Confidentiality Agreements in Healthcare Settlements

Confidentiality agreements during the settlement of civil lawsuits are, as you might expect, quite common.

But healthcare is special, isn't it. Unlike any other industry I can think of, healthcare is both an industry and a public good. Further, a large percentage of the costs are borne by public health plans (Medicare, Medicaid, etc.) -- ultimately, therefore, by the American taxpayer.

Should different rules apply? Should healthcare be treated differently just because it is healthcare?

Consider the article, here, from a recent edition of USA Today, detailing the use of confidential settlements by major U.S. pharmacies. The gist of the article can be summed up as follows:

Barry Furrow, director of the health law concentration at the Drexel University College of Law, says pharmacies have two major reasons to insist on confidential settlements. First, to avoid bad publicity in a field where public trust is important. Second, to keep potentially damaging information from plaintiff lawyers.

The problem, Furrow says, is such agreements make it difficult to detect patterns of errors at pharmacies, though it's in the public interest to know if they exist. Furrow, a law professor, writes textbooks on health law. "There's a whole world of research that's very hard to do," he says. "It is hard to find out much of anything, even if I talk to lawyers, because they can't tell me much. It's hard to spot patterns and see what's going wrong."

Others would argue that such agreements are standard across industries, and that healthcare companies shouldn't be singled out.

Michael Krauss, who teaches legal ethics at George Mason University Law School, says it's true confidentiality is agreed to "in the majority of tort suits," particularly when a company's or an individual's reputation is at stake, as in medical or pharmaceutical malpractice. "If you and I agree to make a contract, we can condition that contract on secrecy," Krauss says. "And that's all a settlement is, a contract. Remember, there is no (court) judgment — it is a voluntary payment."

From my perspective, the point of the USA Today piece is: confidential settlements in the health arena will be treated differently, whether the healthcare companies like it or not. Thus, precautions need to be taken during settlement considerations, for both plaintiffs and defendants, to ensure that the resulting settlement is seen as a resolution, not a cover-up.

More generally, it is important to remember that, confidential or not, the settlement of a legal dispute is a media moment just as surely as a jury verdict is. Often the parties and their attorneys are so relieved to resolve a lawsuit, they forget that the way a case is perceived in settlement can be as important as how it was perceived as it was actively litigated. Issues of winners and losers, what was gained and lost by each side, and -- as in this case -- the public good can all have a bearing on future reputation and future legal action, including copycat lawsuits, government investigation and regulatory action.

In any event, expect USA Today to return to this topic soon, since they're the first major media outlet to "plant the flag" on the issue.