct. App. 1987); Browning v. Burt, 613 N.E.2d 993, 1006-07 (Ohio 1993).

(27.) Greenwood, 741 P.2d 1079; Hill v. Sandhu, 129 F.R.D. 548 (D. Kan. 1990); but see Burnett v. Vakili, 685 F. Supp. 430 (D. Del. 1988).

(28.) Manthe v. VanBolden, 133 F.R.D. 497, 503 (N.D.Tex 1991).

(29.) Humana Hosp., 742 P.2d 1382.

David M. Kopstein practices with Dross, Levenstein, Perilman & Kopstein in Washington, D.C.

RELATED ARTICLE: Massachusetts patients can conduct 'checkup' on doctors

Massachusetts consumers are the first in the nation to have guaranteed access to physicians' malpractice and hospital disciplinary records under a state law that was approved last July.

The Massachusetts Medical Society, a professional association representing most of the state's physicians, attempted to head off a public outcry for mandatory disclosure by drafting the legislation. This effort came on the heels of a Boston Globe investigative series that highlighted malpractice records of repeat offenders and advocated for greater public access to those records. (Malpractice in Massachusetts, Oct. 2, 1994, Spotlight section, at 1; High Hospital Death Rates, Oct. 3, 1994, Spotlight section, at 1.)

The new law, officially known as "An Act Providing for Increased Public Access to Data Concerning Physicians" (1996 Mass. Acts 307, amending Mass. Gen. Laws ch. 112, [sections]5), was packaged as public interest legislation. But it may, instead, chill malpractice settlement negotiations to the detriment of consumers--the people who are intended to benefit most from the law.

The reason for this chilling effect? The physician "profiles" include notice of paid malpractice claims, which allows the public to learn when malpractice claims have been paid on behalf of a doctor and whether the payment amount was "average," "above average," or "below average."

The public has not had access to this information in the past. Under the new law, a doctor's public record will likely be tarnished by these disclosures, which may, in turn, make it more difficult for the physician to compete for new patients and current patients' loyalty.

Lawyers regularly handling medical negligence cases may have noticed that implementation of the National Practitioner Databank has affected their settlement negotiations. The Massachusetts law will likely have a similar effect. The databank, however, is accessible only to hospitals and insurance companies. The Massachusetts profiles, on the other hand, are open to the public.

Physicians who maintain contractual authority to decide whether to settle a claim may hold fast in defending lawsuits against them when settling will definitely produce a publicly accessible blemish on their profiles.

Consumers seeking information about physicians can call the state Board of Registration in Medicine and receive profiles for free by mail. The profiles soon may also be available on the Internet.

Examples of information Massachusetts consumers can find in physicians' profiles include records dating back 10 years of

* felonies, certain misdemeanors, and final disciplinary actions taken by the Massachusetts board or by similar authorities in other states;

* involuntary restrictions or revocation of hospital privileges due to the practitioners' competence or character;

* paid medical malpractice claims, including judgments, arbitration awards, and settlements; and

* physician credentials, such as graduate medical education and training, years in practice, specialties, and whether Medicaid is accepted at their practice.

The law requires that each profile state under the malpractice claims section that settlements "may occur for a variety of reasons, which do not necessarily reflect negatively on the professional competence or conduct of the physician. A [settlement] payment should not be construed as creating a presumption that medical malpractice has occurred."

The stigma factor will likely exist with or without this disclaimer. Although one can argue whether a correlation exists between the number of malpractice claims paid and the quality of care rendered to a particular patient on a given day, consumers will probably favor the doctor whose record is "clean."

Conversely, by accessing only paid malpractice claims, consumers do not acquire information about

* valid but uncompensated claims;

* malpractice for which no claims were made; and

* potentially more reliable indicators of quality of care, such as outcome assessment studies by professional risk managers.

Categorizing malpractice settlement payouts as below average, average, and above average may be difficult and controversial given the diversity of their underlying claims.

By enacting this law, the Massachusetts legislature is striving for more informed consumers in the health care area.

Although the physician profiles give the public useful information about doctors, the data obtained is but a small part of the larger picture. If consumers are looking to choose a new doctor or grade their current one, they would be wise to use the profiles as just a starting point in their search for a competent physician.
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Title Annotation:Medical Negligence; includes related article on Massachusetts public interest law providing option for patients to check up on doctors
Author:Ristuben, Karen R.
Date:May 1, 1997
Previous Article:Preparing the HMO case.
Next Article:Neonatal hypoglycemia.

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