Hiding Behind “Systems Failures”

The recent debacle at Cooley Dickenson Hospital in Northampton, which has involved the deaths of at least one mother and two babies, is a perfect example of how the excuse of a “systems failure” can provide legal cover for institutions that cut corners in staffing and other areas. The absence of meaningful responsibility for non-profit organizations in Massachusetts is a significant disincentive to those organizations, and an enormous impediment to those injured through “systems failures.”

The troubles at Cooley Dickinson have been widely chronicled in the Hampshire Gazette, which has done an admirable job of uncovering many of the circumstances surrounding the recent spate of deaths that have occurred in the maternity department of the community hospital.  The most recent article focused on a state investigation that criticized systems failures, including inadequate staffing, among obstetricians and obstetric nurses.  And even the hospital’s chief medical officer, Mark Novotny, was quoted as agreeing that the staffing levels were “less than optimal.”

One of the hidden factors that permits this type of systems failure–a situation that is potentially life-threatening to patients–is the Massachusetts law relating to the limited liability of non-profit organizations, a category that includes most hospitals.  M.G.L. c.231 s.85K limits the malpractice liability of non-profit hospitals to $100,000–an amount which is grossly inadequate to compensate for a serious injury or death.  The practical effect is two-fold: first, unlike hospitals in other states, which are financially responsible for the full amount of damage caused by “systems failures,” Massachusetts health care facilities do not have a direct financial incentive to avoid such dangerous situations.

And the second problem with this system is the patients, who are often collateral damage.  They may face a situation where the individual providers were doing the best they could with a poor or limited resources, or at least where their individual negligence pales in comparison with that of the “system” in which they were working.  In that situation, their ability to receive fair compensation for their injuries may be extremely limited or virtually non-existent.  Unless the patient can identify individuals responsible for the failures in care, the recovery will be limited to $100,000.

In fact, with awareness of the limited institutional responsibility, individual providers have a ready scapegoat: they can hide behind “systems failures” and faceless bureaucrats in order to minimize or avoid their own liability.  Most juries–and perhaps not unreasonably so–will hesitate to blame an overworked doctor or nurse whom jurors might view as a victim of a system that demanded too much of them.

And all this plays out behind the scenes: in most cases, the jury never knows of the institution’s limited liability.  And so if the institution is a party at trial, the jury may hold only the organization liable, never realizing that such a finding will deprive the patient of compensation for a severe injury or death.  Yet if the institution is not named as a party, the individual providers who are defendants can effectively avoid liability by blaming the faceless–and absent–organization where they worked.

Thus far, the hospital lobby has successfully beaten back all attempts to reform this situation in a way that would promote institutional responsibility and meaningful compensation.  One good thing that could come from the Cooley Dickinson disaster would be a change in these antiquated laws.

The Myth of the Non-Profit Hospital

Many clients come to us about injuries or death suffered as a result of malpractice that occurred in a hospital.  Often they were attracted to that hospital by the facility’s reputation, advertising, or medical school affiliation.  And invariably, they are stunned to learn that their prospects for recovering damages against the hospital itself are minimal–under Massachusetts law, the maximum recovery has long been just $20,000, recently increased to $100,000.  This amount is barely sufficient to cover the costs and fees associated with bringing a lawsuit, and completely inadequate to compensate a family for serious injury or death.

So why the limitation?  Because most Massachusetts hospitals are “non-profit” organizations, and state law grants them this limited liability. (Individual providers such as doctors, residents, nurses, technicians and other staff are still responsible for their negligence, and covered by their own and/or the hospital’s malpractice insurance.)

But to treat these hospitals as “non-profit” or “charitable” corporations, and lump them together with local youth groups, museums, and service organizations is a farce that doesn’t reflect the financial and economic realities of the situation: Massachusetts hospitals are BIG business, with many routinely earning annual profits in the millions of dollars.

A recently released report from the Massachusetts Center for Health Information and Analysis (CHIA) sheds some light on the financial health of hospitals in the Commonwealth.  The report, containing information about hospital profits, liquidity, and overall financial health shows that many hospitals are turning handsome profits.  Take for example, Children’s Hospital Medical Center in Boston.  Children’s has $2.5 billion in assets, and made a profit of some $93 million over the last six months.  Partners, the largest health care system in Massachusetts that includes Brigham & Women’s Hospital and Massachusetts General Hospital, among others, reported an overall profit of $76 million, most of it from those two flagship hospitals.  Dana-Farber–unquestionably a facility that provides excellent care for cancer patients–reported an operating loss of $23 million, yet its operating surplus rose by $11 million to $35 million, and it holds more than $1 billion in net assets.  That’s a lot of Jimmy Fund contributions.  And sleepy little Cooley Dickinson Hospital in Northampton racked up $11 million in profits.

And these hospitals are run like businesses.  They hire financially savvy management teams and pay outside consultants to come up with business development strategies.  They increase their potential earnings by focusing on profitable services, such as obstetrics and cardiac surgery.  And they advertise like any other business–on billboards, television and radio.

Yet Massachusetts remains one of a handful of states to give hospitals the benefit of limited liability.  It’s a surprise to patients who usually have no idea until it’s too late.  And given the power of these institutions and the staggering dollar amount involved, it’s unlikely to change any time soon.

Read the summary report for Quarter 2 of 2013 here.   More detailed information about each individual hospital is available on the CHIA website.