Medical Malpractice and Tort Reform: A Brief Overview and Case Study

By: Abhas Gupta

The previous post, 'Medical Malpractice: A State of Crisis', explores some of the factors responsible for today's exorbitant rates of malpractice insurance.

Empirical Research on Medical Malpractice

Several studies were conducted over the past three decades to better understand medical malpractice litigation. Two studies (NEJM 1977; NEJM 1990) looked at the medical records of thousands of patients in California and New York, respectively. Both found similar rates of iatrogenic injury (~4%). Of these cases, only a fraction were due to negligence (about a quarter, or 1% overall) and an even smaller fraction of those cases actually resulted in malpractice claims. Another study (NEJM 1996) found that compensation in medical malpractice cases was, erroneously, more often proportional to the plaintiff’s degree of disability than the defendant’s degree of negligence.

A recent retrospective study (NEJM 2006) inspected 1452 closed malpractice claims from five insurers. The study found that 3% of claims had no injury and 37% had no errors; therefore, 40% of the claims were found to be frivolous. Fortunately, most frivolous claims (>70%) did not result in payment, but of course, the cost of defending against these claims was ultimately bore out by the defendants. Of the claims deemed valid by the authors, 73% resulted in payment. The most shocking finding of the study was that 54 cents of every $1 in compensation did not go to patients; instead, the bulk of payouts were absorbed by trial attorneys and legal fees.

There is currently little evidence relating litigation with subsequent rates of adverse events, negligence rates, or quality-of-care indicators. This questions the ideology of malpractice litigation as a means of deterring unsafe practices. Moreover, there are a number of studies showing that litigation influences physician behavior in undesirable ways (by promoting defensive medicine, for example). Nevertheless, there is a glaring theme connecting all of these studies: our system of distributing compensation for victims of negligence is insufficient and profoundly inefficient.

Tort Reform: Punitive vs. Systems-based Approaches

Tort reform proponents can be crudely divided into two schools of thought: the first seeks to limit the threat of litigation (conventional tort reform) and the second pursues non-punitive, systems-oriented approaches to limit both errors and court cases (system reform). Patient safety groups largely occupy the second school of thought. They advocate systems-based approaches, implying that physicians are not the only ones to blame for medical errors--our hospital and health care systems are also responsible. The table⁴ on the right categorizes many of the current approaches being considered/implemented in tort reform.

A Long-term Strategy for Controlling Malpractice Costs

As physicians, we need to agree that patients are at the heart of any reform and we should frame our positions as such. We must vehemently advocate, on behalf our patients, that 1) victims of negligence should be compensated quickly and appropriately; and 2) medical errors should be acknowledged and investigated in order for adequate solutions to be implemented. Given the concordance of these values with those of patient-safety groups, our camps should join forces and embrace the push for non-punitive, systems-oriented approaches (described above).

The costs of acknowledging our mistakes will surely be large in the short-term. Arguably, these costs could be on par with current malpractice costs because the corresponding increase in claims would be offset by the decrease in payout amounts (made possible by side-stepping trial attorneys and their substantial fees). Over time, we can expect the incidence of medical errors to decrease--through recognition and corrective action--thereby reducing malpractice costs over the long-term.

Case Study: The University of Michigan Health System

In 2002, the University of Michigan Health System launched their Medical Error Disclosure program with the following three principles:

1. Acknowledge cases in which a patient was hurt because of medical error and compensate these patients quickly and fairly
2. Aggressively defend cases that the hospital considers to be without merit
3. Study all adverse events to determine improvements

The hospital system has only made public three findings from this program (see figure on right). Over the course of four years, a substantial decrease occurred in annual litigation costs, average time to resolution of claims, and the total number of claims. Although not reported, the overall cost of malpractice claims^* can be expected to decrease as well.

In 2006, Senators Obama and Clinton co-sponsored the National Medical Error Disclosure and Compensation (MEDiC) bill³ that created funding for hospitals to undertake programs similar to UMHS. The bill affords legal protections to hospitals who disclose errors voluntarily to the patient. Also, the bill includes an important stipulation that a percent of the savings in malpractice costs, attained by implementing the strategies outlined in MEDiC, would then have to be applied to improve patient safety and further reduce medical errors. The bill also called for the creation of an Office of Patient Safety and Health Care Quality which would assess patient safety issues nationwide and serve as the primary vehicle for disseminating best practices throughout the health care system.

^*Adjusted for fluctuations in staff, regional malpractice rates, etc. and notwithstanding the underwriting structure (individual physicians vs. hospital systems)

Note: If you are interested in learning more, begin by reading Medical Malpractice (NEJM 2004). This post summarizes a lot of the concepts that are presented with greater detail by Studdert et al.

References:
1. California Medical Association and California Hospital Association report on the Medical Insurance Feasibility Study. Mills DH, ed. San Francisco, CA: 1977
2. Claims, Errors, and Compensation Payments in Medical Malpractice Litigation. DM Studdert, MM Mello, AA Gawande, TK Gandhi, A …. NEJM, 2006
3. Making Patient Safety the Centerpiece of Medical Liability Reform. HR Clinton, B Obama. NEJM, 2006
4. Medical Malpractice. DM Studdert, MM Mello, TA Brennan. NEJM, 2004
5. Patients, doctors, and lawyers: medical injury, malpractice litigation, and patient compensation in New York: report of the Harvard Medical Practice Study to the state of New York. Harvard Medical Practice Study. Cambridge, MA: 1990
6. Relation between Negligent Adverse Events and the Outcomes of Medical-Malpractice Litigation. TA Brennan, CM Sox, HR Burstin. NEJM, 1996