Updated: Aug 5, 2019
Please welcome Taylor Fouser, an Attorney at Gjording Fouser as a Guest Blogger!
Last year (2018), according to the U.S. Department of Health and Human Services, the National Practitioner Data Bank (“NPDB”) received over 85,000 reports and provided approximately 8.5 million query responses. The repercussions and damage to a physician’s reputation are real concerns that every defense attorney and insurer must be aware of when negotiating a medical malpractice settlement on behalf of an individual practitioner. The NPBD typically arises as an issue when liability is disputed, but where a potential settlement involves cost savings related to continued litigation. The idea of a report submitted regarding settlement information that is available to a practitioner’s current and future employers, as well as state licensing boards, is enough to make any physician resistant to settlement, and defense counsel must be prepared to discuss with their client the ins and outs of reporting medical malpractice payments.
What is the NPDB?
The NPBD was created by the Health Care Quality Improvement Act of 1986, in which Congress sought to address “increased occurrence of medical malpractice and the need to improve the quality of medical care.” 42 U.S.C. § 11101. The Data Bank itself is a web-based repository of reports used as a workforce tool to enhance professional review efforts, and prevent health care fraud and abuse, with the ultimate goal of protecting the public.
Registered, authorized entities must submit certain information concerning medical malpractice payments and adverse actions regarding health care practitioners, providers, and suppliers. While this post addresses physicians, it is important to keep in mind that the NPDB Guidebook also includes nurses, midwives, and physician assistants as examples of “health care practitioners.” As such, merely because a practitioner is not required to go through the prelitigation process does not mean he or she is excluded from reporting requirements.
Consistent with the privacy and confidentiality surrounding peer review, only registered entities, and certain individuals, have access to the reports, including the following:
A hospital is required to query the NPDB when a health care professional applies for a position on its staff or for clinical privileges, and every two years for professionals on staff or holding privileges.
State licensing boards.
A plaintiff’s attorney in a medical malpractice action against a hospital, where the requested practitioner is named in the action and where the plaintiff can provide independent proof that the hospital did not make the legally required query.
Entities then query the Data Bank for licensing, hiring, and credentialing decisions.
Concerns for Defense Counsel
First and foremost, it is important to know whether the physician’s employment agreement or insurance policy contains a “consent-to-settle” clause. While most policies allow the insurer to dictate litigation and settle on its terms, policies or agreements that have a “consent-to-settle” provision gives the physician the right to approve or reject a settlement. Courts have held that such clauses are enforceable, and a breach could entitle the physician to damages against the insurer. In consent-to-settle cases, it is of the utmost importance to fully explain the circumstances and terms of any proposed settlement to your practitioner-client.
In the unreported case of Steinberg v. Grasso, an obstetrician filed a legal malpractice claim against his attorney, who defended him in a medical malpractice action. In preparation for trial, the defense attorney had his client execute a consent-to-settle form, which acknowledged that any settlement would be reported to the NPDB. However, the defense attorney only discussed settlement with respect to a “high-low” agreement, and that if the obstetrician prevailed at trial, there would be no reporting obligation. The day after the physician executed the consent-to-settle, the case settled for a sum certain, and payment was reported to the NPDB. The obstetrician sued his lawyer for fraud and legal malpractice. The case was originally dismissed on summary judgment, but the Appellate Division of the Superior Court of New Jersey reversed and remanded the case for trial. The court found that even though there was no showing of economic loss, the reporting of the settlement to the NPDB in a case in which he should have been provided a defense damaged the obstetrician’s reputation. The takeaways for defense attorneys are (1) courts are willing to recognize damage to reputation as a valid form of damages, (2) an attorney needs to discuss all settlement scenarios with a physician before settling, and (3) provide reasonable defense expectations in questionable cases.
Addressing Databank Concerns
The easiest and most effective way to address any Data Bank reporting concerns is to talk about the reporting process with your physician client early and often. At your initial meeting, you should discuss the possibility of reporting and gauge your client’s thoughts on the matter. Best practice would also include documenting the conversation for the case file. There are also steps an attorney can make to lessen the blow of reporting.
1. Strengthen liability denial in reporting and settlement agreement.
While the defense attorney does not have any input for what is included in the report, it is important to keep in mind that the reporting form allows space to include substantial detail regarding the settlement. As opposed to a simple report that a sum certain was paid on a disputed claim, a complete summary should include, for example, that the payment was made even though there were viable defenses, and/or that the payment represents a cost savings and not a conclusion regarding the practitioner’s breach of the standard of care. It is also important to let your client know that a practitioner may submit a subject statement explaining his or her perspective, which will become part of the report.
A defense attorney can also help place the client in a better position to explain the circumstances of any report by including strong liability language in the release. While a denial of liability does not alleviate the reporting requirements, it gives the practitioner something in his or file to use in the future should the report ever become an issue. In sum, you are minimizing the impact that reporting will have on the practitioner’s reputation.
2. Corporate Hospital Settlement Only
Hospitals, clinics, and group practices are not within the scope of reporting requirements, so malpractice payments made solely for the benefit of a hospital are currently not reportable to the NPDB. In cases involving a hospital and individual practitioner, it may be tempting to frame a settlement to avoid the reporting requirements for a physician. However, the settlement must be solely for the benefit of the hospital to avoid reporting. With that said, any reporting should include a proportional settlement amount for the claims settled for the benefit of the practitioner. If a dismissal of a practitioner was the result of a condition in the settlement then the entity must submit a report.
3. Expense Reimbursement – maybe
The 2018 NPDB Guidebook identifies a category of payments as “loss adjustment expenses,” such as attorney’s fees, billable hours, expert witness fees, and deposition costs. Loss adjustment expenses should only be reported if they are included in a medical malpractice payment, but if a payment is made only for loss adjustment expenses, then the payment is not required to be reported at all. NPDB Guidebook, E-30. It is somewhat unclear if the Guidebook is referring to the attorney fees paid to outside counsel, or if a payment is made that equals the loss adjustment expenses then it need not be reported. As such, an argument could be made that, while there is no minimum payment threshold to meet the reporting criteria, loss adjustment expenses paid to release or dismiss a health care practitioner do not need to be reported.
4. Payment Made out of Personal Funds
It is never recommended to advise your client to use his or her own personal funds when there is available money from an insurer. However, if a practitioner wants to avoid reporting and the case should likely settle, you should advise your client that any payment made by an individual out of personal funds is not reportable.
The National Practitioner Data Bank reporting does not have to be a problem for defense attorneys. Don’t save this conversation for after a case settles. Early communication with your client can help minimize any impact reporting has on a practitioner’s reputation, and an understanding of what must be reported (and how it should be reported) will be vital in advising a client as to the settlement process.
For a more in-depth and helpful discussion about reporting requirements, please review the NPDB Guidebook found here: https://www.npdb.hrsa.gov/resources/NPDBGuidebook.pdf
 Notably, the 2018 NPDB Guidebook requires a registered entity to submit a report if a payment is based on a high-low agreement that was in place prior to a verdict or arbitration decision.