IU Robert H. McKinney School of Law: IUPUI - Negligent ...As of June 2011, at least 28 states now recognize it as a valid cause of action.2 Due to the slow growth in this cause of

NEGLIGENT CREDENTIALING AS A CAUSE OF ACTIONIN INDIANA MEDICAL MALPRACTICE LITIGATION

Lindsey Stout*

I. INTRODUCTION................................... 250A. Roadmap .............................. .... 252B. Background................................ 252

II. INDIANA CASE LAW AND GUIDANCE IN NEGLIGENTCREDENTIALING ACTIONS ..................... .... 253

III. CURRENT TRENDS IN NEGLIGENT CREDENTIALING FROMOTHER JURISDICTIONS ...................... ...... 260

A. Bifurcation ..................................... 260B. Qualified Immunity................... ........ 265C. Negligent Credentialing and the Peer ReviewProcess............ .................... ..... 267

1. Minnesota's Interpretation of the Peer ReviewPrivilege in Negligent Credentialing Claims......... 269

2. Texas's Interpretation of the Peer Review Privilegein Negligent Credentialing Claims ................ 272

3. Iowa's Interpretation of the Peer Review Privilegein Negligent Credentialing Claims ................ 275

4. Missouri's Interpretation of the Peer ReviewPrivilege in Negligent Credentialing Claims......... 277

D. Statutory Immunity...................... 2811. Utah's Negligent Credentialing Statute.... .... 2812. Ohio's Negligent Credentialing Statute.... .... 282

IV. NEGLIGENT CREDENTIALING AND THE AFFORDABLEHEALTH CARE ACT............................... 284

V. CONCLUSION ............................... ..... 286

* J.D. Candidate, 2013, Indiana University Robert H. McKinney School ofLaw; B.S., 2006, Purdue University.

INDIANA HEALTH LAW REVIEW

I. INTRODUCTION

The concept of negligent credentialing has been aroundsince the 1965 landmark decision by the Illinois SupremeCourt in Darling v. Charleston Memorial Hospital IHowever, the courts have slowly accepted negligentcredentialing as a cause of action. As of June 2011, at least28 states now recognize it as a valid cause of action.2 Due tothe slow growth in this cause of action, there is no clearguidance on how these cases should be handled by thecourts. Unfortunately, state courts are not in agreement asto how negligent credentialing claims should be handledand litigated, and of those states that have adoptednegligent credentialing as a cause of action, some statesupreme courts have not even had the chance to renderdecisions on these claims.3

Negligent credentialing is "the theory in which therecipient of harmful service recovers from a gatekeepingentity for allowing the provider of that service to engage inthe activities that caused the recipient harm."4 In order fordoctors to treat their patients at a hospital, the hospitalmust grant the physicians credentials and privileges toadmit patients and perform certain procedures.5 The recenttrend toward integration of health care facilities and officeshas interrupted the privileges of immunity that onceprotected health care institutions, and has opened a newera of litigation involving hospital liability for physicianerrors.6

I Elam v. Coll. Park Hosp., 183 Cal. Rptr. 156, 164 (Cal. Ct. App. 1982)(citing Darling v. Charleston Cmty. Mem'I Hosp., 211 N.E.2d 253, 258 (Ill. 1965)).

2 Estate of Burton v. Trover Clinic Found., Inc., No. 2009-CA-001595-MR,2010 WL 6816338, at 2 (Ky. Ct. App. June 10, 2011).

3 See Andrew R. deHoll, Vital Surgery or Unnecessary Procedure?Rethinking the Propriety of Hospital Liability for Negligent Credentialing, 60 S.C.L. REv. 1127, 1132 (2009) (explaining that some states allow negligentcredentialing claims, some states do not allow the action due to the state's privilegeor immunity statutes, and some states recognize the cause of action, but effectivelynullify it through granting peer review privileges to hospitals).

4 Id. at 127.5 42 C.F.R. § 422.204.6 Benjamin J. Vernia, Annotation, Tort Claim for Negligent Credentialing

ofPhysician, 98 A.L.R.5th 533 (2002).

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NEGLIGENT CREDENTIALING AS A CAUSE OF ACTION

Historically, physicians working in hospitals wereclassified as independent contractors, meaning they werepermitted to work at the hospital and were given use of thehospital's facility and equipment, but the hospital had nocontrol over the physician, and therefore, no liabilitypertaining to the physician's actions.7 However, theintegration of healthcare has led to the formation ofbusiness relationships between hospitals and physicians,such that now physicians are sometimes employees of thehospitals they are credentialed to work in.8 The problemwith integration, as it pertains to medical malpracticeclaims, is that it is often unclear as to where the actions ofthe hospital end and where the actions of the physicianbegin when evaluating negligence actions and what couldhave been avoided.9 Negligent credentialing is one cause ofaction that seeks to determine the liability of hospitals inmedical malpractice claims.10

Currently, it is estimated that "j]ust six percent ofdoctors are responsible for nearly sixty percent of allmedical negligence." 1 Additionally, "two-thirds of doctorswho make ten or more medical negligence payments arenever disciplined." 12 Furthermore, since the creation of theNational Practitioner Databank in 1990, created forhospitals to report adverse physician events, about half ofall U.S. hospitals have not even reported a single event.13Based on these statistics, there is a clear discrepancybetween what is happening and what is being reported.Hospitals have a duty of care to patients and allowing

7 Whitney Foster, Note, Health Law-Negligent Credentialing and You:What Happens When Hospitals Fail to Monitor Physicians, 31 U. ARK. LITTLEROCK L. REV. 321, 323 (2009).

8 Kevin Kavanagh, Health Care Integration: Will Physicians Lose TheirVoice?, 96 BULL. OF THE AM. COLL. OF SURGEONS 28 (2011).

9 Lyle Griffin Woodruff, Hospital Liability, WARSHAUER LAW GROUP,http://www.warlawgroup.com/files/ LGW-HospitalLiability.pdf (last visited Oct. 5,2012).

1o Vernia, supra note 6.1' AMER. ASS'N FOR JUSTICE, MEDICAL NEGLIGENCE: THE ROLE OF

AMERICA'S CIVIL JUSTICE SYSTEM IN PROTECTING PATIENTS' RIGHTS, 4 (2011),available at http://www.justice.org/resources/MedicalNegligence Primer.pdf.

12 id" Id. at 4, 6.

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negligent credentialing as a cause of action againsthospitals promotes an additional layer of protection topatients against avoidable medical errors and helps to keephospitals accountable in the role of patient safety. 14

A. Roadmap

This note discusses negligent credentialing as a cause ofaction in medical malpractice claims. Section II looks toIndiana case law as it pertains to negligent credentialingand the guidance that the decided cases in Indiana give inregard to defendant and plaintiff actions. In order to betterunderstand negligent credentialing as a cause of action andthe future of this type of claim, Section III explores currenttrends in negligent credentialing in other jurisdictions andargues for three changes to Indiana law: (1) the bifurcationof negligent credentialing claims; (2) a clarification on thepeer review privilege; and (3) for a negligent credentialingstatute to protect plaintiffs.

Indeed, Indiana has looked to neighboring jurisdictionsfor guidance on how to rule in this type of action and will belikely to do so as further issues arise in negligentcredentialing actions.15 Section IV looks to how theenactment of the Patient Protection and Affordable CareAct (PPACA) could impact negligent credentialing inIndiana cases.16

B. Background

Darling v. Charleston Community Memorial Hospital,decided in 1965, was the first case to recognize negligentcredentialing as a cause of action in medical malpracticeclaims.17 The Indiana Court of Appeals was slow torecognize negligent credentialing as a cause of action, but

14 Vernia, supra note 6; see also Deborah LaValley, Why CredentialingMatters for Patient Safety, HARv. CRICO/RMF FORUM, Oct. 2006, at 1.

15 Beswick v. Bell, 940 N.E.2d 338, 345 (Ind. Ct. App. 2010).16 Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124

Stat. 119-1025 (2010).17 Elam v. Coll. Park Hosp., 183 Cal. Rptr. 156, 164 (Cal. Ct. App. 1982)

(citing Darling v. Charleston Cmty. Mem'1 Hosp., 211 N.E.2d 253, 258 (Ill. 1965)).

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eventually ruled that there is a valid cause of action inmedical malpractice claims in 2000.18 In 2010, the IndianaCourt of Appeals decided a case that broadened the scope offactual foundations under which a plaintiff can bring anegligent credentialing action.19 The Indiana SupremeCourt has not yet heard a case on negligent credentialing.Therefore, the only guidance afforded to the lower courts isfrom the few decisions that have been decided through theIndiana Court of Appeals, unless the lower court looks toanother jurisdiction's rulings as demonstrated by the courtin Beswick v. Bell.2 0 The lack of guidance from the IndianaSupreme Court and the lack of cases involving this cause ofaction leave the issue of what exactly is required in anegligent credentialing claim, the adjudicative process thatis afforded in these claims, and issues of privilege anddiscovery open for debate. Thus far, the decisions seem torender more questions than answers.

II. INDIANA CASE LAW AND GUIDANCE IN NEGLIGENTCREDENTIALING ACTIONS

Since 1938, the common law rule in Indiana was that ahospital is generally not liable for the medical negligence ofthe doctors on its staff, since by law, doctors are consideredto be independent contractors. 21 However, in 1986, Yaneyv. MeCray Memorial Hospital provided an exception to thatcommon law rule. 22 The court in Yaney held that a hospitalcould be liable for medical malpractice of its physicians ifthe hospital was aware that the care provided by aphysician had deviated from the normal practice. 23 Indetermining whether the hospital could be found negligent,the court looked to whether the hospital's acts or omissionscould be a proximate cause of the plaintiffs injuries. 24 The

18 Winona Mem'1 Hosp. v. Kuester, 737 N.E.2d 824, 828-29 (Ind. Ct. App.2000).

19 Beswick v. Bell, 940 N.E.2d 338 (Ind. Ct. App. 2010).20 id.21 Iterman v. Baker, 15 N.E.2d 365, 370 (Ind. 1938).22 Yaney v. McCray Mem'1 Hosp., 496 N.E.2d 135 (Ind. Ct. App. 1986).23 Id. at 137.24 id

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court stated:

The test for determining whether a negligentact or omission is the proximate cause of aninjury is whether the injury is a natural andprobable consequence, which in light of thecircumstances, should have been foreseen oranticipated. The key is foreseeability of theultimate injury as a natural and probableconsequence of the act or omission.25

While this case did not include negligent credentialing asone of the causes of action, it opened the door for hospitalnegligence in medical malpractice claims and, eventually,the recognition of negligent credentialing as a cause ofaction.

Winona Memorial Hospital v. Krueger is the landmarkIndiana case that adopted negligent credentialing as acause of action in medical malpractice claims.26 The issuehere was whether a negligent credentialing claim fell withinthe purview of the Indiana Medical Malpractice Act (theAct).27 The court looked to the definition of "malpractice"under the Act and then looked to the statute coveringcredentialing to determine if credentialing of a physiciancould fall under the Act. 28

Since the credentialing process involves both medicaland nonmedical personnel and expertise, the court statedthat it was "neither clearly within the Act nor outside ofit."29 In order for a negligent credentialing cause of action tocontinue, "[t]he credentialing process alleged must haveresulted in a definable act of medical malpractice thatproximately caused injury to [the plaintiff] ."30 The courtreasoned that a complaint of negligent credentialing issubject to a medical review panel as required by the Act:

25 Id. at 138.26 Timothy C. Curess & Katherine Amy Lemon, Recent Developments in

Indiana Tort Law, 35 Ind. L. Rev. 1583, 1591 (2002).27 Id. at 825.28 Id. at 826-27.29 Id. at 827.30 Id. at 828.

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Because the act of credentialing andappointing licensed physicians to its medicalstaff is a service rendered by the hospital in itsrole as a health care provider, inclusion ofnegligent credentialing under the Act isconsistent with use of the medical review panelto establish the standard of care owed byWinona in credentialing. 31

Further, the court held that the credentialing of aphysician was "directly related to the provision of healthcare, and is therefore, not excluded from the Act" as a causeof action in medical malpractice claims. 32 The importance ofthe Winona case lies not only in that it recognized negligentcredentialing as a cause of action, but also gave courts theguidance that negligent credentialing claims have to followthe statutory requirements of medical malpractice claims aslisted in the Act.

In 2007, the federal courts in Indiana revisted thematter of negligent credentialing in Pike v. DecaturMemorial Hospital.33 This case turned on the issue of whocould be considered a "health care provider" under the Actin order to satisfy the requirements for bringing a negligentcredentialing claim. 34

Since Winona established that negligent credentialingclaim could be brought under the Act, it is only validagainst "health care provider" as defined by the act. 35 InPike, the hospital had contracted with a third partycompany, NES, to find and provide it the service ofemergency room physicians. 36 The physician did not disclosethat he had been previously licensed to practice in anotherstate, nor that his license in California had been revoked

31 id32 id

33 Pike v. Decatur Mem'l Hosp., No. 1:04-cv-391-JDT-TAB, 2007 U.S. DistLEXIS 32552, at 1 (S.D. Ind. May 1, 2007).

34 Id. at 26-27.35 IND. CODE § 34-18-3-1 (2012) (providing that if a health care provider

fails to "qualify," it loses the protections afforded it under the Act).36 Pike, 2007 U.S. Dist LEXIS 32552, at 2.

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due to a mental illness..37 The physician was credentialed toperform emergency room services, despite previously havinghis medical license suspended in the State of California,. 38

NES argued that it was not a "qualified provider" asrequired by the Act.3 9 The court responded that NES'scontract:

[T]o be responsible for all physician emergencyroom services at Decatur makes it more thandifficult for it to say it is not a "health careprovider" when the statute provides that anagent of a facility authorized by the state toprovide health care is a "health careprovider."40

Once the court determined that NES was considered a"health care provider" under the provisions of the Act, itturned to the specific claim of negligent credentialing.41

NES attempted to shift the burden of negligentcredentialing to the hospital since NES believed it was"insulated from liability . . . because Decatur had ultimateresponsibility for issuing hospital privileges and regardlessof what information NES may have provided."42 The courtfound that, at the time the hospital granted credentials toDr. Angel, Dr. Angel had not yet obtained the Californialicense so there was no evidence that Decatur knew he hada license in California or that is was revoked. 43 However,the evidence was clear that NES had Dr. Angel's curriculumvitae, which listed his California license number, and NEShad in place a policy of conducting two-year reviews for itsphysicians. 44 The court ultimately held that NES could be

37 id" Id. at 9.39 Id. at 17; see IND. CODE §§ 34-18-2-24.5 and 34-18-3-2 (2012) (requiring

that medical providers and their insurers file certain proofs with the commissionerto become "qualified").

40 Pike, 2007 U.S. Dist LEXIS 32552, at 26 (construing IND. CODE § 34-18-2-14(1) (2012)).

41 Id. at 28.42 id43 id4 Id. at 28-29.

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held liable for the negligent credentialing claim, but therewas not sufficient evidence for summary judgment. 45 Thiscase is essential to the basis of case law for negligentcredentialing since it expanded the realm of negligentcredentialing liability to third party entities that contractwith hospitals.

The next case to provide guidance on negligentcredentialing in Indiana was Beswick v. Bell, which wasdecided in December of 2010.46 The court noted that Indianaaccepted negligent credentialing as a cause of action in thedecision of Winona but went on to state that the elementsneeded for a negligent credentialing claim had not beendefined in Indiana law.4 7 The court looked to Ohio andIllinois law to determine what elements are needed tosatisfy a negligent credentialing cause of action.4 8

In 2009, the Ohio Supreme Court held that "[to prove anegligent-credentialing claim, a plaintiff injured by thenegligence of a staff doctor must show that but for the lackof care in the selection or retention of the doctor, the doctorwould not have been granted staff privileges, and theplaintiff would not have been injured."49 The Indiana Courtof Appeals read this as: "Ohio law contemplates someknowledge on the part of the hospital that would render itscredentialing decision negligent."50

The court also looked to a decision rendered by theIllinois Appellate Court, which looked to other federal andstate courts on the issue of negligent credentialing.51 TheIllinois court decided that:

"[Tlhe elements needed to prove negligentcredentialing" were as follows: that "thehospital failed to meet the standard ofreasonable care in the selection of the

45 Id. at 29-30.46 Beswick v. Bell, 940 N.E.2d 338 (Ind. Ct. App. 2010).47 Id. at 344.48 Id. at 344-45.49 Id. at 345 (citing Schelling v. Humphrey, 916 N.E.2d 1029, 1033 (Ohio

2009)).50 id51 id

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physician it granted medical state privileges towhose treatment provided the basis for theunderlying medical mal-practice claim"; andthat "while practicing pursuant to negligentlygranted medical staff privileges, the physicianbreached the applicable standard of care"; andthat "the negligent granting of medical staffprivileges was the proximate cause of theplaintiffs injuries."52

After reviewing the other courts' decisions, the IndianaCourt of Appeals held that since there were no previouscomplaints or allegations from patients of negligenceagainst Dr. Bell and since Dr. Bell held the appropriatestate medical license and board certification for anorthopedic surgeon, there was no evidence that the hospitalknew he had deviated from the standard of care, as requiredby the Yaney decision. 53 Furthermore, the court held thatthere was no evidence that but for the lack of care in theselection or retention of Dr. Bell, he would never had beengiven staff privileges, as required by Schelling.54

This decision is extremely important since it outlines theelements for a negligent credentialing cause of action.However, the decision leaves an ambiguous area of whatexactly is required by a hospital to protect itself againstnegligent credentialing claims. Perhaps, more importantly,it leaves the question of how much importance hospitalsshould place on patient complaints in determining physicianretention and how past complaints may affect in theirdefense of negligent credentialing claim.

This decision is also important because the court ofappeals looked outside of Indiana for guidance on how tohandle the issues presented in a negligent credentialingdecision. Given the precedent of looking to otherjurisdictions for guidance in negligent credentialing claims,it would be advantageous to be familiar with how these

52 Id. (citing Frigo v. Silver Cross Hosp. & Med. Ctr., 876 N.E.2d 697, 723(Ill. App. Ct. 2007)).

5 Id.54 id

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jurisdictions are deciding negligent credentialing decisionsand any new areas of development in this area so as to gaina better understanding of how the Indiana Court of Appealsmay address these issues in the future.

In December of 2011, the Indiana Court of Appeals onceagain addressed a claim of negligent credentialing.5 5 Theplaintiff filed a medical malpractice claim against thedefendant doctor following issues from a bilateral breastreduction.56 The medical review panel issued a unanimousopinion that the doctor failed to meet the standard of care intreating the plaintiff and that the defendant hospital failedto meet the standard of care in granting the doctorprivileges.57 However, the trial court granted summaryjudgment for both defendants because the plaintiff misseddeadlines for admitting expert evidence.5 8

On appeal, the Indiana Court of Appeals held that "thetrial court properly granted summary judgment to Dr. Parkbecause Martinez failed to rebut the expert testimony thathe did not breach the applicable standard of care in pre-operatively, surgically, or post-operatively treatingMartinez." 59 The court then held that the summaryjudgment on the negligent credentialing claim was alsoappropriate because the defendant cannot be liable"[wlithout a showing of an underlying breach of thestandard of care by [the doctor] proximately causing[plaintiffs] injuries."60 While this case did not exactly createnew law for lower courts to implement, it is important inthat it reiterated the importance of establishing a medicalmalpractice claim against a defendant doctor in order toprove a negligent credentialing claim.

5 Martinez v. Park, 959 N.E.2d 259 (Ind. Ct. App. 2011).56 Id. at 260.

" Id. at 266-67.5 Id at 271-72.60 Id at 272.

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III. CURRENT TRENDS IN NEGLIGENT CREDENTIALING FROM

OTHER JURISDICTIONS

As noted above, the court in Beswick v. Belllooked to thecourt decisions from Ohio and Illinois for guidance on anegligent credentialing claim because of the lack of Indianacases on the subject. 61 Given the importance otherjurisdictional decisions can have on the Indiana courtsystem, it is imperative to look at trends happening aroundthe country in the area of negligent credentialing that couldhave an impact on Indiana law.

A. Bifurcation

In 2009, the Supreme Court of Ohio handed down aruling in Scheling v. Humphrey, which pertained tobifurcation of negligent credentialing claims.62 The plaintifffiled a claim against the surgeon for medical malpracticerelating to two heel surgeries and also filed a claim againstthe hospital for negligently granting staff privileges to thesurgeon. 63 The plaintiff subsequently dismissed her claimagainst the physician after the surgeon filed for bankruptcyand the plaintiff reached a settlement with the bankruptcytrustee. 64 However, the plaintiff continued with hernegligent credentialing claim against the hospital.65

Prior to the surgeon filing for bankruptcy, the hospitalmoved to bifurcate the negligent-credentialing claim andthe medical malpractice claim against the surgeon, arguingthat "the negligent-credentialing claim did not becomeripe until the doctor's negligence was determined".66 Thetrial court granted this motion.67 Once the settlement wasreached between the plaintiff and the surgeon, the hospitalmoved for dismissal of the claim arguing that without afinding of negligence, the negligent credentialing claim

61 Beswick v. Bell, 940 N.E. 2d 338, 344-345 (Ind. Ct. App. 2010).62 Schelling v. Humphrey, 916 N.E.2d 1029, 1031 (Ohio 2009).63 Id.6 Id. at 1031-32.65 Id. at 1031.66 id67 Id.

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could not be established. 68 The hospital did not believe thebankruptcy court found negligence in this case nor was thehospital aware that the surgeon had admitted negligence. 69

The Supreme Court of Ohio ultimately held that theplaintiff could continue with the negligent credentialingclaim, in the absence of the surgeon, so long as she couldprove that his malpractice was a causal element of the claimagainst the hospital. 70 Given the unusual circumstances ofthe case, the court stated that the impeded plaintiff "shouldbe permitted to prove that [the surgeon] committed medicalmalpractice and that the alleged malpractice caused the[plaintiffs] injury, as an element of their negligentcredentialing claim against the hospital."71

The Supreme Court of Ohio gave further instructionregarding the bifurcation of the claims by stating that thebifurcation of the medical malpractice claim and thenegligent credentialing claim would avoid "the problems ofjury confusion or prejudice that may result from admittingevidence of prior acts of malpractice in a combined trial onboth claims." 7 2 Evidence of prior malpractice by the surgeonwould lend credibility to the negligent credentialing claim,but would provide for unfair prejudice in the jurydetermination of whether the doctor committed mal-practice. 73 Additionally, the court reasoned that bifurcationwas appropriate because if the medical malpractice claimagainst the doctor did not prevail, the negligentcredentialing claim could be dismissed.74 The court statedthat "[ilf the fact-finder determines that negligence of thedoctor is not the cause of the plaintiffs injury, then ahospital's grant of staff privileges to a doctor is not thecause of the plaintiffs injuries."75

The Kentucky Court of Appeals has also ruled on the

6 Id. at 1032.69 id.

70 Id. at 1036-37.' Id. at 1036.

72 id.73 id74 Id.75 Id.

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issue of bifurcation in Patterson v. Marshall.76 In that case,the court actually affirmed trifurcation of the claims andordered that the trial proceed in three separate stagesbefore the same jury with the medical negligence claimagainst the physician first, followed by the hospital's statuteof limitations defense if the physician was found guilty, andthen ending with the negligent credentialing claim if thedefense was not sustained.77 In addition to the proposedplan, the trial court excluded all matters relating to thephysician's employment history during the phase pertainingto the physician's medical negligence claim and also deniedthe plaintiffs motion to compel the hospital to produce thephysician's credentialing files and peer review files.7 8

The appellate court held that the trial court had notabused its discretion in regard to the challenged trial plan.7 9

In regard to a challenge to the hospital's participation in thefirst trial state, the appellate court reasoned that "toprevent [the hospital] from introducing evidence of[defendant's] compliance with the standard of care wouldhave prevented [the hospital] from defending itself againstthe negligent credentialing claim under the procedureutilized by the trial court."80 In regards to the challenge ofthe trial court excluding evidence of the physician'semployment and peer review, the court reasoned that thephysician's prior loss of privileges held no bearing on thestandard of care he provided to the plaintiff, and allowanceof this evidence would only confuse the two issues ofmedical negligence and negligent credentialing in thiscase.81 While allowing for the bifurcation of the claims, theKentucky Court of Appeals did not formally recognizenegligent credentialing as a cause of action in this claim. 82

In June 2010, the Kentucky Court of Appealsrevisited the issue of bifurcating claims in negligent

76 Patterson v. Marshall, No. 2008-CA-000157, 2009 WL 2341448, at 1 (Ky.Ct. App. July 31, 2009).

n Id at 2.78 id79id

80 Id at 3.1' Id82 Id at 2.

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credentialing cases in Estate of Burton v. Trover ClinicFoundation, Inc.83 In delivering the opinion, the court beganby first recognizing negligent credentialing as a valid tort inthe State of Kentucky. 84 In this case, the defendant doctorand the defendant hospital joined together and filed amotion, granted by the trial court, to bifurcate the case intotwo phases which would include the medical negligenceissues first, followed by all other issues in the case includingthe claim of negligent credentialing.85 The court stated thatin deter-mining bifurcation of these claims, trial courtshould "consider potential prejudice to the parties, potentialconfusion to the jury, and the relative convenience and eco-nomy which would result."86 The court then held thatbifurcation in this instance was not an abuse of discretionby the trial court.

The plaintiff argued that bifurcation of the trials wasa reversible error on the grounds that bifurcation was inviolation of a state statute requiring that a jury consider allissues concurrently and bifurcation deprived the plaintiff ofhis constitutional right to conduct a full voir dire.87 Therelevant statute in this appeal is KRS § 411.186 whichstates that "[iln any civil action where claims for punitivedamages are included, the jury . . . shall determineconcurrently with all other issues presented, whetherpunitive damages may be assessed."88 The court held thatthe statute was not violated because the trial court onlybifurcated the claims between the defendants, but did notbifurcate the damages claims in relation to each individualdefendant.* 89

In relation to the voir dire argument, the plaintiffonly submitted voir dire questions on the first phase of thetrial for the medical negligence claim. 90 The court held that

83 Estate of Burton v. Trover Clinic Found., Inc., No. 2009-CA-001595-MR,2010 WL 6816338, at 2 (Ky. Ct. App. June 10, 2011).

84 Id. at 2.85 Id at 1.86 Id at 3.87 Id at 2.88 KY. REV. STAT. Ann. § 411.186 (West 2012).89 Estate ofBurton, 2010 WL 6816338, at 3.90 Id.

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the plaintiff should have been allowed to conduct a full voirdire in the initial phase that concerned both phases of thebifurcated trial.91 However, the court went on to note thatthere was no reversible error because the jury did not findthe defendant doctor negligent in the first phase of the trial,so the second portion of the trial was never conducted. 92

The Indiana courts should adopt bifurcation of medicalmalpractice claims and negligent credentialing claims. Thebifurcation of these claims saves hospitals the unnecessaryexpense of defending a claim that may be dismissed prior toadjudication. In December 2011, the American MedicalAssociation released a medical liability reform reportindicating that the average cost of defending a physician ina medical liability claim in 2010 was $47,158.93 Further, thereport noted that in 2010, 63.7% of closed claims againstphysicians were dropped, withdrawn, or dis-missed withoutany payment, and that each of these claims costs an averageof $26,851 to defend. 94 Hospitals and the physicians areboth paying these amounts to defend medical liabilityclaims that involve negligent credentialing complaints. Itmay even be advantageous to allow bifurcation of not onlythe trial, but also the discovery phases of these claims,limiting the initial phase to the issues involved in theunderlying medical negligence claim against the physician.Bifurcating the discovery phase would, in effect, focus ondetermining the underlying issue of whether the physicianwas negligent.9 5 Moreover, it would "lessen credentialingdiscovery expense by postponing the need to depose thoseinvolved in the credentialing process, witnesses testifyingon the physician's alleged defects and experts."96 Since overhalf of medical malpractice claims against physicians are

91 Id92 id93 Morgan Lewis, Jr., Medical Malpractice Costs Continue to Climb, MOD.

MED. (Jan. 11, 2012), http://www.modernmedicine.com/modernmedicine/article/articleDetail.jsp?id=755739 (last visited Sept. 27, 2012).

94 id9 Thomas J. Hurney, Jr. et al., Defending Negligent Credentialing Cases,

FOR THE DEF. 44, 51 (July 2010), available at http://www.moser.com/Firm-News-and-Events/FTD- 1 007-HurneyStiegerWillmanPozzo.pdf.

96 Id.

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dropped, it would be advantageous to bifurcate the claimsand, at least, save the hospital the expenses of defending aclaim that can only be adjudicated on after the physicianhas been found negligent.9 7

In instances of bifurcation, the court should permit thehospital to participate in all phases of the trial since thehospital is a defendant in an underlying claim.9 8 Bifurcationalso allows for protection against jury bias against aphysician defending himself in a medical malpractice suit.Moreover, bifurcating claims is in conformity with theFederal Rules of Evidence. Federal Rule of Evidence 404(b)provides that "le]vidence of a crime, wrong, or other act isnot admissible to prove a person's character in order toshow that on a particular occasion the person acted inaccordance with the character."99

By following the holding and guidance in Estate ofBurton v. Trover Clinic Foundation, Inc.,100 the Indianacourts would give guidance to the lower courts of whatissues to consider when bifurcation is presented. Further,this decision helps to direct how to deal with voir dire ininstances of bifurcating a negligent credentialing claim andwhat needs to be included in the initial voir dire process.

B. Qualified Immunity

Some jurisdictions have looked to state statutes to givequalified immunity from negligent credentialing so long asthe hospital is compliant with credentialing procedures. InHuntsman v. Aultman Hospital, the Ohio Court of Appealsprovided that the defendant hospital was not subject to

97 Dwight Golann, Dropped Medical Malpractice Claims: Their SurprisingFrequency, Apparent Causes, and Potential Remedies, Soc. SCI. RES. NETWORK(July 19, 2011), http://ssrn.com/abstract-1896181 (last visited Sept. 27, 2012).

98 See Patterson v. Marshall, No. 2008-CA-000157, 2009 WL 2341448, at 3(Ky. Ct. App. July 31, 2009) (holding that "to prevent [defendant hospital] fromintroducing evidence of [the doctor's] compliance with the standard of care wouldhave prevented [defendant hospital] from defending itself against the negligentcredentialing claim under the procedure utilized by the trial court").

99 FED. R. EvID. 404(b).100 Estate of Burton v. Trover Clinic Found., Inc., No. 2009-CA-001595-MR,

2010 WL 6816338 (Ky. Ct. App. June 10, 2011).

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liability for alleged negligent re-credentialing since therewas a state statute that granted the hospital qualifiedimmunity from liability based on the hospital's compliancewith credentialing proce-dures. 101 Here, a deceased patient'sestate brought a negligent credentialing claim against thehospital subsequent to the patient passing away one dayafter a hernia repair procedure. 102 The trial court grantedsummary judgment to the defendant hospital concludingthat "R.C. 2305.25 does not allow for a cause of action fornegli-gent credentialing against a hospital where acredentialing process was in place."103 The trial court alsostated that "a hospital cannot be held liable for 'sloppy'credentialing, so long as the proper credentialing processwas followed."104

The relevant statute at issue in this case was R.C.2305.25, which stated, in part, that "[no hospital . . . shallbe liable in damages to any perform for any acts, omissions,decisions, or other conduct within the scope of thecommittee."105 Committee was statutorily defined as: "Aboard or committee of a hospital . .. of which the hospital. .. is a member reviewing professional qualifications oractivities of the medical staff as the hospital . . . orapplicants for admission."10 6

Since there were regulated, specific credentialingprocedures in place at the time of credentialing, and theprocedures were followed by the hospital in the re-credentialing process of the physician in this instance, thehospital was shielded from a negligent credentialingclaim.107 The court did further provide that "R.C. 2305.25does not provide blanket immunity to a hospital fornegligence in granting and/or continuing staff privileges of

101 Huntsman v. Aultman Hosp., No. 2010CA00211, 2011 WL 884107, at 5(Ohio Ct. App. Mar. 14, 2011).

102 Id. at 2.103 id

04 Id. at 5.los OHIO REV. CODE ANN. § 2305.25 (West 2012).106 Huntsman, 2011 WL 884107, at 3 (citing OHIO REV. CODE ANN. §

2305.25 (West 2012)).107 Id.

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an incompetent physician." 0 8

Codifying regulations for credentialing procedures inIndiana would place hospitals on notice as to what isspecifically required in the credentialing process to avoid anegligent credentialing claim. Also, not affording blanketimmunity to the hospital maintains the ideal of hospitalresponsibility in regard to ensuring patient safety throughits actions, but does afford the hospital protection againstliability for acting in accordance with standards ensuringpatient safety. It is important to note that the Ohio statutecited in this claim is no longer a statute. Ohio has now putin to place R.C. 2305.251, which specifically provides thatthere is a presumption of no negligence in credentialing andprovides immunity for hospitals as long as they follow a laidout process in credentialing physicians.109

C. Negligent Credentialing and the Peer Review Process

One recent trend in negligent credentialing litigation isthe determination of whether peer review privilege extendsto negligent credentialing claims. In general, the peerreview process is "a process by which health care providersevaluate their colleagues' work to determine if it compliedwith the standard of care by understanding the root cause ofwhy a preventable adverse event occurred."110 This processis generally used in the credentialing process with thegoverning body of the hospital overseeing the finalizedrecommendations of the peer review committee.11 ' The peerreview committee is involved in reviewing initialapplications from medical professionals who do not yet havecurrent membership in the medical facility, reappointmentsfor staff members who are currently privileged orcredentialed for the facility, and situations in which a

108 id.

109 oHIO REV. CODE ANN. § 2305.251 (West 2012).10 Patricia A. Sullivan & Jon M. Anderson, The Health Care Debate: IfLack

of Tort Reform Is Part of the Problem, Federalized Protection for Peer ReviewNeeds to Be Part of the Solution, 15 ROGER WILLIAMS U. L. REV. 41, 45 (2010).

"' Craig W. Dallon, Understanding Judicial Review of Hospitals' PhysicianCredentialing and Peer Review Decisions, 73 TEMP. L. REv. 597, 610 (2000).

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problem is identified with an existing privilege.112 Inherentwith the peer review process and negligent credentialing isthe problem that most states, including Indiana, provideimmunity to peer review committees in disclosinginformation.113 Indiana Code Section 34-30-15-1 provides:"(a) All proceedings of a peer review committee areconfidential. (b) All communications to a peer reviewcommittee shall be privileged communications."114

Some defendant hospitals will argue that immunityprovided for in peer review statutes precludes negligentcredentialing as a cause of action. Indeed, invoking the peerreview privilege in a negligent credentialing claim could bea crucial move for defendant hospitals since it would protectany documents the peer review committee used .in thecredentialing process, thus frustrating the efforts of theplaintiff to obtain evidence through discovery methods.115 Ahospital can adopt a medical staff bylaw specification thatdefines "peer review" or "peer review committee" in anextensive way that is still consistent with the language ofthe state's peer review statute in an effort to protect evenmore information under peer review confidentialityprovisions.116

Most hospitals have their credentialing process outlinedin their bylaws and policies. Bylaw, policies, procedures,and guidelines are all discoverable since they are availablethrough original sources and are not protected by any peerreview privilege.117 Thus, if a hospital follows its ownpolicies and bylaws, and they are in accordance withcredentialing and peer review statutes, the hospital shouldnot be found to be negligent in the credentialing process. Byblocking the discoverability of the actual peer review

112 Id.

1 Id. at 611.114 IND. CODE § 34-30-15-1 (2012).11s Katten Muchin Rosenman, LLP, Current Issues in Negligent

Credentialing Part II, JDSUPRA (June 14, 2011), http://www.jdsupra.com/post/documentViewer.aspx?fid=9c44f04d-7376-4d74-91fd-da9c9288bll4 (last visitedSept. 27, 2012).

116 Id.117 Charles David Creech, The Medical Review Committee Privilege: A

Jurisdictional Survey, 67 N.C. L. REV. 179, 229 (1988).

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process that was used in the credentialing, the hospital hasthe upper hand on the claim. Since every state has its ownpeer review statute, it is important to examine howdifferent states have interpreted the role of these statutes innegligent credentialing claims.

1. Minnesota's Interpretation of the Peer ReviewPrivilege in Neghgent Credentialing Claims.

Larson v. Wasemiller is a landmark case, in which theMinnesota Supreme Court recognized, for the first time,that the tort of negligent credentialing of a physician by ahospital exists under the common law and is reinforced, notprecluded, by Minnesota's peer review statute." 8 Larson isimportant to review since it reasons through severalportions of Minnesota's peer review statute, and the statuteis very similar to the Indiana statute on peer review.119

The court in Larson looked at several issues with theMinnesota Peer Review Statute as it pertained to negligentcredentialing. First, the court looked to whether the statutecreated a cause of action for negligent credentialing. Thestatute provides:

No review organization and no person shall beliable for damages . .. when the person acts inthe reasonable belief that the action orrecommendation is warranted by facts knownto the person or the review organization afterreasonable efforts to ascertain the facts uponwhich the review organization's action orrecommendation is made.120

The court found that the "language of this statuteimplies that a review organization shall be liable forgranting privileges where the grant is not reasonably basedon the facts that were known or that could have been known

118 Larson v. Wasemiller, 738 N.W.2d 300 (Minn. 2007)."9 Id. at 303-04 (discussing Minnesota's peer review statute).120 MINN. STAT. § 145.63 (2012).

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by reasonable efforts."121 The court declared that while thestatute did not affirmatively declare a negligentcredentialing cause of action, it indicated the existence of acause of action.122

Next, the court looked to whether negligentcredentialing as a cause of action would conflict with thesection of Minnesota's peer review statute that provided aprovision for confidentiality.12 3 The confidentiality provisionstates, in part:

[D]ata and information acquired by a revieworganization, in the exercise of its duties andfunctions . . . shall not be subject to subpoenaor discovery . .. The proceedings and records ofa review organization shall not be subject todiscovery or introduction into evidence in anycivil action against a professional arising out ofthe matter or matters which are the subject ofconsideration by the review organization.12 4

The defendant hospital argued that the statuteprohibited it from disclosing information the credentialingcommittee relied on in making its decision.125 Therefore, thestatute precluded a claim of negligent credentialing sincethe issue in negligent credentialing claims is whether thehospital was negligent in credentialing the physician on thebasis of what he actually knew at the time of the decision.126

The court responded that this interpretation was too narrowsince negligence is decided on "what was actually known orwhat should have been known at the time of thecredentialing decision."127

121 Larson, 738 N.W.2d at 304.122 id123 Id. at 309-10.124 MINN. STAT. § 145.64 (2012).125 Larson, 738 N.W.2d at 309.126 Id.127 Id. at 310. See also Diaz v. Feil, 881 P.2d 745, 750 (N.M. Ct. App. 1994)

(should have known); Corleto v. Shore Mem'l Hosp., 350 A.2d 534, 538 (N.J.Super. Ct. App. Div. 1975) (had reason to know); and Albain v. Flower Hosp., 553N.E.2d 1038, 1046 (Ohio 1990) (had reason to know).

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There is a provision of the statute indicating thatinformation available from the original source is notimmune from discovery or use in civil actions. 128 The courtdetermined that while the statute prevents hospitals fromdisclosing specific information used by the credentialingcommittee, it does not prevent hospitals from introducingthe same information, so long as it could be obtained fromthe original sources. 129 The court acknowledged that thisdoes, in fact, further burden the plaintiff since the plaintiffhas no way of discovering what exact information was usedby the hospital in the credentialing process.130 However, itdoes provide the plaintiff with the cause of action and achance to demonstrate what the hospital should haveknown at the time of the credentialing process.

The court then looked to whether the immunity from theliability portion of the Minnesota peer review statuteprecluded negligent credentialing claims. The courtreasoned that while the statute limited liability of hospitalsand credentialing committees, there was no indication ofintent to immunize hospitals from liability or to nullify acommon law claim for negligent credentialing.131 The courtfurther noted that "[ilf the legislature had intended toforeclose the possibility of a cause of action for negligentcredentialing, it would not have addressed the standard ofcare applicable to such an action."132

Larson reconciled the disparities that can exist betweenpeer review statutes and negligent credentialing claims.However, one result of this decision is that "[alttorneys andtrial court judges must walk a fine line between allowingthe case to proceed within the parameters established bythe Minnesota Supreme Court while maintaining the strictconfidentiality established by the Minnesota Legislature."'3 3

While this was a Minnesota case, the ramifications of the

128 MINN. STAT. § 145.63 (2012).129 Larson, 738 N.W.2d at 310.130 id131 Id. at 311.132 id.133 Mark R. Whitmore, A Survivor's Guide to Larson v. Wasemiller: An Aid to

Eliminating Reversible Error in Managing Negligent Credentialing Claims UnderMinnesota Law, 1 WM. MITCHELL J.L. & PRAC. 2 (2008).

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decision could reach to other jurisdictions since every statehas similar peer review statutes. Since negligentcredentialing as a cause of action is still being developed insome areas, courts may look to this decision to develop theirareas of common law. This decision is important for Indianato adopt since the statutes at issue in the case are similar toIndiana's statutes. The courts need to recognize thepotential issues presented through the peer review statutesand provide guidance in how these statutes will be followedin case determinations.

2. Texas's Interpretation of the Peer Review Privilege inNegligent Credentialing Claims

Another example of peer review protection in negligentcredentialing is found in the Texas Medical MalpracticeAct. 134 Through the Texas Medical Malpractice Act, healthcare providers are given immunity from determinationsmade in the course of peer review, so long as those decisionswere made without malice. 135

Further complicating the process of proving negligentcredentialing through the Texas Medical Malpractice Act'simmunity provision of peer review committees is that theinitial credentialing information is not discoverable.136 Thecourt in St. Luke's Episcopal Hospital v. Agbor determinedthat malice, within the context of negligent credentialing,involved a showing not that the hospital acted with malicetoward the patient but that it acted with malice, ingeneral.137 In determining what behavior constitutedmalice, the court looked to the Civil Practices and RemediesCode and held that to support a negligent credentialingclaim, a showing of malice requires demonstrating that:

134 TEX. OCC. CODE ANN. § 160.010 (West 2012).3 Id.

136 See Brownwood Reg'1 Hosp. v. Eleventh Cir. Ct. App., 927 S.W.2d 24(Tex. 1996); Irving Health Care Sys. v. Brooks, 927 S.W.2d 12 (Tex. 1996).

13n See St. Luke's Episcopal Hosp. v. Agbor, 952 S.W.2d 503, 506 (Tex.1997).

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(A) a specific intent by the defendant tocause substantial injury to the claimant; or

(B) an act or omission:(i) which when viewed objectively from the

standpoint of the actor at the time of itsoccurrence involves an extreme degree of risk,considering the probability and magnitude ofthe potential harm to others; and

(ii) of which the actor has actual, subjectiveawareness of the risk involved, butnevertheless proceeds with consciousindifference to the rights, safety, or welfare ofothers. 138

In 2005, The Texas Supreme Court revisited negligentcredentialing through Romero v. KPH Consolidation, Inc. 39

The court stated that since peer review communications andproceedings were generally confidential, "a plaintiff mustprove that a hospital acted maliciously without access toevidence of what happened, or did not happen, in thecredentialing process." 140 In this case, the plaintiffunderwent an elective back surgery during which he lost asignificant amount of blood before Dr. Baker, the treatingsurgeon, or anyone else noticed, and "in the 45 minutes ittook to prepare a transfusion, he lost almost all of the bloodin his body."141 As a result of the blood loss, the plaintiffwent into cardiac arrest and suffered severe, permanentbrain damage, leaving him "profoundly disabled and unableto care for himself."142

The plaintiff brought a claim for negligent credentialingof Dr. Baker. Despite not having access to the peer reviewcommittee records involved in the credentialing process, theplaintiff presented evidence that at the time ofcredentialing, the hospital had access to informationinvolving Dr. Baker's involvement in ten malpractice

11 Id. at 507.139 Romero v. Consol., Inc., 166 S.W.3d 212 (Tex. 2005).140 Id. at 215.141 Id. at 218.142 id

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actions from 1988 to 1993, including one action foroperating on the wrong hip of a patient.143 The plaintiff alsopresented evidence that the peer review committee hadinformation pertaining to Dr. Baker's prescription drugabuse.144 In light of this evidence, the Texas Supreme Courtaccepted the court of appeals' assumption that the plaintiffestablished an objective showing of malice, as required bythe statute, since "a physician engaged in drug abusepresents an extreme risk to patients."145 The SupremeCourt also accepted the Court of Appeals' assumption thatthe plaintiff established the first prong in the subjectivecomponent of malice by showing that the hospital "hadactual, subjective awareness of the risk posed by Baker'sdrug abuse, at least at one point in time."146

However, despite all of this, the court concluded that ashowing of malice as an element of a negligent credentialingclaim required a higher burden of proof at the trial level anda higher standard of review at the appellate level.147 Attrial, the plaintiff must prove malice by clear andconvincing evidence, and on appeal the Court mustdetermine based on the evidence at trial that a reasonabletrier of fact could have formed a firm belief or convictionthat the reviewing entity acted with malice in credentialingthe doctor.148 The Texas Supreme Court may have decidedthe case differently if the plaintiff had offered testimonythat Columbia would have suspended Dr. Baker if it knewof the drug problems, the lawsuits, and the suspension.149

The Texas standard of proof in a negligent credentialingclaim, in light of its peer review privilege, is almostimpossible to meet. As indicated above, despite alarmingevidence presented by the plaintiff in Romero, the burden ofproof of "firm belief or conviction" is almost impossible to

143 Id. at 216-17.44 Id. at 216-17.

145 Id. at 221.146 Id.147 Id. at 220-21.148 Id. at 221.149 Casey L. Moore, Note, "In the Wake of Rose" and "Life After Romero

The Viability of a Cause of Action for Negligent Credentialing in Texas in Light ofRecent Texas Supreme Court Decisions, 58 BAYLOR L. REV. 549, 576 (2006).

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prove without access to the peer review committees' records.By adopting this type of standard in relation to protectingthe peer review committee and their actions, Indiana courtswould essentially negate the option of negligentcredentialing as a cause of action. While the integrity of thepeer review committee needs to be afforded protection, thatprotection must be weighed with the safety of patients andallowing patients an appropriate remedy when that safetyhas been compromised.

3. Iowa ' Interpretation of the Peer Review Privilege inNegligent Credentialing Claims

In December of 2011, the Iowa Supreme Court ruled on anegligent credentialing case involving the peer reviewprivilege relating to a doctor's credentialing file.150 Theplaintiff filed a medical malpractice suit, which included anegligent credentialing claim against the hospital, after hesuffered complications from two back surgeries performedin 2000.151 Specifically, the plaintiff alleged that thehospital failed to properly investigate the doctor'squalifications, negligently extended surgical privileges tothe doctor, and allowed the doctor to continue to performsurgeries after the hospital had reason to know thatquestions had been raised concerning the surgeries andprocedures that the doctor was performing.152 During thecourse of the case, the plaintiff served a request forproduction for the complete copy of the doctor's credentialfile.153 The hospital objected to the request since thecredential file was subject to the peer review privilege laidout in Iowa Code § 147.135.154 Despite this, the trial judgeentered an Order Compelling Discovery and the hospitalproduced almost the entire contents of the doctor'scredentialing file.155 The case went to trial and the jury

'so Cawthorn v. Catholic Health Initiatives Iowa Corp., 806 N.W. 2d 282(Iowa 2011).

11 Id. at 283.152 id.153 id154 Id. at 284.1ss Id.

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found in favor of the plaintiff, and both parties appealed ondifferent grounds.15 6 Based on these appeals the SupremeCourt remanded the case for a new trial.157

After the case was remanded but prior to the new trialtaking place, the Iowa Court of Appeals handed down thedecision in Day v. Finley Hospital, where the court held thatthe contents of a hospital's credentialing file fell within thescope of the Iowa Code § 147.135 peer review protection tothe extent that those documents were in the custody of apeer review committee.158 At that time, the defendanthospital filed for summary judgment arguing that the newruling barred production of the credentialing file andwithout these documents the plaintiff did not havesufficient evidence to prove a prima facie case.159 The trialcourt ruled that the defendant was not barred fromasserting the peer review privilege, even though thedocuments had been submitted previously, since the newruling was an "intervening change or clarification of thelaw."160 The case was appealed to the Iowa Supreme Court.

The Iowa Supreme Court looked to the peer reviewstatute and determined that the statute set forth threerestrictions: (1) peer review records are "privileged andconfidential"; (2) peer review records are "not subject todiscovery, subpoena, or other means of legal compulsion";and (3) peer review records are "not admissible inevidence."16 The court then held that this privilege couldnot be voluntarily waived by a hospital, and as a result, thehospital was able to claim the privilege even though it hadpreviously submitted the credentialing file.162

This case is important since the hospital was able toassert the peer review privilege after it had submitted thecredentialing file for review. It would seem that mosthospitals would be given adequate legal advice to bardiscovery of these documents in the first place, but this rule

156 id

157 Id. at 283.158 Day v. Finley Hosp., 769 N.W.2d 898, 902 (Iowa Ct. App. 2009).159 Cawthorn, 806 N.W. 2d at 285.10 Id. at 283.161 Id. at 289 (quoting Iowa Code § 147.135 (2009)).162 Id. at 291.

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could add an additional layer of protection against hospitalswho fail to assert the privilege. This ruling essentiallyfurther frustrates a plaintiffs attempts to accesscredentialing documents to establish a prima facie case fornegligent credentialing.

4. Missouri's Interpretation of the Peer Review Privilegein Negligent Credentialing Claims

In December of 2010, the Missouri Court of Appealsruled on State ex rel. Kirksville Missouri HospitalCompany, LLC v. Jaynes, a negligent credentialing case onwhether the peer review privilege protected from discoverydocuments relating to credentialing of a surgeon.163 In thiscase a doctor, Dr. John Bailey, was given temporaryprivileges to practice back surgery at the defendant hospitalin mid-1997. 164 However, at the time the privileges weregranted, there was a question as to whether the doctor hadactually completed training with the Columbia SpineFellowship.16 5 The hospital's director of surgery gave arecommendation to the hospitals executive committee whichadvised having an independent, fellowship trained, spinesurgeon review the doctor's first twenty-five spinalinstrumentation cases.16 6 Subsequent to approval of thisrecommendation, Dr. John Flood, the independent,fellowship trained spine surgeon chosen by the executivecommittee, prepared a written report on his review of thesurgeries and submitted this report to the hospital. 6 7

In 2004, the plaintiff filed a lawsuit against Dr. Baileyalleging negligent treatment and performance of surgery,along with a claim that the hospital was negligent ingranting Dr. Bailey privileges. 168 The plaintiff learned of thereport by Dr. Flood and obtained Dr. Flood's deposition as a

163 State ex rel. Kirksville Missouri Hosp. Co. LLC v. Jaynes, 328 S.W.3d418 (Mo. Ct. App. 2010).

'6 Id. at 420.165 Id.166 Id.167 Id.168 Id.

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result. 169 The hospital filed objections claiming that Dr.Flood's deposition was barred by the peer review privilegein Missouri's Peer Review Committee statute. 170 In responseto the objections, the plaintiff filed a motion for enforcementof discovery, which was granted in part by the trial court.171

Prior to the second deposition, the plaintiff filed a motionfor enforcement of discovery or in the alternative, an in-camera review, pertaining to documents that were allegedto be part of the report Dr. Flood had prepared for thehospital and had been identified on a privileged logprepared by the defendant hospital.172 A Special DiscoveryMaster examined the documents and decided that theapplicable peer review statute offered no protection to thedocuments in question.173 The court of appeals ordered thatthe documents be produced in order to be reviewed onappeal.

The court of appeals first reviewed the plain language ofthe statute which stated that an exception to the privilegewas "information otherwise discoverable or admissible fromoriginal sources will not be immune from discovery merelybecause it was presented during proceedings before a peerreview committee." 174 The court also reviewed the secondexception which included "any person appearing before sucha committee, cannot be prevented from testifying aboutmatters within their personal knowledge, though theycannot testify about the proceedings of a committee,including about any testimony they may have provided to acommittee."175

Upon review of the materials submitted by both parties,the court found that a portion of Dr. Flood's original report,which included his concerns about seven of the twentypatient charts which he had reviewed, was already in theplaintiffs possession and that the motion to enforce onlyincluded portions of the report that plaintiff did not already

169 id170 id

172 Id at 420-21.173 id

174 Id at 422 (citing Mo. ANN. STAT. § 537.035.4 (West 2012)).175 id

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have in possession.176 The defendant hospital failed to notethis in its petition for writ of prohibition; and the court thendetermined that the hospital was "not entitled to apermanent writ of prohibition to protect itself from analleged harm that has already occurred."1 77

In determining whether the rest of the report wasprotected by the privilege, the court looked to a previouscase stating that "[credentials committee findings anddeliberations are not exempt from discovery, therefore,unless they specifically concern the health care provided apatient."178 The court then held that the report was not a"peer review committee report", as it did "not fall into theplain and ordinary meaning" of the categories listed in thestatute. 179 Instead, the report reflected "the knowledgeand/or opinions held by an outside source," since Dr. Floodwas a private, outside physician hired by the executivecommittee of the hospital to review Dr. Bailey's files.180

The court reasoned that since Dr. Flood's activities werenot sufficient for him to be characterized as a "peer reviewcommittee" as required by Missouri Statute § 537.035, thenDr. Flood's report could not be characterized as a "peerreview com-mittee report."181 Additionally, the court heldthat the report was not protected by the peer reviewprivilege because Dr. Bailey had already been grantedprivileges and the purpose of the report was to address theproblem that he was granted privileges despite evidencethat he had not completed a fellowship program in spinesurgery. 182 Further, the letter to Dr. Flood indicated thatthe hospital wanted to use the report "to defend itself inlater lawsuits."183 Due to this evidence, the court held thatthe hospital could not go back on its original stated purposeof the report and claim it was obtained for credentialing

176 Id. at 423.17 Id. at 424.178 id.

179 Id. at 425.1so Id.181 Id.182 Id. at 426.183 id.

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matters subsequent to seeing the contents of the report.184

The court further held that Dr. Flood was never inattendance of a peer review committee proceeding; thereforethe information in his report could not be protected underthe statute.185 Further, the court held that the minutes fromthe actual Executive Committee Peer Review Meetingsdiscussing the report were not protected because they didnot contain information concerning the health care providedto a patient as required by the statute. 8 6

The Missouri court's decision to allow consideration ofinformation that the plaintiff already had access to protectsthe rights of patients and keeps hospitals accountable fornegligently credentialing physicians. The Missouri caseprotects peer review committee information as it was meantto be protected, by providing immunity for the committeemembers and allowing open discussion among physicians'peers in determining disciplinary outcomes without worry offuture litigation brought by the individual physician. 87 .However, it also provides an avenue for plaintiffs in anegligent credentialing claim to obtain information that isessential in establishing a prima facie case of negligentcredentialing. This case also sets out common law for how tointerpret a third party expert opinion that a hospital mightuse in making credentialing or disciplinary decisions.

In interpreting the Indiana Peer Review PrivilegeStatute,188 Indiana courts should adopt the Missouriinterpretation of the privilege and permit discovery of anyinformation prepared by an outsider for review by thecommittee. This would allow for protection of the peerreview committee, as intended by the statute, but stillafford plaintiffs the opportunity to obtain and useinformation they may already have or information that isreadily available, and which could be used to establish aprima facie case. Hospitals would still be protected because

184 id.1 Id at 427-28.186 id187 Alissa Marie Bassler, Federal Law Should Keep Pace with States and

Recognize A Medical Peer Review Privilege, 39 IDAHO L. REV. 689, 690 (2003).188 IND. CODE § 34-30-15-1 (2012).

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they could hire an inside expert to perform reports orpresent the information to the peer review committee.Under this approach, the statute would also protect theexpert.

D. Statutorylmmunity

One recent trend, within the last two years, in negligentcredentialing is for state legislatures to provide statutoryimmunity for hospitals against claims of negligentcredentialing. In 2011, at least two states, Ohio and Utah,passed legislation that provides hospitals with immunityagainst negligent credentialing claims. Each state wentabout the immunity provision in entirely different ways.

1. Utah's Negligent Credentialing Statute

In 2010, the Utah Supreme Court decided a case,Archuleta v. St. Mark's Hospital, which ruled that negligentcredentialing was a valid cause of action. 189 In this case, thedefendant hospital argued that Utah Code Ann. § 58-13-5(7)barred a cause of action for negligent credentialing.190 Thelanguage of Utah Code Ann. § 58-13-5(7) states:

An individual who is a member of a hospitaladministration, board, committee, department,medical staff, or professional organization ofhealth care providers is, and any hospital,other health care entity, or professionalorganization conducting or sponsoring thereview, immune from liability arising fromparticipation in a review of a health careprovider's professional ethics, medicalcompetence, moral turpitude, or substanceabuse.' 9 '

The Supreme Court of Utah held that the plain languageof the statute is clear and that "read as a whole and in

189 id.

190 Id. at 1046.191 UTAH CODE ANN. § 58-13-5(7) (West 2012).

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harmony with related provisions and chapters, it shows thatthe legislature did not intend to immunize hospitals fromnegligent credentialing claims brought by patients."192 Thecourt further reasoned that "the immunity contemplatedunder the statue operates between a doctor whosecredentials are under review and the suppliers ofinformation and decision makers; it does not contemplateimmunity between a patient and a hospital."193

Senate Bill 150 of the 2011 Utah Legislative GeneralSession was then proposed as an attempt to overrule theUtah Supreme Court decision and to provide hospitals withblanket immunity from negligent credentialing claims, nomatter the specific circumstances to the case.194 Utahpassed Utah Code Ann. 1953 § 78B-3-425 in 2011, whichprovides that "[ilt is the policy of this state that the questionof negligent credentialing, as applied to health careproviders in malpractice suits, is not recognized as a causeof action."19

2. Ohio's Negligent Gredentialing Statute

Ohio passed Ohio Rev. Code Ann. § 2305.251 in 2011.196The Ohio statute is much more expansive than the versionpassed by Utah. Ohio Rev. Code Ann. § 2305.251 expandsimmunity for the peer review privilege without providingfull blanket immunity against negligent credentialing.Section (B)(1) of the statute provides that a hospital is to bepresumed to not be negligent in the credentialing of anindividual who has, or has applied for, staff membership orprofessional privileges at the hospital, if the hospital provesby a preponderance of the evidence that, at the time of thealleged negligent credentialing of the individual, thehospital, health insuring corporation, or sickness andaccident insurer was accredited by one of the following: thejoint commission on accreditation of healthcare

192 Archuleta, 238 P.3d at 1046.193 Id. at 1047.194 Negligent Credentialing, S.B. 150, Gen. Sess. (UT 2011).195 UTAH CODE ANN. § 78B-3-425 (West 2012).196 OHIO REV. CODE ANN. § 2305.251 (West 2012).

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organizations; the American osteopathic association; thenational committee for quality assurance; or the utilizationreview accreditation commission.197

Section (B)(2) of the statute provides that thepresumption that the hospital is not negligent incredentialing can only be rebutted by a preponderance ofthe evidence in any of the four following areas:

(a) The credentialing and reviewrequirements of the accrediting organizationdid not apply to the hospital . . . or the type ofprofessional care that is the basis of the claimagainst the hospital.

(b) The hospital .. . failed to comply with allmaterial credentialing and reviewrequirements of the accrediting organizationthat applied to the individual.

(c) The hospital . . . through its medicalstaff executive committee or its governing bodyand sufficiently in advance to take appropriateaction, knew that a previously competentindividual had developed a pattern ofincompetence or otherwise inappropriate

'behavior, either of which indicated that theindividual's staff membership, professionalprivileges, or participation as a provider shouldhave been limited or terminated prior to theindividual's provision of professional care tothe plaintiff.

(d) The hospital . . . through its medicalstaff executive committee or its governing bodyand sufficiently in advance to take appropriateaction, knew that a previously competentindividual would provide fraudulent medicaltreatment but failed to limit or terminate theindividual's staff membership, professionalprivileges, or participation as a provider priorto the individual's provision of professional

197 id.

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care to the plaintiff. 198

The Ohio statute is effective in putting hospitals onnotice because it gives hospitals clear guidance as to whatactions they can take to protect themselves from negligentcredentialing claims, but also preserves the right of anindividual plaintiff to recover damages when there has beena clear negligence issue committed on the part of thehospital. Adopting a statute similar to the Utah statutewould deprive individuals, who have been harmed, fromcollecting damages when the hospital has been negligent inits credentialing process. It would also protect the negligentbehavior of hospitals and while failing to provide anyincentive for hospitals to adopt thorough credentialingprocess. Instead, the Utah statute leaves the patientresponsible for verifying the competency of a medicalprofessional.19 9

Adopting a statute similar to the Ohio statute would bebeneficial for Indiana. A clear, detailed statute would givehospitals notice as to what exactly is required of them in thecredentialing process. It would also solve the issuepresented by the court decision in Beswick which left manyquestions for defendant hospitals in how to protectthemselves against negligent credentialing claims. Further,a statute similar to the Ohio statute would preserve theright of harmed individuals to collect damages for injuriesthat could have been avoided if not for the negligentbehavior of the hospital.

IV. NEGLIGENT CREDENTIALING AND THE AFFORDABLEHEALTH CARE ACT

On July 1, 2011, the Value-Based Purchasing Act 20 0

went into effect. The Value Based Purchasing Act is an

198 id

'9 Utah Senate Bill 150 Threatens Negligent Credentialing as a Valid Causeof Action; CREDENTIALING & PEER REV. LEGAL INSIDER, April 2011, at 4,available at http://user.xmission.com/~kirton/images/News-articles/credentialingwride.

200 42 C.F.R. § 480 (2012).

284 VOL. 10:1


attempt of health care reform to move health care toward aPay-For-Performance model. 201 Through this Act, theDepartment of Health and Human Services (HHS), collectsquality data from hospitals, compiles the data, and thenrewards hospitals for meeting certain performancemeasures in quality and efficiency. 202 This Act calls for somedisclosure of performance information. 203 One purpose ofdisclosing this information is that "reducing errors throughimproved medical practices and effectuating penaltiesagainst poorly performing physicians may benefit theoverall performance of the medical malpractice insurancesystem."204 Currently, states have primary authority toadminister medical licensing and to standardize medicalpractice. Unfortunately, this leaves the issue that each statehas its own method of tracking physicians and there is alack of uniformity among the states. 205 The PatientProtection and Affordable Care Act (PPACA) helps to unifythe reporting and regulating requirements among the statesand allows for better tracking and recording of adverseevents and physicians. 206

There are several ways that this requirement couldimpact negligent credentialing in Indiana claims. First,under the Value-Based Purchasing Act, the hospitals arerequired to disclose each physician's performance withpublic or private review organizations. 20 7 This data is thencompared to other providers' performance levels. 208 This

201 Charles Fiegl, Medicare Pay-for-Performance Plan Criticized Over EarlyLaunch, AMERICAN MEDICAL NEWS, September 19, 2011, http://www.ama-assn.org/amednews/2011/09/19/gvl 10919.htm.

202 Hospital Value-Based Purchasing Program, ICN 907664, Nov. 2011,available at http://www.cms.gov/ Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/Hospital VBPurchasingFactSheet_ICN907664.pdf.

203 Id.204 Bernadette Fernandez, Baird Webel, Vivian S. Chu, Medical Malpractice

Insurance and Health Reform, CONGRESSIONAL RESEARCH SERVICE, April 15,2010, at 4.

205 id.206 See Barry R. Furrow, Regulating Patient Safety: The Patient Protection

and A ordable Care Act, 159 U. PA. L. REV. 1727 (2011).2 42 C.F.R. § 480.208 id.

2013 285


public information could be used as direct evidence againsta hospital showing that it had knowledge that it should nothave credentialed or re-credentialed a particularphysician.209 As mentioned above, peer review privilegeprotects the hospital from having to disclose what exactinformation was used in the credentialing process. However,this rule would make performance information available tothe public making it easier for a plaintiff to obtain thisinformation during discovery and to build a claim on whatthe hospital shouldhave known.

Second, the rule requires external reporting of anadverse event.210 It has been proposed that "externalreporting of an adverse event that is separately the focus ofa malpractice or other claim could result in the waiver ofevidentiary privilege against discovery of thisinformation."211 This could significantly affect hospitals innegligent credentialing claims since Indiana requires thatthere be an underlying medical malpractice claim tosubstantiate a negligent credentialing claim. The waiver ofevidentiary privilege could give the plaintiff in these claimsan added advantage. Unfortunately, the Act is so new thatit is yet to be seen how the courts will interpret themandatory reporting requirements in lieu of evidentiaryand peer review privilege. It also remains to be seen as towhat extent the mandatory reporting information will bemade available for use in litigation and adjudication ofmedical malpractice claims.

V. CONCLUSION

Since 1965, negligent credentialing as a valid cause ofaction in medical malpractice claims has been slow to beadopted throughout state courts. Although Indiana adoptednegligent credentialing as a valid cause of action in 2000, it

209 Stacy L. Cook, Will Pay for Performance Be Worth the Price to MedicalProviders? A Look at Pay for Performance and Its Legal Implications forProviders, 16 ANNALS HEALTH L. 163, 180 (2007).

2 0 42 C.F.R. § 480.211 Anne B. Claiborne, Julia R. Hesse & Daniel T. Roble, Legal Impediments

to Implementing Value-Based Purchasing in Healthcare, 35 AM. J.L. & MED. 442,468 (2009).

286 VOL. 10:1


has been slow to rule on decisions and the Indiana SupremeCourt has yet to hear a case involving this issue on appeal.The lack of rulings and case law on this topic leaves bothdefendant hospitals and plaintiffs unsure of how to proceedin these claims and what exactly is required to bring thistype of claim. Indeed, the more recent cases have tended toleave more questions than answers regarding elements andevidence in these claims.

As more cases are decided on the topic, the Indianacourts should be aware of where other jurisdictions stand onthis cause of action since they have historically looked toneighboring jurisdictions for reference in newer areas oflaw. The issues of bifurcating claims between physiciansand hospitals should be addressed to protect the integrity ofclaims and efficiency of the court process. Also, the concernof how the peer review committee protections affectdiscovery in these claims will need to be clearly laid out infuture decisions. The courts and counsel need to becognizant of recent legislation on negligent credentialing inother states and how it could be implemented in the State ofIndiana either to override or to protect court decisions.Lastly, the recent enactment of the Patient Protection andAffordable Care Act could have far reaching implications fornegligent credentialing actions and the discovery process inthese claims. As the Act is put into practice, it remains to beseen how the courts will interpret the reportingrequirements and their use in medical malpracticeadjudication. However the courts and legislature decide torule out these concerns, the primary issue of balancingpatient safety and recourse with hospital and physicianresponsibility needs to be at the forefront of the decision-making process.

2013 287

INDIANA HEALTH LAW REVIEW2012-2013

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Volume 10


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KENNETH M. STROUD, Professor ofLaw Emeritus. A.B., J.D., Indiana University-Bloomington.JAMES W. TORKE, Carl M Gray Professor ofLaw Emeritus. B.S., J.D., University of Wisconsin.JAMES PATRICK WHITE, Professor ofLaw Emeritus. A.B., University of Iowa; J.D., LL.M., George Washington

University Law School.LAWRENCE P. WILKINS, William R. Neale Professor ofLaw Emeritus. B.A., The Ohio State University; J.D., Capitol

University Law School; LL.M., University of Texas School of Law.MARY THERESE WOLF, Clinical Professor ofLaw Emerita. B.A., Saint Xavier College; J.D., University of Iowa

College of Law.

Ruth Lilly Law Library Faculty

JUDITH FORD ANSPACH, Professor ofLaw and Director, Ruth Lilly Law Library. B.S., M.L.S., Kent State University;J.D., Mississippi College School of Law.

SUSAN DAVID DEMAINE, Research and Instruction Librarian. B.A., Pennsylvania State University; M.S.L.S.,University of Kentucky; J.D., University of Kentucky.

DEBRA DENSLAW, Research and Instruction Librarian. B.A., Franklin College; M.S., University of Illinois, Urbana-Champaign; J.D., Valparaiso School of Law.

RICHARD HUMPHREY, Reference Librarian. A.A., Brewton-Parker Junior College; B.A., Georgia Southwestern College;M.L.S., University of Kentucky.

WENDELL E. JOHNTING, Cataloging and Government Documents Librarian. A.B., Taylor University; M.L.S., IndianaUniversity.

BENJAMIN J. KEELE, Research and Instruction Librarian. B.A., University of Nebraska-Lincoln; J.D., Indiana

University Maurer School of Law; M.L.S., Indiana University School of Library & Information Science.CATHERINE LEMMER, Head ofInformation Services. B.A., Lawrence University; J.D., University of Wisconsin; M.S.,

University of Illinois.CHRIS E. LONG, Cataloging Librarian. B.A., Indiana University; M.A., Indiana University; M.L.S., Indiana University.MIRIAM A. MURPHY, Associate Director. B.A., Purdue University; J.D., M.L.S., Indiana University-Bloomington.