ACCEL: Medical Malpractice Reform And Quality Improvement

In the United States, perhaps the medical malpractice system itself should be charged with malpractice. The goals for such a system are largely two-fold: compensate patients injured through medical negligence and deter providers from practicing negligently. Yet, Steven Farmer, MD, PhD, of the Center for Cardiovascular Innovation at the Feinberg School of Medicine and the Kellogg School of Management at Northwestern University, said the US litigation system does only a "mediocre" job of compensating strong claims and does not deter negligence.

In terms of tort system accuracy, there are two questions of great interest: Does medical error lead to lawsuits? And are payouts random? He offers some facts that shed light on these questions:

  • Few medical adverse events result in a lawsuit (3%)
  • Most lawsuits do involve medical error (60%)
  • Many cases have bad outcomes but no negligence (37%)
  • There is no medical error at all in one of four payouts (28%)

What's missing in those numbers is the fact that few claims ever make it to payout. Richard E. Anderson, MD, is chairman and CEO of The Doctors Company, the nation's largest medical malpractice insurer. In general, he said, his company closes 8 out of 10 claims with no payment. That's not without cost, of course. If you take 100% of claims, he said, it will cost—on average—$112,000 to close. In other words, every time the phone rings with a new claim, that's a $112,000 phone call.

What this costs clinicians was the subject of a recent analysis of nearly 41,000 physicians covered by a large liability insurer with a nationwide client base.1 The proportion of physicians facing a claim each year ranged from 19.1% in neurosurgery, 18.9% in thoracic-cardiovascular surgery, and 15.3% in general surgery to 5.2% in family medicine, 3.1% in pediatrics, and 2.6% in psychiatry. The mean indemnity payment was $274,887, although in the specialty of cardiology that figure was slightly more than $300,000. By the age of 65 years, 75% of physicians in low-risk specialties had faced a malpractice claim, as compared to 99% of physicians in high-risk specialties.

Overall annual medical liability system costs have been estimated to be $55.6 billion, or 2.4% of total health care spending.2 Actual direct costs comprise the smallest portion of that estimate; the great majority—perhaps 81%—is made up of defensive medicine. While financial costs are nearly universally covered by malpractice insurance, Dr. Farmer said the "costs" to physicians include lost time, damage to one's reputation, and the price of having to suffer through "one of life's most stressful experiences."

Tort Reform

One way to perhaps bring these costs under control is tort reform. Health care reform has been a top story for a few years now, but the actual time discussing tort reform has been overwhelmed by broader issues today.

Nevertheless, the topic is still relevant and those supporting reform are optimistic. Options have been proposed as part of tort reform. There is also more emphasis on alternatives to malpractice tort:

  • Guidelines-based systems offering "safe harbor" for guidelines-based patient care
  • Enterprise liability
  • Binding alternative compensation systems
  • Disclosure and compensation

To see how this might play out, consider Texas tort reforms, which emerged from an amended state constitution that now includes a strict noneconomic damage cap: $250,000 against one or more physicians and another $250,000 available each against one or two hospitals. As for emergency room care, Texas law allows for no liability unless "willful and wanton." Also, state law requires an expert report before a physician is even deposed.

Since enactment in 2003, the effect of Texas tort reform has been a cliff-like drop in both the number of claims and payouts per capita.

Bending the Cost Curve (or Not)

Will tort reform "bend the cost curve?" Some experts say yes, claiming that defensive medicine is responsible for hundreds of billions of dollars in health care spending every year. If providers and reform advocates are right, once damages are capped and lawsuits are otherwise restricted, defensive medicine, and thus overall health care spending, should fall substantially.

Well, what happened in Texas? In 2012, investigators reported on how Medicare spending changed after Texas adopted comprehensive tort reform in 2003. In brief: it didn't.

Investigators compared Medicare spending in Texas counties with high claim rates (high-risk) to spending in Texas counties with low claim rates (low-risk), since tort reform should have a greater impact on physician incentives in high-risk counties.3 Pre-reform, Medicare spending levels and trends were similar in high- and low-risk counties. Post-reform, there was no evidence that spending trends in high-risk counties declined relative to low-risk counties; there was some evidence of increased physician spending in high-risk counties.

When compared to national trends, again there was no evidence of reduced spending in Texas after the successful reform measures; additionally, the evidence pointed in the opposite direction with increased physician spending in Texas relative to control states.

Quality Taking Center-Stage

As changes to the system of health care are imminent as part of reform measures, one certain change is a greater emphasis on improving health care quality. The Institute of Medicine estimates that 44,000 to 98,000 patients die each year from medical errors. As bad as those numbers are, subsequent studies suggest the casualties are likely underestimated.

To facilitate a move towards quality as a means to assess care and reduce costs, greater use of guidelines to drive therapy is very likely. That should change current estimates that patients today receive only half of recommended guidelines processes of care.

Will this have an impact on litigation? Not necessarily, said Dr. Farmer; indeed, if malpractice litigation produced higher quality, then the argument could be that we need more malpractice suits, not fewer. Instead, he said, malpractice claims are "a very weak signal for quality improvement."


1. Jena AB, Seabury S, Lakdawalla D, Chandra A. N Engl J Med. 2011;365:629-36.
2. Mello MM, Chandra A, Gawande AA, Studdert DM. Health Aff (Millwood). 2010;29:1569-77.
3. Paik M, Black BS, Hyman DA, Silver S. J Empirical Legal Studies. 2012;9:173-216.

Keywords: Medical Errors, Quality Improvement, Patient Care, Health Care Reform, Malpractice, Insurance, Liability, Health Care Costs, Medicare, Defensive Medicine, Institute of Medicine (U.S.)

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