When Is It About Money? Why Is It About Time?


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  • November 25, 2014

Crisis, it is said, means both danger and opportunity. In medical liability reform, however, greater opportunity may lie in noncrisis. In this issue of JAMA, Mello and colleagues offer data suggesting that no crisis of the conventional sort currently exists in the medical malpractice system.

In the mid-1970s, mid-1980s, and early 2000s, physicians’ liability insurance became suddenly unavailable, unaffordable, or both. Crisis was undisputed, with the potential for serious disruption of access to medical services. So was the direction of reform, which targeted the marketability of liability insurance, primarily by restricting lawsuits and limiting damages. The causal pathway between these “tort reforms” and physicians’ premiums was admittedly tenuous, and other significant failings of the malpractice system with respect to patient safety and compensation for injury were increasingly evident. When each insurance crisis eventually abated, however, tort reformers declared victory.

Three domains comprise the medical malpractice system in operation: clinical care, dispute resolution, and liability insurance. Although malpractice experts have persistently called for a closer connection between the legal and insurance domains and providing safe, accessible medical care, it is still unusual to approach malpractice reform as a health policy problem. Instead, many stakeholders continue to debate liability as an external force: either a needless drag on the health care system (eg, because of costly defensive medicine) or a necessary corrective (eg, because injured patients deserve justice). This perspective dominated even the 2000s crisis, despite new, clear evidence that medical errors were widespread and that uncompensated injury was at least as serious a problem as meritless claims.

Because of the adversarial nature of litigation and the focus on legislated tort reform as a solution, the politics of malpractice reform have always been intense. However, the strong partisan polarization of the principal combatants—physicians and insurers aligning with the Republicans, and trial lawyers with the Democrats—has made it even more difficult in recent years to integrate malpractice policy with overall health policy. For example, lack of bipartisanship caused the Affordable Care Act to sidestep medical liability and miss opportunities for improvement.

The information presented by Mello and colleagues gives little indication of crisis. Liability insurance costs for physicians remain surprisingly variable and are persistently high in some states and specialties. However, paid claims declined from 18.6 to 9.9 per thousand physicians from 2002 through 2013, while median payments declined from $218 400 to $195 000 from 2007 through 2013. The authors assert, reasonably, that another insurance crisis will eventually surface, but there are no seismic rumblings in their data.

Why, then, do these authors and others continue to urge reform? Because research on the malpractice system is now sufficient to demonstrate that declining claims and payments do not signal policy success. If significantly fewer people were being injured by medical care now than in the past and if the event of a serious error triggered a humane, effective process of healing and learning for both physicians and patients, then there would be cause to celebrate a reduction in litigation. But this is not the case. There is no evidence that injuries have declined. Moreover, although physicians and patients may have less of a bad process because of tort reform, they do not yet have a good process.

The more comprehensive initiatives that Mello and colleagues describe attempt to address these issues and to close the circle on malpractice reform. But newer approaches are more complex and nuanced than conventional tort reforms and lack the us-vs-them appeal of those measures. How, then, can these proposals compete for attention among cynical, stressed stakeholder groups and policy makers without a spike in premiums or a similarly substantial event to give them salience and urgency?

Everyone understands time and money. It therefore may be helpful to identify aspects of resolving a malpractice claim that are about the money and what that implies for reform. Doing so also could help skeptical minds appreciate the ways in which malpractice is not about money and to recognize the centrality of time in furthering several consensus goals of an improved system.

SOMETIMES IT IS ABOUT THE MONEY

Injured patients should be compensated. For less serious but clearly avoidable injuries, covering the cost of additional care and the associated disruption of a person’s life is often sufficient. Communication-and-resolution programs and other early intervention initiatives can address these situations collaboratively, without litigation. More severe injuries have greater financial consequences for all parties, which must be negotiated. Even in these cases, most transparency-based initiatives use nonevaluative forms of dispute resolution to determine what the patient needs as a guide to what the patient deserves, rather than benchmarking financial settlements to what a plaintiff might receive in court. This can be challenging in states with low caps on damages or selective immunities for certain defendants (eg, nonprofit hospitals). By contrast, it is not coincidental that “judge-directed negotiation” is a favored approach in New York, where damages are uncapped, juries are generous, and the shadow of the courtroom therefore looms large.

Lawyers need to be paid for representing claimants. Surprisingly, health systems using communication-and-resolution programs and similar approaches tend to strongly favor involving plaintiffs’ lawyers. Lawyers can help their clients through a difficult time, focus discussion on the most important issues, and ensure that any settlement is fair. On the other hand, the traditional model of paying lawyers a hefty percentage of the plaintiff’s recovery assumes that litigation will be protracted and contentious and is unsuitable for systems premised on transparency. Using communication-and-resolution programs to resolve cases should also help reduce defense costs, which have increased persistently even as claims and payments have declined.

An allegation of malpractice has significant economic consequences for physicians. In addition to the possibility that their liability insurance will become unaffordable or unavailable, physicians worry about the reputational effects of both claims and settlements on hospital privileges, managed care contracts, and other sources of patient referrals. Guideline-based reforms appeal to physicians because those reforms offer the prospect of clinical vindication at an early stage. Many of these concerns are ameliorated by the ongoing transition from solo or small-group practice to employment in larger groups or health systems, which are also better positioned to engage in proactive dispute resolution such as communication-and-resolution programs. As Mello and colleagues point out, however, the National Practitioner Data Bank and many state regulatory bodies have yet to adapt their requirements to transparency-based systems in which reports of errors and settlements probably indicate that care is becoming safer, not more dangerous.

In addition, payment to physicians and hospitals is an essential component of malpractice reform using many of the models that Mello et al describe. Traditional fee-for-service payment with little accountability for error creates perverse incentives so that hospitals and even physicians may earn more when a clinical course is complicated than when things go smoothly. Nonpayment policies for “never events” are a reasonable response from both Medicare and private insurers, much as hospitals and even physicians participating in communication-and-resolution programs routinely refrain from billing patients for clearly unsafe care and for subsequent treatment that should not have been necessary. Physicians and hospitals that step forward to address patients’ needs following adverse events, however, may find themselves blind-sided by Medicare liens and subrogation claims from private insurers.7 For example, an elderly patient offered $20 000 through a communication-and-resolution program to help pay for assistance after experiencing injury during a hospitalization would probably be liable to Medicare for the entire amount and would have to navigate a complicated maze of bureaucratic barriers to negotiate a compromise.

BUT IT IS NOT ALWAYS ABOUT THE MONEY

For many physicians, the principal attractions of new malpractice approaches are nonpecuniary. The core commitments of a communication-and-resolution program are to explain to patients what occurred, try to put things right, improve safety for the future, and empower and support caregivers. This is simply good medicine. Moreover, the “deny and defend” mentality typical of malpractice litigation unbalances the ethical compass of today’s physicians. When eliciting informed consent to treatment, physicians willingly honor their obligations to advise patients about what might happen. Following a medical error, then, how can these physicians ethically withhold from patients information about what did happen?

In the increasingly complex world of medical practice, physicians also value the control that newer liability strategies restore to them. Tort reform requires repeated cycles of campaign contributions, public advocacy, and hardball politics to enact, and then to defend against the threat of being overturned by subsequent legislation or judicial review. These tasks are beyond the knowledge and understanding of most physicians and reinforce the helplessness they feel about malpractice risk. By contrast, communication-and-resolution programs are a do-it-yourself malpractice reform based on honest patient engagement, with strong support from colleagues and often a formal program of care for the caregiver.

Process matters as well. When something unexpected occurs, patients and their families often want communication, compassion, nonabandonment, and a genuine commitment to preventing future harm more than payment. None of this is available in traditional litigation. To the contrary, a substantial percentage of seemingly meritless claims are filed simply to force health care practitioners to explain what happened. Nor are physicians well served by litigation, which walls off defendants from human interactions concerning the event and subjects them to periodic intrusion and protracted anxiety.

IT IS ABOUT TIME

Finally, approaches that accelerate the recognition of errors and the resolution of disputes are likely to further both monetary and nonmonetary goals of malpractice reform. Conventional litigation thrives on delay, producing a host of ill effects. Patients and families are denied critical information and assistance. Timely feedback for safety improvement is impossible. Administrative costs mount. Compensation is withheld but emotional pain and adversarial stress are not. Over the longer term, delay exacerbates actuarial uncertainty for liability insurers and increases the vulnerability of insurance markets. A major advantage of communication-and-resolution programs and most of the other liability reforms evaluated by Mello and colleagues, therefore, is that they save time.

ARTICLE INFORMATION

Editorials represent the opinions of the authors and JAMA and not those of the American Medical Association.

Corresponding Author: William M. Sage, MD, JD, University of Texas at Austin School of Law, 727 E Dean Keeton St, Austin, TX 78705 (wsage@law.utexas.edu).

Published Online: October 30, 2014. doi:10.1001/jama.2014.15416.

Conflict of Interest Disclosures: The author has completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest and none were reported.

REFERENCES

1 Mello MM, Studdert DM, Kachalia A. The medical liability climate and prospects for reform. JAMA. doi:10.1001/jama.2014.10705.

2 Sage WM. Malpractice reform as a health policy problem. Widener Law Rev. 2005;12:109-121.

3 Studdert DM, Mello MM, Gawande AA, et al. Claims, errors, and compensation payments in medical malpractice litigation. N Engl J Med. 2006;354(19):2024-2033.

4 Sage WM, Hyman DA. Let’s make a deal: trading malpractice reform for health reform. Health Aff (Millwood). 2014;33(1):53-58.

5 Mello MM, Boothman RC, McDonald T, et al. Communication-and-resolution programs: the challenges and lessons learned from six early adopters. Health Aff (Millwood). 2014;33(1):20-29.

6 Black B, Hyman DA, Silver C, Sage WM. Defense costs and insurer reserves in medical malpractice and other personal injury cases: evidence from Texas, 1988–2004. Am Law Econ Rev. 2008;10(2):185-245.

7 Sage WM, Gallagher TH, Armstrong S, et al. How policy makers can smooth the way for communication-and-resolution programs. Health Aff (Millwood). 2014;33(1):11-19.