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This newspaper and Columbia Law School co-sponsored a roundtable debate on May 27, “The Colliding Realities of the Medical Liability Insurance Crisis.” The moderators were William Sage, M.D., J.D., a professor at Columbia Law School, and National Law Journal staff reporter David Hechler. A focus of the discussion was the bill in Congress that would cap noneconomic damages in medical negligence cases. It passed in the House of Representatives in March and is pending in the Senate. Each side was represented by a lawyer, a doctor and an expert on the insurance industry. Excerpts appear below. The full Webcast is at www.law.columbia.edu. david hechler: If a bill that caps noneconomic damages in medical negligence cases becomes federal law, how will it affect doctors, patients, lawyers and insurance companies? dr. richard anderson: Patients will have access to critical care, to emergency care, to innovative procedures when they need them. And they will have access across the United States-not only in those favored venues that have already enacted these tort reforms. Insurers will be able to provide a stable market for the sale of medical malpractice insurance. Lawyers would live in a world in which they could still make a good living as medical malpractice attorneys, but they would not be able to become infinitely wealthy, while continuing to lose 80% of their cases. victor schwartz: Right now some doctors are playing interstate hopscotch. Because they cannot afford insurance in state A, they go to state B. Doctors should practice medicine where their services are needed, not simply where tort laws favor them. And if you had a national bill, that is what would occur. dr. yank coble: The most important thing is that patients in California [a state with a long-standing cap law] don’t have to worry about passing multiple hospitals before they can get to one that’ll deliver their baby. Or they don’t have to worry about the trauma centers closing and having to be evacuated by air, like they are in West Virginia, or waiting six months for a mammogram, like they frequently do in Florida, whereas a few years ago it was two to four days. When they get an award [in California], they get a much bigger percentage because there’s a cap on contingency fees. So in every way, it’s fairer for the patients. dr. john faulkner: Caps place an arbitrary dollar amount on human loss. A cap is particularly devastating to those patients who have been severely injured and have no economic damages, such as children, homemakers and the elderly. Unless you can cap a patient’s pain and suffering, it’s not fair to cap damage awards. There is no credible evidence to suggest that caps will improve patient access to care. In North Carolina, we don’t have caps, [yet] doctors are flocking to the state. And it’s interesting that despite this fact, the North Carolina Medical Society has called it a crisis state. Patients have an uphill battle to seek justice. They have to deal with the immediate effects of medical malpractice. They have to hire an attorney, negotiate a contract, file a lawsuit and enter what we call the war of attrition with the defendants, their attorneys and the hidden defendants-the insurers. The burden of proof is on the plaintiff, who encounters the defendants’ code of silence. Vital information is rendered nondiscoverable. Lost is the injured patient-and often the true extent of [his or her] injuries and an accurate account of pain and suffering. ken suggs: Let me give you an example of somebody who will be delighted if this law passes: Dr. Shaul Debbi. Practices medicine right here in New York City. He’s the doctor who performed thousands of unnecessary eye surgeries on mentally ill psychiatric patients. Those people had no economic loss, they had nothing but noneconomic loss, and a $250,000 cap benefits Dr. Debbi and his insurance company because they won’t have to pay those people for the damages they’ve suffered. Let me tell you somebody who’s going to be mortally disappointed if this bill passes. Dr. Vince Dagenhart, an anesthesiologist in Columbia, South Carolina. He and hundreds of physicians will be sorely disappointed because they believe that if this bill passes their insurance premiums will go down. That won’t happen until we have insurance reform. If your child is killed as a result of medical negligence, there will be nothing we can do to help you because there’s a cap, and because the expense of proceeding with the case will exceed what can be paid under the cap. Under this bill, damages would be limited to $250,000. Medical malpractice cases often cost as much as $80,000 to $100,000 to prosecute because of the code of silence and the extent we have to go to get expert witnesses. Nobody has addressed what will happen to lawyers. My opinion is we won’t be affected much at all, because each individual lawyer would only handle a few of those noneconomic damages cases in the course of a career. What I want to make sure we understand, though, is that we lawyers don’t have a fight with doctors. The doctors have a problem in affordability of malpractice coverage. We don’t think the reason is runaway juries or frivolous lawsuits. We think the reason is insurance company financial practices. jay angoff: Between 1993 and 1998, when I was the insurance commissioner of Missouri, the trends were generally down. The number of claims filed and closed trended down. After I left, these trends continued, but they were particularly pronounced between 2000 and 2001. Claims closed fell by 16%, and claims filed fell by 31%. And the average payment per claim also fell. So what do you think happened to medical malpractice insurance rates in 2002? They went up. They almost doubled. How could this be? Obviously, it has nothing to do with the litigation system. Malpractice litigation in Missouri isn’t increasing, it’s decreasing. And we already have a cap. The Missouri experience tells us that caps do not eliminate insurance cycles. william sage: The United States experienced malpractice insurance crises in the 1970s and the 1980s and survived them. Is this crisis different? anderson: This crisis is different for a simple reason. The notion of unlimited liability now approaches infinity. We live in an era where we have $200 million medical malpractice judgments. We live in an era where $100 million malpractice judgments are common. We live in an era where attorneys command billion-dollar fees. These kinds of numbers are uninsurable. If society wants to have unlimited judgments, then it can do so, as long as it recognizes that premiums will also be unlimited. angoff: Just like insurance rates went down after the last crisis, and companies started cutting rates like crazy, the same thing will happen after this crisis. But this crisis is worse for three reasons. Insurance companies make their money by investing the premium income they collect. They invest some of that money in stocks, but most of it in bonds. The stock market obviously has crashed, but much more important, interest rates are at a 40-year low. There’s no place insurance companies can put their money to make money. The cost of reinsurance is very significant, particularly for medical malpractice insurers. Doctors are being squeezed more than they were 15 years ago because of managed care. hechler: Some observers, including the president of the United States, have suggested that one cause of the malpractice crisis is frivolous lawsuits. Do you agree? Please define the term. schwartz: A frivolous lawsuit is one that has really no basis in fact. And in some jurisdictions in the United States, which I call judicial hellholes, you can get an expert to testify to almost anything, and that was not true before in the medical area. Doctors were reluctant to testify. There are some states that have screening panels to make sure that frivolous claims do not come through. But weapons to use against frivolous claims were significantly diminished a few years ago, when rules were changed under the federal rules of evidence and under state rules. The power of deterrents, which put the cost of the frivolous claim on a plaintiff’s lawyer, was really taken away. anderson: If we define frivolous as a claim which closes with no payment to the patient, then across the country the number is 70%. For our own company, 80% of claims close with no merit. Fifty percent of the neurosurgeons in the United States report a claim every year. If you’re in the other high-risk specialities-obstetrics, orthopedics, emergency room medicine-about a third of these doctors are sued every year. This is the incarnation of frivolous and damaging litigation. suggs: Let’s assume that there’s a problem with frivolous lawsuits. How does capping the damages of the most seriously injured people affect a remedy? If you want to address the problem, you can adopt the course that presidential candidate John Edwards has laid out. He said in North Carolina, for example, you have to plead specifically that you consulted with a medical expert before you brought your lawsuit. And he’s actually proposed three strikes and you’re out for bringing three frivolous lawsuits. If there is a frivolous lawsuit problem, let’s address that problem, and not address some other problem. The fact that 70% of the claims are closed without payment, that’s a condemnation of the argument that juries are running away. hechler: Studies from the 1980s show that most people who have suffered injuries from medical negligence never get compensated at all. Should anything be done about that? anderson: The Institute of Medicine study, which talked about 44,000 to 98,000 Americans dying every year from medical malpractice, was not original data. They’re simply citing the Harvard Medical Practice Study, which took place in New York state in 1984 and reviewed 32,000 hospital discharges. Two Harvard physician reviewers then reviewed all the charts. They agreed with each other 10% of the time on the presence or absence of medical negligence. That’s where you got the 98,000 Americans dying of medical malpractice. Most of them are still alive today. There were only 180 deaths. With this hopelessly inadequate methodology, a 90% discordance rate, 180 deaths became extrapolated to 98,000. Harvard didn’t use the term “medical malpractice.” It used “medical error.” If you had a penicillin rash, that was counted as medical negligence. angoff: With the possible exception of Dr. Anderson, I think everybody on both sides agrees that a very tiny percentage of the people who were injured or killed by a medical error actually file suit. And so there is this huge group of people who don’t recover anything. That’s a real problem. And if the other side wanted to address that problem, and go to another type of compensation system, where maybe people recovered less money but more people would recover, that’s something that I think reasonable people can disagree about. What makes the movement to impose caps so venal is that it keeps the inefficiencies of this existing system, and simply limits the amount that seriously injured people can recover. schwartz: Jay said no one on this side of the panel agrees with Dr. Anderson. I do. When that study was done, access to plaintiffs’ lawyers was not the same as it is today. Where I live, you cannot go more than half an hour without seeing an ad for a plaintiffs’ lawyer on the morning television. When you looked at the phone book in the early 1980s, there maybe were a couple of pages of ads for lawyers. There are now 52 pages in the District of Columbia phone book. So the idea that you can bring a lawsuit today is very different than it was when that study was done. anderson: One last point on the Harvard Medical Practice Study. These authors concluded that there is no relationship whatever between the presence or absence of medical negligence and the outcome of medical malpractice litigation. The only thing that predicted the outcome of the actual malpractice cases was the severity of injury. If you had a serious injury, whether or not it had anything to do with medical negligence, you were more likely to be compensated. suggs: The 1992 study in the Annals of Internal Medicine found exactly the opposite. The severity of injury did not affect the probability of payment. faulkner: When doctors are reviewing records, in order for the doctor to consider that some other physician has been negligent, in many cases it’s considered an oversight, not really negligence. The doctor has to actually feel that the [other] doctor has been incompetent. sage: Is there any way, other than capping the highest awards, to make damages in malpractice cases more consistent and more predictable? suggs: You are assuming the premise that the other side wants to put forward: that they’re inconsistent and unpredictable. And over the course of time, which is the way insurance companies are supposed to look at things, they are consistent and predictable. According to the National Practitioner database, the median payout now in medical malpractice cases is $135,000. So to make the statement that $100 million verdicts are common, as Mr. Anderson did, is reckless. Furthermore, we have a system in the United States that has more checks and balances than any other system in the world. You have to present your case to a jury, and you have to convince a jury, usually unanimously, that the doctor deviated from the standard of care. And that the deviation caused the particular injury that the client suffered. And that it caused damages. And if you get over all those hurdles where the plaintiff has the burden of proof, and a verdict is rendered that is unreasonable, the trial judge reduces that verdict. And if the trial judge doesn’t reduce it, there’s an appellate process. And we’ve just seen a good example of the common law legal system working things out with Campbell v. State Farm and the other punitive damages case that the Supreme Court decided. anderson: The Doctors Company insures 28,000 physicians in all 50 states. Fewer than a hundred claims each year among 28,000 doctors account for 50% of our indemnity. About 33 cents of each premium dollar goes to defend claims for which no indemnity whatever is paid. So frivolous litigation is a very important determinant of insurance costs, as are the outlier claims. schwartz: Is there an alternative to caps? Believe me, as a former law professor, and a person who has done plaintiffs’ work, I’ve found there is a certain arbitrariness. And in some cases, that cap is going to come in, and somebody’s going to say the person was severely injured and it’s unfair. And you’re balancing the cap against access to medicine. If judges acted the way Mr. Suggs suggested throughout the country-they dismissed frivolous claims, did not let experts testify who really were not experts, reduced outlier verdicts-you wouldn’t need caps. Most judges do act in a responsible way. But there are some that do not, and that is why one comes back to caps, because that says, “This is the standard.” suggs: So the argument is: Because there are four counties in the whole United States that are out of control, every victim of medical malpractice should be punished. Makes no sense. schwartz: There are many more, and somebody whose name sounds a little bit like yours named Scruggs, great man, says he agrees with me on the ones we’ve named, which are well over a dozen, except he calls them magic jurisdictions. I call them judicial hellholes. suggs: Well, I have to say Mr. [Dickie] Scruggs has gone over to the dark side. Last time I saw him, he was representing the Sulzer hip manufacturing company. angoff: Let me give you some data from Missouri, based on claims data [that] medical malpractice insurers filed. In 2001, the average payment for very serious injuries was $248,000. The average death claim was about $190,000. And the average less serious injury claim was about $70,000. In Missouri, we joke that we don’t need a cap on damages, we need a floor on damages. coble: In this country, the only solution has been in those six states that have caps: California, Louisiana, Indiana, Wisconsin, New Mexico and Colorado. And they have had success. Since 1975, premiums have gone up 180% [in California], while in whole country premiums have gone up around 580%. In Florida, since 1975, premiums have gone up over 2,200%. An obstetrician or general surgeon in Los Angeles would pay about $50,000 or $60,000; the obstetrician or general surgeon in Miami would pay $210,000 to $300,000. If they can get insurance. They have the same economics in California that they have in Florida, and California insurance companies make about the same return on their investments. In California, you have 20 or 40 insurance carriers happy to provide insurance. In Florida, you have maybe four. Pennsylvania, it’s down to two. hechler: If noneconomic damages are to be capped, why is $250,000 the magic number? anderson: There’s theory and practice. We have 27 years’ experience with that cap in California, so we don’t need to do a pilot study. And we know that medical malpractice rates in California are a third to one-half less than the rates in comparable states that don’t have caps. We also know that the federal government, when it was trying to create a plan to indemnify the victims of 9-11, came up with precisely the same figure. It is a fact that malpractice indemnities in California, in the last 27 years, have risen twice the rate of inflation. So it doesn’t make sense to index something for inflation that’s already rising faster. And with all the legal talent on the other side of the table, I would be surprised to hear them arguing that there are people in our society who have no noneconomic damages. I can tell you that in California, we have cases of 2-year-olds who were awarded $17 million in lost wages. angoff: Here’s what happened in California. In 1988, the voters passed Proposition 103. What that did [was] it regulated the insurance industry, including medical malpractice insurers, to a much greater extent that it had ever been regulated before. It ordered insurers to roll back their rates by 20% unless they could demonstrate that they couldn’t earn a fair rate of return under the rolled-back rates. It repealed the antitrust exemption. In most states, insurance companies are exempt from state and federal antitrust laws. The other side is right when they say that California rates are more moderate now than they are in the rest of the country. What they don’t tell you, though, is that there was very little change between California and the rest of the country between the time [the $250,000 cap] was enacted [in 1975] and 1988, when Prop 103 was enacted. The relatively good situation in California is due to regulation of the insurance industry under Prop 103, not [the cap]. faulkner: If I could just insert a comment first, in response to Dr. Anderson. What I’ve learned is, when a patient is seriously harmed and you’re faced with filing a lawsuit, the plaintiff and their family have to go out and search for a lawyer. And you don’t necessarily know if this is what this person does all the time, or how good they are. On the other hand, for the doctor who’s paying premiums, the insurer appoints a lawyer for him or her, and this is a specialist. So, the plaintiff is at a disadvantage from the outset. We talked about frivolous lawsuits. The other huge disadvantage that patients have is they don’t know all the facts. They think that there’s been medical malpractice, but the facts are inaccessible. So they file a lawsuit, and during the course of discovery, you may come to learn something, but you can’t blame that on the patient and their attorney, who honestly think that there has been medical malpractice. On the cap of $250,000, in North Carolina nobody knows what the actual awards for pain and suffering are. The only figure that is known is the overall award. sage: How much does the malpractice crisis reflect true failures in American medicine, and how much does it really reflect medicine’s growing ability to succeed? suggs: Virtually every study that’s been done shows that there is a lot of medical error. Does all that rise to the level of malpractice? I spend 20% of every day explaining to patients that bad outcomes are not malpractice. Sometimes bad things happen. Good medical malpractice lawyers explain those things to patients. If I’m getting paid only if I win, I don’t want to take a case that has no merit. I don’t know anybody who wants to take a case that has no merit. anderson: I’m quite sure that [Mr. Suggs] is an outstanding attorney, and that he probably does win most of his cases. But let’s think of the implications of that. If he’s winning most of his cases, and we know that the average plaintiffs’ malpractice attorney is losing seven or eight out of 10 cases, it means that there are some other attorneys who are losing nine or 10 out of 10. So we know for a fact that that expertise is not shared by the majority of medical malpractice attorneys. hechler: The Institute of Medicine and other expert bodies have concluded that avoidable medical errors occur often. What role should malpractice liability play in improving medical care? coble: What it also said was that most of it causes no harm. Medical errors can be the wrong dose, off by 10%, which has no consequence. But the important thing is that we keep records of these things. That is being impeded because, with the present environment, people are afraid to talk openly about errors and do what we should do: implement a National Aeronautics and Space Administration-type approach to errors. The important thing is to pass HR 663, now in the Senate. It provides safety mechanisms so that full analysis of any potential error occurs immediately. The liability system would not be impeded. hechler: Does a malpractice liability system have a purpose for existing? coble: At the moment, the studies of Troy Brennan from Harvard would suggest that it is a total failure at enhancing quality, identifying negligence or improving the system in any way. hechler: So you’d like to see it gone? coble: If one had their druthers. We’ve got to remember, we’ve got 18 states that are in crisis. When you have a neurosurgeon at 50 quit doing brain surgery, it takes 20 years to get another. You don’t just go to the Wal-Mart and pick them out. suggs: Let me quote a source I never thought I would find myself quoting- President Bush’s Council of Economic Advisers-which said in a 2002 report, in answer to the question, “Does the tort system do anything to improve the quality of medical care?”: “The ability of the individual to pursue a liability lawsuit, in the event of an improper treatment, provides an additional incentive for the physician to follow good medical practice. Indeed, from a broad, social perspective, this may be the least costly way to proceed.” They believe that, I believe that. coble: No other country believes that. California doesn’t believe it, either. sage: If the malpractice system really has no role to play in improving quality of medical care, why does the medical profession favor a right to sue HMOs? coble: The Patient Bill of Rights, which was in Congress, would allow individuals to have equal rights. That is, if you are to be able to sue for medical decisions, then you should be able to sue whoever makes those decisions. And even though that didn’t pass nationally, it passed in a number of states and other states have upheld those laws, so it has been fairly widely accepted. I don’t think we’ve ever heard [it said], in professional associations, that patients shouldn’t be allowed to sue for injuries that were negligent. We think it is terribly important that patients should be able to sue for negligence, and we strongly uphold that for all economic losses, and have never suggested any limit on that, even though some states do limit that. hechler: Dr. Faulkner, how should doctors treat patients and families when medical errors occur? faulkner: Well, I can tell you how we were treated. And that’s a good example of how not to treat patients and families. My wife entered the hospital to undergo a lymph node biopsy on her neck-a fairly minor outpatient procedure. During the course of the procedure, an operating room fire occurred. Completely preventable. My wife was severely burned. She was transferred to a specialized burn unit for almost three weeks. I have not worked since last June, taking care of my wife and five children. Along the way, I was terminated. I was medical director of our clinic. Coincidentally, our clinic and the hospital are both owned by the same corporation. The corporation would say, “This is just terrible. Go home, take care of your wife and family.” And they said: “We’re going to have an outside agency conduct a complete investigation into the fire.” Which was done by a reputable agency. And they said, “We will release the results of this investigation to you.” And they never have, despite repeated requests. hechler: The independent investigation: Is that the first step that you would like to see done in situations like yours, with results open to both sides? faulkner: Absolutely. schwartz: The doctor’s story, which has been dramatically told in testimony and other situations, is one that everybody in this room has got to feel very, very bad about. But it happened in a state where there are no caps on pain and suffering. [When] somebody has committed malpractice, [an insurer should] immediately provide for medical costs for that individual, without requiring settlement. And there are insurers that take those steps. Unfortunately, that’s not what the doctor experienced. There are, in any situation, bad actors who don’t act responsibly. But that really has nothing to do with the debate that we have here today about caps. There is something called self-critical examination privilege. And what this would do is create a qualified privilege to encourage investigations of medical incidents, and also to seek ways in which things can be improved. And our evidence system, right now, is built up against that. In fact, if you improve what you’re doing, that can be used against you in a lawsuit. faulkner: I agree a responsible insurer would have helped us. I’m sorry to say, Dr. Anderson, this hospital’s insurance company is The Doctor’s Company. anderson: No, it’s not The Doctors Company I can’t believe it’s The Doctors Company. We don’t insure hospitals in South Carolina. faulkner: It’s North Carolina. coble: Dr. Faulkner’s situation is a tragic one. If it’s a mistake or error, then that [should be] admitted right upfront. As the Institute of Medicine report pointed out, it’s rarely due to one individual. It’s nearly always a system problem. But the important thing, no matter what the cause, is to advise the patient immediately and work on correcting it. Most institutions, I think all institutions that I’m involved with, the thing they’d like to do first is to compensate for that. Because not to do so is so likely to result in unpredictable awards. sage: Medical ethics requires disclosure of errors. Pennsylvania recently enacted a law that requires medical errors to be disclosed to patients. Should Congress adopt a similar law that would apply throughout the country? coble: [HR] 663 does indicate that disclosure would be a part of it. Part of the peer review process of investigation would go along in confidentiality, but that would not prohibit the legal part of it going along separately. But that also is consistent with the ethical responsibility. Now, when you explain something that’s gone wrong, that doesn’t mean that the patient always understands. faulkner: Doctors make mistakes, and they don’t want to admit them. They might be disciplined, they might go before review boards and their reputation might suffer tremendously. It’s nice to say what might happen in an ideal world, but this does not happen in reality. anderson: No one except Dr. Faulk-ner has the facts about the tragic case of his wife. Let me just speak in general. As every lawyer knows, bad cases only get worse with time. And so the incentive to settle, in cases with the facts described here, is very strong, and that’s particularly true in physician-owned insurance companies. Remember, 70% of America’s doctors are insured by mutual companies that they own. But it does take both sides to settle. The problem now is that the medical legal environment makes the open discussion of medical error almost impossible. Even honest error, system error, once-in-a-million errors are discussed in terms of medical negligence. They’re talked about in terms that we would normally use for a serial killer. suggs: I’m amazed at what I’ve heard from the other side, because I’ve been doing medical malpractice cases for 28 years, and the next time that an insurance company comes to one of my clients and says, “Our doctor made a mistake, and we want to pay you for your losses without your having to bring a claim,” will be the first time. And I’m talking about cases where the wrong joint has been operated on. I’m talking about cases where sponges and surgical instruments have been left inside somebody’s body. I’ve sued the same orthopedic practice three times for operating on the wrong joint. And they’ve never been disciplined. Doctors see themselves as different from the rest of us. And all you have to do to understand that is go to your doctor’s office. Your barber wouldn’t schedule four people for the same appointment time and expect them to sit around [while] he was busy with other people. But doctors do. They feel they’re justified because of the investment they have in their education. And maybe to some extent they are. But what that means is most of the doctors that I meet just cannot stand to be criticized-not only by me but by their peers. I don’t think there’s anything you can do to fix that, unless you fix it somehow in the medical education process. [Dr. Coble's comments (c) 2003 American Medical Association. All rights reserved.]

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