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Enterprise Medical Liability and the Choice of the Responsible Enterprise

Published online by Cambridge University Press:  24 February 2021

Kenneth S. Abraham  and
Paul C. Weiler
Kenneth S. Abraham
Affiliation:
University of Virginia School of Law
Paul C. Weiler
Affiliation:
Harvard Law School
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Extract

During the last year, the proposal of “enterprise” liability for medical malpractice became a major issue in debates about health care and malpractice reform. The idea, however, was not new. In scholarly work over an extended period, we have been developing the systematic case for the concept of enterprise — or, as we originally termed it, “organizational” — liability for medical malpractice. After several years of debating the critics of our proposal to shift the focus of liability for medical injury from individual physicians to the organizations that deliver health care, we were naturally gratified that the idea was now on the national agenda.

In particular, we recommended adoption of enterprise liability to President Clinton's Health Care Task Force. The Task Force did embrace a version of the idea as its own, but then encountered stiff resistance from a number of special interests.

Type
Articles
Information
American Journal of Law & Medicine , Volume 20 , Issue 1-2: Quality of Care and Health Reform: Complementary or Conflicting , 1994 , pp. 29 - 36
Copyright
Copyright © American Society of Law, Medicine and Ethics and Boston University 1994

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References

1 One of us had considered a version of the idea almost two decades ago, under the label “channelling.” See Abraham, Kenneth S., Medical Malpractice Reform: A Preliminary Analysis, 36 Md. L. Rev. 489, 520-22 (1977)Google Scholar. Weiler served as Chief Reporter for the American Law Institute Reporters’ Study, Enterprise Responsibility for Personal Injury (1991), with special responsibility for medical liability, and Abraham was Associate Reporter, with special responsibility for the insurance side of the tort system. That Study analyzed and endorsed the concept of organizational liability for medical malpractice. See 2 American Law Institute Reporters’ Study, Enterprise Responsibility for Personal Injury 113-26 (1991). Finally, one of us authored a book on medical malpractice in which the concept was explored in detail. See Paul C. Weiler, Medical Malpractice on Trial 122-32 (1991).

2 These proposals have appeared in various forms. See, e.g., 2 American Law Institute Reporters’ Study, supra note 1, at 113-26; Weiler, supra note 1, at 122-32; Abraham, Kenneth S. et al., Enterprise Responsibility for Personal Injury: Further Reflections, 30 San Diego L. Rev. 333, 355-58 (1993)Google Scholar; Abraham, Kenneth S. & Weiler, Paul C., Organizational Liability for Medical Malpractice: An Alternative to Individual Health Care Provider Liability for Hospital-Related Malpractice (March 1993) (on file with author)Google Scholar.

3 Sage, William M. et al., Enterprise Liability for Medical Malpractice and Health Care Quality Improvement, 20 Am. J. L. & Med. 1 (1994)Google Scholar.

4 Sage et al., supra note 3, at 11-12.

5 We are currently at work on a lengthy study of this and many other issues associated with the concept of enterprise liability, entitled, Enterprise Medical Liability and the Evolution of the American Health-Care System.

6 Although the proposals we discuss are generally designed to apply to physicians and other individual health-care providers, for convenience we will refer in the remainder of this Article to “physicians” alone.

7 See Weiler, supra note 1, at 123-24.

8 We are aware that a shift to enterprise liability would risk an increase in the magnitude of tort awards because of a “deep-pocket” effect resulting from the substitution of enterprise defendants for individual physicians. For this reason (among others) we have argued elsewhere that a variety of tort reforms, including enterprise liability, should be accompanied by sensible reform of the law of tort damages — in effect, through damage guidelines — rather than the adoption of absolute (and thence regressive) fixed dollar caps on tort awards. See, e.g., 2 American Law Institute Reporters’ Study, supra note 1, at 161-316; Weiler, supra note 1, at 45-69; Abraham et al., supra note 2, at 340-47.

9 In addition, as we explain below in Part II, under both our proposal and the SH & B proposal, the enterprises rendered liable in the first instance would be authorized in certain circumstances to shift liability by contract: under our approach hospitals could contract with Health Plans for the latter to bear liability, and under the SH&B approach the converse could occur. Since contracting is not costless, the extent to which liability shifting would occur under these models is highly relevant to the administrative costs that would be incurred under each. Because delivery-based liability is more nearly optimal than its alternatives, less liability-shifting would occur under this approach and correspondingly lower administrative costs would be incurred.

10 Weiler, Paul C. et al., A Measure of Malpractice 39 n. 11 (1991).Google Scholar

11 See Weiler, supra note 1, at 78-80.

12 See, e.g., Keeler, Emmett B. et al., Hospital Characteristics and Quality of Care, 268 JAMA 1709 (1992)Google Scholar; Stephen, Kritchevsky & Simmons, Bryan P., Continuous Quality Improvement: Concepts and Applications for Physician Care, 266 JAMA 1817 (1991)Google Scholar.

13 Janulis, Diane M. & Hornstein, Alan D., Damned If You Do, Damned If You Don't: Hospitals’ Liability for Physicians’ Malpractice, 64 Neb. L. Rev. 689 (1985)Google Scholar; Southwick, Arthur F., Hospital Liability: Two Theories Have Been Merged, 4 J. Leg. Med. 1 (1983)Google Scholar.

14 See S. 1775, 103d Cong., 1st Sess., § 140 (1993) [hereinafter Health Security Act].

15 Clinton Administration Description of President's Health Care Reform Plan, “American Health Security Act of 1993,” BNA, Special Supp., Sept. 13, 1993, at 74.

16 Subtitle E of Title I of the Health Security Act, supra note 14, is labelled “Health Plans,” but most of the provisions it contains pertain to other issues. The most direct description of a “Health Plan” in the entire Subtitle is the definition embodied in § 1400 indicating that the term means “a plan that provides the comprehensive benefit package that meets the requirements of parts 1, 3, and 4.” Health Security Act, supra note 14, § 1400(a). In other words, a Health Plan is an entity that provides health benefits.

17 Sage et al., supra note 3, at 10.

18 Sage et al., supra note 3, at 25-26.

19 Id. at 12.

20 See Vladeck, Bruce C., Medicare Hospital Payment By Diagnosis Related Groups, 100 Annals of Internal Med. 576 (1984)Google Scholar.

21 In the case of HP liability the HP would probably bear the medical costs of non-malpractice-related iatrogenic injury only until the patient became a member of a different HP, although conceivably a comprehensively-legislated approach would dictate that the first HP continue to bear these costs.

22 For discussions of the default-rule concept in contract law generally, see Johnston, Jason S., Strategic Bargaining and the Economic Theory of Contract Bargaining Rules, 100 Yale L.J. 615 (1990)Google Scholar; Richard, Craswell, Contract Law, Default Rules, and the Philosophy of Promising, 88 Mich. L. Rev. 489 (1989)Google Scholar; Goetz, Charles J. & Scott, Robert E., The Limits of Expanded Choice: Analysis of the Interactions Between Express and Implied Contract Terms, 73 Cal. L. Rev. 261 (1985)Google Scholar.

23 Sage et al., supra note 3 at 23, 25-26.