Most aesthetic plastic surgeons have at one time or another been faced with the following conundrum: The surgeon performs a procedure with technical adeptness but, unfortunately, the patient is not happy with the result. The surgeon offers to touch it up; the patient might or might not accept this offer.

Several weeks later, the physician receives a letter from the patient, who demands a refund. Sometimes, the patient also demands additional money so that she can pay for a second round of surgery elsewhere. Implicit or explicit in the letter is the understanding that failure to tender a refund will lead to an eventual lawsuit.

This type of problem is unique to physicians who are in the cash-pay business. Plastic surgeons who perform facelifts, ophthalmologists who perform laser procedures, and dermatologists who inject fillers have struggled with this problem.

At first blush, it might seem reasonable to give the patient her money back in exchange for assurances that the matter is closed. This logic assumes that the physician is in the service business and wants to do all he can to make the patient happy. And clearly, beauty is in the eye of the beholder.

To facilitate such matters, some insurance carriers will provide physicians with a “full release” template for their patients to sign. In this release, the patient agrees that, once money is exchanged, she cannot and will not file a claim for medical malpractice.

If the patient signs this type of contract, (presumably one drafted by the carrier), it is probably a good idea for the physician to recommend that the patient’s attorney review it. Why? The contract could be perceived as being “unconscionable” and against public policy. It is assumed that the physician has superior bargaining power, and the legal system wants to ensure that contracts are associated with “meaningful choice.”

If the physician recommends that the contract be reviewed by a patient’s representative, the playing field has ostensibly been leveled. This will increase the odds that the contract can be successfully enforced should the patient have a change of heart. Of course, if a patient has not already seen an attorney, and the physician is recommending that she now sees one, new issues and risks may be created. Further, the attorney will want to be paid, and the patient will be reluctant to make that payment from the refund.

A related issue is the scope of such a contract. Most states do not allow an individual to contractually forego the right to file an administrative complaint with the board of medicine. In Florida, for example, grounds for discipline include failure to comply with the requirements of sections 381.026 and 381.0261 of the Florida Patient’s Bill of Rights and Responsibilities to provide patients with information about their rights and about how to file a complaint. Hence, a physician may find himself in the position of having tendered a refund, expecting that would be the end of the matter, only to find out that the board is investigating a round of specific allegations.

Is Payment Reportable?

Another question is whether the refund is reportable to the National Practitioner Data Bank. The answer is, “It depends.” The Health Care Quality Improvement Act requires any “entity” that makes payment in settlement of (or in satisfaction of a judgment in) a medical malpractice claim to report the payment to the Data Bank.

In American Dental Association v Donna Shalala, US Department of Health and Human Services,1 the appellate court addressed two questions: Are individual health care practitioners, such as physicians and dentists, considered “entities” that are required to report payments? And, does the Act require reporting of “noninsurance” types of payments, such as refunds?

The court concluded that an individual tendering a payment does not have to report it to the Data Bank, but an entity, such as the corporation that employs said physician, does. The court was silent as to whether a refund would specifically qualify as a reportable event.

It is generally thought that if the refund is given after a demand threatening legal action, and if the refund is given in exchange for not filing a lawsuit, that would constitute a settlement. In short, a refund could trigger reporting requirements to the Data Bank.

A physician who offers a refund would generally think to do so via his or her corporate entity, if for no other reason than to establish the tax-deductibility of the refund as a business expense. In contrast, payment by an individual implies the use of after-tax dollars, further increasing the net expense to the physician.

One might ask, “How would anyone know if the corporate entity that employs the physician failed to report to the Data Bank?” If the patient signs a contract not to file a malpractice claim, and breaches it, the only remedy available to the physician is to challenge the breach in court. In seeking to enforce the agreement, the physician would have to create a public record. But as noted, that agreement might by its very nature have established a duty to report.

This would obviously tilt the balance of power to the patient in terms of being able to secure a second monetary settlement in exchange for silencing the matter. Further, physicians are generally under an obligation to report settlements to medical boards each time their licenses are renewed. Failure to report, combined with a public court record of a “reportable event,” might create additional difficulties with the medical board, hospital-credentialing committees, and other regulatory bodies.

Admission of Guilt?

Finally, giving a refund can be improperly construed as a tacit admission of guilt. That is, the act of tendering a refund can be manipulated by a clever plaintiff’s attorney to support the argument that the surgeon would never have given the refund unless he was guilty of malpractice. One can certainly defend against this argument, but it can be a trap for the unwary. Physicians who just give a refund and require no obligation from the patient might find themselves unpleasantly surprised just before the statute of limitations expires.

Of course, very often a patient simply wants a refund. She treats the surgery no differently than any other consumer purchase. When she receives her money back for a defective appliance, she generally does not embark upon a product-liability suit. Similarly, the patient will be assuaged by the refund, and the physician will never hear from her again. But this is not always the case.

I’ll close with a real-world example of how these vexing problems are being faced by one plastic surgeon. He performed a facelift, and the patient was not happy with the result. She demanded her money back. He accommodated her demand in exchange for an agreement not to sue.

Several months later, she wrote another letter saying that she would be incurring new expenses for having to undergo a second facelift. She asked him “to find it in his h
eart to do the right thing” and give her the funds. The subtext was that she might sue if he did not write the check. As of this writing, the surgeon still has not decided what to do, but he clearly feels betrayed. He had assumed that once he wrote the first check, he was finished.

Sometimes, even a conscious act of bene­volence can create problems. As the saying goes, “No good deed goes unpunished.” PSP

Jeffrey Segal, MD, FACS, is a neurosurgeon and member of the American Asso­ciation of Neurological Surgeons. He is the founder and CEO of a firm that protects physicians from being sued for malpractice for frivolous reasons. He can be reached at (336) 691-1286 or jsegal@medicaljustice.com.

Reference

1. American Dental Association v Shalala, 3 F3d 445 (DC Cir 1993).