Professional liability reform

Dr Lockwood, Editor-in-Chief, is Dean of the Morsani College of Medicine and Senior Vice President of USF Health, University of South Florida, Tampa. He can be reached at DrLockwood@advanstar.com.

Driving through Tampa, you can’t help being struck by the inordinate number of billboards advertising the services of personal injury attorneys. These ads also festoon newspapers and fill the air waves and television channels. Of course, the millions of dollars generated by media companies come at a high cost to the economy.

Beyond the actual costs of litigation, and of excess professional liability insurance premiums, defensive medicine adds billions to US healthcare costs. Baicker and associates noted that professional liability premium increases during the height of the last malpractice insurance crisis were associated with a staggering $15 billion increase in Medicare spending.¹ Every 10% increase in malpractice payments was associated with a nearly 1% increase in physician-directed healthcare spending.

While most rational observers accept that defensive medicine contributes to excessive healthcare costs, it has been difficult to establish a precise correlation between tort reform efforts and reductions in such medical practices or their costs. Trial lawyers and their apologists argue that tort reform has no economic impact, but objective analysis suggests otherwise. Detailed economic modeling data presented by Kessler and McClellan indicate that federal caps on non-economic damages and other measures could reduce healthcare costs by nearly 10%.²

So after two decades of internecine conflict in state legislatures and in Congress between lobbyists and various advocates of trial lawyers and organized medicine over tort reform, where do we stand?

Fewer malpractice claims, cheaper premiums

Mello and her associates merged payment data from the National Practitioner Database (NPDB) with the American Medical Association’s master file and carried out a Poisson regression of numbers of claims per 1000 physicians over time in five representative markets.³ These included Southern California, Long Island, New York, and select counties in Illinois and the states of Tennessee and Colorado. They also studied professional liability premium costs over time extracted from the Medical Liability Monitor’s Annual Rate Survey.

They reported that the annual rate of paid claims per 1000 physicians had fallen markedly, from 18.6 to 9.9, between 2002 and 2013.

During that same period, the annual average rate of claims paid per 1000 physicians decreased by 6.3% (95% CI: 6.2% to 6.5%) for MDs and 5.3% (95% CI: 4.8% to 5.9%) for DOs. Moreover, since 2007, the median indemnity paid decreased from $218,400 to $195,000 and high-end award values have plateaued. Interestingly, only 3.4% of payments made from 1994 to 2013 resulted from jury verdicts. And while there is regional variability, in general, professional liability insurance premiums have dropped, with the largest decreases in states where the toughest tort reform measures have been enacted.

Thus, between 2004 and 2013, California, Illinois, and Tennessee have seen a 36% drop in premiums for internists and ob/gyns and a 30% drop for general surgeons, while Long Island, New York, witnessed increases of 12% for ob/gyns, 16% for internists, and 35% for general surgeons. There was more than a five-fold difference in premiums paid by ob/gyns in Tennessee (about $40,000) versus Miami-Dade County (about $190,000).

Now, I seriously doubt that South Florida ob/gyns are five-fold less safe or, indeed, any less safe, than their brethren in Tennessee!

Why these generally favorable professional liability trends?

Medical liability tort reforms have traditionally focused on creating barriers to lawsuits and limiting payments.³ Primary contrivances for the former are screening panels and certificate-of-merit requirements. Payment limits typically take the form of caps on potential capricious non-economic awards, collateral source rule reforms, and joint and several liability reform.

Mello and her associates are largely dismissive, and I would argue prematurely so, of the notion that tort reform has played a significant role in the recent, albeit inconsistent, reduction in professional liability insurance premiums. They contend that these reductions are better ascribed to the mysterious cycle of the malpractice insurance market.

I would counter that recent drops in premiums are of a greater magnitude than accompanied resolution of prior crises, disproportionately favor states with the strictest reforms and are, in general, too temporally coupled with broad successes in state professional liability reforms accompanying recent Republican domination of state house, senate, and gubernatorial races not to be ascribable, at least in part, to tort reform. For example, there are now more than 30 states with caps on non-economic damages. Moreover, why would fluctuations in the insurance market alone trigger falling claims and payments?

Alternatives to traditional tort reform

Mello and her associates do make a compelling case that the current professional liability system has largely failed to achieve its two fundamental purposes: compensating victims and deterring errors. They propose a laundry list of common-sense, ethically unassailable, though largely unproven measures to further drive down costs and increase fairness.

First on the list are so-called communication and resolution programs. These take the general form of candid discussions between patients and/or their families and providers about the cause(s) of unexpected outcomes, disclosure of root cause analyses, and acceptance of responsibility appropriate to the circumstance. Immediate compensation is offered if appropriate. This approach has been pioneered by the University of Michigan and certain large VA hospitals, with apparent reductions in their malpractice-related expenses.

The applicability in smaller community settings, however, is unproven. “Apology laws” have been adopted by most states but, while well-intentioned, they have not been shown to decrease costs and, in certain states selectively advantage plaintiff attorneys. Similarly, cooling-off periods to allow time for mediation have now been mandated by 11 states, but with as yet unrealized benefits.

Likely more effective are state-facilitated dispute resolution laws, such as have recently been enacted in Oregon. The theory is that confidential “early discussions” between patients and providers concerning an unexpected untoward event will achieve prompt dispute resolution. If that initial effort fails, a mediator may be engaged. Patients and their families retain the ability to file a lawsuit prior to any settlement. However, all settlements must be reported to the NPDB, which likely will diminish physician participation. Nonetheless, it will be interesting to track healthcare costs in Oregon over time.

Benefits of tort reform and increased dialogue may be complementary

I contend that traditional tort reform initiatives and efforts to improve the transparency of error notification are not mutually exclusive and are probably complementary, if not synergistic, since both providers and patients are far more likely to engage in real dialogue if the system is perceived to be fairer and payments are tightly linked to actual otherwise uncompensated costs and apportioned fairly among those responsible.

Thus, we should double down on federal tort reform efforts and expand state programs to locales where basic reforms have been stymied by the trial lawyer lobby. Simultaneously, we should study non-traditional approaches, which I suspect will best take root in the fertile soil of tort reform. Regardless of whether insurance cycles, tort reform, or increased transparency in patent-provider dialogue have contributed to reduced malpractice claims and payments, I am absolutely convinced that the very best way to reduce professional liability claims, payments, and premiums-and ultimately the cost of defensive medicine-is by simply not making errors.

My colleagues and I have demonstrated that patient safety programs work in obstetrics, and that they reduce adverse outcomes and cost while improving both patient and caregiver satisfaction.^4,5 Thus, I have a strong hunch that the findings of Mello and associates are in no small measure also the result of the growing patient safety movement.

References

1. Baicker K, Fisher ES, Chandra A. Malpractice liability costs and the practice of medicine in the Medicare program. Health Aff (Millwood). 2007;26(3):841–852.

2. Kessler DP, McClellan MB. How liability law affects medical productivity. J Health Econ. 2002;21(6):931–955.

3. Mello MM, Studdert DM, Kachalia A. The medical liability climate and prospects for reform. JAMA. 2014;312(20):2146–2155.

4. Pettker CM, Thung SF, Norwitz ER, et al. Impact of a comprehensive patient safety strategy on obstetric adverse events. Am J Obstet Gynecol. 2009;200(5):492.e1-8.

5. Pettker CM, Thung SF, Lipkind HS, et al. A comprehensive obstetric patient safety program reduces liability claims and payments. Am J Obstet Gynecol. 2014;211(4):319–325.