Developing and Supporting Theories of Hospital Liability in Catastrophic Injury Cases
August 10, 2008

Developing and Supporting Theories of
Hospital Liability in Catastrophic Injury Cases

By: Daniel S. Weinstock & Carolyn M. Chopko
Feldman Shepherd Wohlgelernter Tanner Weinstock & Dodig
1845 Walnut Street, 25th Floor, Philadelphia, PA 19103
215-567-8300, e-mail: dweinstock@feldmanshepherd.com

I. INTRODUCTION.

Whether your client is a child with a significant brain injury or not, the medical negligence practitioner who represents catastrophically injured victims is often forced to settle cases for an amount far less than the case on liability and damages would warrant, simply because in the absence of a corporate defendant there would be no way to collect full damages.

The most obvious solution to this dilemma is to identify and name a corporate defendant that can be held vicariously liable for the negligence of an individual healthcare provider. This strategy is very easy to implement where the individual healthcare provider is an employee of a hospital or a well-insured medical group, and will be successful in most cases stemming from healthcare services rendered in an emergency room setting. But what do you do in a labor and delivery case when the only culpable individual defendant is a private practitioner who merely has staff privileges at the hospital where the negligent care was provided?

Opinions have been published in at least 33 states adopting and/or recognizing what has generally been referred to in the medical negligence setting as “corporate liability.”[i] Pennsylvania law, as an example, imposes the following duties upon its hospitals:

(1) a duty to use reasonable care in the maintenance of safe and adequate facilities and equipment;
(2) a duty to select and retain only competent physicians;
(3) a duty to oversee all persons who practice medicine within its walls as to patient care; and
(4) a duty to formulate, adopt and enforce adequate rules and policies to ensure quality care for the patients.[ii]

In the authors’ experience, however, theories of “corporate liability” in the medical negligence world are pleaded far more often than they are proven. This article demonstrates two cases where aggressive investigation and discovery produced strong evidentiary support for “corporate liability” claims, leading to recoveries many times greater than the insurance coverage available to the individual defendants, and makes practical suggestions for the development of a powerful “corporate liability” claim in cases that might otherwise be settled for a less-than-satisfactory sum.

II. EXAMPLE 1: CLASSIC CASE INVOLVING MISINTERPRETATION OF ELECTRONIC FETAL MONITORING STRIPS, WHERE THE MEDICAL RECORDS SUGGEST ALL RESPONSIBILITY RESTS WITH THE DELIVERING PHYSICIAN.

Adams v. Benson[iii] was in many ways a typical medical negligence case involving misinterpretation of electronic fetal monitoring strips. Mrs. Adams had originally sought care for her pregnancy with an obstetrician who happened to be head of the department at a rural New Jersey hospital. Her care was transferred “for insurance reasons” (Mrs. Adams was a Medicaid patient) to Dr. Benson, a family physician who had completed a one year fellowship in obstetrics. Dr. Benson’s privileges permitted her to manage normal pregnancies and those with certain high risk factors. She was not privileged to perform cesarean section deliveries.

The pregnancy was uncomplicated until Mrs. Adams was in labor, at term, and the electronic fetal monitoring strips became non-reassuring. The nursing staff accurately documented the patterns demonstrated in the strips, and Dr. Benson was at bedside virtually every minute between the time the strips became non-reassuring and the time Mrs. Adams delivered, vaginally, an asphyxiated baby boy. Dr. Benson had not consulted with an obstetrician during the labor, and she never considered taking steps to expedite delivery.

Discovery did not establish an actual or apparent agency or employment relationship between Dr. Benson and the hospital. Although the complaint made allegations against the nursing staff regarding improper interpretation of the fetal monitor strips and failure to initiate the “chain of command” at the hospital, neither of these theories proved meritorious. Furthermore, the nurses did not maintain private insurance policies. Baby Adams’ injuries were quite severe, and his future care needs were projected in excess of $10 Million; yet Dr. Benson and her group carried only two lines of coverage, an amount woefully inadequate to provide full compensation in this case. Now what?

Our clients often approach us armed with tales about the target doctor’s history of bad outcomes and lawsuits, and Mrs. Adams was no exception. Dr. Benson’s litigation history included a previous lawsuit involving a stillbirth following incorrect interpretation of electronic fetal monitoring strips. The plaintiff in that case had settled for a very low figure,[iv] but the settlement required Dr. Benson to admit liability, which she ultimately did. This admission was set forth by her attorney in open court, and made part of the record. Investigation then led to the identification of another profoundly brain damaged baby delivered by Dr. Benson, vaginally, following hours of unrecognized fetal distress. This baby had died about a month after delivery. Although the family did not bring a lawsuit against Dr. Benson in that case, the family willingly provided access to all pertinent medical records.

The hospital’s quality assurance files on these two prior deliveries were ultimately discovered, and revealed full fledged peer review proceedings were never conducted because the hospital’s quality assurance manager had made notations stating the OB/Gyn department head had reviewed the strips and found they had been properly interpreted. Unfortunately for the hospital, however, the OB/Gyn department head denied having reviewed the strips at all, and indicated if he had seen the strips he would have recommended full fledged peer review.

Extensive discovery was also conducted concerning Dr. Benson’s “Current Competence”[v] to practice obstetrics. Joint Commission for Accredited Healthcare Organizations (JCAHO) standards and the hospital’s own bylaws require that physicians be granted privileges only after having affirmatively, and in writing, demonstrated their “Current Competence” for the privileges being sought. In this case, all individuals involved in the process that led to Dr. Benson’s privileges for the cycle in question were deposed. As it turned out, because Dr. Benson was a member of the department of family medicine, rather than the department of obstetrics, her privileging recommendations had been made by the head of the department of family medicine.

During his discovery deposition, the family medicine department head admitted he did not know whether Dr. Benson had “Current Competence” for the obstetric privileges he recommended. In fact, this witness admitted he had not even opened Dr. Benson’s credentials file before he signed off on her obstetric privileging recommendations. The chairman of the hospital’s credentialing committee and the CEO, neither of whom are obstetricians, were essentially forced to admit that nobody had evaluated Dr. Benson’s “Current Competence” before her obstetric privileges were recommended and approved.

Following exhaustive investigation and more than 30 discovery depositions, Mrs. Adams was able to present a picture of a family physician who very definitely should not have been privileged to manage her high risk pregnancy. Dr. Benson not only failed to demonstrate her “Current Competence,” as required by JCAHO and the hospital’s own bylaws, but she had affirmatively demonstrated her “Current Incompetence.” The fact that Mrs. Adams’ high risk pregnancy had been transferred from the hospital’s OB/Gyn department head to Dr. Benson solely because Mrs. Adams was a Medicaid patient was the icing on the cake.

The case was settled for a sum that will assure Baby Adams’ medical and related care needs will be met. Another interesting thing happened when the case settled. Dr. Benson stopped delivering babies!

III. EXAMPLE 2: EARLY DISCHARGE OF A HEALTHY APPEARING NEWBORN WITH INADEQUATE FOLLOW-UP BY AN INDEPENDENT CONTRACTOR PEDIATRICIAN, LEADING TO KERNICTERUS AND CEREBRAL PALSY.

Carlson v. Dobbs[vi] was a case involving term delivery of a normal, healthy appearing newborn who developed mild jaundice on the second day of life. Baby Carlson was discharged less than 48 hours from birth, and her mother was instructed by Dr. Dobbs to schedule a follow-up appointment with his office for “one week” after the date of birth.

Mrs. Carlson did exactly as she was told, and in fact called Dr. Dobbs’ office on Baby Carlson’s 5th day of life to complain that his yellowish skin color was getting worse. Dr. Dobbs’ office instructed Mrs. Carlson to simply keep the appointment previously scheduled for day 7. By the time of the appointment, Baby Carlson’s bilirubin level had reached 30 mg/dl, and in spite of aggressive treatment, she developed kernicterus and cerebral palsy.

The negligence of Dr. Dobbs seemed pretty clear from the start. By 2003 (the year Baby Carlson was born) the American Academy of Pediatrics and numerous other medical organizations and societies were publishing clear recommendations that all babies discharged less than 48 hours from birth be seen for follow-up within 2 to 3 days of discharge. However, Dr. Dobbs was clearly an independent contractor at the hospital, and had been selected to care for Baby Carlson by her parents, not by the institution. Dr. Dobbs’ limited insurance coverage obviously was not going to be sufficient to provide a recovery that would provide adequate compensation for Baby Carlson’s extensive care needs. Does the hospital share responsibility under these facts?

Although the hospital where Baby Carlson was born could not be held vicariously liable for the negligence of Dr. Dobbs, it, like most hospitals, was JCAHO accredited. The hospital therefore was required to meet JCAHO requirements, which include formulating an action plan for each Sentinel Event Alert JCAHO issues. In 2001, JCAHO issued Sentinel Event Alert 18, “Kernicterus threatens healthy newborns.”[vii] In this Alert, JCAHO expressly recommended that accredited organizations “take steps to raise awareness among neonatal care givers of the potential for kernicterus and its risk factors,” and identify risk reductions strategies to help prevent the occurrence of kernicterus. One of the recommended risk reduction strategies was establishment of a procedure for follow-up of all newborns discharged less than 48 hours from birth within 2 to 3 days of discharge. This is the very same recommendation put forth by the American Academy of Pediatrics in 1994.[viii] But while the American Academy of Pediatrics Practice Parameter primarily addresses physicians, JCAHO publications are directed to hospitals.

Deposition notices were issued for corporate designees to explain what the hospital did in response to the 2001 JCAHO Sentinel Event Alert. After the usual privilege objections were overruled and the hospital was compelled to produce documents and witnesses, it became clear the hospital had done very little. Its response was apparently limited to the pediatrics department head issuing a memo to the pediatricians at the hospital, including Dr. Dobbs. This memo enclosed the JCAHO Sentinel Event Alert, and recommended all babies discharged less than 48 hours from birth be scheduled for follow-up within 2 days. Interestingly, Dr. Dobbs denied having received this recommendation, and testified the hospital had done nothing to educate him about this subject. As the deposition transcripts piled up, the testimony supporting plaintiffs’ corporate liability theory became even stronger.

Following a joint tort settlement with Dr. Dobbs, the case was tried all the way through to jury deliberations against the hospital. During trial, Dr. Dobbs testified his follow-up recommendation for Baby Carlson was the same as for all of his early discharged babies from 1994 until 2003. In other words, Dr. Dobbs’ failure to comply with the AAP recommendations was his routine. The nurse who carried out Dr. Dobbs’ discharge instructions testified she was aware of Dr. Dobbs’ routine, she knew it was inconsistent with AAP recommendations, and she had made numerous complaints to the administration. The nursing supervisor, a member of the hospital administration, denied having received these specific complaints, but testified Dr. Dobbs’ practice was “common knowledge” at the hospital.

While the jury was deliberating, a very satisfactory settlement agreement was reached between Baby Carlson and the remaining defendant hospital.

IV. FIVE PRACTICAL SUGGESTIONS FOR PROVING YOUR “CORPORATE LIABILITY” CLAIM.

A. First Study the Law. Then Study the Exceptions to the Law.

As noted above, most states have recognized the right to bring a claim for “corporate liability” in the medical negligence setting. Although many states have not expressly addressed the issue, the authors are aware of only one state court opinion declining to recognize such a claim.[ix] However, the specific duties imposed and the criteria that need to be satisfied in order to establish breech of the duties vary from state to state.

Some states, such as New Jersey, impose a very restrictive limitation on the amount of recovery from a charitable corporation, [x] which is characteristic of virtually every hospital in that state. The New Jersey limitation, however, does not provide protection to individuals acting in an administrative capacity on behalf of the hospital. Accordingly, those individuals may need to be named personally.

Complicating matters even further, many states (including New Jersey) have enacted legislation immunizing individuals from liability with regard to activities involving participation in privileging and quality assurance.[xi] These statutes were principally enacted to protect hospital decision makers from lawsuits brought by doctors who were denied credentials or privileges, but may insulate individuals from medical negligence liability as well. Most of these statutes apply only if the defendant can demonstrate he or she acted “reasonably,” and a strong argument can be made that this language simply paraphrases the negligence standard probably applicable to the case anyway.

Finally, published opinions adopting principles of “corporate liability” in many states can be read to require that the hospital be on “notice” of a problem before any duty is triggered.[xii] Clearly “notice” can be constructive or actual, but in cases such as Adams v. Benson, “notice” was proven by Dr. Benson’s track record of bad outcomes and lawsuits. This creates a wonderful evidentiary opportunity. One of the first cases in the United States adopting corporate liability was an Arizona matter where evidence of prior lawsuits against the defendant physician was held admissible at trial to prove notice of the doctor’s alleged incompetence.[xiii] Undeniably, a plaintiff is therefore entitled to discovery of previous bad outcomes and lawsuits where a “corporate liability” claim is pleaded in good faith, subject to certain privilege restrictions, and in some cases this powerful evidence will be admissible at trial.

B. Study and Utilize Publications of the Joint Commission for Accreditation of Healthcare Organizations.

One of the most powerful pieces of evidence available in a “corporate liability” claim can be a JCAHO Sentinel Event Alert. Every lawyer who handles birth trauma cases should own a framed copy of JCAHO’s Sentinel Event Alert 30, entitled “Preventing infant death and injury during delivery.”[xiv] In this 2004 Alert, JCAHO made numerous recommendations to its accredited hospitals, including a recommendation that they:

conduct clinical drills to have staff prepare for when [events such as shoulder dystocia, emergency Cesarean delivery, maternal hemorrhage and neonatal resuscitation] actually occur, and conduct debriefings to evaluate team performance and identify areas for improvement.

How many JCAHO accredited hospitals in the United States followed that recommendation? How will your jury react when a defense expert refutes that the hospital’s failure to follow this recommendation increased the chances that an independent practitioner would make an error, as presumably he or she did in your case?

Over the past 10 years, JCAHO has issued 39 Sentinel Event Alerts, and almost every single one can support a theory of “corporate liability” in the right case. The Sentinel Event Alerts are available to the public, and can easily be accessed online.[xv]

In addition to Sentinel Event Alerts, JCAHO has developed a huge volume of standards its accredited hospitals must follow.

C. Take Hospital Corporate Designee Depositions.

Whenever the hospital’s knowledge about a specific healthcare provider’s competence or experience is in question, the hospital should be compelled to identify and produce for deposition the individual most familiar with that issue. When a hospital’s compliance with a recommendation set forth in a JCAHO Sentinel Event Alert, or another recommendation, is in question, issue a corporate designee deposition notice on that issue. If there is a question as to whether or not appropriate hospital policies and procedures were adopted, implemented or enforced properly, make the hospital produce a witness.

The corporate designee deposition serves many purposes. First, whoever the business chooses as its designee is testifying on behalf of the business, and his or her testimony can probably be utilized at trial as admissions. If the designee claims not to know the answer to a certain question or line of questioning, ask the witness to identify someone who may have more knowledge on the subject. Then take that person’s deposition.

Lawyers often are willing to accept documents, produced either in response to a request for production of documents or in response to a corporate designee deposition notice accompanied by a duces tecum command, in lieu of taking an actual deposition. Great care should be taken before waiving the opportunity to elicit testimony. In addition to the obvious point that sometimes documents need to be authenticated and explained, corporate designees can be invaluable in setting forth the record as to the importance of these documents. For example, in the authors’ experience, corporate designees will uniformly testify that hospital policies and procedures need to be followed without exception. These admissions can be used to completely undermine the “judgment” defense each of us is accustomed to dealing with at trial.

D. Don’t Be Afraid to Go After Credentialing/Privileging Claims.

Study after study has demonstrated that a great percentage of medical negligence cases are filed against a relatively small group of physicians. Some of these physicians are sued frequently because their patient populations are saturated with high risk patients. Others are sued frequently because they are bad doctors. The authors’ firm recently prepared a case for trial in which the defendant neurosurgeon had been sued nearly 30 times, with payment having been made in almost every case. What really gave the case teeth is that in his credentialing application, the neurosurgeon had left blank the part of the form where he was asked to identify previous lawsuits or payouts. The hospital credentialed him and granted him various privileges at the hospital without ever having even considered his litigation record.

Lawyers are sometimes hesitant to get involved in credentialing/privileging claims because of the difficulty in obtaining discovery due to peer review privilege statutes. While the protection does vary somewhat from state to state, in the authors’ experience there are exceptions to the general protection of peer review in every state, and aggressive advocacy can sometimes lead to the discovery of a gold mine.

E. Take Depositions. Take Lots of Depositions.

All of us are accustomed to taking depositions of the parties and key witnesses. Some of us follow the practice of deposing everybody who could conceivably have been involved in a case, even if their involvement appears ancillary from the medical records. We have all had the experience of seeing a difficult case suddenly become much stronger because an adverse witness “gives up the goods.”

In the current environment of aggressive defense experts and a strong cultural “code of silence,” sometimes a plaintiff lawyer’s job is “tricking the witness into telling the truth.” The more witnesses you depose, the more opportunities the defense has to make a mistake and accidentally tell the truth. If you take enough depositions, you may find a witness who wants to tell the truth.

The point is that taking the deposition of an adverse witness almost never hurts us. Any harmful testimony could have been elicited by the defendant at trial regardless, and if you take enough depositions in a meritorious case, you are bound to find helpful testimony sooner or later.

V. CONCLUSION.

One of the greatest challenges to the attorney who regularly represents catastrophically injured medical negligence victims is the lack of sufficient insurance policies to satisfy his or her clients’ claims. It often requires a heroic effort, but the “corporate liability” claim when supported by real, powerful evidence, can often turn a case that might have been settled for $1 or $2 Million into a recovery that truly will provide your client with a satisfactory recovery.

[ii] Thompson v. Nason Hospital, 591 A.2d 703 (Pa. 1991).

[iii] These names are fictitious, as the settlement agreement in the lawsuit contains a confidentiality clause.

[iv] New Jersey law regarding damages in stillbirth cases is rather draconian.

[v] To manage normal and high risk patients such as Mrs. Adams.

[vi] These names are fictitious, as the settlement agreement in the lawsuit contains a confidentiality clause.

[vii] Sentinel Event Alert Issue 18 of Joint Commission for Accreditation of Healthcare Organizations (April 1, 2001).

[viii] American Academy of Pediatrics Practice Parameter: Management of Hyperbilirubinemia in the Healthy Term Newborn (1994).

[ix] Gafner v. Down East Cmty. Hosp., 735 A. 2d 969 (Me. 1999).

[x] N.J. Stat. Ann. §§ 2A:53A-7 and 2A:53A-8.

[xi] See, eg., N.J.S.A. 2A:84A-22.10.

[xii] See, e.g., Welsh v. Bulger, 698 A. 2d 581 (Pa. 1997).

[xiii] Purcell v. Zimbelman, 500 P. 2d 335 (Ariz. App. 1972).

[xiv] Sentinel Event Alert Issue 30 of Joint Commission for Accreditation of Healthcare Organizations (July 21, 2004).

[xv]www.jointcommission.org