The recent announcement that Tenet Healthcare Corporation, one of the largest investor-owned healthcare delivery systems in the nation, settled an undisclosed class action lawsuit in Louisiana brought by the families of over 145 patients who were trapped at Mercy Hospital in New Orleans during hurricane Katrina is both unique and alarming.
What’s unique is that the families did not sue any of the caregivers at Mercy Hospital; rather, they directly sued the owner/operators of the hospital, Tenet Corp, for not having adequate disaster preparedness. Essentially, the plaintiffs said that what happened at Mercy Hospital during hurricane Katrina was not a medical or healthcare issue; rather, it was a business issue. They asserted that Tenet made an active business decision not to prepare. Why? Because preparation was too expensive and taking on the expense of a lawsuit was the less costly route. Besides, a lawsuit such as this had never occurred before, and if one did, the executives figured they could drag it on long enough to outlive the plaintiff in court.
What’s alarming is that Tenet was able to keep this lawsuit out of the press and the public record until they opted to settle the lawsuit (with a gag order in place) on the eve of the beginning of the jury trial. But they didn’t just gag order the plaintiffs who are being compensated; they gag ordered all their employees and executives as well. Additionally, they kept the lawsuit gag ordered from the very start. Because Mercy Hospital is not the only Tenet hospital, the whole time this suit has been playing out they have doing a highly orchestrated PR campaign, sending two former Tenet executives to every disaster conference to give presentations on how Tenet dedicated an entire division of their supply chain and HR to provide supplies and personnel to every Tenet hospital affected by the hurricane. To date, no one in the industry has understood why Tenet would spend so much money sending people out to tell the Tenet Hurricane Katrina story. Now we know why.
In addition, while the lawsuit has been brewing in the background, Tenet has been providing disaster preparedness training at their most at risk hospitals. They have been working to create a culture of preparedness, but they’ve been singular in the industry doing so. Again, no one has understood why…until now.
While the exact reasons for Tenet’s settlement are part of the nondisclosure agreement, the existence of the suit and the legal views that can be surmised from it hold dire implications for the healthcare industry as well as for businesses that serve the public’s interests, such as telecommunications, agriculture, public works, etc.—commonly referred to as “critical infrastructure” and “key resource” (CIKR) industries.
A New Era for Disaster Preparedness
By all accounts, this is the landmark legal case the plaintiff bar has been waiting for. Disaster response and recovery experts of all stripes have been retained by the plaintiff bar in virtually every state to discuss possible legal strategies under which lawsuits could be brought against CIKR industries for failures of preparedness. And the experts have generally agreed that a landmark case was needed—one where a defendant was either found guilty by a jury or conceded a case in which a natural disaster or manmade event beyond the defendant’s control occurred and in which harm occurred as a direct result of the defendant’s failure to prepare for the disaster. In other words, the defendant knew or should have known that disaster preparedness in an all-hazards model was needed, and that preparedness did not occur.
Tenet pled “no contest” and chose to pay an undisclosed settlement amount. This move acknowledges that Tenet was in a situation where they knew or should have known that there was a failure to prepare, and the failure to prepare resulted in harm to 145+ individuals. The plaintiff created a direct cause and effect relationship between failure to prepare and harm. This is basic tort law. Once the plaintiff did that, they created legal precedent for anyone else to come in and repeat the same act in court.
What This Means for Healthcare and CIKR Industries
The National Institute of Health has already established, repeatedly, that 92% of all hospitals and greater than 95% of all other regulated healthcare institutions do not meet the most basic accepted criteria of disaster preparedness as defined by the federal government. That means if you walk into any health facility, and if at that moment an earthquake, tornado, explosion, or any other disaster occurs, you have a 95% chance of becoming a plaintiff in a lawsuit.
Now that everyone knows such a case can occur, that the plaintiff will prevail, and that there is an attorney who can make it happen, more cases will follow. This moment is the ringing of the warning bell. By gag ordering the case and settling for an undisclosed amount, Tenet bought their industry and CIKR industries a few years at the most. So everyone must get their house in order…immediately.
Tenet has used the time they bought very well by working to get their other facilities up to speed. Now the CIKR industries must follow suit, because the plaintiff bar is not just looking at healthcare. Healthcare was simply an easy first target. Therefore, if you are in a key industry, this is the time to get prepared and create a culture of preparedness so you can immunize yourself against the possibility of a lawsuit—both to your company and to your industry. Remember, lawsuits within an industry result in higher insurance premiums.
Fortunately, there are now standards and core competencies for disaster triage that have been accepted by all the various professions. Additionally, today it is much less expensive to bring in a consultant for a day or two to get your facility up to speed, to create a culture of preparedness, and to help you get certified (if certification exists in your industry). Getting your staff trained and demonstrating to them that preparedness is as important as anything else they do could save your organization many millions of dollars down the road.
Speculating, the amount of the Tenet settlement had to be enough to hurt them, as it spurred them to take action. Let their example be the only lesson you need: Prepare now…or pay later.