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Risk managers rely on legal counsel to provide important advice, but there is a real danger in relying upon it too much. When push comes to shove, it probably isn’t going to do you much good to say, "Our attorney said it was OK."
The technical term for that is the advice-of-counsel defense, and many risk managers have thought about using it at some point. The advice-of-counsel defense can be used successfully in some situations, but some sources caution that risk managers may think it more useful than it really is. It is a serious mistake to rely too heavily on an attorney’s opinion instead of exercising your own good judgment as a risk manager, says Grena Porto, RN, ARM, DFASHRM, director of clinical risk management and loss prevention services at VHA Inc. in Berwyn, PA, and past president of the American Society for Healthcare Risk Management.
"I still very much advocate going to legal counsel for many issues, and you have to seriously consider their advice; but you should consider them a valuable resource and not necessarily the final word for everything," Porto says. "A court’s not going to let you off the hook because you asked a lawyer first."
Attorneys are likely to tell you the same thing, and they worry risk managers have too much faith in the advice-of-counsel defense. John Boese, JD, an attorney with Fried Frank in Washington, DC, cautions risk managers that the advice-of-counsel defense rarely is useful. Boese says many defendants in civil False Claims Act (FCA) cases contend they should not be liable for punitive damages and penalties if they sought and followed the advice of legal counsel. That defense is "virtually never accepted by the court," he says.
Courts will expect risk managers, and the health care administration as a whole, to exercise good judgment and not rely excessively on an attorney’s opinion, Boese says. A consultation with an attorney is never going to be an all-purpose, get-out-of-jail-free card, he warns. "People just rely too much on this defense, even if they never have to use it," he says. "They keep it in the back of their mind as the big defense they’ll put out if they have to, but they’re going to be disappointed at how poorly it works."
Porto says there are plenty of occasions in which risk managers should consult legal counsel for advice — and you should listen carefully to what they have to say. But Porto cautions risk managers can let themselves get too dependent on that process and see it as a way to just defer making a difficult decision. That’s not good risk management, she says.
"You have to keep in mind that the attorney’s opinion is only one factor that goes into the mix," she says. "A lot of people — not just risk managers, but also other hospital administrators — tend to stop when an attorney speaks and treat it like the word of God. But even attorneys will tell you it’s just their opinion."
Risk managers must remember they have a responsibility that is equally important as the attorney’s, even though they may work closely together to hammer out a decision. It is inevitable the risk manager sometimes will have to make a decision that the attorney disagrees with, Porto says. A particular risk is posed by consulting with the provider’s defense attorneys for general counsel questions. She points out that different attorneys will have their own perspectives that must be factored into the risk manager’s decision.
"A defense attorney will look entirely at mitigating damages and limiting liability. They’re not going to look at your other responsibilities, like fiduciary obligations and the facility’s public image," Porto says. She cites the example of a risk manager who wants to formally apologize to a patient who has been harmed. If you ask the defense attorney about that possibility, he or she is likely to say no. Even though an apology is not an admission of guilt, a defense attorney will lean toward playing it safe.
In another example, Porto questions how an attorney would respond when a risk manager wants to disclose to a patient that something went wrong during surgery. The defense attorney, and maybe even other legal counsel, is likely to say you shouldn’t tell the patient because you might get sued. "That does not relieve you of your obligation to the patient," she says. "You are going to be held to the standards of your profession, and health care risk managers certainly have a code of ethics and other standards to follow."
Boese tells Healthcare Risk Management that the advice-of-counsel defense can be used successfully, but only in a narrow area of court actions. Courts will be more receptive to the defense when the issue at hand is extremely complex and beyond the assessment of the typical hospital administrator. "It’s no good in cases where things are pretty clear, like coding questions. Everyone is going to reach the same conclusion once the facts are in," he says. "But it’s going to look better in cases where lawyers and lawyers’ advice are critical for whether to proceed with what you’re doing. That’s when the advice-of-counsel defense will make more sense, but it’s still not something you want to pin all your hopes on."
Boese notes the advice-of-counsel defense requires the defendant to waive attorney-client privilege, which opens up a whole can of worms for providers. He calls one recent case "unusual and important" because it shows the specific cases in which advice-of-counsel might be a good defense. In that case, a physician succeeded in having a court dismiss with prejudice false claims act claims related to allegedly illegal kickbacks (United States ex rel. Bidani v. Lewis, No. 97 C 6502, 2001 WL 32868 [N.D. Ill. Jan. 12, 2001]). The relator in that case alleged the defendant received illegal kickbacks by referring dialysis patients to supply companies owned and controlled by the defendant. In a previous decision, the court concluded the relator had stated an actionable FCA claim based on alleged violations of the Anti-Kickback Act.
Evidence was presented in a motion for summary judgment, demonstrating the defendants (the physician and two corporate entities controlled by the physician) sought and relied on the advice of counsel — who provided testimony to the court — as to the legality of the disputed arrangements. The court determined a defendant asserting the advice of counsel defense must demonstrate that "before taking action, the defendant sought in good faith the advice of an attorney he believed to be competent for the purpose of securing advice on the lawfulness of his possible future conduct, made full and accurate report to counsel of all material facts which the defendant knew, and acted strictly in accordance with the advice of the attorney who had been given a full report."
Boese says the court considered client memoranda and other attorney-client communications regarding the ownership relationship, concluding the defendants sought and followed the advice of their attorneys regarding the legality of their conduct. The court noted the defendants apparently did not hide any relevant facts from counsel, that counsel kept defendants advised of changes in the applicable statutes and regulations, and that the defendants changed their conduct accordingly.
The court also considered a variety of government documents, including federal audit reports, relating to the common ownership of dialysis facilities and clinics. Although the court never decided whether the applicable statutes and regulations had been violated, it stated the relator has the burden to show (by a preponderance of the evidence, under the FCA) that defendants knew their conduct violated applicable regulations in order to satisfy the act’s scienter requirement.
Boese says the court held that the only reasonable inference that could be drawn from the evidence was that the defendants had no actual knowledge that the common ownership arrangement was improper. The court thus held that the relator could not demonstrate that defendants knowingly presented or caused false Medicare claims to be presented to the government, and granted defendants’ summary judgment motion with prejudice.
The case was unusual, Boese says. He notes that it is extremely uncommon for the provider’s counsel to actually testify, but in this case, the provider’s attorney essentially told the court "this is a very confused area of law, and I told them what they were doing was OK." The FCA also is unusual in that it requires proof the defendant knew or should have known the action was prohibited.
"If you had asked me before this case how many times the advice-of-counsel defense had been successful, I would have said, None,’" Boese says. "Now I’d say, One.’"