Reporting Medical Malpractice Payments

Each entity that makes a payment for the benefit of a health care practitioner in settlement of, or in satisfaction in whole or in part of, a written claim or judgment for medical malpractice against that practitioner must report the payment information to the NPDB. A payment made as a result of a suit or claim solely against an entity (for example, a hospital, clinic, or group practice) that does not identify an individual practitioner should not be reported to the NPDB.

Medical malpractice payments are limited to exchanges of money and must be the result of a written complaint or claim demanding monetary payment for damages.

The written complaint or claim must be based on a practitioner's provision of or failure to provide health care services. A written complaint or claim can include, but is not limited to, the filing of a cause of action based on the law of tort in any state or federal court or other adjudicative body, such as a claims arbitration board. Eligible entities must report when a lump sum payment is made or when the first of multiple payments is made.

Table E-3 outlines these reporting obligations.

Interpretation of Medical Malpractice Payment Information

As stated in Title IV and in Section 60.7(d) of the NPDB regulations, "[A] payment in settlement of a medical malpractice action or claim shall not be construed as creating a presumption that medical malpractice has occurred." Some medical malpractice claims (particularly those referred to as nuisance claims) may be settled for convenience and, as such, are not a reflection on the professional competence or professional conduct of a practitioner.

Payments by Individuals

Individuals are not required to report to the NPDB payments they make for their own benefit. Thus, if a practitioner or other individual makes a medical malpractice payment out of personal funds, the payment should not be reported. However, a professional corporation or other entity composed of a sole practitioner that makes a payment for the benefit of a named practitioner must report that payment to the NPDB. (See next section.)

Previously, the NPDB had required that all medical malpractice payments made on behalf of a practitioner - even payments made out of personal funds - be reported. However, on August 27, 1993, in American Dental Association v. Shalala, the U.S. Court of Appeals for the District of Columbia Circuit held that an NPDB regulation requiring a report from each "person or entity" making a medical malpractice payment was invalid when applied to payments made by a practitioner on his or her own behalf, because the regulation was inconsistent with statutory language requiring any "entity" to report medical malpractice payments to the NPDB. The NPDB removed previously submitted reports on medical malpractice payments made by individuals for their own benefit.

The amount of the payment is irrelevant; there is no de minimis exception. In addition, payments not made in connection with litigation (e.g., those made resulting from professional peer review proceedings) may need to be reported. Peer review committees and others investigating and resolving patient complaints against practitioners should consider notifying practitioners of reporting requirements before a payment is made.

Payments for Sole Shareholder Corporations

Any resulting payment for claims against a sole shareholder corporation (SSC), and not the practitioner who owns the SSC, may be reportable if it is made for the benefit of an individual. When the SSC, and not any individual practitioner, is named as the defendant, payments resulting from the claim may be reportable if:

• The individual practitioner-owner of the SSC is named, identified, or sufficiently described in the body of the claim and in the settlement or final adjudication; or
• An employee of the SSC, who meets the definition of a health care practitioner, is named, identified, or sufficiently described in the body of the claim and in the settlement or final adjudication; or
• A practitioner (either the owner of the SSC or one of the SSC's employees) is named, identified, or otherwise described in the written complaint or claim and is dismissed from the suit as a condition of the settlement or release. In this instance, for the payment to be reportable the practitioner need not be named or identified in the settlement or release if dismissal of the practitioner was a condition of the settlement.

Payments for Corporations and Hospitals

Medical malpractice payments made solely for the benefit of a corporation - such as a clinic, group practice, or hospital - should not be reported to the NPDB. A payment made for the benefit of a professional corporation or other business entity that consists of only a sole practitioner must be reported if the payment was made by the entity rather than by the sole practitioner out of personal funds.

Identifying Practitioners

An MMPR is submitted on a particular health care practitioner, not an organization. In order for an MMPR to be submitted to the NPDB on a particular health care practitioner, the practitioner must be named, identified, or otherwise described in both the written complaint or claim demanding monetary payment for damages and the settlement release or final adjudication, if any. Practitioners named, identified, or described in the release but not in the written demand or as defendants in a lawsuit should not be reported to the NPDB. So, if a practitioner is named, identified, or described in the body of the written complaint or claim and is not named as a defendant in the suit, the payment would be reportable if (1) the practitioner also is named, identified, or described in the settlement or final judgment and (2) a payment was made on behalf of the named, identified, or described practitioner.

A practitioner named, identified, or described in the written complaint or claim who is subsequently dismissed from the lawsuit and not named, identified, or described in the settlement release should not be reported to the NPDB unless the dismissal results from a condition in the settlement or release. The given name of the practitioner does not have to appear in the complaint, release, or final adjudication as long as the practitioner is sufficiently described as to be identifiable. A practitioner may be sufficiently identified by title or role in a procedure, such as "chief of surgery" or "the anesthetist who participated in the patient's surgery," without being specifically named.

Written Complaint or Claim

To be reported to the NPDB, a medical malpractice payment must be the result of a written complaint or a written claim demanding monetary payment for damages. The NPDB interprets this requirement to include any form of writing, including pre-litigation written communications. The NPDB, not any other entity, determines whether a written claim has occurred for purposes of filing a report.

Dismissal of a Defendant from a Lawsuit

If a defendant health care practitioner is dismissed from a lawsuit prior to settlement or judgment, for reasons independent of the settlement or release, a payment made to settle a medical malpractice claim or action should not be reported to the NPDB for that defendant health care practitioner. However, if the dismissal results from a settlement or release, the payment must be reported to the NPDB. In the first instance, there is no payment for the benefit of the health care practitioner because the individual has been dismissed from the action independently of the settlement or release. In the latter instance, if the practitioner is dismissed from the lawsuit in consideration of the payment being made in settlement of the lawsuit, the payment can only be construed as a payment for the benefit of the health care practitioner and must be reported.

Confidential Terms of a Settlement or Judgment

Confidential terms of a settlement or judgment do not excuse an entity from the statutory requirement to report a payment to the NPDB or from providing a narrative describing the payment. The reporting entity should explain in the narrative section of the MMPR that the settlement or court order stipulates that the terms of the settlement are confidential.

Insurance Policies that Cover More than One Practitioner

A medical malpractice payment made under an insurance policy that covers more than one health care practitioner should be reported only for the individual practitioner for whose benefit the payment was made, not for every practitioner named on the policy.

One Payment for More than One Practitioner

In the case of a payment made for the benefit of multiple health care practitioners, if it is impossible to determine the amount paid for the benefit of each individual practitioner, the insurer must report, for each practitioner, the total (undivided) amount of the initial payment and the total number of practitioners on whose behalf the payment was made. If a payment was made for the benefit of multiple practitioners, and it is possible to apportion payment amounts to individual practitioners, the insurer must report, for each practitioner, the actual amount paid for the benefit of that practitioner.

Residents and Interns

Reports must be submitted when medical malpractice payments are made for the benefit of licensed residents or interns, including those insured by employers.

If a supervisory practitioner is named in a lawsuit based on the actions of a subordinate practitioner (e.g., a licensed resident or intern), separate reports must be submitted for each practitioner. The report on the supervisory practitioner should be submitted using the same malpractice claim description code used in the subordinate practitioner's payment report. The reporting entity should use the narrative description to explain that the supervisory practitioner was named based on the subordinate practitioner's services.

Students

Payments made for the benefit of unlicensed students should not be reported to the NPDB. Unlicensed student practitioners provide health care services exclusively under the supervision of licensed health care practitioners in a training environment. The definition of health care practitioner does not include unlicensed students.

Practitioner Fee Refunds

If a health care practitioner's fee is refunded by an entity (including solo incorporated practitioners), the payment must be reported to the NPDB if the conditions described in the next paragraph are met. A refund made by an individual, out of personal funds, should not be reported to the NPDB.

For purposes of NPDB reporting, medical malpractice payments are limited to exchanges of money. A refund of a fee must be reported only if it results from a written complaint or claim demanding monetary payment for damages. The written complaint or claim must be based on a health care practitioner's provision of, or failure to provide, health care services. A written complaint or claim may include, but is not limited to, the filing of a cause of action based on the law of tort in any state or federal court or other adjudicative body, such as a claims arbitration board.

Waiver of Debt

A waiver of a debt is not considered a payment and should not be reported to the NPDB. For example, if a patient has an adverse reaction to an injection and is willing to accept a waiver of fee as settlement, that waiver should not be reported to the NPDB.

Loss Adjustment Expenses

Loss adjustment expenses (LAEs) refer to expenses other than those in compensation of injuries, such as attorney fees, billable hours, copying costs, expert witness fees, and deposition and transcript costs.

LAEs should be reported to the NPDB only if they are included in a medical malpractice payment. The total amount of a medical malpractice payment, a description of and amount of the judgment or settlement, and any conditions (including terms of payment) should be reported to the NPDB. LAEs should be itemized in the narrative description section of the reporting format. If LAEs are not included in the medical malpractice payment amount, they should not be reported to the NPDB.

High-Low Agreements

A high-low agreement is a contractual agreement between a plaintiff and a defendant's insurer that defines the parameters of a payment the plaintiff may receive after a trial or arbitration proceeding. The benefit to insurers is to limit the amount they may be required to pay if the plaintiff wins the case. The benefit to plaintiffs is a guaranteed payment even if they lose the case or win only a small award. The defendant's insurer agrees to pay the "low end" amount to the plaintiff if the verdict or decision is for the defendant. The defendant's insurer is obligated to pay no more than the "high end" amount to the plaintiff if the verdict or decision is for the plaintiff.

A payment made at the low end of a high-low agreement must be reported to the NPDB unless the fact-finder (such as a judge, jury, or arbitrator) rules in favor of the defendant and assigns no liability to the defendant practitioner. If the fact-finder rules in favor of the defendant and assigns no liability to the defendant practitioner, the payment is not being made for the benefit of the practitioner in settlement of a medical malpractice claim. Rather, it is being made pursuant to an independent contract between the defendant's insurer and the plaintiff.

When a defendant practitioner has been found liable by a fact-finder, any payment made for the practitioner's benefit must be reported, regardless of the existence of a high-low agreement. If a high-low agreement is in place, and the plaintiff and defendant settle the case prior to trial, the existence of the high-low agreement does not alter the requirement to report the settlement payment to the NPDB.

Example 1: A high-low agreement is in place prior to trial. The parties agree to a low-end payment of $50,000 and a high-end payment of $200,000. The jury finds the defendant physician liable and awards $40,000 to the plaintiff in damages. This $40,000 payment must be reported to the NPDB because the jury found the defendant physician liable. The defendant's insurer must pay an additional $10,000 as a result of the high-low agreement ($40,000 +$10,000 = $50,000). The payment amount should be reported as $40,000 and the additional $10,000 explained in the narrative.

Example 2: A high-low agreement is in place prior to binding arbitration. The parties agree to a low-end payment of $50,000 and a high-end payment of $150,000. The arbitrator finds in favor of the defendant practitioner with no liability on the part of the practitioner. However, due to the existence of the high-low agreement, the defendant's insurer makes a payment of $50,000 to the plaintiff (the low-end payment). This payment should not be reported because the arbitrator (fact-finder) explicitly found no liability and the payment is being made pursuant to an independent contract between the defendant's insurer and the plaintiff.

Example 3: A high-low agreement is in place prior to trial. The parties agree to a low-end payment of $50,000 and a high-end payment of $150,000. Before the fact finder returns a verdict, the parties agree to settle the case for $100,000. The high-low agreement is no longer in effect due to the settlement. This $100,000 payment must be reported because it is made in settlement of the claim.

Example 4: A high-low agreement is in place prior to trial. The parties agree to a low-end payment of $50,000 and a high-end payment of $200,000. Rather than go to trial, the parties agree to binding arbitration to assess the amount of damages the plaintiff will receive and not to determine liability. The arbitrator awards the plaintiff $80,000. In this case, the arbitration proceeding was conducted to determine the amount of recovery by the plaintiff and not to determine liability. Because liability was not determined at this arbitration proceeding, there was no explicit finding that the practitioner had no liability. Therefore, the payment of $80,000 is made in settlement of the claim, and not as a result of the high-low agreement, and must be reported.

Payments by Multiple Payers

Any medical malpractice payer that makes an indemnity payment for the benefit of a practitioner must submit a report to the NPDB. Generally, primary insurers and excess insurers are obligated to make an indemnity payment for the benefit of a practitioner and so must submit a report to the NPDB. Typically, reinsurers are obligated to make an indemnity payment directly to the primary insurer, not for the benefit of the practitioner, and are not required to submit a report to the NPDB.

Example: If three primary insurers contribute to a payment, all three insurers are required to submit separate reports to the NPDB. Each insurer should describe the basis for its payment in the narrative description of the settlement to avoid the impression of duplicate reporting.

Subrogation-Type Payments

Subrogation-type payments made by one insurer to another are not required to be reported, provided the insurer receiving the payment has previously reported the total judgment or settlement to the NPDB. Subrogation often occurs when there is a dispute between insurance companies over which professional liability policy ought to respond to a lawsuit.

Example: A practitioner is insured in 2017 by Insurer X and changes over to Insurer Y in 2018. Both policies provide occurrence-type coverage. A medical malpractice lawsuit is filed in 2018. There is a dispute over whether the alleged medical malpractice occurred in late 2017 or early 2018. Under the 2018 policy, Insurer Y agrees to defend the lawsuit but obtains an agreement from the practitioner that it may pursue the practitioner's legal right to recover any indemnity and defense payments that should have been paid under Insurer X's policy. This is a subrogation agreement. The jury subsequently determines that the incident occurred in 2017 and awards $500,000 to the plaintiff. Insurer Y makes the $500,000 payment to the plaintiff and reports it to the NPDB. Insurer Y seeks subrogation of its indemnity and defense payment from Insurer X. Insurer X ultimately concedes and pays Insurer Y the $500,000 plus defense costs. Insurer X is not required to report its reimbursement of Insurer Y to the NPDB.

Structured Settlements

A medical malpractice payer entering into a structured settlement agreement with a life insurance or annuity company must submit a payment report within 30 days of the date the lump sum payment is made by the payer to that company.

Offshore Payers

A medical malpractice payment made by an offshore medical malpractice insurer must be reported to the NPDB.

Payments Made Prior to Settlement

When a payment is made prior to a settlement or judgment, a report must be submitted within 30 days from the date the payment was made. Since the total amount of the payment is unknown, the medical malpractice payer should state this in the narrative description section of the report. When the settlement or judgment is finalized, the insurer must submit a Correction Report.

Reporting of Medical Malpractice Payments by Authorized Agents

The organization that makes the medical malpractice payment is the organization that must report the medical malpractice payment to the NPDB.

A medical malpractice payer may choose to use an adjusting company, claims servicing company, or law firm, for example, acting as its authorized agent, to complete and submit NPDB reports. An insurance company also may wish to have all of its NPDB correspondence relating to reports handled by an authorized agent. This is strictly a matter of administrative policy by the medical malpractice payer.

Submitting a Copy of the Report to the State Licensing Board

A copy of the report that medical malpractice payers receive after a report is successfully processed by the NPDB must be provided to the appropriate state licensing board(s) in the state in which the act or omission upon which the medical malpractice claim was based. Alternatively, NPDB reporters may elect to send an electronic version of the report to the appropriate state licensing board through the NPDB's Electronic Report Forwarding service, provided the state board has agreed to accept electronic notices of a payment.

Sanctions for Failing to Report to the NPDB

The OIG has the authority to impose civil money penalties in accordance with Title IV. Under the statute, any malpractice payer that fails to report medical malpractice payments in accordance with NPDB requirements is subject to a civil money penalty for each such payment involved.

The civil money penalty provided under Title IV is to be imposed in the same manner as other civil money penalties imposed pursuant to Section 1128A of the Social Security Act, 42 USC § 1320a-7a. Regulations governing civil money penalties under Section 1128A are set forth at 42 CFR Part 1003.

Table E-4 provides examples of whether medical malpractice payments must be reported to the NPDB.