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Malpractice Makes Perfect

Compensating injured patients while fixing medicine.

You would think Susan Sheridan would be opposed to medical malpractice reform. After all, Sheridan has lived through two medical catastrophes. A decade ago, her newborn son, Cal, suffered kernicterus, a brain injury producing cerebral palsy and other neurological defects, caused by the failure to recognize and treat neonatal jaundice. A few years later, her husband, Pat, died from spinal cancer because of a miscommunication between the hospital pathology department, the operating surgeon, and the patient. Pat was never told that the tumor that had been removed from his cervical spine was not benign, as initially thought; it was actually a malignant sarcoma. When it recurred six months later, the window for potentially life-saving treatment had closed.

Sheridan, an energetic and savvy forty-something from Eagle, Idaho, now spends her days advocating for Cal. At ten, he is undeniably bright, already reading at least at a sixth-grade level. He is a budding poet and filmmaker with a highly ironic sense of humor (even though his hearing and speech are impaired), he drools, he can’t dress himself, and his arms and legs flail uncontrollably.

Given her experiences, Sheridan might be expected to oppose any attempts— including a proposal currently being pushed by President Bush—to limit the amount of money plaintiffs can win in malpractice suits. But, like growing numbers of people who have been involved in malpractice cases, Sheridan believes the current malpractice system stands in the way of long overdue efforts to improve patient safety. The organization she co-founded, Consumers Advancing Patient Safety, is working to forge a partnership between consumers and health care providers to puncture the complacency about medical error. Meanwhile, she faults both the current system that trial attorneys defend and the president’s attack on lawsuits and trial attorneys.

Sheridan advocates a different approach to malpractice reform, one that permits doctors and patients to become allies in trying to make health care safer by encouraging transparency with regard to medical errors. The idea is to allow patients to be promptly and fairly compensated for their avoidable injuries while turning errors into lessons that can improve patient safety. She sees the current malpractice system and the wall of silence between doctors and their patients as a barrier to that life-saving alliance. The president’s proposal—which has passed the House and faces uncertain prospects in the Senate—would do nothing to break down the wall. Rather, by placing an arbitrary cap on noneconomic damage awards, it would make it even more difficult for injured patients to sue. Yet, it would neither make the system safer nor promptly compensate injured patients.

THE MAIN REASONS our legal system permits individuals to bring tort suits are to appropriately compensate negligently injured patients and to deter substandard care. But the current malpractice system fails to adequately do either of these things. Dozens of patients die daily from avoidable medical errors, and hundreds more suffer permanent disability and disfigurement. Despite studies suggesting that many of these errors can be avoided, the public seems to believe, as most physicians do, that “mistakes happen.” They are unfortunate but inevitable side effects of modern medicine.

Meanwhile, trial attorneys reasonably assert that the problem with the malpractice liability system is actual malpractice, plain and simple. But they don’t own up to the fact that state-based variations in the current tort system don’t deter substandard care. If lawsuits inspired better medicine, the current system’s inefficiency—60 percent of its costs support lawyers, expert witnesses, and court operations rather than compensating injured patients— might be acceptable. But, while malpractice insurance costs and payouts keep rising, health care does not get appreciably safer. For example, adverse drug events are estimated to kill or injure more than 770,000 people in hospitals each year, with prescribing errors as the most frequent source. Efforts to improve the situation have focused on computerized order-entry systems, but even these have not greatly reduced prescription errors. With some notable exceptions, such as the efforts by the American Society of Anesthesiologists to reduce anesthesia injuries—and malpractice claims—starting in the 1980s, the malpractice system has not been successful at enhancing patient safety.

Compounding the problem, the political parties defend their client- contributors’ interests. Significantly bankrolled by trial attorneys, the Democratic Party finds little about the malpractice tort system to criticize, and it muddies the waters by blaming rapidly escalating malpractice insurance premiums solely on supposedly avaricious and incompetent insurance companies.

For their part, Republicans have long aligned themselves with organized medicine, decrying government’s expanding role in health care. The Bush administration and congressional Republicans, led by surgeon and Senate Majority Leader Bill Frist, have adopted as their own the American Medical Association (AMA)’s malpractice position: Cap noneconomic damage awards and limit attorney fees. Other business interests that stand to benefit from the Bush administration’s medical malpractice legislation—pharmaceutical companies, medical device manufacturers, and health insurers—have joined forces, too. (If this particular provision were the law today, Merck’s potential liability would be minimal even though it seems likely that it covered up data showing that the pain reliever Vioxx was dangerous to the heart.) The U.S. Chamber of Commerce has also signed on, hoping federal tort reform of medical malpractice will create the momentum for passing other pro-business federal litigation reforms.

THE UNWITTING CONSPIRACY between doctors and lawyers to frustrate the public interest in fixing malpractice liability plays out not only in state legislatures and the halls of Congress, but also in the legal system. As with most torts, more than 90 percent of medical malpractice claims are dropped or settled before they ever get to court. In settlements, the parties typically agree to seal court records. Physicians and hospitals naturally want to protect their own reputations through such gag clauses, while insurance companies do not want the amounts of prior settlements to become precedents for subsequent claims. If agreeing to keep the details of the case secret makes the deal, injured plaintiffs and their lawyers, who stand to collect contingency fees usually worth a third or more of the settlement, go along. Often the promise of secrecy is a bargaining chip.

Only the public is harmed by sealed settlements. That’s because only by flushing out all information can the causes of errors and accidents be identified and reduced. Six years ago, the Institute of Medicine (IOM) of the National Academy of Sciences documented in a report, titled “To Err is Human: Building a Safer Health System,” that firms like DuPont and Alcoa in other high- risk industries far outdo health care providers in systematically collecting, analyzing, and publicly reporting data about accidents in order to make workplaces safer. In organizations like these, with a culture of safety, mistakes are usually treated as treasures to be learned from, not kept hidden. Errors made while acting in good faith generally aren’t punished or sanctioned, whereas complacency, cover-ups, or other failures to join the effort to identify and manage risk are.

The concern that sealed malpractice settlements can stifle patient safety efforts is not merely theoretical. When Cal Sheridan was born a decade ago, he was a healthy, full-term infant. His brain injury was suffered when he was six days old, by failure to treat his neonatal jaundice, an injury so preventable that the National Quality Forum now includes it on a list of 27 “never events” that just should not occur in the United States.

Kernicterus, Cal’s condition, had been a well-recognized diagnosis for decades. Indeed, when I was in medical school in the 1970s, we commonly placed babies “under the lights”—simple fluorescent lights—to control their jaundice and head off brain damage. By 1980, the problem had essentially disappeared, thanks to early detection and treatment. But hospital stays after delivery got shorter, patient education about this disappearing complication ceased, and neonatal testing for rising bilirubin levels, an early marker for the disease, became less common; the trend reversed. At least 125 children have suffered from the devastating complications of kernicterus in the past 15 years.

These cases were apparently well-known among plaintiffs’ attorneys and expert witnesses. Most were litigated and successfully settled. Yet, once the settlements were sealed, the parties were not permitted to discuss the findings. Often, awards to the injured children were conditional, with penalties assessed if their parents dared to go public. As a result, it took many years for public health authorities, practicing pediatricians, and hospitals to discover the condition’s reemergence. Finally, in 2000, Sheridan and other parents of these needlessly brain-damaged babies began to speak out publicly, usually against their own lawyers’ advice.

THE PRESIDENT’S MEDICAL tort reform proposals do nothing to address this code of silence. But they do address one real and growing problem: that some specialists now face exorbitant costs to obtain professional liability insurance. And, in contrast to the malpractice insurance “crises” that struck in the mid-’70s and again in the mid-’80s, this time around, physicians find it much harder to pass along the costs of escalating premiums. The reason is that virtually all of the third-party payers, including private insurers, Medicare, and Medicaid, have adopted fixed-fee payment schedules that don’t automatically rise to accommodate large malpractice insurance premium increases. An obstetrician in Miami asked to pay $200,000 or more a year for liability insurance cannot simply throw that overhead cost into the price of a delivery.

Others in particularly high-risk specialties include neurosurgeons, orthopedists, and emergency room physicians. These doctors provide very technical services, often in stressful emergencies, where a slip or an error in judgment can produce a devastating, if unintentional, injury. In the face of severe and often unforeseen outcomes, some injured patients or their families will sue, whether or not actual negligence can be proved. Calling these suits frivolous does not capture the human anguish that usually underlies the difficult decision to file a malpractice suit.

Without question, the underwriting cycle for insurance, reduced investment income from a declining bond market, and shocks to the reinsurance market from costly events (including the World Trade Center attack and now Hurricane Katrina) have elevated insurance premiums. Although the evidence is hotly contested, it appears that payouts from malpractice settlements and court judgments have been rising modestly as well—at about the rate of health care cost inflation.

The president’s malpractice liability reform proposals come straight out of 30-year-old California legislation called the Medical Injury Compensation Reform Act. Researchers and insurance company actuaries agree that one provision of that act—capping noneconomic damages for “pain and suffering” and other intangible, but real, losses—has been most responsible for moderating the rise in malpractice insurance premiums in California. The administration’s proposal contains the same flat cap of $250,000 on noneconomic damages that California enacted 30 years ago. That was a lot of money in 1975 (it would be equivalent to about $900,000 today), but it isn’t that much now, especially when you consider that health care costs continue to rise far faster than the general inflation rate. And research confirms what one would expect when an arbitrary, inflexible cap is placed on noneconomic damage awards for medical injury. By making the most lucrative cases worth less, these caps somewhat reduce the number of cases that plaintiffs’ attorneys will take. But the cap’s effect will be to weed out both the non-meritorious cases that the president wants to eliminate as well as meritorious cases for individuals who cannot claim substantial economic harm from lost wages but have nevertheless suffered very real loss—of fertility, for instance—due to negligence.

These flat caps on noneconomic damages disproportionately hurt children, homemakers, and seniors. They also substantially reduce judgments in successful cases. Last year, a RAND Corporation study documented that California caps cut defendants’ payments to plaintiffs who win at trial by 30 percent and that plaintiffs with the most severe, nonfatal injuries, such as brain damage and paralysis, saw their noneconomic damages capped far more often than those with less severe injuries. In the rand study, successful plaintiffs younger than age one had awards capped 71 percent of the time. Clearly, injured babies are going out with the bathwater as some of the most deserving patients are deprived of the compensation required to help pay their lawyers’ contingency fees and ongoing bills for health care and rehabilitation.

The Congressional Budget Office estimates that the proposals in the administration’s malpractice reform package, centered on the noneconomic flat cap, might decrease liability insurance premiums by 25 to 30 percent. But would this federal malpractice reform package help reduce the skyrocketing costs of the health care system, as the president has frequently asserted? With national spending on health care approaching $2 trillion, adopting the president’s cap nationally would save perhaps $10 billion per year. That’s about an eighth of what the new Medicare prescription- drug benefit alone will cost annually starting next year.

The president also claims that his plan would reduce “defensive medicine” and save the country another $60 to $100 billion a year. Physicians surely do perform tests and procedures for legal, defensive reasons rather than sound, clinical ones, thereby increasing costs. But some defensive medicine also reduces costs. For example, obstetricians may turn high-risk pregnancies over to specialized centers because they are concerned about legally defending the inevitable bad outcomes. But specialized centers might achieve better outcomes, thereby holding health care costs down while decreasing the chances for a suit. Who knows?

Certainly not the president. He relies on one disputed study to estimate large cost savings, while ignoring other studies suggesting that defensive medicine is not so costly. Simply put, there is no good evidence on how much defensive medicine raises health care costs, much less evidence showing that capping noneconomic damages somehow makes physicians less defensive. Yet it is on this bare thread of defensive medicine logic that the president rests his case that his proposed legislation would rein in health care costs.

By denying compensation to the most severely injured patients, the administration’s proposal actually would exacerbate the current malpractice system’s failings. Fewer people would receive the compensation they need and deserve. And caps and related barriers to litigation only undercut the deterrent signals the tort system is supposed to send doctors.

WORSE, A LEGISLATIVE compromise on caps—indeed, any sort of tort reform— would still not address the fundamental flaws in the malpractice liability system. The landmark Harvard Medical Practice Study—which scrutinized the records of over 30,000 hospitalized patients in New York state hospitals in 1984—found that less than 3 percent of negligent injuries resulted in claims, and only 17 percent of claims appeared to involve negligence. Rather, patients with serious disabilities unrelated to medical negligence tended to file claims and then often settle them. Subsequent studies in Colorado and Utah using 1992 data found similar results. Given the inconsistent signals sent by the malpractice system, it is not surprising that no evidence shows that patient safety has been substantially improved by the threat of suit, despite the billions spent on lawyers, expert witnesses, and the courts. The tort system and the slowly developing patient-safety movement simply function in separate worlds.

Real reform would join those worlds. And there are promising proposals to do just that. Three years ago, the IOM responded to the challenge of then- Secretary of Health and Human Services Tommy Thompson to propose innovative pilot projects that would serve as models for the reform of the health care system. The two professional liability proposals (to which I contributed) were based on ideas that have been long discussed in academic circles but ignored politically.

Although the approaches differ in their details, both IOM reform models would automatically, quickly, and equitably compensate patients who had experienced avoidable injuries, and neither would require the plaintiff to prove negligence in traditional courtrooms. Compensation for avoidable injuries would be determined in nonadversarial forums, now often described as “health courts,” where judges or settlement mediators experienced in medical injury would hear cases without juries. Because the risk associated with the unpredictable outcome of a lengthy suit would disappear, plaintiffs’ attorneys would no longer have a claim to a high-percentage contingency fee. For many avoidable medical errors, compensation would be automatic based on the nature of the injury. In this new environment, with more assured compensation, the IOM committee argued, limits might be fairly placed on the damage awards.

Importantly, both approaches would substitute the standard of “avoidability” for the current one of “negligence” in assigning liability for errors. Avoidability is a statistically determined listing of complications that generally should not occur under competent medical care. Negligence requires a determination that a practitioner failed to meet a particular standard of care and is very fact-specific. It leads to dueling expert witnesses in an adversarial legal proceeding.

Although avoidable occurrences represent a broader set of cases than those deemed negligent, judging cases would be much easier because it would not require determining whether a particular standard of care had been breached. Also, because candor no longer could undermine a medical practitioner’s defense, physicians could acknowledge mistakes to their patients and colleagues and, yes, apologize where warranted. Perhaps most important, errors would no longer be kept hidden, and providers could be held accountable for their performance in protecting patient safety.

Although the political lens is still focused on the president’s California- based model, for the first time in 30 years of periodic malpractice crises, there seems to be genuine interest in alternatives to the current system, with or without damage caps. Admittedly, the IOM proposals represent radical alternatives to the prevailing tort system and, with many moving parts, need extensive testing before broad application. But the Joint Commission on Accreditation of Healthcare Organizations recently endorsed testing similar models. In achieving fairer and surer compensation, these approaches might prove more expensive than the current court-based one, at least initially. If so, the increased costs might have to be shouldered not only by providers but also by the public, whose long-term interest is in reform-driven improvements in safety and transparency. Wyoming Senator Michael Enzi, the chairman of the Health, Education, Labor, and Pensions Committee, and Montana Senator Max Baucus have introduced legislation that would provide federal support for such demonstrations.

WHILE ESTABLISHMENT ORGANIZATIONS are raising these new ideas, an equally important development is taking place at the grassroots level, with the emergence of an organization called the Sorry Works! Coalition. Doug Wojcieszak, a Glen Carbon, Illinois, p.r. consultant, once made a living helping Illinois Lawsuit Abuse Watch and other tort reform advocates sell their cases for caps on damages. But after his 39-year-old brother Jim died in 1998 from what might have been a preventable heart attack, his family ran up against the same wall of silence in Illinois that Susan Sheridan faced in Idaho. Doug’s father, Ray, a PhD engineer, was amazed that the hospital apparently made little effort to learn from the string of errors that led physicians to dismiss Jim’s symptoms, thereby missing the correct diagnosis of severe coronary artery disease until it was too late. The family sued for malpractice, partly hoping that corrective action would prevent similar errors in the future. The settlement was sealed.

Sorry Works! is built on the premise of forthright and routine disclosure to patients and families of what went wrong, sometimes with an apology and an offer of fair compensation for losses. As Wojcieszak has said, “More patients get justice; there are fewer lawsuits, so it lowers liability costs; it reduces errors in the long run; and the constitution [of Illinois] isn’t altered [to permit caps]. It’s truly a middle-ground solution.” Partly based on his initiative, the Illinois legislature passed legislation that would promote a pilot test of the approach in two Illinois hospitals. A number of hospital systems around the country and the Veteran’s Administration are also committing to full disclosure of errors and, in some cases, prompt settlements to head off litigation.

A Sorry Works! approach would surely benefit injured patients and their families, many of whom just want to know what went wrong and why. But this commitment to candor might also help physicians themselves. Although rarely acknowledged, physicians, too, are harmed by the secrecy that the current medical malpractice system promotes. As a young physician still in training, I did not come forward to disclose what was probably my error in appraising the results of a patient’s chest x-ray, possibly leading to his subsequent serious illness and disability. I followed the advice of the hospital’s risk manager, who told me, in effect, to let sleeping dogs lie. My patient and his family deserved to know that my mistake might have contributed to his illness. And I should have been acting in the best interest of my patient, not my own. Just as important, the delivery system of which I was part should have learned from my error, and the many others that remain hidden, to adopt patient safety approaches that accept that human errors in medicine are inevitable but should not be allowed to harm patients.

IT IS HUMAN nature to shrink from one’s own errors. It is particularly hard for professionals to admit they failed to meet their profession’s standard of care. With medical malpractice, it is now time to overcome the natural tendency to cover one’s tracks. Require physicians and hospitals to provide honest and forthright disclosure in all cases when serious errors were made. Permit professionals to apologize when appropriate, without fortifying a potential legal claim. Turn errors into treasures that can lead to improved patient safety.

To promote physician apologies for errors, some states are considering legislation that would make certain kinds of apologies voiced under carefully defined circumstances inadmissible as evidence in a subsequent malpractice lawsuit. Unfortunately, this well-intentioned approach will fail as long as the legal system is at the ready to say, “Gotcha.”

Instead of trying to wall off the malpractice system from physicians’ and hospitals’ important disclosures about errors, it is time to change the legal system so that candid disclosure of errors is routinely provided, not just permitted under particular circumstances. And, because full candor would tilt the legal balance of power, an entirely different system outside of adversarial courtrooms must be developed. Instead of debating different versions of the current, failed malpractice liability system, Republicans and Democrats should be talking about how to proceed to test new approaches. It is time to test whether Sorry really does work.

This article originally ran in the October 10, 2005 issue of the magazine.