In a major disaster, health care institutions face many issues, including disaster readiness, privacy concerns, and insurance coverage considerations. Superstorm Sandy offers a few lessons with respect to various health law requirements, and also sends a reminder to health care institutions of the need to carefully review their property insurance policies before faced with a claim.
Disaster readiness and privacy issues
Some facilities, like New York University Langone Medical Center, met Sandy’s challenges admirably, conducting an orderly and safe evacuation of patients when emergency power failed, and notifying family members of the new locations of the relocated patients.
Other facilities were less prepared, failing to prepare patient health information for evacuation and stock sufficient medicine and flashlights (in violation of state regulations). These failures resulted in patients being transferred without their health care information, and relatives unable to find out where their loved ones had been sent.
In a disaster, it is important to be clear about what the federal Health Insurance Portability and Accountability Act (HIPAA) permits with respect to sharing patient health information. Following Hurricane Katrina in 2005, the United States Department of Health and Human Services Office for Civil Rights issued a bulletin that provides guidance on how HIPAA allows patient information to be shared to assist in disaster relief efforts, and to assist patients in receiving the care they need. For example, a facility’s patient directory information can be shared for these purposes.
In addition, HIPAA business associates, subject to their contractual agreements, can help facilitate appropriate information sharing. The Office for Civil Rights of the U.S. Department of Health and Human Services (also known as the HIPPA Police) has indicated that it will consider emergency circumstances when it assesses whether there has been a failure to meet HIPAA requirements and how quickly any failure must be cured.
Disaster readiness will also be under the microscope in the coming months. In light of the power failures at hospitals affected by Sandy, the Centers for Medicare and Medicaid Services are reviewing whether requirements for backup power should be updated.
Currently, Medicare Conditions of Participation (COPs) for hospitals require that the hospital meet the applicable provisions of the 2000 edition of the Life Safety Code, which references National Fire Protection Association (NFPA) standards, specifically NFPA 99. Emergency power and lighting are required in critical areas such as operating, recovery, intensive care and emergency rooms and stairwells. In other areas not serviced by emergency supply sources, battery lamps and flashlights must be available. Although NFPA updates its standards every three years, the COPs still reference the version that was in place in 2000.
Similarly, long-term care facilities must have emergency power and water systems, and provisions for emergency lighting. In a skilled nursing facility, the emergency electrical power system must supply power adequate for at least lighting all entrances and exits, equipment to maintain the fire detection, alarm and extinguishing systems, and other support systems. When life support systems are used in the facility, there must be electrical power provided with an emergency generator located on the premises.
The facility must also have detailed written plans and procedures to meet all potential emergencies and disasters, including severe weather, and must train its employees in emergency procedures.
The Joint Commission (JC), which accredits hospitals, has recommended that for new construction the placement of the generator, fuel tank and support equipment should be optimized. For example, in a flood-prone area, it should be above potential flood levels, and there should be proper redundancy to it. The JC also suggested that health care facilities assess the need for additional redundancy through portable truck-mounted generators, and to develop procedures to isolate generators from problem areas. The JC Accreditation Standards also require that hospitals have an Emergency Operations Plan that describes how the hospital will manage utilities during an emergency. The plan must identify alternative means of providing various essential support, including electricity.
Now, more than seven years after Katrina, commentators are asking why major hospitals still house critical backup systems (like generators) in basements, which are prone to flooding. In the coming weeks and months, we can expect to see a renewed focus on this issue, and it is entirely possible that new requirements will be enacted, which may apply to both existing and new facilities.
Insurance coverage considerations
Health care institutions damaged by Superstorm Sandy should also carefully review their property insurance policies as soon as possible, before they submit their claims.
The damage caused by Sandy was devastating – the current initial estimates are between $10-20 billion, a large percentage of which should be covered by insurance. Most businesses – including health care institutions – purchase property policies that insure against “all risk” of direct physical loss of or damage to property occurring during the policy term.
These policies often cover real and personal property, including property owned, used, leased or intended for use by the insured; property of others in the insured’s care, custody or control; and property which the insured is responsible for or has agreed to insure. Property policies contain numerous exclusions, as well as sublimits and deductibles specific to the cause of the loss.
As with all coverage claims, the policy language is key, and it varies by insurer and policyholder.
Property insurance policies generally afford significant coverage beyond just coverage for damage to physical property. These additional coverages might include business interruption (lost income due to property damage), contingent business interruption (lost income due to a customer or supplier affected by the storm), civil or military authority (lost income due to prohibited access by government order), and ingress/egress (losses resulting from inability to access the insured’s business).
Unlike other businesses that may be able to shut down after a storm like Sandy in order to make repairs and cleanup the damage, health care institutions like hospitals and nursing homes must continue to operate.
Most insurance policies provide coverage for service interruption (costs incurred due to losses caused by interruption in utility services), as well as extra expenses (costs incurred to continue normal business operations).
Finally, hospitals and nursing homes should make sure they are looking at all applicable insurance policies. Most institutions that reside in a flood plain have flood insurance coverage through the National Flood Insurance Program, which is administered by the Federal Emergency Management Association (FEMA).
As such, many institutions may need to submit multiple claims to various insurers – their own property insurer, as well as FEMA.
Everyone hopes such disasters never occur, but when they do, they serve as reminders to all to review how their organization would fare if faced with a similar natural disaster.
Natalie Maciolek is a partner at Quarles & Brady LLP who specializes in commercial litigation focused on complex insurance and professional liability disputes. Alyce Katayama is a Quarles & Brady partner who specializes in health law, including counseling hospitals and health care organizations on regulatory compliance. Both can be reached at 414-277-5000.
