Public Citizen Calls For Removal of Medical Malpractice Settlement Reporting “Loophole”

The prominent consumer watchdog group Public Citizen is criticizing federal regulators for failing to close a loophole that allows doctors to get away without reporting medical malpractice payments. 

Public Citizen issued a statement on September 22, indicating that the U.S. Department of Health and Human Services (HHS) rejected a petition to fix what is known as the “corporate shield” loophole for doctors and healthcare workers. According to the group, it allows health care providers to avoid reporting medical malpractice settlements to the National Practitioner Data Bank (NPDB).

In May 2014, Public Citizen filed a petition calling for HSS and the Health Resources and Services Administration (HRSA) to issue a notice of proposed rulemaking to address the loophole. HRSA proposed such a rulemaking in December 24, 1998, but declined to pursue it.

HRSA filed a response (PDF) on September 21, rejecting a May 2014 petition by Public Citizen, which filed a lawsuit (PDF) over the decision in July.

“HRSA’s denial of Public Citizen’s petition to close the corporate shield loophole represents an abject failure of the agency to act in the best interests of patient safety and public health,” Dr. Michael Carome, director of Public Citizen’s Health Research Group, said in the statement. “The agency’s terse denial letter offers little substantive explanation justifying its action.”

Carome said that the loophole is not consistent with federal law, and undercuts the NPDB’s mission to ensure patient safety by providing information on malpractice payments and the disciplinary history of doctors and health care workers.

However, the HRSA letter says that it rejected the petition, and previous proposed rule to close the loophole due to comments it received during the public comment period. The HRSA letter says that the vast majority of comments it received were in opposition to the rule, saying that it was overly broad, that current regulations exist to address the problem, and that HHS may not have the legal authority to address the problem.

“In HRSA’s view, the regulatory solution proposed in the NPRM and again suggested by Public Citizen in its May 2014 letter is not a viable answer for many of the reasons raised by commenters to the 1998 NPRM,” the HRSA letter states. “Though HRSA remains open as how to address the ‘corporate shield,’ HRSA is currently unaware of any regulatory mechanism that does not raise similar concerns.”

Carome stated that the letter and HRSA’s actions indicate that the agency is more protecting doctors who provide substandard care than it is protecting patients.