Apologize-and-Pay Laws Don't Keep Docs Out of Data Bank

August 18, 2014

Physicians who avoid the meat grinder of litigation when their insurers pay malpractice plaintiffs out of court under state "disclosure, apology and offer" (DA&O) laws still must be reported to the federal National Practitioner Data Bank (NPDB), the Department of Health and Human Services (HHS) has ruled.

The recent decision dampens the hope in some quarters of organized medicine that such forms of alternative dispute resolution — potentially faster, more transparent, and less adversarial than a lawsuit — can keep physicians out of what they view as a professional Hall of Shame.

Third parties such as medical liability insurers and self-insured hospital systems are responsible for reporting any malpractice payments made on behalf of a physician to the NPDB. In turn, hospitals and healthcare insurers routinely check the data bank, operated by the Health Resources and Services Administration (HRSA) within HHS, to vet physicians. Too many payment reports can exclude a physician from a hospital medical staff or a health plan network, said Alan Woodward, MD, head of the professional liability committee of the Massachusetts Medical Society (MMS).

"You don't want to have a record with the NPDB," Dr. Woodward told Medscape Medical News. His state's DA&O law of 2012 figured prominently in the HHS decision.

The prospect of getting reported to the Data Bank for making a payment under a DA&O law could discourage physicians from choosing this kinder and gentler approach to medical liability, according to Dr. Woodward and other supporters of these laws.

Former HHS Secretary Kathleen Sebelius issued the ruling on May 22. However, it didn't come to light until earlier this week, when the consumer watchdog group Public Citizen asked Sylvia Burwell, the successor to Sebelius, in a letter if HHS was working to ensure compliance with NPDB requirements in states with DA&O laws. Public Citizen had spotlighted the issue in September 2013 when it asked HHS to address what it called a reporting loophole in an Oregon DA&O law. If other states follow Oregon's lead, Public Citizen warned, the ability of the NPDB to help identify bad physicians "will be severely compromised."

DA&O Laws in Massachusetts, Oregon Had Physician Support

The Oregon law, enacted in March 2013, created a process for physicians and injured patients to engage each other to make things right before any litigation ensues. A physician can explain what caused the injury, apologize, and if appropriate, offer compensation. A mediator can help both parties decide on a figure. The law specifies that a payment arrived at through discussion or mediation does not result "from a written claim or demand for payment." It also states that a "notice of an adverse event" filed by a patient to start the prelitigation process does not represent a written claim or demand for money.

These caveats reflect the NPDB's definition of reportable payments. The federal law authorizing the database states that third-party payments on behalf of a clinician must be filed when there is a medical malpractice claim or judgment made against him or her. Claims must be in written form under the law. Malpractice insurers don't have to tell the Data Bank about money changing hands in response to verbal demands.

There were hopes in Oregon that the new law would indeed give physicians an NPDB loophole. Governor John Kitzhaber, MD, for example, urged HHS in a letter to make payments to injured patients under the new law nonreportable, according to HRSA.

Unlike the Oregon law, the Massachusetts DA&O law does not contain language that plays off federal law to skirt NPDB reporting. Massachusetts does have something akin to Oregon's "notice of an adverse event," however. Its law calls for injured patients considering a lawsuit to file a "prelitigation notice" and then wait at least 6 months before they go to court. That cooling-off period creates space for an out-of-court resolution process similar to that in Oregon.

The medical societies in both Oregon and Massachusetts supported passage of the DA&O laws in their states.

HHS Cites Intentional Loophole in Oregon Law to Avoid NPDB

In a memo to Sebelius on May 20, HRSA Administrator Mary Wakefield, PhD, agreed with Public Citizen that the "Oregon law was explicitly designed to avoid medical malpractice reporting to the NPDB." Dr. Wakefield recommended that HHS classify payments made under both the Oregon and Massachusetts DA&O laws as reportable. She also said that Massachusetts' prelitigation notice and Oregon's notice of an adverse event qualify as written claims if they include a demand for money.

Sebelius approved Dr. Wakefield's recommendations on May 22.

The HHS ruling cut physicians a bit of slack on Data Bank requirements, however. Dr. Wakefield wrote in her memo that if her recommendation was adopted, HRSA would issue guidance explaining that when "the provider initiates the settlement and no written demand for payment is made," no NPDB report is necessary.

Dr. Wakefield's memo also bends a little toward a proposal from a group called the Massachusetts Alliance for Communication and Resolution Following Medical Injury, which included the state medical society. The alliance had asked HHS to make DA&O payments nonreportable if an injury stemmed from a system or human error and the physician nevertheless satisfied the standard of care. "We're all for reporting substandard or negligent care," Dr. Woodward, of the MMS, told Medscape Medical News.

Dr. Wakefield did not grant the alliance's request, but suggested that the NPDB could flag physicians determined to have met the standard of care. She said HRSA would consider revising the NPDB report form "to include a check-box where reporters can indicate whether the standard of care was met."

Public Citizen Pleased with HHS Ruling

Public Citizen applauded the HHS ruling in May on DA&O laws and the NPDB.

"HHS implemented exactly what we were seeking," said Michael Carome, MD, director of Public Citizen's Health Research Group, in an interview with Medscape Medical News. Dr. Carome said he learned of the HHS decision only a few weeks ago.

Public Citizen, he said, has no objections to DA&O laws in themselves. "I think they have value. You can still have reporting to the NPDB. The two things aren't mutually exclusive."

Public Citizen wants to make sure that HHS is communicating the May ruling on DA&O laws to Massachusetts, Oregon, and other states contemplating this kind of legislation, Dr. Carome said. He acknowledged that state governments are not responsible for enforcing the federal NPDB law. However, he said that states have a responsibility to communicate federal policies to medical liability insurers and other organizations required by law to report malpractice payments.

HRSA spokesman Martin Kramer told Medscape Medical News in an email that HHS recently has provided guidance to Oregon Governor Kitzhaber and the Massachusetts Alliance for Communication and Resolution Following Medical Injury on how to implement their DA&O laws in compliance with NPDB reporting requirements. HHS will help other states with similar laws, Kramer said. However, like Dr. Carome, Kramer noted that the ultimate responsibility for NPDB compliance lies with healthcare entities that make malpractice payments on behalf of their physicians.

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