The Colorado Supreme Court recently ruled that healthcare companies in the state are not immune from employee lawsuits for reporting suspected controlled substances diversion. The case points to issues facing providers nationwide.

Why It Matters

Federal and state laws require healthcare providers to report potential controlled substances diversion.

  • However, regulatory authorities determine what, if any, action to take based on the reported conduct.
  • This exposes the reporting entity to potential legal and financial liability from allegedly diverting employees resulting from a process the entity cannot control.
  • Providers, of course, also face potential government enforcement liability for diversion they report.

What Providers Can Do

The ruling highlights the importance of conducting a thorough and well-designed investigation before reporting to a state or federal regulatory authority.

  • Providers should define the parameters of the investigation and fully investigate the facts before determining what to report and which authorities to involve.
  • Providers should also consider what, if any, process changes to make in response to the suspected diversion.
  • Experienced legal counsel can help providers navigate these issues and conduct investigations under privilege, where appropriate.

Dig Deeper

In 2019, a Colorado hospice suspected that a nurse had diverted over 400 oxycodone pills from an elderly patient.

  • The hospice reported the nurse to local law enforcement, the state department of public health, and the state nursing board. Ultimately, no criminal charges were filed, and no formal disciplinary actions were taken against the nurse.
  • In response, the nurse sued the hospice and its director for negligent supervision, negligent hiring, defamation, and intentional infliction of emotional distress.

Immunity Claim

The hospice asserted immunity under four state statutes that provide immunity for reporting potential misconduct. But the Colorado Supreme Court denied immunity across the board.

  • Three of the statutes provide immunity only for a “person.” The court held that, in this context, “person” excludes a corporation.
  • The fourth statute provides immunity only for reporting conduct to warn against future criminal activity. The court found that the hospice failed to show this was its purpose in making the reports.

The hospice must now litigate the nurse’s claims and face monetary exposure if found liable.

The Bass, Berry & Sims Controlled Substances Enforcement & Diversion Practice routinely helps healthcare providers conduct internal diversion investigations and navigate the myriad risks faced when complying with federal and state reporting requirements, like the ones that subjected the hospice to legal action here.

If you have any questions about how this Colorado ruling may impact your business, please contact the authors.