COMMENTARY

Times When Your Malpractice Policy Won't Cover You; and More

Wayne J. Guglielmo, MA

Disclosures

November 12, 2012

Five New Risks Arise With ACOs

Accountable Care Organizations (ACOs) hold out the promise of better-coordinated, more cost-effective care, but they also hold out something else -- new situations in which various risks, including malpractice risk, could occur, according to an October 2012 white paper by Marsh, the insurance and risk management consulting company.[2]

The Marsh white paper lists 5 potentially risky areas:

1. Establishing provider networks. "Errors in the provision of nonmedical professional services, including the distribution of shared savings across the network, and other risks could lead to antitrust allegations, contractual liabilities, and lawsuits from patients, competitors, and regulators. If mergers and acquisitions are involved in the formation of the network, participating organizations could also face transactional risks."

2. Entering into payer contracts. "Depending on the structure of reimbursement agreements with the government and various benefit plans, an ACO could assume additional risks. Examples include the risks related to the pricing of medical services, contract mismanagement for member providers, or incurring medical expenses in excess of agreed capitation levels."

3. Developing transitional care models. "In the short term, realigning organizational resources (including personnel), redefining measurements to track patient care and expenses, and establishing new processes and best practices could increase the risk of errors in delivery of medical services."

4. Sharing of data. "Even before the push toward accountable care, health care organizations that had been victimized by data breaches were well aware of the costs related to a data breach, including those related to patient notification, potential government fines imposed under the Health Information Technology for Economic and Clinical Health Act (HITECH) and the Health Insurance Portability and Accountability Act (HIPAA), and litigation."

5. Physician integration. "Whether through direct employment, provider service agreements, or loose affiliations, a key component of the transition to accountable care is the integration and alignment of physicians with hospitals. Depending on the nature of their agreements with physicians, hospitals and the ACOs in which they participate could face added risks, notably medical professional liability (medical malpractice) exposures."

These 5 risks can be boiled down to 1 overarching risk, said white paper coauthor Donna Jennings to Business Insurance.[3]

"The biggest risk associated with sponsoring ACOs, or any hybrid model of an ACO, is that by doing so, you've just incurred areas of risk that were previously unknown to you," said Jennings, who is an Atlanta-based VP of clinical healthcare consulting at Marsh Risk Consulting. She points with special concern to the "potential exposures" of integrating smaller doctor practices into larger hospital systems.

Patients Sue Doctors Related to the Meningitis Outbreak

The nationwide meningitis outbreak in October has thus far infected over 400 people and killed 30. It's been estimated that as many as 14,000 people were exposed to tainted steroid injections, which were manufactured by the New England Compounding Center (NECC), a small Massachusetts firm.

Now the widely reported outbreak is beginning to take an additional toll, according to an October 24 article on insurancejournal.com. "Victims of . . . [the] outbreak are starting to sue the physicians and clinics that administered the tainted steroid shots."[4]

Several New Jersey doctors and clinics have already been sued, "and legal experts predict similar cases against other doctors and clinics." The impetus for the suits seems clear: Because NECC is relatively small, plaintiffs have begun targeting defendants, doctors, and clinics with deeper pockets.

But the success of the suits will depend "on whether judges decide the injections are subject to product liability or medical malpractice laws."

If the former, "hospitals could be sued for product liability and held responsible regardless of intent to harm. These strict standards are part of most state product liability laws."

If, in contrast, the courts define an injection as a service, plaintiffs will have a tougher time proving negligence under medical malpractice laws. "The question will be whether the doctor or hospital failed to investigate the competence and safety of the steroids," personal injury lawyer Fred Thompson told Insurance Journal. That question, Thompson says, will not be easy to address.

Lawsuits are likely to be filed in multiple states, making it difficult to calculate their outcomes given the variation in the laws governing product and malpractice liability. Plaintiffs may also file claims for both product liability and malpractice in the hope that one or both will stick, says personal injury lawyer Andrew Meyer, whose Massachusetts firm "has been looking into potential cases on behalf of meningitis plaintiffs."

Other potential targets could include suppliers, compounders, and distributors. But one target that's unlikely to face litigation is the government, whether at the state or federal level. Notes Meyer: "You can always make a claim, but the difficulties associated with suing any government, federal or state, are enormous."

DHHS Secretary Pressed on Med-Mal Reform Grants

In a pair of letters to Department of Health and Human Services (DHHS) Secretary Kathleen Sebelius, 3 prominent GOP members of Congress demanded answers from the Obama Administration about its medical malpractice reform grants, funded through DHHS and administered by the Agency for Healthcare Research and Quality.[5]

The 3 members are Chuck Grassley (R-IA), Senate Judiciary Committee Ranking Member; Orrin Hatch (R-UT), Senate Finance Committee Ranking Member; and Lamar Smith (R-TX), House Judiciary Committee Chairman. In the first of their joint letters, sent on April 3, the 3 high-profile Republicans expressed their concerns that none of the $23.2 million awarded to date "has gone to researching or implementing 'traditional' medical malpractice reforms." As they make clear, traditional med-mal reforms refer to such things as caps on punitive damages, caps on noneconomic damages, and limits on contingency fees. Each is the kind of tort reform long favored by Republican lawmakers.

The letter contained 14 separate questions for Secretary Sebelius to address, including the question of why the grant program was "exploring 'nontraditional liability reforms’' -- a veiled reference to an emphasis on patient safety, evaluation, and reporting requirements.

Following the Secretary's response, which they deemed inadequate, Grassley, Hatch, and Smith sent a follow-up letter to her last month. It reiterated their concerns and asked that she address their original questions more fully and substantively. They also added 2 additional queries, which called into question whether the grants as currently implemented were ever expressly approved by Congress.

At press time, Secretary Sebelius had not responded to GOP lawmakers' most recent letter.

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