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Thursday, May 1, 2008

Medical Malpractice: Actors, Flaws, and Reform

          Today I'm beginning a multi-post series on medical malpractice litigation.  The posts are inspired by a book I'm publishing with Jeffrey O'Connell, A Recipe for Balanced Tort Reform.  It should be available in June.  Of course, all comments are welcome.

I.         Actors

          There is considerable antagonism among the actors involved in the medical malpractice litigation system:  lawyers, health care providers, and liability insurers.  In particular, there is enmity between plaintiffs’ lawyers and insurers (with health care providers generally aligned with insurers).  The sides each blame the other for perceived problems in the system.  The vilification is unfortunate, but perhaps understandable.

 

          It seems to me that each group of actors is simply responding to incentives.  In other words, to the extent there are problems with medical malpractice law, it is not generally due to the illicit conduct of either the plaintiffs’ bar or insurers (and certainly not health care providers).  They are behaving largely as one would expect, given the adversary system in which they operate.  Insurers are in business to make a profit.  They want to maximize the amount of premiums collected and minimize the amount of settlements and judgments paid out.  Plaintiffs’ attorneys are also in business to make a profit.  The contingent fee provides their incentives.  The more claims they can settle or win, and the higher the value of those claims, the better.

 

        Although that sounds stark (perhaps even critical), it’s not meant to be.  All of the actors in this system have positive roles to play.  We want them to play their roles, and there is a good reason for the incentives.  The benefits we receive from health care providers are too obvious to require elaboration.  Medical liability insurers are necessary because health care providers are necessary.  Insurers allow health care providers to spread the risk of liability.  Many med mal judgments are so large they would financially crush even the wealthiest health care provider.  Even if there is a defense verdict, the costs of defense are often steep as well.  Few people considering a medical education would invest the necessary money, only to risk a reasonable possibility of financial ruin through liability.

 

          Finally, plaintiffs’ lawyers have a positive role to play.  As valuable as health care providers may be, they are only human.  They make mistakes, and, because of the nature of their work, those mistakes can have serious consequences.  Plaintiffs’ lawyers bring lawsuits that can:  1. correct the wrong of an injury, 2. compensate the victim, and 3. provide cost-internalization.

 

        The problems lays not so much with the actors in the malpractice system, but in the content of the rules that goven it.

--CJR

         

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Comments

"Plaintiffs’ lawyers bring lawsuits that can: 1. correct the wrong of an injury, 2. compensate the victim, and 3. provide cost-internalization."

But that's not what their incentives are. Their incentives are to bring profitable lawsuits; if they correct wrongs, compensate victims, and provide cost-internalization in the process, that is just serendipity. The most profitable lawsuits--cerebral palsy cases alleging "birth injury"--do none of these three. As a result, doctors' incentives are distorted.

Posted by: Ted | May 1, 2008 5:37:46 AM

You're right. The incentive is the contingency fee. The rationales are the reason to provide the incentive.

You're also right that the system doesn't function precisely as it should. (More on that in later posts.) However, if by serendipity you mean whether the lawsuits result in the "correct" outcome, I think that's too strong. It's true that the 1984 New York malpractice study found that a plaintiff victory was correlated not to any negligence, but only the severity of the injury. However, more recent studies have disputed that finding. See, e.g., David Studdert et al., Claims, Errors, and Compensation Payments in Medical Malpractice Litigation, 354 New Eng. J. Med. 2024 (2006); Philip G. Peters, Jr., Doctors & Juries, 105 Mich. L. Rev. 1453 (2007). The Studdert piece finds an error rate of approximately 25%. The Peters piece finds a correlation between plaintiffs' verdicts and negligence. You may still find the error rate too high, and I agree with you (especially given some of the costs involved). The question is what to do about it.

Posted by: Chris Robinette | May 1, 2008 6:50:46 AM

Depends on what you're defining as an "error rate." Studdert found about 40% of claims brought were without medical error, and that adjudications/settlements were inconsistent with whether medical error had occurred 27-28% of the time (which is where I guess you're getting the 25% figure).

Correctly resolving 72% of meritless claims without payment is certainly better than a coin-flip, but the problem is that that accuracy rate isn't high enough to give a plaintiffs' attorney with a diversified portfolio of cases sufficient incentive not to bring a meritless case, given that even under Studdert, the average meritless case was worth $90,000.

That's before we get to the fact that "medical error," which is what was measured by Studdert, isn't necessarily actionable "medical malpractice."

Posted by: Ted | May 8, 2008 9:30:00 AM

Thanks for your comment, Ted. I still think the error rate is somewhere between serendipitous and acceptable. The crux of the Studdert findings are on 2027-2028:

Sixty-three percent of the injuries were judged to be the result of error. Most claims involving injuries due to error received compensation (653 of 889 [73 percent]), and most claims that did not involve errors (370 of 515 [72 percent]) or injuries (31 of 37 [84 percent]) did not. Overall, 73 percent (1054 of 1441) of all claims for which determinations of merit were made had outcomes concordant with their merit.

You make a good point that "medical error" is not necessarily "medical malpractice." However, the definition of "medical error" is fairly broad: "the failure of a planned action to be completed as intended (i.e. error of execution) or the use of a wrong plan to achieve an aim (i.e., error of planning." 2026. It's hard to imagine the technical requirements of malpractice (proximate causation, etc.) winnowing those numbers down to a coin flip. The Peters study, among others, also finds a correlation between malpractice and a plaintiff's verdict.

My main point, however, is that the contingency fee itself is not the source of the problem. As I argued in my second post, I think the main problem is the level of uncertainty involved in proving liability. A contingency fee coupled with a tighter standard would result in a more acceptable rate of error.

Posted by: Chris Robinette | May 8, 2008 11:37:12 AM

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