Just How Necessary Are Nondisclosure Agreements In Medical Malpractice Settlements?

A recent study published in a prominent medical journal found that the six healthcare institutions owned by the University of Texas lacked a consistent, uniform method of structuring non-disclosure clauses within medical malpractice settlement agreements.

The findings have already prompted change: UT has since barred settlements from prohibiting the parties from reporting the outcome to regulatory agencies, such as the Texas Medical Board.

“The bottom line, having confidentiality provisions in tort settlements is routine practice. It’s routine practice across the country,” says Dr. William Sage, the paper’s lead author and a faculty member of the University Texas School of Law in Austin. “But we were surprised to see how unsystematic and pervasive it was in an academic system that’s tried to have a much more comprehensive and patient safety-oriented approach in resolving patient disputes.”

Researchers looked at 715 claims filed because of care provided at UT Southwestern Medical Center; UT Medical Branch at Galveston; the UT Health Science Center at Houston; the UT Health Science Center at San Antonio; the UT MD Anderson Cancer Center; and the UT Health Science Center at Tyler. Of those, 150 were settled. UT Southwestern declined to comment on the study’s findings.

The study analyzed 124 of those settlements, leaving out 20 because they were paid out by defendants outside the university system and six that were small dental claims. UT counts more than 6,000 practicing physicians at its six medical hospitals, all of whom are covered by the university for medical malpractice liability insurance.

Of the 124, 110 had non-disclosure clauses—not a problem on its face, necessarily, but a trend with a slippery slope that the authors warn could impact patient safety in the future. The study was published last month in JAMA Internal Medicine, finding that about nine of 10 settlements in the years studied (2001-2002; 2006-2007; and 2009-2012) included some sort of nondisclosure agreement. The median compensation paid out was about $100,000, while the average was $185,372. They ranged from $500 to $1.25 million.

The research found that it would behoove health systems to develop a standardized definition of nondisclosure terms to avoid overstepping what is needed to protect the defendants. Quoting the study, “The scope of nondisclosure was often broader than seemed needed to protect physicians and hospitals from disparagement by the plaintiff or to avoid publicizing settlement amounts that might attract other claimants.” In other words, preventing errors in the future could be more difficult to achieve considering the confidentiality.

But not all agree.

“Truth be told, these institutions and physicians have constant quality assurance processes where many times adverse outcomes are evaluated,” says attorney Kimberly Bocell, a shareholder at Dallas firm Chamblee Ryan who often represents physicians in medical malpractice cases. “Just because the patient is not allowed to shout from the rooftops that this incident occurred or this case was settled doesn’t mean these institutions aren’t having internal reviews, evaluating adverse outcomes and medical errors.”

True, the Texas Occupations Code requires a physician to report to the medical board any malpractice claims to which he or she is “found liable, a jury awarded monetary damages to the claimant, and the award has been determined to be final and not subject to further appeal.” For the insurer, the code requires them to report settlement of a claim to the board when the physician they cover is liable for the harm.

Since tort reform was passed in 2003—capping non-economic malpractice damages at $250,000—the study found that the settlements that came later “were more likely to prohibit disclosure of the event of settlement, to prohibit disclosure of the facts of the claims, and to prohibit reporting to regulatory bodies.” Bocell argues that this is exactly the point of the settlement: “After this is all said and done and I paid you $100,000 and we resolved this case, you can’t turn around and pursue something against me using a regulatory agency. It’s not for the purpose of trying to hide negligence, it’s that once and for all this is resolved.”

The study found that about half of the 110 settlements with confidentiality clauses barred the patient from revealing any details about the medical error. In 9 percent of them, doctors and hospitals were not allowed to discuss what occurred. Despite the fact that this only dug into the claims inside one system, Sage says he hopes this sends a message to other healthcare institutions throughout the country. He argues that it’s important to have a standardized process to manage what type of information can be shared after a settlement to better improve care by lessening the risk of the error happening again.

“The point of the paper we’re trying to communicate is if you are moving toward these types of claim resolutions as a system, this is one of the processes you should examine,” Sage said. “One reason why it’s so been so hard to address patient safety problems is either the errors were never known in the first place or never revealed, or they were handled in a confidential manner.”

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