August 2007

Professional Liability Bulletin

The Professional Liability Bulletin is published by the Professional Liability Practice Group at Arthur, Chapman, Kettering, Smetak & Pikala, P.A. to keep our clients informed of the ever-changing complexities of Minnesota law.  In this issue:

• Negligent Credentialing: The Minnesota Supreme Court's Recognition of the Common Law Claim of Negligent Credentialing Against Hospitals
• Peer Review Immunity: The Scope of Peer Review Immunity as Defined by the Wisconsin Court of Appeals
• About the Author

Negligent Credentialing:
The Minnesota Supreme Court's Recognition of the
Common Law Claim of Negligent Credentialing Against Hospitals

The Court initially notes that the granting of privileges normally does not create an employment relationship with a hospital, but does allow the credentialed physician to use to hospital’s facilities and also imposes certain standards. The Court then addressed whether Minn. Stat. § 145.63, subd. 1 (the peer review statute) creates a cause of action for negligent credentialing. The relevant portion of the statute which the Court addressed reads:

The Court concluded that the statute did not affirmatively create a cause of action for negligent credentialing, but did not preclude one on the basis of the common law. The Court then addressed whether a cause of action for negligent credentialing existed in the common law.

To establish whether a tort exists in common law, the Court addressed four issues: (1) whether the tort is inherent, or a natural extension of, a well established common law right; (2) whether the tort had been recognized in other states; (3) whether recognition of the cause of action would create tension with other applicable laws; and (4) whether any such tension was outweighed by the importance of the recognition of the claim to injured persons. The Court first addressed the issue of whether negligent credentialing was a natural extension of an existing common law right. The Court found that Minnesota already recognized that a hospital had a duty directly to a patient to protect them from harm from third persons and Minnesota also recognized a claim of negligent hiring. The Court also noted that under the Restatement of Torts, a cause of action could exist for the tort of the negligent selection of an independent contractor. Based on these three factors, the Court concluded that negligent credentialing was a natural extension of well established common law rights.

The Court then addressed the remaining factors finding that at least 27 other states recognized a cause of action for negligent credentialing, although the claims are based on widely varied underlying tort theories, including direct and corporate negligence, a duty of care for patient safety, as well as negligent hiring and negligent selection of independent contractors. The Court further found that by allowing a common law claim of negligent credentialing, the claim was not in conflict with existing laws. While it was argued that the confidentiality provisions surrounding the peer review statute essentially eliminate any way a plaintiff could prove a claim of negligent credentialing, the Court determined that while a cause of action for negligent credentialing could be difficult as the peer review records could not be disclosed, it was not impossible. Instead, the Court suggested that the claim could be proven by original source documents or matters which were within a person’s own knowledge, both of which are exceptions to the peer review confidentiality dictates. The Court further noted that the common law claim of negligent credentialing did not involve any sort of "different" standard of care, rather the ordinary standard of negligence applied. Finally the Court determined that there was no policy reason which would preclude allowing a claim of negligent credentialing.

The holding of Wasemiller is a striking change from the longstanding policy in Minnesota that a hospital is not liable for the actions of its independent contractor physician. By creating a new common law cause of action for negligent credentialing, the Minnesota Supreme Court has now recognized that a hospital can be found liable for negligence if it grants credentials and privileges to a physician who later commits malpractice. This new cause of action will likely add to the already complex nature of a medical malpractice claim and will no doubt bring rise to new litigation regarding the scope of the confidentiality and immunity provisions of the peer review statute. Moreover, because a physician must first be proven to be negligent before a claim of negligent credentialing can be brought, the possibility of a bifurcated trial is very likely when a claim of negligent credentialing is brought.

¹The Court of Appeals also addressed a second certified question and held that the plain language of Minn. Stat. § 145.63-.64 does not grant immunity to a hospital or other review organization for a claim of negligent credentialing, but did limit the liability to actions or recommendations not made in the reasonable belief that it was warranted after reasonable efforts were made to ascertain the facts on which the recommendation was made. Neither party appealed that ruling.

Peer Review Immunity:
The Scope of Peer Review Immunity as
Defined by the Wisconsin Court of Appeals

The Wisconsin Court of Appeals has recently provided new guidance on the scope of immunity provided to members of a peer review group under Wis. Stat. § 146.37 (1g). In Rechsteiner v. Hazelden, et al., Appeal No. 2006AP1521 (approved for publication), the Court rejected a narrow construction of the statute which would have excluded immunity for outside experts and pre-emptive peer review, and found that a peer review group could have immunity even when it was not exclusively made up of hospital members reviewing past practices of physicians.

In Rechsteiner, Dr. Rechsteiner worked as a surgeon in Spooner, Wisconsin at the local hospital. Dr. Rechsteiner had previously been admonished for drinking while on call. In March 2003, while on call, Dr. Rechsteiner was snowmobiling with a friend. The friend was involved in an accident and was seriously injured. Officers deployed to the scene interviewed Dr. Rechsteiner and noted the odor of alcohol. Dr. Rechsteiner was tested and had a blood alcohol level of .06% approximately one hour after the accident. The officers then reported this finding to the hospital.

The hospital reviewed the report and instituted a formal review of Dr. Rechsteiner according to their bylaws. As an integral part of this review, the hospital paid for a five day assessment of Dr. Rechsteiner at Hazelden, a nationally recognized alcohol and drug treatment facility. During the assessment, and with Dr. Rechsteiner’s permission, the Hazelden staff contacted members of the hospital’s peer review group and others to discuss Dr. Rechsteiner and his behavior. It was during these conversations, Dr. Rechsteiner alleges that the defamatory remarks were made. These remarks were not made public until Dr. Rechsteiner filed his Complaint.

Dr. Rechsteiner was diagnosed as alcohol dependent and underwent a 28 day course of inpatient treatment. After he was released, two subsequent counselors advised him that he should have been diagnosed as abusing alcohol, rather than alcohol dependent. Hazelden subsequently re-diagnosed Dr. Rechsteiner as abusing alcohol. Dr. Rechsteiner then brought suit against the hospital and its peer review committee and Hazelden for defamation and against Hazelden for malpractice and misdiagnosis. The Defendants jointly moved for summary judgment on the grounds of statutory immunity under Wis. Stat. § 146.37 (1g). The circuit court granted Defendants’ motion. Dr. Rechsteiner then appealed to the Wisconsin Court of Appeals, which issued its opinion upholding summary judgment on May 22, 2007¹ . Order for publication was entered on June 27, 2007.

The decision by the Court of Appeals clearly outlined the parameters of the immunity granted to peer review groups under Wis. Stat. § 146.37(1g). Dr. Rechsteiner had urged the court to reject immunity to the peer review group by arguing that Hazelden, as an outside entity, was not a part of the review process and because Hazelden did not evaluate his services as a surgeon, but merely evaluated his chemical dependency issues. The Court rejected this interpretation. The Court, relying on Hofflander v. St. Catherine’s Hosp., 262 Wis. 2d 539, 664 N.W.2d 545 (Wis. 2003), noted that the purpose behind Wis. Stat. § 146.37 was to "encourage hospital to perform quality-control reviews aimed at improving, prospectively, their services." The Court examined the appropriateness of including Hazelden in the peer review process by examining the role Hazelden played in the overall peer review. The Court noted that Hazelden was an integral part of the peer review process. Once Dr. Rechsteiner was determined to be in need of "corrective action," he was obligated to go through the assessment process through a "recognized addictionology center", i.e. Hazelden. The Court noted "it is evident that treatment is not the end result of the review process but an integral, intermediate step, and a significant factor in whether the hospital will ultimately retain or discharge a doctor. As such, when a doctor is referred to an addictionology center under the hospital’s bylaws, that center is brought into the review process and will impact the outcome of the review." Accordingly, the Court extended the immunity provided to peer review groups to Hazelden and thus protected all communications between the hospital’s peer review group and the Hazelden treatment team.

The Court of Appeals decision in the Rechsteiner case is an important new direction for immunity given to peer review groups under Wis. Stat. § 146.37. Not only did the Court approve of affirmative actions by peer review groups to prevent problems and incidents before they occurred, but the Court also sanctioned the inclusion of outside experts into the peer review community when necessary. This ruling is particularly important in small and rural communities which may not have more than one surgeon on staff or may not have the expertise necessary to appropriately review a situation or a physician.

¹ Dr. Rechsteiner has petitioned the Wisconsin Supreme Court for review.

About the Author

Kirsten J. Hansen is an associate at the firm who focuses her practice in the areas of professional liability, construction, commercial litigation, general liability, and employment law.  Kit has been successful at resolving claims by way of arbitration and mediation.   She provides in-house presentations to clients to educate and guide them through the complex intricacies that make up Minnesota  law.  Kit serves as co-chair of the  firm's Professional Liability Practice Group.

Our Professional Liability Practice Group  has substantial professional liability experience litigating malpractice claims involving lawyers, accountants, appraisers, doctors, psychologists, teachers, architects, the clergy, insurance agents, real estate professionals, corporate officers and directors, and other professionals. Our Group members are also available to conduct seminars at your office to assist your team in evaluating and addressing any professional liability-related claims. We look forward to working with you in the near future.