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Unintended Consequences of the National Practitioner Data Bank on Medical Malpractice Litigation

Posted Thursday, January 20, 2011 by Christopher L. Thayer and Mark B. Shepherd

Authors: Christopher L. Thayer and Mark B. Shepherd are principals at Pivotal Law Group. Mr. Thayer and Mr. Shepherd have over 40 years of combined experience helping patients who have been victims of negligent medical care.

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I. Inception of the National Practitioner Data Bank

The National Practitioner Data Bank (“NPDB”) was established by the Health Care Quality Improvement Act of 1986 and has been in effect since 1990. The NPDB tracks payments made on medical malpractice claims (whether by settlement, arbitration award or verdict) and tracks other “adverse actions” involving licensure or hospital privileges. The establishment of the NPDB was prompted in part by a concern that physicians who had been the subjects of disciplinary actions or other “adverse actions” in one jurisdiction (e.g., having admitting privileges revoked or having settled a malpractice suit) were simply moving to other jurisdictions or other hospitals to continue practicing without disclosure of the prior problems.

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II. A basic primer on the National Practitioner Data Bank

Who must report, and what must be reported?

Medical malpractice payers must report for physicians, dentists and other defined health care practitioners any payment resulting from a written claim or judgment. There is an exception for amounts paid pursuant to a “high-low” agreement when a payment is made at the low end of an agreement that is in place prior to a verdict or an arbitration decision, but only if the fact-finder rules in favor of the defendant and assigns no liability to the defendant practitioner. The rationale is that the payment is being made pursuant to an independent contract between the defendant’s insurer and the plaintiff rather than in settlement of a medical malpractice claim. In addition, when an individual (the practitioner or another person) pays out of personal funds, or when payments are made solely for the benefit of a corporation such as a clinic, group practice or hospital – reporting to the NPDB is not required.
State licensing boards must report for physicians and dentists any licensure disciplinary action based on professional competence or conduct. Licensure disciplinary actions include (1) revocation, suspension, restriction, or acceptance of surrender of a license; and (2) censure, reprimand, or probation of a licensed physician or dentist based on professional competence or professional conduct.

Hospitals and other health care entities must report for physicians and dentists any professional review action, based on reasons related to professional competence or conduct, adversely affecting clinical privileges for a period longer than 30 days; or voluntary surrender or restriction of clinical privileges while under, or to avoid, investigation.

Professional societies must report for physicians and dentists any professional review action, based on reasons relating to professional competence or conduct, adversely affecting membership.

HHS office of inspector general must report for physicians, dentists and other health care practitioners any exclusion from Medicaid/Medicare and other Federal programs. 45 C.F.R §60

Who has access to information from the NPDB?

45 C.F.R. §60.13 allows requests for information by: hospitals and health care entities regarding a practitioner for purposes of employment, clinical privileges or professional review activity; practitioners requesting information about themselves; state licensing boards; and, in tightly circumscribed circumstances, an individual or his/her attorney. A plaintiff’s attorney or a pro se plaintiff is permitted to obtain information from the NPDB under very limited conditions: A medical malpractice action or claim must have been filed by the plaintiff against a hospital, and the individual physician or practitioner about whom the information is requested must be named in the action or claim. Obtaining NPDB information on that individual is permitted only after evidence is submitted to HHS demonstrating that the hospital failed to submit a query mandated by 45 C.F.R §60.12 to the NPDB regarding the individual named by the plaintiff in the action. This evidence is not available to the plaintiff through the NPDB. Evidence that the hospital failed to request information from the NPDB must be obtained by the plaintiff from the hospital through discovery in the litigation process.

III. Effects of NPDB on medical malpractice litigation

Questions and criticisms concerning the application of the NPDB have existed from the outset. One controversial feature of the NPDB is that all malpractice settlements identified in 45 C.F.R. §60 need to be reported, regardless of size. Some have questioned whether there should be a minimum amount as a threshold, so that cases with more modest damages could be settled for nominal amounts without the negative impact of reporting the settlement to the NPDBi. This raises the question as to whether the reporting requirements of the NPDB have had any “chilling” effect on the settlement of otherwise legitimate medical malpractice claims. The question is whether a physician, who may have a “consent to settle” provision in his or her insurance policy, may decline to authorize settlement of a claim that arguably should settle, due to concern over the ramifications of reporting to the NPDB.

This question was addressed in a 2003 study published in the journal Inquiry (“Impact of the National Practitioner Data Bank on Resolution of Malpractice Claims”)ii. The results of that study are both thought-provoking and concerning for attorneys who represent patients injured through negligent healthcare. The Inquiry study looked at over 3,500 claims reported to the NPDB to determine if there is any empirical evidence of a chilling effect on malpractice settlements. The authors noted that:

Malpractice settlements avert costly trials, dispose of worthy claims expeditiously, and spare defendants and plaintiffs the anxiety of protracted disputes.

The Inquiry authors collaborated with four commercial insurance carriers to compile a database of information on the respective claims. Lacking the resources to individually evaluate each of the over 3,500 claims on their merit (to assess whether or not any particular claim was “legitimate” and therefore should theoretically settle), the authors used the amount of indemnity reserves set by the claims adjusters as a metric for assessing the validity of any given claim.iii Certainly practitioners who handle medical malpractice cases on behalf of injured patients would likely disagree with many of these assessments but, faced with the impracticality of conducting detailed medical reviews of each and every one of the 3,500 cases, this was a compromise that the authors had to accept.

Notwithstanding the limitations of the data available, the authors were able to conclude that the NPDB reporting process has had measurable effects on the malpractice litigation process. The authors noted that settlement of claims the study deemed to have a “low probability of success” decreased by approximately 30% after the adoption of the NPDB.iv Interestingly, the authors characterized this effect as a “decrease [in] the proportion of nonmeritorious claims that received compensation” and that:

[T]he imposition of reporting and querying requirements actually may have sharpened the malpractice system’s accuracy by bolstering incentives to deny spurious claims.v

Some might view that same data as merely reflecting that the NPDB reporting requirements erect a barrier to settlements by encouraging physicians to litigate cases to conclusion rather than settle. Although the Inquiry study acknowledged that there were certain limitations associated with their interpretation of the available data, the results of this study are consistent with these authors’ experience – the NPDB’s reporting requirements noticeably effect medical malpractice litigation.

IV. A view from “in the trenches”

As any plaintiff practitioner knows, even with the average tort claim, it is not merely the merits of a case that influence whether or not a case settles – or even gets filed. The challenges of proving liability, causation and damages combine with the expenses of litigation and various other factors in every plaintiff attorney’s evaluation of a potential case. In medical malpractices cases there is yet another layer to factor in. Any attorney representing an injured patient in a medical malpractice action in Washington needs to be keenly aware of the effects of the NPDB reporting requirements and the likely role this will play in settlement discussions. Combined with the provision included in many medical malpractice insurance policies which require that the physician provide consent to any settlement (so called “consent to settle” provisions), care must be taken in selecting which medical malpractice cases you are going to take on and what parties you will name as defendants.

Modest damages cases, even those with relatively clear liability and causation, can be challenging to pursue. Based on personal experience in a number of cases, it is not uncommon to encounter a situation where the malpractice carrier and/or defense counsel recommends settlement, but the physician, who may have the right to preclude settlement under the terms of his or her insurance policy and is concerned about the effects of reporting to the NPDB (on obtaining subsequent hospital privileges, licensure issues, and increased malpractice premiums, etc.), refuses to authorize settlement. The plaintiff practitioner is then faced with the decision of whether to proceed to an expensive trial (where the doctor will contest liability), on a case that might only have modest damages.The Inquiry authors portray this as a benefit of the NPDB, characterizing it as weeding out the cases that lack merit. The reality is that the dynamic created by the reporting requirements of the NPDB also negatively impacts the practicality of pursuing modest yet very much meritorious claims.

Given the disincentives to settlement created by the NPDB reporting requirements, in the authors’ experience it is advisable, where appropriate and supported by the facts and law, to include as defendants hospitals, clinics and other organizations that may have culpability in a medical negligence action – as these parties do not face the same reporting requirements imposed on physicians by the NPDB.

For more information, please contact Christopher Thayer at 206-805-1494 or Mark Shepherd at 206-340-2008.

i. Impact of the National Practitioner Data Bank on Resolution of Malpractice Claims; Waters, Studdert, Brennan, Thomas, Almagor, Mancewicz & Budetti, Inquiry (Vol. 40, 283-294, 2003).
ii. Id.
iii. Id., at 291.
iv. Id., at 290.
v. Id., at 291.

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