United Tort Claimants v. Quorum Health Res., LLC (In re Otero Cnty. Hosp. Ass'n, Inc.)

• Decision Date: 18 March 2015
• Docket Number: 12–1208j through 12–1223j, 12–1271j, 12–1235j, 12–1276j and 12–1278j.,Consolidated Misc. Adv. No. 13–00007, 12–1238j through 12–1249j,Case No. 11–11–13686 JL, 12–1251j through 12–1261j,Adversary Nos: 12–1204j through 12–1216j
• Citation: 527 B.R. 719
• Parties: In re: Otero County Hospital Association, Inc., Debtor. United Tort Claimants, as individuals, Plaintiffs, v. Quorum Health Resources, LLC, Defendant.
• Court: U.S. Bankruptcy Court — District of New Mexico

527 B.R. 719

In re: Otero County Hospital Association, Inc., Debtor.United Tort Claimants, as individuals, Plaintiffs

v.Quorum Health Resources, LLC, Defendant.

Case No. 11–11–13686 JL

Consolidated Misc. Adv. No. 13–00007

Adversary Nos: 12–1204j through 12–1216j

12–1208j through 12–1223j

12–1235j

12–1238j through 12–1249j

12–1251j through 12–1261j

12–1271j

12–1276j and 12–1278j.

United States Bankruptcy Court, D. New Mexico.

Signed March 18, 2015

Craig H. Averch, Lauren Christie Fujiu, Ronald Kevin Gorsich, Roberto J. Kampfner, White & Case, LLP, Los Angeles, CA, Spencer Lewis Edelman, Jeremy Harrison, Jennifer A. Noya, Modrall Sperling Roehl, Harris & Sisk PA, Robert G. Heyman, Sutin, Thayer & Browne, APC, Charles R. Hughson, Rodey, Dickason, Sloan, Akin & Robb, P.A, William R. Keleher, Albuquerque, NM, John D. Wheeler, Alamogordo, NM, for Debtor.

AMENDED MEMORANDUM OPINION

ROBERT H. JACOBVITZ, United States Bankruptcy Judge

THIS MATTER is before the Court following an eleven-day trial on the merits of the corporate liability phase of this litigation. The United Tort Claimants (the “UTC”)¹ and Quorum Health Resources, LLC (“QHR”) were represented by counsel as noted on the record.

This case stems from the suffering of dozens of patients who unwittingly were subjected to experimental procedures on their lower backs by a doctor tasked with alleviating pain. The hospital, doctors, and others involved have reached settlements with the patients. The sole remaining defendant is the hospital management company that provided non-medical administrative services to the hospital. Although the hospital and its medical staff are in a position to supervise, monitor, and evaluate physician performance, hospital management companies have a more limited role. They do not exercise professional medical judgments. While there is little doubt negligence occurred, the Court necessarily must focus on the role and responsibility of a hospital management company in deciding whether and to what extent QHR should be held accountable for what happened.

The UTC claims QHR was negligent in the way in which it managed the hospital, particularly with respect to the hiring, privileging, and retention of Dr. Schlicht. Dr. Schlicht performed various procedures on members of the UTC. To find QHR liable, the Court must find that QHR had a duty directly to patients of the hospital and by its negligence failed to fulfill the duty. The UTC asserts that QHR had broad duties to patients. QHR denies it owed any duty to patients. Taking into account the specialized role of a hospital management company, the Court finds that QHR owed a duty to the UTC, but one that is narrower than what the UTC urges.

QHR owed a direct duty to the UTC and breached its duty when the hospital's chief executive officer: 1) granted temporary privileges to Dr. Schlicht to perform procedures on patients of the hospital; and 2) failed to make a formal request that the hospital's medical executive committee initiate an investigation of Dr. Schlicht's performing a procedure on patients after learning that another physician asserted the procedure is experimental. In connection with the second breach, the Court further concludes that QHR failed to keep the hospital's board appropriately informed. In addition, the Court concludes that the doctrine of comparative fault applies to any assessment of damages against QHR. Under that doctrine, each negligent party causing the injury is responsible only for its own percentage of fault for the injury. The issues of causation and damages have been reserved for later proceedings.

I. SCOPE OF MATTERS AT ISSUE IN THE CONSOLIDATED TRIAL ON CORPORATE LIABILITY

The Court will first identify the issues appropriately before the Court following the September 2014 trial. In this ruling, the Court will decide: 1) whether and what duty or duties QHR owed to the UTC; 2) whether QHR breached any duties to the UTC; and 3) whether the doctrine of joint and several liability or comparative negligence applies. The Court will not now decide: 1) whether QHR caused the UTC any injury; or 2) damages, including allocation of fault for purposes of calculating damages. Although duty, breach, causation, and damages ordinarily would be decided together, causation and damages issues are not presently before the Court.

In the summer of 2012, the UTC removed certain negligence actions pending in state court to this Court in connection with Otero County Hospital Association, Inc.'s Chapter 11 bankruptcy case. A year later, the Court consolidated certain portions of the UTC's claims against QHR for purposes of conducting a separate consolidated trial “on the liability issues relating to QHR,” defined in the consolidation order as the “Corporate Liability Issues.” See, e.g., Order Resulting from Hearing on Motion to Establish Discovery and Case Management Procedures (“Case Management Order”), Adversary Proceeding No. 12–1204–Docket No. 44.² The Case Management Order expressly clarified that Corporate Liability Issues “do not include issues regarding whether any medical providers committed malpractice or any issues with respect to damages.” See Case Management Order, n. 1. An Amended Case Management Order for Trial on the Bifurcated Issue of Corporate Liability (“Amended Case Management Order”) entered on July 18, 2014 echoed the Case Management Order's deferral of issues to the second phase of the trial other than the Corporate Liability Issues. See Docket No. 199.

Of the four elements of the UTC's negligence claim (duty, breach of duty, causation, and damages), it is clear that duty and breach were at issue at the September 2014 trial. It is also clear that causation and damages were not at issue.³

At the request of the parties, the Court also agreed to decide whether the doctrine of joint several and liability or the doctrine of comparative negligence applies. For a couple of reasons, the Court rejects the UTC's contention that it should attribute all fault to QHR because QHR did not put on evidence that anyone other than QHR was negligent. First, there is evidence before the Court that the hospital and its medical staff were at fault. And more importantly, requiring QHR to present evidence that anyone other than QHR was negligent as a condition to the Court determining whether to apply comparative negligence or joint and several liability would be contrary to the Case Management Order and the Pretrial Order. Allocation of fault to others is part of the Court's damages analysis and, at least in part, would require a determination of whether the physicians committed malpractice. That was reserved for a later phase of the trial.

In addition, in closing argument and in a post-trial brief, QHR argued that the UTC cannot prove causation because they denied QHR's request for an admission that Dr. Schlicht and Dr. Bryant were “a cause” of their injuries. The Court rules on that issue below because it is potentially dispositive of all of the adversary proceedings even though causation was not at issue in the consolidated trial.

In sum, causation and damages are reserved for a later phase of the trial, except for the Court's decisions whether joint and several liability or comparative fault applies and whether the UTC's denial of a request for admission entirely defeats their claims.

II. FINDINGS OF FACT⁴

A. Background

QHR is one of the country's largest hospital management companies. QHR provided administrative services for Otero County Hospital Association, Inc. d/b/a Gerald Champion Regional Medical Center (“GCRMC” or the “Hospital”) from December 15, 2005 until sometime in 2008. In 2006, Dr. Christian Schlicht became an employed physician at the Hospital. While employed at the Hospital, Dr. Schlicht performed various procedures on patients of the Hospital, including a procedure sometimes called percutaneous disc arthroplasty

(“PDA”).⁵ The PDA procedure, which Dr. Schlicht invented, involves the injection of polymethylmethacrylate (“PMMA”) into the intervertebral disc space of the patient's lumbar spine. Dr. Schlicht is a D.O. who was board certified as an anesthesiologist and trained in pain management. He is not an M.D. and is not a board certified surgeon.

Many patients of the Hospital who underwent a PDA procedure, minimally invasive spine surgery, or other procedures on the spine while Dr. Schlicht was a Hospital employee, filed lawsuits asserting that they were harmed by the procedures. Due to the large number of lawsuits, the Hospital filed a voluntary petition under Chapter 11 of the Bankruptcy Code on August 16, 2011. The plaintiffs in most of those lawsuits removed their state court lawsuits to this Court, initiating forty-seven separate adversary proceedings. Those plaintiffs collectively are referred to as the UTC, which stands for United Tort Claimants. Other lawsuits remain pending in state court. The UTC settled their claims against the Hospital and others as part of the Chapter 11 bankruptcy case. QHR is the remaining defendant in the removed lawsuits disputing the UTC's claims.

B. The Respective Roles and Responsibilities of the Board, CEO, and Medical Staff

GCRMC is a rural hospital located in Alamogordo, New Mexico. It is a non-profit hospital that provides healthcare services to patients in the Alamogordo area. QHR is a national, for-profit hospital management company. QHR represents itself to potential hospital clients, particularly those in rural areas, as an expert in hospital administration. Its internal operating manual touts QHR's “expertise in virtually all areas of hospital operations and management.”See Exhibit 7. QHR does in fact have a high level of expertise in hospital administration.

1. The Agreement for Hospital Administration Services

In 2005, GCRMC and QHR entered into an Agreement for Hospital Administrative Services (the “Services Agreement”), effective December 15, 2005. See Exhibit 6. The facts underlying the UTC's claims occurred while the Services...