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Medical malpractice reform: finding a better way

New research shows no fault, arbitration and mediation each holds promise—and pitfalls

From the November 1997 ACP Observer, copyright 1997 by the American College of Physicians.

By Deborah Gesensway

DURHAM, N.C.—When it comes to medical malpractice, there must be a better way. Instead of dragging everyone through lengthy court battles, what if there was a no-fault system? What if the system for punishing bad doctors and compensating injured patients was built around arbitration or mediation?

Leading medical, legal and economic experts converged on Duke Law School this fall to probe these ideas. Based on their research for the Robert Wood Johnson Foundation's "Improving Malpractice Prevention and Compensation Systems" (IMPACS) grant program, they laid out some of the latest thinking on how to reform the medical malpractice system.

Take the idea of making malpractice insurance function as a no-fault system, like car insurance is treated in many states. Under no-fault systems, which already exist in Sweden, New Zealand, Finland and other countries, a person who is injured is compensated according to a schedule of payments without having to first prove who was at fault. Currently, in order to collect any damages, patients have to prove that their injuries were caused by physician negligence.

Despite what doctors may think, studies have found the vast majority of injured patients never receive compensation for their injuries. Most of the state-level tort reforms have actually decreased the claims rates, which means some patients who may have sued in the past do not now. In addition, these tort reforms have kept down increases in malpractice insurance rates for doctors.

A no-fault type of medical malpractice system would cost a little more than the current system, but it would more frequently compensate patients injured by the health care system, a research team from Harvard University concluded.

For example, compensating all patients in Utah and Colorado who suffered "avoidable" adverse events, as judged by a medical reviewer, would cost $77 million in 1992 dollars in Utah and a little more than $100 million in Colorado, slightly more than the current total malpractice premiums paid in those states, explained David M. Studdert, LLD, MPH, of Harvard's School of Public Health. However, he said, a Swedish-style no-fault system would result in many more injured patients receiving payments—nearly 1,000 in Colorado, compared to the 200 to 300 successful claimants today and 800 to 900 people in Utah, compared to 150 to 200 today.

However, a no-fault system does not necessarily educate physicians about their errors and thus may not result in improved patient safety, said Frank A. Sloan, PhD, a professor of health policy and management at Duke University. Such programs "pay out in cases where there has been fault on the part of the doctors—with no feedback to the doctors," said Dr. Sloan, who is researching existing limited no-fault systems in Florida and Virginia.

The Florida and Virginia no-fault systems—the only such medical systems operating in the U.S—were created in the late '80s in response to the perceived liability insurance crisis and are limited to newborns with severe, birth-related neurological impairments. Doctors are assessed varying annual fees (e.g., those who deliver babies pay more) to pay for the programs.

Patients and their families who went through the programs were compensated about a year faster than those who went through the tort system. And although the total payouts were the same as if the case had gone through the courts, the administrative costs were less and patients got a bigger share of the compensation, said Randall R. Bovbjerg, JD, of The Urban Institute in Washington, D.C., who also worked on this study.

And in terms of helping doctors make fewer mistakes or provide less negligent care, Frances H. Miller, JD, a professor at Boston University School of Law, showed that doctors are being less frequently "disciplined" ex post facto by licensing boards and the courts. Instead, purchasers of medical services have moved toward a "total quality improvement" approach and introduced such mechanisms as report cards, network selection and practice guidelines to improve the quality of care provided by doctors.

The corporate purchasers of medicine, Dr. Miller said, "have become secondary licensers because they determine whether or not they are going to do business with you." This is an important consideration in any discussion of reforming the medical malpractice system, she said.

Meeting attendees explored two other possible malpractice reforms: experiments with private arbitration agreements in California and court-ordered mediation in North Carolina.

In private arbitration agreements—where patients agree when they enroll with a health plan that they will take their malpractice complaints to mandatory binding arbitration rather than to court—researchers Elizabeth Rolph and John E. Rolph, PhD, at RAND in Santa Monica, Calif., found that only 9% of doctors and hospitals in California use these agreements although about 20% of hospitalized patients were admitted using arbitration agreements. This is a much lower rate than expected, said Ms. Rolph.

However, as malpractice insurance companies and HMOs see such agreements as cost-effective, they will encourage more of their physicians to offer them by, for example, giving these doctors a break on their malpractice premiums. More than half of the doctors who currently use such agreements, she said, do so because their insurance company recommended it.

Court-ordered mediation has led to some out-of-court settlements, but has not lived up to its promise in North Carolina, said Thomas B. Metzloff, JD, a professor in the Duke University School of Law. The North Carolina program, enacted in 1991, is a judge-ordered step before going to court in a malpractice dispute. It has not worked better because doctors have been reluctant participants. That means that the whole point of mediation—bring disputants together to talk to diffuse their anger—'hasn't occurred in the vast majority of these cases. Of the 23 mediations observed by researchers, the doctor-defendants didn't say anything at all 14 times. Moreover, the doctors are more frequently being excused from even attending these mediation sessions.

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