The EMTALA Strikes Back: An Independent Hospital Duty to Comply with Federal Law, or a Duty Transferable to Physicians via Indemnification Clauses?
In what could have significant implications to physician groups providing services to hospital emergency departments (“EDs”), the US District Court for the Southern District of Mississippi allowed a third-party complaint by a hospital to proceed against an ED physician practice after a patient sued the hospital, alleging that it violated the Emergency Medical Treatment and Labor Act, 42 CFR §489.24 (“EMTALA”). https://casetext.com/case/williams-v-vicksburg-healthcare-llc
EMTALA requires eligible hospitals participating in Medicare to appropriately screen and properly stabilize all patients who are present with emergency conditions (as well as transfer them when necessary). Physicians providing services to a hospital, such as ED physicians, are often required by the hospital to sign indemnification agreements taking contractual responsibility for damages caused by the physicians but incurred by the hospital. Generally, physicians grant such indemnification in exchange for receiving an exclusive right to provide at the hospital services such as pathology, emergency, or radiology.
In Williams v. Vicksburg Healthcare, LLC , Merit Health (the “Hospital”) is arguing that, because APP of Mississippi ED, LLC (the “ED Group”) contractually indemnifies the Hospital for damages caused by the negligence of the ED Group, the ED Group should be responsible to cover damages associated with the EMTALA violation.
This case raises several issues that physicians and hospitals should monitor carefully.
Many medical professional liability policies exclude coverage for violations of federal law, such as EMTALA. Moreover, policies may exclude contractual liability (i.e. indemnification clauses), particularly when related to indirect damages.
In Williams, the underlying action is an EMTALA violation, which could call insurance coverage into question. Physicians signing indemnification agreements should first understand the interplay between coverage and contract law and ask their brokers for guidance.
Indemnification Clauses, Generally
Often, boiler plate language is used for indemnification clauses, which can cause disputes in practice. For example, the Hospital will undoubtedly want to defend itself against the EMTALA action. However, its indemnification clause with the ED Group likely does not address how this process plays out.
Specifically, is the ED Group responsible for all legal costs, regardless of how the Hospital elects to defend itself? In other words, can the ED Group influence choice of counsel (cost, expertise) and strategy (settle or fight)? If not, how can the ED Group protect its own rights and mitigate damages when it is not a direct party to the claim?
The practical operation of such provisions should be thoroughly understood prior to entering into indemnification arrangements.
An Independent Duty?
In Williams, it appears that the Hospital is attempting to shift its duty to comply with EMTALA.
CMS requires under EMTALA that hospitals, “(a)dopt and enforce policies and procedures to comply with the requirements of 42 CFR §489.24.” Arguably, the hospital – at a minimum – failed to adequately enforce such policies. Should hospitals be able to escape this duty via indemnification clauses?
Furthermore, if the Hospital markets and promotes its emergency department as an independently specialized entity, it may have a difficult time convincing a judge that it simultaneously has no independent duty to comply with EMTALA; that the ED Group’s negligence is dispositive.
Assuming the hospital is found to violate EMTALA, must there then be a separate ruling on whether the ED Group committed negligence? Does negligence need to be committed against the patient – and all elements of a medical professional liability case met – or only a breach of the contractual duty to the Hospital?
Regardless of the above circumstances, any governmental fines or penalties levied against a hospital for violating EMTALA would be the hospital’s primary responsibility. Reimbursing the hospital for a fine might appear logistically simple. But what if the hospital were to be suspended from Medicare? How would a medical group indemnify such an action that amounts to millions of dollars annually of potentially lost revenue, not to mention, the loss to the community of emergency services?
Stock indemnification clauses are rarely sufficient to address myriad issues raised in cases such as Williams, never mind be used to shift liability under Federal Law. The decision in this case may have widespread implications for healthcare contractual liability.
Brian S. Kern, Esq. is a Partner with Acadia Professional, LLC and Of Counsel with Frier & Levitt, LLC and David A. De Simone, JD MHL CPHRM.