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Defusing the med-mal time bomb: litigation is not the answer for medical-malpractice cases, so hospitals have turned old practices on their head in search of new solutions. The result is to simply say, "Sorry.".

"Our actuaries are excited!" reports Richard Boothman, chief risk officer of the self-insured University of Michigan Health System.

They're excited enough to reduce reserves for medical-malpractice legal expenses by two-thirds after four consecutive years of declining legal costs.

Boothman achieved those results by throwing traditional malpractice wisdom out the window, and leading UMHS into a new approach based on full disclosure and early offer of compensation for medical injuries caused by hospitals, doctors and nurses. He's not alone. Similar programs are operating in several Veterans Affairs hospitals, the Bethesda Naval Medical Center, Stanford University Health System and Kaiser Permanente.

They enjoy some advantages: Staff physicians practice under their self-insurance coverage, and they operate largely or exclusively under favorable state or federal tort laws.

Catholic Healthcare West and other hospitals that operate using independent physicians are exploring ways to adapt the approach, too, but often find that physicians' malpractice policies won't protect full disclosure.

To make this solution available to more physicians and hospitals, at least 24 states have passed "I'm Sorry" laws, according to the American Medical Association. These laws generally protect physician apologies or expressions of sympathy from being used as evidence of malpractice in civil suits.

Early-offer pioneer Dr. Steven Kraman, former chief of staff for the VA hospital in Lexington, Ky., says the laws provide no benefit to their program.

On the federal level, Sen. Hillary Clinton, D-N.Y., and Sen. Barack Obama, D-Ill., are sponsoring S. 1784, which would facilitate early compensation and establish six national patient safety initiatives. Another federal malpractice reform bill, S. 1337, sponsored by Sen. Michael Enzi, R-Wyo., and Sen. Max Baucus, D-Mont., would authorize and fund state demonstrations for alternatives to the current medical tort system, including disclosure/early compensation and special health-care courts.


When negative, unexpected outcomes occur, medical providers have traditionally followed a "deny and defend" strategy. Physician communication with the patient goes into lockdown. Frustrated patients and families pursue legal action if only to get information.

Boothman says that over the years of defending UMHS and other institutions as a trial lawyer, he's realized that "our own behaviors drove people to seek lawyers, who then obviously took the opportunity to look for a medical-malpractice case."

Litigation may take two years or more before closing. Because these complex eases often require extensive research and expert witnesses, attorney fees usually consume more than half of the long-delayed award.

Early-offer programs take a totally different approach. When an unanticipated outcome rears its ugly head, these programs promote early, open and honest communication with patients, regardless of the cause of the outcome. Physicians will:

* Investigate and explain what happened as information becomes available.

* Express sympathy and human compassion, with apologies if appropriate for medical errors or deviations from standard of care.

* Develop new practices to avoid repeating the problem with other patients.

* Initiate discussion about early compensation when patients and/or family are ready.

Physicians are usually coached through this process by risk managers, patient advocates or other trained specialists. These partners may also join physicians in meetings with patients and family, especially for discussions about early compensation. Patients are often encouraged to bring competent malpractice attorneys to the table to discuss compensation. In some cases, such as those involving minor patients in California, state laws may require it.

When making an early offer, self-insured health-care organizations usually don't ask patients to waive their right to sue. Patients may accept an offer, but providers still must wait up to two years for the statute of limitations on filing suit to run out before they know if they really avoided litigation. In practice, however, hospital risk leaders report that few eases go to litigation, and hospitals have a much stronger position in court.

"Litigation is a last resort for us ... (but) in eases we take to trial, there are no surprises for us," says Jeffrey Driver, chief risk officer, Stanford University Medical Center. "The eases are either dismissed completely, or we pay from an indemnity standpoint what we predicted to pay in the first place."

Driver says Stanford's program educates physicians to provide informed-consent counseling with patients and families before treatment or surgery. It reduces the risk of surprise, anger and litigation if patients understand that undesired outcomes could still occur despite quality health care. Informed consent, says Driver, "takes the field of unanticipated outcomes and reduces it truly to those things that are unanticipated."


Kraman and his General Counsel, Ginny Hamm, were in the right place at the right time. In 1999, the Institute of Medicine published its landmark "To Err Is Human" study, estimating as many as 98,000 patients die from medical errors every year and causing a nationwide hunt for solutions.

Soon after, a study of Kraman and Hamm's program, comparing it with 35 similar VA hospitals, was published in the "Annals of Internal Medicine." From 1987 to 2000, Kraman's program at the Lexington VA Hospital tried only three cases.

Kraman and Hamm were instantly on the radar screen of mainstream news media.

In 2001, the Joint Commission for the Accreditation of Healthcare Organizations promulgated a new standard requiring hospitals to disclose all outcomes, including unanticipated ones. Full disclosure became the new required norm, with most disclosure efforts based in patient safety programs to capture learnings from every event.

Measuring outcomes has also allowed large hospital organizations to uncover the positive financial outcomes from their disclosure/ early-offer programs.

Compared to a peer group of 35 similar VA hospitals, Lexington VA Hospital has above-average compensated claim counts, with very low per-claim costs, resulting in substantially lower malpractice costs. Over a 13-year period, Kraman reports, their average settlement was $16,000 in more than 170 cases, with only three going to trial. In 2000, the Lexington VA mean malpractice payment for all eases was $36,000. The VA national malpractice payments that year were $98,000 for mean pretrial settlement, $248,165 for mean settlement at trial and $413,000 for mean malpractice judgment.

At Stanford University Health System, Driver has led the program for two years, and declines to report comprehensive figures. He notes, however, that using mediation as appropriate in significant eases can avoid litigation and reduce litigation-associated costs by 50 percent to 75 percent. "That's where the real savings are," he says.

At the University of Michigan Health System, malpractice claims counts and cost per claim are both dropping, Boothman says. From August 2001 to April 2006, the number of open malpractice claims and suits declined from 262 to 93. Average legal expense per malpractice claim dropped from $48,000 in 1997 to $21,000 in 2003. Legal expenses per indemnity dollar paid have dropped sharply. Reserves have been cut by two-thirds, releasing cash for patient safety program improvements and other organizational needs. Duration from claim opening to dosing has dropped from 20.7 months in 2001 to 9.5 months.

Catholic Healthcare West Vice President of Risk Services Hillery Trippe reports that, due to favorable claim experience, the 41-hospital organization reduced the amount it has paid into malpractice litigation reserves by 10 percent in 2006. She notes it's too difficult to separate out the impact of disclosure programs from other patient safety initiatives, especially in their perinatal units. Their independent physicians must provide their own malpractice insurance, so their participation in the disclosure program is negotiated ease by case. She says, "We haven't yet wrestled that one to the ground."


One critic of disclosure/ early-offer as a solution to the malpractice crisis is Michelle Mello, associate professor of health policy and law at the Harvard School of Public Health.

Mello is the principal investigator of "Design of a Reliable System of Medical Justice," a study supporting demonstration projects for "health courts," which is in partnership with the advocacy group, Common Good. In addition to her study of health courts, Mello has another study under peer review to predict how medical-malpractice liability costs would be affected if disclosure/early-offer were universally practiced. This study could be published in early 2007, she says.

Disclosure "is a regulatory requirement, and from a professional, ethical standpoint, it's absolutely the right thing to do," Mello says. "I'm just skeptical of arguments that these programs will pay for themselves."

She cautions against drawing conclusions about patient claims behavior from the experience of early-offer programs due to the two-year statute of limitations, which makes claims data develop slowly.

"It's just too soon to tell," she says.

In place of fully developed claims data, Mello developed a method for making assumptions about patient claims behavior. She surveyed 68 patient safety and malpractice litigation professionals for their best guesses at lowest reasonable and highest reasonable claims rates under different circumstances. She couldn't think of anyone in the group with any experience in an early-offer program.

Her findings are embargoed until publication, but Mello offers this: "Under almost any set of reasonable assumptions, both the volume and cost of litigation would go up in a world of full disclosure."

On the basis of best guesses by professionals who have no experience with early-offer programs, the study concludes that these programs will backfire.

Whether Mello's predictions are reliable, disclosure/early-offer programs face challenges. So far, results from self-insured hospitals with staff physicians show promise. But independent physicians who lose their malpractice coverage if they disclose medical errors have a strong incentive for sticking with the status quo.

Can the requirements of the Joint Commission for the Accreditation of Healthcare Organizations and pressure by hospital managers move them to take on more risky Can federal legislation break through the election-year logjam in Congress to lift some of that risk off the shoulders of independent physicians?

Either way, a promising medical-malpractice reform has a long way to the finish line.

PETER MEAD lives in Oregon. He can be reached at
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Title Annotation:LIABILITY
Author:Mead, Peter
Publication:Risk & Insurance
Date:Oct 15, 2006
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