As the sector awaits the government’s response to the recommendations set out in the Paterson Report, the question of hospitals’ liability for the actions of consultants practising on their premises, remains unanswered. Ahead of a webinar on 4 March, Paterson Inquiry team member, Stephen Collier, looks at the liability position and asks whether the sector should come together in search of a solution or wait for one to be imposed?
A key observation from the Paterson Report was on the lack of clarity over when and to what extent private hospitals are liable for medical consultants working at their premises.
Currently, there is no standardisation in the sector. Different providers take different approaches to their responsibility to ensure patients are compensated for the consequences of avoidable harm. But it is not always clear exactly who is responsible. And that problem, as the Inquiry team highlighted, is compounded by the discretionary nature of medical indemnity provided to consultants by defence organisations. So when things go wrong, there is the potential to leave patients without a clear remedy.
The issues around medical indemnity are likely to be addressed in the government’s response to the Paterson Report, expected shortly. The risk though is that the sector has legislation imposed on it which materially increases cost, takes away control, and imposes a blunt-edged liability regime which is out of step with the commercial reality. There is an alternative to this, but it requires the sector to act collectively to establish a different and agreed way of working. A suggested way forward is set out below.
For private hospitals, the current situation is deeply problematic. It is clear that the pace of change in the way indemnity is managed has failed to keep up with changes in healthcare commissioning and delivery, resulting in a dangerous, unpredictable – and potentially expensive – gap opening up for private hospitals in relation to their liability insurance.
The ways in which private healthcare is delivered to patients has changed materially over recent years. In the past, a traditional and well-established operational structure saw hospitals compete for consultants (1), who would choose where to take their patients. In recent years, however, this has given way to a very different model. A mix of commercial factors, such as end-to-end pathway contracting, increases in NHS caseload and the quality and outcomes agenda, together with tougher regulation and the introduction by the CMA of the Private Healthcare Order have driven changes in the hospital operating model that would have been unthinkable even 20 years ago.
The question is, to what extent has this new model brought the hospital to account for the quality of services provided on its premises? What began with a requirement for the hospital to take responsibility for quality assurance is heading firmly in the direction of overall liability for services delivered negligently. Whether a hospital is in law responsible depends on the service model in question. To complicate matters and add to the unpredictability, many private hospitals are often running two delivery models at the same time.
The issue providers face
Contracting arrangements increasingly require private hospitals to take on responsibility for the various components necessary to deliver a full end-to-end clinical pathway. And, with that, comes a responsibility for those elements delivered by third parties. This is enshrined in regulation, but the extent of the legal liability for those third parties remains unclear.
A multi-party civil litigation case dealing with legal liability for compensation to patients for the acts of Paterson might well have resolved much of this uncertainty, but for understandable reasons the case never reached a hearing. Instead, it was settled in advance. Between them, Spire Healthcare, its insurer (2), and the Heart of England NHS Foundation Trust (‘HEFT’) paid some £51m on a voluntary basis to a large number of former patients of Paterson. Paterson’s medical defence organisation, the MDU, exercised its discretion and disclaimed liability on the basis that the harm suffered by patients was the result of criminal acts and, therefore, stood outside the scope of the indemnity it provided.
The consequence was that the only parties (3) to the litigation with sufficient worth to pay compensation were Spire, and HEFT. But they had not themselves undertaken the surgery, so the question arose: ‘what was it in law that would make them legally responsible, and therefore liable, for Paterson’s actions?’
Broadly, liability for the acts or omissions of consultants in hospitals can arise in three ways: by contract; by vicarious liability; and by the establishment of a non-delegable duty of care. The law in these areas has been moving rapidly – led by the higher courts considering a variety of cases involving local authority outsourcing and sub-contracting and, separately, sexual abuse in residential settings. While it is outside the scope of this article to dive into detail, we can draw some broad conclusions about the current legal position and the implications for private hospitals which adopt newer models of healthcare contracting and delivery.
The position under contract is generally well understood, less so vicarious liability and non-delegable duty of care.
The types of arrangements hospital providers need to focus on are the ones where they assume delivery across the whole pathway and assemble the component parts. Examples include contracts with NHS commissioners, typically under the e-referral system or as nominated contractors to NHS trusts and FTs; certain self-pay surgeries, where the hospital ‘owns’ the patient self-referral (possibly generated online) and appoints the consultant surgeon and anaesthetist to undertake the relevant procedure. Such cases may also include pathway-commissioned services by private medical insurers, where the hospital is required to source, secure and pay for services from consultants to deliver certain components of the full pathway.
In each of these cases, the hospital or group is assuming the ‘enterprise delivery responsibility’. The assumption of that ‘enterprise risk’ has a direct bearing on the establishment by the courts of legal liability for the delivery of the various component parts, and specifically for any negligence in that delivery.
Looking at legal case law, one way a court is likely to impose legal liability on the hospital for the actions of consultants is by imputing vicarious liability. For this to be established, the older law covering those who are ‘employees’ (4) or ‘servants’ remains firmly in place. However, that law has been extended to cover other situations and in cases where a hospital has assumed enterprise risk, the courts will likely impute legal liability for the acts of consultants in situations where two tests are satisfied. First, they will need to establish that the relationship between the hospital and the consultant is ‘akin to employment’.
This is a legal assessment with a specific set of legal case-defined criteria, and not something that is driven by an IR35-type HMRC employment status analysis. In fact, the courts have been at pains to point out that there is no overlap between IR-35 ‘workers’ and the existence of vicarious liability. Second, where such a relationship has been identified, the courts will look at whether the relationship was the basis or reason why the consultant undertook the relevant act, albeit in a negligent or criminal manner. If the relationship was the ‘connection’ or basis for the consultant undertaking the action, vicarious liability will generally be imputed (5).
The second way legal liability can be established is through a non-delegable duty of care, which is ascertained by a test that looks at four factors. In broad terms these are that: there should be a reliance or dependence by the patient on the hospital which places the patient in its care, charge or custody; there should be a direct relationship between the hospital and the patient; the patient should have no real control or choice over how or by whom the relevant procedure is undertaken; and the hospital should have delegated or sub-contracted an integral part of the service to a consultant. In such a situation, the courts would likely impute a non-delegable duty of care to the hospital and negligence by the consultant would represent a breach of that duty of care to the patient.
In the Paterson/Spire compensation claim, the claimants alleged that Spire was both vicariously liable and that it had breached a non-delegable duty of care owed to patients. If the case had come to court and either argument accepted, Spire would likely have been found liable for the negligent acts of Paterson. However, it never got that far and was instead settled in advance under a payment arrangement negotiated between the various lawyers involved.
The uncertainty of the litigation outcome, together with considerations of reputational risk and the trauma to former patients were likely to have been factors in the decision to negotiate an out of court settlement.
But had the cases come to Court, what would have been the outcome?
The simple answer is that we will never know, given that not all of the ingredients of vicarious liability and/or of a non-delegable duty of care were present. That is itself unsatisfactory. But the real concern is the very fact that we still cannot answer this fundamental point about liability. As a result there is no clarity for patients considering private treatment about the availability of an effective mechanism for compensation, in the event that things do not go to plan.
This uncertainty sets the private hospital sector apart from other industries and settings, and presents an unmanaged and, to some extent, unquantifiable risk for private hospital providers.
However that is by no means the end of the story. There is an achievable and affordable solution to the present lack of clarity on liability and it is one which would be best and most quickly implemented by agreement across the whole sector, with the active support of consultants, hospitals, insurers, defence organisations and regulators. It would not be without cost, although this could largely be covered by reallocation rather than new spending. The question for hospital providers is: do they want to explore proposals for a voluntary solution in more depth, or leave it in the hands of regulators and legislators?
This is not a problem that can be solved by hospitals in isolation. It requires healthcare providers and their consultants to work together with their respective medical malpractice providers to find a model of protection that leaves no one exposed, whilst swiftly delivering the most appropriate resolution for the harmed patient.
The winds of change are blowing in private healthcare and the market is increasingly offering self-pay and pathway packages to commissioners and consumers. These offerings only serve to exacerbate the issue though, with the primary contracting entity viewed by the patient as the responsible party when outcomes are not as expected. Legally, identification of the responsible party is more complex – and unpredictable. A more holistic approach to discretionary indemnity and insurance could help mitigate this enterprise risk. That might involve a move away from traditional self-employed consultant status to em- ployed models (reflective of new working practices) or to insurance and indemnity providers insuring end to end self-pay and pathway packages themselves. By moving malpractice claims liability away from individual clinicians, it becomes relatively straightforward to centralise the management of risk.
Where clinicians have personal indemnity – often with those involved in delivering care indemnified by different medical defence organisations/insurers – there is the risk that the private hospital may not have complete visibility of the protection in place. Without full governance of the level of cover held by the clinician, in the event a claim arises relating to their practice it may prove difficult for the hospital to redirect the claim, or understand how it is being managed and at what speed. The result can often be an adverse experience for the patient due to delays in agreeing who is actually liable and for what apportionment. For hospitals using a non-employed model or a model where clinicians still wish to have their own individual protection for claims, an alternative solution could be for the same organisation to provide both the individual and the corporate protection; any reduction in clinician choice of insurer would though require collaboration and consultation between the hospital and its clinicians.
Further beneficial results of a centralised risk management approach are frictionless claims handling, reduced legal costs, and improved opportunities for system-wide risk management. Having oversight of all the complaints and claims that occur within a healthcare system allows for continuous institutional learning. Harnessing these lessons to design new ways of working that improve patient outcomes, intrinsically linked to financial performance of the hospital and wider system, will also drive down the claims risk posed to indemnifiers/insurers. Ultimately to deliver better outcomes for all parties involved – patient, provider, and payer – by creating a genuine partnership which fosters real improvements in healthcare delivery.
And if there is a reluctance to move straight to a restructured set of legal responsibilities and indemnity arrangements, the option exists to adopt a protocol-based approach to create a test period for any proposed solution.
So as we approach the first anniversary of the Paterson Report and the potential for wide-reaching legislation, the private healthcare sector does still have the opportunity to take control of this situation. Act to protect patients and service providers: by asking and agreeing what can and should be done – ahead of any future enforced legislative direction. And then doing it.
Fit for the Future? – Legal liability in the post-Paterson age – free-at-attend webinar. 4 March 10:00-11:00. Online
If you are interested in exploring these ideas further, please join us for a free webinar hosted by LaingBuisson and MPS Partnerships on Thursday 4 March, which will explore the matter from legal, medical and business perspectives with the help of guest speakers.
If progress is to be made, this will need the sector as a whole to agree a position. So please join in and express your view.