Fain Sheldon Anderson & VanDerhoef, PLLC

Law Firm

Columbia Center
701 Fifth Avenue, Suite 4650
Seattle, WA 98104
Phone: (206) 749-0094  Fax: (206) 749-0194

July 12, 2006

Introduction

On March 6, 2006, Governor Christine Gregoire signed a new bill that which was a result of the failure of ballot Initiatives 330 and 336 in the November 2005 election.  The new law, House Bill 2292/Senate Bill 6087, amended several existing laws that regulate the health care industry in the state, reenacted portions of law stricken by the courts, and enacted new provisions impacting patients, health care providers, and professional liability insurance providers.  This law became effective June 7, 2006.  The statutory section numbers have not been assigned.  FSAV has prepared this summary and overview of the new provisions and highlights of the law. 

Health Care Liability Reform

Statutes of Limitations & Repose
The legislature reenacted RCW 4.16.350.  In doing so, the legislature specifically stated that its action was in response to the Washington State Supreme Court’s decision in DeYoung v. Providence Medical Center, 136 Wn.2d 136 (1998), in which the Court struck down the eight year statute of repose for medical malpractice actions on the basis that the provision did not survive the rational basis or minimal scrutiny test for constitutionality and, therefore, violated the privileges and immunities clause of the Washington State Constitution and was unconstitutional.  The legislature added a section to the law expressly stating its rationale for reenacting RCW 4.16.350 including the eight-year statute of repose.  The rationale includes, among other things, protection against claims that are stale, based on untrustworthy evidence, or place undue burdens on defendants.  The statement of its rationale for reenacting the statute was the legislature’s attempt to provide a rational basis so that the statute will survive “minimal scrutiny”, the standard that should guide a court considering the constitutionality of a statute such as this, and withstand constitutional challenge in the future.

In another section of the new law, the legislature amended 4.16.190 to specifically eliminate the tolling of the statute of limitation for minors in medical malpractice actions.  The legislature specifically reenacted the provision of RCW 4.16.350 that imputes the knowledge of a custodial parent or guardian to the minor child to bar the claim of a minor to the same extent that the claim of an adult would be barred under this statute.  Therefore, a person under the age of eighteen must meet the same limitation periods as an adult and must commence an action within eight years. 

Certificate of Merit
The new statute adds a new section to RCW 7.70 that requires a plaintiff to file a certificate of merit with the complaint commencing a medical malpractice civil suit alleging a breach of the standard of care.  The certificate must be executed by a health care provider qualified to be an expert in the action.  The expert must state his or her belief that there is a reasonable probability that the defendant’s conduct did not follow the accepted standard of care.  Plaintiff must file a certificate of merit for claims against each defendant.  The plaintiff may make a motion requesting that the court grant additional time to file the certificate, and the court may grant additional time up to ninety days if it finds that there is “good cause” for the extension.  Failure to file a certificate of merit in compliance with this new law is grounds for dismissal of the action.  The statute does not state that dismissal is mandatory or that dismissal would be with prejudice.  If the case is dismissed for failure to file a certificate of merit, the filing of the action may not be used against a health care provider in professional liability insurance rate setting or professional licensing or credentialing.

Voluntary Arbitration
The new law provides that parties to a “dispute” based on alleged professional negligence in the provision of health care may elect to submit the “dispute” to voluntary arbitration pursuant to a procedure described in the new legislation.  However, it is clear that the provisions apply only after a civil action is filed.  To elect arbitration authorized by this legislation, the plaintiff may state his or her election in the complaint commencing the action and a defendant may indicate his or her election in his or her answer.  It is only submitted to arbitration under this provision if all parties to the action agree.  Parties may subsequently elect arbitration by filing a stipulation with the court indicating that all parties now agree to the arbitration described by the law.

Parties not wishing to elect to submit the action to arbitration must file a declaration with the court that so indicates.  The declaration must be filed by the plaintiff at the time of commencing the action and by the defendant with the filing of an answer.  The declaration must state that the party’s attorney has shown him or her a copy of the provisions of the new law relating to voluntary arbitration and that the party has elected not to submit the dispute to arbitration under this law.  It is unclear whether the party must sign the declaration or whether signature by an attorney is sufficient.

If the parties elect arbitration, they may agree to an arbitrator (or more than one arbitrator) to conduct arbitration but must do so within forty-five days of the answer in which defendant agreed to arbitration or of the stipulation to arbitration, whichever is later.  If the parties are unable to agree on an arbitrator within forty-five days, then each party may submit the names of three arbitrators to the court (though the law refers to “each side” so it may limit defendants to one list of three potential arbitrators), and the court shall select an arbitrator from the among the submitted names within fifteen days of notification that the parties cannot agree on an arbitrator.  If no list is offered, the court shall select an arbitrator. 

The arbitrator or arbitrators may conduct the arbitration as they deem appropriate “so as to aid in the fair and expeditious disposition of the proceeding”, but must comply with certain requirements.  In a case with two parties, each party is entitled to two experts on the issue of liability, two experts on the issue of damages, and one rebuttal expert.  If there are multiple parties on one side, the arbitrator will determine the number of experts allowed based on the “minimum number necessary for a fair and economic resolution”,  Unless the arbitrator finds “exceptional circumstances that require additional discovery”, each party is entitled to only twenty-five interrogatories, including subparts, and ten requests for admission.  Requests for production of documents and things and for entry upon land for inspection and other purposes and requests for physical and mental examinations are limited only by the Civil Rules.  Depositions are limited.  Absent a finding by the arbitrator of “good cause” for longer depositions, parties and any expert that a party expects to call as a witness may be deposed, but those depositions are limited to four hours.  Unless the arbitrator determines that “exceptional circumstances require additional depositions”, each side may depose five other witnesses (who are not parties or experts).  These depositions may last no longer than two hours each.  In depositions of any of those other witnesses who are fact witnesses, each side is entitled to one hour of the two hour deposition.  Arbitrators may issue subpoenas requiring the attendance of witnesses or the production of documents at hearings.  These provisions are worded in terms of limits on “each side”.  It is unclear whether “side” refers to “party” or what the legislature contemplated in cases with multiple parties.  For example, the legislature made no provision for multiple parties on one side or the other in a deposition of a fact witness that is limited to two hours.

The law also defines timeframes for conducting the arbitration.  The timeframes run from the date all defendants agreed to the arbitration in their answers or from the date of the stipulation to arbitration.  The arbitrator is required to issue a case scheduling order specifying dates by which certain requirements must be met.  Within forty-five days, plaintiff must provide stipulations for all relevant medical records to defendants.  Plaintiff must disclose the name and curriculum vitae of any experts he or she expects to call as a witness within one hundred twenty days.  Defendants shall disclose the same within one hundred forty days.  Each party must disclose any rebuttal witnesses to the other parties within one hundred sixty days.  All discovery shall be completed within two hundred forty days.  The arbitration shall commence within two hundred seventy days.  The arbitrator may grant a continuance of the arbitration commencement date but not later than one year after commencement unless one party shows “exceptional circumstances create an undue and unavoidable hardship on the party. 

The arbitrator shall issue a written decision within fourteen days after the completion of the arbitration hearing and deliver a copy of the decision to each of the parties or their attorneys.  There are limitations on the arbitrator’s authority, however.  The arbitrator may not award damages that exceed one million dollars for both economic and non-economic damages, presumably in the aggregate but the law is not specific.  The arbitrator may not make an award of damages under the theory of ostensible agency liability.  With or without a request of any party, the arbitrator is required to review each party’s attorneys’ fees taking into account RCW 4.24.005.  The legislature did not state the purpose or effect of the arbitrator’s review of the attorneys’ fees.  The arbitrator’s fees and expenses shall be paid by the losing parties. 
After the decision is issued, a party may file a motion with the court for a judgment.  The arbitrator’s decision may be appealed, but only on limited bases.  There is no right to a trial de novo.  Appeal is limited to the bases delineated in RCW 7.04A.230(1)(a) through (d) and 7.04A.240.  Under RCW 7.04A.230, an award may be vacated if the award was procured by corruption, fraud, or other undue means; if there is evident partiality by an arbitrator appointed as a neutral; for corruption by an arbitrator; for misconduct by an arbitrator prejudicing the rights of a party to proceeding; if an arbitrator unreasonably refused to postpone the hearing, refused to consider evidence material to the controversy, or otherwise conducted the hearing contrary to RCW 7.04A.150 (the arbitration process) so as to prejudice substantially the rights to the arbitration proceeding; or if an arbitrator exceeded the arbitrator’s powers.  RCW 7.04A.240 allows for modification or correction of an arbitration award if there was an evident mathematical miscalculation; an evident mistake in the description of a person, thing or property referred to in the award; an award on a claim not submitted to the arbitrator (and may be corrected without affecting the merits of the decision upon the claims submitted); or an award that is imperfect in a matter of form not affecting the merits of the decision on the claims.

Pre-suit Notice and Mandatory Mediation
RCW 7.70.100, relating to mandatory mediation, has been amended and new requirements added.  A plaintiff may not file a medical malpractice claim without giving ninety days’ notice of the intention to commence the action to any defendant whose name is known.  The statute of limitation is extended to ninety days from the date of notice if the notice is filed within ninety days of expiration of the statute of limitation.  This does not apply to defendants whose name is not known at the time the complaint is filed.

All causes of action for damages arising from injury as a result of health care are subject to mandatory mediation prior to trial. There is an exception to this requirement for cases subject to mandatory arbitration under RCW 7.06 or for cases in which the parties elected the voluntary arbitration process described above.  The law requires the Supreme Court to adopt procedures to implement mandatory mediation and establishes minimum requirements for those procedures. 

Collateral Sources
A party may present evidence that the plaintiff has already been compensated for the alleged injury from any source except the assets of the plaintiff, the plaintiff’s representative, or the plaintiff’s immediate family.  Compensation is defined as money, property, gratuitous services, or indemnification of plaintiff for expenses.  RCW 7.70.080, the “collateral source” rule previously applicable in medical malpractice actions, has been amended to remove insurance as an inadmissible source of compensation.  The plaintiff may present evidence of an obligation to repay this compensation. 

Frivolous Lawsuits
The signature of any attorney on any pleading is certification that, to the best of the attorney’s knowledge and belief after reasonable inquiry, the claim or defense is not frivolous or interposed for any improper purpose.  If an action is signed in violation of this rule, sanctions may be imposed by the court either on motion or on the court’s own initiative.  These provisions codify Superior Court Civil Rule 11 and are no broader than Civil Rule 11.  The enforcement of this is governed by RCW 4.84.185. 

Patient Safety

Statements of Apology and Fault
The new law amended RCW 5.64.010 to provide that if a health car provider offers an apology (“any statement, affirmation, gesture, or conduct expressing apology, fault, sympathy, commiseration, condolence, compassion, or a general sense of benevolence”) to an injured person or that person’s appointed guardian, within thirty days of the act or omission or within thirty days of discovering the act or omission that is the basis for negligence, it is not admissible as evidence in a civil action, arbitration or mediation.

Under RCW 5.66.010, which is not limited to medical negligence actions, benevolent gestures of a person involved in an accident are inadmissible as evidence in a civil action.  A statement of fault, however, is expressly admissible.  RCW 5.66.010 also does not limit the timeframe for benevolent gestures to thirty days, and the new law did not amend that statute.  RCW 5.64.010 is specific to health care providers, however, and will likely be controlling in civil actions, arbitrations, or mediations arising out of health care.  Therefore, health care providers who want to make apologies or statements of fault should make those within thirty days of the alleged negligence or discovery of the alleged negligence if the health care provider wants to take advantage of this statute and make those statements inadmissible. 

Report of Unprofessional Conduct
The legislature sought to encourage good faith reports of unprofessional conduct (as defined in RCW 18.130.180) or inability to practice with reasonable skill and safety by reason of any physical or mental condition (as defined in RCW 18.130.170) by a health care provider listed in RCW 18.130.040 by amending RCW 4.24.260.  The amendments expand the immunity provided in that statute by providing that (1) any member of a health profession may make a report under this section and that (2) the report may be made to any board, agency, or commission responsible for disciplinary activities for the profession of the person reported.  The report must be based upon unprofessional conduct or inability to practice with reasonable skill and safety to consumers by reason of a physical or mental condition.  The amendment may also expand the statute by adding immunity for a “report” while the prior statute spoke of immunity for “filing charges” or “presenting evidence”.  It also adds that a health care provider who makes such a report in good faith, is subsequently sued, and prevails upon a good faith defense is entitled to recover expenses and attorney’s fees incurred in establishing the defense.

Medical Quality Assurance Commission (MQAC) Consumer Membership
The MQAC is largely unchanged, but the law is amended to add two public members and provide that at least two of the six public members shall not be from the health care industry.

Health Care Provider Discipline
Under the new law, the disciplining authority has the added authority to consider imposition of sanctions and the added authority to consider prior findings of fact, stipulations to informal disposition, and action taken by other in-state or out-of-state disciplining authorities when doing so.  The addition of sanctions and the authorization to consider prior actions is the only amendment made to RCW 18.130.160. 

Disclosure of Adverse Event
The mandatory reporting of “adverse events” and voluntary disclosure of “incidents”, both of which are defined in the statute, to the Department of Health are new provisions of the law.  The new law requires reporting of adverse events and permits reporting of incidents.  The legislature stated that the intent of this new reporting system is to facilitate quality improvement of the health care system; improve patient safety; and decrease medical errors in a nonpunitive manner. 

A “medical facility” must notify the Department of Health, via an internet-based system established by the independent entity, of any adverse event within forty-eight (48) hours of confirmation that the event has occurred.  The medical facility must also submit a report to the department within forty-five days after confirmation of the event.  The report must contain a root cause analysis and either a corrective action plan or an explanation of the reasons for not taking corrective action.  The rules regarding the form and content of a root cause analysis are to be created by the department in consultation with medical facilities and the company providing the internet-based system.

Medical facilities are defined as a childbirth center, hospital, psychiatric hospital, or correctional medical facility, and an ambulatory surgical center upon the effective date of any requirement for state registration or licensure of ambulatory surgical facilities.  The legislation requires the Department of Health to contract with a suitable “independent entity” to administer an internet-based reporting process, establish forms and procedures for reporting, derive data from the reports, and make statistical reports and recommendations for statutory and regulatory changes annually to the governor and legislature. 

The format of the report will be determined by the department, after consultation with medical facilities and the company providing the internet-based system.  The independent entity will be responsible for collecting, analyzing, and evaluating the reports of adverse events as well as developing recommendations for changes in health care practices and procedures; advising medical facilities that have filed reports of immediate changes that may reduce adverse events or incidents; issuing recommendations to all medical facilities regarding trends or changes that may reduce the total number and severity of adverse events; and monitoring other states’ reporting systems to be as consistent as possible with similar systems.

The independent entity will also report annually to the governor and legislature about the activities from the previous year.  The report will include recommendations for statutory or regulatory changes that may improve patient safety in the state.  The first report is required by January 1, 2008.

The information and documents in reports submitted to the department that are made by or through a coordinated quality improvement program shall be confidential.  The legislation amended RCW 42.17.310 and 42.56.360, which are long lists of types of information that are confidential, to include reports mandated or authorized by this section.  The law amends RCW 43.70.075 to expand “whistle blower” protections to persons reporting adverse events or incidents under this section.

Coordinated Quality Improvement Programs
The legislature amended RCW 43.70.510(2) to expand the definition of a “health care provider group” to include “a consortium of providers consisting of five or more providers in total”.  The remainder of RCW 43.70.510 was unchanged.  

Prescription Legibility
The legislature found that drug errors occur when the pharmacist or nurse cannot read the prescription.  To address this, RCW 69.41.010(13) was amended to add that a “prescription must be hand printed, typewritten, or electronically generated.” 

Insurance Industry Reform

Medical Malpractice Closed Claim Reporting
The legislature adopted an entirely new law that requires insurers and health care facilities to report medical malpractice closed claims that are closed on or after January 1, 2008 to the Insurance Commissioner on March 1st each year beginning in March 2009, or face a $250/day fine for not doing so.  Closed claims include those that have been settled or otherwise disposed of by the insuring entity, self-insurer, health care facility, or provider.  The Insurance Commissioner must prepare annual reports of the information submitted.  The law establishes detailed requirements for both the reports to and by the Insurance Commissioner.

Underwriting Standards
The legislature added a new section to RCW 48.18 providing that, during the underwriting process, the insurer may consider certain factors only in combination with other substantive underwriting factors.  These factors include the nature and scope of the coverage; an incident that the insured has notified the insurer about that does not result in a claim; and a claim that was made against the insured that was closed by the insurer without payment.  If any underwriting activity related to the insured’s risk causes the premium to increase, the insurer must provide written notice to the insured that describes the significant risk factors which led to the premium increase. 

Cancellation or Non-renewal of Liability Insurance Policies
An insurer must renew a medical malpractice insurance policy, unless the insurer provides ninety days notice of the non-renewal and includes the insurer’s actual reason for refusing to renew the policy.  If the reason for cancellation is nonpayment of the premium, the insurer must provide at least ten days notice.

Prior Approval of Medical Malpractice Insurance Rates
Medical malpractice insurance rate filings and insurance form filings will be subject to a prior approval system as outlined in RCW 48.18.100.   The insurer must file policy rate and forms with the Insurance Commission who will review the filing.  The rates cannot become effective until 30 days after the filing and are deemed approved unless the commissioner disapproves.