North Carolina Announces New Fiduciary Relationship for Health Care Providers Independent of Physician-Patient Relationship
On January 27, 2017, in King v. Bryant, the Supreme Court of North Carolina held that health care providers now owe prospective patients a fiduciary relationship that is independent of a physician-patient relationship and can even exist prior to formation of a physician-patient relationship.
In King, the plaintiff-patient presented to an ambulatory surgical center in Fayetteville to undergo a bilateral inguinal hernia repair. Prior to his being seen by the surgeon at his initial appointment, the plaintiff filled out a number of forms. In addition to soliciting personal health information, the forms also contained an agreement to arbitrate any claims arising from his treatment with the surgeon. The plaintiff stated that although he signed the forms that he did not read any of the documents, believing them to be a mere formality.
During surgery, complications arose. The surgeon damaged the patient’s distal abdominal aorta ultimately resulting in the plaintiff suffering an occlusion of the artery, a thromboembolism in the right lower leg, and an acute ischemia in the right foot. Plaintiff sued for medical expenses, abdominal scarring, lost wages, and permanent injury.
When plaintiff filed a malpractice lawsuit in court, the defendant surgeon and surgical practice moved to stay the lawsuit based on the arbitration agreement signed by the plaintiff prior to his initial consultation. This decision arose out of a dispute about the enforceability of the arbitration agreement.
The Court held that the arbitration agreement between the patient and doctor and surgical practice was unenforceable. What made this decision important, however, is why the Court chose not to enforce the agreement. The Court concluded that prior to the existence of a physician-patient relationship, the surgeon and surgery practice owed a fiduciary duty to the patient that was independent of the physician-patient relationship.
The Court stated that a fiduciary relationship “exists wherever confidence on one side results in superiority and influence on the other side” or “where a special confidence is reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing confidence.” The Court further stated that such a relationship is breached when the party in whom the confidence is placed” takes advantage of the confidential relationship.”
The Court concluded that the surgeon had special knowledge and skills and that, while the plaintiff was still a prospective patient, the plaintiff had placed a special confidence in the surgeon as demonstrated by his willingness to disclose personal health information before his initial consultation. These two factors alone, relative to the plaintiff-patient’s limited education and limited experience with legal documents, resulted in a fiduciary relationship. Similarly, the surgeon and surgical practice’s failure to “make full disclosure of the nature and import of the arbitration agreement” prior to the patient’s signing the agreement violated the fiduciary duty owed to the patient. Instead of pointing the agreement out and explaining it to the plaintiff, the Court stated that the agreement was simply in a collection of documents, giving the impression that the arbitration agreement “was simply another routine document” that the plaintiff “needed to sign in order to become a patient.” Consequently, the arbitration agreement was unenforceable duty to the violation of the fiduciary duty.
What It Means
By imposing a new fiduciary duty on health care providers, the King decision makes the legal environment in which health care providers operate more complicated in two respects. First, the fiduciary duty makes it more complicated for health care providers, practices, or entities to manage their risk exposure in a reliable and predictable way. On its face, the decision imposes a new duty on health care providers or entities to both highlight and explain the legal significance of waivers or releases signed by a prospective or current patient. In addition to arbitration agreements, the Court noted the applicability of its decision to “any agreement that substantially affects” substantive legal rights. This includes, but is not limited to, waivers of compliance based on federal or state regulations (i.e. HIPAA), waivers of tort or contract-based claims (i.e. malpractice waivers), or an agreement to transfer items of real or personal property from a prospective or current patient to the health care provider or entity. The last category of agreements represents a potential Pandora’s box of risk for health care providers. Presumably, this clause could apply to payment agreements, insurance reimbursement submissions, or agreements for the retention and disposal of biohazard materials.
In addition to limiting the current ability to manage risk, the King duty also creates new risks that could expose health care providers or entities to more liability. By its very terms, the Court’s opinion requires health care employees to provide legal explanations and representations to their prospective or current patients. The extent to which they would be liable, however, for any misrepresentation or misstatement is unclear and could take years of litigation to decipher.
In the meantime, our attorneys are prepared to help advise health care professionals and entities on how to review their current practices and procedures to avoid the potential problems that they now face with their new fiduciary duty.