CSM Legal Aspects of Health Care Administration Paper

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Chapter 7 Contracts and Antitrust Learning Objectives ➢ Explain what a contract is. ➢ Describe the elements of a contract. ➢ Describe how a hospital can be liable for the acts of a physician under contract. ➢ Explain the possible defenses and remedies for nonperformance of a contract. ➢ Describe under what circumstances an employee handbook could be considered a contract and how to avoid that assumption. Contract ➢ A contract is a special kind of voluntary agreement, either written or oral, that involves legally binding obligations between two or more parties. Purpose of a Contract ➢ To specify, limit, and define agreements that are legally enforceable ➢ A contract forces the participants to be specific in their understandings and expectations of each other. ➢ Contracts serve to minimize misunderstanding and offer a means for parties of a contract to resolve any disputes that may arise. Types of Contracts (1 of 2) ➢ Express ➢ Oral ➢ Written ➢ Implied ➢ Voidable ➢ Executed Types of Contracts (2 of 2) ➢ Enforceable ➢ Unenforceable ➢ Realty ➢ Goods ➢ Services Elements of a Contract ➢ Offer/Communication ➢ Consideration ➢ Adequacy ➢ Acceptance ➢ ➢ ➢ ➢ Meeting of the minds Definite and complete Duration Complete and conforming Breach of Contract ➢ Occurs when there is a violation of one or more of the terms of the contract ➢ Elements necessary to establish a breach: ➢ A valid contract was executed. ➢ The plaintiff performed as specified in the contract. ➢ The defendant failed to perform as specified in the contract. ➢ The plaintiff suffered an economic loss as a result of the defendant’s breach of contract. Corporate Contracts ➢ Limited by its powers as contained in or inferred from its articles of incorporation ➢ Chief executive officer (CEO) limited in his or her authority to execute contracts. ➢ Boards set limits of expenditures by CEOs. Partnerships (1 of 2) ➢ Comprises two or more persons who agree to carry on a business for profit and share profits and losses in some proportions ➢ Agent: One who has the power to contract for and bind another person, the principal, to a contract. Partnerships (2 of 2) ➢ Apparent agent/ostensible agent ➢ One who a third person believes is acting on behalf of the principal ➢ If a hospital undertakes to provide physician services to a community, and the community reasonably believes that a physician is employed by the hospital to deliver services, then the hospital would generally be liable for the physician’s negligent acts. Agent ➢ One who has the power to contract for and bind another person, the principal, to a contract. ➢ Apparent or ostensible agent: One who a third person believes is acting on behalf of the principal. ➢ Corporations can act only through agents (e.g., officers). Independent Contractor ➢ An individual who agrees to undertake work without being under the direct control or direction of another ➢ Independent contractors are personally liable for their own negligent acts. ➢ Hospital liable for physician’s negligence ➢ Agency not liable for negligent hiring Legality of Object ➢ To be a valid contract, the purpose or object of the contract must not violate state or federal policy and must not violate any statute, rule, or regulation. Conditions ➢ Act(s) or event(s) that must occur or be performed by one party before the second party has any responsibility to perform under the contract Performance ➢ Performance is the act of doing what is required by a contract. ➢ Each party to a contract is bound to perform the promises according to the stipulated terms contained in the contract. ➢ Substantial performance by one party to a contract will obligate the other parties to perform. Nonperformance Defenses ➢ Fraud ➢ Mistakes ➢ Mistake of fact ➢ Mistake of law ➢ Duress ➢ Illegal contract ➢ Impossibility to perform the requirements of a contract ➢ Statute of limitations Remedies ➢ ➢ ➢ ➢ ➢ Specified performance Monetary damages General and consequential damages Duty to mitigate damages Arbitration Employment Contracts ➢ A written document that sets forth the terms of the employment relationship ➢ Express agreement ➢ Implied contracts Employment Contracts: Cases (1 of 2) ➢ Employee Breaches Contract: Repayment of Tuition Required ➢ Geographic Limitations on Practice Reasonable ➢ No Express Agreement: Right to Terminate ➢ Restrictive Covenant Enforceable Employment Contracts: Cases (2 of 2) ➢ ➢ ➢ ➢ ➢ Breach of Employment Contract Restrictive Covenant Enforceable Restrictive Covenant Not Enforceable Employee Handbook: A Contract Employee Handbook: Not a Contract Employee Handbook (1 of 2) ➢ Elements to establish employee handbook as a contract ➢ A policy statement that clearly sets forth a promise that the employee can construe to be an offer. ➢ Policy statement must be distributed to the employee, making him or her aware of the offer. ➢ After learning about the offer and policy statement, the employee must “begin” or “continue” to work. Employee Handbook (2 of 2) ➢ Employee handbook: Considered a Contract ➢ Employee handbook: Not a Contract ➢ Due to disclaimer ➢ Termination of contract: Insubordination Medical Staff Bylaws ➢ Medical staff bylaws can be considered a contract. ➢ Applicants for appointment to a medical-dental facility read and agree to the provisions in the bylaws. ➢ The physician promises to abide by the bylaws in exchange for privileges. ➢ Exchange of promises constitutes consideration to support any contract of this bilateral nature. ➢ Physicians have a right to appeal suspension of privileges. Exclusive Contracts ➢ An organization often enters into an exclusive contract with physicians or medical groups for the purpose of providing a specific service to the organization. ➢ Exclusive contracts generally occur within the organization’s ancillary service departments. ➢ ➢ ➢ ➢ Radiology Anesthesiology Pathology Emergency department Exclusive Contracts: Cases ➢ Competition clause not overly restrictive ➢ Nurse practitioner: Noncompetitive clause ➢ Circuit Court prohibited the nurse from practicing nursing within a 50-mile radius of the hospital for a period of 1 year from April 15. ➢ Noncompetition clause in the nurse’s employment agreement was found to be clear and unambiguous. Restraint of Trade ➢ Department of Justice: Primary responsibility for enforcing federal antitrust laws ➢ Federal Trade Commission ➢ Sherman Antitrust Act ➢ Cases ➢ Conspiracy to Terminate Physician’s Privileges ➢ Claim of Group Boycott Denied ➢ Agreement for Professional Services Too Restrictive Hospital Staff Privileges: Restricting Privileges ➢ Moratoriums and closed medical staffs, as used in the healthcare field, describe an organization’s policy of prohibiting further appointments to its medical staff. ➢ Generally, a moratorium is for a specified period of time. ➢ It is lifted at such time as the purpose for which it was instituted no longer exists. Moratorium Effect (1 of 6) ➢ Effect on the organization’s census ➢ Organization and community needs for additional physicians in certain medical and surgical specialties and subspecialties ➢ Strain that additional staff will put on the organization’s supporting departments (e.g., radiology and laboratory services) Moratorium Effect (2 of 6) ➢ Effect of denying medical staff privileges to applicants who presently are located within the geographic area of the organization and serving community residents ➢ Effect on any contracts the organization may have with other healthcare delivery systems, such as health maintenance organizations ➢ Effect a moratorium will have on physician groups that may desire to add a partner Moratorium Effect (3 of 6) ➢ Effect additional staff may have on the quality of care rendered in the organization ➢ Whether closing the staff will confine control of the organization’s beds to the existing medical staff, allowing them to enhance their economic interests at the expense of their patients and other qualified physicians ➢ Effect of a limited moratorium by specialty as opposed to a comprehensive one involving all specialties; indiscriminately closing a staff in all departments and sections without a review could be considered an action in restraint of trade Moratorium Effect (4 of 6) ➢ Existence of a mechanism for periodic review of the need to continue a moratorium ➢ Effect that medical staff resignations during the moratorium may have on the organization’s census ➢ Existence of a mechanism for notifying potential medical staff candidates at such time that the organization determines that there is a need for an expanded medical staff Moratorium Effect (5 of 6) ➢ Characteristics of the medical staff ➢ Is the staff aging and in need of new membership? ➢ Potential for restraint of trade legal action under antitrust laws ➢ Effect on physicians without staff privileges whose patients are admitted to the hospital Moratorium Effect (6 of 6) ➢ Formation of a committee composed of representatives from the governing body, medical staff, administration, and legal counsel to develop an appropriate moratorium policy Moratorium Effect: Selection of a Consultant ➢ To study/develop: ➢ ➢ ➢ ➢ ➢ ➢ ➢ Demographics marketplace Physician referral patterns Literature and organization use Medical staff opinion poll Patient–physician population ratios Population shifts Formula to determine optimal staffing levels by department and section ➢ Information for governing body to use in determining appropriateness of closing staff in selected medical departments and/or sections Transfer Agreement (1 of 2) ➢ ➢ ➢ ➢ ➢ Identification of parties to agreement Purpose of agreement Policies and procedures for transfer Organizational responsibilities for transfer Exchanging/sharing information Transfer Agreement (2 of 2) ➢ ➢ ➢ ➢ ➢ ➢ Retention of autonomy Procedure for settling disputes Procedure for modification or termination Sharing of services Publicity Exclusive vs. non-exclusive agreement Insurance Contract ➢ Insurance ➢ Form of risk management used primarily to hedge against the risk of potential loss ➢ Insurance contract ➢ Insurer has an obligation to indemnify the insured for losses caused by specified events ➢ Coverage denied Review Questions (1 of 2) 1. Explain the importance of a “written” contract. 2. Explain the elements of a contract. 3. Describe the differences between an express and an implied contract. Review Questions (2 of 2) 4. Describe various defenses and remedies available for nonperformance of a contract. 5. Explain why and under what circumstances an employee handbook can be considered a contract. 6. Explain why employers should place disclaimers in employee handbooks. Chapter 8 Civil Procedure and Trial Practice Learning Objectives ➢ Discuss the pretrial discovery process. ➢ Describe the trial process. ➢ Describe the forms of evidence presented by the plaintiff. ➢ Describe defenses offered by the defendant. ➢ Explain the purpose of the judge’s charge to the jury. ➢ Describe the types of damages and how they are awarded. Pleadings: Complaint ➢ Essential elements of a complaint: ➢ A short, concise statement of the grounds on which the court’s jurisdiction depends (the court’s authority to hear the case) ➢ A statement of the claim demonstrating that the pleader is entitled to relief ➢ A demand for judgment for the relief to which the plaintiff deems himself or herself entitled Pleadings: Summons & Complaint ➢ A legal document issued by a court and served on an individual announcing that a legal proceeding has been commenced. ➢ Provides the date and place where the defendant must appear to respond to and answer the complaint. ➢ In some jurisdictions, a complaint must accompany a summons. ➢ Case: Improper Service of a Summons Pleadings: Demurrer ➢ A pleading is filed by a defendant challenging legal sufficiency of a complaint. ➢ The pleading represents preliminary objections that are constructed so as to preempt “answering” the plaintiff’s complaint. Pleadings: Answer ➢ The answer to a complaint requires the defendant to respond to each of the allegations of the complaint. ➢ A pleading admits or denies each of the allegations. Pleadings: Counterclaim ➢ Denial of the plaintiff’s claims by alleging that it was the plaintiff, and not the defendant, who committed a wrongful act and, therefore, it is the defendant who is entitled to damages Pleadings: Bill of Particulars ➢ Request by the plaintiff for written itemization of claims made: ➢ ➢ ➢ ➢ ➢ ➢ ➢ ➢ ➢ Date and time the alleged malpractice occurred Specific injuries alleged Where the alleged malpractice occurred Negligent acts alleged to have occurred How the alleged malpractice occurred Listing of injuries claimed Listing of any witnesses who alleged malpractice Listing of damages Name and address of plaintiff’s employer Discovery: Examination before Trial ➢ Process of investigating facts of a case before trial ➢ Discovery rules promulgated to prevent trial by ambush ➢ Objectives of discovery ➢ Obtain evidence that might not be obtainable at time of trial ➢ Isolate and narrow issues for trial ➢ Gather evidence that may be admissible at trial ➢ Enable discovering party to gather further evidence Examination Before Trial: Deposition ➢ A deposition, taken at an examination before trial (EBT), is the testimony of a witness that has been recorded in a written format. ➢ Preparation of witnesses ➢ The manner in which a witness handles questioning at a deposition or trial is often as important as the facts of the case. ➢ Each witness should be well-prepared before testifying. ➢ Preparation should include a review of all pertinent records. Preparation of Witnesses (1 of 3) ➢ ➢ ➢ ➢ ➢ ➢ Review records. Do not be antagonistic. Be organized in thinking. Be organized in recollection of facts. Answer “only” the questions asked. Explain simply and succinctly. Preparation of Witnesses (2 of 2) ➢ Do not overdramatize. ➢ Do not become overpowered by the crossexaminer. ➢ Be polite, sincere, and courteous. ➢ Dress appropriately. ➢ Be well-groomed. ➢ Listen for objections. Preparation of Witnesses (3 of 3) ➢ ➢ ➢ ➢ Review your EBT before trial. Be honest with the examiner. Do not show displeasure. Ask for questions to be repeated for clarification. ➢ If you are not sure of answer, indicate that you are not sure. Attorney-Client Privilege ➢ Confidential communications made by a client and an attorney ➢ Elements necessary to establish privilege ➢ Both parties must agree attorney–client relationship does or will exist. ➢ Client must seek advice from attorney in his or her capacity as a legal advisor. ➢ Communication between attorney and client must be identified to be confidential. Incident and Investigative Reports ➢ Incident reports ➢ Not generally protected from discovery ➢ Statistical data ➢ Not always privileged Pre-Trial Motions (1 of 2) ➢ Motion to dismiss a case ➢ Defendant alleges plaintiff’s complaint, even if believed, does not set forth a claim or cause of action recognized by law ➢ A motion to dismiss can be made before, during, or after a trial. Pre-Trial Motions (2 of 2) ➢ Motion for summary judgment ➢ Either party to a suit may believe that there are no triable issues of fact and only issues of law to be decided. ➢ Either party may make a motion for summary judgment. ➢ Courts are reluctant to look favorably on such motions. ➢ Will be granted if circumstances of a case warrant it Pre-Trial Conference ➢ Informal discussion during which the judge and the attorneys eliminate matters not in dispute, agree on the issues, and settle procedural matters relating to the trial Notice of Trial ➢ Once a decision to go forward is reached, the case is placed on a court calendar. ➢ Postponement of the trial may be secured with the consent of both parties and the consent of the court. Memorandum of Law ➢ A memorandum of law (or trial brief) presents to the court the nature of the case, cites case decisions to substantiate arguments, and aids the court regarding points of law. The Judge ➢ ➢ ➢ ➢ ➢ ➢ Handles conduct of trial Decides questions of law Determines issues of procedure Decides if evidence admissible Charges the jury May direct a verdict The Jury ➢ Jury selection process ➢ Determines issues of fact ➢ Determines damages ➢ Waiver of trial by jury Subpoena ➢ A legal order requiring the appearance of a witness and/or the presentation of documents at a legal proceeding ➢ Subpoena ad testificandum ➢ Subpoena for a witness ➢ Subpoena duces tecum ➢ Subpoena of records Burden of Proof ➢ The obligation of the plaintiff to persuade the jury regarding the truth of his or her case ➢ Preponderance of credible evidence must be presented for a plaintiff to recover damages. ➢ Credible evidence is evidence that, in the light of reason and common sense, is worthy of belief. Res Ipsa Loquitur: The Thing Speaks for Itself ➢ Legal doctrine that shifts the burden of proof from the plaintiff to the defendant ➢ Cases ➢ Burns while Bathing Patient ➢ Burn by Electrocautery Unit ➢ Oxygen Mask Catches Fire Res Ipsa Loquitur: Plaintiff Must Show 1. Event causing injury: Would not normally have occurred in the absence of negligence 2. Defendant: Must have exclusive control over instrument causing injury 3. Plaintiff: Must not have contributed to the event causing injury Wrong Medication (1 of 2) ➢ Stanley refills his drug prescription at Discount Drugs. Prior to taking his nightly dosage, he notices the pills appear larger than normal. He phones Discount Drugs and explains his concern. The pharmacist, stating he was busy, assures Stanley that generic drugs sometimes are larger and the medication is correct. Stanley takes the drug and never wakes up. The dosage given was five times that prescribed. The pharmacist filled Stanley’s prescription from the wrong container. ➢ Is the pharmacy liable for Stanley’s death? Wrong Medication (2 of 2) ➢ The plaintiff, Stanley, need not prove conclusively that the defendant (pharmacist’s) negligence resulted in injury, only that all reasonably probable causes of the accident can be traced to the defendant. ➢ See res ipsa loquitur on a prior slide. Opening Statements ➢ Plaintiff’s attorney ➢ Provides, in capsule form, the facts of the case, what he or she intends to prove by means of a summary of the evidence to be presented, and a description of the damages to his or her client ➢ Defense attorney ➢ Explains the facts as they apply to the case for the defendant Examination of Witnesses ➢ ➢ ➢ ➢ ➢ Officer of Court administers oath Direct examination Cross examination Redirect examination Recross examination Judicial Notice Rule ➢ Prescribes that well-known facts (e.g., fractures require prompt attention, two X-rays of the same patient may show different results) need not be proven ➢ A court recognizes that a particular fact in a case is so commonly known by the average person that expert testimony is not necessary to establish the fact. Evidence (1 of 4) ➢ Direct evidence ➢ Direct evidence is proof offered through direct testimony. ➢ ➢ ➢ Admissibility of expert testimony Pharmacist not always a qualified witness Gross negligence Evidence (2 of 4) ➢ Demonstrative evidence ➢ Evidence furnished by things themselves ➢ Considered the most trustworthy and preferred type of evidence ➢ Consists of tangible objects to which testimony refers ➢ ➢ ➢ Photographs Imaging studies Viewing patient injuries Evidence (3 of 4) ➢ Documentary evidence ➢ ➢ ➢ ➢ ➢ Medical records Manufacturers’ drug inserts Statutes, rules, and regulations Policies and procedures Facebook entries and e-mails Evidence (4 of 4) ➢ Hearsay evidence ➢ Based on what another has said or done and is not the result of the personal knowledge of the witness ➢ Consists of written and oral statements ➢ Because it is hearsay, it is therefore objectionable ➢ Hearsay exceptions: Dying declaration ➢ Medical books as hearsay evidence Presenting Evidence ➢ Expert testimony ➢ Experts necessary ➢ When issues to be resolved are outside the experience of the average juror ➢ Experts not always necessary ➢ When issues are within common knowledge understanding ➢ For example: Broken bones should be X-rayed. Defenses Against Plaintiff’s Allegations ➢ ➢ ➢ ➢ ➢ Ignorance of fact and unintentional wrongs Assumption of a risk Contributory negligence Comparative negligence Good Samaritan statutes Legal Defenses (1 of 2) ➢ Borrowed Servant doctrine ➢ Hospital responsible for resident’s negligence ➢ Physician not responsible for resident’s negligence ➢ Captain of the Ship doctrine Legal Defenses (2 of 2) ➢ ➢ ➢ ➢ Statute of limitations Sovereign immunity State immunity laws Intervening cause ➢ A force that takes effect after the defendant’s negligence, which contributes to that negligence in producing the plaintiff’s injury Superseding Intervening Cause ➢ An unforeseeable force coming into being after a defendant’s negligent act, which cancels the defendant’s liability by breaking the chain of causation from the defendant’s act to the plaintiff’s injury. ➢ Such an act destroys the casual connection between the negligent act of the defendant and the injury. ➢ Damages are not recoverable because the original act is not the probable cause of the plaintiff’s injury. Unforeseeable Causes ➢ Malicious, intervening acts, if unforeseeable ➢ Intervention by one with a higher ethical duty to the victim (e.g., parent or guardian) ➢ Extraordinarily negligent intervening conduct ➢ Acts of God (e.g., floods, hurricanes, tornados, earthquakes) Case: Lightning Strikes (1 of 2) ➢ Mary underwent surgery at General Hospital in Anytown, U.S.A. The power grid in the Northeast shut down and the hospital’s emergency generator came online. Lightning struck the generator and the operating room lights went out. The surgeon cut an artery while completing Mary’s surgery under difficult circumstances. Mary suffered serious injuries. Mary sues the surgeon. ➢ Will Mary succeed in her lawsuit? Case: Lightning Strikes (2 of 2) ➢ No! ➢ There was a superseding intervening cause. ➢ It was unforeseeable that the power grid in the Northeast would shut down and lightning would strike the generator. Foreseeable Intervening Causes ➢ Those subsequent forces that ➢ Objectively speaking, one should reasonably anticipate, or ➢ Those the defendant should reasonably anticipate under the circumstances Injury from Stretcher Transport (1 of 2) ➢ Mindy, while transporting Jen to a minor treatment room, negligently pushes Jen’s stretcher through corridors, injuring her foot. While being operated on for foot injuries, Mindy miscarriages. ➢ Is the hospital liable for Jen’s miscarriage? Injury from Stretcher Transport (2 of 2) ➢ Yes! ➢ Mindy, the negligent defendant, is liable for intervening acts as long as they are foreseeable. Bottle of Pills (1 of 2) ➢ Mary was visiting her young son, Tom, in the hospital. She noticed a bottle of pills on Tom’s over-bed table. She intended to ask the nurse about the pills but forgot. Mary received a call from work on her cell phone and had to leave. She told Tom she would be right back as she rushed out the door. Tom finds the pills and swallows them, making him seriously ill. ➢ Are the nurse and hospital responsible for Tom’s injuries? Bottle of Pills (2 of 2) ➢ Yes and no ➢ Yes, it is foreseeable that if a nurse leaves pills on a child’s over-bed table that the child may swallow them. The hospital is liable on the basis of respondeat superior. ➢ No, although the result here is foreseeable (injury to the patient), as well as the cause (the child finding the pills), there is an independent intervening event— mom’s discovery—that relieves the nurse of responsibility, due to the mother’s heightened ethical duty to protect her son. Bottle of Pills: Discuss (1 of 2) ➢ Defense counsel argues: ➢ Intervening cause ➢ Contributory negligence: mother? ➢ Comparative negligence: mother? ➢ Plaintiff’s counsel argues: ➢ Hospital and nurse had a duty greater than the mother Bottle of Pills: Discuss (2 of 2) ➢ This case is a perfect example of why there is a need for a trial. ➢ The jury determines the facts. ➢ The judge decides questions of law. ➢ A verdict needs to be reached. ➢ Postverdict: There will always be someone unhappy with the outcome. End of Trial ➢ Closing statements ➢ Judge’s charge to jury ➢ ➢ ➢ ➢ ➢ Example of judge’s charges Jury charges must be clear. Jury instructions must not be prejudicial. Court erred in jury charges. Jury deliberation and determination Awarding Damages ➢ Nominal: Are a token in recognition that a wrong has been committed. In such cases, the amount of compensation is insignificant. ➢ Compensatory: Intended as reparation for detriment or injury sustained. ➢ Hedonic: Awarded to compensate plaintiff for loss of enjoyment of life. ➢ Punitive: Additional monetary awards when an injury is caused by gross carelessness or disregard for others’ safety. Cases: Damages (1 of 2) ➢ Punitive Damages/Mighty Engine of Deterrence ➢ Punitive Damages Not Awarded ➢ Future Pain and Suffering ➢ Damages for Surviving Spouse and Children ➢ Damages/Emotional Distress Cases: Damages (2 of 2) ➢ Damages/Not Excessive ➢ Award Was Fair and Just ➢ Damages Not Based on Prejudice and Passion ➢ Damages Excessive ➢ Damages Capped Joint and Several Liability ➢ Permits defendant to bring suit against all persons sharing responsibility for injuries ➢ Permits plaintiff to collect from any “one” or “all” of defendants Appeals: Grounds for ➢ Verdict excessive ➢ Evidence rejected that should have been accepted ➢ Inadmissible evidence permitted Execution of Judgments ➢ Once the amount of damages has been established and all the appeals have been heard, the defendant must comply with the judgment. ➢ This follows after all appeals have been exhausted. Review Questions (1 of 2) 1. Discuss the pretrial discovery process. 2. Describe the trial process. 3. Describe the role of the judge and jury in the trial process. 4. Explain the terms res ipsa loquitur and judicial notice rule. Review Questions (2 of 2) 5. Describe the forms of evidence presented by a plaintiff at trial. 6. Describe defenses to a lawsuit a defendant can offer at trial. 7. Explain the purpose of the judge’s charge to the jury. 8. Describe the various types of damages that can be awarded to the plaintiff. Chapter 9 Corporate Structure and Legal Issues Learning Objectives (1 of 2) 1. Explain from where a corporation derives its authority. 2. Explain the difference between express, implied, and corporate authority. 3. Discuss corporate organization and committee structure. 4. Describe corporate ethics, the Sarbanes– Oxley Act of 2002, and corporate compliance. 5. Explain the terms corporate negligence, respondeat superior, and independent contractor. Learning Objectives (2 of 2) 6. Describe the duties of healthcare organizations, the chief executive officer (CEO), and medical staff. 7. Explain the purpose of corporate reorganization and the process of restructuring. 8. Describe what is meant by parent holding company model. 9. Describe what the Safe Harbor Act is designed to regulate. Fiduciary Responsibility ➢ Fiduciary ➢ Relationship of trust or confidence with another ➢ Designed to meet only needs of the organization ➢ Must act without regard to one’s own needs ➢ Entrusted with overseeing fulfillment of the organization’s mission Corporate Authority ➢ Express ➢ Authority designated by statute ➢ Implied ➢ Authority not expressed by written words ➢ Ultra vires acts ➢ Acting beyond scope of authority Executive Committee ➢ Liaison between management and full board ➢ Reviews and make recommendations on management proposals ➢ Performs special assignments as may be delegated by full board ➢ Business transacted reported at regular sessions of the governing body and ratified ➢ Powers of the governing body Bylaws Committee ➢ Reviews and recommends bylaw changes to the governing body. ➢ Bylaws generally are amended or rescinded by a majority vote of the governing body. Finance Committee ➢ Oversees financial affairs of the organization ➢ Directs and reviews preparation of financial statements, operating budgets, major capital requests, etc. Joint Conference Committee ➢ Often consists of an equal number of representatives from: ➢ Governing body ➢ Medical staff ➢ Administration and nursing ➢ Acts as a forum for discussion of matters of policy and practice pertaining to patient care Nominating Committee ➢ Develops and recommends criteria for governing body membership ➢ Recommends appointments for new board members Planning Committee (1 of 3) ➢ Periodically reviews organization’s mission and vision statements ➢ Conducts community health needs assessments ➢ Develops strategic plans and ongoing monitoring ➢ Develops short-term and long-range goals Planning Committee (2 of 3) ➢ ➢ ➢ ➢ Maintains the organization’s physical facilities Prepares capital budgets Oversees expansion programs Acquires major equipment Planning Committee (3 of 3) ➢ Adds new services based on identified community need ➢ Downsizes and closes services ➢ Gives planning progress reports to the full board ➢ Develops programs Patient Care Committee (1 of 2) ➢ Corporate development ➢ Identifies patient and family needs and expectations ➢ Determines methodology for reviewing data Patient Care Committee (2 of 2) ➢ Identifies patterns of concern ➢ Forwards information to those responsible change ➢ Reviews, evaluates, & implements plans for improving performance Audit Committee (1 of 4) ➢ Develops corporate auditing policies & procedures ➢ Recommends independent auditors (IAs) ➢ Reviews credentials & facilitates change in auditors as appropriate Audit Committee (2 of 4) ➢ Reviews the scope & extent of audit duties & responsibilities ➢ Reviews scope & results of annual audit(s) ➢ Sets, oversees, reviews, & acts on recommendations of internal audit staff Audit Committee (3 of 4) ➢ Reviews internal accounting practices of corporation ➢ Reviews and evaluates financial statements ➢ Promotes prevention, detection, and reporting of fraud Audit Committee (4 of 4) ➢ Reviews means for safeguarding assets ➢ Ensures financial reporting functions comply with accepted accounting principles ➢ Reviews reliability & integrity of financial & operating information Safety Committee ➢ Oversees safety management programs ➢ ➢ ➢ ➢ ➢ Emergency preparedness Equipment management Fire safety Risk management Utilities management Corporate Ethics (1 of 2) ➢ Promote responsible behavior in the decisionmaking process ➢ ➢ ➢ ➢ Provide a written code of conduct Provide training & education Provide guidelines for behavior Build trust Corporate Ethics (2 of 2) ➢ ➢ ➢ ➢ ➢ Increase awareness of ethical issues Guide decision making Encourage staff to seek advice Provide for confidential reporting Report misconduct Corporate Conduct Under Scrutiny (1 of 2) ➢ False advertisements ➢ Knowingly using flawed data ➢ Schemes designed to deny patients insurance benefits ➢ Accepting kickbacks Corporate Conduct Under Scrutiny (2 of 2) ➢ Entering into financial arrangements that are conflicts of interest ➢ Covering up wrongdoing ➢ Falsification of records ➢ Fraudulent activities (e.g., reimbursement schemes) Code of Ethics (1 of 4) ➢ Required compliance with the Code of Ethics ➢ Honest & fair in dealings with employees ➢ Develop and maintain an ethical & legal environment ➢ Impartial when personal interests conflict with others ➢ Freedom to speak-up Code of Ethics (2 of 4) ➢ Critical evaluation of ideas by “all” employees ➢ Provide a safe environment within which to work ➢ Drive to increase revenues will not be tied to unethical activities ➢ Employees will avoid conflict of interest situations Code of Ethics (3 of 4) ➢ Provide high-quality care ➢ Treatment with honesty, dignity, respect, & courtesy ➢ Patients ➢ Informed of risks, benefits, & alternatives to care ➢ Treatment preserving rights, autonomy, selfesteem, privacy, & involvement in their care Code of Ethics (4 of 4) ➢ Respect for each patient’s culture, religion, & heritage ➢ Provide patients and families access to a patient advocate ➢ Provide support services for those with language barriers ➢ Hearing, language, sight ➢ Provide patients with a “Bill of Rights” ➢ Honor advance directives Sarbanes–Oxley Act ➢ Sarbanes–Oxley Act was signed into law by President Bush on July 30, 2002 in response to the Enron debacle & high-profile cases of corporate mismanagement. ➢ Act titles, or sections, range from corporate board responsibilities to criminal penalties, & require the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the Act. Major Provisions of the Sarbanes–Oxley Act ➢ Certification of financial reports ➢ Ban on personal loans to executive officer and director ➢ Accelerated reporting of trades by insiders ➢ Prohibition on insider trades during pension fund blackout periods ➢ Public reporting of CEO and CFO compensation and profits ➢ Inside audit board independence Sarbanes–Oxley Act of 2002: Promoting Due Diligence ➢ The Act is not about regulation; it’s about selfregulation ➢ Selecting a leader with morals and core values ➢ Examining incentives ➢ Monitoring the organization’s culture ➢ Building a strong, knowledgeable governing body ➢ Searching for conflicts of interest ➢ Focusing attention on the right things ➢ Having courage to speak out Corporate Compliance Program (1 of 2) ➢ Appointment of a corporate compliance officer ➢ Development of standards of conduct ➢ Assignment of duties, authority, and responsibility ➢ Communication and education of all employees and agents Corporate Compliance Program (2 of 2) ➢ Monitoring & auditing systems to detect criminal conduct ➢ Policies must be consistently enforced ➢ Respond appropriately to any offense to prevent similar offenses ➢ Annually audit compliance program Corporate Negligence ➢ The doctrine under which the hospital is liable if it fails to uphold the proper standard of care owed the patient. ➢ Theory of liability creates a non-delegable duty which the healthcare corporation owes the patient. Benchmark Case Facts: Darling v. Charleston Comm. Mem. Hosp. (1 of 3) ➢ 18-year-old football player injured ➢ Fracture of tibia and fibula ➢ Leg casted by general practitioner in emergency department (ED) ➢ Patient complains of pain ➢ No specialist called for consultation ➢ Two weeks later, student transferred ➢ Eventually leg amputated Benchmark Case (2 of 3) ➢ No expert testimony presented ➢ Documentary evidence included ➢ ➢ ➢ ➢ Medical records Hospital’s bylaws, rules, and regulations Illinois Hospital Licensing Act JCAHO standards Benchmark Case (3 of 3) ➢ Hospital, as a corporate entity, liable for: ➢ Negligent acts of nurses ➢ Negligent acts of physicians Benchmark Case Lessons ➢ Provide competent staff ➢ ➢ ➢ ➢ ➢ ➢ Verify licensure, as appropriate Verify training and experience Provide procedures for credential and privileging Monitor quality of care Require consultations Alert supervisor of care concerns Corporate Officer/Director ➢ An officer or a director of a corporation is not personally liable for the torts of corporate employees. ➢ To incur liability, the officer or the director ordinarily must be shown to have in some way authorized, directed, or participated in a tortious act. Doctrine of Respondeat Superior (1 of 2) ➢ Respondeat superior ➢ “Let the master respond” ➢ Legal doctrine holding employers liable for wrongful acts of employees ➢ Also referred to as vicarious liability, whereby an employer is answerable for the torts committed by employees Doctrine of Respondeat Superior (2 of 2) ➢ To impute liability to the employer ➢ Master–servant relationship between employer and employee must exist ➢ Wrongful act of employee must occur within scope of employment Independent Contractors ➢ Responsible for their own negligent acts ➢ Principal must not have right to control agent’s work Governing Body: Responsibilities (1 of 9) ➢ Appointment of CEO ➢ ➢ ➢ ➢ Licensure Responsibility Tort liability Liability for the acts of others Governing Body: Responsibilities (2 of 9) ➢ Medical staff appointments and privileging ➢ Ensure medical staff competency ➢ Discipline abusive behavior (e.g., rage in the operating room; disruptive physicians) ➢ ➢ Suspension of privileges Enforce standards of professional ethics Governing Body: Responsibilities (3 of 9) ➢ ➢ ➢ ➢ ➢ Duty to be financially scrupulous Duty to require competitive bidding Duty to avoid conflicts of interest Duty to provide adequate insurance Duty to comply with law Governing Body: Responsibilities (4 of 9) ➢ Duty to comply with accreditation standards ➢ ➢ ➢ ➢ Conflicts of interests Hospital accreditation and conflicts of interest Joint Commission national patient safety goals Joint Commission complaint process Governing Body: Responsibilities (5 of 9) ➢ Duty to provide adequate and competent staff ➢ ➢ ➢ ➢ Deficient nursing care Timely response to patient calls Postoperative care Nursing facility staffing Governing Body: Responsibilities (6 of 9) ➢ Duty to provide timely treatment ➢ Duty to provide adequate facilities and equipment Governing Body: Responsibilities (7 of 9) ➢ Duty to provide a safe environment ➢ ➢ ➢ ➢ ➢ ➢ ➢ ➢ ➢ Develop a culture of safety Physical environment Unsafe walking and driving conditions Construction hazards Fire hazards Chemical hazards Failure to educate staff Failure to properly maintain equipment Contracted maintenance services Governing Body: Responsibilities (8 of 9) ➢ Prevent falls ➢ ➢ ➢ ➢ ➢ ➢ Parking lot Lobby Stretcher Restraints Floors Loading dock Governing Body: Responsibilities (9 of 9) ➢ Safeguard patient valuables ➢ Handle patient property in a safe manner ➢ Deposit in a hospital safe area (e.g., safe) ➢ Record all items & place in pre-numbered envelope(s) Corporate Reorganization & Mergers (1 of 3) ➢ Hospitals, because of fewer revenues from traditional sources (third-party payers), have restructured to set up related business enterprises in order to increase revenues to support patient care operations. ➢ Legal pressures present substantial impediments. Corporate Reorganization & Mergers (2 of 3) ➢ ➢ ➢ ➢ ➢ Taxation Third-party reimbursement Certificate of need Financing Corporate restructuring ➢ Parent holding company model ➢ Controlled foundation ➢ Independent foundation Corporate Reorganization & Mergers (3 of 3) ➢ General considerations ➢ Reason for restructuring structuring ➢ Mission, legal, tax considerations, etc. ➢ Medical staff restructuring ➢ Explanation to medical staff ➢ Fundraising Regulatory Authority Checklist (1 of 3) ➢ Not-for-profit corporations ➢ Not-for-profit corporation law ➢ Internal Revenue Code (exemption and taxpayer identification number) ➢ State and local tax laws on exemptions (including real property) ➢ Attorney general or similar charitable registration requirements ➢ Bylaws, organization minutes, and minutes of first governing body meeting ➢ Bank account Regulatory Authority Checklist (2 of 3) ➢ For-profit corporations ➢ Business corporation law ➢ Taxpayer identification number ➢ Bylaws, organization minutes, minutes of first governing body meeting, and issuance of stock ➢ Bank account Regulatory Authority Checklist (3 of 3) ➢ Hospitals ➢ Reimbursement regulations ➢ CON regulations ➢ Governing body bylaws and relationship to additional corporations ➢ Fraud and abuse laws, rules, and regulations Competition and Restructuring ➢ Careful planning, legal & accounting advice ➢ Restructuring should be undertaken to provide the hospital with opportunities not available under its current structure Review Questions (1 of 2) 1. Explain from where a corporation derives its authority. 2. Explain the difference between express, implied, and corporate authority. 3. Discuss corporate organization and committee structure. 4. Describe corporate ethics, the Sarbanes– Oxley Act of 2002, and corporate compliance. Review Questions (2 of 2) 5. Explain the terms corporate negligence, respondeat superior, and independent contractor. 6. Describe the duties of healthcare organizations, the CEO, and medical staff. 7. Explain the purpose of corporate reorganization and the process of restructuring. 8. Describe what is meant by parent holding company model.

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