Home > Property & Casualty > Tort reform – hype vs. reality

Tort reform – hype vs. reality

med_mal_op_edAsk any healthcare provider about what goes on during the arduous task of completing a medical professional liability renewal and you’re bound to hear about insurance market conditions and the state of insurance renewals. Everyone from politicians (both local and federal) to advocacy groups and providers themselves seems to be commenting about how the “crisis” with medical malpractice insurance inhibits the performance of good medicine. The phrase “defensive medicine” was a phrase rarely mentioned until recently. Now, it’s permeated the nomenclature of both patients and providers alike. However, an objective review of the medical professional liability insurance market would find the claim of a “crisis” to be unfounded, or incomplete at best.

None of this is to imply that unwarranted claims and lawsuits do not exist. They do. These actions cause a tremendous amount of stress and consternation for medical providers everywhere. Being a party named in a lawsuit is not a comfortable position for anyone. This is especially true for medical providers who, in the vast majority of cases, simply tried to provide care to the best of their ability. It is a sad fact that negative outcomes happen no matter how high the quality of care. Still, it’s important to acknowledge the strides being made to improve the medical malpractice legal landscape.

According to a data from a recent study in The Journal of the American Medical Association (“JAMA”), the number of paid claims costs decreased by over 45% from 2002 to 2013. In addition, over 96% of indemnity payments were a result of settlements, while a little over 3% of indemnity payments were the result of a trial verdict. The study found “little evidence of crisis”, but the authors do go on to note that these figures cannot be wholly credited to changes in or actual public policy successes.

Another positive outcome from these reduced costs has been the rates charged by medical professional liability insurance companies. According to Medical Liability Monitor, rates charged by these carriers have declined steadily since 2006. These macroeconomic figures, however, do not take into account regional and other “microclimates” that encounter rates that are significantly higher than the national average. Philadelphia, Cook County, Nassau and Suffolk County in New York and the Miami region are all micro-economies that remain very challenging from a risk profile standpoint. In spite of these and a few other geographic areas that concern underwriters (not to mention negative industry reports generated by the media), the medical malpractice marketplace has greatly improved. These positive changes present the healthcare community with an opportunity to explore innovative and alternative resolution strategies that can pay long-term dividends to the malpractice market, as well as to the overall quality of care provided to patients.

Historically, the medical community has tried to influence the stabilization of the insurance market via tort reform. The primary focus of these efforts have concentrated on three areas of “reform” that the medical and legal community believed would have a positive impact on the overall market:

  • the imposition of barriers to bringing legal action or to reach a trial
  • limits on the amount of compensation that plaintiffs could recover from a claim
  • changes in how damages were awarded and/or paid.

Last Fall, the New England Journal of Medicine examined whether or not “tort reform” efforts will end defensive medicine. The purpose of the article was to study whether or not legal reforms would reduce wasteful spending in the ER when physicians practice in an information poor, resource rich environment. Several tort reform advocates theorize that tort reform efforts would reduce alleged defensive practices.

The article studied three states: Texas, Georgia and South Carolina, to determine whether or not tort reform reduced testing and/or wasteful spending. From 2007 through 2011, researchers compared patient-level outcomes of emergency room visits in Texas, South Carolina and Georgia, all that had passed reforms, and in those that did not. The study found no evidence of a reduction in care between the two, nor were there any reduction rates of CT or MRI utilization or hospital admissions.

This article concludes that tort reform had very little effect on the intensity of practice and the rate of any purported defensive medicine. In the view of patient advocates, this study further debunks the belief that tort reforms will lower healthcare costs and increase the quality of care for patients.

Thus far, over half the states in the U.S . have implemented some form of caps on noneconomic damages. Unfortunately, these reforms do not appear to be solving the most basic issue. Michelle Mello, Professor of Law and Health Research and Policy at Stanford University writes in the JAMA article that these reforms “do not address problems with the malpractice system’s two core functions – compensating negligently injured patients and deterring substandard care.” She goes on to say that “the system’s effectiveness as both a compensation and a deterrence mechanism is mediocre at best.” It is this reality that gives rise to the need and opportunity for real changes in the resolution of medical malpractice claims.

In 2009, the Obama Administration secured $25 million to explore non-traditional malpractice reforms. This work has resulted in seven areas that hold some promise for real change in this area:

  • Communication and resolution programs: Health care practitioners discuss adverse outcomes with patients and seek resolution, offer an apology, explain what happened, and possibly offer compensation.
  • Mandatory pre-suit notification laws: Plaintiffs must give doctors and hospitals advance notice (1 to 6 months) that they intend to sue.
  • Apology laws: When doctors and hospitals make statements of regret, apology, or fault to patients, those statements may not be used in malpractice suits.
  • State-facilitated dispute resolution laws: Patients and practitioners may voluntarily work with a state agency that helps resolve the conflict. Conversations can’t be used in a trial.
  • Safe harbors: Laws protect practitioners who can demonstrate they followed a best-practice guideline or protocol in patient care.
  • Judge-directed negotiation: Parties to malpractice cases meet with a judge who will assertively move them toward settlement, with advice from a neutral attorney with clinical training.
  • Administrative compensation systems: Medical injury claims are routed into an alternative adjudication process that uses specialized experts, evidence-based guidelines for liability findings and damages, and a broader compensation standard.

Each of these reforms takes a substantive step away from the confrontational-dispute resolution system that is currently in place across the United States. It must be noted, however, that none of these potential solutions is a “quick fix” or one that providers should expect will bring about dramatic or immediate insurance rate changes. Each of these reforms will take time to have meaning full and impactful results.

In light of the growth and use of predictive modeling by insurance companies, (and from a professional liability standpoint), efforts surrounding tort reform seem somewhat fruitless. It’s likely that these trends will work at cross purposes for some time in the near future. While this is certainly not the intent of predictive modeling, these models are only as good as the historical data they use. They fall short in how they will value any reform efforts that ultimately lead to better quality patient care. And isn’t that the intended result?

About the Author

Pete Reilly is the Healthcare Practice Leader at WGA with extensive knowledge in healthcare systems, including hospitals, long-term care facilities, and medical practice groups of all sizes.

617.692.0256 | PReilly@wgains.com | Connect with Pete on LinkedIn
Follow Pete @MedMalInsGuy

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