November 9, 2020

The Colorado Court of Appeals (“Colorado Appellate Court”) vacated a $14,905,000 Colorado medical malpractice verdict that had been reduced to $6,974,692.27 pursuant to Colorado’s Health Care Availability Act (“HCAA”), stating in its opinion dated October 15, 2020: “We conclude that the trial court should have dismissed the corporate negligence and uninformed consent claims against SCLT as a matter of law because, under the corporate practice of medicine doctrine, SCLT was not vicariously liable for any malpractice by Dr. Khan, nor did it owe a duty to Ms. Smith to assume any medical responsibilities that Dr. Khan failed to fulfill.”

The Underlying Facts 

The plaintiff had back pain for which she was scheduled to undergo a series of transforaminal epidural steroid injections to treat it. After her treating physician, Hashim Khan, M.D. (“Dr. Khan”), performed an epidural injection into her spine, the plaintiff lost all feeling in her lower extremities and was eventually diagnosed with bilateral lower extremity paraplegia secondary to spinal infarct/ischemia and she remains permanently paralyzed below the waist.

The plaintiff settled her Colorado medical malpractice claim against Dr. Kahn and only her claims against Surgery Center at Lone Tree, LLC (“SCLT”) for “corporate negligence,” “uninformed consent,” and “negligence per se” proceeded to trial. The plaintiff alleged that SCLT had a duty to prevent Dr. Khan’s off-label use of Kenalog, or at least to ensure that she had given her informed consent to its off-label use in the event that Dr. Khan failed to obtain such consent.

SCLT did not tell its physicians how they could use Kenalog or any other drug that it stocked. It was undisputed at trial that Kenalog has a wide variety of uses consistent with its labeling. It was also undisputed that Dr. Khan did not inform the plaintiff either that he intended to use Kenalog during her procedure or that he intended to use it in a manner inconsistent with the manufacturer’s label. It was undisputed at trial that no one explained to the plaintiff that Kenalog would be used off-label and the forms that the plaintiff signed did not disclose that information.

Corporate Practice Of Medicine Doctrine

The corporate practice of medicine doctrine prohibits a corporation that employs a physician from interfering with the physician’s medical judgment. The trial court ruled that the evidence showed that SCLT itself “practiced medicine” notwithstanding its corporate status, concluding that “when [SCLT] overtook the policy of controlling the formulary and providing informed consent to patients, it danced on, and over, the line of practicing medicine.” By doing so, the trial court found that SCLT opened itself up to liability for its own negligence, which was established by its inclusion of Kenalog on the formulary and its failure to advise the plaintiff that Dr. Khan’s use of that drug would be inconsistent with its label.

Colorado Appellate Court Opinion

The Colorado Appellate Court stated that because a hospital may not dictate to a physician how he or she may practice medicine, it likewise may not be held liable for lapses in a physician’s professional judgment. The only exception to this general rule appears in the form of a negligent credentialing claim: “In extending staff privileges to a doctor, a hospital does not generally expose itself to liability for the doctor’s negligence unless it knows or should know of a propensity on the doctor’s part to commit negligent acts.”

The Colorado Appellate Court held: “The decision to administer a certain medication to a patient in a certain situation is, without question, a medical decision made by a physician alone. Because SCLT could not dictate to Dr. Khan how he could use Kenalog, SCLT cannot be held vicariously liable for Dr. Khan’s negligent administration of that drug.”

The Colorado Appellate Court explained: “[The plaintiffs] contend that once SCLT placed Kenalog on its formulary, it assumed the responsibility of ensuring that the drug would be used safely. We reject this position because it is flatly inconsistent with the corporate practice of medicine doctrine. SCLT did not, by making certain drugs available for use in its facility, dictate to its credentialed physicians how those drugs could be used. Nor could it, because section 25-3-103.7(3) prohibits health care facilities from “limit[ing] or otherwise exercis[ing] control over the physician’s independent professional judgment concerning the practice of medicine or diagnosis or treatment.””

The Colorado Appellate Court continued: “Although the [plaintiffs] asserted that Dr. Khan had regularly used Kenalog off-label in the past —and that at least some employees of SCLT were aware of this practice — they did not plead, argue, or prove that SCLT was negligent for allowing Dr. Khan to continue to perform procedures at the facility. Rather, they argued that SCLT was negligent for failing to direct Dr. Khan’s treatment of his patients. Because interference with the physician-patient relationship is precisely what the corporate practice of medicine doctrine is intended to prevent, SCLT cannot, as a matter of law, be held directly liable for failing to prevent Dr. Khan’s off-label use of Kenalog.”

Source Smith v. Surgery Center, No. 19CA0186.

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