Faculty Publication on the Role of Hospitals in Credentialing Doctors

Sallie Thieme Sanford, Candor after Kadlec: Why, Despite the Fifth Circuit’s Decision, Hospitals Should Anticipate an Expanded Obligation to Disclose Risky Physician Behavior, 1 Drexel L. Rev. 383 (2009).

As Professor Sanford explains, hospital references play a significant part in the process of approving doctors for hospital privileges. But what happens when these references include partial rather than full information?

In 2002, Kimberly Jones, a healthy thirty-one-year-old, had a routine operation at Kadlec Medical Center in Richland, Washington. During the surgery she suffered massive brain damage, leaving her in a vegetative state. Later, the anesthesiologist, Dr. Berry, admitted to having been drug-impaired during the surgery.

Jones’ family sued Berry and Kadlec for malpractice. Dr. Berry was not an employee of the hospital, but was credentialed to practice there. The trial court ruled that even though he was an independent contractor, he acted as an apparent agent of the hospital and thus Kadlec could be vicariously liable for his actions. Shortly thereafter, the parties settled: the doctor paying $1 million and Kadlec paying $7.5 million.

Kadlec and its insurer then endeavored to recoup their losses. In granting Dr. Berry hospital privileges, Kadlec had relied in part on two strong letters of recommendation from members of his former anesthesia practice group and a short letter from Lakeview Regional Medical Center, his prior hospital, both in Louisiana. The hospital’s letter stated merely that the doctor had been an active member of its staff with anesthesia privileges for the past four years. In reality, Berry had been terminated from the practice group because of concerns about his drug use, which in turn had meant that he could not exercise his hospital privileges.

The trial court held the two doctors liable for their misleading letters and also found Lakeview to be liable for its neutral letter because of the importance of proper credentialing to patient safety. In Kadlec Med. Ctr. v. Lakeview Anesthesia Assocs., 527 F.3d 412 (5th Cir. 2008), cert. denied 129 S. Ct. 631 (2008), the Fifth Circuit disagreed that there was reason to depart from normal employment law analyses as far as the hospital was concerned. It held that the hospital’s letter was not misleading and that Lakeview, under Louisiana law, had no duty to disclose negative information to Kadlec.

After reviewing in detail the facts of this case and the trial court and Fifth Circuit decisions, Professor Sanford looks at the history and present trends in hospital credentialing of physicians. She points out that hospitals are increasingly viewed as having a duty to their patients to monitor those practicing there, whether or not the doctors are hospital employees. She argues that there is a “patient-centered framework” in health law “that views the central purpose of health law as the improvement of patients’ lives, and assumes that automatic application of doctrines from other areas of law is not necessarily appropriate given certain essential features of medicine and treatment relationships.” Thus, she deduces that in the future hospitals will be required to provide more complete information for credentialing, despite the Kadlec decision. The article concludes with Sanford’s suggestions about how hospitals can balance a duty to provide expanded disclosure with fair physician review.