Accountability for Health Care Leaders as Officers (Coach Series, Part 2)

Increasingly, legal theory warns that all with significant authority who carry a lofty title such as “officer” may find themselves accountable for the acts of the organization, regardless of job description.

Increasingly, health care organizations designate individuals with authority as “officers.” Examples are:

• Chief executive officer.

• Chief financial officer.

• Chief nursing officer.

• Chief operating officer.

Physician leaders in health care organizations frequently hold the title of chief medical officer, often without any meaningful job description.

Increasingly, legal theory warns that all with significant authority in a corporate organization who carry a lofty title such as that of “officer” may find themselves accountable for the acts of the organization, regardless of apparent confines of specific duties identified within any written job description of a chief medical officer.

Indeed, the officers’ accountabilities for corporate acts may extend beyond the strict borders of job descriptions, exposing a CMO to unanticipated risk.

The argument presented here is physicians holding the formal title of chief medical officer (or perhaps any other designation as “officer”) may indeed find themselves held to a higher standard of legal responsibility than anticipated, as their corporate responsibilities and accountabilities may extend beyond the boundaries of a general job description.

Case law and the legal theory are ever-evolving, and the trend of the health care industry to follow other corporate entities in providing grand titles to those in senior leadership possesses a certain risk. Accordingly, physician officers should take note.

Responsible Corporate Officer Doctrine

The Responsible Corporate Officer Doctrine was first clarified 75 years ago by the U.S. Supreme Court in the case of United States vs. Dotterweich, 320 U.S. 277 (1943).

That case involved individual allegations against Joseph Dotterweich, who was president and general manager of a pharmaceutical corporation accused of shipping adulterated, misbranded drugs in interstate commerce in violation of the Food and Drug Act. Dotterweich, as a corporate officer, and the corporation were charged with these offenses.

Justice Felix Frankfurter, writing for the majority, concluded that individuals within a corporate structure who possessed a certain elevated level of responsibility “in the furtherance of the transaction which the state outlaws” could be subject to criminal liability.

Carrying this logic forward into the 21st century, health care executives need to recognize that under this doctrine, individual corporate officers can be held responsible for corporate acts in some circumstances without exhibiting unlawful intent, knowledge of a problem or violation or any direct participation in wrongdoing. In some settings, the government may only need to prove that the executive:

• Held a position of responsibility and authority in the corporation.

• Had the ability to prevent the alleged violation.

• Failed to prevent it.

A lofty title only serves to invite more scrutiny and should serve to put leaders such as CMOs on notice that their responsibilities extend well beyond the limits of a generic job description. There is every indication that the government intends to apply the principles of RCOD to the behaviors of officers of health care organizations to serve as a “tool to change corporate culture,” stated an October 2010 article from the Philadelphia Inquirer.

The 2015 announcement by the U.S. Department of Justice that it intends to focus on individual and personal criminal liability in future health care fraud cases serves to reinforce the point that members of senior leadership need to beware.

RCOD Applied

The hypothetical Community Health System (CHS) employs 450 physicians and other licensed providers. A physician holding the title of chief medical officer is employed full time to oversee operations of the employed provider group.

CHS acquires an independent practice of two board-certified pain specialists (anesthesiologists) who practice at one of the system’s smaller, regional hospitals. These physicians hold hospital privileges to perform a list of invasive procedures approved by the hospital’s board.

One of these physicians has special training in an off-label invasive spine procedure commonly referred to as kyphoplasty. Several hundred patients were treated and the procedure was highly profitable for the hospital. Acquisition of this practice by the regional hospital ensures these physicians will not move to a competitor (as noted in board meeting minutes).

These physicians will be employees of CHS’ regional hospital, but their practice will not be managed within the group of employed physicians overseen by the CMO. This practice will instead be managed by the chief financial officer of the hospital where the physicians are employed and practice.

The CMO informally and unofficially becomes aware of rumors of unnecessary procedures being performed by one of the pain specialists, but because these physicians are responsible to the CFO of their hospital, the CMO chooses not to press the issue.

Two years later, the health system finds itself involved in intense litigation brought by more than 120 patients claiming harm from the off-label procedure. CHS faces a projected liability risk of at least $75 million. The CMO is called to testify at trial and, as can be expected, the plaintiffs’ lawyer leads her examination by asking, “As the chief medical officer of CHS, are you aware of the clinical practice of the physicians sitting in court today?” Of course, the examination then proceeds into areas that the CMO wished to avoid.

So how should officers of health care organizations discharge their responsibilities?

There are no bullet-proof protections in this realm, but forethought, good faith and direct action are key.

It is useful to begin with an understanding of not only the position that one holds, but also an understanding of other existing or planned physician/provider/hospital relationships; a solidly defined job description integrated into the organization’s long-term strategy and short-term tactical goals; and a working understanding of these, including how roles and responsibilities might be implicated.

Have a discussion with your peers (other officers) and boss beginning with these questions:

• What are your perspectives and expectations concerning my roles, responsibilities and accountabilities?

• What are your views on my boundaries related to other officers and their roles, responsibilities and accountabilities — especially as they might relate to employed physicians, as well as those affiliated by other methods?

Express your understanding of your responsibilities as a physician and officer, and engage other leaders in a discussion of how you expect to discharge your duties.

Create a pathway for reporting; clarifying to whom you report, when and for what. Focus especially on issues that fall in the categories of how your obligations and duties may extend beyond your technical job description.

The point here is to make clear what you believe to be your responsibilities in instances where concerns may arise implicating your position as a corporate officer, especially as it may relate to your specialized education, training, experience, license and code of ethics. A similar discussion with internal legal counsel, if available, is also useful.

Your reason for such efforts is your understanding of the RCOD as it relates to your title, job description and duties within and to the organization you serve.

If your peers believe you are overreaching with your understanding, the polite response is, “The basis for my understanding is the RCOD. If I am misguided, please provide the organization’s position on this issue.”

Board education on this topic is likewise useful. Surprisingly, few governing boards are sufficiently informed about the risks in this area, especially regarding how the RCOD applies to corporate officers and their interactions with governing boards.

Daniel K. Zismer, Ph.D, is a founder and managing director of Castling Partners, an advisory and consultancy focused on strategy performance and integrative risk management for health and health care organizations. Zismer has a 30-year career in the leadership of health care organizations and executive education. His area of specialization is strategy and the performance of strategy. He is the Wegmiller Professor Emeritus, School of Public Health, University of Minnesota Programs in Health Care Administration.