Medicolegal Issues

Playing high-stakes poker: Do you fight—or settle—that malpractice lawsuit?

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Avoiding the National Practitioner Data Bank

In 1990, the National Practitioner Data Bank (NPDB) was launched with the goal of keeping dangerous physicians from migrating from state to state to escape accountability. A central database allows licensing agencies to quickly determine whether a doctor has a checkered past.

The NPDB labels a physician “as marked” if money is paid for a malpractice settlement or judgment. The NPDB lists hundreds of thousands of physicians, most of whom have a single entry. Many state licensing agencies have also begun listing physicians who have lost or settled a lawsuit; the only difference is that such information is posted online and is accessible to the public. In contrast, the NPDB remains confidential, accessible only by those who “need to know,” such as credentialing committees, hospitals, and licensing boards.

Even $1 can incur a listing

Many physicians wrongly believe that they will not be reported to the NPDB if they are involved in a case that settles for an amount under $30,000. Low-value settlements are often consummated for nuisance value, meaning that they have no legal merit. However, any payment—even $1—is reportable to the NPDB. It does not matter whether payment is made by settlement or judgment.

A written demand for money, whether as damages for an injury, money to see another physician, or a refund of cash tendered, can sometimes be construed as reportable.

Being joined to a corporate entity can help you

Seasoned plaintiff’s attorneys understand physicians’ deep aversion to being reported. They often take advantage of a well-known exception to reporting: payment made in the name of a corporate entity.

If a physician is employed by a corporation with at least two physicians, and the case is settled in the name of the corporation, the physician can be dismissed from the claim, and no reporting is required. In that case, the physician maintains his clean record in the data bank. That said, this can get complicated if one is obligated to report to state authorities. Because each state is different, these details should be addressed with your attorney.

High-low agreements can avert huge judgments

As discovery progresses, the plaintiff and defendant usually come to a better understanding of their respective risk—but not always. In some situations, the plaintiff may have a strong case in regard to one element of negligence, such as damages, but a weak case in regard to causation. Cerebral palsy cases fit this paradigm. In such cases, the infant has clear-cut medical and rehabilitation needs that can run easily into seven figures, but proving that a physician’s actions or omissions caused the injury can be difficult. Both sides can mitigate risk for one another by embracing a “high-low” agreement—a contract defining how a plaintiff will be paid based on a specific jury verdict.

For example, if the high-low agreement is $500,000/$100,000, the insurer is locked into one of two payments. If the jury returns a verdict for the defense, the carrier pays $100,000; if the verdict is for the plaintiff, the carrier pays $500,000, regardless of the amount of damages awarded by the jury. Without such an agreement, the range of potential judgments is no money at all to almost any amount.

When a high-low agreement is in effect, and the jury returns a verdict for the physician, the settlement is not reported to the NPDB even though the carrier must make a payment.

Why not?

The payment is being made pursuant to a separate agreement between the carrier and the plaintiff. The benefit to the insurer is the limitation of its liability, even if the plaintiff wins at trial and is awarded a higher amount. The benefit to the plaintiff is a guaranteed payment, even if there is no finding of liability against the practitioner.

How a reputation for settling can hurt

If you are so risk-averse that you demand that your carrier settle all cases—even those with no merit—two things will happen:

  • Word will spread throughout the plaintiff’s bar that you are an easy target, and the threshold for filing suit against you will decline. And given how little work will be required to net a settlement, attorney’s summons will forever darken your door
  • Your medical liability rates will climb—or coverage will be terminated. Settling meritorious cases makes sense, but settling all cases regardless of merit is ill-advised.

Stress is common on both sides of the equation

Lawsuits take a long time to percolate through the system, with an average time from medical event to claim resolution of about 5 years—longer in obstetrics.2

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