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Malpractice reforms could ease physician burdens

Medical Economics, June 14, 2017

By: By Todd Shryock

For physicians tired of working under the constant threat of a malpractice suit, the signs of positive change are encouraging.

First, President Donald Trump told a joint session of Congress in February that he was in favor of “legal reforms that protect patients and doctors from unnecessary costs that drive up the price of insurance.”

Second, Trump appointed Tom Price, MD, to head the U.S. Department of Health and Human Services. Price has been a vocal critic of the current malpractice system and authored bills to change it as a U.S. representative for Georgia’s 6th District.

Third, Republicans control both houses of Congress, and malpractice reform has typically been a cause championed by the GOP.  Finally, Trump’s proposed budget contains a number of recommended malpractice liability reforms.

And physicians are certainly desperate for change. In a Medical Economics survey, 89% of doctors indicated they wanted the Trump administration to address tort reform, with 84% saying they feel pressured to practice defensive medicine and 87% saying they work under the constant threat of a lawsuit.

“If you have a system that is paid for by blame, even sometimes when a doctor has done nothing wrong, then it’s structured wrong,” says Susan Osborne, DO, a primary care physician in rural southwest Virginia.

Experts agree that malpractice tort reform is complicated, and despite the favorable environment for change, is anything but assured in the current tumultuous political environment. Here’s a closer look at the factors affecting reform efforts and what reform might look like if it comes to pass.

Is it time for malpractice reform?

A harsh reality of American medicine is that the majority of doctors will be sued for malpractice at least once in their lifetime. For some high-risk specialties like neurosurgeons, it’s practically a guarantee, according to a 2011 study published by theNew England Journal of Medicine, which tracked lawsuits against 40,000 doctors for more than a decade.

“The lifetime risk of malpractice is substantive,” says Anupam Jena, MD, Ph.D., an author of the study and an internist and associate professor of healthcare policy at Harvard Medical School. “It’s hard for physicians not to think about it.”

Despite the high risk of being sued, malpractice claims are currently in a lull, with many physicians paying less for insurance than they paid five or even 10 years ago, says David Studdert, MPH, professor of medicine and law at Stanford University.

“Claims volume is not going up and the average value of claims is not going up, so the question raised is: ‘Why do tort reform now?’” Studdert says. “It’s actually a pretty good time; the alternative is to wait until there is a crisis, and no one really makes good policy under pressure.”

Malpractice tends to be cyclical, with a crisis arriving every 10 to 15 years, says Studdert. “The smart money is on another one in the next few years, but no one really knows why they happen,” he adds.

According to data from The Doctors Company, a medical malpractice insurer, the average premium for malpractice insurance was $15,000 in 2006 and $8,000 in 2016.

In 2006, the average number of claims per 100 doctors was nine; in 2016 it was seven. The average claim value in 2006 was $68,000, while in 2016 it was $100,000. (Note: The 2006 number adjusted for inflation is about $82,000.)

Jena says one reason that medical tort reform might gain traction is that most stakeholder agree that the system as currently constituted doesn’t work. Those who deserve compensation in a timely manner typically have to wait four to five years for a case to be resolved in court, and even those cases that settle before trial average two years to resolve.

“You want to compensate quickly, and those that are not hurt shouldn’t be compensated at all,” he adds. “The whole system should be fair, and most people agree that is not what we have in place now.”

Because malpractice is an insurance matter, states have had first crack at finding a solution. Thirty-three states have established some sort of cap on non-economic—i.e. pain and suffering—awards, but these have resulted in differing levels of risk exposure for insurance companies, often causing them to set widely varying premiums, depending on the state where a physician practices.

For example, Kansas has a $250,000 cap on non-economic damages, while Maryland has a cap of $770,000 that increases $15,000 annually. Malpractice insurance for internists in Kansas averaged $5,500 in 2016, while rates in Maryland averaged $14,200 annually, according to Houston-based insurance brokerage Arthur J. Gallagher & Co.

While the states may have oversight of the issue now, some experts see the need for a federal law to create nationwide uniformity. “Even though medical liability is a state law issue, given the role the federal government plays in healthcare, it is clear that Congress has a constitutional basis of redressing the issue,” says Sherman Joyce, JD, president of the American Tort Reform Association.

Mike Strazzella, JD, a healthcare lobbyist and practice group leader for federal government relations at the law firm of Buchanan Ingersoll & Rooney, says that state laws would only be pre-empted if they were less stringent than a federal law.

Any new law has to balance the interests of doctors, who fear frivolous malpractice suits, with those of patients, who worry that too many restrictions will eliminate their chance for financial recourse in the event of malpractice, says Jena.

“Doctors and patients can unite around the idea that compensation should be there and be fair,” he adds. “But most people outside of medicine just don’t appreciate the lifetime risk of malpractice faced by doctors.”

What malpractice reform might look like

Malpractice reform typically takes three main forms, experts say, and each has its own merits.

Caps on non-economic damages. California passed this type of reform decades ago, and it’s considered the gold standard for cap-based legislation, says Joyce.

Patients can receive full compensation for actual damages, including lost wages, but can only be awarded a maximum of $250,000 for non-economic damages. A bill (HR 1215, Protecting Access to Care Act of 2017) introduced in the U.S. House of Representatives includes many elements of the California law.

“We believe that the bill is strong, balanced reform that provides stability for high-risk specialists while insuring appropriate avenues for those who have suffered an injury from what could be medical negligence,” says Joyce.

Safe harbors. “Safe harbor” reforms typically establish best practices for how patients should be treated for a particular diagnosis, with the premise that if physicians are following accepted guidelines, they should be protected from lawsuits.

“Safe harbors have been tried in a number of states and the results have been disappointing,” says Studdert. The problem is that with so many variables in medicine, it’s difficult to establish guidelines for anything but the most common treatments.

“It’s a good idea, but in practice, the safe harbor protections don’t seem to intersect with the majority of malpractice suits,” he says.

Healthcare courts. Healthcare courts or tribunals would establish a system outside the standard judicial path to handle malpractice claims. An administrative law judge would hear each case and would have a panel of experts—provided by the court, not the attorneys—to call upon for additional testimony.

“Most important, the standard for compensation isn’t negligence, it’s preventability or avoidability of the event,” says Studdert.

While setting up an additional system to handle malpractice claims would be costly at first, the long-term savings to the healthcare system would most likely make it budget-neutral, he adds. No state has tried a healthcare court yet, but they exist in New Zealand and Denmark, where they have had some success.

Kentucky recently passed a law that will establish a three-member advisory panel for reviewing each malpractice claim and determining if it has merit. The panel’s opinion is sent to a trial judge for a final determination of whether the suit can proceed.

Each side in a suit chooses one of the panel members, with the two chosen members picking the third. Both sides can mutually agree to skip the advisory panel.

The road to reform

Initial Republican healthcare reform efforts did not cover malpractice reform, but it still remains a top Republican priority.

“When it comes to healthcare legislation, malpractice reform continues to be at the top of their list of wants,” says Strazzella, adding that any meaningful reform may be part of later phases of the GOP’s plan to replace the Affordable Care Act (ACA). “Obviously, this will be a challenge to get through 60 Senators, but not necessarily impossible.”

Trump has shown he isn’t afraid to use executive orders to try to implement new interpretations of existing laws, but Strazzella says Republicans want to achieve malpractice reform with legislation, not executive orders. However, resistance is expected to increase.

“If malpractice reform continues to pick up steam, you will see the Trial Bar and the [American Bar Association] get very involved and active, where they will try to focus on the Senate to put out as many roadblocks as possible,” Strazzella says.

Scott Eldredge, JD, president of the Medical Malpractice Trial Lawyers Association and a shareholder with the Denver-based law firm of Burg Simpson, says that federal reform efforts are not needed, adding that most state reforms are “draconian and discriminatory.”

“Caps on damages just line the pockets of malpractice insurers, don’t help patients and arguably don’t help physicians,” Eldredge says. “Caps discriminate strongly against the person injured in a malpractice scenario compared to someone injured by a product.”

Eldredge says that physicians win 90% of cases that go to trial, and with the expense involved, there is no incentive for plaintiff attorneys to file frivolous malpractice suits. “I turn down 95 to 98 out of every 100 cases, and most good lawyers do the same thing because the cases are uniformly difficult and time consuming,” he says.  On the federal level, Price could intervene within the framework of the ACA. A  provision in the law authorized $50 million  to evaluate alternatives to the existing system, but Congress never appropriated the money, says Anand Parekh, MD, MPH, internist and chief medical adviser for the Bipartisan Policy Center, a Washington, D.C.-based think tank.

“There would probably be support from both sides for this,” he adds. (When contacted byMedical Economics, Price’s office had no comment regarding malpractice reform, stating only that any change would come from legislative action. Previously, Price has supported reforms that included both safe harbors and healthcare courts or review boards in the past.)

Joyce says reforms probably need to be part of a larger healthcare package, otherwise they are unlikely to get enough votes to  survive a filibuster. He also questions whether some Republican members of Congress actually favor reforms as much as they claimed during the Obama administration. “Now that we have a president who would be expected to sign this type of initiative, I think we’ll find out where all the members of the party really stand,” he says.

An argument in favor of reforms that might garner bipartisan support focuses on defensive medicine and how it impacts overall costs, experts say. “There are estimates of significant revenue saved if reform is enacted,” says Joyce. “That could have a big impact on the overall healthcare picture.”

The money-saving goals of value-based care might help drive malpractice reforms, says Parekh, who notes that studies have shown defensive medicine costs the healthcare system billions each year. “Reducing defensive medicine might be something both parties can agree on, because practicing defensive medicine makes it harder for providers to get to their value-based care targets,” he says.

Alexandra Tien, MD, a primary care physician in North Dartmouth, Massachusetts, says the possibility of a malpractice suit doesn’t affect her decision-making. “I try to take good care of my patients and generally don’t order tests and imaging if I don’t think it’s warranted,” Tien says.

Whether malpractice reforms come to pass remains to be seen. Expert opinions on its chances range from “too early to tell” to “the political winds are blowing in the right direction.” Meanwhile, America’s doctors soldier on under the current system. “I don’t dwell on the threat of malpractice,” says Tien, “but then again, I have not been sued yet.”