Do healthcare managers have an ethical duty to admit mistakes?

Healthcare Financial Management, Oct, 1998 by Michael Nowicki

Managers in all industries, including health care, have faced the dilemma of whether to admit to organizational mistakes that consumers are unaware cause or could cause harm. Well-known examples of organizations that concealed such mistakes that later were discovered - with disastrous consequences for those organizations - include Dow Corning, which concealed the possible health risks of silicone breast implants, and General Motors, which covered up the risk of explosion posed by the "side-saddle" gas tanks in many of its pick-up trucks.

Managers in healthcare organizations frequently are reluctant to admit mistakes, especially in patient care, because they perceive that they have a duty to protect the organization from legal liability. Such action, however, has not only legal consequences but also financial and ethical consequences that, in the long run, may not serve the best interests of the organization.

Arguments for and against Disclosure

Patients often file lawsuits for mistakes made by the organization's employees and physicians. When managers seek legal advice about whether to admit mistakes, especially obvious mistakes, to patients, attorneys usually advise against such admission. Attorneys argue that lawsuits are a function not only of the number of mistakes made, but also of the number of mistakes made that patients know about. Therefore, attorneys conclude that admitting mistakes increases the number of mistakes that patients know about and thereby increases the organization's exposure to liability. Attorneys also claim that admitting mistakes impairs their ability to defend or settle the case if the patient files a lawsuit.

While admitting mistakes increases the number of mistakes that patients know about, the mere act of admission reduces the likelihood of patients filing lawsuits, according to a published survey of internal medicine patients. Virtually all patients surveyed (98 percent) desired admission of even minor mistakes. For both moderate and severe mistakes, patients were significantly more likely to consider a lawsuit if mistakes were not disclosed. For instance, for moderate mistakes, 12 percent of the patients surveyed would consider a lawsuit for disclosed mistakes; on the other hand, 20 percent of the patients would consider a lawsuit if mistakes were not disclosed but were discovered by the patient in another way. a For patients who would consider a lawsuit after a mistake was disclosed, and assuming the organization took appropriate corrective action and compensated the patient fairly after the mistake was disclosed, the courts may be limited to punitive damages in providing a remedy. In theory, punitive damages should be insignificant, if awarded at all, in such cases.

Case Law

Healthcare organizations that do not admit mistakes may increase their exposure to direct liability in addition to negligence. Courts have found that healthcare organization-patient relationships are fiduciary in nature and require the healthcare organization to disclose all pertinent information to the patient. If a healthcare organization fails to admit the mistake and the patient later suspects a mistake has been made and files a lawsuit, the court might find that such lack of disclosure on the part of the organization warrants a finding of malicious or willful intent, resulting in punitive damages and direct liability on the part of the organization. Courts also have found that withholding such information, especially in wrongful-death claims, may indicate misrepresentation, fraud, or fraudulent concealment.(b)

In Kruegar v. St. Joseph's Hospital, physicians told Mrs. Kruegar that her husband had died from heart failure during surgery. The death certificate indicated the same cause of death. Several years later, someone anonymously sent Mrs. Kruegar a letter and copies of her husband's medical records, which indicated that his death had been caused, in part, by a malfunctioning respirator. In the resulting lawsuit for wrongful death, the hospital argued that no false statements had been made to mislead Mrs. Kruegar and, therefore, the hospital's defense that the statute of limitations had expired should be upheld. The court concluded that fraud and fraudulent concealment can exist in the absence of false statements by not disclosing material facts in a fiduciary relationship. The hospital's defense that the statute of limitations had expired was not upheld due to the hospital's fraudulent concealment.(c)

Several rulings support imposing a fiduciary duty on healthcare organization-patient relationships.(d) When patients enter into a relationship with a healthcare organization, they place their trust and confidence in the organization and its physicians and employees, and patients expect the organization to act in their best interests. When healthcare organizations do not admit mistakes, they are subject to direct liability and punitive damages.(e,f)

Financial Consequences

Financial consequences of admitting all mistakes include incurring all associated compensatory costs. The financial consequences of admitting no mistakes include incurring associated compensatory and punitive damage costs for only the lawsuits arising from discovered mistakes. Other costs associated with either tactic may include taking measures to ensure that similar mistakes do not occur in the future.