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HHS Must Close Loophole Allowing Health Care Providers to Evade Malpractice Payment Reporting

July 26, 2016

HHS Must Close Loophole Allowing Health Care Providers to Evade Malpractice Payment Reporting

Public Citizen Sues to Compel HHS to Act on a 2014 Citizen Petition to Close the Dangerous Loophole

WASHINGTON, D.C. – Federal agencies must act to ensure that health care providers are not allowed to evade medical malpractice reporting requirements, Public Citizen said in a lawsuit (PDF)filed today in the U.S. District Court for the District of Columbia.

At issue is the so-called “corporate shield loophole,” which allows physicians and other health care providers to avoid having medical malpractice payments that are made on their behalf reported to the National Practitioner Data Bank (NPDB). The loophole deprives hospitals and state licensing boards of vital information needed to protect patient health and safety.

Public Citizen’s complaint urges the court to compel the U.S. Department of Health and Human Services (HHS) and its component the U.S. Health Resources and Services Administration (HRSA) to act on a May 2014 citizen petition to close the loophole.

In that 2014 petition, Public Citizen requested that the agency amend the NPDB regulations to require that all reports of medical malpractice payments be submitted to the NPDB in the name of any health care practitioners on whose behalf the malpractice payment is made, whether or not the practitioners are named in the claim or action. In the more than two years since the petition was filed, the agency has neither granted nor denied the requested action.

“It is well past time for HHS to issue a rule slamming the door on this loophole, as it should have done when it first acknowledged the problem more than 15 years ago when the agency issued a proposed rule to close the loophole. The agency later withdrew the proposal, leaving the loophole open,” said Dr. Michael Carome, director of Public Citizen’s Health Research Group.

Current NPDB rules, which are not consistent with the federal statute that established the NPDB, create what is referred to as the “corporate shield loophole.” This loophole allows a practitioner to avoid being reported to the NPDB if a malpractice victim agrees to dismiss the practitioner from a lawsuit or claim, leaving a hospital or some other corporate entity as the sole defendant. Such dismissals often occur in response to a request from attorneys for a self-insured hospital or other corporate entity that employs the practitioner. The loophole is used to allow the practitioner who was alleged to have committed malpractice to avoid having a report of a malpractice payment made on his or her behalf submitted to the NPDB.

The NPDB is used by state licensing boards, hospitals and health maintenance organizations to conduct background checks to determine whether a doctor or other health care provider has been sanctioned for misconduct by a hospital, had his or her license to practice curtailed, or had malpractice payments made on his or her behalf. The goal of the NPDB is to protect patients from doctors and other health care providers who provide substandard or negligent care.

“The NPDB was created to ensure patient safety by providing a comprehensive, reliable information center concerning the malpractice payment and disciplinary history of physicians and other health care practitioners,” added Carome. “The corporate shield loophole makes the NPDB’s information less complete, less reliable and less useful.”