Hospitality Liability: Deep Pocket for the 90s?

Some see it as a recognition of the role of the modern medical center in today's society. Others see it as the next great deep pocket for plaintiffs faced with underinsured physicians. Regardless of the perspective, the Florida Supreme Court's 1989 decision holding a Miami hospital liable for its failure to ensure the competency of its staff physicians is already beginning to have an impact on the face of medical malpractice litigation in the state.¹

Plaintiff's attorneys, unable to fill in the missing figures in the defense coverage equation, are increasingly turning to this new Florida corporate negligence doctrine to protect themselves against legal malpractice.

As with all seminal decisions, there is still much left to be resolved as to the standard of care for hospitals in the selection and retention of its medical staff. However, the strong language used by the Supreme Court is enlightening. In the Insinga case, the court went so far as to state that there was a "public policy" justifying "placing the expanded responsibility and duty of care on a hospital." The court went on to say this is premised on society's view that:

A hospital is a multi-faceted [facility] ... responsible for proper medical treatment on its premises. This view is justified because the hospital is in a superior position to supervise and monitor physician performance and is, consequently, the only entity that can realistically provide quality contol... [W]e find as a matter of public policy, that hospitals are in the best position to protect their patients and, consequently, have an independent duty to select and retain competent independent physicians seeking staff privileges.

The most ominous aspect of the court's ruling is its declaration that "public policy" exists justifying an expansion of the hospital's responsibility and duties with regard to its medical staff.

When the highest court dictates that the basis for liability lies in a nebulous "public policy," the lower courts generally are given great latitute in their judicial pronouncements on the subject. Therefore, it remains to be seen how far the courts will go in extending the hospital's liability of on-staff physicians.

This fact remains clear: the hospital's liability is limited to the physician's patient treatment in the confines of the hospital In other words, the hospital is not liable for any treatment the physician renders to the patient outside of the hospital, even if the doctor-patient relationship was established by virtue of his position in the staff of the hospital

Secondly, the hospital is not responsible for a physician's negligence when the hospital has failed to exercise due care in the selection and retention of the physician.

Many questions remain. For instance, "due care" has not been defined. What is a hospital's responsibility in the face of notice the physician has been found negligent in the treatment of one of his patients? Carried one step further, what is the hospital's responsibility if it is put on notice a lawsuit has been filed against one of its physicians? In the absence of an adjudication of negligence, does the hospital have any independent duty to investigate civil complaints as it proceeds through the laborious and time-consuming litigation process, or may it wait out a settlement or jury verdict before intervening?

These are important questions because the hospital's duty does not end with the granting of staff privileges. The court specifically held that a failure to exercise due care in the retention of the physician is grounds for an action under the corporate negligence ruling.

Obviously, if the negligence is committed at another hospital, one's ability to investigate is going to be impaired. Similarly, if the act of negligence was committed at the subject hospital, is that hospital negligent if it doesn't use the full peer review and quality assurance vehicles to investigate the claim?

More importantly, are courts of Florida down the road going to allow the discovery of the peer review and quality assurance assessments to be discovered in plaintiff's efforts to establish a claim for corporate negligence?

The case law to date would indicate that ilie Florida courts will not be so inclined. In Holly v. Auld,² the Florida Supreme Court held that the peer review material was not available to a physician attempting to defend himself in a civil medical malpractice action, and there is no reason to believe that the high court will make an exception to this dictate to give the plaintiffs access to the material to prove their case.

Interestingly, since 1985 Florida has had a statute imposing the very liability articulated by the Supreme Court in Insinga. That statute provides that:

All healthcare facilities, including hospitals and ambulatory surgical centers, as defined in Chapter 395, have a duty to assure comprehensive risk management and the competence of their medical staff and personnel through careful selection and review, and are liable for a failure to exercise due care in fulfilling these duties... Each such facility shall be liable for a failure to exercise due care in fulfilling one or more of these duties when such failure is a proximate cause of injury to a patient.³

Although both the statute and the Insinga case impose liability for negligence under a concept of active liability, it would appear that the pronouncements of the high courts were necessary to bring the statute to life. The importance of the theory is that it creates a direct duty running from the hospital to the patient. Prior to the statute and the Insinga case, the hospitals, for all intents and purposes, had avoided vicarious or possible liability, in the theory the doctors are independent and outside the control of the hospital.

An employer may be held vicariously or passively liable for the negligence of another even if it was never negligent. Early on, however, it was held that an independent contractor status, versus an employee status, can shield the hospital from any vicarious liability for the negligence of the doctor.

From a legal standpoint, the Insinga case pierces this shield to give plaintiffs an entirely new and innovative cause of action against a hospital based upon an individual and personal duty owed to the plaintiff by the institution.

It remains to be seen how far the lower courts will go in applying this ruling. And then again, it also remains to be seen if hospitals will use their privileges to release material to defend itself against these sort of actions. Under current law, the material is strictly privileged. But what if the hospital wants to release peer review quality assurance information to prove that it was not on notice of the incompetence of the physician? It would be entitled to do so, but this could set a dangerous precedent for future claims of privilege.

Although the Insinga case leaves many questions unanswered, a number of obvious conclusions may be drawn. First, the court's edict that a "public policy" exists which justifies this expansive new duty on behalf of the hospitals will most certainly mean that hospitals must be ever vigilant and responsive to issues involving quality assurance and physician competence.

This, in turn, is likely to exacerbate the inherent conflicts between hospital administration and its medical staff. The reason is that if the courts are going to hold hospitals independently liable for their negligence in granting physician staff privileges, hospitals are going to have to be increasingly involved in quality assurance.