UPDATE Health Law JUNE 2002 Act 13—Pennsylvania’s New Malpractice Act Is “13” Your Hospital’s Lucky Number?? Have you ever been in the middle of a homeimprovement project and quickly ripped open a new package of screws, only to end up tearing the box wide open, spilling the whole box over the floor, and ending up with a bigger mess than when you started? (If not, maybe you are handier than I.) But if you have, Act 13 will seem all too familiar. Act 13 was recently enacted to resolve the growing malpractice insurance crisis. The crisis was exacerbated by the failure of PHICO, the once mighty offspring of the last malpractice crisis, and the departure of a number of wellknown physician underwriters from Pennsylvania. While it has done that, it has also spawned an organism of unknown etiology and impact in the form of the new patient safety provisions. Act 13 has two major components: (1) various malpractice reforms which tweak the existing process and (2) the revolutionary new “patient safety” section which: n creates a new state agency, the Patient Safety Authority; n broadens the authority and oversight of the Department of Health; and n requires each hospital to designate a “patient safety officer,” develop a patient safety program, and form a new patient safety committee. Given the novelty of these latter provisions, we will address them first. THE PATIENT SAFETY PROVISIONS The state has decided to borrow a page from the JCAHO and “open up” a hospital’s process for discovering and dealing with medical errors. In a nutshell, the state has created a new “Patient Safety Authority” and is requiring hospitals to report all “serious events” and “incidents” to this Authority. The Authority will develop recommendations aimed at specific hospitals or to all hospitals concerning “immediate changes that can be instituted to reduce serious events and incidents.” Although the Authority’s recommendations are technically advisory, the Department of Health has been given the power to evaluate the hospital’s response to the Authority’s recommendations in its (the Department’s) licensing decisions. The Department has also been given the authority to require conformance with the Authority’s recommendations if it choses to adopt Authority recommendations as regulations. Kirkpatrick & Lockhart LLP The Authority is governed by 11 individuals and includes the Physician General ex-officio. To assure that patronage is preserved, six of the remaining ten are appointed by the governor and four are appointed by specific individuals in the Legislature (i.e., the President Pro Tempore and Minority Leader of the Senate, and the Speaker and the Minority Leader of the House; each appointee serves conterminously with his respective appointing authority). At least six of the eleven members of the committee will be licensed or unlicensed healthcare workers, although remarkably only one of the eleven members must be employed by a hospital (although others could be). The state has also created a “Patient Safety Trust Fund” which is funded exclusively by a special surcharge to be levied on hospitals, ASCs, and birthing facilities. The surcharge may raise up to $5 million per year. It is to be used exclusively to fund the activities of the Authority. The Authority may contract with a contractor to collect and analyze the data and reports it will receive from hospitals, to develop recommendations on specific procedures or changes for individual hospitals or hospitals generally, and to perform the day-to-day work of the Authority. Some parties expect JCAHO to bid on the contract, although PROs would seem to be well qualified to do so as well. How does the Authority get information from your hospital? Easy, you give it to them. Once the Authority is in place and operational, all hospitals are required to report all “serious events” to the Department of Health (DOH) and the Authority within 24 hours of the confirmation of its occurrence. The Authority will also collect information on less serious events, known as “incidents” from the hospital 2 in a routine manner, although incidents are not required to be reported within 24 hours. In addition, the Authority may receive information from anonymous callers who are given encouragement and protection in the Act. Lastly, hospitals are required to report “infrastructure” failures such as power outages or fires as well. Hospitals are now required by law to notify patients of a serious event within seven days of that event. A “serious event” is an event or situation which produces either: (1) a death or (2) compromises patient safety and (i) results in an unanticipated injury (ii) which requires additional healthcare. This definition is simpler than many that have tried to distinguish between naturally occurring consequences of a given course of therapy and what is widely and instantly recognized as a mistake or error. Nonetheless, complying with the definition will still require close analysis. For instance, is it reportable if the wrong medication is administered during a cardiac arrest and the patient dies, but there is no clear evidence as to whether the patient would have survived had the error not occurred? Did the wrong medication cause an injury, did it require additional healthcare services and did the medical error result in the death of the patient? The duty to notify the patient of an “adverse” or serious event is not new. Up to this point, however, it had been required under Pennsylvania DOH regulations and encouraged by the JCAHO and by various professional societies; now it is statutory. More important, however, is that the duty falls to the hospital, even though it may have been the physician (e.g., a surgeon who accidentally severs an artery) who caused the event. THE PATIENT SAFETY PLAN AND OTHER OBLIGATIONS IMPOSED UPON HOSPITALS By July 21st, hospitals must create a Patient Safety Plan and submit that Plan to the DOH for its approval. The Department has 60 days after receipt to approve the Plan; if it doesn’t act within that time frame, the Plan is deemed to be approved. It does not appear that the Department is prepared at this point to deal with the review of hundreds of patient safety plans. One strategy might be to quickly submit a Plan with the notion that the second 60-day “deemed approved” clock may run before the Department has the chance to gear up for its state-wide approval. The Plan must provide for the appointment and job description of the Patient Safety Officer (“PSO”). The statute does not designate the training, background, or reporting relationship required for this position. It does require that the individual serve on the Patient Safety Committee and investigate all reports of serious events and incidents. It would seem that the risk manager or director of quality assurance would be prime candidates for this designation. The Plan must also provide for the creation of the Patient Safety Committee. The Committee must have at least six members: the Patient Safety Officer, three healthcare workers, and two “residents” of the community. Only one member of the Committee may be a board member. Assuming that there are no other board members, a current board member may be one of these two residents; a former director could be the other. The Committee is supposed to review the work of the Patient Safety Officer and to coordinate and oversee the quality of patient safety measures in the hospital. The Committee should review the reports made to the Authority and the DOH as well as reports and recommendations received back from the Authority. Hospitals have two choices regarding this committee: (1) create a separate committee or (2) integrate the functions set forth in the statute into an existing committee. If a hospital chooses the former, it will have to invest time and thought integrating the activities of the committee into its existing committee structure because the duties of the committee as set forth in the statute almost certainly overlap with the duties and responsibilities of existing committees. If a hospital chooses the latter, it will have to be certain that its membership meets the statutory requirement and that the committee’s charge is rewritten to pick up the additional statutory duties. One way of trying to assure that the quality assurance committee and other peer review type committees achieve Act 13 protection is to structure these existing committees as sub-committees of the patient review committee and to make the patient safety officer an ex-officio member of each of these committees. Hospitals need to be careful how these committees are structured. There are a number of existing hospital committees that examine medical care and conduct peer review. These committees traditionally have been and will continue to be protected under the existing Pennsylvania peer review statute. The enhanced Kirkpatrick & Lockhart LLP 3 protections of Act 13, however, are arguably only available to those activities conducted under the rubric of the patient safety officer and committee. One way of trying to assure that the quality assurance committee and other peer review type committees achieve Act 13 protection is to structure these existing committees as sub-committees of the patient review committee and to make the patient safety officer an ex-officio member of each of these committees. The patient safety committee would then be the clearinghouse of all these other committees and should be able to cloak all of its activities and all of the reports, deliberations, and activities of its subcommittees under the umbrella of its enhanced protection. This will require a rewrite of the medical staff bylaws, possibly the corporate bylaws, and existing procedures. In addition to the creation of the committee, the Plan must provide for the establishment of a 24hour reporting mechanism where workers can report serious events and incidents. This does not require the creation of a hotline; it simply requires that there be a reporting mechanism. If your compliance hotline is still operational, it could be used for this purpose as well. This requirement might already be satisfied by existing policies that require notification of nursing supervisors, filing of incident reports and so forth. One of the first duties of the PSO and/or the committee can be to determine how your hospital’s existing reporting mechanisms satisfy this requirement. REPORTING, REPORTING, AND MORE REPORTING The Legislature apparently believes that more reporting is good reporting. As a result, it has charged everyone connected with patient care 4 with the duty to report. Who has to report what to whom? 1. Healthcare workers must report serious events and incidents to the hospital. Section 308(a). 2. The hospital has to report serious events to the Authority within 24 hours of confirmation of the occurrence. Section 313(a). 3. The hospital has to report serious events to the Department within 24 hours of confirmation of the occurrence. Section 313(a). 4. The hospital has to report incidents and reports of incidents (query whether this is the same as “incident reports”) to the Authority in a manner yet to be determined by the Authority. Section 313(b). 5. The hospital has to report a serious event to the patient. Section 308(b). 6. The hospital has to report “infrastructure failures” to the DOH within 24 hours of confirmation of occurrence. An infrastructure failure refers to a failure of structures related to the physical plant. Section 313(c). 7. Physicians have to report all notices of lawsuits (e.g., complaints) to the State Licensing Board. Section 903. 8. The hospital has to report licensed personnel to their respective State Licensing Board if it discovers that the individual should have reported a serious event but did not. Section 314(e). Reporting begats disclosure, and disclosure begats lawsuits. What is the trade-off for all this reporting? Confidentiality, we hope. ENHANCED CONFIDENTIALITY The Act attempts to wrap all of these reports, including the reports to the Authority, the Department, and internal reports generated among the PSO and the Patient Safety Committee, under an enhanced cloak of confidentiality. It specifically provides that reports to the Authority and the Department are not public documents and may not be discovered under the state’s Right-to-Know Law. The strongest protections are afforded to documents, materials, and other information “which arise out of” matters sent to and received by the Patient Safety Committee or the governing board of the hospital. This protection applies to both documents and to interviews of individuals who either perform responsibilities for or participate in the meetings of the Committee or the governing board. Under JCAHO and Act 13, “the process used by a hospital to analyze unexpected events or outcomes...is pretty similar.” The so-called “original source” rule still applies which means that a document such as a medical record or an incident report is considered an “original source” and is still available for discovery. What is undiscoverable is how the hospital processes and interprets that document as well as what actions it takes in following up on that document. Likewise, reports sent from the hospital to the Authority or DOH are not discoverable from the hospital. On the governmental side, records received from the Authority or the DOH from the hospital are not considered to be public records under the state’s Right-to-Know Law and are not discoverable either. It is interesting that the statute limits this protection to “records” received by the Authority. Hopefully, “records” also includes reports and other documents and materials. So much for the good news—now for the bad news. Although the records received by the Department are immune from discoverability or admissibility in a civil or administrative action, the DOH still retains access to the information and may use the information for the sole purpose of a licensure or corrective action against the hospital. So while information conveyed by the hospital to the DOH may not be used in any third-party proceeding, it may be used against the hospital in a licensure or corrective action. It is also not clear that the fact that a hospital has received a recommendation from the DOH or the Authority is protected from discovery. JOINT COMMISSION SENTINEL EVENT REPORTING AND ACT 13 Hospitals are presently under a JCAHO accreditation requirement to thoroughly analyze unexpected events and outcomes to determine whether they rise to a level that requires the reporting thereof to JCAHO. How do the JCAHO and Act 13 processes overlap, if at all, and are the confidentiality protections afforded to the Act 13 process available for JCAHO reports as well? Under either scheme, the process used by a hospital to analyze unexpected events or outcomes (often also called “mistakes”) is pretty similar. The process typically involves the review of triggering documents (e.g., incident reports or medical records), an investigation undertaken by a Kirkpatrick & Lockhart LLP 5 designated individual, review by some type of hospital or medical staff committee, and the development of some type of conclusionary document (e.g., a finding). Act 13 and JCAHO compare as follows: 1. Each scheme requires the investigation of an “event.” JCAHO defines a “sentinel event” as “an unexpected occurrence involving death or serious physical or psychological injury or risk thereof.” Under JCAHO, incidents which produce injury require reporting, those which merely risk injury (a “near miss”; query why these are not called “near hits”) need not be reported, although they must be investigated. Under Act 13, actual injuries and near misses must be reported although they are reported differently. Actual injuries (at least to the extent they cause a death or an injury requiring additional healthcare) are reported as a serious event to the DOH and to the Authority within 24 hours of the facility’s “confirmation” of the occurrence. Near misses are considered incidents and are reportable to the Authority only (not DOH) under rules that are yet to be devised by the Authority. 2. JCAHO’s definition specifically enumerates psychological injury as a type of patient injury; Pennsylvania does not specifically enumerate this type of injury, but conceivably, psychological injuries could trigger the 6 Observations and Opinions on The patient safety chapter has the potential of becoming the most mettlesome provision of state lawmaking since the days of CON. The reason is that a hospital’s responsibility for solving its quality problems is now shared if not displaced by an un-elected, non-accountable Authority. Hospitals will have solutions conveyed to and in some cases imposed upon them by the Authority and the Department. Imposed solutions might be the right answer if one had some assurances that the solutions were developed using the right ingredients. In this case, however, all the indicators at this point are pointing in the wrong direction. n First, there is going to be tremendous pressure on the new eleven appointees to the Authority to “do something.” n Second, the Authority is going to be buried in data. n Third, the real analytical work of the Authority is going to be done by an as of yet unidentified contractor with no accountability to the field or to the public. n Fourth, there is a not insubstantial concern that these unknown “qualitycrats” can be one-dimensional and perhaps naive in their approach to and understanding of hospital operations. n Fifth, the role of hospitals on the Safety Patient Authority is limited. Recommendations that are formed by the Authority do not require the input of hospitals even though the full cost of the solutions will be borne by hospitals. statute if they required the delivery of additional health care. 3. JCAHO’s definition encompasses any unexpected occurrence whether clinical or the Patient Safety Chapter n Sixth, the Authority’s recommendations are then sent to the DOH where again there is no input required of hospitals. The end result is that hospitals can be forced to implement systems and solutions that are expensive and perhaps infeasible simply because a (i) political body with limited healthcare expertise, (ii) a contracting group composed of qualitycrats, and (iii) a Health Department, each with no direct public accountability, thinks it is a good idea. In essence, the state has superseded or at least severely limited each hospital’s role in determining how to address patient safety measures in its own hospital. other hand, distinguishes between clinical events (defining them as either serious events or incidents) and infrastructure failures. An infrastructure failure is reportable under either regimen; the difference is how and when the reports need to be made. Under JCAHO, the hospital has to analyze the data to Hospitals will have solutions conveyed to and in some There are a number of troubling trends highlighted by this legislation. First is the premise that the hospital industry is not doing its job with respect to the review and implementation of patient safety matters. Second is the hypothesis that the best cure for this perceived oversight is to require the state to intervene. Third is the notion that the problem can only be solved by employing resources which are largely unfamiliar with hospitals and keeping hospitals, which after all are the site and source for the solution, on the outside of the process. We can only hope that the Authority appointees, the contracted “qualitycrats,” and DOH are blessed with a certain degree of wisdom, practicality, and patience and that they develop recommendations that are practical and obtainable. not. This includes fires, explosions, or even the crash of a medical helicopter into a hospital building (which occurred in Cleveland earlier this year). The Act, on the cases imposed upon them by the Authority and the Department. determine if the event qualifies as a sentinel event. Under the Pennsylvania statute, however, the event is reported to the Department (not to the Authority) and must be made within 24 hours of the “confirmation” of the occurrence or discovery of the failure. Protection During the Investigative Phase. After the investigative phase, the hospital has to decide which outside entities (i.e., DOH, the Authority or JCAHO) receive a report and what that report says. Whether the enhanced protections of the Act apply to this process appears to depend on two variables: (1) who is doing the investigating and (2) where the report is sent. Kirkpatrick & Lockhart LLP 7 Section 311 protects documents, materials and information created or relied upon in the process provided these are “solely” prepared or created for the purpose of complying with the Act’s reporting requirements. (As mentioned above, the Act does not protect original source documents, such as medical records). Thus, the enhanced confidentiality protection of Act 13 appears to apply only if the investigation is done “solely” under the auspices of the patient safety regimen, i.e., involving the patient safety officer and the patient safety committee. For those with higher indices of paranoia, inclusion of the word “solely” is troubling if a hospital intends to use the same material or committee work product for the basis of a report to JCAHO. There are two reasons for this paranoia. First, does a hospital lose its Act 13 protection if the information was not prepared “solely” for purposes of complying with Act 13? Second, even if the information prepared for the state is protected under Act 13 (in other words, the patient safety officer and patient safety committee work product is secure), does the information sent to JCAHO (i.e., the actual document) become discoverable either from the hospital or from JCAHO? If it is protected, is it protected under Act 13 or the existing peer review statute? It is pure speculation at this point to guess how this section will be interpreted. Nevertheless, if experience with the current peer review statute is a guide, each county and perhaps each judge in each county will likely provide his or her own answer. One can hope that a court would be swayed by the purposes of the Act and interpret “solely” as applying solely to the process of preparing an analytical report in furtherance of 8 the objectives of the Act and not on whether the Authority or DOH are the sole parties receiving the work product. In other words, the determinative feature is the process, not the recipient and the work product does not lose its enhanced Act 13 protection simply because some of that work product may also be used as the basis of a report to the JCAHO. Even if §311 is determined not to protect the work product which forms the basis for the report to JCAHO, the existing Pennsylvania peer review statute should. Because the patient safety committee is a “review organization” under the existing Pennsylvania peer review statute (i.e. a committee engaging in peer review to gather information relating to the care and treatment of patients for the purpose of evaluating and improving the quality of patient care), the patient safety committee’s review of sentinel events should be protected from disclosure by the hospital under the peer review statute. Whether the information (i.e. the notice) sent to JCAHO is protected is still an open question. This is why most hospitals use reporting option four, which provides the least amount of substantive information to JCAHO. What should a hospital do? Nothing different at the moment. Until the Authority commences its reporting process, which could take 6 to 12 months, a hospital still has to fulfill its JCAHO obligations. Reports to JCAHO should continue to be filed under option four. In the meantime, the hospital should develop its patient safety plan and charge its patient safety committee and patient safety officer so that all activities (Act 13 and JCAHO) are undertaken in furtherance of the duties imposed upon the hospital by Act 13. PROVISIONS RELATING TO MALPRACTICE REFORM The malpractice reform provisions of the Act attempt to “fix” what is either a malpractice crisis or an insurance crisis. The scheme leaves in place the traditional base level of hospitalphysician coverage supplemented by a governmental layer (formerly the CAT Fund), now known as the Medical Care Availability and Reduction of Error Fund. In 2002, it provides n There are different coverage limits for instate versus out-of-state providers. An out-of-state provider (someone who practices less than 20% in Pennsylvania) has to maintain higher per-occurrence limits than in-state providers. n Healthcare providers can retain the right to consent to settle, although insurers are allowed to charge an additional premium for this contractual concession. n Providers are permitted to continue to make after-the-fact entries into a medical record provided these later entries correct or clarify prior entries. A provider may also add additional information which was not available at the time the record was first created. In each case, the entries have to be dated as of the entry. If it is determined beyond a preponderance of the evidence that there has been an intentional alteration, the plaintiff may be entitled to a jury instruction that permits the jury to draw an adverse inference from that event and the individuals involved can be sanctioned under their respective licensing authorities. n In instances of high verdicts, the providers can file a motion for what is known as “remittitur” asking the trial judge to reduce the verdict. A trial court has always been given a great deal of latitude in deciding whether to change a jury’s verdict. The statute now permits a judge to determine evidence of the impact on the availability of access to healthcare in a community if the defendant-provider is required to satisfy the verdict. Moreover, it requires a trial court, if it denies the motion, to set forth the factors and evidence it considered in denying the motion. It also permits an appellate court to The most important provision of this statute for hospitals is the patient safety chapter.” for a base level of $500,000 and an excess (from the Fund) of $700,000, for a total of $1,200,000. In years 2003 through 2005 (inclusive), the base level stays the same ($500,000) but the excess level diminishes so that the combined level is $1 million, which is a $200,000 decrease from the prior year. In 2006, the base level increases and the excess level (Medical Care Availability and Reduction of Error Funds) decreases to only $250,000, again leaving a total benefit level of $1 million. There are a number of other interesting features in the Act: n Within two years, podiatrists as a class can opt out of the Act provided that they in effect buy their way out of the remaining liabilities attributable to podiatrists. As an alternative to a buy-out, they may be separately assessed from other healthcare providers. Kirkpatrick & Lockhart LLP 9 reverse a lower court’s failure to lower a verdict if the appeals court finds that the lower court did not adequately consider the impact of healthcare on the community. n Importantly, the statute now permits a trial court or an appellate court to reduce the amount of an appeal bond (which is normally 120% of the jury verdict) if the court finds that requiring a bond in excess of the limits of the available insurance coverage would effectively deny the right of an appeal. This is often a problem for physicians who do not have sufficient personal assets (beyond their malpractice liability policy) to post a bond which means that they are sometimes precluded from appealing a case. n As a deep pocket and the site where the most intensive medical care is delivered, hospitals are often vicariously (that is derivatively) liable for the acts of its staff physicians. This is known as ostensible agency. The factual underpinnings for ostensible agency have been rather thin in a number of cases. In other words, a hospital has been held vicariously liable under the ostensible agency doctrine simply because a physician is appointed to the medical staff of a hospital. Act 13 now specifically establishes that staff appointment in and of itself is insufficient to establish ostensible agency. Instead, the claimant must prove that he or she was justified in relying on the belief that the care was being rendered by the hospital or that the care was otherwise advertised or represented to the patient as being rendered by the hospital. n What the Legislature did not include in the statute was a section on joint and several liability. In a negligence action, all defendants can be held jointly and individually responsible for the damages due the plaintiff. In other words, even a defendant who is only 30% responsible can be held completely responsible to the plaintiff for satisfying the entire judgment. This defendant then has a right to collect from the remaining non-paying defendants. The Legislature had considered, but deleted, a provision which would have limited each defendant’s exposure to the plaintiff to a percentage of its own negligence. In other words, if Defendant A is 30% negligent, then plaintiff could only recover 30% of the judgment from that defendant and would have to pursue the other defendants for the remaining 70%. This is a key provision that if the hospitals and physicians are ultimately able to enact should save significant premium dollars. n There is also a limitation on the award of damages. All damages will be divided into past and future damages. Past damages will be paid in a lump sum and include medical expenses, loss of earnings, and non-economic losses. Future damages for medical and other related expenses and loss of earnings will be paid in the form of periodic payments. Periodic payments tend to reduce the present value amount of the settlement. n Punitive damages will only be awarded for willful or wanton conduct and not for gross negligence. Importantly for hospitals, punitive damages may not be awarded against a provider who is only vicariously or derivatively liable unless it can be shown that the party knew of and allowed the conduct to continue. Importantly, this is a standard of absolute knowledge and not one of imputed knowledge (e.g., “should have known”). n n Unless there is intentional misconduct, punitive damages against an individual physician may not exceed 200% of the compensatory damages. Only 75% of punitive damages will be given to the patient; the other 25% goes to the Medical Care Availability Reduction of Error Fund. There are a number of other refinements to the process, including some refinements to the informed consent doctrine, statute of limitations, and standards for expert witnesses, but for the most part these are technical changes which will have some impact on the legal process and to some extent on the size and manageability of the judgments. SUMMARY The most important provision of this statute for hospitals is the patient safety chapter. The technical amendments will long be forgotten while hospitals are still wrestling with the role of recommendations from the Authority and the DOH. Perhaps some day this Act will be remembered by hospitals as “Unlucky Act 13.” EDWARD V. 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