Resuscitating Hospital Enterprise Liability

I. INTRODUCTION No tort reform has more potential to improve the quality of medical care and to reduce the frequency of patient injuries than exclusive hospital enterprise liability. Hospital enterprise liability would make hospitals liable for all patient injuries occurring in the hospital that are the product of provider negligence, regardless of the independent contractor status of the providers. In its "exclusive" form, enterprise liability would also eliminate the personal liability of individual physicians and nurses. Exclusive hospital liability is also more likely than any other evenhanded tort reform to reduce the extraordinary fear and anger that the threat of malpractice liability engenders in practicing physicians. As a result, the disappearance of enterprise liability from current discussions of malpractice reform is a serious mistake. Medical errors are far too common. (1) Yet, medical malpractice law--the body of law intended to reduce these errors--is widely believed to have failed in its deterrent role. (2) Critics base this conclusion on three contentions. First, research studies have been unable to detect a significant deterrent effect on the frequency of medical errors. Second, physicians do not believe that providing high quality medical care will shield them from malpractice liability. As long as they believe that tort law operates this way, then the threat of tort liability is unlikely to prompt improvements in patient safety. Third, patient safety advocates regularly complain that medical malpractice law poses a serious obstacle to the reduction of medical errors because it makes physicians afraid to discuss them. Exclusive hospital enterprise liability has the potential to revive the dormant deterrent power of tort law. The reasons are simple. Unlike individual physicians, hospitals are experience-rated repeat players who have the vantage point and the resources needed to recognize and implement systematic improvements in the process of delivering health care. Adoption of enterprise liability would align the incentives of tort law with the goals of modern patient safety advocates who emphasize the need to shift our focus from the blaming of individual wrongdoers to the design of systems that anticipate and prevent human error. Exclusive enterprise liability would also reduce the disruption caused by the insurance cycle, spare high-risk specialists from shouldering a disproportionate share of health care's liability costs, reduce litigation costs that arise in multi-defendant lawsuits, and dampen the extraordinary anger of practicing physicians. The time has come to adopt hospital enterprise liability. Part I of this Article explains why existing malpractice law has failed to make patients safer. Part II then reviews the history of proposals for enterprise liability and the reasons those proposals were not adopted. Part III outlines my contention that hospital enterprise liability would revive the deterrent power of medical malpractice law. It also defends my claim that enterprise liability would align tort law with efforts of modern patient safety experts to reduce errors by focusing on system-wide improvement, rather than individual blame. Finally, it explains how this reform would advance the recommendations of health reformers who want to improve the quality and cost-effectiveness of health care by making health care systems more accountable for these outcomes. They, too, place great emphasis on hospital level accountability. Part IV then explores the many benefits that enterprise liability is likely to confer which are not related to patient safety. Part V reviews several possible weaknesses of enterprise liability. In the Conclusion, I argue that the strengths of exclusive hospital enterprise liability substantially outweigh those weaknesses. II. THE LACK OF DETERRENCE FROM INDIVIDUAL PHYSICIAN LIABILITY Scholars have long lamented the failure of malpractice law to send a coherent deterrent signal to physicians. …