1. What type of factual, legal and expert issues may typically arise in healthcare/medical litigation? Please give a brief overview of the different areas.

Healthcare is a broad area of the law that can include any legal matter affecting a consumer with a healthcare legal issue; a healthcare provider; a healthcare payor, such as a commercial HMO or a government program like Medicare; or an individual or entity that serves the healthcare industry, such as a billing company. The most common sub-areas within healthcare law encompass the following:

  • Medical negligence/malpractice: A plaintiff in a medical malpractice suit is generally a consumer that experiences an adverse event while undergoing a healthcare procedure or course of treatment, or develops an adverse condition after the procedure or treatment. Issues include: whether the adverse event or condition is factually accurate; whether, in the view of experts, the treatment can causes the adverse condition; whether information concerning the event is peer review-protected; and whether negligence (tort) law theories (such as whether the procedure proximately caused the event) support the plaintiff’s claim. Many malpractice actions result in multimillion-dollar verdicts against healthcare providers. Some jurisdictions are seeking to cap malpractice awards. Also, many states now require hospitals to report medical errors, giving rise to legal questions concerning the reporting requirements.
  • Reimbursement issues: Providers are often paid for the healthcare services they provide by healthcare payors/insurers. The federal government, through the Medicare program, pays for services for the elderly. States, through state Medicaid programs, pay for services for the poor, with some federal support. On the commercial side, private payors pay for services for covered subscribers. (If an individual does not have insurance, either in general or for a particular service, then the individual must pay for the service out-of-pocket, or the provider must write off all or part of the cost of the service.) Many disputes arise around reimbursement based on complex regulations and private rules governing reimbursement, including whether the amount of the reimbursement was appropriate, or whether correct procedures were followed in delivering the care or seeking reimbursement. Experts may be necessary to determine whether reimbursement levels are actuarially sound.
  • Managed care disputes: These disputes are a subset of reimbursement disputes. They are exclusively between healthcare providers and managed care payors. Managed care payors include traditional health maintenance organizations (HMOs), preferred provider organizations (PPOs), and lesser known kinds of payors, such as disease management programs, where “care” is “managed” by the payor by closely reviewing the appropriateness of care being delivered to an individual, and often by paying for services on a capitated basis. Common managed care disputes include whether rates are sound; whether the plan is inappropriately denying care; and whether coverage and payment rules are sufficiently disclosed.
  • Fraud and abuse. The federal fraud and abuse statutes generally include the Anti-Kickback Act, the Stark Law, the Civil Monetary Penalties provisions, and the federal criminal law. Many states maintain corollaries to these federal laws. These laws are used by federal and state prosecutors to pursue improperly or unlawfully billed monies under the Medicare and state Medicaid programs. In many cases, the difference between a billing mistake and a billing error with intent to defraud is not clear, given the complexity of the reimbursement rules and regulations. When an error is discovered, providers are encouraged to voluntarily disclose the error, in compliance with federal Disclosure Guidelines, in order to avoid sizable penalties. When litigation occurs, experts are used to determine whether a particular billing method satisfies a particular billing rule. Also, citizens may bring complaints, through the qui tam mechanism. Multimillion-dollar judgments and settlements in fraud and abuse matters are not uncommon.
  • Antitrust/unfair competition issues: The federal and state antitrust laws apply to healthcare entities. Over the last 20 years, the Department of Justice and the Federal Trade Commission have demonstrated particular interest in the activities of competing healthcare providers, such as hospitals and physicians, with respect to payors, as set forth in the 1996 Antitrust Guidelines. The underlying concern is that such providers will act collectively to negotiate payor prices and leverage markets. However, providers may proceed with certain activities, including the exchange of price information, information on delivery practices, and joint purchasing arrangements, when these activities fall within the safety zones described in the 1996 Antitrust Guidelines, or with FTC and DOJ approval through the advisory opinion process.
  • Hospital-medical staff issues. Many healthcare legal issues arise in disputes between hospitals and medical staff members over issues such as medical staff membership credentialing/privileging (by which a physician is permitted to provide services in a hospital), sanctions, medical staff bylaws, and the fair hearing and appeal process. Experts may be called to evaluate whether a particular physician’s conduct or competence falls within acceptable parameters. Ancillary disputes often arise over whether a physician was properly peer-reviewed, or whether information on the physician is protected by peer-review laws.
  • Research. Healthcare providers play a key role in medical research activities. Whether the research sponsor is the government or a private party, research often takes place in a hospital, with physicians acting as investigators, and with patients participating as research subjects. Common research issues include participant disclosure and conflict of interest issues, and generally whether a study complied with applicable Department of Health and Human Services, Food and Drug Administration, and/or National Institute of Health requirements, as well as requirements imposed both by the Institutional Review Board overseeing the study and by the host institution. Experts may be necessary to determine whether a particular risk of the study was adequately disclosed to participants.
  • Employment law issues. Most hospitals are large institutions that need a range of employees to function, from healthcare practitioners to groundskeepers. In addition to employment issues that affect any institution, such as union, anti-discrimination, compensation and benefit issues, hospitals often face unique employment issues such as issues arising between hospital administration and the medical staff; the review and granting of credentials and privileges for medical staff and ancillary personnel; and staff shortages. Because hospitals may face liability for hiring, or not firing, an employee whose actions result in bad patient care, it is imperative that hospitals develop and enforce good policies and procedures governing employee activity. In addition, medical staff disputes must be managed through appropriate hospital hearings and review procedures prior to court challenge.
  • Ethics. Ethical issues pervade healthcare. For example, physicians must agree to comply with the Hippocratic Oath (“to do no harm”) as part of their training. Numerous regulatory requirements, such as patient confidentiality requirements, require physicians and other providers to comply with the highest ethical standards and norms of professional judgment. However, in order for an ethical issue to come before a court, there must be an overlapping legal issue as well. In a malpractice case, for instance, a defendant practitioner may claim that she administered treatment believing that she was acting in the patient’s best interests, in other words, that she intended no harm. The court would likely consider the range of acceptable professional practice in addition to the defendant’s intentions in weighing this defense.

2. Has the increase in healthcare-related litigation detrimentally affected the provision of healthcare services?

The increase in healthcare-related litigation, including the high costs of litigation and damages awards, has positively and negatively impacted the provision of healthcare services. On the positive side, more litigation has led to increased pressures to hold healthcare providers more accountable for poor patient care, and to cause providers to more readily disclose information about provider competency and conduct. On the negative side, providers in many areas face a malpractice insurance crisis, as malpractice insurance premiums swell to keep pace with the size of verdicts. Also, providers everywhere practice defensive medicine, such as ordering additional diagnostic testing, to ensure patient health. Although additional testing may lead to finding a medical condition in an early, less costly phase, more often testing only confirms that no medical problem exists. In the aggregate, the costs of such testing increase the cost of healthcare, which inevitably are passed onto the patient directly or through their insurance premiums.

3. What particular litigation issues may arise in connection with health insurance?

Health insurance, or insurance that pays for the cost of a patient’s healthcare treatment, gives rise to several types of litigation involving healthcare providers. Disputes involving coverage for medical care and proper reimbursement frequently become litigated claims. Where a managed care insurer’s decision not to provide coverage allegedly causes a patient to suffer injury, the insurer can be the defendant in the equivalent of a malpractice claim (typically styled as breach of contract) with the resolution often turning on whether the claim is preempted by federal ERISA legislation. Healthcare providers may litigate their exclusion from managed care networks of healthcare insurers and insurers’ complaints may give rise to antitrust claims against providers for collectively negotiating rates in violation of antitrust price-fixing laws. Insurers also are the challengers of hospital mergers on antitrust grounds.

4. What makes healthcare litigation a particularly complex area of litigation? What are the unique challenges to litigation in the healthcare industry?

Healthcare entities operate within an intricate set of laws and regulations. All healthcare litigation must take the underlying regulatory scheme, both state and federal, into account. In addition, there are industry practices that provide an additional layer of complexity to what would otherwise be a commonplace contract or tort claim. Reimbursement, or getting paid for services, is a relatively straightforward claim in most industries, but requires a specialist to understand revenue codes, DRGs, PPS, bundling, and outliers and the other unique terms that make up a healthcare litigation payment case. A unique challenge in healthcare litigation is that the parties to the dispute often must maintain a continuing relationship going forward. As a result, successful healthcare litigation must leave the parties standing when it is over, able to continue to serve their shared patient base.

5. Where are medical/healthcare civil claims determined? What are the relative advantages and disadvantages, in this context, of litigation, arbitration and ADR?

Medical/healthcare claims can be brought in any appropriate venue. To obtain jurisdiction in a federal court, there must be federal question jurisdiction or the plaintiffs and defendants must be citizens of different states. Medicare and Medicaid appeals will have their own set of administrative hearing procedures that must be exhausted before resorting to the courts. Insurance and managed care contracts typically specify the procedure for resolving disputes in the contract between the insurer and the providers. Litigation in court tends to be more expensive and slower than arbitration, where the parties hire the decisionmaker(s). Also, most arbitration clauses provide that the arbitration award is final and not appealable, thereby making the arbitration proceeding much faster and less costly than if an appeal would have otherwise been asserted. Alternative dispute resolution (ADR) or binding mediation is a useful technique if the parties want a prompt resolution or settlement, but need assistance in structuring their discussions. Non-binding mediation will provide a venue for each side to hear the other’s arguments, but frequently ends without a final resolution.

6. Are there any no-fault compensation schemes? If so, how do these compare with litigation/arbitration/ADR?

In the malpractice area, liability is still based on fault – or negligence – which is generally defined as failure to take reasonable care under the circumstances. Some states by regulation have adopted a form of non-fault liability system. In most states, the workers’ compensation program is non-fault, meaning that a worker injured on the job will be compensated for his medical expenses and lost wages, without having to prove that his accident resulted from his employer’s negligence. In exchange, the employee gives up the right to sue his employer, but employees often sue makers of equipment or other products alleged to have caused their injury. Non-fault programs eliminate much of the litigation found in the tort liability system, but also bypass the punishment/reward system of incentives provided by lawsuit outcomes. In that vacuum, regulation of the workplace and the cost of workers compensation insurance provide the mechanisms for controlling safety in the workplace.

7. How prevalent are class actions/plaintiff support groups? What particular issues may arise in mass tort litigation? Is it practicable for multi-plaintiff claims be referred to arbitration or ADR?

Mass tort litigation can involve either class actions or multidistrict litigation. These cases typically involve claims of personal injury allegedly caused by a product or substance. It is not unusual for plaintiffs’ attorneys to work with patient support groups to develop the claims of potential class members or plaintiffs. Class action claims are permitted to be brought on a consolidated basis because the common issues – such as the alleged defect in the product – predominate over individual issues. If an individual plaintiff’s medical condition is critical to the claims, class action status may be denied, but multiple cases can still be consolidated under the federal multidistrict litigation procedures for pretrial purposes. When pretrial discovery is completed, each individual case would be transferred to the court where it was filed for final proceedings such as a trial. Class action claims can be resolved through arbitration or ADR, provided that both sides agree. Multidistrict litigation literally involves hundreds or thousands of cases, so a single arbitration or mediation is less likely.

8. How do healthcare management structures affect a claimant’s choice of defendant?employees/service providers?

In general, a claimant may choose to sue a hospital, health system, or other corporate defendant to take advantage of a more favorable venue. For example, in Pennsylvania, medical malpractice actions may only be brought in the county in which they arose. A claimant may attempt to assert corporate negligence claims against a hospital, health system, or other corporate defendant in order to argue that the cause of action arose in a more favorable county, even when the treatment at issue arose in a different county. Claimants have had limited success in using this tactic.

In particular

Will management usually be liable for the negligence of doctors or hospital staff?

The answer to this question depends on the jurisdiction where the healthcare facility is located and the particular facts. In general, if management is the employer of the doctor or member of the hospital staff, then they will be liable under the theory of vicarious liability. If management is not the employer of the doctor or member of the hospital staff, then they may be liable under the theory of ostensible agency. In order to establish ostensible agency, a claimant must show that management held out the doctor or hospital staff as their employee and that the claimant looked to the institution rather than the individual physician for care. Management may also be liable under a theory of negligent supervision, negligent credentialing, or negligent promulgation/enforcement of policies and/or procedures.

Can doctors be liable for the negligence of nursing/auxiliary staff?

Again, the answer to this question depends on the jurisdiction where the treatment occurs and the particular facts of the case. In general, a physician will be liable for any nurse/auxiliary staff member who is an employee of the physician. If the physician is not the employer, he or she may still be liable under a theory of ostensible agency, or by virtue of the remnants of the "captain-of-the ship" doctrine, which made a surgeon liable for any negligence that occurred in an operating room. Under the current law in most jurisdictions, a physician will be liable for a non-employee nurse/auxiliary staff member if he or she controls or has the right to control the other person. In some jurisdictions, a physician may also be liable under a theory of negligent supervision.

How can healthcare providers best protect themselves from claims arising from the conduct of their employees/service providers?

Healthcare providers can create separate legal entities, with separate insurance policies, to be the actual employer of the employees/service providers. They should also ensure clear communication with their patients about the identity of the employer, either by posting signs and/or including the information on consent forms and patient literature. Healthcare providers should also ensure that there are clear protocols/procedures about which healthcare provider is responsible for specific tasks, and who is in charge of supervision. Physicians should also check state laws, regulations and institutional policies on supervision of non-physicians.

9. Can suppliers or manufacturers of medicines or equipment be made liable in respect of their use? What recent developments have there been in this area?

Suppliers or manufacturers of medicines or equipment are often sued for alleged design defects in their products. (Manufacturing defects can also form a basis for liability, but are more straightforward and less likely to involve contested litigation.) These cases often involve class action or multidistrict litigation because of their focus on a single product. Where medicines are available only upon a doctor’s prescription, the supplier or manufacturer will not be liable if the doctor was fully warned of the product’s defect because the doctor is considered a "learned intermediary" between the supplier and the patient. Similarly, if medicines or equipment are unavoidably unsafe in some way, but still provide a significant health benefit to patients, a complete warning of the problem may reduce the risk of liability. Some state laws will balance the benefits of the product against the known risk to determine whether such a product is legally defective. Where the risk of litigation prevents development of a necessary product, such as has occurred in the area of vaccines, the government may agree to compensate any persons suffering injury from the product.

10. Please outline the particular problems which may need to be addressed in relation to practical management of healthcare litigation/arbitration. Do different issues arise in arbitration or ADR?

A key issue in healthcare litigation is the confidentiality of patient medical information. Although a plaintiff in a healthcare case is deemed to have waived the confidentiality of any medical information pertinent to the claims in the case, there may be other information in the records that should not be revealed. Records of patients who are not plaintiffs are subject to strict confidentiality. Peer review records regarding physician misconduct are also privileged from discovery in litigation. Confidentiality issues are less significant in arbitration or ADR because those proceedings are not public. In multidistrict litigation, the sheer number of cases poses case management problems that require sophisticated computer systems and software to address. Careful attention to customizing this system to organize the input of data for a particular matter can pay benefits throughout the litigation by permitting searches of the patient or product database as issues arise in the litigation. Some multidistrict litigation involving medicines or equipment may involve multiple defendants as well as multiple plaintiffs, which requires execution of joint defense agreements and coordination of many defense issues. In malpractice cases, coordination among defendants – often the hospital and physician – is also desirable to avoid having the defendants make the plaintiff’s case against each other.

11. Please give examples of the particular practical issues which may arise in the various areas of healthcare dispute resolution identified in question 1? Are there particular issues which arise typically in particular types of dispute?

In negligence disputes, the enactment of HIPAA and other privacy laws have created a situation where some experts who have performed Independent Medical Examinations on behalf of defendants are requiring authorizations from plaintiffs before they will release a report to the party who retained them. HIPAA has also created confusion about whether subpoenas for documents can be issued without an appropriate release, and whether treating physicians can testify at a deposition without a HIPAA authorization. In addition, choice of venue issues will frequently arise in medical negligence actions, because plaintiffs will frequently attempt to institute lawsuits in a more favorable jurisdiction that has little connection to the events at issue.

In Pennsylvania, new laws on the qualifications of experts in medical malpractice cases have created questions about which medical specialties sufficiently overlap each other to have the same standards of care. For example, can a general surgeon testify against a gynecological surgeon on the issue of post-operative wound care?

Furthermore, several jurisdictions have enacted new laws on damages caps and/or elimination of certain types of damages in medical negligence actions. Some of these laws preclude plaintiffs from recovering from a defendant any amount that has been paid by a collateral source, i.e., a health insurer. The application of these laws becomes more difficult when an ERISA-qualified plan is the source of the collateral payment that a plaintiff is not permitted to collect, because recent case law in some jurisdictions has suggested that the ERISA-qualified plan cannot be precluded from enforcing a contractual right to subrogate from a plaintiff the amount that the ERISA-qualified plan has expended.

12. How will a court/tribunal determine what documents need to be disclosed by the parties to litigation/arbitration? What issues of privacy or confidentiality may this raise? What factors need to be considered by healthcare providers/insurers in relation to retention of documents and records?

With limited exceptions, a court/tribunal will permit a litigant to discover any documents that are reasonably calculated to lead to the discovery of admissible evidence. A healthcare provider/insurer does not need to volunteer the existence of any type of document, but generally is required to disclose the existence of a document when specifically asked in written discovery, depositions, or via subpoena. Production of the actual documents may be protected by a Peer Review statute, by HIPAA, or through statutes governing patient safety reporting requirements. Healthcare providers/insurers should review and comply with their own document retention policies and mandatory record retention laws before considering any type of document destruction. Healthcare providers/insurers should also consider the purpose for which the document was created and the manner in which the document is retained before asserting any type of privilege or protection from discovery.

13. What particular issues may need to be addressed in connection with expert evidence? Is there scope for the use of expert evidence in a non-adversarial setting (eg ADR)?

A lawyer retaining an expert on behalf of a healthcare provider must consider the particular specialty and qualifications of the defendant, as well as the treatment or procedure at issue in the case. In Pennsylvania, the MCare Act generally requires that an expert have a license and to have practiced or taught within the last five years. To testify on the standard of care, an expert must have substantially the same credentials as the defendant and practice in the same or a substantially similar specialty. A defendant healthcare provider will frequently need to have more than one expert testify on his behalf, i.e. one on the standard of care and one on causation.

When preparing to offer medical/technical testimony/evidence, an attorney must keep in mind that many judges and most jury members will not be familiar with medical/scientific/technical terminology. Therefore, it is important to define and explain any technical terms, and, when possible, use demonstrative or illustrative exhibits. For example, when describing spinal surgery, a lawyer and/or an expert may wish to use a large diagram of the spine, with labels, to explain the anatomy at issue. If a particular medical device is important to the case, a lawyer or expert may wish to show the jury the actual piece of equipment, or a picture of the equipment, to help them visualize the events at issue in the case.

14. How may industry standards be relevant in healthcare related litigation? How are such standards defined? Are there any relevant guidelines?

Given the specialized nature of the practice and delivery of healthcare, industry standards, that is, standards which do not arise under the law or regulations, are often key to the resolution of a healthcare dispute. Most national associations representing healthcare groups and other organizations have developed standards relevant to their practice. For instance, the Joint Commission on the Accreditation of Healthcare Organizations surveys hospitals based on JCAHO standards. If the hospital receives JCAHO accreditation, it may participate in Medicare, as long as additional Medicare standards are also met. JCAHO accreditation may also assist the state in obtaining state licensure. Health insurers consider JCAHO accreditation, and Medicare and Medicaid participation in determining whether to contract with a hospital. With respect to billing issues, the Healthcare Financial Management Association issues guidelines for billing for healthcare services, relying in part on general accounting principles. Also, the Office of the Inspector General for the Department of Health and Human Services has issued voluntary compliance guidelines for different providers (hospitals, long-term care organizations, etc.) to assist providers in avoiding sanctions for fraud and abuse and other legal violations.

15. What techniques can be used to minimise the cost and duration of healthcare litigation?

Early attempts at mediation or realistic settlement offers early in the process are often successful in minimizing the cost and duration of litigation. For cases involving multiple plaintiffs and a single product, however, this technique may not be possible, as nothing short of a global settlement will resolve the litigation. In high-profile litigation, it is important to respond diligently to discovery requirements and case management schedules imposed by courts or arbitrators in order to avoid becoming embroiled in collateral issues that damage credibility. As a preventative measure, it is prudent to consider the possibility of litigation at the time of developing a healthcare product or procedure so that the actions that will inevitably come under the scrutiny of the litigation process can be guided before they become problematic.

16. How can those involved in healthcare provision best protect themselves from litigation?

For healthcare providers, the best protection is knowledge. Although healthcare billing and practice rules can seem overwhelming, there are numerous national, state and regional industry associations whose focus is assisting their members in understanding and complying with the law.

17. What are likely to be the important developments in this area?

One of the most interesting and significant areas of development in healthcare litigation is the possibility of contracting for participation in mandatory alternative dispute resolution programs. These pre-dispute contracts would require plaintiffs to present their cases to a mediator or an arbitrator prior to initiating a lawsuit.

18. Is there any other FAQ which has not been raised above but which should be addressed? Please explain its significance.

One of the most interesting and significant areas of development in healthcare litigation is the possibility of contracting for participation in mandatory alternative dispute resolution programs. These pre-dispute contracts would require plaintiffs to present their cases to a mediator or an arbitrator prior to initiating a lawsuit.

Lisa Clark, Esq., Philip Lebowitz, Esq., and Helena Poch Ciechanowski, Esq.

The content of this FAQ is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.