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Medical Malpractice Reform Measures and Their Effects
CHEST
Medical Ethics
Medical Malpractice Reform Measures and Their Effects Robert B Leflar, JD, MPH
New rules and methods for medical injury dispute resolution have been launched in New Hampshire and New York, and demonstration projects are underway elsewhere. This article describes major medical malpractice reforms undertaken and proposed in recent years. Reforms are classified as (1) liability-limiting initiatives favoring health-care providers; (2) procedural innovations promoted as improving dispute resolution processes, such as patient compensation funds, “sorry” laws, disclosure and early offer laws, health courts, and safe harbor laws; and (3) major conceptual reforms to move liability away from physicians to hospitals or administrative no-fault compensation systems. Empirical evidence about the practical effects of alreadyimplemented reforms, such as damage caps, is reviewed. In light of declining malpractice claim rates, heavier adverse impacts of damage caps on vulnerable groups (people who have severe injuries, who are elderly, and who are unemployed) and repeated findings of state law unconstitutionality, the rationale for nationwide damage caps is questioned. Attention to innovative reform proposals such as patient compensation funds, disclosure and early offer laws, safe harbor laws, enterprise insurance and no-fault compensation systems, is encouraged. CHEST 2013; 144(1):306–318 Abbreviations: PCF 5 patient compensation fund; PPACA 5 Patient Protection and Affordable Care Act
Editor’s note: This essay is the seventh article in the Law and Medicine curriculum of the ongoing “Medical Ethics” series. To view all articles from the core curriculum, visit http://journal.publications. chestnet.org/collection.aspx?categoryid=9186. —Constantine A. Manthous, MD, FCCP, Section Editor, Medical Ethics wave of proposals to alter American law’s Another often maligned handling of medical malpractice
claims has arisen. New systems to change the way medical injury disputes are resolved have been launched in New Hampshire and New York, and demonstration projects are underway in other states. Earlier Manuscript received November 27, 2012; revision accepted February 6, 2013. Affiliations: From the School of Law, University of Arkansas, Fayetteville, and College of Medicine and College of Public Health, University of Arkansas for Medical Sciences, Little Rock, AR. Correspondence to: Robert B Leflar, JD, MPH, School of Law, University of Arkansas, 1045 W Maple St, Fayetteville, AR 72701; e-mail: rblefl[email protected] © 2013 American College of Chest Physicians. Reproduction of this article is prohibited without written permission from the American College of Chest Physicians. See online for more details. DOI: 10.1378/chest.12-2861
reforms, such as those capping damage awards to injured patients, have been struck down as unconstitutional by several state supreme courts, most recently in Missouri,1 Georgia,2 Illinois,3 and Wisconsin.4 These developments are playing out against a background of significant changes in the health-care landscape that are due to both the implementation of the Patient Protection and Affordable Care Act (PPACA) and the ongoing private restructuring of physicians’ relationships with hospitals from independent contractor to employee status. In the meantime, detailed academic studies have revealed much that was previously unknown about the practical effects of the medical malpractice system on the people and institutions affected. This article catalogs the major medical malpractice reforms undertaken and proposed in recent years. Reforms are classified into (1) liability-limiting initiatives favoring health-care providers that were enacted across the country from the mid-1970s on; (2) procedural innovations promoted as improving the dispute resolution process without explicitly favoring either plaintiffs or defendants, such as patient compensation funds, “sorry” laws, disclosure and early offer laws,
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Better access/quality of care?
Burden to vulnerable class?
Better dispute-resolution process?
X U X X
X X X
X
X
X X
X X X
X X U
X X X U X X
X
9, 10,11
X
U X
X
X X
X X X
X X
X
X
X X
X
X
X X
X
X
X
X
X
X
X
U
X U X X
X X X
U X
Yes
Yes
Yes
Yes
Non-Economic Damage Caps
X
X X
X
X X
X
X
X X
Punitive Damage Caps
X X X
X U X X
X X X U X X X X
Mixed
Mixed
Collateral Source Offset
Restrict Damage Amounts
X X
U
X X X X
X X U X X X
Mixed
Joint and Several Modification
A
M A, M A M
A A
A A A
Arbitration/ Mediation
A 5 voluntary arbitration; M 5 mandatory mediation; Prof 5 professional; Std 5 standard; U 5 held unconstitutional; X 5 enacted.
X X X X
X
X
X X
X
X X
U X
Yes
Yes
Yes
Total Damage Caps
Lower premiums?
Mixed
Expert Witness Standards
Yes
Mixed
Attorney Fee Limits
Prof Custom Std for Informed Consent9
Alter Trial Rules
Smaller payouts?
Fewer claims?
Defendant protective
Shorten Statute of Limitation
Details of laws vary from state to state.
IL IN IA KS
AL AK AZ AR CA CO CT DE DC FL GA HI ID
State
Demonstrated Effects
Pretrial Screen/ Certificate of Merit
Limit Number of Claims
Liability-Limiting (Pro-Defendant) Measures
Table 1—First-Generation Reforms by State: Evidence of Reforms’ Effects
X X X X
X
X X
U X U X X X X X
Periodic Payment
(Continued)
X
X
X
Patient Compensation Fund
Process Reforms
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Better access/quality of care?
Burden to vulnerable class?
Better dispute-resolution process?
X X
U
X X X X
X X
U U? X X X X X
X X X X X X
X
X
X
X X X X
X X X X X X X X
X U X
X
X
X
X X X
X X X X X X
X
X
X
X
X
Yes
Yes
Yes
Total Damage Caps
Lower premiums?
Mixed
Expert Witness Standards
Yes
Mixed
Attorney Fee Limits
Smaller payouts?
Fewer claims?
Defendant protective
Shorten Statute of Limitation
Prof Custom Std for Informed Consent9
Alter Trial Rules
X U
X U X
X X X X
Yes
Yes
Yes
Yes
Non-Economic Damage Caps
X
X X X X X X X
X
Punitive Damage Caps
X
X X X U X
X X X
X
U
Mixed
Mixed
Collateral Source Offset
Restrict Damage Amounts
X X X X X X X X X X
X X
Mixed
Joint and Several Modification
A A
A, M
M
M
A, M
A
A
Arbitration/ Mediation
Details of laws vary from state to state.9, 10,11 A 5 voluntary arbitration; M 5 mandatory mediation; Prof 5 professional; Std 5 standard; U 5 held unconstitutional; X 5 enacted.
KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC
State
Demonstrated Effects
Pretrial Screen/ Certificate of Merit
Limit Number of Claims
Liability-Limiting (Pro-Defendant) Measures
Table 1—Continued
X X
X U
X X
X X
X X
Periodic Payment
(Continued)
X X
X
X
Patient Compensation Fund
Process Reforms
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Better access/quality of care?
Burden to vulnerable class?
Better dispute-resolution process?
X X X X X X X U X X X
X
X X X X
X X X
X X
X
X
X
U
X
X U X
X X X
X
X
X
X
X X
X X
X
X X
X
X
X
X
X U
Yes
Yes
Yes
Total Damage Caps
Lower premiums?
Mixed
Expert Witness Standards
Yes
Mixed
Attorney Fee Limits
Smaller payouts?
Fewer claims?
Defendant protective
Shorten Statute of Limitation
Prof Custom Std for Informed Consent9
Alter Trial Rules
U X U
X X X X X
X X X U
Yes
Yes
Yes
Yes
Non-Economic Damage Caps
X
X X
X X
X X X X X
Punitive Damage Caps
X X X
X
X X
X X X X X U
Mixed
Mixed
Collateral Source Offset
Restrict Damage Amounts
X X X X
X X X X X X
X X X X
Mixed
Joint and Several Modification
A
A A A A A, M M
A, M A
A, M M
M A
Arbitration/ Mediation
Details of laws vary from state to state.9, 10,11 A 5 voluntary arbitration; M 5 mandatory mediation; Prof 5 professional; Std 5 standard; U 5 held unconstitutional; X 5 enacted.
ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY
State
Demonstrated Effects
Pretrial Screen/ Certificate of Merit
Limit Number of Claims
Liability-Limiting (Pro-Defendant) Measures
Table 1—Continued
X
X
X X
X
X X
X X
Periodic Payment
X X X
X
X
X
X
Patient Compensation Fund
Process Reforms
Table 2—Second-Generation Reforms by State: Evidence of Reforms’ Effects Process Reforms
State
Demonstrated Effects
“Sorry” Laws
Disclosure and Early Offer
Thorough-Going Reforms
Health Courts/ Judge-Directed Negotiation
Enterprise Liability/ Insurance
No-Fault Compensation (Obstetrical)
Defendant-protective Fewer claims? Smaller payouts? Lower premiums? Better dispute-resolution process?
Yes Yes
Yes
Burden to vulnerable class? Better access/quality of care? AL AK AZ AR CA CO CT DE DC FL GA HI IL IN IA ID KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD
X X X X X X X X X X X X X
X
X X X X
X X X X
X
X X X X X X
X X (Continued)
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Table 2—Continued Process Reforms
State
“Sorry” Laws
Demonstrated Effects
Disclosure and Early Offer
Health Courts/ Judge-Directed Negotiation
Thorough-Going Reforms Enterprise Liability/ Insurance
No-Fault Compensation (Obstetrical)
Defendant-protective Fewer claims? Smaller payouts? Lower premiums?
Yes
Better dispute-resolution process?
Yes
Yes
Burden to vulnerable class? Better access/quality of care? TN TX UT VT VA WA WV WI WY
X X X X X X X
X
X
Details of laws vary from state to state.
9, 10,11
See Table 1 legend for expansion of abbreviation.
health courts, and safe harbor laws; and (3) major conceptual reforms to move liability away from physicians to hospitals or administrative no-fault compensation systems. Where good evidence is available about the practical effects of already-implemented reforms, that evidence is reviewed. Tables 1 and 2 list the major reforms by category and outline the chief characteristics of each state’s laws. First-Generation Liability-Limiting Reforms Medical malpractice law is essentially based on the common law of torts, that is, judge-made law requiring compensation for personal injuries negligently inflicted. The legal rules vary somewhat from state to state. (There are also pockets of federal law for cases involving harm at federal institutions.) State legislatures have codified and sometimes modified principles first laid down by judges. Responding to concerns about spikes in physician and hospital liability insurance premiums, states enacted two waves of liabilitylimiting laws in the late 1970s and 1980s and in the early 2000s. These laws, some aspects of which were adopted in every state, are labeled first-generation malpractice reforms.5,6 Most first-generation reforms made personal injury law more favorable to health-care provider-defendants than to defendants engaged in other lines of work. These laws had three chief goals: (1) reduce the number of claims filed by patients and families; (2) alter
the litigation process to favor health-care providerdefendants; and (3) limit the amount of payouts to plaintiffs with successful claims.5,7 Payout limitations comprise the first-generation reform most strongly favored by organized medicine. Laws to Reduce the Number of Claims Filed Laws designed to reduce the number of claims filed against health-care providers include statutes of limitation, requirements for submitting claims to pretrial screening panels or to arbitration, requirements for certificates of merit before filing cases, and controls on fees received by plaintiffs’ attorneys.5-7 Statutes of limitation set time bars after which claims can no longer be filed. First-generation reforms typically shortened the time bar for medical cases so that a claim of injury from a defective automobile, for example, is barred after 3 years, but a claim of injury from malpractice is barred after 2 years.8 Many time bar rules operate in favor of health-care defendants, but not other defendants, to bar claims even for injuries undiscoverable until the specified time had passed.10 Requirements for pretrial screening panels and certificates of merit were designed to keep meritless and difficult-to-prove claims out of the judicial process and require prelitigation review by medical experts. Laws imposing fee controls on plaintiffs’ lawyers attempted to make medical malpractice cases financially less attractive to the plaintiffs’ bar.6
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Laws Altering the Litigation Process to Favor Defendants Laws heightening plaintiffs’ difficulty of winning medical cases include rules that set minimum qualifications for expert witnesses and specify standards for informed consent. Expert qualification laws generally require that expert witnesses be in active practice in the same specialty as the physician-defendant about whose care the expert testifies.12 Informed consent laws typically adopt professional custom, rather than patients’ need for facts to make informed decisions about treatment, as the standard for disclosure of risks, benefits, and alternative treatments.13 Laws Limiting Payout Amounts Laws limiting payouts to successful plaintiffs include dollar limits on noneconomic damages, total damages, and punitive damages; elimination or restriction of joint and several liability and of the collateral source rule; and laws authorizing periodic rather than lumpsum payments. In some states, these enactments apply only to health-care lawsuits; other states apply them across the board. The first and most influential law that caps payouts was California’s 1975 statute limiting noneconomic damages (for physical and mental suffering and other intangible injuries) in medical cases to $250,000, a limit that remains in effect without adjustment for inflation.14 Other states instituted caps on total damages as well as, or instead of, noneconomic damages. Many states limit punitive damages awards in a similar fashion. Another type of payout limitation is modification or abolition of the common law joint and several liability principle. Under this principle, if among two or more liable defendants one (eg, a negligent physician with inadequate insurance) lacks assets to pay his or her share of the plaintiff’s damages, the other liable defendants (eg, a negligent hospital or drug company) must pay that share. Most states have changed that rule. Typically, each defendant’s liability is now limited to the degree of that defendant’s fault so that injured plaintiffs absorb the fault shares of negligent defendants who cannot pay for the damage they caused.11 A third type of award restriction changes the common law collateral source rule. In calculating damages under this rule, benefits plaintiffs receive from collateral sources, such as medical and unemployment insurance, are disregarded and not subtracted from their awards. Reasons supporting the rule are that negligent defendants should not take advantage of plaintiffs’ foresight in securing insurance and that if collateral source payments were subtracted from awards, defendants might have less reason to take
harm prevention measures. The collateral source rule has been attacked as allowing patient-plaintiffs a double recovery, although many insurers reclaim benefits paid out on patients’ behalf through subrogation clauses in health insurance contracts. Most states have abolished or modified the rule.11 Laws Arguably Benefiting Both Plaintiffs and Defendants Not all first-generation reforms were explicitly defendant protective. Laws authorizing periodic damage payments, arbitration of medical injury claims, and patient compensation funds arguably accorded benefits to both caregivers and patients. Most states enacted laws authorizing judges to space out high-dollar awards in periodic payments rather than to pay them as lump sums. These laws aim at protecting spendthrift plaintiffs from their own profligacy, tying payouts to expenditures as they arise, and preventing patients’ families from obtaining windfalls if the patient dies sooner than was anticipated when future medical costs and lost earnings were estimated at trial.15 Several states enacted laws authorizing voluntary agreements to resolve medical injury disputes through private arbitration rather than through the court system, and some states allow predispute binding arbitration agreements.5 One aim is to protect health-care personnel from burdensome litigation; another is to reduce court dockets and speed dispute resolution. Critics objected that patients might unknowingly sign away their rights to judicial redress.16 Thirteen states have initiated publicly sponsored patient compensation funds as reinsurance for large losses beyond providers’ liability insurance coverage. These funds aim to offer hospitals and physicians affordable coverage even during periods of premium spikes while providing compensation for patients with grave injuries.6,7 New York’s recently launched fund covers only obstetrical injuries.17
Second-Generation Procedural Innovations to Improve Dispute Resolution and Decrease Defensive Medicine Beyond the laws outlined in the previous section, many states have launched attempts to improve the medical dispute resolution process and inhibit wasteful defensive medicine. Unlike first-generation defendantfavoring laws, most second-generation procedural reforms are promoted as not tipping the balance toward either side. Examples include “sorry” laws, disclosure and early offer proposals, health courts, and safe harbor laws.
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“Sorry” Laws Medical malpractice law is criticized for inhibiting physicians from candidly sharing information about adverse outcomes with patients and families for fear that such communications might be used in court as evidence of liability (or so defense lawyers have advised). The result: Both physicians preferring honest disclosure to patients and patients seeking the truth about what happened and apology for harm done are foiled. Often, dissatisfied patients file lawsuits that could have been avoided by more transparent systems.18 To counter this criticism, 36 states have enacted so-called “sorry” laws, making health-care personnel expressions of regret or apology inadmissible as evidence in litigation.9 Details of what communications are inadmissible vary from state to state, but the laws’ general aim is to encourage honesty about adverse medical outcomes. Disclosure and Early Offer Proposals Akin to sorry laws but with a stronger focus on speedy dispute resolution, proposed disclosure and early offer laws aim to give hospitals reasons to come forward promptly with truth about adverse outcomes and offer compensation rather than to adopt hardedged delay and resistance tactics. The hospital’s incentive is that awards would be limited to pecuniary damages, such as medical expenses and lost earnings not covered by collateral sources, plus reasonable legal fees, thereby averting liability for intangible harm from pain and suffering. The patients’ and families’ incentives are quicker and more certain compensation, although in diminished amount, and avoidance of a stricter burden of proof or payment of defense costs if they reject the offer, go to trial, and obtain a result worse than the offer. Both sides benefit from avoidance of expensive, time-devouring litigation.19 First proposed by O’Connell20 in 1982 and endorsed in part by leading Democrats,21 a version of the disclosure and early offer concept finally was enacted into law (over trial lawyers’ opposition) in New Hampshire in the summer of 2012.22 Health Courts Provider dissatisfaction with inconsistent judgments by lay juries sparked proposals for health courts to replace standard courts in medical cases. In health courts, cases would be tried before judges with training on medical issues rather than before juries, and testifying experts would be selected and compensated by courts rather than, or in addition to those retained by, the parties. Some health court proposals would establish standard damage scales with caps on intangible damage awards.23 One objection is that most states enshrine the jury trial as a constitutional right.24
New York recently launched a variation of the health courts concept in connection with a demonstration project funded under PPACA. In the New York approach, which is supported by both hospitals and trial lawyers, judges with medical training engage plaintiffs and defendants in judge-directed negotiations.25 Similar in operation to health-care divisions of metropolitan district courts in Japan,26 New York health courts speed up the settlement process but (unlike Japan and early health court proposals) retain jury trial rights if cases do not settle. Safe Harbor Proposals To encourage compliance with evidence-based clinical practice guidelines and reduce wasteful defensive medicine, safe harbor proposals allow physicians to defend lawsuits by proof of adherence to established guidelines supported by weightier authority than mere professional custom.5 Critics argue that established guidelines often reflect established interests rather than good science; are frequently vague, inconsistent, and even contradictory; and are lopsided in effect, that is, a physicians’ shield when followed but no patients’ sword when disregarded.27,28 The guidelines development process has recently been strengthened under two Institute of Medicine committees,29,30 leading eminent policy analysts to support a safe harbor approach to reduce defensive medicine costs.31,32 Major Conceptual Reforms Beyond first-generation liability-limiting measures and procedural innovations, two reforms to alter the structure of medical malpractice litigation are worthy of special attention. The first, which would shift the focus of liability from individual physicians to hospitals, is enterprise liability or its cousin, enterprise insurance. The second reform, which would abolish litigation over negligence entirely for selected types of injury, is no-fault compensation. Enterprise Liability and Enterprise Insurance Enterprise liability is an arrangement under which the hospital is the entity liable for harm negligently inflicted within the hospital’s walls, even harm caused by nonemployees (physicians and others) with hospital privileges.33 Centralizing responsibility for injury at the hospital level fits well with the widely accepted concept stressed by the Institute of Medicine and patient safety experts34 that focusing attention on system error rather than exclusively on individual error pays off in preventing avoidable harm, because the hospital level is where system errors are best addressed.35 Under enterprise liability, hospitals would be legally responsible for the quality of their providers and the
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coordination of care among them. Enterprise liability would also simplify litigation somewhat because hospitals and individual physicians would not need separate representation. Enterprise insurance is similar in concept to enterprise liability but would alter malpractice litigation less markedly. Nonemployee physicians could still be sued for negligent care delivered within hospital walls, but rather than buying malpractice coverage from commercial insurers, their insurance purchases would be channeled to a hospital-controlled captive entity. The hospital, as liability insurer, would have similar incentives to reduce avoidable injury through system error prevention as with enterprise liability.5,18,36,37 Enterprise liability and enterprise insurance have yet to be enacted by any state, although some leading hospital systems have voluntarily adopted enterprise insurance.38 Some physicians object to hospital-based liability, fearing loss of professional autonomy to hospital control. However, the enterprise liability concept fits in with two major developments in health care. First, PPACA encourages the formation of accountable care organizations, entities (mostly hospital system based) that Medicare will reward for providing cost-effective care of good quality and penalize for the contrary.39 This is akin to enterprise responsibility at the level of administrative payment systems; it would not be surprising if enterprise responsibility at the level of legal doctrine followed close behind. Second, the ongoing restructuring of physicians’ relationships with hospitals from independent contractor to employee status40 will likely mitigate opposition to enterprise responsibility on the grounds of loss of professional autonomy. Physicians are relinquishing that autonomy anyway by choice of career direction. No-Fault Compensation Systems The most thoroughgoing reforms proposed for medical injury cases do away with proof of caregiver fault as the fundamental basis of patients’ right to compensation. Several nations (eg, New Zealand,41 France,42 the Nordic countries,43 and Japan26) have adopted no-fault systems for all or a portion of iatrogenic harm. Virginia and Florida have also done so for a limited set of birth-related neurologic defect events (bad baby cases) that sometimes result in staggering liability awards under the traditional tort system.44 Likewise, the federal vaccine injury compensation system is structured along no-fault lines.45 No-fault systems take injury claims out of courts and lodge them in special administrative commissions. Because compensation is awarded on the basis of harm to patients rather than provider negligence,
the expense, time, and rancor of disputes over fault are avoided.46 Defining what harms entitle patients to compensation is problematic both in the law’s drafting and in individual compensation decisions. Nevertheless, however the line is drawn, more patients will receive compensation than under negligence law, so compensation amounts must be limited to avoid bankrupting the system. This is typically accomplished by restricting benefits to monetary loss (medical expenses, wage loss) with collateral source offsets and no recovery for intangible harm44 or (as in Japan’s birth injury compensation system) by standardized periodic payments. 26 Some laws allow physicians (Virginia, Florida) and hospitals (Virginia) to choose whether to participate in the no-fault system.44 Other laws (New Zealand) essentially abolish malpractice litigation altogether.41
Practical Effects of Reform: Available Evidence Considerable scholarship has evaluated the effects of implementing the reforms listed herein. Different states have adopted different mixes of reforms, so disaggregation and attribution of specific effects to particular measures are difficult. But the results of the scholarship, although by no means unanimous, illuminate both facts and misconceptions about the operation of the malpractice system.47 Evaluations of past reforms have tended to focus chiefly on their effects on litigation volume, compensation payouts, and liability insurance premiums—matters of concern to health-care providers and their insurers. Also worthy of consideration, although less susceptible to quantified analysis, are the effects of reforms on the dispute resolution process, on vulnerable classes of patients, and on access to and quality of care.48,49 Most first-generation liability-limiting measures, such as laws imposing controls on plaintiffs’ attorney fees50 and punitive damages,51 had little if any effect on the number of claims filed or paid or on liability premium levels.33,52 Evidence on the effects of shortened statutes of limitations and changes in joint and several liability rules is mixed.50,53-55 A probable reason for these results is simple human adaptation. Lawyers faced with shorter deadlines learn to submit pleadings more quickly. Jurors precluded by law from awarding one category of damages may award the same amounts under different labels.56 A balloon squeezed here expands there. Collateral Source Rules As for changes in collateral source rules, evidence is inconclusive.57 Sloan and Chepke58 characterized the
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collateral source rule studies as “uniformly negative” with regard to effects on claim frequency and severity. Other studies, however, found that award offsets for collateral source benefits result in decreases in payments and claims frequency.57,59,60 The PPACA health insurance expansion may bring the collateral source rule under greater pressure. The great majority of successful malpractice claimants will have most of their medical expenses covered, except for low-income claimants in states forgoing Medicaid expansion under PPACA and perhaps claimants in health plans with high deductibles (16% of privately insured adults aged , 65 years61). So the argument for ignoring collateral source benefits in damage calculations to avoid penalizing those with the foresight to obtain insurance weakens.62 Damage Caps One measure that appears to result in less litigation and lower payouts is caps on damages, particularly for noneconomic (intangible) injuries.53,63,64 Hyman et al65 found that Texas’s caps on noneconomic and total damages, for example, affect 47% of plaintiff jury verdicts, reducing mean allowed noneconomic damages by 73%, mean allowed verdicts by 38%, and mean total payout by 27%, and that the caps affect settled cases as well, reducing predicted mean total payout by 18%. Ellington et al52 found that a $250,000 cap on noneconomic damages is “strongly correlated with lower malpractice costs, especially for urban and teaching hospitals.” Paik et al66 found that states with damage caps had significantly greater declines in malpractice claim rates and payouts per active physician than did states without. However, damage caps alone cannot explain all the decrease in malpractice litigation over the past 20 years. In states with post2000 caps, paid claims per physician declined 60% from 1992 to 2011, but states with no caps at all also showed a 49% decline.66 Whether states enacting damage caps lower liability insurance premiums, attract physicians, and thereby enhance access to care is controverted. Studies concluding that damage caps lower premiums are criticized for methodologic flaws.67 Since caps limit jury awards, insurers may be more apt to try cases than settle them, increasing defense costs and perversely cutting premiums savings.68 Some scholars found that tort reform increases physician supply,69,70 others found no evidence to support the claim,71 and still others found increases only in “frontier rural specialist physicians.”72 Also controverted is whether liability-limiting measures such as damage caps harm patients by diminishing provider incentives to take precautions for safer care, as plaintiffs’ attorneys and some scholars
contend,73-75 or whether such measures restrain unproductive defensive medicine without adverse effects on patient safety, as Kessler and McClellan76,77 concluded in studies of patients with acute myocardial infarction or ischemic heart disease. Applying the Kessler-McClellan method to a broader set of ailments, the Congressional Budget Office found no evidence that tort reforms reduced medical spending.78 A later Congressional Budget Office report concluded, to the contrary, that a “combination of direct savings in malpractice costs and indirect savings in health care services would reduce national health spending in response to the proposed reforms by roughly 0.5 percent.”79 For all the heated rhetorical wrangling about whether damage caps save money or endanger patients (or both), no fact-based consensus has emerged. Adverse effects of damage caps on fairness and justice must also be considered. Caps specifically target people with serious injuries as a disfavored class, and postcap jury verdicts reflect this discrimination.80 Caps on noneconomic damages also target groups whose economic loss is small relative to their intangible injuries, such as elderly people, unemployed people, and people whose injuries cause chronic pain or disfigurement.65,80 Limits on noneconomic damage are premised on the assumption that its subjective measurement leads to overcompensation of those with large losses.81 But no empirical evidence supports that assumption,73 and as Sloan and Chepke82 observed, the only systematic comparisons indicate that “such injury victims are undercompensated on average.” Process Reform Initiatives Patient compensation funds (PCFs) providing reinsurance for large-loss claims have drawn limited scholarly attention. Sloan and Chepke,83 although critical of the management of some PCFs, suggested that well-run PCFs with mandatory provider participation can reduce insurance pricing volatility. Both disclosure and early offer reforms and enterprise liability proposals have attracted criticism.84,85 Neither has yet established a legislative track record for empirical evaluation. Voluntary disclosure and offer programs, however, are reported to have shown considerable promise.21,86,87 Several states passed safe harbor laws to protect physicians who follow clinical practice guidelines against liability. Criticized as lopsidedly shielding guidelinecompliant defendants but offering patients no benefit when guidelines are disregarded, these laws have been repealed in most states that enacted them (Maine, Florida, and Minnesota).88 While in force, the laws were reported as not having much effect.28
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No-Fault Compensation Systems No-fault systems, launched in Florida and Virginia in the 1980s to compensate a limited class of serious birth-related injuries, have received several analytic evaluations.44,89 Those evaluations are largely positive. Siegal et al44 summarized the studies as concluding that the Florida and Virginia no-fault systems have improved claim adjudication speed and efficiency, lowered overhead costs and attorneys’ fees, diminished the number of high-cost claims brought in courts, and resulted in lower premiums for obstetrician-gynecologists while addressing the needs of injured children and their families.
processes may enhance the merits of safe harbor proposals. Information is already available on compensation fund operations, and recently launched disclosure and offer initiatives will be closely watched. Further research is imperative on whether these initiatives should be expanded. Two broader initiatives are worthy of attention. The first is enterprise insurance, which accords well with trends toward physicians becoming hospital employees and toward accountable care organization development. The second is no-fault compensation systems for serious birth-related injuries, building on Florida and Virginia’s experience. Seeds of balanced reform are being scattered. Some will fall on fallow ground.
Conclusion Medical malpractice reform continues to generate intense political controversy. Previous battles were characterized by the use of anecdote, rhetoric, and political muscle. Now, objective empirical analyses are available of reforms previously implemented. A second generation of reform ideas aimed at patient safety and improved dispute resolution has edged toward center stage. In the next round of debate, political muscle will again be applied, but this time, it should be tempered by objective evidence and informed by creative second-generation proposals. First-generation liability-limiting reforms effectively placed health-care defendants in a privileged position compared with other classes of defendants in personal injury litigation. Among first-generation measures, empirical analyses demonstrate that only one proved consistently to restrain malpractice suits: caps on damages, especially noneconomic damages. However, noneconomic damage caps have differential impacts on patients, disfavoring those with severe injuries and those with smaller proportions of economic injury, such as people who are elderly or unemployed. Whether damage caps also undermine patient safety by diminishing provider injury prevention incentives is empirically unresolved. Many courts struck down caps as violating state constitutions.1-4 In light of evidence that malpractice claim rates and payouts per active physician have steadily declined66 and that the impact of liability insurance premiums has been manageable,90 the case for legislation to supplement existing state laws by capping damages nationwide seems questionable. Other reforms such as PCFs for reinsurance of large-loss claims, health courts, and disclosure and early offer proposals contain theoretical merit, but their success depends on deft implementation. Safe harbor laws that protect physicians who comply with guidelines from liability did not live up to sponsors’ hopes, but improvements in guidelines formulation
Acknowledgments Financial/nonfinancial disclosures: The author has reported to CHEST that no potential conflicts of interest exist with any companies or organizations whose products or services are mentioned in this article. Other contributions: The author thanks Katie Church, JD, and Andrew Johncox, JD, for their effective research assistance and Samantha Leflar, JD, for comments on an earlier draft.
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62. Schwartz GT. A national health care program: what its effects would be on American tort law and malpractice law. Cornell Law Rev. 1994;79:1339-1381. 63. Yoon A. Damage caps and civil litigation: an empirical study of medical malpractice litigation in the South. Am Law Econ Rev. 2001;3(2):199-227. 64. Viscusi WK, Born PH. Damages caps, insurability, and the performance of medical malpractice insurance. J Risk Insur. 2005;72(1):23-43. 65. Hyman DA, Black B, Silver C, Sage WM. Estimating the effect of damages caps in medical malpractice cases: evidence from Texas. J Legal Analysis. 2009;1(1):355-409. 66. Paik M, Black BS, Hyman DA. The receding tide of medical malpractice litigation. J Empirical Legal Stud. In press. 67. Zeiler K, Hardcastle LE. Do damages caps reduce medical malpractice insurance premiums? A systematic review of estimates and the methods used to produce them. Social Science Research Network website. http://ssrn.com/abstract52179074. Posted November 28, 2012. Accessed April 1, 2013. 68. Ambrose JM, Carroll A. Medical malpractice reform and insurer claims defense: unintended effects? J Health Polit Policy Law. 2007;32(5):843-865. 69. Kessler DP, Sage WM, Becker DJ. Impact of malpractice reforms on the supply of physician services. JAMA. 2005; 293(21):2618-2625. 70. Encinosa WE, Hellinger FJ. Have state caps on malpractice awards increased the supply of physicians? Health Aff (Millwood). 2005;(suppl):W5-250-W5-258. http://content. healthaffairs.org/content/early/2005/05/31/hlthaff.w5.250. full.pdf1html. Accessed April 1, 2013. 71. Hyman DA, Silver C, Black BS, Paik M. Does tort reform affect physician supply? Evidence from Texas. Social Science Research Network website. http://ssrn.com/abstract52047433. Posted April 30, 2012. Revised July 17, 2012. Accessed April 1, 2013. 72. Matsa DA. Does malpractice liability keep the doctor away? Evidence from tort reform damage caps. J Legal Stud. 2007; 36(S2):S143-S182. 73. Hyman DA, Silver C. The poor state of health care quality in the U.S.: is malpractice liability part of the problem or part of the solution? Cornell Law Rev. 2005;90(4):893-993. 74. Currie J, MacLeod WB. First do no harm? Tort reform and birth outcomes. Q J Econ. 2008;123(2):795-830.
75. Lakdawalla DN, Seabury SA. The welfare effects of medical malpractice liability. NBER Working Paper no. 15383. Intl Rev Law & Econ. 2012;356-369. 76. Kessler DP, McClellan M. The effects of malpractice pressure and liability reforms on physicians’ perceptions of medical care. Law Contemp Probl. 1997;60(1):81-106. 77. Kessler DP, McClellan MB. Malpractice law and health care reform: optimal liability policy in an era of managed care. J Public Econ. 2002;84(2):175-197. 78. US Congress. Cost Estimate for H.R. 5, the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2003. Washington, DC: Congressional Budget Office; 2003. 79. Congressional Budget Office . Letter to Hon. John D. Rockefeller IV: additional information on the effects of tort reform (December 10, 2009). Congressional Budget Office website. http:/www.cbo.gov/publication/41812. Accessed April 1, 2013. 80. Studdert DM, Yang YT, Mello MM. Are damage caps regressive? A study of malpractice jury verdicts in California. Health Aff (Millwood). 2004;23(4):54-67. 81. Garber S, Greenberg MD, Rhodes H, Zhuo X, Adams JL. Do noneconomic damages caps and attorney fee limits reduce access to justice for victims of medical negligence? J Empirical Legal Stud. 2009;6(4):637-686. 82. Sloan & Chepke, note 6, p. 116. 83. Sloan & Chepke, pp 274-276. 84. Black B, Hyman DA, Silver C. The effects of ‘early offers’ in medical malpractice cases: evidence from Texas. J Empirical Legal Stud. 2009;6(4):723-767. 85. Bovbjerg RR. Beyond tort reform: fixing real problems. Indiana Health Law Rev. 2006;3:3-26. 86. Gallagher TH, Studdert D, Levinson W. Disclosing harmful medical errors to patients. N Engl J Med. 2007;356(26):2713-2719. 87. AHRQ-funded medical liability and patient safety initiative shows promise for reducing patient harm, lawsuits, and costs. AHRQ Research Activities. 2012;(385):1-6. 88. Rosoff AJ. The role of clinical practice guidelines in healthcare reform: an update. Ann Health Law. 2012;21:21-33. 89. Bovbjerg RR, Sloan FA, Rankin PJ. Administrative performance of ‘no-fault’ compensation for medical injury. Law Contemp Probl. 1997;60(2):71-115. 90. Rodwin MA, Chang HJ, Clausen J. Malpractice premiums and physicians’ income: perceptions of a crisis conflict with empirical evidence. Health Aff (Millwood). 2006;25(3):750-758.
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Medical Ethics
Medical Malpractice Reform Measures and Their Effects Robert B Leflar, JD, MPH
New rules and methods for medical injury dispute resolution have been launched in New Hampshire and New York, and demonstration projects are underway elsewhere. This article describes major medical malpractice reforms undertaken and proposed in recent years. Reforms are classified as (1) liability-limiting initiatives favoring health-care providers; (2) procedural innovations promoted as improving dispute resolution processes, such as patient compensation funds, “sorry” laws, disclosure and early offer laws, health courts, and safe harbor laws; and (3) major conceptual reforms to move liability away from physicians to hospitals or administrative no-fault compensation systems. Empirical evidence about the practical effects of alreadyimplemented reforms, such as damage caps, is reviewed. In light of declining malpractice claim rates, heavier adverse impacts of damage caps on vulnerable groups (people who have severe injuries, who are elderly, and who are unemployed) and repeated findings of state law unconstitutionality, the rationale for nationwide damage caps is questioned. Attention to innovative reform proposals such as patient compensation funds, disclosure and early offer laws, safe harbor laws, enterprise insurance and no-fault compensation systems, is encouraged. CHEST 2013; 144(1):306–318 Abbreviations: PCF 5 patient compensation fund; PPACA 5 Patient Protection and Affordable Care Act
Editor’s note: This essay is the seventh article in the Law and Medicine curriculum of the ongoing “Medical Ethics” series. To view all articles from the core curriculum, visit http://journal.publications. chestnet.org/collection.aspx?categoryid=9186. —Constantine A. Manthous, MD, FCCP, Section Editor, Medical Ethics wave of proposals to alter American law’s Another often maligned handling of medical malpractice
claims has arisen. New systems to change the way medical injury disputes are resolved have been launched in New Hampshire and New York, and demonstration projects are underway in other states. Earlier Manuscript received November 27, 2012; revision accepted February 6, 2013. Affiliations: From the School of Law, University of Arkansas, Fayetteville, and College of Medicine and College of Public Health, University of Arkansas for Medical Sciences, Little Rock, AR. Correspondence to: Robert B Leflar, JD, MPH, School of Law, University of Arkansas, 1045 W Maple St, Fayetteville, AR 72701; e-mail: rblefl[email protected] © 2013 American College of Chest Physicians. Reproduction of this article is prohibited without written permission from the American College of Chest Physicians. See online for more details. DOI: 10.1378/chest.12-2861
reforms, such as those capping damage awards to injured patients, have been struck down as unconstitutional by several state supreme courts, most recently in Missouri,1 Georgia,2 Illinois,3 and Wisconsin.4 These developments are playing out against a background of significant changes in the health-care landscape that are due to both the implementation of the Patient Protection and Affordable Care Act (PPACA) and the ongoing private restructuring of physicians’ relationships with hospitals from independent contractor to employee status. In the meantime, detailed academic studies have revealed much that was previously unknown about the practical effects of the medical malpractice system on the people and institutions affected. This article catalogs the major medical malpractice reforms undertaken and proposed in recent years. Reforms are classified into (1) liability-limiting initiatives favoring health-care providers that were enacted across the country from the mid-1970s on; (2) procedural innovations promoted as improving the dispute resolution process without explicitly favoring either plaintiffs or defendants, such as patient compensation funds, “sorry” laws, disclosure and early offer laws,
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Better access/quality of care?
Burden to vulnerable class?
Better dispute-resolution process?
X U X X
X X X
X
X
X X
X X X
X X U
X X X U X X
X
9, 10,11
X
U X
X
X X
X X X
X X
X
X
X X
X
X
X X
X
X
X
X
X
X
X
U
X U X X
X X X
U X
Yes
Yes
Yes
Yes
Non-Economic Damage Caps
X
X X
X
X X
X
X
X X
Punitive Damage Caps
X X X
X U X X
X X X U X X X X
Mixed
Mixed
Collateral Source Offset
Restrict Damage Amounts
X X
U
X X X X
X X U X X X
Mixed
Joint and Several Modification
A
M A, M A M
A A
A A A
Arbitration/ Mediation
A 5 voluntary arbitration; M 5 mandatory mediation; Prof 5 professional; Std 5 standard; U 5 held unconstitutional; X 5 enacted.
X X X X
X
X
X X
X
X X
U X
Yes
Yes
Yes
Total Damage Caps
Lower premiums?
Mixed
Expert Witness Standards
Yes
Mixed
Attorney Fee Limits
Prof Custom Std for Informed Consent9
Alter Trial Rules
Smaller payouts?
Fewer claims?
Defendant protective
Shorten Statute of Limitation
Details of laws vary from state to state.
IL IN IA KS
AL AK AZ AR CA CO CT DE DC FL GA HI ID
State
Demonstrated Effects
Pretrial Screen/ Certificate of Merit
Limit Number of Claims
Liability-Limiting (Pro-Defendant) Measures
Table 1—First-Generation Reforms by State: Evidence of Reforms’ Effects
X X X X
X
X X
U X U X X X X X
Periodic Payment
(Continued)
X
X
X
Patient Compensation Fund
Process Reforms
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Better access/quality of care?
Burden to vulnerable class?
Better dispute-resolution process?
X X
U
X X X X
X X
U U? X X X X X
X X X X X X
X
X
X
X X X X
X X X X X X X X
X U X
X
X
X
X X X
X X X X X X
X
X
X
X
X
Yes
Yes
Yes
Total Damage Caps
Lower premiums?
Mixed
Expert Witness Standards
Yes
Mixed
Attorney Fee Limits
Smaller payouts?
Fewer claims?
Defendant protective
Shorten Statute of Limitation
Prof Custom Std for Informed Consent9
Alter Trial Rules
X U
X U X
X X X X
Yes
Yes
Yes
Yes
Non-Economic Damage Caps
X
X X X X X X X
X
Punitive Damage Caps
X
X X X U X
X X X
X
U
Mixed
Mixed
Collateral Source Offset
Restrict Damage Amounts
X X X X X X X X X X
X X
Mixed
Joint and Several Modification
A A
A, M
M
M
A, M
A
A
Arbitration/ Mediation
Details of laws vary from state to state.9, 10,11 A 5 voluntary arbitration; M 5 mandatory mediation; Prof 5 professional; Std 5 standard; U 5 held unconstitutional; X 5 enacted.
KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC
State
Demonstrated Effects
Pretrial Screen/ Certificate of Merit
Limit Number of Claims
Liability-Limiting (Pro-Defendant) Measures
Table 1—Continued
X X
X U
X X
X X
X X
Periodic Payment
(Continued)
X X
X
X
Patient Compensation Fund
Process Reforms
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Better access/quality of care?
Burden to vulnerable class?
Better dispute-resolution process?
X X X X X X X U X X X
X
X X X X
X X X
X X
X
X
X
U
X
X U X
X X X
X
X
X
X
X X
X X
X
X X
X
X
X
X
X U
Yes
Yes
Yes
Total Damage Caps
Lower premiums?
Mixed
Expert Witness Standards
Yes
Mixed
Attorney Fee Limits
Smaller payouts?
Fewer claims?
Defendant protective
Shorten Statute of Limitation
Prof Custom Std for Informed Consent9
Alter Trial Rules
U X U
X X X X X
X X X U
Yes
Yes
Yes
Yes
Non-Economic Damage Caps
X
X X
X X
X X X X X
Punitive Damage Caps
X X X
X
X X
X X X X X U
Mixed
Mixed
Collateral Source Offset
Restrict Damage Amounts
X X X X
X X X X X X
X X X X
Mixed
Joint and Several Modification
A
A A A A A, M M
A, M A
A, M M
M A
Arbitration/ Mediation
Details of laws vary from state to state.9, 10,11 A 5 voluntary arbitration; M 5 mandatory mediation; Prof 5 professional; Std 5 standard; U 5 held unconstitutional; X 5 enacted.
ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY
State
Demonstrated Effects
Pretrial Screen/ Certificate of Merit
Limit Number of Claims
Liability-Limiting (Pro-Defendant) Measures
Table 1—Continued
X
X
X X
X
X X
X X
Periodic Payment
X X X
X
X
X
X
Patient Compensation Fund
Process Reforms
Table 2—Second-Generation Reforms by State: Evidence of Reforms’ Effects Process Reforms
State
Demonstrated Effects
“Sorry” Laws
Disclosure and Early Offer
Thorough-Going Reforms
Health Courts/ Judge-Directed Negotiation
Enterprise Liability/ Insurance
No-Fault Compensation (Obstetrical)
Defendant-protective Fewer claims? Smaller payouts? Lower premiums? Better dispute-resolution process?
Yes Yes
Yes
Burden to vulnerable class? Better access/quality of care? AL AK AZ AR CA CO CT DE DC FL GA HI IL IN IA ID KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD
X X X X X X X X X X X X X
X
X X X X
X X X X
X
X X X X X X
X X (Continued)
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Table 2—Continued Process Reforms
State
“Sorry” Laws
Demonstrated Effects
Disclosure and Early Offer
Health Courts/ Judge-Directed Negotiation
Thorough-Going Reforms Enterprise Liability/ Insurance
No-Fault Compensation (Obstetrical)
Defendant-protective Fewer claims? Smaller payouts? Lower premiums?
Yes
Better dispute-resolution process?
Yes
Yes
Burden to vulnerable class? Better access/quality of care? TN TX UT VT VA WA WV WI WY
X X X X X X X
X
X
Details of laws vary from state to state.
9, 10,11
See Table 1 legend for expansion of abbreviation.
health courts, and safe harbor laws; and (3) major conceptual reforms to move liability away from physicians to hospitals or administrative no-fault compensation systems. Where good evidence is available about the practical effects of already-implemented reforms, that evidence is reviewed. Tables 1 and 2 list the major reforms by category and outline the chief characteristics of each state’s laws. First-Generation Liability-Limiting Reforms Medical malpractice law is essentially based on the common law of torts, that is, judge-made law requiring compensation for personal injuries negligently inflicted. The legal rules vary somewhat from state to state. (There are also pockets of federal law for cases involving harm at federal institutions.) State legislatures have codified and sometimes modified principles first laid down by judges. Responding to concerns about spikes in physician and hospital liability insurance premiums, states enacted two waves of liabilitylimiting laws in the late 1970s and 1980s and in the early 2000s. These laws, some aspects of which were adopted in every state, are labeled first-generation malpractice reforms.5,6 Most first-generation reforms made personal injury law more favorable to health-care provider-defendants than to defendants engaged in other lines of work. These laws had three chief goals: (1) reduce the number of claims filed by patients and families; (2) alter
the litigation process to favor health-care providerdefendants; and (3) limit the amount of payouts to plaintiffs with successful claims.5,7 Payout limitations comprise the first-generation reform most strongly favored by organized medicine. Laws to Reduce the Number of Claims Filed Laws designed to reduce the number of claims filed against health-care providers include statutes of limitation, requirements for submitting claims to pretrial screening panels or to arbitration, requirements for certificates of merit before filing cases, and controls on fees received by plaintiffs’ attorneys.5-7 Statutes of limitation set time bars after which claims can no longer be filed. First-generation reforms typically shortened the time bar for medical cases so that a claim of injury from a defective automobile, for example, is barred after 3 years, but a claim of injury from malpractice is barred after 2 years.8 Many time bar rules operate in favor of health-care defendants, but not other defendants, to bar claims even for injuries undiscoverable until the specified time had passed.10 Requirements for pretrial screening panels and certificates of merit were designed to keep meritless and difficult-to-prove claims out of the judicial process and require prelitigation review by medical experts. Laws imposing fee controls on plaintiffs’ lawyers attempted to make medical malpractice cases financially less attractive to the plaintiffs’ bar.6
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Laws Altering the Litigation Process to Favor Defendants Laws heightening plaintiffs’ difficulty of winning medical cases include rules that set minimum qualifications for expert witnesses and specify standards for informed consent. Expert qualification laws generally require that expert witnesses be in active practice in the same specialty as the physician-defendant about whose care the expert testifies.12 Informed consent laws typically adopt professional custom, rather than patients’ need for facts to make informed decisions about treatment, as the standard for disclosure of risks, benefits, and alternative treatments.13 Laws Limiting Payout Amounts Laws limiting payouts to successful plaintiffs include dollar limits on noneconomic damages, total damages, and punitive damages; elimination or restriction of joint and several liability and of the collateral source rule; and laws authorizing periodic rather than lumpsum payments. In some states, these enactments apply only to health-care lawsuits; other states apply them across the board. The first and most influential law that caps payouts was California’s 1975 statute limiting noneconomic damages (for physical and mental suffering and other intangible injuries) in medical cases to $250,000, a limit that remains in effect without adjustment for inflation.14 Other states instituted caps on total damages as well as, or instead of, noneconomic damages. Many states limit punitive damages awards in a similar fashion. Another type of payout limitation is modification or abolition of the common law joint and several liability principle. Under this principle, if among two or more liable defendants one (eg, a negligent physician with inadequate insurance) lacks assets to pay his or her share of the plaintiff’s damages, the other liable defendants (eg, a negligent hospital or drug company) must pay that share. Most states have changed that rule. Typically, each defendant’s liability is now limited to the degree of that defendant’s fault so that injured plaintiffs absorb the fault shares of negligent defendants who cannot pay for the damage they caused.11 A third type of award restriction changes the common law collateral source rule. In calculating damages under this rule, benefits plaintiffs receive from collateral sources, such as medical and unemployment insurance, are disregarded and not subtracted from their awards. Reasons supporting the rule are that negligent defendants should not take advantage of plaintiffs’ foresight in securing insurance and that if collateral source payments were subtracted from awards, defendants might have less reason to take
harm prevention measures. The collateral source rule has been attacked as allowing patient-plaintiffs a double recovery, although many insurers reclaim benefits paid out on patients’ behalf through subrogation clauses in health insurance contracts. Most states have abolished or modified the rule.11 Laws Arguably Benefiting Both Plaintiffs and Defendants Not all first-generation reforms were explicitly defendant protective. Laws authorizing periodic damage payments, arbitration of medical injury claims, and patient compensation funds arguably accorded benefits to both caregivers and patients. Most states enacted laws authorizing judges to space out high-dollar awards in periodic payments rather than to pay them as lump sums. These laws aim at protecting spendthrift plaintiffs from their own profligacy, tying payouts to expenditures as they arise, and preventing patients’ families from obtaining windfalls if the patient dies sooner than was anticipated when future medical costs and lost earnings were estimated at trial.15 Several states enacted laws authorizing voluntary agreements to resolve medical injury disputes through private arbitration rather than through the court system, and some states allow predispute binding arbitration agreements.5 One aim is to protect health-care personnel from burdensome litigation; another is to reduce court dockets and speed dispute resolution. Critics objected that patients might unknowingly sign away their rights to judicial redress.16 Thirteen states have initiated publicly sponsored patient compensation funds as reinsurance for large losses beyond providers’ liability insurance coverage. These funds aim to offer hospitals and physicians affordable coverage even during periods of premium spikes while providing compensation for patients with grave injuries.6,7 New York’s recently launched fund covers only obstetrical injuries.17
Second-Generation Procedural Innovations to Improve Dispute Resolution and Decrease Defensive Medicine Beyond the laws outlined in the previous section, many states have launched attempts to improve the medical dispute resolution process and inhibit wasteful defensive medicine. Unlike first-generation defendantfavoring laws, most second-generation procedural reforms are promoted as not tipping the balance toward either side. Examples include “sorry” laws, disclosure and early offer proposals, health courts, and safe harbor laws.
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“Sorry” Laws Medical malpractice law is criticized for inhibiting physicians from candidly sharing information about adverse outcomes with patients and families for fear that such communications might be used in court as evidence of liability (or so defense lawyers have advised). The result: Both physicians preferring honest disclosure to patients and patients seeking the truth about what happened and apology for harm done are foiled. Often, dissatisfied patients file lawsuits that could have been avoided by more transparent systems.18 To counter this criticism, 36 states have enacted so-called “sorry” laws, making health-care personnel expressions of regret or apology inadmissible as evidence in litigation.9 Details of what communications are inadmissible vary from state to state, but the laws’ general aim is to encourage honesty about adverse medical outcomes. Disclosure and Early Offer Proposals Akin to sorry laws but with a stronger focus on speedy dispute resolution, proposed disclosure and early offer laws aim to give hospitals reasons to come forward promptly with truth about adverse outcomes and offer compensation rather than to adopt hardedged delay and resistance tactics. The hospital’s incentive is that awards would be limited to pecuniary damages, such as medical expenses and lost earnings not covered by collateral sources, plus reasonable legal fees, thereby averting liability for intangible harm from pain and suffering. The patients’ and families’ incentives are quicker and more certain compensation, although in diminished amount, and avoidance of a stricter burden of proof or payment of defense costs if they reject the offer, go to trial, and obtain a result worse than the offer. Both sides benefit from avoidance of expensive, time-devouring litigation.19 First proposed by O’Connell20 in 1982 and endorsed in part by leading Democrats,21 a version of the disclosure and early offer concept finally was enacted into law (over trial lawyers’ opposition) in New Hampshire in the summer of 2012.22 Health Courts Provider dissatisfaction with inconsistent judgments by lay juries sparked proposals for health courts to replace standard courts in medical cases. In health courts, cases would be tried before judges with training on medical issues rather than before juries, and testifying experts would be selected and compensated by courts rather than, or in addition to those retained by, the parties. Some health court proposals would establish standard damage scales with caps on intangible damage awards.23 One objection is that most states enshrine the jury trial as a constitutional right.24
New York recently launched a variation of the health courts concept in connection with a demonstration project funded under PPACA. In the New York approach, which is supported by both hospitals and trial lawyers, judges with medical training engage plaintiffs and defendants in judge-directed negotiations.25 Similar in operation to health-care divisions of metropolitan district courts in Japan,26 New York health courts speed up the settlement process but (unlike Japan and early health court proposals) retain jury trial rights if cases do not settle. Safe Harbor Proposals To encourage compliance with evidence-based clinical practice guidelines and reduce wasteful defensive medicine, safe harbor proposals allow physicians to defend lawsuits by proof of adherence to established guidelines supported by weightier authority than mere professional custom.5 Critics argue that established guidelines often reflect established interests rather than good science; are frequently vague, inconsistent, and even contradictory; and are lopsided in effect, that is, a physicians’ shield when followed but no patients’ sword when disregarded.27,28 The guidelines development process has recently been strengthened under two Institute of Medicine committees,29,30 leading eminent policy analysts to support a safe harbor approach to reduce defensive medicine costs.31,32 Major Conceptual Reforms Beyond first-generation liability-limiting measures and procedural innovations, two reforms to alter the structure of medical malpractice litigation are worthy of special attention. The first, which would shift the focus of liability from individual physicians to hospitals, is enterprise liability or its cousin, enterprise insurance. The second reform, which would abolish litigation over negligence entirely for selected types of injury, is no-fault compensation. Enterprise Liability and Enterprise Insurance Enterprise liability is an arrangement under which the hospital is the entity liable for harm negligently inflicted within the hospital’s walls, even harm caused by nonemployees (physicians and others) with hospital privileges.33 Centralizing responsibility for injury at the hospital level fits well with the widely accepted concept stressed by the Institute of Medicine and patient safety experts34 that focusing attention on system error rather than exclusively on individual error pays off in preventing avoidable harm, because the hospital level is where system errors are best addressed.35 Under enterprise liability, hospitals would be legally responsible for the quality of their providers and the
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coordination of care among them. Enterprise liability would also simplify litigation somewhat because hospitals and individual physicians would not need separate representation. Enterprise insurance is similar in concept to enterprise liability but would alter malpractice litigation less markedly. Nonemployee physicians could still be sued for negligent care delivered within hospital walls, but rather than buying malpractice coverage from commercial insurers, their insurance purchases would be channeled to a hospital-controlled captive entity. The hospital, as liability insurer, would have similar incentives to reduce avoidable injury through system error prevention as with enterprise liability.5,18,36,37 Enterprise liability and enterprise insurance have yet to be enacted by any state, although some leading hospital systems have voluntarily adopted enterprise insurance.38 Some physicians object to hospital-based liability, fearing loss of professional autonomy to hospital control. However, the enterprise liability concept fits in with two major developments in health care. First, PPACA encourages the formation of accountable care organizations, entities (mostly hospital system based) that Medicare will reward for providing cost-effective care of good quality and penalize for the contrary.39 This is akin to enterprise responsibility at the level of administrative payment systems; it would not be surprising if enterprise responsibility at the level of legal doctrine followed close behind. Second, the ongoing restructuring of physicians’ relationships with hospitals from independent contractor to employee status40 will likely mitigate opposition to enterprise responsibility on the grounds of loss of professional autonomy. Physicians are relinquishing that autonomy anyway by choice of career direction. No-Fault Compensation Systems The most thoroughgoing reforms proposed for medical injury cases do away with proof of caregiver fault as the fundamental basis of patients’ right to compensation. Several nations (eg, New Zealand,41 France,42 the Nordic countries,43 and Japan26) have adopted no-fault systems for all or a portion of iatrogenic harm. Virginia and Florida have also done so for a limited set of birth-related neurologic defect events (bad baby cases) that sometimes result in staggering liability awards under the traditional tort system.44 Likewise, the federal vaccine injury compensation system is structured along no-fault lines.45 No-fault systems take injury claims out of courts and lodge them in special administrative commissions. Because compensation is awarded on the basis of harm to patients rather than provider negligence,
the expense, time, and rancor of disputes over fault are avoided.46 Defining what harms entitle patients to compensation is problematic both in the law’s drafting and in individual compensation decisions. Nevertheless, however the line is drawn, more patients will receive compensation than under negligence law, so compensation amounts must be limited to avoid bankrupting the system. This is typically accomplished by restricting benefits to monetary loss (medical expenses, wage loss) with collateral source offsets and no recovery for intangible harm44 or (as in Japan’s birth injury compensation system) by standardized periodic payments. 26 Some laws allow physicians (Virginia, Florida) and hospitals (Virginia) to choose whether to participate in the no-fault system.44 Other laws (New Zealand) essentially abolish malpractice litigation altogether.41
Practical Effects of Reform: Available Evidence Considerable scholarship has evaluated the effects of implementing the reforms listed herein. Different states have adopted different mixes of reforms, so disaggregation and attribution of specific effects to particular measures are difficult. But the results of the scholarship, although by no means unanimous, illuminate both facts and misconceptions about the operation of the malpractice system.47 Evaluations of past reforms have tended to focus chiefly on their effects on litigation volume, compensation payouts, and liability insurance premiums—matters of concern to health-care providers and their insurers. Also worthy of consideration, although less susceptible to quantified analysis, are the effects of reforms on the dispute resolution process, on vulnerable classes of patients, and on access to and quality of care.48,49 Most first-generation liability-limiting measures, such as laws imposing controls on plaintiffs’ attorney fees50 and punitive damages,51 had little if any effect on the number of claims filed or paid or on liability premium levels.33,52 Evidence on the effects of shortened statutes of limitations and changes in joint and several liability rules is mixed.50,53-55 A probable reason for these results is simple human adaptation. Lawyers faced with shorter deadlines learn to submit pleadings more quickly. Jurors precluded by law from awarding one category of damages may award the same amounts under different labels.56 A balloon squeezed here expands there. Collateral Source Rules As for changes in collateral source rules, evidence is inconclusive.57 Sloan and Chepke58 characterized the
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collateral source rule studies as “uniformly negative” with regard to effects on claim frequency and severity. Other studies, however, found that award offsets for collateral source benefits result in decreases in payments and claims frequency.57,59,60 The PPACA health insurance expansion may bring the collateral source rule under greater pressure. The great majority of successful malpractice claimants will have most of their medical expenses covered, except for low-income claimants in states forgoing Medicaid expansion under PPACA and perhaps claimants in health plans with high deductibles (16% of privately insured adults aged , 65 years61). So the argument for ignoring collateral source benefits in damage calculations to avoid penalizing those with the foresight to obtain insurance weakens.62 Damage Caps One measure that appears to result in less litigation and lower payouts is caps on damages, particularly for noneconomic (intangible) injuries.53,63,64 Hyman et al65 found that Texas’s caps on noneconomic and total damages, for example, affect 47% of plaintiff jury verdicts, reducing mean allowed noneconomic damages by 73%, mean allowed verdicts by 38%, and mean total payout by 27%, and that the caps affect settled cases as well, reducing predicted mean total payout by 18%. Ellington et al52 found that a $250,000 cap on noneconomic damages is “strongly correlated with lower malpractice costs, especially for urban and teaching hospitals.” Paik et al66 found that states with damage caps had significantly greater declines in malpractice claim rates and payouts per active physician than did states without. However, damage caps alone cannot explain all the decrease in malpractice litigation over the past 20 years. In states with post2000 caps, paid claims per physician declined 60% from 1992 to 2011, but states with no caps at all also showed a 49% decline.66 Whether states enacting damage caps lower liability insurance premiums, attract physicians, and thereby enhance access to care is controverted. Studies concluding that damage caps lower premiums are criticized for methodologic flaws.67 Since caps limit jury awards, insurers may be more apt to try cases than settle them, increasing defense costs and perversely cutting premiums savings.68 Some scholars found that tort reform increases physician supply,69,70 others found no evidence to support the claim,71 and still others found increases only in “frontier rural specialist physicians.”72 Also controverted is whether liability-limiting measures such as damage caps harm patients by diminishing provider incentives to take precautions for safer care, as plaintiffs’ attorneys and some scholars
contend,73-75 or whether such measures restrain unproductive defensive medicine without adverse effects on patient safety, as Kessler and McClellan76,77 concluded in studies of patients with acute myocardial infarction or ischemic heart disease. Applying the Kessler-McClellan method to a broader set of ailments, the Congressional Budget Office found no evidence that tort reforms reduced medical spending.78 A later Congressional Budget Office report concluded, to the contrary, that a “combination of direct savings in malpractice costs and indirect savings in health care services would reduce national health spending in response to the proposed reforms by roughly 0.5 percent.”79 For all the heated rhetorical wrangling about whether damage caps save money or endanger patients (or both), no fact-based consensus has emerged. Adverse effects of damage caps on fairness and justice must also be considered. Caps specifically target people with serious injuries as a disfavored class, and postcap jury verdicts reflect this discrimination.80 Caps on noneconomic damages also target groups whose economic loss is small relative to their intangible injuries, such as elderly people, unemployed people, and people whose injuries cause chronic pain or disfigurement.65,80 Limits on noneconomic damage are premised on the assumption that its subjective measurement leads to overcompensation of those with large losses.81 But no empirical evidence supports that assumption,73 and as Sloan and Chepke82 observed, the only systematic comparisons indicate that “such injury victims are undercompensated on average.” Process Reform Initiatives Patient compensation funds (PCFs) providing reinsurance for large-loss claims have drawn limited scholarly attention. Sloan and Chepke,83 although critical of the management of some PCFs, suggested that well-run PCFs with mandatory provider participation can reduce insurance pricing volatility. Both disclosure and early offer reforms and enterprise liability proposals have attracted criticism.84,85 Neither has yet established a legislative track record for empirical evaluation. Voluntary disclosure and offer programs, however, are reported to have shown considerable promise.21,86,87 Several states passed safe harbor laws to protect physicians who follow clinical practice guidelines against liability. Criticized as lopsidedly shielding guidelinecompliant defendants but offering patients no benefit when guidelines are disregarded, these laws have been repealed in most states that enacted them (Maine, Florida, and Minnesota).88 While in force, the laws were reported as not having much effect.28
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No-Fault Compensation Systems No-fault systems, launched in Florida and Virginia in the 1980s to compensate a limited class of serious birth-related injuries, have received several analytic evaluations.44,89 Those evaluations are largely positive. Siegal et al44 summarized the studies as concluding that the Florida and Virginia no-fault systems have improved claim adjudication speed and efficiency, lowered overhead costs and attorneys’ fees, diminished the number of high-cost claims brought in courts, and resulted in lower premiums for obstetrician-gynecologists while addressing the needs of injured children and their families.
processes may enhance the merits of safe harbor proposals. Information is already available on compensation fund operations, and recently launched disclosure and offer initiatives will be closely watched. Further research is imperative on whether these initiatives should be expanded. Two broader initiatives are worthy of attention. The first is enterprise insurance, which accords well with trends toward physicians becoming hospital employees and toward accountable care organization development. The second is no-fault compensation systems for serious birth-related injuries, building on Florida and Virginia’s experience. Seeds of balanced reform are being scattered. Some will fall on fallow ground.
Conclusion Medical malpractice reform continues to generate intense political controversy. Previous battles were characterized by the use of anecdote, rhetoric, and political muscle. Now, objective empirical analyses are available of reforms previously implemented. A second generation of reform ideas aimed at patient safety and improved dispute resolution has edged toward center stage. In the next round of debate, political muscle will again be applied, but this time, it should be tempered by objective evidence and informed by creative second-generation proposals. First-generation liability-limiting reforms effectively placed health-care defendants in a privileged position compared with other classes of defendants in personal injury litigation. Among first-generation measures, empirical analyses demonstrate that only one proved consistently to restrain malpractice suits: caps on damages, especially noneconomic damages. However, noneconomic damage caps have differential impacts on patients, disfavoring those with severe injuries and those with smaller proportions of economic injury, such as people who are elderly or unemployed. Whether damage caps also undermine patient safety by diminishing provider injury prevention incentives is empirically unresolved. Many courts struck down caps as violating state constitutions.1-4 In light of evidence that malpractice claim rates and payouts per active physician have steadily declined66 and that the impact of liability insurance premiums has been manageable,90 the case for legislation to supplement existing state laws by capping damages nationwide seems questionable. Other reforms such as PCFs for reinsurance of large-loss claims, health courts, and disclosure and early offer proposals contain theoretical merit, but their success depends on deft implementation. Safe harbor laws that protect physicians who comply with guidelines from liability did not live up to sponsors’ hopes, but improvements in guidelines formulation
Acknowledgments Financial/nonfinancial disclosures: The author has reported to CHEST that no potential conflicts of interest exist with any companies or organizations whose products or services are mentioned in this article. Other contributions: The author thanks Katie Church, JD, and Andrew Johncox, JD, for their effective research assistance and Samantha Leflar, JD, for comments on an earlier draft.
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Medical Ethics