Enterprise liability: These tips can help spot trouble

"Enterprise liability" is a legal concept that some advocates say can help health care organizations achieve patient safety, but it could represent another reason for risk managers to worry, says Fay A. Rozovsky, JD, MPH, DFASHRM, DSA, senior vice president of Marsh, a consulting firm in Richmond, VA. Rozovsky addressed risk managers’ concerns about enterprise liability at the recent meeting of the American Society for Healthcare Risk Management in Nashville, TN. She explained that the concept calls for liability for errors and omissions to shift from the individual clinician to the health care organization.

Enterprise liability was suggested as a solution to medical errors in To Err is Human, the landmark report released by the Institute of Medicine in 1999, because it can encourage individuals to report errors if they are not afraid of being held personally responsible. "But enterprise liability is fraught with risk management concerns," Rozovsky says. "Rather than enhancing patient safety, enterprise liability may serve to exacerbate underlying issues that give rise to questions about quality, safe patient care."

Emergency department a risky area

A focus on enterprise liability could result in hospitals being held responsible for the actions of physician groups or other entities that are legally separate, she says. Liability is most likely to occur in emergency departments or other departments in which the patient cannot easily make the distinction, Rozovsky says. Notifying the patient of such distinctions with signage and consent forms may be ineffective and provide a false sense of security, she adds.

Exposure also is possible when state licensure laws and regulations delineate specific, nondelegable responsibilities to a health care organization, Rozovsky says. Hospital leaders may assume there is no liability risk because the responsibility was delegated, but the law may prohibit such delegation. She suggests looking for these warning signs that your organization could be exposed to enterprise liability exposure:

  • The health care organization uses signage in the emergency department indicating that the unit is managed or operated by a separate physician group.
  • Consent forms are used in the emergency department that acknowledge that the department or unit is managed or operated by a separate physician group.
  • Health care organization policy and procedure appears to delegate nondelegable duties to a committee.
  • In agreements with physician groups and other vendors to whom responsibility is given to manage or operation a department or unit, the terms and conditions are not reviewed for purposes of enterprise liability exposure.

Check state laws for nondelegable duties

  • In agreements with physician groups or other vendors to whom responsibility is given to manage or operate a department or unit, state law is not checked with respect to nondelegable duties of care.
  • With respect to enterprise liability, only a save harmless and indemnification provision is included in agreements with physician groups or other vendors to whom responsibility is given to manage or operate a department or unit.
  • Private contracts attempt to or actually create an enterprise liability between the health care organization and care providers.
  • The structure of the integrated delivery system reflects a corporate style conducive to interpretation of an operation functioning as an enterprise.
  • Managed care organizations receive complaints or lawsuits premised on organizational negligent care or service.
  • Integrated delivery systems receive complaints or lawsuits premised on organizational negligence or service.
  • The integrated delivery system has a centralized credentialing service that is the subject of complaints or lawsuits premised on negligence.
  • Orientation training does not describe enterprise liability.
  • Orientation training does not provide descriptions of enterprise liability.
  • Contracts are not reviewed for liability insurance coverages for purposes of enterprise liability.
  • Captive management programs do not include an assessment of enterprise liability exposure.