Katrina lawsuit could bring new liability risk for hospitals

Suit alleged lack of emergency preparedness led to patient death

A recent legal battle in New Orleans could have far-reaching implications for health care providers across the country, opening up new areas of vulnerability related to emergency preparedness. Ultimately, hospitals and other providers may have to decide how much they can afford to spend on emergency preparedness, choosing to make their facilities ready for even the most unlikely scenarios, or risking the liability that will follow if that event does occur.

The New Orleans case was one of the most significant lawsuits following the devastation wrought by Hurricane Katrina in August 2005. The case of LaCoste v. Pendleton Methodist Hospital involves the death of 73-year-old Althea LaCoste, who was recovering from pneumonia and needed a ventilator to help her breathe when her family took her to Pendleton Methodist Hospital the day before Hurricane Katrina struck New Orleans, according to a ruling from the state supreme court.1 She was admitted and subsequently died when the hospital lost power during the hurricane, and its backup generator failed because of flooding. The lawsuit alleged that the hospital did not prepare adequately for power loss during an emergency and that Pendleton had an inadequate evacuation plan, according to the state's supreme court ruling.

After a week of trial testimony, the hospital's owner, Universal Health Services Inc. of King of Prussia, PA, announced that the litigation had come to an end with a confidential settlement. Without a verdict, the thorny questions raised by the lawsuit are left with no definitive answer.

Nevertheless, the case already is putting more focus on the issue of emergency preparedness, and that means trial lawyers are likely to see more opportunities, says M. Michael Zuckerman, JD, managing director with the consultant and insurance broker Aon Risk Services Central in Philadelphia.

"We're talking about New Orleans today, but we may be talking about northern California tomorrow with an earthquake or Chicago next week with a blizzard," he says. "There's no one solution to how to prepare for the catastrophe, but this case is going to cause much more attention to be focused on this issue. The very fact that the case went to trial, that alone is enough to encourage plaintiffs' attorneys to pursue similar actions."

Lack of emergency preparedness could be a new theory of liability against hospitals, says Kristin D. McMahon, JD, chief claims officer with IronHealth, a hospital insurer in Simsbury, CT.

"The courts are going to be looking at what standard of care to apply, so to me it screams out for the need for a national framework that determines crisis standards of care," she says. "After a disaster, there will be efforts to hold facilities to standards of care that would apply in ordinary times, but the question is whether that is the standard you should be applying in times of crisis."

McMahon notes that some states, such as Indiana, have laws that provide some immunity from standard of care issues during an officially declared disaster.

"We provide insurance, and we understand that our insureds are sometimes between a rock and a hard place," McMahon says. "The courts need to recognize that also, because it is not always reasonable to demand that the hospital provide the same care in the midst of a huge disaster as it does on a nice, clear day."

McMahon points out that Pendleton's generator systems met all local standards, but that does not necessarily mean they met requirements from The Joint Commission. She also notes that, in addition to the generator issues, the plaintiffs alleged that the hospital failed to properly evacuate the hospital, an issue that comes with its own conundrums.

The LaCoste plaintiffs sued under a premises liability theory, the tort theory used to sue businesses for accidents on their premises, such as slip-and-fall cases, rather than malpractice, arguing that business decisions not related to patient care are to blame for the death, according to the state supreme court ruling. Pendleton countered by claiming that the lawsuit was governed by the Louisiana Medical Malpractice Act (LMMA), which requires that all medical liability lawsuits go to the state's Patient's Compensation Fund Oversight Board and be reviewed by a medical panel — three health care professionals and an attorney, in most cases. Damages for medical malpractice are capped at $500,000.

An appeals court initially found in favor of the hospital, saying that a failure to have appropriate or working backup equipment was equivalent to a failure to have necessary medical supplies with which to treat a patient, but the dispute went all the way to the Louisiana Supreme Court, which ruled that the case does not fall under the LMMA.

Generators central to suit

With that ruling, the case already set a precedent even before the trial began. When the state's Supreme Court decided the allegations were based on general negligence claims, and not medical malpractice, the hospital owners' potential liability greatly increased.

Officials report that more than 100 patients died in New Orleans-area hospitals and nursing homes after Hurricane Katrina when emergency backup power systems failed and patients waited for days awaiting transport in sweltering heat. About 200 lawsuits have been filed in Louisiana alleging negligence related to those deaths and the suffering of other patients.

LaCoste's family claims Pendleton was negligent for having inadequate emergency power systems, evacuation plans, and floodwater protection. An emergency generator on the roof shut down after a fuel pump on the first floor was submerged in floodwaters, and the family claims that could have been prevented by spending less than $10,000 on a submersible pump. In court filings, the hospital's owners describe Hurricane Katrina as an "act of God" that could not be foreseen and say that it would be unreasonable to require that a hospital provide uninterrupted care in such extreme and unlikely catastrophes.

The hospital's owners say the emergency power system "met or exceeded applicable electrical codes and standards," according to court papers. Evidence filed as part of the lawsuit includes a memo from Cameron B. Barr, an executive vice president with the hospital at the time, in which he says, "The first question is, do we have generators placed to accommodate an emergency flood with 15 feet of water? The answer to that question is no." The document goes on to explain that although one of the two main generators was located on a roof, the second would cease to operate with "about 2 feet of flood water around the generator." As it turned out, the floodwaters shut down the rooftop generator as well.

Barr wrote in the memo that fixing the problem would require not only relocating the generators, but also the fuel supply, power plant, and an underground tunnel — a project he estimated would cost $7.5 million.

There has to be a limit to what a hospital can reasonably spend on emergency preparedness, Zuckerman says.

"Obviously, all organizations — including hospitals — have an obligation to recognize their exposures and to manage their exposures, but what I'm struggling with as a risk management consultant and insurance broker is where do you draw the line," Zuckerman says. "How much does a hospital have to invest to prepare for extreme types of catastrophes like Katrina? We can say they knew that this tragedy was possible, and they could have prepared for making their generators viable in even the most extreme conditions. But on the other hand, in this era of health care reform and shrinking reimbursements, there might be a line where you say the hospital can only go this far and continue to function financially."

Risk managers should not see LaCoste as reason to push for unlimited spending on emergency preparedness, says Marco Salazar, JD, a partner with the law firm of Maltzman Foreman Law in Miami. The case can rightly be seen as a reminder that emergency preparedness is a genuine risk issue, but it would be foolhardy to devote endless resources, he says.

"Even if you had unlimited funds, where would you stop? How can you anticipate everything that might possibly happen in a disaster?" he says. "It is necessary to prepare for what is reasonably anticipated, but that's the big question. What is reasonable?"

Salazar says he suspects health care providers will devote more resources to emergency preparedness because of the LaCoste case, which will in turn result in higher health care costs.

"The cat's out of the bag. We're going to see more of these lawsuits, and that's going to prompt more providers to act defensively and shore up their emergency plans, possibly beyond a point that we should consider reasonable," he says.

Salazar points out that the Barr memo documenting the generator issue was a key piece of evidence in LaCoste, and he suggests risk managers take a look at what similar evidence might be used against them. Do you have documentation showing that the provider knew of potential deficiencies in emergency preparedness? Is there a paper trail showing that you dealt with those issues or why you didn't?

"That kind of memo can be powerful in court if it makes you look like you saw the problem and just moved on without doing anything," he says.

Zuckerman worries that LaCoste and similar allegations about emergency preparedness will have a negative impact on enterprise risk management. When Standard & Poor's does a credit evaluation to establish a credit rating, it now looks specifically at enterprise risk management with its broad view of all risks within the organization. Zuckerman wonders if this litigation will result in Standard & Poor's taking a closer look at emergency preparedness.

"Regardless of the LaCoste trial verdict, the whole issue of emergency preparedness has been brought to the forefront and specifically as a risk and liability issue," he says. "Now, we have the question of how far the hospital has to go on its own before we can say that, at this level of catastrophe, we have to depend on the government for relief. If it's going to cost $8 million or $16 million to meet the most extreme situations, can we really demand that hospitals go that far?" Zuckerman advises risk managers to work closely with those most responsible for emergency preparedness, helping them understand the risk and liability implications of some of their decisions. Documenting the decision process also can be important, he says.

"I think you're always going to be in a better position if you can show that you considered the possibilities and made a decision, rather than just being negligent and not even addressing them," he says. "You can say you had to make some tough decisions about expenditures and you opted to spend the money here, on a cancer center that is desperately needed in your community, rather than on extreme preparedness for a once-in-a-hundred-year event."

Reference

• LaCoste v. Pendleton Methodist Hospital, 966So.2d 519 (La. 2007).

Sources

For more information on liability risks regarding emergency preparedness, contact:

• Kristin D. McMahon, JD, Chief Claims Officer, IronHealth, Simsbury, CT. Telephone: (860) 408-7812. E-mail: Kristin.McMahon@ironshore.com.

• Marco Salazar, JD, Partner, Maltzman Foreman Law, Miami. Telephone: (305) 358-6555, ext. 125. E-mail: msalazar@mflegal.com.

• M. Michael Zuckerman, JD, Managing Director, Aon Risk Services Central, Philadelphia. Telephone: (215) 255-1839. E-mail: michael_zuckerman@asg.aon.com.