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From Health Law Daily, October 9, 2014

Wrongful accusation of HIPAA violation provides basis for defamation claim

By Michelle L. Oxman, JD, LLM

The operator of Cumberland Hospital (Cumberland) must defend a defamation action bought by a former nurse who contests the hospital’s statements that it terminated her employment because she violated the Health Insurance Portability and Accountability Act (HIPAA) (P.L. 104-191), which protects patient confidentiality. The court ruled that the nurse had adequately alleged that the hospital’s statements tended to damage her professional reputation. In addition, state law did not recognize the hospital’s claim of “intracorporate privilege,” and the nurse’s allegations of retaliation were sufficient to plead the element of malice. Only a qualified privilege is available for statements made at an unemployment compensation hearing (MacGlashan v ABS LINCS KY, Inc., October 7, 2014, Russell, T).

The underlying dispute. MacGlashan was a nurse manager at Cumberland Hospital. When she learned that a patient with a known allergy to sulfa had been given multiple doses of a sulfa-based antibiotic, she immediately transferred him to another hospital. She then met with the chief executive officer (CEO) and the Director of Nursing to discuss the medical error. The CEO directed her to check on the patient. She did so and reported back to him.

MacGlashan alleged that the CEO told her to investigate further, so she took some of the patient’s medical records home to review and then visited the patient the following day. The CEO became concerned that the investigation brought negative attention to the hospital and suspended MacGlashan. Within a week, Cumberland terminated her employment “for violating HIPAA.” MacGlashan applied for unemployment compensation. The employer objected, claiming that it fired her for misconduct, i.e., violating HIPAA, and testified to that effect at a hearing on MacGlashan’s eligibility for benefits.

Stating a claim for defamation. Under state law, to establish defamation, the injured party must establish: (1) a statement that would tend to bring a person into public contempt, ridicule, or hatred, cause the person to be shunned or avoided, or injure his or her business or occupation; (2) publication of the statement; and (3) injury to reputation. The court noted that a statement that a nurse violated an important law regulating health care professionals tended to injure both her professional and personal reputations.

The court found that the statements had been published to the unemployment compensation agency and to at least two senior employees of Cumberland. Cumberland argued for two types of privilege: (1) statements made about employees in the course of an unemployment compensation hearing are privileged; and, (2) statements made within the company are absolutely privileged. The court, however, ruled that the privilege for unemployment compensation hearings is qualified, so that the employee may overcome it by showing that the statement is false and motivated by retaliation, as she alleged. The court also rejected the claim of “intracorporate privilege,” relying on previous cases in which a court of appeal ruled that there was no reason to insulate a corporation or its officers and employees from liability merely because the statements were made exclusively to its officers or employees.

The case number is 5:13-cv-00135-TBR-LLK

Attorneys: Brian Butler (Dathorne & Butler, LLC) for Margaret MacGlashan. Demetrius O. Holloway (Stites & Harbison, PLLC) for ABS Lincs KY, Inc.

Companies: ABS Lincs KY, Inc.; Cumberland Hospital

MainStory: TopStory EmploymentNews HIPAANews KentuckyNews

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