The Elephant in the Room - The NPDB and Dispute Resolution

By Bridget Zaremba RN, BSN, MJ
AVP Healthcare Claims Practice Leader
QBE North America

The National Practitioner Data Bank (“NPDB” or the “Data Bank”) was created in order to establish a nationwide database of information regarding health care providers’ malpractice claims, privilege actions and other disciplinary actions. This article explores the efficacy of the NPDB and its effect on early dispute resolution.

The Role and Scope of the National Practitioner Data Bank

In the 1970s, the United States experienced a medical malpractice insurance availability deficit, prompted by the abrupt exit of one of the major medical malpractice insurance carriers. As a result, health care providers were faced with large premiums and the possibility of total unavailability of professional liability insurance at any price. Public interest in the problem prompted Congress to enact the 1986 Health Care Quality Improvement Act (“HCQIA”) in an effort to improve health care quality by focusing on peer review and by providing immunity to those that participated in peer review. The NPDB was created as a result of the HCQIA and was designed to collect information on providers so that any entity undertaking a review of a practitioner would have an extensive information resource.

The role of the NPDB is to serve as a central repository of the following: (1) medical malpractice payment information; (2) licensure actions taken against physicians and dentists; (3) mandatory professional review actions taken against physicians and dentists, and optional reviews of other licensed practitioners; and (4) actions taken against medical professionals by the Drug Enforcement Agency. The NPDB was not designed to provide all details of reported incidents or actions. ¹ The list of reportable practitioners includes physicians, dentists, chiropractors, and nurses who have been disciplined by a state licensing board, professional society or health care provider or who have been named in a medical malpractice settlement or judgment.² Records of practitioners who have committed fraudulent or abusive activities or defaulted on Federal loan agreements are also maintained by the NPDB. The NPDB captures information only on malpractice claims that result in a settlement payment, which account for about thirty-two percent of all medical malpractice claims resolved. ³

Dispute Resolution and The Data Bank

A medical malpractice settlement compensates the allegedly injured party and theoretically deters others from making the same error in the future. However, this does not contemplate the settlement of claims that were not necessarily the result of negligence. Monetary resolution of such claims may be a financially appropriate “business decision” made by insurers when considering the cost of litigation, ongoing and often extensive discovery, hiring expert physicians to testify, and also the emotional toll trial preparation and trial can take on a defendant.

There are a large number of medical professional liability insurance policies which do not require a practitioner’s consent to settle a malpractice claim. Thus, the insurer can settle a claim in order to avoid costly litigation or a long and often contentious discovery period. It is possible an insurer may make a payment on behalf of a practitioner without allowing him or her to provide details regarding the incident. The practitioner’s care may have been thoroughly within the standard of care, yet the insurer makes a payment for purely economic reasons. Although such practices do not take into account the quality of medical care, these payments must be reported to the NPDB and are available to querying entities. Furthermore, the NPDB Guidebook states that “a payment in settlement of a medical malpractice action or claim shall not be construed as creating a presumption that medical malpractice has occurred.”⁴ Thus, payments reported to the NPDB do not necessarily reflect a provider’s level of competence and expertise. Rather, the querying entity is left to make that judgment, potentially at the expense of the practitioner. Many adverse events result, not from an individual provider’s error, but from complex system flaws that collectively contribute to the outcome. Identification of these system-level problems remains a challenge for most health care entities.

Some hospitals have initiated non-punitive early resolution programs and total quality improvement programs. In contrast, tort litigation’s approach focuses upon errors and compensation for such errors and, thus, is not consistent with quality and safety improvement in complex systems such as health care.

Early Dispute Resolution Options

Hospitals’ early resolution programs primarily focus on transparency and apology involving full disclosure to the patients and families regarding errors and complications. For example, the University of Michigan Health System (UMHS) has a successful disclosure-with-offer program.⁵ In 2001, the UMHS began responding to all existing and new malpractice claims by admitting fault and offering compensation when an internal investigation revealed a medical error. If an investigation revealed no error, UMHS provided the reasons for its conclusion and vigorously defended the claim, if necessary. UMHS’s efforts paid off as it reported a decrease in claims and lawsuits, and as a result, compensation amounts were reduced. In theory, this sort of early dispute resolution should be equally attractive to physicians, who would benefit by preserving important relationships, reducing the amount of time and money spent defending claims, and enhancing their communication with patients and other providers following an adverse event. However, the mandatory NPDB report is a deterrent.

Although disclosure, transparency and improving patient safety are becoming hotter topics, physicians continue to take the legal route to resolving patient complaints and claims in the hopes of successfully defending their care and avoiding the NPDB. Health care practitioners note the NPDB does not register meaningful data regarding the fact patterns surrounding a report. All payouts on written claims are reportable to the NPDB, and as a result, most physicians remain reluctant to enter into a settlement in order to resolve a claim or suit. Seventy-six percent of malpractice insurers queried by the NPDB in 1994 reported that claims resolution had been affected by the NPDB reporting requirement, with 83 percent of larger insurers reporting that practitioners had become less willing to settle cases. ⁶Thus, patients seeking accountability, for an actual or perceived medical mishap, usually pursue a remedy via litigation.

Events That Are Not Reportable to the NPDB

Notwithstanding the common course of litigation, several options permit physicians to resolve claims early, yet still avoid reporting to the Data Bank. Claims that are not set forth in writing are not reportable. For example, an intubation by an anesthesiologist resulting in a chipped tooth may have been caused by the patient’s poor dentition rather than any inappropriate technique or other medical error on the part of the anesthesiologist, but a compassionate provider could still compensate the patient. If the patient or patient’s attorney has made the claim orally, such as in a face-to-face communication, and the physician compensates the patient, this is not reportable to the NPDB. Reporting is not triggered as the NPDB language requiring a report for a medical malpractice payment states that only written claims or demands for payment are reportable. ⁷

Other payments which are not reportable to the NPDB include refunding a payment or paying a settlement out of pocket. The Health Care Quality Improvement Act (“HCQIA”) requires “dollar one of any payment under a policy of insurance, self-insurance, or otherwise in settlement (or partial settlement) of, or in satisfaction of a judgment in, a medical malpractice action or claim shall report . . . information respecting the payment and circumstances thereof.”⁸ In other words, the HCQIA was not intended to require individual providers who provide refunds or settle out of pocket to report to the Data Bank. The guidelines are clear that individual practitioners need not report to the NPDB if an out-of-pocket payment is made.

Another non-reportable option is waiver of a patient’s bills or otherwise adjusting the patient-s expenses. Any practitioner who chooses to waive or alter a patient’s medical bill is not required to report to the NPDB.

Additionally, another method used for achieving settlement and avoiding an NPDB report is a “high-low agreement.” This form of resolution is used only in medical malpractice cases that are litigated. In this arrangement, a defendant agrees to pay the plaintiff a minimum amount of money (the “low”) in return for the plaintiff’s agreement to accept a maximum amount (the “high”) regardless of the outcome of the trial. These agreements assure plaintiffs a set amount of recovery and also protect defendants from a high verdict. If the outcome of the trial is a defense verdict, the “low” amount that will be paid is not reportable to the NPDB. The rationale here is that the payment is part of an independent contract between the two parties and is not considered settlement of a malpractice claim. However, if a jury finds in favor of a plaintiff and against a medical provider, the “high” amount is paid by the medical provider, no matter what amount of verdict the jury returns. Since the jury found against the medical practitioner, this amount is reportable.

The “corporate shield” is another means to avoid NPDB reporting. The “corporate shield” refers to cases in which the physician’s medical corporation is named as a party in the suit, and the doctor is either not originally named or is dismissed prior to settlement specifically for the purpose of avoiding a report to the NPDB. There is evidence that some insurers will “cut a deal” with the plaintiff’s attorney to dismiss the doctor from the suit and let the payment be made entirely on behalf of the corporation, hospital, or other entity. Using the corporate shield to avoid the NPDB reporting may be controversial; however, it has proved to be an important asset to promote early dispute resolution.

Lastly, a settlement payment following receipt of an “intent to sue” notice is not reportable to the NPDB. Many states require early mediation prior to filing a formal complaint. Usually this requires forwarding an “intent to sue” notice to the provider in advance of filing suit. The timeframe for providing a notice of intent to sue varies by state. The notice gives both sides the opportunity to acknowledge the claim and is the ideal environment to foster some form of alternative dispute resolution in order to avoid litigation. Although these notices generally are in writing and may require considerable specificity, arguably they do not constitute a “written claim or demand for payment,” but rather, an alert that in the future there will likely be such a written demand. Payments made during this pre-suit notification period are not reportable.

Conclusion

Though the NPDB was created to protect entities from hiring potentially problematic practitioners, many believe that NPDB reporting does not enhance quality and, conversely, may deter quality improvement by shutting down communication by stakeholders. Suppressing open communication between providers in a healthcare environment essentially promotes the litigation process because providers may be afraid to speak to each other without representation from defense counsel, communication becomes increasingly formal, and the courthouse becomes the environment for fact-seeking.

Furthermore, compliance with NPDB reporting is poor. In 2000, the U.S. General Accounting Office (GAO) found high levels of errors among all reports (malpractice, peer review, and licensure actions). Specifically, regarding medical malpractice reports, the GAO observed that, although the Health Services Resource Administration (HRSA) has been concerned that malpractice payments are underreported, it has not been able to determine the magnitude of the problem despite many years of effort. ⁹

As discussed above, there are several scenarios in which a practitioner may not be obligated to report a settlement payment to the NPDB:
- when a practitioner pays out-of pocket
- when a practitioner waives or pays a patient’s bills
- when a claim is not made in writing
- when a hospital or other entity makes a payment after an individual practitioner is dismissed from the claim
- when a payment is made during a mediation that takes place prior to a written claim
- when a payment is made during the pre-suit notification period

¹National Practitioner Data Bank, National Practitioner Data Bank 1996 Annual Report (1997).
²Government Accountability Office: National Practitioner Data Bank: Major Improvements Are Needed to Enhance Data Bank’s Reliability GAO-01-130 (2000) 7-8.
³Lawrence Smarr, Medical Malpractice: External Influences and Controls: A Comparative Assessment of the PIAA Data Sharing Project and the National Practitioner Data Bank: Policy, Purpose and Application, Law & Contemp. Prob. 59 (1997) 64.
⁴National Practitioner Data Bank Guidebook (2015) A-8.
⁵Allen Kachalia et al., Liability Claims and Costs Before and After Implementation of a Medical Error Disclosure Program, 153 ANNALS INTERNAL MED. (2010) 213-214.
⁶Lawrence Smarr, Medical Malpractice: External Influences and Controls: A Comparative Assessment of the PIAA Data Sharing Project and the National Practitioner Data Bank: Policy, Purpose and Application, Lae & Contemp. Prob. 59 (1997) 64.
⁷42 U.S.C. § 11151(7) (2006).
⁸42 U.S.C. § 11131.
⁹Malpractice, Mediation, and Moral Hazard: The Virtues of Dodging the Data Bank, 27 Ohio St. J. on Disp. Resol. 109, 160.

This article is for general informational purposes only and is not legal advice and should not be construed as legal advice. The information in this article is descriptive only. Actual coverage is subject to the language of the policies as issued.