Legal Perspectives: Mission Critical Health Care Facilities
State regulators recognize the importance of uninterrupted power to health-care facilities by requiring them to have on-site backup power. For example, the New York State Department of Health requires each hospital and nursing facility to have an established plan of emergency electric service in the event of an electrical system failure. It also requires compliance with the 1996-1997 Guidelines for Design and Construction of Hospital and Health Care Facilities. Hospitals and nursing facilities typically satisfy these requirements by having on-site backup generation interconnected to the utility system or separated by a transfer switch that will switch to and activate on-site power upon the loss of utility power. These units are required to be tested periodically.
If a health-care facility in New York loses power and fails to meet its legal requirements to have backup power or is negligent in carrying out its emergency plan, the owner and operator are subject to possible administrative penalties and fines, and possible loss of an operating license in the event of casualty or death. The owner or operator may also be subject to lawsuits as well as loss of reputation.
How does the facility owner or operator protect itself?
State law and utility commission regulations generally provide a measure of protection. For example, the New York State Public Service law and Public Service Commission regulations limit a utility’s ability to cease providing power to health-care facilities. Manufacturers and maintenance agreements also provide warranties and other protections.
While it would appear that health-care facilities have overlapping protections, there are significant gaps in the protective wall that leave health-care facilities open to legal liability in the event of a loss of power in the facility. In certain circumstances, the facility may be left virtually on its own.
Con Edison, like other New York utilities, operates under tariff provisions that limit its liability to “gross” negligence and, in addition, such liability is further limited in most circumstances in which an outage might actually occur. One such circumstance is that Con Edison may cut power to networks to protect the overall distribution system. Even if the utility is found to be liable, recovery is likely to be limited.
The manufacturer’s or installer’s warranty for backup generator installed is generally one year or less and may only require the provider to supply equipment, parts and labor to restore the generator to working order, even if the warranty is still in force when the outage occurs. In fact, the sales agreement will include a provision limiting the liability of the manufacturer.
Even if the facility has arranged for a comprehensive maintenance “package,” the maintenance provider will not be required to “instantly” restore power and, based upon the majority of maintenance contracts we have seen, will typically require the maintenance provider to be “on site” within 4 hours – with no specific requirement as to when power will be restored. Like the manufacturer, the maintenance provider will include limitations of liability in the maintenance agreement.
The ability of a health-care facility owner or operator to protect itself against liability by contractual means is limited. The first line of protection will reside with procuring, installing, and regularly testing on-site generation equipment suitable for the purpose and maintaining it in first-rate condition, and arranging for proper training of facility personnel. As an extra measure of protection, it is prudent to arrange for remote monitoring and emergency operational control services.
This article was prepared with assistance from Jerome Levy, who is a partner in the Health Care Group of Duane Morris LLP, and David Ahrens of Energy Spectrum, an engineer who has experience with health care facilities.