A New Era for Hospital Liability

By Kearney, Kerry; McCord, Edward | Risk Management, September 1992 | Go to article overview
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A New Era for Hospital Liability


Kearney, Kerry, McCord, Edward, Risk Management


LIKE OTHER PRIVATE CHARITABLE INSTITUTIONS, HOSPITALS WERE ONCE IMMUNE FROM LIABILITY IN TORT UNDER THE JUDICIAL DOCTRINE OF CHARITABLE IMMUNITY. PATIENTS INJURED IN THE COURSE OF MEDICAL TREATMENT COULD SUE PHYSICIANS FOR DAMAGES, BUT NOT THE HOSPITALS. SINCE THE 1940s, HowEvER, WITH INCREASED COMMERCIALIZATION AND ASSET GROWTH AMONG HOSPITALS, COURTS AND LEGISLATURES STATE BY STATE BEGAN TO LIMIT THE DOCTRINE OF CHARITABLE IMMUNITY.

At present, at least 22 states k dramatically changed a hospital's ability for the acts of its independe physicians by adopting a theory of law called corporate liability. Under this theory, a hospital is no longer merely a facility with equipment where autonomous physicians may practice on their private patients; hospitals owe a direct duty of reasonable care to patients, independent of any duty owed by physicians.

Viewed against the practices of a generation ago, this is a dramatic transition for physicians and for hospital accountability, one that will ensure a sea of change in the character of hospital medical practice and management. Because of this dramatic change in liability, hospitals must evaluate the adequacy of their procedures for the initial screening and continuing review of medical staff and practices on their premises, consider additional education of staff, and reassess insurance and self-insurance programs.

The cost of heightened hospital liability makes this issue all the more timely as the nation considers alternative financing mechanisms for national health care. Before 1978, the average annual incidence of malpractice claims for every 100 physicians was 3.3. The figure climbed to 8.0 between 1978 and 1983. Suits against hospitals increased accordingly. At the same time, the cost of medical services rose from $42 billion in 1965, or 5.9 percent of the gross national product (GNP), to $300 billion in 1982, or 10.5 percent of the GNP. Today it is about $590 billion, or about 12 percent of the GNP. Heightened liability contributes significantly to this trend through the expense of insurance and of heightened expectations in the delivery of services or "defensive" medicine.

Hospitals now must take sole responsibility for injuries in as many as a quarter of the medical malpracrice cases that come to trial. Furthermore, the odds of verdicts against hospitals may be increasing as well. One study found that a hospital had a 64 percent chance of losing to plaintiffs who alleged improper or negligent treatment in 1988, versus just a 50 percent chance of losing in 1981.

The average paid claim against hospitals has also increased, with one insurer reporting a 137 percent increase from 1980 to 1984 alone. This growth is largely attributable to the upper end of the scale, where the number of million-dollar medical realpractice verdicts increased by 1200 percent between 1975 and 1985.

The risk to hospitals was dramatized in 1988 by a $52 million Texas verdict that apportioned 70 percent to a hospital's management company. The jury found that the patient had suffered in a comatose state and died because the hospital had admitted to staff practice an anesthesiologist whose history involved drug abuse and criticism of his handling of patients. Although prior settlements between the parties rendered the jury's award moot, its size illustrates how strongly a jury may react to evidence that a hospital has been negligent.

In addition to charitable immunity, other limits on hospital liability have been gradually lifted as well. There had previously been limits on the "vicarious liability" of hospitals for physicians' negligence. In general, corporations are vicariously liable for the acts of their employees performed in the scope of their employment. Even without charitable immunity, however, courts held hospitals vicariously liable, although only for the administrative acts of their employees, not for the acts of their medical staff.

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