UPDATE Health Law Act 13—Pennsylvania’s New Malpractice Act

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:
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creates a new state agency, the Patient Safety
Authority;
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broadens the authority and oversight of the
Department of Health; and
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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.
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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
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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
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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
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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
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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
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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.
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First, there is going to be tremendous pressure on the
new eleven appointees to the Authority to “do
something.”
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Second, the Authority is going to be buried in data.
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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.
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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.
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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
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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.
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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
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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.
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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. WEISGERBER
eweisgerber@kl.com
412.355.8980
®
Kirkpatrick & Lockhart LLP
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This publication/newsletter is for informational purposes and does not contain or convey legal advice. The information herein
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