Negligent Credentialing, Quirky Question # 121

Quirky Question # 121:

Our organization is responsible for evaluating the credentials for employees at certain medical facilities.  I have reason to believe that one or more of the individuals we have referred out may have been less qualified than we were led to believe.  Does that present any risks for our organization?

Dorsey’s Analysis:

Great question, the answer to which the answer is “Yes, there are risks for your organization.”  Your question squarely explores the issue of the legal theory known as “negligent credentialing.”  This is an offshoot of the doctrine of negligent hiring or retention, which is recognized in most jurisdictions.  (For a discussion of this legal theory, see Quirky Question # 26, which is accessible through the “View By Topic” bar to the upper left.  Just scroll down to the topic of “Negligent Hiring,” and you will find that analysis.)  Simply stated, the negligent hiring doctrine is a common law theory that imposes an appropriate standard of care on those making hiring decisions, when considering the totality of the circumstances (e.g., the nature of the job, the risk to co-workers or the public, the employee’s employment history and skills, etc.).  Often, negligent hiring cases arise in contexts where an employee with a discoverable, but undiscovered, propensity for violence or dishonesty, commits a crime that injures a member of the public or a co-worker.

The negligent credentialing theory is an offshoot of the negligent hiring doctrine.  In essence, it holds those responsible for making credentialing determinations responsible to the injured third-party if they fail to meet the standard of care that would be expected of someone making these determinations.

You stated in your question that you were responsible for evaluating credentials for employees at certain medical facilities.  By way of extreme (and admittedly unlikely) example, if your organization had to ensure that brain surgeons were adequately qualified to receive nuero-surgery credentials and you instead provided “credentials” to individuals who had no training whatsoever in brain surgery, resulting in injuries to patients, you would have a problem.

The Minnesota Supreme Court first recognized a cause of action for negligent credentialing two years ago in the case of Larson v. Wasemiller, No. A05-1698 (Minn. S. Ct. 2007), a case that arose in the medical credentialing context.  In Larson, a medical malpractice case involving a botched gastric bypass operation, the plaintiff sued the physicians who performed the surgery, and the St. Francis Medical Center, which had granted the physicians’ hospital privileges, on a negligent credentialing theory.  The medical center moved to dismiss the case, but the District Court rejected that motion.  The trial court, however, certified the question to the Minnesota Court of Appeals, which reversed, finding that Minnesota does not recognize that legal theory.  The Minnesota Supreme Court reversed again, holding that a claim of negligent credentialing exists in Minnesota.

When assessing whether to recognize this legal theory, Minnesota’s high court pointed out that whenever it has the responsibility for evaluating a new common law tort, it assesses four factors: a) whether the tort is inherent in, or the natural extension of, a well-established common law right; b) whether the tort has been recognized in other states; c) whether recognizing the tort will create tension with other applicable laws; and d) whether such tension is outweighed by the importance of the additional protections the new legal theory would provide to injured persons.

Despite considerable opposition from not just the defendant medical center but various amici groups (e.g., the Minnesota Hospital Association, the Minnesota Defense Lawyers Association), the Supreme Court found that the negligent credentialing theory was a natural extension of other recognized rights.  For example, the court pointed to the decisions holding that hospitals have an obligation to protect patients from other intoxicated patients, and that hospitals have the obligation to retain a sufficient number of attendants to ensure patient safety.  Moreover, the court noted that the negligent credentialing theory is closely analogous to the doctrines of negligent hiring and negligent selection of an independent contractor.

The Minnesota court then examined the question of whether the legal theory had been recognized in other states, noting that only two states that have considered the claim have rejected it.  The plaintiff argued that “this broad recognition of the claim evidences a national consensus that hospitals owe a common law duty to patients to exercise reasonable care when making privileging decision[s].”  After reviewing the analyses of other jurisdictions, Minnesota’s high court found this argument persuasive.

Turning to the third factor in the analysis, the court explored whether recognizing the tort would create tension with other applicable laws.  The defendant medical center argued that this cause of action would conflict with Minnesota’s Peer Review Statute, which contains both confidentiality and limited liability provisions.  The defendant argued that because it is precluded by statute from revealing the information relied upon in making its credentialing decisions, it would not be possible to defend against this type of claim.  The court rejected this argument, noting that some of the same information upon which the credentialing committee relied may be available through original sources.  (The court also noted that both Ohio and Wyoming had considered that argument and found it unpersuasive.)  Minnesota’s Supreme Court acknowledged that the confidentiality provisions of the statute may complicate the underlying trial on a negligent credentialing claim but felt that that burden would fall more heavily on the plaintiffs than the defendants.

With regard to the fourth factor, the court found that the importance of recognizing this new legal theory and providing additional protections to patients outweighed the problems associated with resolving the tensions created by the inherent conflicts between the tort theory and the proscriptions of the Peer Review Statute.  The court left for another day the potential problems associated with the need for a bifurcated trial and the scope of both the confidentiality and immunity provisions of the Peer Review Statute, finding that those issues could best be addressed by the trial court as part of its trial management responsibilities.  The Minnesota Supreme Court concluded, “We therefore hold that a claim of negligent credentialing does exist in Minnesota, and is not precluded by Minnesota’s peer review statute.”

Applying this decision to your situation raises a number of points you may wish to explore.  First, is your company located in Minnesota?  If so, the Larson case will be dispositive of the question you raised.  If not, you will want to explore carefully whether your state has addressed this issue in the context of medical facilities and medical credentialing committees.  Second, if your medical center or hospital is not located in Minnesota, you should carefully examine the peer review statute of the state (or states) where you are operating.  Those statutes may be similar or dissimilar to the statutes in Minnesota, and may afford your organization new or different arguments.  Third, even if your facility is located in Minnesota, there likely will be difficult issues, reserved by the Larson court, that may be outcome determinative in your situation.

The bottom line, however, is that in many jurisdictions, courts have recognized a cause of action for negligent credentialing.  Recognition of this theory heightens the obligations on all credentialing committees (hospital or otherwise) to ensure that credentials only are being offered to those who are qualified to perform the job responsibilities for which the credentials have been granted.  Particularly if those credentials are granted to individuals who are physicians or others working with vulnerable members of the public, it is critical that the credentialing committee perform its tasks carefully and responsibly, exercising the reasonable care that would be expected of them.  Keep in mind that your work will be judged from a “knew or should have known” standard, and that the underlying atmospherics will be a patient or another member of the public who has suffered injuries allegedly because of the failure of your credentialing committee to do its job effectively.

My last observation is that now that you have independently reached the determination that you may have “credentialed” undeserving parties, as you state in your question, you should act.  In my view, even if your initial decision to credential someone may have been defensible, now that you know you based your decision on erroneous information, you need to take action.  It would be very difficult for you to explain to a party injured in the future that despite your recently acquired knowledge, you remained silent.  Presumably, those facts would come out during the discovery phase of a negligent credentialing lawsuit and they would be difficult to defend.  Of course, how you go about communicating your recently discovered information and how you do so without creating separate problems for your organization, such as a defamation action, would have to be carefully and thoughtfully examined before you proceed.