Fundamental Malpractice Reform Requires National Rational HC System

Posted on | November 29, 2016 | Comments Off on Fundamental Malpractice Reform Requires National Rational HC System

President-Elect and HHS Nominee

Mike Magee

President-Elect Trump announced today his nomination of Congressman Tom Price for HHS Secretary. Dr. Price, an orthopedic surgeon, steeped in organized medicine politics, has a conservative record of supporting small government, state’s rights, and malpractice reform. But if he truly wants to address medical liability and its impact on the Medical-Industrial Complex, he will need to think national and rational.

The power of the Medical Industrial Complex derives from shared resources, shared rewards, and shared career paths. But to leverage these assets, the various collaborators must also share liability. By choosing a decentralized system, whose credentialing and licensure and regulatory framework are largely controlled by fifty state regimes, doctors, hospitals and pharmaceutical manufacturers have had to accept a liability system based on state tort laws, one that all agree serves both patients and the Medical Industrial Complex poorly.

Ours is a system where an estimated 400,000 patients die each year due to hospital based medical errors, and where 1 in every 14 physicians is sued each year. The average physician in America can plan on a malpractice claim every seven years. The average time cost to a physician over 40 years in addressing these tort cases is over 4 years. Getting a case dismissed can take a year and a half, and settling a case out of court is still a three-year affair. Our system also extracts government penalties and awards in the billions almost continuously from the pharmaceutical and medical device industries, and this is without counting a continuous ongoing stream of class action suits whose ads rival the industry’s own DTC ads for frequency on the air.

The distinctly American choice to decentralize control of health care has limited the ability to rationalize the system, control costs, and standardize best practices across the nation. This choice has also accepted high levels of variability in quality, cost, coverage, and access in return for minimizing the potential for federal government induced price controls. In the cracks, collaborating members of the Medical Industrial Complex often find themselves deflecting blame and pointing fingers at each other.

Pharmaceutical companies have leaned heavily on “learned intermediary” law to limit their exposure. By “handing over” their product to doctors (primarily), and leaving the prescribing decisions to them, they embrace a “hands off” defense. But, as large judgments and penalties, through the government and class action suits originating in tort friendly states like Mississippi have demonstrated, they maintain significant exposure made worse by DTC advertising, aggressive marketing (including off-label) to doctors, CME and research ripe with conflicts of interest, and mergers and acquisitions that often purchase more liability than asset.

Physicians and hospitals, as well, pay a steep price in liability exposure for maintaining a privatized, de-centralized and disintegrate health care system. First, they insure that they and their patients will be dogged by ever increasing health care costs as compared to all other developed nations. Second, they must live with the fact that many of their neighbors in the community will be uninsured or underinsured. And finally, they must continue to manage the financial and psychological fallout of their individual state’s tort systems.

As one expert on medical malpractice commented, “Professional passions run high, and money and politics further inflame them…malpractice reform should be debated as a health policy issue, not as a political referendum on personal injury litigation.” For the past two decades, the business community and conservative think tanks have piggy-backed on this issue as a method of attacking personal injury lawyers who historically support the opposition party in large numbers.

Out of this has come occasional, state based reforms under the banner acronym “MICRA” or Medical Injury Compensation Reform Act, which generally cap payment for “pain and suffering” at $250,000 and limit a plaintiff lawyer’s contingency fees. California was the first to enact this in 1975. Texas created its’ version in 2003. In state’s with caps, the average decrease in settlements has been 15% , and malpractice insurance premiums have stabilized.

This sounds good, but does little to address the systemic issues of combating poor quality care, fairly compensating patients for injuries resulting from negligence, and imposing justice in a manner that would make future occurrences less likely. Plaintiff’s win only 25% of the time. It takes an average four years to gain a decision. And even in these cases, 54 cents of every dollar is diverted to legal and administrative fees.

The state-by-state approach to health care created a medical malpractice tort system that is fundamentally unsound. This becomes obvious if one compares this legal approach to current efforts to improve quality and safety in our health care system. The tort system uses litigation as its lever for change. The safety movement uses quality improvement analysis. Tort law focuses on the individual. Safety focuses on the process. The tort system’s punitive and adversarial style drives information down, encouraging secrecy. The safety movement uses a non-punitive and collaborative approach, which encourages openness, transparency, and continuous improvement. With tort law, exposing oneself can end one’s career and harm one’s mental health. In the safety movement, contributing is career-enhancing and therapeutic.

The medical malpractice system is fundamentally adversarial and built on a culture of blame. Doctors, hospitals, insurers and lawyers are locked into battle and patients are routinely caught in the crossfire. The most often-quoted study was conducted in 1984 when Harvard examined 30,000 medical records and 3,500 malpractice claims from New York hospitals. From the medical records they determined that four percent of patients had suffered adverse events, and that one percent rose to the level of negligence. But when they correlated these records with malpractice claims, they found that only two percent of the patients who had suffered from negligence had actually submitted claims, and only seventeen percent of the malpractice claims were in any way tied to negligence.

Proponents of medical malpractice reform have argued that state-by-state reform will limit the practice of “defensive medicine” and will be very beneficial in controlling health cost inflation. But one economist after the other pegs the savings at just over 2% of total health care spending. The Congressional Budget Office (CBO) estimated the savings if a package of 5 reforms were instituted at just .5%. There have also been state based arguments for reform based on enhanced statewide recruitment of doctors. But studies show that the gains in state’s that have MICRA have been small, in the range of 3%, and have not moved the needle on service to under-served populations.(5)

A rational national approach to malpractice reform could certainly include the rather crude MICRA provisions that the AMA Federation and state physicians support. But it could go far beyond that according to a proponent for creating federally funded special medical courts to handle claims quickly and efficiently. He says such reforms would address “reliability and consistency in rulings, costs associated with defensive medicine, fair and efficient compensation for injured patients, patient safety, and physician accountability.”

Legal experts also caution about a reform package based on the status-quo. Moving toward universal coverage, through whatever means, carries with it predictable demands to address proportionate increases in liability. They say, “The core difficulty is not that we lack sufficient courthouses, judges, or lawyers to accommodate such a throng. Rather, the problem is that tort doctrine itself is not structured to deal effectively with the legal problems that expansion will bring with it.”

So, as the President-Elect and the Republican controlled Congress poise to further privatize and divided our segmented system, and reinforce a state by state approach, they should seriously consider the costs. These are not just financial, but also a missed opportunity to fundamentally rethink a rational federal approach to medical liability with the potential to share risk across the Medical Industrial Complex.

Finally, even if it were possible to wall or fence populations within state borders, we should be mindful that information technology, whether in the form of patient-generated research, electronic medical records, or A.I. driven diagnostic and therapeutic devices, no longer respects geographic borders.

For HealthCommentary, I’m Mike Magee.