Useful data on medical malpractice costs in the court system is notoriously difficult to come by. Much of the time the researchers totally ignore defense costs--which leaves an analysis of 'payouts' woefully inadequate because it assumes that a suit which doesn't lead to a payout doesn't have a cost to the doctor. Other analyses leave you wondering if the costs are paying people who are injured or just anyone who sues. The Harvard School of Public Health has just put out an interesting study which attempts to address some of these problems. I am working off their direct press release (I'm not dedicated enough to spend $100 subscribing to the NEJM but if anyone finds more of the direct data please let me know) and while your mileage may vary about the conclusions offered with the data, the data itself is worth talking about.
The factual findings are as follows:
The authors reviewed 1,452 closed claims from five malpractice insurance companies across the country. They focused on four clinical categories: surgery, obstetrics, medication and missed or delayed diagnosis, areas that collectively account for about 80% of all malpractice claims filed in the U.S. Specialist physicians in each of these clinical areas reviewed the claims and the associated medical records to determine whether the plaintiff had sustained an injury from care. If an injury had occurred, the physicians judged how likely it was to have been due to medical error.
The reviewers found that almost all of the claims involved a treatment-related injury. More than 90% involved a physical injury, which was generally severe (80% resulted in significant or major disability and 26% resulted in death). The reviewers judged that 63% of the injuries were due to error. The remaining 37% lacked evidence of error, although some were close calls.
Most claims (72%) that did not involve error did not receive compensation. When they did, the payments were lower, on average, than payments for claims that did involve error ($313,205 vs. $521,560). Among claims that involved error, 73% received compensation. “Overall, the malpractice system appears to be getting it right about three quarters of the time,” said Studdert. “That’s far from a perfect record, but it’s not bad, especially considering that questions of error and negligence can be complex.” The 27% of cases with outcomes that didn’t match their merit included claims that went unpaid even though the injury was caused by an error (16%); claims that were paid but did not involve error (10%); and claims that were paid but did not appear to involve a treatment-related injury (0.4%).
However, the study did not paint a uniformly positive picture of the current malpractice system. [--ed. That is uniformly positive?] The costs of litigating claims, including defense costs and contingency fees paid to plaintiffs’ lawyers, averaged $52,521 per claim. Overall, these administrative costs amounted to 54% of the compensation paid to plaintiffs. “Deciding negligence is a very expensive process,” said Studdert. The authors also found that it took an average of five years from injury to resolution of the claim—a long time for plaintiffs to wait for compensation and for defendants to endure the uncertainty that litigation entails.
Finally, the authors found that the claims that did not involve errors absorbed a relatively small piece of the costs of compensation. Eliminating those claims would decrease the system’s compensation and administrative costs by no more than 13% to 16%. “Many of the current tort reform initiatives, such as caps on noneconomic damages, are motivated by a perception that ‘jackpot’ awards in frivolous suits are draining the system,” explained Michelle Mello, an associate professor of health policy and law at HSPH and a co-author of the study. “But nearly 80% of the administrative costs of the malpractice system are tied to resolving claims that have merit. Finding ways to streamline the lengthy and costly processing of meritorious claims should be in the bullseye of reform efforts.”
I was struck by the following:
37% lacked evidence of error. I don't really understand what they mean by "some were close calls" when you use such strong language as "lacked evidence of error". It may be clearer in the underlying paper, but I'm taking it to mean that when the case was looked at by medical professionals it definitely was not malpractice.
If I were a doctor I wouldn't be thrilled that almost 40% of cases brought lacked evidence of error.
Of the claims that did not involve error, 28% were forced to pay compensation anyway. That compensation averaged $313,205.
If I were a doctor I wouldn't be thrilled that almost 10% (0.37*0.28) of all malpractice cases were both without error and involved paying compensation averaging $313,205. That provides an average expected cost per case (in compensation to the plaintiff) for doctors who did not commit an error of $87,697.
The report states that 72% of claims without error did not receive compensation. Since defense costs are not zero on such cases, it is clear that they are not taking defense costs into consideration in "compensation".
" The costs of litigating claims, including defense costs and contingency fees paid to plaintiffs’ lawyers, averaged $52,521 per claim. Overall, these administrative costs amounted to 54% of the compensation paid to plaintiffs. "
This is a deeply odd statistic as presented. Under normal legal accounting, the "contingency fees paid to plaintiffs' lawyers" piece would be a subset of "compensation paid to plaintiff". Here they are treating it as if it isn't part of that. I can't make that jibe with other statistics. Contigency fees before trial are rarely below 20% and if the case goes to trial they tend toward 30%. Assuming no case went to trial the average contingency fee for the cases where there was other than "no evidence of error" would be ($521,560*0.2) $112,712. The average contingency fee for cases with no evidence of error would be ($313,205*0.2*0.28) $17,539. [The 0.28 term represents the fact that only 28% of the no error cases received compensation]. Therefore the average contingency fee per case should be (112,712*.63+17,539*.37) $77,498. This is greater than the reported average administration cost and we haven't even added in defense costs yet. So as I say, the statistic as reported does not make sense to me. [If anyone gets better access to the underlying statistics please let me know]. As such I am reluctant to rely on the statistics which are derived in their costs section.
Defense costs are clearly not zero even in the lack of error cases. But even without them the average expected payout for non-error cases (which is incidentally how an insurance company looks at the question) is more than $80,000 per case. That doesn't strike me as a great outcome.
Now just because there is a problem doesn't mean that there is a governmental remedy to the problem or that the commonly proposed solution really is a remedy to the problem. The economic cap proposals which are most regularly touted as tort reform do not particularly address the problem of being forced to defend and pay out on cases where no medical error took place. I suspect a large part of the problem lies not with the plaintiff's attorney, but rather with a judge who fails to quickly dispense of a frivolous case or fails to finally dismiss a case if at the end the evidence reveals that there was no error. It may be that the costs in collecting all the right evidence cannot be easily avoided. But when that process comes to an end, a judge should be willing to dismiss. In practice it seems to me that judges are reluctant to dismiss cases even when the evidence is clear. I suspect the answer is to give judges some incentive to dismiss cases or some mechanism to make it easier to dismiss cases when the scientific evidence is clear. But I can't off-hand think of a great way to do that without endangering the plaintiff's cases where there is evidence of error. I wonder of some sort of third-party screening system could be used instead of the battle of bought malpractice experts which currently dominate the court system. Anyway, food for thought.
Further interesting questions that weren't addressed:
When there is "evidence of error" was it tracked beyond a mere threshold level? It might be interesting to divide such cases into broad categories like "minimal evidence of error mitigated by substantial evidence of non-error" "substantial evidence in both directions" and "substantial evidence of error". My intuition is that the last two categories would have significantly higher pay-outs than the first, while the first two would be the largest percentage of the cases. This intuition is somewhat tempered by the highish number of non-error cases which nevertheless seem to get a substantial payout.
In the non-error cases what does the breakdown look like per injury type? Are medical outcomes resulting in death more likely to cause payouts in non-error cases than other types? If so does this represent an illegitimate emotional factor among juries that might be remedied somehow?
In error cases that do not recieve compensation, what is the injury profile like?
How do defense costs play out over the course of the case? Could we minimize costs by emphasizing or streamlining certain segments in the life of a lawsuit?
I have received a copy of the underlying study. I haven't comprehensively analyzed it (more to come), but I checked out the administrative expenditures because they are A) easy to analyze and B) made absolutely no sense to me as reported in the press release.
The press release appears to conflict with the underlying report as to:
The costs of litigating claims, including defense costs and contingency fees paid to plaintiffs’ lawyers, averaged $52,521 per claim. Overall, these administrative costs amounted to 54% of the compensation paid to plaintiffs.
This statement made no sense to me because I couldn't imagine that average defense costs were much lower on average than $40,000 (as would be strongly implied if defense plus plaintiff costs averaged $52,000) and given the other numbers $52,000 per claim can't amount to 54% of the compensation paid to the plaintiffs.
Table 3 (page 2031) Entitled "Apportionment of Total Expenditures between Claims Involving Error and Those Not Involving Error" shows 1441 claims with $72,617,594 allocated to defense costs and $131,765,574 allocated to plaintiff's costs. This gives a rough average defense cost per case of $50,393. This is much more in line with what I would expect.