MALPRACTICE

The big secret about confidential settlements

By Berkeley Rice
Senior Editor

Settling a case to avoid negative publicity may be naive. The ugly details may come out anyway.

Prime-time crime shows may end in exciting courtroom dramas, but most malpractice cases don't: The great majority are either dismissed or settled before trial. The settlements often include a confidentiality agreement under which both sides promise not to reveal the terms of the deal.

But are those settlements really confidential? Not necessarily. In fact, physicians who agree to them in order to keep the details of a case secret may be guilty of naivete, if not malpractice.

When the Chicago Tribune ran a series on "unhealthy hospitals" last July, one of the articles featured a hospital in Bridgeport, CT, where the rate of death and serious illness due to bacterial infection among cardiac surgery patients was alarming. The story mentioned one of the victims by name, and quoted the widower of another.

The hospital had already settled suits brought by those plaintiffs—with the usual confidentiality agreements. After the newspaper story appeared, the hospital sued them both for breach of contract, claiming they had violated the agreements. The news of that suit, however, caused the kind of outraged media coverage that no medical institution wants. Two days later, the hospital dropped the suits.

The lesson for doctors: Settlement confidentiality agreements are no guarantee that a patient won't later disclose the details of a malpractice case. And if a patient does, there's little recourse. Any doctor who sues a patient will look bad, whether he was negligent or not.

We talked to malpractice attorneys to get their take on confidentiality agreements—and whether there are ways to enforce them. We also took a closer look at the Bridgeport, CT, case to see what it could teach physicians.

The hospital sues the malpractice victims

Among the victims at Bridgeport Hospital were Gloria Bonaffini, who died after more than a year in a coma, and Eunice Babcock, who survived, but remains permanently disabled. In 1999, Babcock, her husband, and Bonaffini's husband filed a joint malpractice suit against the hospital, claiming that officials there knew or should have known about the high infection rate, and failed to take prompt action to solve the problem.

As part of their discovery, the plaintiffs demanded the hospital's infection control records. The hospital refused, but the state Supreme Court eventually ordered those records to be released to the plaintiffs. In May 2001, the two sides reached a confidential settlement under which the hospital paid the plaintiffs undisclosed sums.

The Tribune based its story on those records (obtained at the courthouse) and on interviews with Bonaffini, the Babcocks, and their lawyer, Margaret Haering. They were also quoted in stories that appeared the same day in Bridgeport's Connecticut Post and The Hartford Courant.

Three days after the stories appeared, the hospital sued the four, accusing them of violating the confidentiality agreement and damaging the hospital's reputation. The hospital also sought—and was granted—a temporary injunction forbidding them from discussing their cases with the media.

Bonaffini, the Babcocks, and Haering all denied violating the agreement. "It's stupid," Bonaffini told the Connecticut Post. "The only thing I wasn't supposed to talk about was the settlement, and I didn't. I only talked about the way they treated my wife." Haering also insists, "The confidential agreement does not limit my clients' right to discuss their experience at the hospital."

The hospital's suit and the court's gag order brought calls from reporters around the country, and turned what had been a relatively minor local story into a highly embarrassing national one. By the end of the week, the hospital dropped its suit. "We deemed that the best course of action for everyone involved," said a hospital spokesperson.

Despite the hospital's belated discretion, several newspapers commented on its ham-handed attempt to silence the plaintiffs. An article in The New York Times noted: "If the [hospital's] goal was to stem negative publicity, suing a man whose wife died and a woman who was left mostly wheelchair-bound, was probably ill-advised." In an editorial entitled "Hospital's suit backfires," the New Haven Register accused the hospital of trying "to cover up and buy off the victims of its own misdeeds."

Confidentiality agreements: appealing–but misleading

Usually it's the defense attorneys who push for confidentiality. But confidential settlements can offer clear benefits for everyone involved:

• Doctors avoid the embarrassment of a public trial, and having their treatment decisions critiqued by the plaintiff's attorney and his expert witnesses.

• Malpractice carriers dodge the risk of paying a much bigger judgment if the case goes to a jury. And by keeping their payments secret, insurers prevent the local plaintiffs' bar from learning what the market will bear.

• Judges like settlements because they resolve cases quickly, saving the time and cost of a lengthy trial.

• Plaintiffs often agree to a confidential settlement because it brings an immediate payment. Otherwise, they might wait years for the case to drag through trial and possible appeals, with the risk of getting nothing if they lose. It also protects their privacy by preventing friends, neighbors, and telemarketers from reading about their sudden windfall and the medical details that prompted the suit.

But, in fact, no settlement is completely confidential, regardless of the terms of the agreement. First of all, any settlement payment by a malpractice carrier on behalf of a physician must be reported to the National Practitioner Data Bank. While the general public can't access that information, state medical boards, hospitals, and other health care entities or professional societies that do peer review can tap into it.

Doctors must also disclose details about settlement payments and judgments when renewing their medical license, malpractice insurance, hospital privileges, and HMO credentials. While a confidentiality agreement theoretically forbids a doctor from revealing such details, not doing so could result in nonrenewal of his license or malpractice coverage, or in being dropped by an HMO or hospital. "Medmal insurers, hospitals, and HMOs insist on that information," says Steven I. Kern, a health care attorney in Bridgewater, NJ. "They don't care whether it means breaching your confidentiality agreement."

Even if both sides do abide by their vows of confidentiality, their agreement generally applies to the terms and the amount of the settlement—not the allegations and other details of the case. Since many settlements occur just before trial, much of the evidence may have already been gathered through discovery, and filed as part of the court record. That means it's public, and available for review by any industrious reporter. While those records can be sealed, judges are reluctant to do so except in rare cases.

What if a plaintiff out-and-out disregards a confidentiality agreement? You could sue, but, as the Bridgeport case illustrates, doing so could be a public relations disaster, particularly for a physician.

Besides, although confidentiality agreements are binding in theory, they're not easy to enforce, according to Kern. "Even if it's clear that the plaintiff or his lawyer has divulged the details of the settlement," he says, "it's very hard for a physician to prove that the breach of contract has caused economic damage."

To win damages, Kern explains, you'd have to show that the release of settlement details caused a significant drop in your practice income. That means proving that patients stopped coming in as a direct result of hearing about the settlement. The only way to do that would be to ask those patients to sign affidavits to that effect, or to testify at trial.

One way to help ensure confidentiality, says Kern, is to include a "liquidated damages provision" under which the plaintiff and/or his lawyer would forfeit a sizable chunk of the settlement sum if they reveal the terms of the agreement. The advantage of such a provision is that the doctor wouldn't have to prove a loss of income. "It might be difficult to get," says Kern, "but it's worth negotiating for because it gives teeth to the promise of confidentiality."

A move to ban all secret settlements?

There's been a trend in recent years to limit confidential settlements. More than a dozen states now have—or are considering—such restrictions, particularly in cases involving issues of public safety. A few states have passed "sunshine laws" under which malpractice settlements as well as court judgments become part of the public record.

In Massachusetts, the state medical board's Web site lists doctors' malpractice payments as part of their profiles, although the amounts are reported only as "average," "below average," or "above average." In Florida, the Department of Health's Web site lists all settlements and verdicts—including the specific amount paid. As department spokesman Bill Parizek explains: "If you're shopping for a car, you want all the information you can get. If you're shopping for a doctor, you should also have the information you need."

In South Carolina, the state's federal judges recently voted unanimously to ban all court-approved sealed settlements. Such agreements, proponents held, make the courts complicit in preventing the public from learning the truth about hazardous products, sexually abusive priests, and incompetent physicians. The new rule will apply only to the federal courts, however, not to state courts, which handle most malpractice cases.

South Carolina's ban will cover only court-approved settlements, which are typically required in cases brought by plaintiffs who are minors, mentally incompetent, or wrongful-death heirs. It would not prevent other plaintiffs and defendants from reaching confidential settlements out of court, which is how most malpractice suits are settled.

Ken Suggs, a plaintiffs' attorney in Columbia, SC, applauds the ban because he feels it will help focus attention on incompetent physicians. He insists that the amount of a settlement is a fair measure of the validity of the plaintiff's case. As he explains, "It's one thing if a doctor pays $25,000 to settle a case because it would cost that much in legal fees to fight it. But it's another thing if he pays $500,000 or more. Let's face it: Doctors win most of the cases that go to trial. So if a doctor and his insurance carrier are willing to pay that much to settle a case, they must be afraid of losing at trial."

Some critics of confidential settlements argue that they amount to a bribe in which the defense buys the plaintiff's silence. Stephen Gillers, professor of legal ethics at New York University School of Law, argues that when such settlements forbid victims to talk about their experiences, they constitute "obstruction of justice," and violate ethical rules governing lawyers.

Christopher Bernard, a malpractice attorney in Bridgeport, CT, thinks the whole issue of confidentiality is overblown. "Even if a settlement is confidential," he explains, "it's not realistic to expect to keep the plaintiff's allegations and the basic facts of a case secret. But even if a confidential agreement isn't possible, any settlement provides far more privacy than a public trial."

 

Berkeley Rice. Malpractice: The big secret about confidential settlements. Medical Economics Apr. 25, 2003;80:22.