Last night I was with some good friends. One, a retired lawyer and radio talk show personality, has just started reading this blog. He, we will call him Froggie for reasons that I hope he figures out, told me that this week he planned to initiate a discussion of malpractice, focusing on the article about some physicians refusing routine care to malpractice lawyers and their families. Froggie posed several hypotheticals – lawyers love hypotheticals – about the value of certain damages, e.g., a surgeon cuts off the wrong leg, or takes out the wrong kidney. These are interesting hypotheticals, but even the answers seem tangential to the vast majority of malpractice claims.

A commentary in the current Archives of Internal Medicine gives an excellent overview of the problem – Defending the Practice of Medicine . This extract should whet your appetite. To read the entire article, you either need a subscription or access to the print copy at your medical library. I will extract some key concepts in this rant. To read more background from the author (who is Chairman and CEO of The Doctors Company) – http://www.thedoctors.com/default.asp

The article has a wealth of valuable information. I have chosen these issues as those which struck me most significant.

It is estimated that malpractice insurers will pay out approximately $1.40 in claims losses and direct expenses for every dollar of premium collected in 2001 and 2002.3 Even with significant rate increases, it is projected that insurers will be forced to expend $1.35 in claims costs and expenses for each premium dollar received in 2003.3 These figures are independent of investment gains or losses.

Mutual or reciprocal insurance companies, companies that are owned by the physician policyholders themselves, not outside shareholders, insure more than 60% of America’s practicing physicians.4 The primary mission of these companies is to provide insurance protection for practicing physicians. Nonetheless, no company can long sustain losses of this magnitude and remain solvent, so premium rates have been forced sharply upward. Since 2000, mean rates across the country have increased between 10% and 20% annually.5 These averages obscure increases of 100% or more in some venues with unlimited liability in contrast to average increases of 5% to 10% in states that have passed effective tort reform statues.5 In the states most severely affected, which include Pennsylvania, Nevada, West Virginia, Mississippi, Texas, and Florida, some physicians have been unable to find coverage at any price, or have been forced into state-run plans.6

Despite the trial lawyers trying to blame malpractice rate increases on investments, the data argue that the problem is a cost problem. Trial lawyers speak persuasively, regardless of the data. That is their job! But the data prove them just sophists.

Though frequency has changed little over the past few years, it has stabilized at extraordinarily high levels. On any given day, there are more than 120 000 malpractice actions pending against the physicians of the United States.10 One sixth of America’s physicians report a claim every year (The Doctors Company, unpublished data, 2002). For high-risk specialties, the numbers are even larger. The average neurosurgeon reports a claim every other year (The Doctors Company, unpublished data, 2002). Expressed differently, 50% of America’s neurosurgeons are sued every year. More than 30% of orthopedists, obstetricians, trauma surgeons, emergency department physicians, and plastic and reconstructive surgeons are sued every year (The Doctors Company, unpublished data, 2002).

Approximately 70% of all these claims are closed with no payment to the plaintiff, but each one costs an average of $22 967 to defend,11-12 adding an enormous expense that must be calculated into the cost of insurance.

This last sentence is the one that most opponents of tort reform ignore. We cannot just look at settlements and judgements; we have huge costs even in frivolous claims.

Another way to understand the problem created by jury awards based on injury rather than negligence is illustrated by the following calculation. The average cost of a wrongful death claim in the United States today is $5.7 million. If a new drug saved 99 lives for every 1 lost because of adverse effects, a charge of $57 000 per dose would be required solely to cover the cost of indemnity.

Wrongful death is abhorent. No monetary settlement can really right that wrong. However, huge payments add a second injury to the first. Physicians do not pay the $5.7 million. Society pays. Society pays through decreased access to the benefits of medical care. Society pays through increased defensive medicine. Society pays as the doctor patient relationship becomes eroded. Physicians feel under siege. Many view each patient as a potential litigant.

In this atmosphere, California has the best track record. The article points out the key features of California’s tort reform, all portions, Dr. Anderson argues, being important to success.

• A $250,000 cap on non-economic damages
• the collateral source rule. This prevents double collection for the same damages. For example, if an injured patient has already had lost wages or medical costs covered by disability or medical insurance, recovery is not duplicated in a malpractice award
• the provision for periodic payments. This allows damage awards to be paid over the period they are intended to cover
• Fourth, there are some limits on attorneys’ contingency fees. MICRA provides for a sliding scale; a plaintiff’s attorney keeps 40% of the first $50 000 of an award but “only” $221 000 (plus expenses) of a $1 000 000 judgment. This allows more of an award to actually reach the injured patient. The difference is significant. A patient with a $1 000 000 award in a state with a contingency fee of 40% must give $400 000 (plus expenses) to his or her attorney.

Dr. Anderson argues, persuasively in my opinion, that we need all four provisions for truly succesful tort reform. As I read each provision, I see common sense. As one examines the California experience, one sees the positive effect of these rules.

So Froggie, hopefully this article and the comments answer the appropriate question. The malpractice problem is too complex and emotionally charged for hypotheticals. We must examine the totality of the issue and try to develop a system that is truly fair to patients and physicians.

Related posts:

1. Commentaries on malpractice
2. Comments on the malpractice rant
3. Studying the impact of malpractice laws
4. Some more thoughts on malpractice
5. Update on the Pennsylvania malpractice crisis

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