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Kadlec ruling overturned: Hospitals have no obligation to disclose information, but information disclosed must not mislead

Credentialing & Verification Update, June 4, 2008

A previous court ruling which held that a hospital had a duty to disclose to another facility evidence of a prior staff member’s impairment has been overturned. On May 8 The U.S. Court of Appeals for the Fifth Circuit ruled that a healthcare facility has no special relationship with another hospital to disclose information, says Michael R. Callahan, a lawyer in the healthcare department of Katten Muchin Rosenman LLP in Chicago. If a hospital chooses to respond to a questionnaire with neutral information that is acceptable, but it is not acceptable to disclose misleading information.

In 2001, Robert Berry, MD, an anesthesiologist at Lakeview Regional Medical Center in Covington, LA, was fired by his Lakeview Anesthesia Association (LAA) colleagues for working under the influence of prescription painkillers. Neither the medical center nor LAA reported his behavior to the National Practitioner Data Bank, the hospital board of trustees, or to the Louisiana Board of Medical Examiners. Berry then applied for a job at Kadlec Medical Center in Richland, WA, through a staffing agency.

The medical center provided neutral information about Berry’s employment to Kadlec, while LAA provided a positive review of Berry that was misleading and did not reveal his drug impairment.

In 2002, Berry caused serious harm to a patient while providing care under the influence of Demerol. Kadlec settled a lawsuit with the patient’s family for $8.5 million. Then, Kadlec brought a lawsuit which included claims for intentional and negligent misrepresentation against Lakeview Regional Medical Center and LAA. The jury found the medical center and LAA at fault, and awarded $8.2 million to Kadlec, an amount that was later reduced to $5.5 million.

Callahan says the recent ruling is important for hospitals. “Although the Fifth circuit held that there was no duty to disclose, clearly hospitals have to be truthful and objective if they decide to provide a response to another hospital as part of the appointment and reappointment process,” he says. “Misleading information will serve as a basis for a potential liability claim.”

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