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Protecting patients from physician business malpractice.

Three states have applied consumer protection laws to the entrepreneurial aspects of medicine.

Federal and state tort "reform" legislation to restrict or abolish medical negligence claims is forcing trial lawyers to refocus their efforts to preserve the legal rights of consumers injured by improper delivery of medical services. One legal remedy being employed in three states permits injured consumers to seek redress from physicians for unfair and deceptive trade practices.

The idea is not new. After all, lawyers have been held liable for unfair and deceptive business practices under state consumer protection laws.(1) Why not physicians? This article examines the prospect of patients suing physicians for violations of state unfair and deceptive trade practice statutes.

Currently, 48 states and the District of Columbia permit a private right of action against businesses that commit unfair or deceptive trade practices.(2) These statutes were created to protect consumers by making unfair or deceptive acts and practices illegal in trade and commerce.

The statutes closely mirror the Federal Trade Commission Act (FTC act),(3) which also protects "the public from abuses arising in the course of competitive trade."(4) The state statutes require that great deference be accorded to the Federal Trade Commission and to federal court interpretations of the FTC act. The statutes do not displace any other remedy afforded to consumers either by common law or other state or federal law. Some of the statutes also prohibit unconscionable and fraudulent business practices.

Most state and federal courts agree that any business practice that has the tendency or capacity to deceive consumers is a deceptive trade practice.(5) For example, a business advertisement that misstates a fact, fails to disclose a material fact, or merely confuses a potential consumer qualifies as a deceptive trade practice.(6) Consumers do not have to show intentional fraud or actual deceit.(7)

Most state and federal courts also agree that any business practice that "offends established public policy" and is "immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers" is an unfair trade practice.(8) Again, the courts do not require proof of intent or actual fraud to establish an unfair trade practice.

The Washington State Court of Appeals was the first court to address whether state unfair and deceptive trade practice statutes apply to physicians.

In Quimby v. Fine, a physician substituted procedures during tubal ligation surgery without the patient's consent and without advising her of the risks and alternatives.(9) About 10 months after the surgery, a baby with multiple birth defects was born and lived only 10 months.

The patient sued the physician for wrongful birth based on negligence. She also filed an unfair and deceptive trade practice claim based on the Washington Consumer Protection Act, alleging the negligence and lack of informed consent constituted deceptive trade practices.

The court held the negligence claim was not within the scope of the act. However, the court ruled the physician's failure to fully disclose accurate medical information could form the basis of an unfair and deceptive trade practice claim. The court reasoned that the doctor's entrepreneurial activities are trade or commerce and fall within the scope of Washington's consumer protection act.(10)

In reaching its conclusion, the court defined the entrepreneurial aspects of the practice of medicine specifically to include any acts that "increase profits and the volume of patients."(11)

Consequently, physicians who unfairly or deceptively promote their medical skills or other medical services(12) and acquire fee-paying patients from this promotion fall within the act's boundaries. The court concluded the plaintiff had a claim against the physician under the Washington act if she, as a fee-paying patient, could prove the physician unfairly or deceptively failed to disclose the risks of and alternatives to the treatment performed.(13)

Texas follows Washington

Only three other states have addressed the issue of consumer protection violations as they apply to physicians.

In Texas, a claim exists against a physician under the state's Deceptive Trade Practices Consumer Protection Act(14) as long as it is not based on negligence.(15) Negligence claims are excluded because the Texas Medical Liability and Insurance Improvement Act, reportedly enacted to combat the state's medical malpractice insurance problems, states that the trade practices act does not apply to a malpractice claim against a physician.

The baseline case in Texas for permitting deceptive trade practices act claims against health care providers involved a claim against a dentist. In Chapman v. Wilson, a dentist made false statements regarding his expertise in wisdom tooth extraction and the use of general anesthesia during the procedure.(16)

The court held that because the dentist made false and misleading statements, the patient could claim a violation of the Texas Deceptive Trade Practices Act. The court ruled the plaintiff's claim was not based on negligence but on deception.

Texas extended the Chapman decision to medical doctors in Sorokolit v. Rhodes. There, the court held a valid deceptive trade practices act claim based on misrepresentation and breach of warranty existed against a physician for false, misleading, and deceptive acts and practices.(17)

Before performing breast augmentation surgery, the physician guaranteed the patient she would look exactly like a photograph the physician had shown her. The court held the claim against the physician for unfair and deceptive trade practices was not negligence-based because its foundation was deception and not a breach of the medical standard of care. In this case, the patient alleged that the physician not only failed to accurately disclose, but actively misrepresented, both his medical skill and the possible results of the patient's surgery.

The Washington and Texas cases are analogous in their application of state consumer protection laws to physicians. In both cases, the physicians engaged in conduct that promoted business.(18) Their activities were intended to increase patient volume and profit.

In both cases, the conduct did not actually deceive the patients involved, but the business methods used had a tendency or capacity to deceive, which is the pertinent requirement of the state unfair and deceptive trade practices laws. Consequently, the foundation for both court decisions is that unfair and deceptive trade practices laws in Washington and Texas cover the business or entrepreneurial aspects of the practice of medicine.(19)

Other states split

Two other states, Ohio and Pennsylvania, have also considered the issue with different results.

In Ohio--unlike in Washington or Texas --physicians are expressly excluded from coverage under the Ohio Consumer Sales Practices Act.(20)

As a result, in Chiropractic Clinic of Solon v. Kutsko, the court did not explore the relationship of a physician's medical practice to consumer protection violations when a patient claimed improper billing practices against his chiropractor.(21) Instead, the court held licensed chiropractors are physicians under Ohio law and exempt from consumer protection laws.

In Pennsylvania, actions against physicians are not expressly excluded by the Pennsylvania Unfair Trade Practices and Consumer Protection Law.(22) However, in Gatten v. Merzi, the court held a patient could not sue her physician under the state consumer protection law after undergoing unsuccessful weight loss surgery.(23)

The patient based her cause of action on statements the physician made about the probable results of her surgery. But the court reasoned that allowing an unfair and deceptive trade practice claim against a medical doctor would render all physicians "absolute guarantor[s]" of medical results. The court concluded that allowing physicians to become absolutely liable for any preoperative statements whenever surgery was unsuccessful was "absurd."(24)

Gatten is distinguishable from the Washington and Texas cases because the patient did not argue, and the court did not consider, that the entrepreneurial aspects of the practice of medicine could form the basis of a consumer protection claim.(25)

Although the Gatten court did consider the physician's preoperative statements, it did not consider their business aspects, namely that they resulted in the acquisition of a patient and an increase in profit. Had the court been presented with this argument, the unfair trade practices and consumer protection law may have permitted the claim as an unfair and deceptive trade practice.

In Chalfin v. Beverly Enterprises, Inc., a federal district court in Pennsylvania ruled that the state unfair trade practices and consumer protection law applied to health care providers. In this case, the law applied to a nursing home that provided health care services to a Medicare patient.(26)

The court found the nursing home's act of evicting a patient it had agreed to care for in order to substitute a higher paying patient could constitute a claim for an unfair and deceptive trade practice.

The court's thinking illustrates that Pennsylvania has adopted the approach of Washington and Texas--applying consumer protection claims against physicians and other health care providers based on the entrepreneurial aspects of health care services.

The scarcity of specific statutory provisions and case law indicates that most states have not yet had the opportunity to consider whether consumer protection laws apply to the entrepreneurial aspects of the learned professions, especially medicine. However, within the confines of the Washington, Texas, and Pennsylvania opinions there seems to be no impediment in applying the laws that way.(27)

Physicians' conduct or activities that may be considered entrepreneurial include advertising; financial arrangements with testing facilities, drug companies, and other medical doctors; financial interests in testing or therapy facilities; and disparate pricing schedules for insured and uninsured patients.

Patients stand to benefit

The primary effect of applying state consumer protection laws to physicians is to protect patients from false, misleading, and deceptive representations and promises made by doctors. State unfair and deceptive trade practice claims are statutory claims. Thus, while they may be subject to limitations built into the unfair trade practice statutes, the claims are generally not going to be subject to general tort "reform" measures--such as damages caps--applicable to personal injury claims.

For example, a patient's claim would not have to contend with a statute of repose, joint and several liability, the collateral source rule, "phantom" nonparty liability, the economic loss rule, or statutory preemption.

An injured patient would benefit from a longer statute of limitations and no cap on damages, although many consumer protection statutes do limit a consumer's recovery to actual damages.(28) An injured patient would also benefit from the attorney fees and cost provisions in most state unfair and deceptive trade practice laws.

Most states permit the prevailing plaintiff to recover reasonable attorney fees and costs from the defendant because the plaintiff is acting as a "private attorney general" --to penalize unsavory businesses and to protect consumers and legitimate businesses. The statutory award of reasonable attorney fees and costs also makes injured patients' claims against physicians more economically practicable for attorneys.

Injured patients would further gain from the relaxed proof requirements for an unfair and deceptive trade practice claim. Deception only demands proof that the business practice has the tendency or capacity to deceive.

Unfairness only requires proof that the business practice offends public policy or is illegitimate and substantially injures consumers. These companion proof requirements permit consumers to effectively confront unscrupulous business practices.

Finally, consumers--including patients --would benefit from knowing that all businesses, including the learned practice of medicine, must abide by the same standard. No business should be exempt from treating consumers fairly.

Notes

(1.) Short v. Demopolis, 691 P.2d 163 (Wash. 1989).

(2.) JONATHAN A. SHELDON & CAROLYN L. CARTER, UNFAIR AND DECEPTIVE ACTS AND PRACTICES [sections] 7.2.1 (4th ed. 1997) (46 states expressly authorize a private right of action, Delaware expressly provides for a private injunctive remedy, and Arizona has implied a right of action); see also Debra D. Burke & Max Bishop, A Survey of the Potential Liability of Accountants Under State Deceptive Trade Practices Acts, 23 MEM. ST. U. L. REV. 805, 813 (1993).

(3.) 15 U.S.C. [sections] 45 (1994).

(4.) Federal Trade Comm'n v. Raladam Co., 283 U.S. 643, 647 (1931).

(5.) See, e.g., Charles of the Ritz Distribs. Corp. v. Federal Trade Comm'n, 143 F.2d 676 (2d Cir. 1944).

(6.) See, e.g., Federal Trade Comm'n v. Colgate-Palmolive Co., 380 U.S. 374, 389-91 (1965); American Pest Corp. v. Barco Chemicals Div., Inc., 317 So. 2d 789 (Fla. Dist. Ct. App. 1975).

(7.) D.D.D. Corp. v. Federal Trade Comm'n, 125 F.2d 679, 682 (7th Cir. 1942).

(8.) Spiegel, Inc. v. Federal Trade Comm'n, 540 F.2d 287, 293 (7th Cir. 1976); accord Federal Trade Comm'n v. Sperry Hutchinson Co., 405 U.S. 233, 241-42 (1972).

(9.) 724 P.2d 403, 404 (Wash. Ct. App. 1986).

(10.) Id. at 405-06. Trade or commerce includes "the sale of assets or services, and any commerce directly or indirectly affecting the people of the state." WASH. REV. CODE ANN. [sections] 19.86.010(2) (West 1989 & Supp. 1998).

(11.) Quimby, 724 P.2d 403, 406.

(12.) Business advertising falls within the scope of trade or commerce. See Heslin v. Connecticut Law Clinic of Trantolo & Trantolo, 461 A.2d 938,941 (Conn. 1983); Reed v. Allison & Perrone, 376 So. 2d 1067, 1068-69 (La. Ct. App. 1979); Aponte v. Raychuk, 559 N.Y.S.2d 255 (App. Div. 1990), later proceeding, 568 N.Y.S.2d 735 (App. Div. 1991).

(13.) Quimby, 724 P.2d 403, 406.

(14.) TEX. BUS. & COM. CODE ANN. [subsections] 17.41-17.59 (West 1987).

(15.) See TEX. HEALTH & SAFETY CODE ANN. art. 4590i [sections] 12.01 (West Supp. 1998).

(16.) 826 S.W.2d 214, 215 (Tex. Ct. App. 1992).

(17.) 889 S.W.2d 239 (Tex. 1994).

(18.) See Richard M. Alderman, The Business of Medicine--Health Care Providers, Physicians, and the Deceptive Trade Practices Act, 26 HOUS. L. REV. 109, 120 (1989).

(19.) See Carroll Rusk Jr., Note, Automatic Consumer Protection Act Recovery for Lack of Informed Consent: Quimby v. Fine, 11 U. PUGET SOUND L. REV. 347, 364 (1988); see Alderman, supra note 18, at 114-20.

(20.) OHIO REV. CODE ANN. [sections] 1345.01(A) (Anderson 1994).

(21.) 636 N.E.2d 422 (Ohio Ct. App. 1994) (the patient qualified as a consumer and the sale of a service qualified as a consumer transaction). See OHIO REV. CODE ANN. [sections] 1345.01(A).

(22.) PA. STAT. ANN. tit. 73, [sections] 201-2 (West 1993 & Supp. 1998).

(23.) 579 A.2d 974 (Pa. Super. Ct. 1990).

(24.) Id. at 976.

(25.) The plaintiff's complaint consisted of five counts, with one count an alleged violation of the Pennsylvania UTPCPL. However, the plaintiff failed to assert any factual or legal basis to support this count, and it was dismissed. Id. at 974-75. The appellate court, with little explanation, further decided that although "the act does not exclude services performed by physicians," it was designed to deal with trade or commerce practices and did not apply to physicians. Id. at 976.

(26.) 741 F.Supp. 1162, 1176 (E.D. Pa. 1989).

(27.) See Alderman, supra note 18.

(28.) In Florida, actual damages are equivalent to the amount "attributable to the diminished value of the goods or services received. "E.g., Urling v. Helms Exterminators, Inc., 468 So. 2d 451, 454 (Fla. Dist. Ct. App. 1985) (interpreting Rollins, Inc. v. Heller, 454 So. 2d 580 (Fla. Dist. Ct. App. 1984)).

Michael Flynn is a professor at the NOVA Southeastern University Shepard Broad Law Center in Fort Lauderdale, Florida. A longer version of this article is published in 20 Hamline L. Rev. 333 (1996).
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Author:Flynn, Michael
Publication:Trial
Geographic Code:1U7TX
Date:Nov 1, 1998
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