t i gfi ci/

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'

HEALTHSECURITYACT— MEDICALMALPRACTICEPROVISIONS

HEAR INGBEFOR E THE

SUBCOMMITTEE ONECONOMIC AND COMMERCIAL LAW

OF THE

COMMITTEE ON THE JUDICIARYHOUSE OF REPRESENTATIVES

ONE HUNDR ED THIR D CONGR ESS

SECOND SESSION

H .R . 3600

TO ENSUR E INDIVIDUAL AND FAMILY SECUR ITY THR OUGH

HEALTH CAR E COVERAGE FOR ALL AMER ICANS IN A MANNER

THAT CONTAINS THE RATE OF GROWTH IN HEALTH CARE COSTS

AND PR OMOTES RESPONSIBLE HEALTH INSURANCE PRACTICES ,

TO PROMOTE CHOICE IN HEALTH CAR E, AND TO ENSURE AND

PROTECT THE HEALTH CARE OF ALL AMER ICANS

JUNE 22 , 1994

Seriallof'

Gih

TV

84-714 CC WASHINGTON I 1994

Fo rsale by theU S. Go vernmentPrinting Offi ce

Superintendento f D o cuments, C o ngressio nalSales Of fice, Washingto n, DC 20402

YN S W /I V 1 631 0 ”

HEALTHSECURITYACT— MEDICALMALPRACTICE

PROVISIONS

HEAR INGBEFOR E THE

SUBCOMMITTEE ONECONOMIC AND COMMERCIAL LAW

OF THE

COMMITTEE ON THE JUDICIARYHOUSE OF REPRESENTATIVES

ONE HUNDR ED THIR D CONGR ESS

SECOND SESSION

H .R . 3600

TO ENSURE INDIVIDUAL AND FAMILY SECUR ITY THR OUGH

HEALTH CAR E COVERAGE FOR ALL AMER ICANS IN A MANNER

THAT CONTAINS THE RATE OF GR OWTH IN HEALTH CAR E COSTS

AND PROMOTES RESPONSIBLE HEALTH INSURANCE PRACTICES,

TO PROMOTE CHOICE IN HEALTH CAR E, AND TO ENSURE AND

PROTECT THE HEALTH CARE OF ALL AMER ICANS

JUNE 2 2 , 1994

“

remna

SerialgNdfgf

Printed

84—714 CC WASHINGTON Z 1994

Fo rsale by theUS . Go vernmentPrinting Offi ce

Superintendento f D o cuments , C o ngressio nalSales Offi ce, Washingto n ,DC 20402

COMM ITTEE ON THE JUDICIARY

JACK BROOKS

DON EDWAR DS,Califo rnia

JOHN CONYER S ,JR .

, Michigan

ROMANO L . MAZZOLI , KentuckyW ILLIAM J . HUGHES , New Jersey

MIKE SYNAR ,Oklahoma

PATR ICIA SCHROEDER,Colo rado

DAN GLICKMAN,Kansas

BARNEY FRANK,Massachus etts

CHAR LES E. SCHUMER ,New Yo rk

HOWAR D L. BERMAN ,Califo rnia

R ICK BOUCHER ,Virginia

JOHN BRYANT, Tex as

GEORGE E. SANGMEISTER ,Illino is

CRAIG A . WASHINGTON,Tex as

JACK R EED, R ho de Island

JERR OLD NADLER , New Yo rk

ROBERT C . SCOTT,Virginia

DAVID MANN,Ohio

MELVIN L. WATT, North CarolinaXAVIER BECERR A,

California

JONATHAN R . YAR OWSKY,GeneralCo un sel

ROBERT A . LEMBO,Co unsel/Administrato r

ALAN F. COFFEY,JR .

,Min o rity Chief Co un sel

SUBCOMMI'I'I'EE ON ECONOMIC AND COMMERC IAL LAW

JACK BROOKS,Tex as

,Chairman

JOHN CONYER S ,JR

, Michigan HAM ILTON FISH,JR .

,New Yo rk

MIKE SYNAR , Oklaho ma ELTON GALLEGLY,Califo rnia

PATR ICIA SCHROEDER , Colo rado CHAR LES T. CANADY,Florida

DAN GLICKMAN,Kansas BOB iNGLIS , So uth Carolina

HOWAR D L.'

BERMAN,California BOB GOODLATTE,

Virginia

R ICK BOUCHER,Virginia CAR LOS J . MOORHEAD ,

California

ROBERT C . SCOTT,Virginia

DAVID MANN,Ohio

MELVIN L . WATT,North Carolina

CYNTHIA W . MEADOW,Co unsel

” AGEORGE P. SLOVER

,AssistantCo unsel

PER R Y APELBAUM,AssistantCo unsel

CAR R IE BEDWELL MANN,AssistantCo unsel

ROGER T. FLEMING,Min o rity Co unsel

Tex as,Chairman

HAMILTON FISH,JR .

, New Yo rk

CAR LOS J . MOORHEAD,California

HENRY J . HYDE, Illino is

F. JAMES SENSENBR ENNER,JR .

,

Wisco nsinBILL MCCOLLUM

,Flo rida

GEORGE W . GEKAS,Pennsylvania

HOWAR D COBLE,No rth Carolina

LAMAR S . SM ITH,Taras

STEVEN SCHIFF,New Mex ico

JIM RAMSTAD, Minnes otaELTON GALLEGLY

, California

CHAR LES T. CANADY, Florida

BOB INGLIS,S o uth Carolina

BOB GOODLATTE,Virginia

C ON TE N TS

HEAR ING DATE

June 22 , 1994

SELECTED TEXT OF BILL

HR . 3600 : Title I , Subtitle D ,Part2 — Generalrespo nsibilities and autho rities

o f re gio nalalliances , sec . 132 1 and 132 2

OPENING STATEMENT

Bro o ks , Ho n . Jack, a R epresentative in Co ngress fro m the State o f Tex as ,an d chairman , Subco mmittee o n Eco nomic and CommercialLaw

WITNESSES

Co rbo y , Philip H. , chairman , Committee o n MedicalPro fessio nalLiability ,erican BarAsso ciatio n

Falco n , Anto nio , M D R io Grande City , TX, o n behalf o f the Health CareLiabilit Alliance

Harman , avid T., M .D . , MedicalSo ciet Ofthe State o fNew Yo rkKeener, KarlA ., Baker, Silberberg eener Santa Mo nica, CA, o n behalfo fthe American Bo ard o f TrialAdvo cates

Keller, R o bertB . , M .D . ,vice chairman , Phy sician PaymentR eview Commis

Slo n

Wittkin , Laura,ex ecutive directo r, Natio nalCenter fo rPatients

’R ights

LETTER S , STATEMENTS , ETC . , SUBMITTED FOR THE HEAR ING

Baker,R o bertC . , as submitted by KarlA . Keener, Baker, Silberbe

Keener, Santa Mo nica, CA, o n behalf o fthe American Bo ard o f TrialA vo

cates : Prepared statementCo rbo y , Philip H. , chairman , Committee o n MedicalPro fessio nalLiability ,

erican BarAsso ciatio n . Prepared stateme

Falco n , Anto nio , R io Grande City ,TX o n behalf o f the Health Care

HLiabilit

£AlliaiIce z Prepared statement

Harman avid T. ,M .D . , MedicalSo ciety o fthe State o f New Yo rk : Prepared

statementKeller, R o bertB . , M .D .

, vice chairman , Phy sician PaymentR eview Commissio n : Prepared statement

Wittkin , Laura, ex ecutive directo r, Natio nalCenter fo rPatients’

R ights :Prepare d statement“

The Influence o f Standard o f Care o f Severit o f Injury o n the R esolutio n

gfMedicalMalpractice Claims

, Annals o f nternalMedicine, 1 No vemer 1992

The MedicalMalpractice Sy stem, Annals o f InternalMedicine, AnnalsOf InternalMedicine, 1 Ju ne 1993

APPENDD(ES

1 .— Material submitted with the prepared statemento f Anto nio

Appendix 2 .-Materialsubmitted fo rthe hearing reco rd

American BarAsso ciatio n : July 15 , 1994 , statement

IV

Appendix 2 .— Materialsubmitted fo rthe hearing reco rd— Co ntinued

Gekas , Ho n . Geo rge W . , a R epresentative in Co ngress from the Stateo f Pennsylvania: Ju ne 2 1 , 1994 , letterto Chairman Bro o ks and state

Natio nalBankruptcy Co nference: June 29 , 1994 , statementR eid, R o bertA . , M .D . , Co o perative o f American Physicians , Inc/MutualProtectio n Tru st: June 2 2 , 1994 , statement

Searle, G .D . , CO. and the PharmaceuticalR esearch and Manu facturerso f America: July 2 1 , 1994 , letter and statement o f Benjamin R .

CiviletteSo ciet fo r Human R eso u rce Mana ement: June 22 , 1994 , statemento fNlichaelR . Lo sey , president C O

HEALTH SECUR ITY ACT— MED ICAL

MALPR ACTICE ISSUES

WEDNESDAY, JUNE 2 2 , 1994

HOUSE OF R EPR ESENTATIVES ,

SUB COMM ITTEE ON ECONOM IC AND COMMER CIAL LAW ,

COMMITTEE ON THE JUDICIAR Y,

Washingto n, DC.

The subcommittee met, pursuantto n otice, at a.m . ,in ro om

2 141, R a burn Ho u se Office Building , Ho n . Jack Bro o ks (chairman

o fthe sugcommittee) presiding .

Present: R epresentatives Jack Bro oks , Jo hn C o nyers , Jr. ,Mike

Synar, Patricia Schro eder, Dan Glickman ,Howard L. Berman , R ob

ertC . Scott, David Mann ,Hamilto n Fish , Jr. ,

Elto n Gallegly ,

Charles T. Canady ,B ob Inglis, and Carlo s J . M o o rhead.

Subcommittee staff present: Cynthia W. Meadow , co u n sel;PerryApelbaum , assistantco un sel; Catherine S . Cash ,

research assistant; and Delo ris L. Cole, o ffice manager; full committee staffpresent: Jo nathan R . Yarowsky , generalco un sel;Alan F . Co ffey ,

min o rity chief co un sel; and R o ger T. Fleming ,min o rity co un sel;

also present: Bryan Fraz ier and MichaelMcGown ,Intern s .

OPENING STATENIENT OF CHAIRMAN B R OOKSMr. BR OOKS . The committee willcome to o rder. To day the sub

committee holds its seco nd hearing o n the Health Security Act, focu sing o n medicalmalpractice issues .

Since PresidentClinto n submitted his ambitio u s plan fo r refo rming o ne-seventh o f the American eco n omy ,

three committees in theHo u se and tw o in the Senate have been absorbed in comprehensively reviewing ,

rethinking , rewriting it.

As I indicated during lastweek’

s hearing , the Judiciary Committee’s jurisdictio n o verthe bill, while n otas ex pan sive, neverthelessholds crucialimplicatio n s fo r the ultimate su ccess o f any healthcare

l

refo rm initiative and the future well-being o f the Americanpeo p e.

Witho utquestio n,the pro per functio ning o f the medicalmal

practice sy stem is o n e o f the mo stimpo rtantsafeguards again stsubstandard medicalcare. The ability o f victims to bring lawsuitsin cases o f medicalmalpractice achieves tw o impo rtantg o als : Itpermits the victim to receive ju stand adequate compen satio n fo rharm suffered, and itserves as a deterrentagain stfuture substandard co ndu ct.

The State-go verned to rtsy stem has evolved gradually o ver thecenturies . In the past, when State laws were perceived as unfairlyfavo ring o ne side o ver an other

,the laws tended to co rrectthem(I )

2

selves , eitherthro ugh case law develo pmento r by statutory changewithin the States .

As a resulto f this dynamic in the States , we in Co ngress mu stbe ex tremely carefulin reviewing so -called malpractice reform pro

po sals thatwo uld unilaterally preemptState law .

Nevertheless , itis essentialthatwe appro ach these issues withan o pen mind to empiricalinfo rmatio n from either side thatprovides hard and compelling evidence abo utthe need and effecto fpropo sed legislative changes .

But, given the breadth o f change pro po sed by some, I think weneed to be carefulabo uto pting fo r radicalsurgery o n the basis o f

anecdotalevidence.

The subcommittee is fo rtunate to have a distinguished group o f

witnesses befo re u s today to help u s co nsider te medicalmalpractice issues in health care . We welcome y o u all. The subcommittee lo oks fo rward to yourtestimo ny .

This mo rning I am asking the rivate sector witn esses to appearatthe witness table as a pane to testify o n the medicalmalpractice provisio n s in HR . 3600. To save time, we willask eachwitness to summariz e his statementwithin about5 minutes .

After the witnesses have completed their statements , the sub

committee willaddress questio n s to allo f the panel. Allo f o ur

prepared statements, eve pristine wo rd, willbe made part0 theprinted record. Withouto jectio n , the hearing reco rd willremaino pen to receive written testimo ny from perso n s wh o have requestedtheir statements be made a parto fthis printed reco rd.

Our firstwitness willbe Mr. Co rbo y and we willgo into a descriptio n o f the witnesses and welcome them after we have someopening statements by some o f the members o f the subcommittee .

Mr. Carlo s Moo rhead had requested thathe be given the firsto ppo rtunity ,

if thatis allright. Carlo s Moorhead, the gentleman fromCalifo rnia.

[Selected po rtio n s o fthetex to fthe bill, H R . 3600, follow z]

1030 CONGR ESS

I ST SESSION H . R . 3600

To ensure individualand family security thro ugh health care co verage fo rallAmericans in a manner thatco ntains the rate o f growth in health

care co sts and promotes respo nsible health insurance practices , to pm.

mote cho ice in health care, and to ensure and protectthe health care

o f allAmericans.

IN THE HOUSE OF R EPRESENTATIVES

NOVEMB ER 20, 1993

GEPHAR DT (fo r himself, Mr. BONIOR , Mr. HOYER ,Mr. FAz ro , Mrs . KEN

NELLY, Mr. LEWIS o f Geo rgia, Mr. R ICHAR DSON,Mr. DINGELL

,Mr.

ROSTENx owsro , Mr. FORD o f Michigan ,Mr. “UtXMAN , Mrs . COLLINS o f

Illinois, Mr. STARK, Mr. W ILL IAM S , Mr. CLAY,Mr. B ROOKS , Mr. MOAx

LEY, Mr. AEERCROMEIE ,Mr. ACICERMAN,

Mr. ANDR E WS o f Maine, Mr.BAR R ETT o f Wisco nsin ,

Mr. BERMAN, Mr. EIL ERAY,Mr. BLACKWELL,

Mr. BORS IG ,Mr. B ROWN o f Califo rnia, Ms . B ROWN o f Flo rida, Mr.

CAR DIN,Mr. CLYBUR N, Mr. COYNE , Mr. DE LUGO, Ms . DELAURO

, Mr.

DEUTSCH, Mr. DICKS , Mr. DDtON,Mr. DUR EIN, Mr. EDWAR DS o f Cali

fo rnia, Mr. ENGEL , Ms. ENGLISH o f Ariz o na, Ms. ESHOO Mr.

FALEOI IAVAEGA,Mr. FILNER , Mr. FLAKE,Mr. FOOL IETTA

,_Mr. FRANK

of Massachusetts“

, Mr. GEJDENSON,Mr. GIB BONS , Mr. HASTINGS, Mr.

IImL IAR D , Mr. HINCHEY, Ms . EDDIE BERNICE JOHNSON o f Tex as , Mr.

JOHNSTON o f Flo rida, Mr. KANJORS IO, Mr. KR EIDLER , Mr. LAFAI.CE,Mr. LANTOS, Mr. LEVIN, Ms . LONG,

Mr. MAR TINEZ, Mr. MATSUI , Ms .

MCKINNEY, Mrs . MEEx,Mr. MINCE, Mrs . MINx , Mr. MUR PHY

, Mr.

MURTHA, Ms . NOR TON, Mr. OEERSTAR ,Mr. OBEY, Mr. OWENS

, Mr.

PASTOR , Mr. PAYNE o f New Jersey , Mr. RAHALL, Mr. R ANGEL

, Mr.R EYNOLDS , Mr. ROMERo -BAR CELO

,Mr. R USH, Mr. SAR O, Mr. SAWYER ,

Mr. SCOTT, Mr. SER RANO,Ms . SHEPHERD,

Mr. SkAGcs , Ms . SLAUGH

TER , Mr. SMITH o f Iowa, Mr. STOKE S, Mr. STR ICM ’

D, Mr. STUDDS,

Mr. SWIFT,Mr. SYNAR ,

Mr. THORNTON,Mrs . THURMAN

,Mr. TRAFI

CANT, Mr. UNDERwOOD , Mrs . UNSOELD, Mr. VENTO, Mr. WATT, Mr.

WHEAT, Mr. W ISE, and Mr. YATES) introduced the following bill;whichwas referred jointly to the Committee o n Energy and Co mmerce to theCommittee o n

'Ways and Means , and to the Committee o n Educatio n and

Labo r fo r co nsideratio n o f such pro visio ns in'

titles I , III , VI , VIII, X,and X1 as fallwithin its jurisdictio n pursuantto clau se l(g) o f rule X;and co ncurrently, fo r a period ending notlater than tit-o weeks alter allthree committees o f j o intreferralrepo rtto the Ho u se (o r a later time

if the Speaker 80 designates) , to the Committee o n Armed Services for

co nsideratio n o f subtitle A o f title VIII and such pro visio ns o f title I asfallwithin its jurisdiction pursuantto clause I (c) o f rule X, to the Co mmittee o n Veterans’Affairs fo r co nsideratio n o f subtitle B o f title VIIIand such pro visio ns o f title I as fallwithin its jurisdictio n pursuanttoclause l(n) o f ruleX, to the Committee o n Po stOffice and CivilServicefo r co nsideratio n o f subtitle C o f title VIII and such provisio ns o f titleI as fallwithin its jurisdictio n pursuantto clause l(o ) o f rule X, to theCommittee o n NaturalRes ourc es fo r co nsideration o f subtitle D o f titleVIII and such provisio ns o f title I as fallwithin its jurisdictio n purs uantto clause l(n) o f ruleX, to the Committee o n the Judiciary for co nsideratio n o f subtitles 0 thro ugh F o f title V and such other pro visions asfallwithin its jurisdiction pursuantto clause 10) o f rule X, to the Com.

mittee o n R ules for co nsideration o f sectio ns li32td), and

and to the Committee on GovernmentOperatio ns fo r consideratio n o f subtitleB o ftitleV and sectio n 5401

A B ILL

ensure individualand family security through health carecoverage fo r allAmericans in a manner thatcontainsthe rate o f growth in health care costs and promotesresponsible health insurance practices, to promote choicein health care, and to ensure and protectthe healthc are o f allAmericans.

Be itenacted‘

by ,

the Senate and Ho usec epresenta

2‘

tives of"the United States ofAmerica in Co ngress assembled,

l ssc n o n r. sno ar TABLE o r

(a) SHORT TITLE.— This Actmay be cited as the

4 Health Security Act

4 Subtitle D— M edicalMalpractic e

PAR T l— LIAB ILI'I‘Y REFORM

6 SEC . 5301 . FEDER AL TOR T R EFORM .

(a) APPLICAB IL ITY.

(1 ) IN GENE R AL — Ex ceptas provided in sec

tio n 5302 , this partshallapply with respectto any

medicalmalpractice liability action bro ughtin any

State o r Federalcourt, ex ceptthatthis partshall

notapply to a claim o r actio n fo r damages arising

from a vaccine-related injury o r death to the ex tent

thattitle XXI o f the Public Health Service Actapplies to the claim o r actio n .

(2 ) PR EEMPTION.—The provisio ns o f this part

shallpreemptany State law to the ex tentsu ch law

is inco nsistentwith the limitatio ns co ntained in su ch

provisions . The provisions o f this partshallnotpre

emptany State law thatpro vides fo r defenses o r

places limitatio ns o n a perso n’s liability in additio n

to tho se co ntained in this subtitle,places greater

limitatio ns o n the amounto f atto rneys’fees thatcan

be collected, o r otherwise imposes greater restric

tions than those provided in this part.

Title V, Subtitle D

934

(3) EFFECT ON SOVER EIGN IMMUNITY AND

CHOICE OF LAW OR VENUE — Nothing in this part

shallbe co nstrued to

(A ) waive o r affectany defense o f so v

ereign immunity asserted by any State under

any provisio n o f law;

(B ) waive o r affectany defense o f sov

ereign immunity asserted by the United States;(C) affectthe applicability o fany provisio n

o f the Fo reign So vereign Immunities Acto f

(D ) preemptState cho ice-o f-law rules with

respectto claims bro ughtby a fo reign natio n o r

a citiz en o f a fo reign natio n; o r

(E ) affectthe rightOf any co urtto trans

fer venue o rto apply the law o f a fo reign natio n

o r to dismiss a claim o f a fo reign natio n o r Of

a citiz en o f a fo reign natio n o n the gro und o f

inco nvenientfo rum .

(4) FEOER AL COUR T JUR ISDICTION NOT ES

TAB LISHED ON FEDER AL QUESTION GROUND S .

Nothing in this partshallbe co nstrued to establish

any jurisdictio n in the districtco urts o f the UnitedStates over medicalmalpractice liability actions o n

mu V, Subtitle D

the basis o f section 1331 o r 1337 o f title 28, UnitedStates Code.

(b) DEFINITIONS — Ih this subtitle, the following

4 definitions apply :

1 ) ALTER NATIVE D ISPUTE RE SOLUTION SYS

TEM; ADE— The term alternative dispute resolu

tio n system o r“ADR means a system thatpro

vides fo rthe resolutio n o f medicalmalpractice claims

in a manner otherthan thro ugh medicalmalpractice

liability actions .

(2 ) CLAmaNT.— The term claimant means

any perso n who alleges a medicalmalpractice claim,

and any perso n o n who se behalf such a claim is al

leged, including the decedentin the case o f an actio n

broughtthrough o r o n behalf o f an estate.

(3) HEALTH CAR E PROFESSIONAL .— The term

health care pro fessio nal means any individualwho

pro vides health care services in a State and who is

required by the laws o r regulatio ns o f the State to

be licensed o r certified by the State to pro vide such

services in the State .

(4) HEALTH CAR E PROVID ER — The term

health care provider means any o rganiz atio n o r

institution thatis engaged in the delivery o f health

care services in a State and thatis required by the

Title V, Subtitle D

laws o r regulatio ns o f the State to be licensed o r cer

tified by the State to engage in the delivery o f such

services in the State.

(5) INJURY .—The term injury

”means any ill

ness, disease, o r other harm thatis the subjecto f

a medicalmalpractice liability actio n o r a medical

malpractice claim .

(6) MED ICAL MALPR ACTICE LIAB IL ITY AC

TION — The term medicalmalpractice liability ac

tio n means a civilactio n bro ughtin a State o r Fed

eralco urtagainsta health care pro vider o r health

care pro fessio nal(regardless o f thetheo ry o f liability

o n which the claim is based) in which the plaintiff

alleges a medicalmalpractice claim .

(7) MED ICAL MALPR ACTICE CLAIM .

-The term

medicalmalpractice claim means a claim bro ught

againsta health care provider o r health care pro fes

sio ualin which a claimantalleges thatinjury was

cau sed by the provisio n o f (o rthe failure to provide)

health care services , ex ceptthatsuch term do es not

include

(A ) any claim based o n an allegatio n o f an

intentio nalto rt; o r

(B ) any claim based o n an allegatio n that

a pro ductis defective thatis bro ughtagainst

so

oo

q

oi

ll

12

13

15

16

10

Title V, Subtitle D

any individual o r entity thatis nota health

care professionalo r health care provider.

SEC . 5302 . PLAN-BAS ALTER NA'I‘IVE D ISPUTE R ESOLU

(a) APPLICATION To MALPR ACTICE CLAIMS UNDER

PLANS — In the case o f any medicalmalpractice claim

arising fromthe provisio n o f (o r failure to pro vide) health

care services to an individualenrolled in a regio nalalliance

health plan or a corporate alliance health plan ,no medical

malpractice liability action may be broughtwith respect

to such claim untilthe finalresolution o f the claim under

the alternative dispute resolutio n system adopted by the

plan undersubsection (b) .

(b) ADOPTION o rMECHANI SM BY PLANS .— Each re

gio nalalliance health plan and co rpo rate alliance health

plan shall

(1 ) ado ptatleasto ne o f the alternative dispute

resolutio n metho ds specified under subsectio n (c) fo r

the resolutio n o f medicalmalpractice claims arising

from the pro visio n o f (o r failure to provide) health

care services to individuals enrolled in the plan; and

(2 ) disclo se to enrollees (and potentialenroll

ees) , in a manner specifi ed by the regio nalalliance

o rthe corporate alliance, the availability and pro ce

dures fo r co nsumer grievances under the plan ,in

https://www.forgottenbooks.com/join

12

Title V, Subtitle D

(C) pro vides fo r the co nsistentand fair

resolutio n o f claims;and

(D ) pro vides fo r reasonably co nvenientac

cess to dispute resolution fo r individuals en

(d) FURTHER R EDR Ess .— A plan enrollee dissatisfied

7 with the determination reached as a resulto f an alter

ll or other redress with respectto the claim te the ex tent

17 tion (ex ceptas"

providedin subsection the individ

18 ualsubmits anaffidavit

(1 ) declaring thatthe individual(orthe individ

ual’s attorney) has consulted and reviewed the facts

o f the actio n with a'

qualified specialist(as defined

in subsectio n

(2 ) including"

a written reportby a qualified

13

Title V, Subtitle D

after a review o f the medicalrecord and other rel

evantmaterial, there is a reasonable and merito rious

cau se fo rthe filing o f the action againstthe defend

ant;and

(3) o n the basis o f the qualified specialist’s re

view and co nsultation, thatthe individual(o rthe in

dividual’s atto rney ) has concluded thatthere is a

reaso nable and merito riou s cause forthe filing o f the

action .

-

(b) Ex TENSIONm CERTAIN INSTANCES .

(1) IN GENER AL .— Subjectto p aragraph

subsection (a) shallnotapply with respectto an in

dividualwho brings a medicalmalpractice liabilityactio n witho utsubmitting an

"’

a'

ffidavitdescribed in

such subsectio n if

(A )‘

the individualis Unable to obtain the

affidavitbefo re the ex piratio n o f the applicable

statute o f limitatio ns; o r

(B ) atthe timethe individualbrings the

action,-the

'

individualhas '

been unable to obtain

medicalreco rds o r Other informatio n necessary

to f prepare the affidavit: requested pursuantto

(2 ) D EADLINE FOR SUBMISSION WHERE Ex

TENSION APPLIES .— Inthe case o f an

”

individualwho

14

Title V, Subtitle D

brings an actio n fo r which paragraph (1 ) applies ,the actio n shallbe dismissed unless the individual

submits the affidavitdescribed in subsection (a) not

laterthan

(A) in the case o f an action fo rwhich sub

paragraph (A) o f paragraph (1 ) applies, 90

(B ) in the case o f an action fo rwhich sub

paragraph (B ) o f paragraph (1) applies , 90

days after obtaining the info rmation described

(c) QUALIFIED SPECIALIST DEFINED — In sub

13 . section (a) , a qualified specialist” means, with respect

14 to amedicalmalpractice liability action , a health care pro

(1 ) is knowledgeable o f, and has ex pertise in ,

jecto fthe action;and

(A ) to be lmowledgeable in the relevantis

(B ) to practice (o rto have practiced within

tbc preceding G years) or to teaeh (or to have

taughtwithin the preceding ti years) in tli’

e

15

Title V, Subtitle D

same area o f health care o r medicine thatis at

issue in the actio n , and

(C) to be qualified by ex perience o r dem

o nstrated competence in the subjectmatter o f

(d) SANCTIONS POR SUBMITTING FALSE ALLEOA

TIONs .— Upo n the motion o f any party o r its own initia

8 tive, the co urtin amedicalmalpractice liability action mayimpo se a sanction o n a party o r the party's atto rney (o r

both), including a requirementthatthe party reimburse

theother party to the action fo r co sts and reaso nable at

to rney’s fees, if any info rmation contained in an affidavit

described in subsectio n (a) is submitted withoutreason

able cause and is foundto be untrue.

SEC . 6304. LIMITATION ON AMOUNT OF ATTOR NEYS CON

(a) INGENERAL — Ah atto rney who represents , o n

a co ntingency fee basis , a plaintiff in a medicalmal

practice liability actio n may notcharge, demand, receive,o r collectfo r services rendered in co nnectio n with such ac

tio n (including the resolutio n o f the claim thatis the sub

jceto f the actio n under any alternative dispute resolutio n

system) in ex cess o f percento f thetotalamo untre

co vered by judgmento r settlementin such actio n .

xo

oo

xl

a

u

a

u

lo

ll

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Title V, Subtitle D

(b) CALCULATION OF PER IOD IC PAYMENTS — In the

eventthata judgmento r settlementincludes periodic o r

future payments o f damages, the amo untreco vered fo r

purpo ses o f computing the limitation o n the co ntingency

fee under subsectio n (a) shallbe based o n the co sto f the

annuity o rtrustestablished to make the payments . In any

case in which an annuity o r trustis notestablished to

make such payments , such amo untshallbe based o n the

presentvalue o fthe payments .

(c) CONTINGENCY FEE DEFINED — As u sed in this

sectio n , theterm co ntingency fee means any fee fo r pro

fessio nallegalservices which is , in whole o r in part,co n

tingentupo n the recovery o f any amo unto f damages,

whetherthro ugh judgmento r settlement.

SEC . 5306. R EDUCTION OF AWAR DS FOR R ECOVER Y FR OM

COLLA'I'ER AL SOUR CES .

Theto talamo unto f damages recovered by a plaintiff

in a medicalmalpractice liability actio n shallbe reduced

by the amo unto f any p asto r future paymentwhich the

plaintiff has received o r fo r which the plaintiff is eligible

o n acco unto f the same injury fo r which the damages are

awarded,including paymentunder

Federalo r State disability o r sickness pro

grams;

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Title V, Subtitle D

(2 ) Federal, State, o r private health insurance

pro grams;

(3) private disability insurance pro grams;

(4) employer wage co ntinuation pro grams; and

(5) any other pro gram,if the paymentis in

tended to compensate the plaintiff fo r the same in

jury fo rwhich damages are awarded .

SEC . 5306. PER IODIC PAYMENT OF AWAR DS .

Atthe requesto f any party to a medicalmalpractice

liability actio n ,the defendantshallnotbe required to pay

damages in a single, lump-sum payment, butshallbe per

mitted to make such payments perio dically based o n such

schedule as the co urtco nsiders appro priate, taking into

acco untthe perio ds fo r which the injured party willneed

medicaland other services .

PAR T 2— 0 THER PR OVISIONS R ELATING TOMED ICAL MALPR ACTICE LIAB ILITY

SEC . 53 1 1 . ENTER PR ISE LIAB ILITY DEMONSTR ATION

PROJECT.

(a) ESTAB LISHMENT.— Notlater than January 1

,

1996, the Secretary Shall establish a demo nstratio n

projectunder which the Secretary shallpro vide funds (in

su ch amo untas the Secretary co nsiders appro priate) to

o ne o r mo re eligible States to demo nstrate whether sub

stituting liability fo r medicalmalpractice o n the parto f

M

A

CO

N

Q

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Title V, Subtitle D

the health plan in which a physician participates fo r the

perso nalliability o f the physician willresultin improve

ments in the quality o f care provided underthe plan , re

ductio ns in defensive medicalpractices, and better risk

management.

(b) ELIGIB IL ITY OF STATE — A State is eligible to

participate in the demo nstration projectestablished under

8 subsectio n (a) if the State submits an applicatio n to the

10

1 1

Secretary (atsuch time and in such form as the Secretarymay require) co ntaining such info rmation and assurances

as the Secretary may require, including assurances that

(1 ) has entered into an agreementwith a health

plan (other than a fee-fo r-service plan ) o perating in

the State under which the plan assumes legalliabil

ity with respectto any medicalmalpractice claim

arising from the provisio n o f (or failure to pro vide)services under the plan by any physician participat

ing in the plan;

(2 ) has provided that, under the law o f the

State, a physician participating in a plan thathas

entered into an agreementwith the State under

paragraph 1 ) may notbe liable in damages o r oth

erwise fo r such a claim and the plan may notrequire

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Title V, Subtitle D

(1 ) assurances that, underthe law o f the State,

in the resolutio n o f any medicalmalpractice liabilityactio n , itshallbe a complete defense to any allega

tio n thata party againstwhom the actio n is filed

was negligentthat, in the pro visio n o f (o rthe failure

to pro vide) the servrces thatare the subjecto f the

actio n , the party followed the appro priate practice

guideline established by the Natio nalQuality Man

agementPro gram under subtitle A;and

(2 ) such other info rmatio n and assurances as

the Secretary may require.

(c) R EPOR TS TO CONGR ESS — Not later than 3

mo nths afterthe lastday o f each year fo r which the pilot

pro gram established under subsectio n (a) is in effect, the

Secretary shallsubmita repo rtto Co ngress describing the

o peratio n o f the pro gram during the previo u s year and

co ntaining such recommendatio ns as the Secretary co nsid

ers appropriate, including recommendations relating to re

visio ns to the laws go verning medicalmalpractice liability .

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Title v, Subtitle .4

SEC 5005 .

6 TIONAL

7 AWARDS, AND SETTLEMENTS.

1) IN GENER AL — Section 427(a) o ftheHealth

Care Quality Improvement Act (42 U.S.O.

11137(a)) is amended by adding atthe end the fol

lowing new sentence: Notlater than January 1,

1996, the Secretary shall promulgate regulations

under which individuals seeking to enrollin health

plans underthe Health Security Actmay obtain ln

fo rmation reported under this partwith respectto

physicians and other licensed health practitioners

participating in such plans for whom'

information

has been reported underthis parto n repeated occa

sions .

(2 ) ACCESS To DATA BANK FOR POINT-OE

SEe CE CONTR ACTORS UNDER MEDICAR E — Section

427(a) o f such Act (42 U.S.O. 11137(a)) is

amended

(A) by inserting to sponsors o f point-o f

service networks under section 1890 o f the So

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Title v, Subtitle A

cial Security Act, after State licensing

boards and

(B ) in the heading , by inserting R ELAT

ED after “CAR E

23

Mr. MOORHEAD . Thank y o u very mu ch , Mr. Chairman . I am es

peciall pleased thatwe are fo cu sing today o n medicalliability issues . o r some time, this has been an issue o f greatinterestto myco n stituents and to me.

Meaningful, bold medicalmalpractice reform mu stbe a parto f

any future health care refo rm bi1 becau se malpractice co sts are integral] tied to the rising co sto f health care. They are linkedthro ug increased utiliz atio n o f services , o r

“

defensive medicine”thro ugh increased insurance and legalco sts, and, finally , thro ughincreased co sts fo r services to the patient. We are wasting preciou sresources o n cases with n o meritand we sho uld resolve tho se cases

which are legitimate in more co steffective ways .

Studies estimate the wasted ex penses to be con servatively at$20to $2 5 billio n a year. The malpractice sy stem is certainly n ottheonly cau se o f risrng health care co sts , butitis a major contributor.

I believe thatwe can make changes thatwillredu ce these co stswithoutjeopardiz ing rotectio n s fortrue victims .

In my own State 0 California, we have seen how successfulmedicalmalpractice refo rm efforts can be. In 1975, after tremendousco o eratio n between allthe parties , the State legislature passed“M CRA, the Medical Injury Compensation R eform Act.” Fo r 18

years ithas successfully confronted serious ex cesses in the malpractice sy stem while simultaneo u sl providing fair redress fortho se who havetruly suffered from s standard care.

I can tellyo u thatI have talked to man lawyers in Califo rniaand many peo ple who have been the plainti s in malpractice cases .

I have received virtually n o complaints abo utthe sy stem as itiswo rking there in o ur State. Whatthe law do es is limitthen o ncompen sato ry damages to buteveryo ne can collectevery penny thatthe can show in actualdama es .

Co ngress wante to implementa s stem li e MICRA, there isalread le

°

slatio n pending to do'

u sttat. H.R . 3080, the“

Affordable eslt Care Now Act, whic has abo ut140 Members o f theHo use co spo n soring , contains the kind o f stro ng malpractice refo rmprovisio n s I wantto see enacted.

I wish thatthe President’s health billcontained stringentmalpractice reform like tho se ln H.R . 3080, butitreally does n otgofar en o ugh . However, I am increasing] ho pefulthatC o ngress willn otmiss this o pportunit to make rea pro gress in the area. Earlylastyear, members o f te Energy and Commerce Committee hadan o ppo rtu nity to talk to the leaders o f health care in England,France, and Germany . Allo fthem stated very clearly thata sy stemlike they have o r like the o ne thatMr. Clinto n is pro po sing in thisco untry willn otwork unless y o u can do somethin abo utmedicalmalpractice. Itju stcann otbe putto gether witho ut o ing somethingvery serio u s in thatarea.

I lo ok fo rward to hearing from o ur witnesses to day and I wantto thank y o u ,

Mr. Chairman ,fo rthe courtesy y o u have shown me .

I do have to go to an other hearing and I willn otbe here thro ugho utthe entire perfo rmance to day .

Thank y o u .

Mr. BR OOKS . Mrs . Schro eder, any?Mr. B obby Scott.Mr. SCOTT. No thank yo u .

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Mr. BR OOKS . Mr. Fish , the gentleman from New York .

Mr. FISH . Thank y o u ,Mr. Chairman . This mo rning’s hearing will

fo cu s the subcommittee’

s attentio n o n the impo rtantand complexproblem o f medicalmalpractice.

Our health sy stem is underthe micro sco pe both in Co ngress andin the media. Itis a sy stem thatclearly is being burdened by a

number o f co st-driven pressures . One o f these “

co sts”

is the threato f liabilit suits facing medicalpractitio ners and the amo unts theyare forced

,

to spend to protectthemselves again stthese suits .

The estimate is thatmedicalmalpractice premiums no w total$ 10 billio n annually and malpractice in surance premiums fo r do cto rs ln my own State o f New Yo rk are amo ng the highestin theNatio n . Fo r a do cto r specializ ing in obstetrics in New Yo rk State,

the average annualmedicalmalpractice premium ex ceeds

per year. New Yo rk is lo sing do cto rs , in partbecau se o f this liability threat, and therefo re the quality o f health care in o ur State isthreatened.

Butmalpractice premiums represento nly parto f this o verallmedicallegalsy stem problem . The estimates are thatthe co sts o f“

defen sive medicine”

run from $20 billio n to $25 billio n a year. Fur

thermo re,medicalpro duct-related liability co sts affecting pharma

ceuticalmanufacturers and tho se wh o make medicaldevices o r provide blo o d o r tissue services are likewise impacted by the same liability co n cern s . And finally ,

as we m o ve mo re and m o re into managed care, the issue o f the sco pe o f a third-party pay o r’s liabilityis a matter o f co n cern .

Naturally ,negligento r reckless actio n s o n the parto f medical

pro fessio nals o r the manufacturers o f medicaldevices mu stn otbeco ndo ned n or ign o red. I believe in thetraditio nalstandard fo rlegalto rtrespo n sibility ,

i.e.,negligence. If a practitio ner is shown to act

in an unreaso nable,unpro fessio nal

,negligentmanner in a given

factsituatio n ,then liability sho uld attach .

But, the facto f the matter is thatvery few o f these cases ever

go to trialo r are ever really resolved in a definitive “

true o r false”sen se. M o stclaims are settled o uto f co urtirrespective o f any fi nd

ing o f fault, so the vastmajo rity o f the co sts are really the tran sactio nalco sts .

Mr. Chairman,C o ngress sho uld serio u sly lo ok ata number o f the

refo rm pro po sals thathave been putfo rth . These include the u se

o f the alternative dispute resolutio n mechanism ,but these

n o njudicialfo rum s sho uld resolve disputes and n otmerely delaythe inevitable co urtactio n which wo uld o nly add further co sts .

Similarly , we need to ado pta fair and sen sible collateralso urce

rule and the mo dificatio n o f jo intand severalliability with respectto n o neco n omic damages is an other o ptio n thatCo ngress sho uldcarefully ex amine. Punitive damages sho uld o nly be awarded intho se cases where itcan be pro ven thatthe behavio r was “

wanto n ,

willful,o r reckless in nature. Punitive damages are frequently

awarded in these cases when n otju stifi ed. I am n otan advo cateo f flatdollar “

caps” o n atto rney s’

fees , butI do believe thata sliding scale similar to thatado pted in Califo rnia makes sen se. Su cha scale sho uld be stru ctured so as to en co urage lawyers to representlow and medium-income perso ns . Finally ,

I believethatperi

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o dic payments fo r damage awards ratherthan lump sum paymentsalso makes sen se.

What o vernmentsho uld do is pro vide a fair legalstru cture toresolve tese disputes— butitsho uld be a legalstructure thatenco urages go o d medicaljudgment, n otdefen sivetactics . Go vernmentpolicies sho uld enco urage ex cellen ce in the practice o f medicine andsuppo rtquality medicalresearch thatwillco ntinue to better o ur

co untry and the entire wo rld.

Mr. Chairman , as we pro ceed this mo rning ,I welcome the com

ments o f any o f o ur witnesses o n these suggested changes in o ur

tortsy stem . Of co urse, I wantto welcome allo f o ur witnesses tothis hearing this mo rning , and I greatly appreciate their takingtime to share their ex pertise with u s . In particular

,I welcome Dr.David Harman o f New Yo rk in Wayne C o unty NY, who is here this

morning representing theMedicalSo ciety o fthe State o f New Yo rk .

Dr. Hannan practices in a ruralarea in upstate New Yo rk and iso ne o f the few generalpractitio ners in the State wh o co ntinues toprovide obstetricalservices . I am sure his insights willbe helpful.Again ,

Mr. Chairman,thank y o u fo r scheduling these hearings

and I lo ok fo rward to the testimo ny .

Mr. BR OOKS . Thank y o u very mu ch . Our firstwitness willbe Mr.

Philip H . Co rbo chairman o f the Committee o n MedicalPro fessio nalLiabilit flitthe American BarAs so ciatio n . He is an atto rneyin Chicago , w ere he is a partner with the Co rbo y Dimitrio fi rm .

Nex twe have Mr. CarlKeener, testifying o n behalf o f the American B o ard o f TrialAdvo cates . He is with Baker

, SilberbergKeener in SantaM o nica, CA .

Our nex twitness willbe LauraWittkin , ex ecutive directo r o f theNatio nalCenter fo r Patients’ R ights , New Yo rk City . Ourwitness willbe Dr. Anto nio Falco n— how do y o u pro n o un cethat?Dr. FALCON . Falco n , yes , sir.

Mr. BR OOKS . He is a famil practitio ner in Rio Grande City ,TX

,

way down in the valley , an he is here to testify o n behalf o f theHealth Care Liability Allian ce, a co alitio n o f health pro viders . Nex twillbe Dr. R obertB . Keller, o rtho pedic surgeon and ex ecutive director o f the Maine MedicalAssessmentFo undation , a health serv

ices research o rganiz atio n in Maine. To day he represents the Physician PaymentR eview Commissio n o n which he serves as vicechairman . Our finalwitness willbe Dr. David T. Harman o f New

gzrk

i‘NY

, affiliated with the MedicalSo ciety o f the State o f Newo r

Gentlemen and Ms . Wittkin , we thank y o u very mu ch fo r beingwith u s and I willfirststartwith Mr. Co rboy . Yo u are reco gniz ed,

srr.

STATEMENT OF PHILIP H . COR BOY, CHAIRMAN, COMMITTEEON MEDICAL PR OFESSIONAL LIAB ILITY, AMER ICAN BAR

ASSOC IATION

Mr. COR BOY . Thank y o u ,Mr. Chairman ,

and gentlemen . Thanksfo rthe o ppo rtunity to presentthese views o f the American Bar Asso ciatio n o n pro fessio nalmedicalliability .

Surprisingly, letme say o n the surface thatmu ch o f whatMr.

Fish has ju ststated we are in acco rd with;however, we are n otinacco rd wrth the manifestatio n as suggested. We are in favo r o f

26

ADR . We are in favo r o f vario u s aspects o f tho se things which are

euphemistically referred to as reform .

I mightpo into utthatthe American Bar Asso ciatio n , which is avoluntary o r aniz atio n o f lawyers , is n ota Jo hnny-come

lately to heath care. Since 1972 , the ABA has been o n reco rd insuppo rto f legislatio n thatwo uld provide fo r every American access

to quality health care regardless o f a perso n’

s income.

However, access to the American legalsystem has also been a

fundamentalrighttracing back to the beginnings o f o ur co untry ,

which is wellover 200 years old now .

We understand the co ncern s bein ex pressed aboutthe issue o fmedicalpro fessio nalliability . The A is deeply committed to having a legalsy stem in America thatis effective and ju stand o ne

thatprotects the rights o f plaintiffs and defendants .

Now ,in Octo ber o f 1992 , the C o ngressio nalBudgetOffice sup

plied a study thatrepo rted thatmedicalmalpractice premiums acco untfo r less than 1 percento f the dollars thatare spentannuallyo n the Natio n

’

s health care.

I am n otso sure itis $ 10 billion , butI think itis clo se to $ 10billio n ,

Mr. Fish . I think itis somewhere in the neighborho o d o f $9billio n plu s . One percento f thatis spento n premiums o r somewhere ih the neighbo rh o o d o f $9 billio n . Of tho se $9 billio n , something less than -billio n is actually spento n the satisfactio n andsettlemento f claims which do n otgo to the jury ,

some o f which dog o to the jury .

This re o rtalso co n cluded thatmuch o f the care thatis comm only du bed defen sive medicine wo uld probably stillbe pro videdfo r reaso n s otherthan co ncern s abo utmedicalmalpractice.

Now,I am o ing to sa something thatis go ing to irritate many

listeners . I be ieve that efen sive medicine is malpractice. I am n ottalking abo utitbeing malpractice which is a pro x imate cau se fo r

injuries , butI think itis malpractice. If a do ctor comes to me andsay s , I wo uld liketo treaty o u and I think y o u sho uld have an MR Ibecau se y o u are g o ing to sue me, I am go ing to change do cto rs . If

a do cto r do es n othave en o ugh security to satisfy his patient/do cto rrelation ship and in stead go es o uto f his way to charge dollars thatsho uld notbe charged, I respectfully suggestthatis n otdefen sivemedicine

,thatis malpractice.

Now,mo stdo cto rs in this co untry , thank Go d, have been very ,

very capable o f suppl ‘

n the very besto f medicalcare to their patients . They do n ’

tca ltatdefen sive medicine. They callitg o o dmedicine, and I respectfully suggestthatthe term defen sive medicine is a Shibboleth .

I do n’

tbelievethere are an fi res anywhere in the world whichcan verify thatsome $ 15 o r 20 illio n is spento n defensive medicine. I think itis a myth .

And there are other reaso n s fo r whatthey calldefen sive medicine. Some o f them have to do with defending themselves in lawsuits . The an swer to defending themselves in lawsuits is two fold.

Number o ne, firsto f all, do n’tbe negligent, and number two ,

have malpractice insurance. Malpractice in surance is a deductibleitem . Itis deductible as a bu siness ex pen se. Itis rent, and I re

spectful] suggestthatpremiums are a parto f practicing medicine,

justas tey are a partof practicing law.

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28

Many o f the peo ple in this co untry have insurance thatpay s fo rtheir medicalbills . If the medicalbills are paid, ordinarily ,

n otalway s , buto rdinarily , there is a subro gatio n right.If y o u redu cethe judgmento r redu ce settlementby those amount

o f dollars which are paid b a rich un cle, i.e. , an in suran ce company , y o u are cutting o utthe ri hto f thatin surance company tocollectthe damages tha pai fo r.

So ally o u are do ing is tran sferring the rightto collectdamageso r repaymentfrom o ne in surance company to another.

I mi htalso say thatin surance, medicalin surance, is o ftentimesa resu to f labo r relatio n s . Itbecomes a parto f the compen satio npaid to many peo ple who wo rk in this co untry . Itis a negotiatedright. Now , to have thatnegotiated rightthen cutbecau sethe premiums paid by a company and n otallow reco very o f the collateral— o f the dollars thatare paid by an in suran ce company , we te

spectfully suggestis unfair.

With reference to jo intand severalliability ,my ex perien ce uite

frankly with jo intand severalliability , and I have itdirectly romhaving do nethe ex actsamethin in Illino is thatI am do ing befo reo u this mo rning is , do cto rs do n twantit. Do cto rs do n otwantit.

y? Becau se do cto rs , when they etsued, wo uld like to have the

defendantalo ng as a potentialto rteaso r paying entity and if thereis jointand severalliability , o ftentimes the do cto r willbe held tespo n sible mo re than the ho spital, and, if thatis true, the do cto r isg o ing to pay the mo stseriou s parto f a judgment.I have talked to do cto rs allo ver the co untry . When y o u ex plain

to them whatjo intand severalliability is , they do n’

twantitbecau se they mightend up paying the fulljudgmentand letting theho spitalo ff the ho ok .

Now , do es italway s happen? No , o f co urse n ot. Also the ho spitaladministrato rs I have talked to in Illino is— n ow ,

maybe they are

differentin other parts o f the wo rld— the ho spitaladministrato rsare splito n this subject. Some wo uld like the do ctor along fo r thelitigatio n ride, some wo uld prefer

"

thatsometype o fmitigatio n ex istin the realm o f legislatio n which wo uld in o ne way or anothermo dify the presentJointand SeveralLiability Act.I think I have discu ssed mo sto f the matters that— thatare in

Ho u se bill3600, and I awaithearing the other testimo ny and Iawaitany questio n s thatmightbe available.

Mr. BR OOKS . Thank yo u very mu ch .

[The prepared statemento f Mr. Co rbo y follows z]

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Statement o f

PHI L I P E . COR BOY , CHAI R o f theS PEC I AL COMMI TTEE ON MEDI CAL PR OFES S I ONAL L I AB I L I TY

o n b ehalf o f theAMER I CAN BAR AS SOC I ATI ON

b ef o re th eSUBCOMMI TTEE ON ECONOMI C AND COMMER CI AL LAW

COMMI TTEE ON THE JUDI C I AR Y

o f theUNI TED STATES HOUSE OF R EPR ESENTATI VES

o n the s ub j ect o f

MEDI CAL PR OFES S I ONAL L I AB I L I TY I S S UES AND HEALTH CAR E R EFORM

J une 2 2 , 1 9 9 4

Mr . Chairman and Memb ers o f th e Su bc o mmittee

I apprec iate th e o pp o rtunity to pres ent th e views o f theAmeric an Bar As s o c iatio n o n med ic al p ro f e s s io nal liab ility in

th e c o nte x t o f pro p o s als to inc reas e ac c e s s to h ealth c are .

I am Ph ilip H . C o rb o y , Ch air o f th e ABA 's Spec ial C ommittee o n

Med ic al Pro f e s s io nal Liab ility .

S inc e 1 9 7 2 , th e ABA has been o n rec o rd in s upp o rt o f leg is

latio n that wo u ld pro vid e f o r every Americ an to h ave ac c es s to

quality h ealth c are regardles s o f a pers o n's inc o me . I n

February 1 9 9 2 , and ag ain in February 1 9 9 4 , the ABA 's Ho u s e o f

Delegates reaf f irmed its s upp o rt o f leg is latio n c alling f o r

univers al c o verage f o r all thro ugh a c o mmo n public o r pu blic /private mec h an ism thro u gh wh ic h all c o ntrib ute .

Th e Americ an Bar As s o c iatio n is c o nc ern ed ab o ut th e ab ilityo f Americ ans , in c lud ing its o wn members , to o btain a f f o rdab le

health in s uran c e . Health c are at a reas o nable c o st h as been an

Americ an e x p e ctatio n , and a c o nc ept th e Americ an Bar As s o c iatio ns upp o rts . Likewis e , ac c es s to th e Americ an legal s y stem h as

been a f undamental right trac ing bac k to th e o rig in s o f th isc o untry .

Th e ABA understand s th e c o nc ern s being e x pre s s ed ab o ut theis s ue o f med ic al pro f es sio nal liab ility and is d eep ly c o mmittedto having a leg al s y stem in Americ a that is e f f ective and j u st,

o ne that pro tects the rig hts o f plaintif f s and d e f endants . Two

ABA entities wo rked to ward s this end by d evelo ping rec o mmandatio ns f o r the ABA 's Ho u s e o f Delegates . Th ey are th e Spec ial

Co mmittee o n Medic al Pro f es s io nal Liab ility and th e Actio nCo mmis s io n to Impr o ve the To rt Liab ility Sy stem.

84-7 14 0 — 94 — 2

30

Th e ABA Spec ial C o mmittee o n Med ic al Pro f e s s io nal Liab ilitywas c o mp o s ed o f a balanc ed gro up o f plaintif f s

' lawy ers , d e f en s e

lawy ers and repres entative s o f ac ademia , and the j ud ic iary . The

C ommittee was c haired by ABA Past-Pres ident Talb o t S .

D 'Alemb erte , then Dean o f th e Flo rida State Un ivers ity C o lleg e

o f Law. Th e Co mmittee was c harg ed with study ing leg is lativeinitiatives in th e med ic al malpractic e area and d evelo p ing ABA

p o lic y pro p o s als f o r th e As s o c iatio n 's p o lic ymakers to c o n s id er .

I n February 1 9 8 6 , the ABA Ho u s e o f Deleg ates ad o pted a res o lu

tio n up o n rec o mmendatio n o f th e‘

Co mmittee . (A c o py o f thatres o lutio n is appended to th is statement a s App end ix A . ) The

C o mmittee was th en d is band ed . Ho wever , it was reactivated in

August 1 9 9 1 .

Near the end o f 1 985 the ABA , thro ug h its Pres ident,

app o inted an Actio n C o mmis s io n to Impro ve th e To rt Liab ilitySy stem. Th e 1 4-member C o mmis s io n was as ked to d evelo p s pec if ic

pro p o s als to impro ve the to rt liab ility s y stem. The memb ers o f

th e C o mmis s io n were f ederal trial and appellate c o urt j ud ge s ; a

state Supreme C o urt j u stic e ; c o rp o rate c o un s el, inc lud ing th o s ewith ins uranc e e x perienc e ; c o n s umer and c ivil rights ad vo c ates ;ac ademic ian s ; and practic ing plaintif f s ' and d e f ens e lawy ers .

I n February 1 9 87 , the ABA Ho u s e o f Deleg ates c o ns idered theC ommis s io n '

s re c o mmendatio ns and ad o pted th e res o lutio n appended

to th is statement as Append ix B . Th e ABA take s the p o s itio nthat th es e pro p o s als to impro ve the to rt s y stem c an and s h o uld

be implemented by th e c o urts and leg is lature s at the state , and

no t the f ed eral level. The to rt s y stem h as s h o wn c o ns iderab le

res ilienc e in the f ac e o f dramatic s o c ial and ec o no mic de velo pments . State c o urts and leg is lature s are c o nstantly wo rking toimpro ve the to rt laws and s h o uld b e permitted to c o ntinue to d o

Thu s , f ederal intru s io n into the f ield , with s o me d is c reteex c eptio n s , is inappro priate .

The ABA b elieves that f ed eral pre-emptio n o f the state

med ic al pr o f e s s io nal liab ility laws wo u ld c o nstitute an unwis e

and unnec e s s ary intru s io n o f maj o r pro p o rtio n s o n the lo ngstanding auth o rity o f th e states to pro mulgate to rt law . Su c h

pre-emptio n wo uld c au s e th e wh o le b o dy o f state to rt law to b e

c ome un s ettled and c reate new c o mple x itie s f o r the f ederal

s y stem. Unequal res ults wo uld o c c ur when med ic al pro f es s io nal

liab ility litigatio n is c o mb ined with o ther f ield s o f law withd if f ering rules o f law. An e x ample o f th is wo uld be a s ituatio nwhere a med ic al malpractic e c laim is j o ined with an auto mo b ileliability c laim. I f state to rt laws dif f er f ro m the f ederal law

in areas s uc h as c ap s o n damag es , the c o llateral s o urc e rule o r

j o int and s everal liab ility , c o n f licts and u nc ertainty wo uld

likely res ult; and o ne def endant in an actio n c o uld well be

treated entirely d if f erently than ano ther . Having o ne s et o f

31

ru les to try med ic al pr o f es s io nal liab ility c as e s and an o th er

s et o f rules to try o th er to rt c as es is n o t c o n s istent with th es o und and equ itable admin istratio n o f j u stic e .

Our ABA p o lic ies re f lect th e ABA 's rec o g n itio n that th e

is s u e o f med ic al pro f es s io nal liab ility is o f vital imp o rtan c en o t o nly to the leg al pro f es s io n but to the med ic al pr o f e s s io n ,

th e in s uranc e ind u stry and , mo st o f all, to th e pu blic .

The public has the mo st at stake in th is is s u e . Wh en a

pers o n s u f f ers in j ury as a res ult o f neg lig en c e by a pr o vid er o f

h ealth c are s ervic e s , h e o r s h e mu st h ave th e rig ht to s eek

rec o very f o r th e f ull meas ure o f th o s e damag e s . We b elie ve th atright is s everely threatened by th o s e wh o c all f o r maj o r c h ang e s

in th is c o untry’s to rt law s y stem, and partic u larly by th o s e wh o

pro p o s e th at limits b e p lac ed o n th e amo u nt o f d amag e s per s o n s

may s eek in c o mpen s atio n f o r th e ir in j uries c au s ed b y th e n eg li

genc e , o r c arele s s nes s o f health c are pro vid er s .

We are es pec ially c o nc erned with pr o p o s als to alter th es y stem . o f med ic al malpractic e to c arve o ut e x c eptio n s in th eto rt law s y stem f o r o ne g ro up o f p o tential d e f endants in th isc as e , th e med ic al pro f e s s io n . I t is th e ABA '

s b e lie f that th erights o f in j ured pers o n s to re c o ver f u lly f o r in j uries c au s ed

by th e wr o ng f ul acts o f o thers mu st b e pr o tected . We are

c o nc erned that th o s e wh o-s eek maj o r c hang es in the way th e to rt

law s y stem d eals with c as es o f med ic al malpractic e are willingto trade away th e rights o f all ind ivid uals in th e h o pe o f

eas ing a perc eived burd en o n s o me o r redu c ing th e o verall c o s tso f health c are . S inc e med ic al malpractic e in s uran c e c o sts make

up o nly a small f ractio n o f the d o llars s pent o n h ealth c are in

th e United State s , th e c hang e s in th e to rt laws wo u ld h ave n o

real impact o n c o sts o f health c are .

I n addres s ing ac c es s to h ealth c are pro p o s als , that c o ntain

pro vis io n s o n med ic al pro f e s s io n al liab ility , thre e q uestio n sneed to be as ked . First, what is the c o st s aving s that c an b e

ac h ieved ? Sec o nd , have s uc h pr o vis io n s , wh en e nacted , lo wered

health c are c o sts in !

states wh ic h have ad o pted th eir es s entialelements ? Th ird , what are the c o ns equenc es to th e trad itio nalAmeric an legal s y stem and to th e rights o f th e in j ured per s o n s

?

I n o th er wo rd s , d o e s a c o st s h ifting f ro m th e med ic al pro tess io nal wh o c au s ed the in j uries to th e pers o n wh o was in j ured o r

to a g o vernmental ag enc y ac h ieve anyth ing mo re than an illu s o rys aving s ?

32

What is the C o st o f the Med ic al-Legal Sy stem?

Th e Americ an Bar As s o c iatio n d o es n o t purp o rt to p o s s es s

the e x pertis e to analy z e all o f the reas o ns f o r es c alatingmed ic al c o sts . We d o , h o we ver , have th e ab ility to analy z e theinterrelatio n s h ip o f th e legal s y stem and th o s e c o sts .

Mo reo ver , we are able to determine the c o n s equenc es o f pro p o s ed

leg is latio n up o n the Americ an legal s y stem and th o s e s eek ingc o mpen s atio n f o r in j urie s .

Th e maj o r c o mp o nents that have b een c ited as c o ntributingto the ris ing c o st o f that c are are

R elianc e o n mo dern , s o ph istic ated and

e x pens ive treatment.

I nno vative treatment o f illne s s es , s u c h as

heart d is eas e , AI DS and c anc er ;

An ag ing p o pu latio n , wh ic h add s to Med ic are

and Med ic aid e x pend itures ;

High administrative c o sts o f the h ealthc are s y stem; and

The med ic al-legal s y stem.

Stu d ie s c o n c erning the med ic al-leg al s y stem s h o w th at itsimpact o n the natio nal e x pend itures is n o t o nly qu e stio nab le butals o in s ignif ic ant. Th e C o ngres s io nal Budg et Of f ic e stated in

1 9 9 2 that med ic al-leg al c o sts , as meas ured by med ic al mal

practic e ins uranc e premiums , ac c o unt f o r perc ent o f thenatio nal health e x pend iture s . I understand that thes ein s uranc e premiums ac c o unt f o r a lo wer perc entag e o f natio nalhealth ex pend itures at th is p o int in time . The o ther c o mp o nento f c o st attributed to th e leg al s y stem is that o f s o -c alled"def en s ive med ic ine .

" Vary ing f igures f o r the c o st o f"de f en s ive med ic ine" have b een e stimated . Ho we ver , n o o ne has

reliably meas ured what, if anyth ing , d e f en s ive med ic ine c o sts .

An Octo ber 1 9 9 2 study o f the C o ngres s io nal Budg et Of f ic e

c o n c lud ed that health c are s pending is pr o pelled upward byh igh

-c o st tec hn o lo g ic al and med ic al breakthro ug h s . Th e studyf ind s that ris ing inc o mes , d emo graph ic c hang es , and med ic almalpractic e c o sts d o n o t appear to ac c o u nt f o r muc h o f th einc reas e in the natio n '

s health c are b ill. Th e rep o rt statesthat malpractic e in s uranc e premiums ac c o u nt f o r le s s th an o ne

perc ent o f the d o llars s pent annually o n th e natio n 's h ealth

c are .

33

Th e repo rt als o c o nc luded th at "mu c h o f th e c are th at is

c o mmo nly dubbed 'de f en s ive med ic ine ' wo uld pr o bab ly still b e

pro vided f o r reas o ns o th er than c o nc erns ab o ut med ic al malprac

tic e . Phy s ic ian s h ave alway s s o u g ht to pr o vid e patients with

the best p o s s ib le med ic al c are at the lo we st ris k s and wo uld

c o ntinue to d o s o e ven with o ut th e threat o f laws u its . Be c au s e

muc h o f th is 'def en s ive c are' help s to red u c e th e unc ertainty o f

med ic al d iagno s is , it s eems u nlikely that ph y s ic ian s wo u ld

c hang e th eir practics pattern s dramatic ally in re s p o n s e tomalpractic e ref o rm.

"

To addres s th e s ub j ect o f "d e f ens ive med ic ine ,

" th ere mu stb e agreement up o n th e meaning o f he phras e . Ho we ver , th ere is

no agreement up o n th e de f initio n . Th at unc ertainty has r

s ulted in th e inab ility to statistic ally meas u re th e c o st. I n

publis hed stud ies ,"d e f ens ive med ic ine" h as inc lu d ed erro ne o u s ly

the c o st o f th e c o n s eq u enc e o f phy s ic ian s' f inan c ial in c entive

to direct patients f o r te sts and e x aminatio ns in f ac ilitie s in

wh ic h phy s ic ian s have a pro prietary intere st. S o me have c o n

s idered the c o st o f new tec h n o lo g y and ad vancements in med ic alkn o wledge , c are and treatment. I n that regard , patients e x p ectth e u s e o f very mo d ern , s o ph istic ated and e x p en s ive tec h n o lo g yto re f ine diagno s is and eliminate unc ertaintie s .

There f o re , to e x amine th e impact o f the med ic al-leg als y stem, th e nec es s ary inqu iry is to what e x tent phy s ic ian s

d irect med ic al e x pens es that are u nwarranted f o r th e treatmento r d iag no s is o f patients , an d are no t mo tivated b y pers o n al

f inanc ial interests . I n o th er wo rd s , an e x pen s e is o nlyattributable to the med ic al—leg al s y stem when th e s o le reas o n

f o r th at e x pens e is c o n c ern by th e ph y s ic ian ab o ut a med ic almalpractic e c laim. There has been no stud y to meas u re thatc o st, and th ere appears to b e no bas is f o r as s uming thatc o mpetent and reputab le phy s ic ian s imp o s e s u c h e x p ens e s up o n

th eir patients with o ut a j u stif iab le med ic al reas o n .

To th e e x tent that phy s ic ians'

c o nc ern ab o ut liab ilityres ults in mo re c o n s c ientio u s med c al c are , th en "d e f en s ivemed ic ine" is c ertainly d e s irab le . When th e f ear o f to rtliability deters med ic al in j uries , then h ealth c are c o sts are

lo wered by avo id ing the c o sts as s o c iated with med ic al in j ury .

Thu s , if liab ility c o n c ern s are a d eterrent, pr o vis io n s thatrelieve phy s ic ian s o f c o nc ern reg ard ing neg lig ent practic es c an

actually res ult in an inc reas e o f h ealth c are c o sts .

Bec aus e n o reliab le stud ies have been d o ne to e stimate th ec o st o f s o -c alled d e f ens ive med ic ine , th e Of f ic e o f Te c hn o lo gyAs s es sment has b een as ked to stud y th e is s u e and is e x p ected to

c o mp lete its study in 1 9 9 4 .

34

HAVE TOR T PR OPOSAL S , WHEN

ENACTED , LOWER ED OVER ALL HEALTH CAR E COSTS ?

It is o ften as s erted that c ap s o n n o nec o no mic damag es and

eliminatio n o f the c o llateral s o urc e rule re s ult in lo wer healthc are c o sts f o r every o ne . I n general, thes e types o f pro p o s als

have b een enacted o nly with in the last ten y ears .‘ I n s u f f ic ient

time has elap s ed , and ins u f f ic ient data has been gath ered tnenable u s to be c ertain o f th e impact o n c o sts o f th e s e p ro p o s

als . Ho wever , f ro m o ur res earc h and study it appears that thes e

pro p o s als have no t had any meas urable impact o n o verall healthc o sts . I n lo o king into th e is s ue we f o u nd that pers o nal h ealthc are s pend ing per c apita appro x imately d o ub led th ro ugh o ut theUnited States f ro m 1 9 82 to 1 99 0 regard les s o f wh ether a statehad enacted "to rt re f o rms " and regardles s o f the type o f"ref o rms " enacted . We develo ped a c hart (attac hed as Append ix

C ) s h o wing the perc entage o f inc reas e f ro m 1 9 82 to 1 9 9 0 in

pers o nal health c are s pend ing per c apita b y state . I t is d e

rived f ro m a February 1 9 9 2 repo rt entitled "Health Care Spend ingNo np o lic y Facto rs Ac c o unt f o r Mo st State Dif f erenc e s ,

"pub

lis hed by the General Ac c o unting Of f ic e (GAO) . Th e GAO rep o rtutiliz ed 1 9 82 data c o mpiled by the Health Care Financ ing Administratio n (HCFA ) and 1 9 9 0 estimates f ro m Lewin / I CF .

As the c hart demo n strates , pers o nal h ealth c are c o stsappro x imately d o ub led f ro m 1 9 82 to 1 99 0 regardles s o f whether a

state had enacted to rt ” ref o rms " and regardle s s o f th e typ e o f"ref o rms " enacted .

Fo r e x ample , bas ed o n the f igures utiliz ed in th e GAO

rep o rt, th e three states with perc entage inc reas es estimated tobe s lightly lo wer than average Arkans as , Kentuc ky and

Mis s is s ippi h ad no c ap s o n damages in med ic al malpractic ec as es . Alabama , with a s lig htly higher than averag e e stimated

perc entag e inc reas e , had a c ap o n damage s . Mas s ac h u s etts and

Calif o rnia , th e two state s with th e h igh est e stimated pers o nal

health c are c o sts per c ap ita , had in plac e a c ap o n damag es .

Our f ind ing s are c o ns istent with o ther stud ies . Fo r e x

ample , in Marc h 1 9 9 3 , the Co alitio n f o r C o ns umer R ights pub

lis h ed Fals e Claims : The Relatio ns h ip Between Med ic al

Malpractic e"R e f o rms " and Health Care C o sts . Th is study f o und

there to be "n o ind ic atio n that enacting maj o r to rt

're f o rms ' is

p o s itively c o rrelated with lo wer health c are c o sts .

" I n f act,

the study f o und that "states with the lo west per c apita e x pend i

tures are mo re likely to have enacted f ewer to rt 'ref o rms '

o verall than th e average .

" R eg ard ing c ap s o n d amage s , th eCo alitio n '

s study c o nc luded as f o llo ws

https://www.forgottenbooks.com/join

36

lien against its in s ured 's rec o very o r purs u e a s u bro g atio n

c laim. Under pro p o s als to eliminate th e c o llateral s o urc e ru le ,

the neglig ent phy s ic ian wo uld g et a c red it f o r the in s urer 's

payment, and th e in s urer c o uld no t rec o ver f r o m the p ers o n wh o

in j ured its in s ured . An o b vio u s c o ns equ enc e o f th e lo s s o f lien

and s ubro gatio n rig hts by a health o r d is ab ility in s urer will be

an inc reas e in th o s e premiums . Wh ere g o vernment pro p o s als pr o

vide s u c h ins uran c e , g o vernment health c are c o sts wo u ld

inc reas e . Th e net res ult is n o redu ctio n in h ealth c are c o stsbut a wind f all bene f it to th e d e f endant med ic al pro f e s s io nal and

h is o r h er ins urer at th e ex pens e o f the in j ured pers o n .

Pro p o s als to limit n o nec o n o mic damag es d eprive ind ividu also f c o mpens atio n f o r th e c o n s equenc e s o f med ic al malpractic ein j uries . No o ne has stated that s u c h in j uries are n o t real o r

s evere . I n f act, no nec o no mic in j uries may f ar ex c eed th e ec o

nomic damag es . The s e pro p o s als , if enacted , wo uld makes erio u s ly in j ured pers o n s wh o are th e least ab le to a f f o rd itrec eive les s than f ull c o mpen s atio n wh ile les s s erio u s ly in j ured

pers o n s wo uld be f ully c o mpen s ated . Th is wo uld be g ro s s lyun j u st.

A b o tto m line is wheth er the ec o no mic bene f its to the

public in reduc ing health c are c o st is s ignif ic ant en o ug h towarrant depriving o th er members o f the public in j ured pers o ns

o f f ull and ad equate c o mpens atio n f ro m th o s e re s p o ns ib le f o r

th eir in j uries . With the c o st o f the entire med ic al-leg als y stem c o n stituting les s than o ne perc ent o f h ealth c are c o sts ,

a pertinent inqu iry is wheth er s u c h pro p o s als wo uld h ave anyn o tic eable impact ex c ept up o n in j ured pers o ns .

Su c h pro po s als wo uld n o t eliminate the le s s than o ne

perc ent o f h ealth c are c o sts attributable to med ic al pro f es

s io nal liab ility s inc e n o o ne s erio u s ly urges that th e med ic al

pro f es s io n s h o uld b e immune f ro m liab ility . R ather , s u c h pro

p o s als are d irected at th o s e in j ured pers o n s wh o are ultimatelyc ompens ated . Th e s e victims o f med ic al neg lig enc e are thes ub j ect o f s uc h pro p o s als . Any s aving s in th e c o st o f healthc are wo uld be a small f ractio n o f a perc ent. Thu s , e ven o n an

e c o no mic analy s is , s u c h pro p o s als , if implemented , will no t ihave

a meas urable impact up o n the c o st o f health c are . Suc h

pro p o s als , h o wever , wo uld impact s everely and dramatic ally up o n

the pers o ns wh o are victims o f med ic al malpractic e .

37

SHOULD ALTERNATI VE DI SPUTE R ESOLUTI ON

BE I NCLUDED I N A NATI ONAL HEALTH ACCES S PR OPOSAL ?

Th e ABA has lo ng s upp o rted th e u s e o f vario u s meth o d s o f

alternative d is pute res o lutio n (ADR ) and was an early lead er in

ad vo c ating f o r its u s e . We en c o urag e pr o vid ing appr o priate ADR

o ptio n s in a natio nal health ac c es s pr o p o s al as an e f f ic ientmean s o f e x ped iting med ic al malprac tic e c laims .

I n 1 9 7 6 , th e ABA c o -s p o ns o red a c o n f erenc e in St. Paul,

Minne s o ta . The c o n f erenc e s o ught to ad dres s two princ ipal tepic s "Wh at types o f d is putes are b est re s o lved b y j ud ic ialactio n and what kind s are better as s ig ned to an o th er mo reappro priate and "Can th e intere st o f j u stic e be b etters erved with pro c e s s e s les s time-c o n s uming and le s s e x pen s ive ? "The c o n f erenc e d is c u s s io n s led to th e app o intment o f a

"Po und

C o n f erenc e Fo llo w-up Tas k Fo rc e ,"

u nd er th e c hairman s h ip o f

J udg e Grif f in Bell. Th e Tas k Fo rc e pu b lis h ed a rep o rt withnumer o u s rec o mmendatio ns f o r j u stic e re f o rm in Au g u st, 1 9 7 6 .

A princ ipal rec o mmendatio n o f the rep o rt is that a varietyo f inn o vative d is pute res o lutio n tec h n iq ue s b e e x plo red

arb itratio n , med iatio n , revitaliz ed and ex pand ed small c laimsc o urts , and th e c o nc ept o f a

"neigh b o rh o o d j u stic e c enter .

"

I n 1 9 7 7 , wh en th e ABA establis h ed its Stand ing C o mmittee o n

Dis pute R e s o lutio n , that s ub j ect was relatively o b s c ure ; h o w

ever , during th e past 1 6 y ears , th e ABA thro ug h its Stand ingC o mmittee and its newly e stablis h ed S ectio n o n Dis pute R e s o lu

tio n , has c hartered the natio n 's d is pute re s o lutio n ag enda . Th e

Multi-Do o r C o urth o u s e , s c h o o l med iatio n and p o lic e d is pute re s o

lutio n pro grams were unkn o wn c o nc epts u ntil after th e ABA 's 1 9 7 6

Co n f erenc e o n Impro vements in the Admin istratio n o f J u stic e .

To day , th e d is pute res o lutio n wo rld is dramatic ally d if f er

ent. Muc h has h appened , in part b ec au s e o f ABA lead er s h ip . The

e x tens ive wo rk o f th e ABA is d es c rib ed in a d o c ument entitled

Co pies o f th e "Blu eprint"

are available up o n requ e st.

The ABA 's Ho u s e o f Delegates has ad o pted f o ur res o lutio n s

relevant to ADR and med ic al malpractic e . The res o lutio n s c all

f o r th e f o llo wing

1 . To pro mo te c o ntinued u s e o f and ex perimentatio nwith ADR , b o th b e f o re and a fter s u it is f iled , as

welc o me c o mp o nents o f the j u stic e s y stem.

(Ad o pted Augu st

38

- 1 0

2 . C o ns istent with the attac hed ABA p o lic y

(Append ix D ) , to s upp o rt the in c reas ed u s e o f ADR

by f ederal agenc ies ,wh ic h inc lu d ed s upp o rt f o r

the rec ently pas s ed Administrative Dis puteR e s o lutio n Act o f 1 9 9 0 . (Ad o pted Augu st

3 . To s upp o rt th e u s e o f arb itratio n f o r re s o lutio no f med ic al malpractic e d is pute s u nd er c irc um

stanc e s wh ereby the agreement to arb itrate is

entered into o nly after a d is pute h as aris en .

(Ad o pted Au gu st

4 . To s upp o rt th e vo luntary u s e o f arb itratio n s o

lo ng as th e parties have f ull kn o wledg e that o n c e

entered into , the arb itratio n panel's d ec is io n is

f inal and b ind ing ; and that arb itratio n panels

s h o u ld c o n s ist o f o ne impartial arb itrato r in"small" c laims c as e s and three arb itrato rs

atto rney , a phy s ic ian , and a layman in larg er

c laims c as e s . (Ad o pted Au gu st

Th e ABA is c o n c erned ab o ut ac h ieving a mo re e x ped itio u s and

ec o n o mic al re s o lutio n o f med ic al malpractic e litig atio n .

V o luntary alternative d is pute res o lutio n , f o r e x ample , has

g ained ac c eptanc e as an alternative to litigatio n . The ABA rec

o gniz es th e imp o rtanc e o f the develo pment and u s e o f ADR meth o d so th er than f ull j ud ic ial trials f o r re s o lving legal d is pute s .

ABA p o lic y s upp o rts the “c o ntinu ed u s e o f and e x perimentatio n

with alternative d is pute res o lutio n tec hn iques b o th be f o re and

after s u it is f iled ,"

s o lo ng as they as s ure that everyd is putant's c o n stitutio nal and o th er legal rig hts and remed iesare pro tected . Of c o urs e , s uc h c o nc epts have equal valid ity in

litigatio n ag ainst any de f end ant, and n o s pec ial j u stif ic atio ne x ists f o r b eing applied o nly in c as es in vo lving med ic alpro f es s io nals .

The u s e o f vo luntary alternative d is pute re s o lutio ntec hniqu es is c o n s istent with th e relevant p o lic y c o ns ideratio nso f attracting to an o verburdened j ud ic ial s y stem the ind epend entand impartial s ervic es and e x pertis e up o n wh ic h that s y stemnec es s arily d epend s . Bes ides relieving c o urt c o ng estio n and

s peed ing up the c o nc lus io n o f c as es , th es e alternative d is puteres o lutio n pro c edures are o ften les s e x pens ive and les s

stres s f ul than s eeing a c as e thro ugh its n o rmal trial path .

Thank y o u f o r g iving u s th is o pp o rtunity to pres ent o ur

views to y o u .

40

- 1 2

An o ther study ex amined wo rkers 'c o mpen s atio n c laims in Cali

f o rnia and f o und that s elf -re f erral inc reas e s the c o st o f

med ic al c are c o vered by wo rkers 'c o mpen s atio n f o r phy s ic al

therapy , p s y c h iatric evaluatio n s ervic es and MR I S c ans .

Swed lo w, Ale x ; J o hn s o n , Greg o ry ; Smith line , Ne il; and

Milstein , Arn o ld ,"I nc reas ed Co sts and R ates o f Us e in the

Calif o rnia Wo rkers ' C ompens atio n S y stem as a R e s ult o f

Self -R e f erral by Phy s ic ians ," Th e New En g land J o urpal o f

Med ic ine , Vo l. 3 2 7 , No . 2 1 No v . 1 9 , 1 9 9 2 , pag e s 1 5 0 2 -1 5 0 6 .

Patric ia M . Dan z o n ,"Liab ility f o r Med ic al Malpractic e ,

"

J o urnal o f Ec o n o mic Per s pectives ,Vo l. 5 , No . 3 , Summer 1 9 9 1 ,

pages 5 1-6 9 . Ms . Dan z o n c o nc ludes that liab ility c o nc erns

have bro ught ab o ut s o me e f f ic ient c hang e s in practic e .

als o d is c u s s e s o ther po s s ible c au s e s o f ine f f ic ient and ih

appro priate de f ens ive med ic ine .

Phy s ic ian s and h o s p itals o ften ben e f it f inan c ially b y

d elivering mo re c are .

I ns uran c e d o es n o t d eter phy s ic ian s f ro m o rd eringadd itio nal tests bec au s e ins uranc e pro vid es f und ing f o r

that wh ic h a patient c o uld n o t o th erwis e a f f o rd .

S o -c alled d e f ens ive med ic ine practic e s o ften have b ec o methe standard o f c are ad o pted by th e med ic al c o mmu n ity , and

re f lect an ad vanc ement in tec hn o lo g y o r c are .

Testimo ny , R o bert D . R e is c hauer , Directo r , C o ng res s io nal Bud getOf f ic e , Statement b e f o re the Co mmittee o n Way s and Means , U . S .

Ho u s e o f R epres entatives , Marc h 4 , 1 9 9 2 , Append ix F, pag e 32 .

Malpractic e"R e f o rms " and Health Care C o sts , prepared f o r the

Med ic al and Ho s p ital Pro f e s s io nal Liab ility ,

"a rep o rt prepared

f o r th e Tex as Health Po lic y Tas k Fo rc e b y To mm and As s o c iate s ,

J uly 1 9 9 2 .

1 9 89 Pr o f itab ility Study (By Line By State ) 1 9 9 0 Pr o f itab ilityStud B ine B State 1 9 9 1 l Pro f itab ility Study (By Line ByState ) , 12 2 2 Pro f itab ility Study , (By L ine By State) , Natio nalAs s o c iatio n o f I n s uranc e Co mmis s io ners , 1 9 9 0 , 1 9 9 1 , 1 9 9 2 and

1 9 9 3 .

Martin L . Go n z ale z "Med ic al Pro f e s s io nal Claims and Premiums

1 9 85 So c io e c o p o mic Characteristic s o f Med ic al Practic e

1 9 9 2 , pag e 2 3 .

42

f. Notices o f intentto sue. screening panels and affidavits o f no n-invo lve

mentare unnecessary in medicalmalpractice actio ns .

g . No justifi catio n ex ists fo ra specialrulego verning malicio us pro secutio n

actio ns bro ughtby health care pro viders againstpers o ns who sued them fo r

malpractice.

h. Trialco urts sho uld scrutiniz e carefully the qualifi catio ns o f perso ns

presented as ex perts to assurethato nlytho se perso ns are permitted to testifywho , by knowledge, skill, ex perience, training o r educatio n . Qualify as

ex perts .

i. Thecollateralso urce rulesho uld beretained;andthird parties who havefurnished mo netary benefits to plaintifi

'

s sho uld be permitted to seek reim

bursemento uto f the reco very.

j . Co ntingentfees pro vide access to the co urts : and no justifi catio n ex ists

fo r impo sing specialrestrictio ns o n co ntingentfees in medicalmalpractice

actio ns .

it. The use o f structured settlements sho uld be enco uraged .

1. Collectio n and study o f data o n the co stand causes o fpro fessio nalliabil

ity claims sho uld beundertaken to evaluateand develo p effectivelo ss preventio n pro grams .

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44

The Pro c es s o f Dec is io n

(l) ggg-tr a A to riar -r i i

sho uld be ro utinely utiliizsto c

punitive danago s prio r to trial. with a savings nachaniaeavailable fo r lara dis c o vary o f niac o nducr s eating the standardo f liability .

(2 ) Il!.

iEvidence o f no two rth and o ther

evidence ralavanr o n o the’ueario o o f punitive daeagaa

o rdinarily sho uld ba nrro duca o nly after the dafandanr‘aliabilit

yfo r c o epanaaro ry denegas and the aeo unr o f tho aa

daeagaa ava baan darareinad .

As a check against enc e s s ive(l) f o gs-I ris}

punitive den s gn avails . ver c ca including such awards sho ulda sub jected to clo aa s c rutiny by rha co urts . the trial c o urt

ustiiied . Enceaaivao aass ho uld o rder raairrirur wherever

sho uld be avaluarad in light o f r a degree o f raprahanaibillryo f rha dafao danr

‘a acra. rha riah undartaban by the plaintif f .

cha actual inj ury caused. the notwo rth o f the defendant.wharhar rha dafao danc ha rafo rs a its co nductand rha da res

o f daparrura fro s typica ratio s as raflacrad in the hasavailabla as piric al data) between co apanaaro and punitivadaeagaa. if nacasaary to as sure such udicia raviawap ro prlara la islario n sho uld be snac ad. Opinio ns iaauad byer al o r a pd i ara c o urra airhar u ho lding o r s o difying as

aw rd sho u d spec ify the facto rs w ich wara c o ns idarad andre lad upo n .

Mu ltiple Judgeen f To rre

while the co ral aeo unr o f an

‘punitive daeagaa

eawardad sho uld be adequate to scco npliah r

lur

zo aea o f

puniriva daeagaa. appro priate safeguards sho u d a put in fo rc e

to pravanr any dafandsnr fro e being subjacrad so unitivadenegas rhar ara as caasiva in rha aggregate fo r r a sane

wro ngful acr.

d . Vic ario u s liabiiigy

with respectto vicario us liabiliti fo r punitivedens gen rha pravi io ns o f lacrio n 90! o f rho lsararaaaerif s candlo f tarts lilil sho uld apply . legislatures and c o urts

sho uld be aanairiva ro ado ptingappro priate aafa wo rds s o

free vicario us l ability fo rpresses the eaarar o r principethe unautho ris ad acts o f no neanagarial servants o r agents .

To Uho n Awards Sho uld ls Paid

in certainpunitive danago s cases . such as to rts

invo lvingp

o s s ible eulrip e j ud nests againstthe eas e

dafaadas a cause c o uld be aur o risad rs darareina what is s

unirive danago s award to c o apanaarareas o nable po rtio n o f thethe plaisri f and c o unsel o r bringing rba actio n and

pro secuting the punitive daeage aisle . with rha balanc a o f the

45

award to be allo cated to public purpo ses . wh ich c o u ld invo lve

netho ds o f dealing with nultipls to rt clains such as

c o ns o lidatio n o f clains o r fo rna o f clas s actio ns . the no veltyo f such pro po sals and the absence o f any adequately testedpro gres s fo r inplensnting require further study bef o re an

n fnrns d j udlnent can he ends as to whether. o r to what errant.

such pro po s e a will wo rb in practice . He urge s uc h studies .

The c o ncept o f public allo catio n o f po rtio ns o f punitive danageawards in single j udgnentactio ns is also wo rthy o fc o nsideratio n to the ex tentwo rkable netho ds o f inplens ntario nnay hereafter be develo ped .

0 . Jo int-and-Several Liability

6. The do ctrine o f j o int-and-several liabilitysho uld be no difiad to rec o nice that defendants who serespo ns ibility is s ubstant ally dispro po rtio nate to liabilityfo r the entire lo s s suf fered by the plaintif f are to be heldliable fo r o nly their equitable share o f the laintiff ‘sno o s c o no s ic lo ss . while renaining liable fo r be plaintiff

‘s

full eco no nic lo s s . d defendanta respo nsibility sho uld beregarded as

“s ubstantially dispro po rtio nate

” when it issignificantly les s than any o f the other defendants ; fo reranple when o ne o f two defendants in detsrnined to be les sthan iiirespo ns ible fo r the plaintif f

‘s inj ury .

r. Atto rnez s'lens

7. fee arrangens nts with each party in to rt cas es

sho uld be s et fo rth in a written a reas o n that clearlyidentifies the basis o n which the se is to be calculated . inadditio n . because nan

!plaintif fs say no t be fanilisr with the

vario us ways that c o n ingeo cy fans sa

ybe calculated . there

sho uld be a requirenantthatthe co at ngency fee inf o rnatio nfo re be given to each laiotif f bef o re a co ntingenc y feea

grees s ntis si

gned . a c o ntent o f the info rnatio n fo ra

s o uld be apesi iad in each j urisdictio n and sho uld include atleast the naninun fee ercnnta e. if any . in the j urisdictio n.the o ptio n o f using di ferant ee percentages depending o n theano unt o f wo rk the atto rney has do ne in o btaining a rec o very .and the o ptio n o f us ing fee percentages that decrease as thesire o f a rec o very increases . the fo rn sho uld be written in

plain tnglish . and . where appro priate. o ther languages .

Co urts ahhuld dis c o ursgn thn‘

prscticn o f taking a

perc entage fan o ut o f the gro s s enc unt o f any j udgnent o r

settles ent. Co ntin no t fees sho uld no r-all bethe net ano unt rec oeersd after liti atio nfiling fees . depo sition c o sts . tria transcripts . travel.espertwitno aa fees , and o ther ex penses neces sary to c o nductthe litigatio n .

9 . Upo n c o nplaint o f a pers o n who has retainedc o unsel. o r who is required to

ga

yco unsel fees . the fee

arrangenentand the fee ano unt i led say be subnitted to theco urt o r o ther appro priate public bo dy . which sho uld have theautho rity to dine lo w. after a hearing . as po rtio n o f a feefo und to be

“

plainly eacesaiva in light o prevailing ratesand practic e s .

46

Sec rec y and Co erc ive A.reennnts

lo . Uhera info rnatio n o btained under sec rec ya

gree-o nto (a) indic ates risk o f haaards to o ther pers o ns . o r

i reveals evidence relevantto clains based o n s uch haaards .

c o urts sho uld o rdinarily rerait disclo sure o f such inf o rnatio n .

after hearing . to o ther p aintif fs o r to go vernnnnt agenc ieswho agree to be bo und by appro priate agreenants o r c o urt o rdersto protect the c o nfidantia ty o f trade secrets and sens itive

pro prietary inf o rnatio n .

ll. No pro tective o rder sho uld c o ntain any pro vis io n

that requires an atto rney fo r a plaintif f in a to rt actio n todestro y inf o rnatio n o r rec o rds furnished purs uantto sucho rder. including the atto rney

‘s notes and other wo rb pro duct.

unles s the atto rney fo r a laistif f refuses to agree to bebo und by the o rder after t a case has been c o ncluded . An

atto rney fo r plaintif f sho uld o nl be required to return c o pies

o f do cunents o btained fro n the ds sndanto n c o nditio n thatdefendant a ro s e no tto destro y any such do cunents so thattheywill be ava lsble. under appro priate circunstancs s . to

go vernns nt agenc ies o r to o ther litigants in future cas es .

if . Any pro visio n in a settles ent o r o ther agreenantthat pro hibits an atto rney tro n representin

gany o ther clainant

in a sinilar actio n against the de endant s o uld be vo id and o fno ef fect. An atto rney sho uld no t be pernittsd to s ign s uch an

agreans nt o r request ano ther atto rney to do s o .

ll. A“fast tracb“ sy sten sho uld be ado pted fo r the

trial o f to rt cases . in rs co nnanding such a systen. we endo rse

a po licy o f active j udicial nanags s s nt o f the pre-trial phaseso f to rt litigatio n . Us anticipate a systen that sets up a

rigo ro us pro-trial s chedule with a series o f deadlines intended

to ensure thatto rt cases are readyto be laced o n the trial

calendar within a spec ified tine a ter fil ng and triedpro sptly thereafter. The c o urts sho uld enf o rc e a firn po lic yagainst c o ntinuancas .

lb . Steps sho uld be taken by t n c o urts o f thevario us states to ado pt pro cedures fo r t c o ntro l andliaitatio n o f the s c o pe and duratio n o f dis c o ver

yin to rt

c as es . The c o urts sh o uld c o ns ider. ano ng o ther nitlativea

(a) At an early s cheduling c o nferenc e . lin itingthe nunber o f interro gato ries any party nay serve. and

establishin the nunber and tine o depo sitio ns ac c o rding to a

firn achs du e . Additio nal disc o very c o uld be allo wed upo n a

sho wing o f g o o d caus e .

(b ) when a

spro priate. sanctio ning atto rney s and

o ther pers o ns fo r abuse o dis c o very pro cedures .

47

ll. Standards sho uld be ado ted s ubstantinll s in ilarto tho se set f o rth in luln ll o f tho eds rnl luls s o f iwilfro c sdure as a nesns o f disco uraging dileto ry n o tio ns practic eand frivo lo us clains and defenses .

lb . Trial j udges sho uld carefully esanine. o n a

cas e-by-c ase bas is . whether liability and o s s aga is s ues c an o r

sho uld be tried separately .

l) . No nunanino us j ury verdicts sho uld be pernittad in

fo rt cas es . s uch as verdicts by five o f air o r ten o f twelveuro ra.

ld . Use o f the vario us alternative dis ute res o lutio neechanis s s sho uld be anc o uraged,

by federal and s are

legislatures by federal and state co urts and by all partieswho are libaly to . o r do bac o ns invo lved in to rt disputes witho thers .

h . in ur Preventio n leduc o n

l9 . Attentio n sho uld be paid to the dis ciplining o fall lic ensed pro fes s io nals thro ugh the fo llo wing neasurest

(a) A c o nnitnentto lapo s s disc ipline wherewarranted . and fundin

’o f full-tins staf f fo r d s ciplinnry

autho rities . Disci i no o f lawyers sho uld co ntinue to be therespo nsibility o f te highest j udicial autho rity in each statein o rder to safeguard the rights o f all c itiaena.

shtin ever

ycase in which a clain o f negligenc e

o r o ther wro ng u co nduct a no de againsta licensed

pro fes sio nal. relating to his o r her pro fes s io n. . ao d a j udgnento r the plaintif f is entered o r a settlesent paid to an in uredpers o n. the insurance carrier. o r in the absence o f a cart o r.be plaintiff a atto rney sho uld repo rtthe factand the ano unto f aynsuc to the licensing a tbo rity . Any agresnenttowit ho ld such inf o rnatio n and o r to clo se the files fron thedisc iplinary autho rities sho uld be unenfo rceable as c o ntrary to

public po licy .

Mas s To rt

20 . The Anerican bar Asso ciatio n sho uld establish a

c o nn is sio n as s o o n as feas ible. including s eabers withex pertise in to rt law. insurance. ao viro saests l po licy . c ivil

pro cedure. and regulato ry design to undertake a c o nprshens ivestudy o f the seas to rt pro bien w th the go al o f o f fering a seto f c o ncrete pro po sals fo r dealing in a fair and ef fic ientnanner with these cases .

Co nc luding lec o nnendatio n

f l. After publicatio n o f the re o rt. the AEA Actio n

Co nnis s io n to laptevo the To rt Liability ysten sho u d bedischarged o f its as s ign-ant.

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55

Mr. BR OOKS . Mr. Keener.

STATEMENT OF R OBER T C . BAKER , PR ESIDENT, AMER ICAN

BOAR D OF TR IAL ADVOCATES , PR ESENTED BY KAR L A.

KEENER , BAKER , SILBER BER G KEENERMr. KEENER . Thank y o u ,

Mr. Chairman , members o f the committee.

Mr. BR OOKS . I kn ow lawyers can’tstay within 5 minutes , but

let’s make a better effo rt.Mr. COR BOY . I was waiting fo r a red light. I apologiz e .

Mr. BR OOKS . Go ahead, Mr. Keener.

Mr. KEENER . Five minutes , Mr. Chairman . My law partner, R obertBaker, natio nalpresidento f ABOTA, the American B o ard o f

TrialAdvo cates , has submitted to this subcommittee his writtentestimo ny .

Atthe time thatMr. Baker requested the o ppo rtunity to testifybefo rethis subcommittee, the hearing date had n otas yetbeen set.Unfortunately ,

he had a lo ngstanding bu siness commitmento utsideo fthe co untry thatco uld notbe canceled.

He therefo re asked me as a member o f ABOTA and as his lawpartnerto appear in his stead. ABOTA is a natio nalasso ciatio n o f

more than prominenttrial lawyers and legal scholarsthro u b o utthe United States . Ourmembership is almo stevenly divided etween lawyers representing plaintiffs and defendants .

In orderto be co n sidered fo rABOTA membership , o ne mu sthavetried atleast20 civilju trials , to verdictand be approved fo rmembership by the lo calc apter and the natio nalbo ard. My partner

, R obertBaker, bro ughtto the presidency o f ABOTA over 20

years o f practice specializ ing in the defen se o f phy sicians in so uthern Califo rnia.

Itis from this perspective thatMr. Baker has presented his opinion s co ncerning the Califo rnia ex perimentwith its pro visio n smosto f which o r many o f which n ow appear in pro po sed Federallegislatio n . I sho uld n ote thatin my firm ,

which consists o f 35 lawyars , the vastmajority o f o ur practice is devoted to defending phySlClanS .

In o ur view ,while Califo rnia’s malpractice refo rms may have

aided in surance companies and to a lesser ex tentsome phy sician s ,ithas been harm fulfo r the victims o f medicalne ligen ce. A s a te

sulto f caps placed o n n o neco n omic damages , and imitatio n s o n atto rney s

’

fees , mo stex ceptio nally competentplaintiffs’ attorney s inCalifo rnia simply willn o lo nger handle medicalmalpractice cases .

Medicalmalpractice cases can take years to resolve and literallytho u sands o f an atto rney

’

s ho urs and dollars . They are n oto rio u slyrisky for a plaintiff’s atto rney to handle, becau se appro x imately 80percento f allmedicalmalpractice cases thatgo to trialare wo n bythe defendants .

They are ex ceedingly ex pen sive to prepare and try . A phy sician’s

co n sentto any settlementis required undertheir in surance policy ,

and thu s the phy sician co ntrols whether o r n ota case is settled o r

tried. An d phy sician s frequently refu se to co n sentto settlementsbecau se o f their fear o f the repo rting requirements o f the medicalboard o f California and the Natio nalPractitio ner Data Bank.

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As a result, tho se attom e s who cho o se to handle malpracticecases co ncentrate o nly o n to se cases thathave high eco n omicdamages asso ciated with them , such as the brain damaged baby ,

o rthe wro ngfuldeath o f a significantwage earner.

The end resultis thatpatients wh o suffer n o ncatastro phic injuries are effectively leftwitho utrepresentatio n . This is particularlytrue o f homemakers, low-wage earners, and senio r citiz en s .

If b settling , a physician is going to be repo rted to the Natio nalPractitio ner Data Bank and/o r the medicalbo ard, he o r she hasvery little to lo se by pro ceeding to trialwhere there is an 80 percentchance o f winning .

In H.R . 3600 there is the repo rting requirementthatallows thepublic to obtain access to info rmatio n co ntained in the NationalPractitioner Data Bank. In addition , there are provisio n s for ADRpro cess thro ugh which co n sumers are required to firstattempttoresolvethe claim .

Similar to the situatio n in Califo rnia under MICRA, these twoprovisio n s wo rk atcro ss-purpo ses . First, mandato ry ADR is ve

ex pen sive fo r both sides , and either side can o ptto go fo rward withe litigation . If the patientwin s, the physician has little to lo seby seeking the jury trialto which he o r she is entitled.

Ifthe C o ngress is intento n enacting malpractice refo rms , and weho pe yo u are n ot

,which in clude mandatory re o rtin to the Na

tio nalPractitio ner Data Bank , then we submittatthis committeesho uld co n sider in co rpo rating a provisio n requiring thato nly settlements o r verdicts in ex cess o f need be repo rted.

This wo uld resultin far m o re phy sician s co n sentingto settle

ments o f the more min o r cases and thereby remo ving a arge number o f lawsuits from an already o verex tended judicialsy stem .

With health care co sts in the United States running in ex cess o f

$800 millio n annually and malpractice insurance premiums representing less than 1 percento f that, alleged malractice refo rm isn otthe an swerto redu cing health care co sts in te United States .

Itis o ur view , based upo n a significantamo unto f ex perience inCalifo rnia with the M ICRA ex periment, thatthe pro po sed medicalmalpractice refo rms now under co n sideratio n by Co ngress will, infact, resultin mo re medicalmalpractice cases going to trialatsubstantially increased co st. Itwillalso resultin m ore victim s o f medicalnegligen ce being denied access to o urju stice sy stem .

If time permits later, I wo uld be happy to give y o u a number o f

ex amples o f why I believe these o pinio n s have been pro ven thro ugh15 years o f ex perience in Califo rnia.

Thank y o u ,Mr. Chairman .

[The prepared statemento f Mr. Baker follows z]

57

TESTIMONY OE

ROBERT C . BAKER

PRES I DENT, AMER I CAN BOARD OF TR I AL ADVOCATES

PRESENTED BY

MEMBER , AMER I CAN BOARD OF TR I AL ADVOCATES

BEFORE THE

SUBCOMMI TTEE ON ECONOMI C AND COMMER CI AL LAW

COMMI TTEE ON THE JUDI CI ARY

U . S . HOUSE OF REPRESENTATI VE

JUNE 2 2 , 1 994

I am R o bert C . Baker, Natio nal Pres ident o f the American B o ard o f

Trial Advo c ates . I am a Senio r Partner in the f irm o f Baker , Silberberg

Keener , lo cated in Santa Mo nica , Calif o rnia.

The American Bo ard o f Trial Advo cates (ABOTA ) is an o rganiz atio n o f

o ver 4 000 distinguished litigato rs from all 5 0 states . We are unique in

that o ur members hip is almo st evenly divided between lawyers repres enting

plaintif f s and lawyers repres enting defendants . The c omp o s itio n o f ABOTA 's

membership ins ures that its po sitio n o n such is s ues as medical malpractic e

ref o rm is balanc ed . ABOTA members have a distinctive understanding o f the

c ivil j ustic e s y stem, s ince a lawyer must have tried 2 0 c ivil j ury trials

to verdict, in o rder to be even c o ns idered f o r membersh ip in o ur

o rganiz atio n .

The maj o rity o f my pers o nal practice f o r the lasttwenty plus years

has been devoted to defending phys ic ians atthe request o f their medical

malpractic e ins urance carrier . I ndeed , my f irm generates mo st o f its

inc ome thro ugh the def ens e o f phy s icians atthe request o f medical

malpractic e ins urers .

58

To day , I wo uld like to g ive y o u my o pinio n , as a lawyer wh o repres ents

the health industry notthe plaintif f , o n ho w medical malpractic e ref o rm

has af f ected malpractic e litigatio n in Calif o rnia . This s h o uld be

imp o rtantto this Committee 's c o ns ideratio n s inc e many pro p o nents o f

malpractic e ref o rm c ite the Calif o rnia law as suc c es s ful ref o rm and have

inc o rp o rated many o f its pro vis io ns in pro po s ed f ederal legislatio n .

As y o u may recall the “HI CRA' limitatio ns were pas s ed by the

Calif o rnia Legislature in 1 97 5 and were held c o nstitutio nal by the

Calif o rnia Supreme Co urt in almo st all particulars in 1 984 and 1 985 . we

have had , theref o re , appro x imately 1 0 years o f e x perienc e with alleged

malpractic e ref o rms .

I n my view, th o s e malpractic e ref o rms have aided ins uranc e c ompanies

and phy s ic ians ,. but have , to a s ignif icant ex tent, been detrimental to

pers o ns inj ured by medical negligence . As a res ult o f c aps o n damages , as

well as limitatio ns o n atto rney s' f ees , mo st o f the ex ceedingly c ompetent

plaintif f 's lawyers in Calif o rnia s imply will nothandle a medical

malpractic e cas e . This is a f act, and letme ex plain why .

First, the c o ntingent f ee allo ws acces s to the c o urts f o r th o s e wh o

lack-the means to pay a lawyer's h o urly fees .

’

It pro vides a clientthe

means to f inance litigatio n with funds es s entially bo rro wed f ro mthe

lawyer . I f the lawyer lo ses the cas e it is as if he o r she made a bad

lo an .

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60

There are entire categ o ries o f cas es that have been eliminated s inc e

malpractic e ref o rm was implemented in Calif o rnia . The victims o f c as es

that have a value b etween and are bas ic ally with o ut

repres entatio n . As an ex ample , incidents o f f ailure to diagno s e an

appendic itis still o c cur , but s uits are not f iled to any ex tent in

Calif o rnia . The reas o ns f o r this are s imple

(l) 80% o f medic al malpractic e cas es that g o to trial are wo n by the

def endantmedic al practitio ner;

(2 ) Medical malpractic e c as es by their very nature are ex pens ive .

(3 ) Phy s ic ian s in Calif o rnia , as in virtually all states have the

ability to withh o ld c o ns entto s ettle and , theref o re , the phy s ician s

c o ntro l whether a c as e is s ettled o r g o es to trial:

(4 ) Phy s ic ians in Calif o rnia are required to rep o rtmalpractic e

s ettlements to the Medic al Bo ard o f Calif o rnia .

I f , by s ettling , a phy s ician is to be rep o rted to the Medical Bo ard ,

he o r s he has very little to lo s e by pro c eeding to a trial where the

c hanc es o f s u c c es s are sat. They are in no wo rs e p o s itio n pro f es s io nally

if they lo s e than they wo uld be by being rep o rted to the Medical Bo ard .

Under th o s e c o nditio ns , given the ex pens e to the plaintif f and the

plaintif f ‘s atto rney , cas es in the $50 , o o o-sis o , o o o range are rarely f iled .

On the other hand , o f the medical malpractice cas es f iled , a f ar

greater number will pro c eed to trial, as o ppo s ed to being s ettled . I n

Calif o rnia a s ignif icantly higher perc entage o f medical malpractic e c as es

g o to trial -the c o stly alternative -than any other type o f cas e .

61

Medical malpractic e premiums have not diminis hed in Calif o rnia as a

r esult o f MI CRA , no r to my kno wledge have they in any state that has

enacted alleged medic al malpractic e ref o rm. There c an b e little d o ubtthat

with c ap s o n pain and s u f f ering and limitatio ns o n atto rney s' f ees there

are f ewer c as es being f iled (alth o ugh , as stated , o f th o s e f iled mo re g o to

t r ial) . I b elieve thes e realities c o nf irm the studies c o nducted els ewhere ,

whic h as s ert that damages rec o vered f rom litigatio n are no t unwarranted no r

are they a prime c au s e f o r high malpractic e premiums .

A Harvard study1 in 1 99 0 f o und that o f mo re than victims o f

o ster negligenc e , f ewer than o ne in eight f iled s uit, and les s than 40% o f

0"n o s e victims , o r 5 % o f the total, rec o vered c ompens atio n . A mo re

omprehens ive study2 by Pro f es s o r Neal Vidmar at Duke Univers ity S ch o o l o f

Law bro adly ex amined malpractic e litigatio n in No rth Caro lina and f o und o f

t he nearly 9 00 cas es that were f iled in a three-year perio d in No rth

Caro lina , 4 0% were terminated with o ut paymentto plaintif f , s otres ulted in

a s ettlement, and lotwere eventually decided by a j ury .

The plaintif f s in j ury cas es prevailed in o ne o ut o f f ive times , which

is appro x imately the natio nal average . There were o nly f o ur large award s

o ut o f th e 1 1 7 c as es that wentto trial and the median award o f th o s e 1 1 7

laws uits was

1Patients , go cto z s , and n yg z g ; Megigal I nj g gy , Malpgagtige

i a'

o d e s e New o a rep o rt by the

Harvard Medic al Practic e Study to the State o f New Yo rk

2Neil Vidmar,” The Un fair Critic ism o f Medic al Malpractic e

J uries ,"gggiggtg x g , Octo ber-No vember 1 992 , Vo l. 7 6 , No . 3 .

. 62

I n M. R . 3600 there are pro vis io ns f o r an alternative dis pute

es o lutio n pro c es s thro ugh which c o ns umers are required to f irst attemptto

res o lve the claim. I n additio n , there is the repo rting requirementthat

allo ws the public to o btain ac c es s to inf o rmatio n c o ntained in the Natio nal

P ractitio ner Data Bank .

Similar to the s ituatio n in Calif o rnia in which the phy s ician has

little incentive to s ettle , thes e two pro vis io ns wo rk at cro s s-purpo s es s .

P irst, mandato ry ADR is very ex pens ive and will c o stthe plaintif f s and the

plaintif f 's atto rney s , as well as the defendants and their insurers ,

c o ns iderable mo nies with which to c omply . Bowever, the chanc es o f s uc c es s

o f ADR are ex c eedingly diminished by the repo rting requirements to the

Natio nal Practitio ner Data Bank .

I n other wo rds , if a phy s ic ian wins the ADR , and the patient o pts to

g o no further, then o bvio us ly the dispute between the patient and the

phy s ic ian wo uld end . I n the alternative , if the patientwins the ADR , the

phy s ician has little to lo s e by seeking the j ury trial to which he o r s he

is entitled . Unles s s ome s o rt o f repo rting flo o r is established , the

alternative dispute res o lutio n pro c es s , in my o pinio n , will not eliminate a

s ignificantnumber o f disputes .

63

I f the Co ngres s is intent o n enacting malpractic e ref o rms which

include the mandato ry repo rting to a Natio nal Practitio ner Data Bank , th en

th is c ommittee s h o uld c o ns ider inc o rp o rating a pro vis io n requiring o nly

th o s e health c are pro viders that s ettle , o r incur verdicts and/ o r

j udgements in e x c es s o f to rep o rtthe matters to the Natio nal

Practitio ner Data Bank . This , in my view, wo uld res ult in f ar mo re

phy s ic ians c o ns enting to s ettlements o f the mo re mino r cas es , thereby

remo ving a large numb er o f laws uits from o ur already clo gged j udic ial

s y stem.

It is my o pinio n thatmalpractic e ref o rm has notwo rked in Calif o rnia

f o r the inj ured victims o f medical negligenc e . Phy s ician gro up s rep o rt

thatth ere has been no reduc io n in their medic al malpractic e premiums . As

the numb er o f cas e f iling s has diminis hed and d o llar amo unts o f award s have

dec reas ed , o ne can as s ume medical malpractic e ref o rm is benef itting s ome

entity , but itmo st c ertainly is not b enef itting the average c itiz en in o ur

c o untry .

with health care c o sts in the United States running at $800 b illio n

annually , and medical malpractic e insuranc e running aro und $6 billio n -les s

than lt, alleged medical malpractic e ref o rm is notthe answer to reduc ing

health care c o sts in the United States . I n my ,view, this c ommittee c o uld

d o mo re to as s istthe American public by lo o king at s ome o f the real c o sts

that are incurred in the delivery o f health c are in o ur c o untry .

64

One wo uld n o t have to lo o k bey o nd the mo st f requently perf o rmed

s urgery in the United States -the implantatio n o f intrao cular lens .

f ifteen-minute o peratio n may be perf o rmed by a phy s ician anywhere f rom 6 to

2 0 times a day f o r which the charge may be o r higher per o peratio n .

That s ame pro c edure in an o utpatient h o spital s etting will c o st in ex c es s

o f The intrao cular lens that is implanted by the phys ic ian may

have appro x imately three to f o ur c ents o f plastic in it and c o stthe

h o s pital 51 00-52 00 . As o f the early 1 9 90 's , the United States g o vernment

was pay ing mo re f o r the implantatio n o f intrao cular lens es than f o r the

ne x t f o ur mo st f requently perf o rmed o peratio ns c ombined .

An other ex ample o f real c o sts is the pro liferatio n o f ex pens ive CAT

and MR I machines . I n the City o f Santa Mo nica where I practice there are 7

MR I machines which are mo re than in the entire c o untry o f Canada . Becaus e

o f their pro lif eratio n thes e wo nderful but ex pens ive machines are under

utiliz ed . As a res ult, the c o st o f the diagno stic tests have g o ne up in

o rder to c o ver the c o st o f the machine .

To c o nclude , it is my view, bas ed o n a s ignif icant amo unt o f

e x perienc e in the Calif o rnia ex periment, that a reductio n in health care

c o sts is not g o ing to be achieved by s ome o f the far-reaching medical

malpractice ref o rm pro p o s als now being c o ns iderid by the Co ngres s . What

will o c cur is that victims o f medical negligence will have a decreas ed

o ppo rtunity f o r redres s .

Thank y o u .

65

Mr. BR OOKS . Ms . Wittkin .

STATEMENT OF LAUR A WITTKIN, EXECUTIVE D IR ECTOR ,

NATIONAL CENTER FOR PATIENTS’R IGHTSMs . Thank y o u . I am Laura Wittkin . I am the ex ecutive

director o f the Natio nalCenter fo r Patients’ R i hts , which is a

medicalmalpractice victim and patients’ rights a vo cacy and suppo rtgro up . I am also a survivo r o f malpractice.

Thank y o u fo r inviting me to testify abo utthe impacto f medicalmalpractice o n o ur health care sy stem . Befo re I begin ,

I wo uld ju stlike to say thatI am reco vering from some dentalsurge so I amspeaking a little mo re slo wly than I n o rmally w o uld, so p ease bearwith me.

I wo uld like to address malpractice from three perspectivesto day : the emotio naltoll

, the disparity between malpractice mythand reality ,

and fi nally , the administratio n’

s respo n se to this silentpublic health epidemic .

Medicalnegligen ce is the Natio n’

s third leading cau se o f preventable death . One ho spitalpatientdies every 6 minutes in this co untry from malpractice, and thattran slates to deaths and

serio u s injuries each year as a resultof malpractice. Andthatis based o n the Harvard Medicalpractice studItis simply in comprehen sible to me h ow a problem o f this ma

nitude has been i o red by each and every administratio n whiethe plight o f rea malpractice victims has been ridiculed andmo cked. As a victim o f malpractice,

I have been leftwith lifelo ngdisability and a co nstantly painfulreminder o f whathappen s whenthe public is leftunprotected from incompetentand dangero u s do cto rs .

My case was in Califo rnia and was tried under M ICR A,which

is theMedicalIn'

ury Compen satio n R efo rm Act, so I am perso nallyvery familiar wit how crueland dehumaniz ing and regressive thatto rtrefo rm is .

Itis refo rm which do es n othing butpunish victims and rewardwro ngdo ers . Yet, itis the same antico n sumer actthatpro vides theframewo rk fo rthis administratio n’

s malpractice refo rms .

As a patientadvo cate, mo sto f my time is spentdealing with theflo o d o f calls and letters we getfrom families and victims alloverthe co untry who are desperate fo r help , fo r an swers and abo ve all,fo r acco untability .

And to ask o u allto imagine whatitis liketo walk in o ur sho es ,itis to o cruefa request

,I think

,butsomehow we mu stbegin to

reco gniz e thatmalpractice victims are mo re than abstractstatistics . They are y o ur neighbo rs , they are y o ur friends , they are o ur

families , they are y o ur co n stituents,the peo ple thaty o u are ere

to representand protect.Mu ch o f the malpractice to date has been eclipsed by o utrageo u s

myths perpetuated by the medicalestablishment, butletme give

y o u some facts to dispelth o se myths and setthe reco rd strai ht.We do n

’

thave to o many lawsuits in this co untry . We have to o ew .

M o re than 90 percento f victims never bring law suits . Negligentdo cto rs already geta free ride o n the sho ulders o f tax payers whoare fo rced to pay $60 billio n a year to pro vide care and services fo r

victims thatare already currently locked outo fthetortsystem .

66

States thathave ado pted the refo rms thatare being discu ssedhere today have allfailed to realiz e any o f these so-called benefitsthatthe administratio n keeps talking abo ut, whether itis increased access to care o r redu ction in health care spending fo r a

State, and acco rding to an u pcoming Office o f Techn olo gy Assessmentstudy , the currentliability sy stem is n otrespo nsible fo r runaway defen sive medicine practices in this country .

The OTA fo und thatboth the AMA and Lewin studies , which arebeing u sed by everybody in evaluating the defensive medicineissue, are unreliable, inaccurate, and based o n empirically un soundevidence. They fo und thatphy sicians rarely perform tests thatwilln otbenefita patientand thatmu ch o f whatis mistakenly calleddefensive medicine is in factso und medicalpractice .

OTA further concluded thatwhile to rtrefo rm may lower premiums and phy sician’

s an x ieties , itwilln othave any effecto n defen sive medicine spendin in this country .

And finally , su ccessfu frivolou s defenses by doctors who are

guilty o f malpractice far o utnumber po ssible frivolo u s lawsuits byplaintiffs by a staggering 12 to 1 ratio. Six ty percento f indefensiblecases are wo n by defendantdo ctors attrial, and thatis outrageous .

Fo r some reaso n though , these and many other facts which are

in my written testimo ny and which have been shared with theWhite Ho u se o n co untless o ccasio n s have been ign o red

'

by this administratio n . In stead, their pro po sals punish both medicalco nsumers and victims alike and do nothing to safeguard the delivery o f

quality health care.

Fo r ex ample, the eliminatio n o f the collateralsource rule redu cesthe value o f the case, makes itmore difficultfo r victims to bringsuit, and italso creates a hidden tax o n both emplo yers and healthcare con sumers who are forced to pick up the entire billfo r allo fthe collateralsources, collateralsource benefits thatthese victimsare entitled to .

Periodic paymento f an award reduces the value o f a case and itlets the wro ngdo er geto ff cheap by purchasing an annuity fo r a

fractio n o f the award amo unt. An d the idea o f impo sing caps o n

n o neco n omic damages in additio n to these other ho rrendo u s propo sals is absolutely unthinkable.

Allvictims wh o are serio usly injured would be devastated bysuch a cap , and in additio n to that, o ur po o r and o ur elderly , who

are already far more dependento n the co ntingency fee system becau se they do n’

thave significantcompensable medicalex pen ses o re

go nomic lo sses , willbe virtually lo cked o utif y o u impo se any kind

0 a cap .

Nobo dy is go ing to argue abo utthe need fo r health care refo rmin this country . Butthese refo rms do nothing butcreate a mo redangero u s and co stly health care enviro nment. We need a sy stemthatis builtaro und n oto nly co stand access , butquality and medicalmalpractice preventio n , and o ur o rganiz atio n has pro vided a

number o f recommendatio n s . I wo uld be happy to discu ss themafter every o ne has testifi ed, if y o u like.

Mr. BR OOKS . Thank yo u very mu ch .

[The prepared statemento fMs . Wittkin follows zl

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68

Itis alarming thata problem o f this magnimde can be ignoro d by this and every other

administratio nto date. Instead o fattackingthepro blemhead-o n, they haveallcho sen, instead,

to turn ablind eyeto this epidemic andthe plighto f itsmillio ns o f victims .

Thanksto ahighly effectivemedicalindustry campaignwhichmalicio usly and falsely stereotypes

malpractice victims as greedy , co nniving parasites feeding o ff o f the system by persecuting

“

powerless"do ctors forfinancialgain, therights o fvictims and o fallmedicalco nsumers inthis

co untry have been dealtacrushing blow.

Wemustmo vebeyo ndmerhewnc o f nch and powafinmteren grwpsmdmly o nthewu lth

o f empifi cfl smdiesmatshow m mno fm d media lsymmwhich pmm infuim md

subsmndmdm . Thu symemia ronsibk fmtheM smd injufies o f nafly ah lfmfllim

care has o n o urnatio n’

s heelth eere systemas awhole.

IM W wex aminemc mlpu cdoeismefibmthreediffaentpu specfives.

‘

I'

hefirst, isthe

emofimfl impea o fmis qfidennc . 1hen o ond, ismediw hy bawemflmmydB andm fifies

o f the medicelrnalpractice symem. And thethird, is the Administntion’

s reqiosseto the

69

As avictim o fmedicalmalpractice, I amleftwith alifelo ng handicap andthe co nstantly painful

remindero fwhathappenswhenthepublic is leftunprotected againstincompetentand dangero us

do ctors .

My malpractice case was tried in Califo rnia eightyears ago under the Medical Injury

Compensatio n Reform Act, otherwise known as MICRA . Under MlCRA I ex perienced ,

firsthand, the crueland dehumaniz ing effects o f regressive to rtrefo rm which rewards the

wro ngdo erand punishestheirvictims by callo usly limitingtheirlegalredress and compensatio n.

Unfortunately,itis this anti-co nsumer Actwhich pro vides the framewo rk fo r the Chilto n

Administratio n’

s liability refo rm pro po sals.

My own life-threatening ex periencewithmedicalmalpracticeledmeto fo rmtheNatio nalCenter

fo rPatients’

Rights (CPR ) , thelargestadvo cacy and suppo rtgro up o f its kind,where mo sto f

my day is spentrespo nding to the o verwhelming flo o d o f calls and letters we receive from

medicalmalpractice victims and their lo ved o nes who are desperately crying o utfo r help,

answers understanding, compassio n and, abo ve all, acco untability .

The familiesthatreach o utto ouro rganizatio n aretrying valiantly ,tho ugh o ften unsuccessfully,

to copewiththe senseless lo ss o f a child, the unfimely death o f a spo use o rparent, permanent

crippling injuries orunbearablepain and suffering which ro b victims o ftheirdignity and quality

o f life, and o ften leave entire ho useholds shattered in theirwake.

70

Inthelastmo nth , every network news show has aired a sto ry o n adifferentaspecto f medical

negligenceand unfortunately, they haven’

teven scratchedthesurfaceo fthis eno rmo us pro blem.

Someo ne suggested thatI give yo u specific ex amples o fthetypes o f sto ries I hear, butI just

do n'

tknow whereto begin. Do I talk abo utthe o verwhelming pro blem o f managed care and

the alarming odds apatientin thattype o f setting takes o n justbeing misdiagno sed.

Ordo I tellyo u abo utthe many mothers who callme becausetheir children were killed by

doctors who justwo uldn’

tlisten to the very realsymptoms the child was complaining o f.

Or, perhaps, I sho uld reco untthestories o fthemyriad o fmedicalpractitio ners, bethey do ctors,

nurses orlabtechnicians, who , o newo uldthinkwo uld beprepared forany and allemergencies,

yetare, themselves pawns, justas allAmericans are, whenthey becomepatients in ourmedical

system.

Allo fthe stories lhearare horrifying and heartbreaking and mo sttypify theplightand human

tollmedicalmalpracticetakes o n us all. To even ask yo uto imagine yo urselves intheir sho es

wo uld beto o cruelarequest. Butsomehow yo u mustbe convinced that deaths and

morethan serio usdisabling injuries aren’

tjust they areyo urneighbors , yo ur

friends, your they are yo ur co nstituents, the people you are hereto representand

71

Yo umustunderstandthatintheface o f suchtrueand sometimes interminablesuffering ,wehave

become sick and tired o f hearing abo uthowmuch do cto rs arethe o nes suffering fromthethreat

o f malpractice litigatio n. And we are tired o f hearing how sleepless theirnights are. No

do ctor’

s liability anx iety can everbegin to compareto the reallifepain , lo ss ordeath suffered

by hundreds o ftho usands o fmedicalmalpractice victims andtheirfamilies inthis co untry each

and every day .

TheMYTHS abo utthemalpracticesystem, whichhavebeen carefully propagated bythemedical

industry and now embracedbytheClinto nAdministratio n, aresimply o utrageo usand gro undless:

MYTH : Themedicalmalpracticeliability system is o verwhelmed by ex cessive and

frivolo us lawsuits .

MYTH: Lawsuits resultin o utrageo us jury awards, ex cessive plaintiff atto rney fees,

and do nothing to deterpo o rcare.

MYTH: Theliability crisis and high premiums are respo nsible fordecreased access to

care, runaway health care spending , and defensivemedicine practices .

. 72

Permitme to setthe reco rd straightwith the follo wing facts (mo sto f which belie the

medicallo bbies'

self-ano inted '

status as'victims ' o f the medicalmalpractice system) :

FAC T:

FACT:

FACT

The currentmedicalmalpractice systemactuallym t;themajo rity o f victims

(9096) from bringing lawsuits , and mo stvictims who receive awards are

W based o n the severity o ftheirinjuries.

The liability system as itex ists today , already gives negligentpractitio ners and

pro viders a free ride o nthe backs o fthe American tax payers . It’

s thetax payers

who fo otthesim mmnj glmbilleach yearto pro vide careand servicesto the

hundreds o ftho usands o f victims who have been lo cked o uto fthelegalsystem.

Acco rding to Dr. Tro yen Brennan, co—autho r o fthelandmark Harvard Medical

Practice Study ,"this fi gure o f $60 billio n is largerthan the combined estimates

o ftheco sts o fmedicalmalpracticepremiums billio n) and defensivemedicine

(510 520

Stateswhich haveado ptedto rtrefo rms similarto o nes o utlined intheClinto n Bill,

have failedto realiz eany o fthe so-called benefits this Administratio n claimsthey

have, such as : savings to the health care system, increased accessto health care,

mo re affo rdable care, o rareductio n in“

so -called“ defensivemedicine spending

and"frivolo us” lawsuits by plaintiffs . The Administratio n,

no netheless , insists

o n pushing the American people down this misguided path .

FAC T:

73

The malpractice liability system is notrespo nsible fo r runaway”

defensive

medicine”

practices . A so o n to be released Study o n Defensive Medicine and

MedicalMalpractice, bytheOffice o fTechno lo gy Assessment(OTA) fo undthat

boththeAMA and lewin Studies o n defensivemedicine spending are inaccurate,

unreliable and notbased o n empirically so lid evidence. (Yet. these defensive

medicine studies are stillused as o ne o f the primary justificatio ns fo r natio nal

liability reform. )

OTA also fo und thatphysicians rarelv perfo rm tests thatwillnotbenefit

patients , and thatmuch o f whatis mistakenly characteriz ed as"

defensive

medicine"

practices is, in fact,m g medicalpractice. OTA co ncludedthatwhile

to rtrefo rm may lowerpremiums and aphvsicran’

s anx iety , itwillnoteffectthe

practice o f defensivemedicine.

These findings were echo ed in an earlierCo ngressio nalBudgetOffi ce R epo rto n

Health Care R efo rm,which stated thateven if medicalmalpracticeliability were

refo rmed,

"much o fthecarethatis commo nly dubbed

"defensivemedicine" wo uld

pro bably co ntinue to be pro vided fo r reaso ns other than co ncerns abo ut

malpractice.

FACT:

FACT:

FAC T:

74

Theto rtsystem DOES deterpo o rpractices . Acco rding to Dr. Tro y Brennan o f

the Harvard Study team,recentempiricalanalysis do ne atthe ho spitallevel

fo undthatas liability claims increased per discharges, therisk o f negligent

injury forpatients decreased. To quoteDr. Brennan, this isthe firststatistically

significantevidence thatthere is a deterrenteffectasso ciated with malpractice

litigatio n. Itsuggests thattortlitigatio n,with allo f its warts , no netheless

accomplishesthe task fo rwhich itis primarily intended, thatisthepreventio n o f

medicalinjury'

.

Successfulfrivolo us defenses by do ctors, lawyers and insurance companies FAR

OUTNUMBER'

po ssible'frivolo us plaintiff

's verdicts by a staggering ratio o f

according to alandmark study by the American College o f Physicians ,

published in the Annals o f InternalMedicine, No vember 1992 . The study

fo undthatdo ctors currently win appro x imately 601»o findefensiblecases attrial,

compared to as few as 5% plaintiff wins in so -called defensibleeases .

Victims o f malpractice are forced to waityears for redress and compensatio n

while insurance companies and defense attorneys, driven by their own financial

self-interests , sypho n o fftheirpro fits through investmentearnings and uncapped

and o utrageo usly high ho urly defense fees forhandling such cases Allo fwhich

are respo nsible fo rdriving upthe co sto fthemedicalliability system.

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76

2 . Develop a natio nalenforcementsystem fo rrepeatmalpractice o ffenders .

Iro nically, Mr. Magaz inerevenwentso farasto statethattheAdministratio n believed

thatdo ctors who commitmalpracticemice sho uld permanently lo setheirrightto

practicemedicine in this co untry .

3. And lastbutnotleast, to ensurethatvictims receivethe awards thatthey

deserve both in no n-eco no mic and eco no mic damages , while limiting all

attorneys fees (defense fees, as well, as plaintiff fees) .

ButtheAdministratio n delivered justthe oppo site o fwhatMr. Magaz inerpromised. Almo stall

o f the liability reform propo sals in the Clinto n Plan harm, punish and discriminate against

medicalco nsumers and victims o f malpractice, and do absolutely nothing to safeguard the

delivery o f quality health care inthis co untry .

Nowhereismepowa o fme nwdicalandmaumcelo bbies mmeevidemm mdu m o fmis

Bill. Aldto ugh PresidemClmwn begins by admitfint he eo sto f nwdia lnnlpracfice

accounts forless than 2 % o f ournatio n's health care bill. Somehow, fromthis

'less thantwo

percentthreat'

co nleslegislatio nwhichvimlally annihilates patients’

recmrrseinthetortsystem,

allows negligentdo ctors to sleep betteratnight.

77

FOUR o fthese pro po sals areparticularly tro ubling :

Eliminatio n o f Co llateralSo urce R ule:

This reformrequires thatallvictims’

awards be auto matically reduced by any pastor

futurehealth care,so cialservice, emplo ymento rotherbenefits they may beeligible fo r.

However, there is no way to guaranteethatallo f a victim’

s medicalneeds willbe met

in aspecific health careplan, orthatthey will, automatically inthe futurequalify fo rand

receive other co llateralbenefits. Also , the reducing o f awards by collateralso urces ,

instead o f allowing forsubrogatio n, devalues a case. making itless eco nomically viable

forattorneysto take.

The netresulto f this pro po salis the further victimiz atio n o f patients harmed by

substandard careand ahidden health caretax o n emplo yers and alltax payers, because

they'

are the ones who wo uld be forced to pick-up the billfor allcollateralso urce

Thisreform states that, instead o f paying o utthe entireaward upfro nt, eitherparty may

requestthatl'

theaward bepaid outo ver-

aperiod o fmalty years ors“

lifetime. This pro po sal

is yetanotherex ampleo fthe cruelte—victimizatio n o f patients harmed by po o rcare, because

o nly DEEENDANI S (and theirinsurance carriers) wo uld evermakethis request.

78

Itallowsthewro ngdo erto purchasean annuity fo rafraction o f co sto ftheaward (abo ut

the co st) , investmuch o fthatmo ney , and doleito utto thevictimbit-by-bito verthe

c o urse o fthe victim'

s lifetime.

This effectively shacklesmalpracticevictims andtheirfamiliesto an endless bureaucratic

system and deprives them o f theiraward . And, if the victim dies BEFOR E allo f the

award is paid o ut, the unpaid medicaland eco nomic lo sses go back into insurance

company co ffers, NOTto the victim’

s family .

0

Periodic payments also reducethe o verallvalue o f cases, again , creating a financial

disincentive fo ratto rneys to taketho se cases o n .

Alternative Dispute R eso lutio n Mechanisms (ADR ) :

This reform wo uld require thatallmalpractice claimants firstsubmitto some form o f

no n-binding arbitratio n, mediatio n orearly settlementpro cess PRIOR to pro ceeding with

amalpractice actio n. Becausethere is NO incentiveto resolvethe case, this propo sal

wo uld simply drag o utmalpracticecases , cause furtherharmto the victims, and incrmse

theco sto flitigation. The only effectiveADR mechanismwhichwould, in fact, ex pedite

cases and reducethe co sto f litigation wutwhich is, unformnately , NOT parto f the

Clinto n Plan) , would be binding arbitratio n forlow-end cases, atthe discretio n o f the

plaintiff ONLY.

79

Practice Guidelines as a Defense:

This refo rm wo uld establish a pilotpro gramto testthe use o f practice guidelines as a

DEFENSE in medicalmalpractice cases . This pro po salis o ne-sided and gro ssly unfair,

because evidence abo utcompliance with guidelines co uld o nly be introduced atthe

discretio n o fthe DEFENDANT.

Thedefendantwo uld beableto literally pick and cho o setho se cases in whichthey wish

to introduce evidence o f compliance with practice guidelines, whilethe plaintiff wo uld

be pro hibited from introducing evidence abo utthe FAILURE to follow tho se same

guidelines as gro unds formedicalmalpractice.

This discriminatory propo salis particularly harmfulto medicalmalpracticevictims since,

accordingto thePhysician PaymentReview Commissio n, practiceguidelines arealready

being successfully used in malpractice cases, far more by PLAINTIFFS, than by

Defendants . Underthe Clinto n Bill, this wo uld no lo ngerbethe case.

This administratio n suffers finala skewed ex pressio n o f o utrage and misguided empathy o ver

the emotio naldistress and inco nvenience do ctors feelwhenthey are sued .

80

A sentimentwhich is, frankly, incomprehensible in the face o f o ur natio n’

s growing medical

malpractice epidemic . Their complete failure to acknowledge and reso lve the endless,

suffo cating pain and devastatio n negligentdo cto rs inflicto n victims and their families, is

unco nscio nable.

Fo rus, the Iitrnus testo f whetherthe Clinto n Administratio n is truly designing a health care

systemthatis inthe bestinteresto ftheAmerican people, a system based o n careful, tho ughtful

and ho nestresearch and analysis o ftheentirehealth delivery system, can be seen intheway they

have handled the issue o f medicalmalpractice.

We had hoped fo rstro ng leadership and pro gressivemalpractice refo rm solutio ns which wo uld

protecttherights o f inno centpeo pleharmed by medicalnegligencewhileimpro vingthe o verall

quality o f care. Instead, whatthis administratio n has given us is simply a repackaging o fthe

same morally bankruptand fi scally irrespo nsibletortrefo rm garbagethemedicalindustry has

been peddling fo ryears .

No o newillargueabo utthe urgentneed to reformhealth care inthis co untry . But, itmustbe

a system based o n so und public po licy , notpo liticalex pediency . Inthe finalanalysis itcomes

down to o ne simple we willing to pay foro urmedicalcarewith o urlives?

(A LIST o r R ECOMMENDATIONS IS ATTACHED)

82

FEDERAL PRO—CONSUMER MEDICAL MALPR ACTICE LIAB ILITY

REFORM RECOMMENDATIONS :

To impro vethe malpractice liability system and protectthe rights o f medicalco nsumers and

victims o fmalpractice, theNatio nalCenter fo rPatients’

Rights recommends the following :

(NOTE: Where applicable, these reforms are intended to pre-emptstatelaw . )

A three-yearstatute o flimitatio ns fortheDISPOSITION o f allmalpractice cases (from

date o f filing) .

Ex pedited handling o f cases involving children and terminally illpatients .

Creatio n o f a SmallClaims Binding Arbitratio n Unitfo rcases under

A cap o n defense attorney fees .

Remo valo f limitatio ns orcaps o n no n-eco nomic damageawards .

Full, lump sumpaymento f awards, unless otherwise requested by the plaintiff.

R einstatemento fthecollateralso urcerule, alo ngwiththerightto subro gatio n in allstates

which have eliminatedthatrule.

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Center fo r Patients’

R ights666 Broadway. Suite410.NewYork, N.Y. 10012

Tel. (212) 979-6670 0 Fax (212) 982-3036

MODEL FOR STATE MEDICAL BOAR D M INIMUM STANDAR DS

In o rderto impro ve physican discipline and protectthe public from harm, the Federal

go vernmentsho uldenactthefo llowingminimumrequirements fo rallstatemedicalbo ards

Bo ard Compo sitio n :AllBoards shallbe compo sed o f amajority o f public members (aueast preferably

M s) . TheChairperso n andVice-Chairo ftheBo ard shallbepublicmembers . The

siz e o f theBoard shallbe based o nthe state’

s physician populatio n (to be determined) .Physician Bo ard members shallbe appo inted by the Go vernor based solely o n

recommendatio nsnotnominatio ns fromavariety o fLegggniz edmedicaland no n-medical

so urces (to bedetermined) . Boardmembers shallserveaterm o f no lo ngerthan 3years

(with o ne co nsecutiveterm) .

Co nsentAgreements :Bo ards shallpro hibitplea bargins orco nsentagreements unless the physician agrees to

plead guilty to themo stserio us allegatio n. Boards shallpro hibitsuch agreements in

negligenceand incompetence-related cases unless thephysician agreesto plead guilty tothemo stserio us allegation and surrenderhis orherlicense.

Co nsumerProtectio n Unit:Bo ards shallcreate a specialCo nsumerProtectio n Unitwhich willconsisto f co nsumer

protectio n o fficers with medicalor so cialwork backgro undto dealdirectly with victimcomplainants . And allvictim complainants shallbe granted statutory immunity fromliability , forlibel, defamatio n, etc .

Disciplinary Hearings:

Bo ard disciplinary hearings shallbe open to the public, and allhearings shalladhere

to a specified time frame (to be determined) .

Funding :

Bo ards shallbe allotted adequate funding in order hire the caliber o f investigators,pro secutors and supportstaff necessary to effectively o verseethe pro fessio n (and mayraise physician fees to do so ) . Allphysician licensure and registratio n fees, ansLanyrescu es, shallbededicated forex clusiveusebythemedicalboard. These fundsmay not

beto uched by a state forANY reaso n otherthan theprescribed o nes .

Impaired Physicians :Boards shallestablish an Impaired Physician Pro gram (based o n amodelto bedeveloped) , and shallmaintain jurisdictio n o verthatpro gram. Bo ards shallco nductan

annualaudito fthe ImpairedPhysician Pro gramandmakethefindings publicly available.

Boards shallshare informatio n abo utinfo rmalactio ns , such as letters o f warning , with

Boards shallupgradethe salary and qualificatio ns fo r complaintinvestigators (z l3’

s o f

whom shallhavemedicalbackgro und) .

Boards shallbereqrd'

nsrhle forboth licensureand discipline o f physicians .

Gro unds fordenialo f licensure shallincludethe follo wing :

a. Any actorco nductwhich would co nstitute gro unds formedicalmisco nductinthestate in whichthe physican is applying.

b. Any disciplinary actio ntaken in anotherjurisdiction,which wo uld co nstitute

gro unds formedicalmisconductinthe state in whichthe physician is applying .

c . Any PENDING disciplinary investigatio n oractio n in anotherjurisdictio n.

d. Lo ss o f 'ho spitalprivileges in anotherjurisdictio n.

e. Malpracdcehwmitsmmomerjtnisdicdo nmdicadngmatmedo ctormesens afisk.

Boards shafl requirethatany physician who has lostalicense (as'

aresuh o f

o f license, and mustprovide pro o f o f o n—going medicaland remedialtraining (the

parameters forwhich areto bedetermined) .

Bo u ds shafl requh'edo cmrsmw ry nnlpracficemstm ce as awndido n o f hcmnne.

‘

I'

heamormto f coverage shallbedetermined by thewecialty . Physicians who perform

angay , btnDO NOT lnveho spitalprivileges shau cany the samemimmum covaage

12 .

I3.

86

Malpractice Data Unit:Boards shallcreateaMalpractice DataUnit. This unitwillberespo nsible fo rco llectingallmalpractice data statewide, and reviewing allmalpractice claims to determine iftheywarrantfurther investigatio n fo rpo ssible medicalmisco nduct. This unitwillalso be

respo nsible fordeveloping a systemthatwillflag physicians with an abnormally highnumbero fmalpracticeclaims orpayo uts . Do ctors who fitthese

'

o utlier'

pro files (which

should bebased o nthe siz eand scopeo fado cto r’

s practice, the specialty , and otherrisk

adjusted factors) wo uld be subjectto an automatic full-scale investigatio n.

Mandato ry R epo rting :Boards shallrequire mandatory reporting o f violatio ns o r dangero us practices by alllicensees (including self-reporting bythelicenseecommitting violatio n) , co urts, ho spitals(staffand administratio n) , allotherhealth carepro viders (includingHMO

’

s clinics ,

liability inmrance carriers, state and lo calmedicalso cieties and asso ciatio ns, state and

lo calpro fessio nalso cieties, other state agencies, PRO’

s, otherhealth care pro fessio ns,and federalagencies. Allstates shallimpo se severe civilpenalties forfailureto report.

Bo ards shallassure co nfidentiality to tho se reporting to the Board in go o d faith on

po ssibleviolatio ns . Boardmembers , Board staff, individuals, and o rganizatio ns required

by law to reportshallbe granted immunity frompro secutio n and suit

Liability carriers and self-insured entities mustreportallclaims, and allpayments

including the dollaramo unt.

Misco nductDefinitio ns :Boards shalladoptuniform definitio ns o f medicalmisco nduct(based o n a compilatio no fthe strangestcurrentstatemedicalmisconductdefinitions) .

Out-o f-State Actio ns :Boards shal n conductanew heming onmy acdonmken by mmherjmisdicfitm, bmshallo nly determinetheappropriatedisciplinary sanctio nto beimpo sedbased o nthato uto f-stateactio n. Thatsanctio n shall, ataminimum, beequivalentto the originalsanctio n

PermanentLo ss o f Licenae:Bomds shallpermanently revokethelicense o f any physician convicted o f

system. 1hepanelshanconsisto f aevenmembers appomted byme go vm md m yinclude no morethantwo physiciansmd oneattorney .

87

co ntinued)Thepanelmembers shallserveas individuals notas representatives o f any o rganizatio n,

innitutio n, agency orgro up. Panelmembers shallnotparticipate in o rreview pendingmatters, butwillreview finaldeterminatio nsto assess the quality o f wo rk and whetherthe decisions are in thepublic interest. The panelshallassess the o verallgoals andobjectives o f physician discipline, how wellthe goalarebeing met, and whetherand towhatdegreethepro cess servesto minimiz e o rdetermedicalmisco nduct. Thepanelmayconsultwithmedicaland specialty so cieties co nsumero rganizatio ns, othergo vernmentalorganizations, anteorganizatio ns, federalorganizatio nsandOtherstates in its analysis and

This panelshallalso handleW o f cases dismissed by theBoard

Physician self-referrals :

Boards shallprohibitthepracticewhichallowstreating do cto rs to referpatientsto clinics,labs, orotherhealth care-related facilities orservices in whichthatdo ctor, orhis orher

immediate family, has a financialinterest. Any violatio n shallco nstitute gro unds for

medicalmisconduct. Any physician who currently self-refers shallhave o ne yearto

comply withthe statue.

Public Informatio n and Outreach:Boards shallhaveapublic information o fficerrespo nsible fo r o rganiz ing co nsumerand

physician outreach and educatio n pro grams, to include: developmento f a quarterlynewsletter, informatio nbro chures, public serveanno uncements , and othero utreachefforts

to community groups, organiz atio ns, agencies , etc .

Boards shallset-up (md adequately staff) toll-freehotlines forco nsumercomplaints and

physician backgro und checks . Anyo ne calling to check o n a do ctor shallautomaticallybe entitled to the following physician

'

prnfile"informatio n: date physician was first

licensed, educatio nalbackgro und; registratio n status, ho spitalaffiliations;otherstates inwhichthedo ctorholds alicense, the numbero f clo sed complaints againstthe physician

(regardless o f whetherornotan actio n was taken);any fo rmalcharges pending against

the physician;any disciplinary actio ntaken againstthe physician’

s license (including a

brief ex planatio n aboutthe baa’

s forthe actio n) . This pro file may be mailed toco nsumers upon request. Afterthe federalgo vernmentenacts legislatio nto open uptheNationalPractitio ners

’

Data Bank, callers willalso anmmafigany be given the DataBank

’

stoll-freenumber.

Boards shallissuean annualreportmadeavailableto thepublic , media, legislatureandotherstate o ffi cials . The reportsho uld co ntain informatio n o n licensure, including :

o f applicatio ns received, licenses granted, licensure hearings, denials, temporary

88

(19. co ntinued)Thereportshallalso co ntaindisciplinary information, including : II o f complaints received(plus the so urce, status, category ) , II o f actio ns taken, category o f actio n;types o f

penalties;aggregate information abo utinformalactions taken, etc . (Fulllisto f items, tobe developed.)

R ecredentialing :Boards shallrequiredo ctorsto berecredentialed every 5 years as aco nditio n o flicensure.

Do ctors who have been involved in lawsuits or other disciplinary actio ns during anyinterimperiod, wo uld berequiredto undergo a

”

clinical”

performance evaluatio n as parto ftheirrecredentialing .

Do ctors who practice ex clusiyely in private o ffice settings wo uld also be required to

undergo clinicalperformance evaluations and patientchartreviews forrecredentialing .

Standard o f Pro o f:

Bo ards shallrequirethatthestandard o fpro o f in disciplinary actio ns beamemmlemnceQLt flidflc ONLY . No other standard willbe acceptable.

Bo ards shallhave fullsubpoenapower.

Summary Suspensio ns :Boards shallhavethepowerto issuesummary suspensio ns whichwillrun until

“

ahearingcan be promptly scheduled .

89

Mr. BR OOKS . Do ctor.

STATEMENT OF ANTONIO FALCON, M.D ., ON BEHALF OF THEHEALTH CAR E LIAB IL ITY ALLIANCE

Dr. FALCON . Mr. Chairman .

Mr. BR OOKS . Glad to have y o u .

Dr. FALCON. Thank y o u very much fo r this o ppo rtunity ,

name is Anto nio Falco n and I am a .1977 aduate o f Baylo rlege o f Medicine. I am a residen traine bo ard-certifi ed familyph sician from the lower R io Gran eValley o f Tex as .

ur medical practice is in Stark Co unty , the seco nd poorestco unty in the United States . Our patientprofile is appro x imately80 percentmedicaid, 12 percentindigent, and 8 percentprivatepay . We are the o nly health care pro viders o f obstetrics in a three

go unty area thatis atleastthe siz e o f R ho de Island and po ssibly1gger.

My artners and I deliver abo ut babies a year. Stark Co unty bo r ers with Mex ico and o ur practicetakes care o f a loto f illegalimmi ants . The combinatio n o f the abo ve facto rs and the R ioGran e Valley being o ne o fthe medicalmalpractice hotspots o ftheco untry allow me to o ffer a uniqu e perspective o n the currenttortsystem in this co untry .

The sy stem is bro ken . Victims who sho uld be compen sated fairlyare being robbed o f mo ney intended fo rthem . Attached to my written statementis a settlementagreementthatis an o utrageo u s ex

ample o f a sy stem go ne bad. In a settlemento n a cerebralpalsy case thato ne o f the localdo cto rs decided n otto co ntest,called the in surance company and said, take care o f my patient, theatto rney s walked away with How can any o ne fathomthata few ho urs of time is wo rth thatkind o f mo ney? Whateverhappened to somebo dy saying , this is to o much mo ney ,

letme letyour child take some o f it?In another case in o ur area, an atto rney dressed as clergy to so

licitclients in an awfulaccident. I cannotimagine any o ne sto o pingso low . In another case

,a body was actually taken o uto f a ceme

tery and tran sferred to o ur community fo r a change o f venue. Howcan any o ne rip the family thatlives miles away for supportju stfo r a change o f venue case?The sy stem , atleastas I kn ow itin Tex as, has go ne craz y andthe FederalGo vernmentmu stintervene.

The Presidentin his State o f the Unio n mentioned thathealthcare co sts mu stbe curtailed in o rder to co ntrolthe deficit, and Itelly o u thatliability co sts mu stbe curtailed in o rder to controlmedicalco sts . We have an other o utra co u s ex ample thatis sometimes humo ro u s o f some o fthe abu setfiato ccurs .

I had a medicalmalpractice case filed again stme o n a birth-telated injury thatwas later dro pped. The ex pertthatwas u sed wasa retired nuclear radiolo gistwh o had do ne 6 weeks o f obstetrics 32

years prio r to the case. This man didn’

thave the o ppo rtunity totestify again stme becau se he was picked up by the Bo ard o f MedicalEx aminers for peddlin dru s .

Tex as is o ne o f the leasing States in the co untry in discipliningbad do ctors, and I perso nally am involved in that, wo rking with theState licensing bo ard. We have stopped many doctors from practic

90

ing medicine in Tex as . I wish the trialbar wo uld sto p u sing themas ex pertwitnesses .

Lastspring my partners and I decided thatwe had had en o ugho f lawsuits . I had practiced 1 1 years witho uta single lawsuitandallo f a su dden , after the wo rkmen

’

s compen satio n laws in Tex aschanged,

I was faced with fo urlawsuits .

My partners and I decided thatwe were g oing to dro p o ur obstetricalcare. We knew thatthis was going to leave a huge area o fTex as witho utcare, butthere was j u stto o much pressure o n u s .

We decided thatwe were beaten .

The FederalGo vernmentintervened atthattime. The lo callyfunded community health center, under the help o f Mr. Jo seCamancho , came in and o ffered the FederalTo rtClaim Protectio nActand after many h o urs o f negotiatio n ,

we were able to continueobstetricalpractices witho utany lo ss o f careto o ur patients .

We wo rk underthatsy stem ri htn ow .

One lastissue thatI wo uld 11 e to address to y o u is the care o fillegalimmigrants alo ng the bo rder o f this co untry . We need tobe— rightn ow the care o f illegalimmigrants is co vered under emer

geney medicaid.

If there 13 n o co verage fo rthis type o f patient, ho spitals and providers willbe devastated alo ng o ur bo rders . I ask y o u to please co n

sider some kind o f safety netfo r the care o f these patients fo r thesake o f co ntinuing to keep o ur ho spitals and o ur practitio ners in

practice.

Mr. Chairman , the sy stem ,I feel, is bro ken . I willbe available

to an swer questio n s and specifi cally I wo uld like to address theHarvard study later if someo ne wo uld like fo rmeto do so .

Mr. BR OOKS . Thank y o u v mu ch[The prepared statemento

e

ft. Falco n follows :

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92

myself, 1 am pleased to havethis o ppo rtunity to testify regarding the need fo rmedical

liability refo rm as a necessary compo nento f comprehensive health system refo rm.

The Health Care Liability Alliance (HCLA) is a co alitio n o f health care pro viders ,

insurers , health service o rganiz atio ns , manufacturers and individuals who believethato ur

co untry’

s dysfunctio nalsystem fo rreso lving health w e liability disputes is a natio nal

pro blemthatdemands a natio nalsolutio n. HCLA members have cometo getherwith the

commo n purpo se o f calling fo rthe inclusio n o f health care liability refo rm in federalhealth

care refo rm legislatio n (An HCLA membership listis attached as Appendix A) .

As the 1994 Physician PaymentReview Commissio n (PPRG) AnnualRepo rtto

Co ngress and many repo rts befo re it make clear, the currentsystem fo r compensating

patients who have been injured in the co urse o f receiving health w e serv1ces 1s bro ken and

sho uld be repaired atthe natio nallevel. (The PPRC Repo rtis attached as Appendix B . ) The

system is inefficientand wasteful, co ntributes to pro blems with patientaccess to o bstetric

care and other specialty services , pro duces unfairand inco nsistento utcomes , and benefits

lawyers mo rethan itdo es injured plaintiffs .

Unless changes aremade in o urliability laws , health care co sts willco ntinueto rise

and access to health pro ducts and services willco ntinueto be unnecessarily co nstrained.

Medicalmalpractice premiums werethe fastestgrowing compo nento f physicians’

practice

co sts in the 19805 . Driven by sharp increases in the frequency o f claims and the average

malpractice award in the early 19805 , malpractice premiums grew attwicethe rate o f

medicalinflatio n. Fo llowing a plateau in the growth cycle atthe end o f thatdecade,

frequency and average award magnitude began to climb again in the early 1990s .

93

own ex perience co nfirms thesenatio naltrends . Prio rto the 19905 . I had practiced 11 years

witho uta single lawsuit, when suddenly I was faced with fo ur claims atthe same time. In

Tex as , claim frequency increased every yearbetween 1983 and 1992 ex cepto ne with

dramatic increases since 1990. Totalclaims againstphysicians ro se 2 1 percentin 1991 and

another23 percentin 1992 . Based o n pastex perience,itis likely thatmo re than 70 percent

o f these claims willbe clo sed with no indemnity payment. Afteranaly z ing this data, a new

repo rtfromthe Tex as MedicalAsso ciatio n (attached as Appendix C ) has declared eleven

co unties in thatstateto be"disasterareas

”

dueto sharp increases in award frequency and

average magnitude in recentyears .

Premiums are fo llo wing these key indicato rs upward . Fo rex ample. malpractice

premiums increased by l4% in New Yo rk in 1993, and the largestNew Yo rk insurance

carrierhas applied to the state’

s Insurance Commissio n fo ra 19% increase in 1994 .

Severalother states also have impo sed o rare preparing to impo se do uble digitincreases in

Members o fthe HCLA believethatliability refo rm sho uld apply equally to all

potentialdefendants in perso nalinjury cases arising from the delivery o f health care services .

Physicians willco ntinueto practice'

defensive" medicine o r be reluctantto pro vide treatment

to patients in tho se areas o f medicinethatare plagued by lawsuits. Life-saving drugs and

medicaldevices willbe slow in emerging and willeitherCOStmo re, o rbeco me co mpletely

unavailable. Health care co sts willincrease as managed care plans increasingly targeted as

the“

deepestpo cket“

o f alldefendants feelco nstrained to pay fo r unpro ven o rex perimental

treatments ratherthan run the risk o f multi-millio n dollarawards .

94

Fo rthese reaso ns , members o f the HCLA believethatnatio nalhealth care refo rm will

notbe effective unless itincludes broad-based liability refo rm applicable in allmedical

malpractice claims arising fromthe delivery o f health care services . Refo rm sho uld apply

whetherthe defendants are physicians , nurses , ho spitals , pharmaceuticaland medicaldevice

makers and distributo rs , managed care o rganiz atio ns o r others. Twenty years o f ex perience

in the states has pro duced valuable info rmatio n upo n which to craftfederalpo licy . In

particular, Califo rnia’

s MedicalInjury Compensatio n Refo rm Act(MICRA) , in place since

1975 , has pro ven to be an effectivemodel, and therefo re is the basis o f the legislative

package suppo rted by allHCLA members.

The United States has the wo rld’

s mo stex pensiveto rtsystem. At percento f

Gro ss Domestic Product, U.S . to rtco sts are substantially higherthan thato f any co untry and

two and a half times the average o f alldeveloped co untries . (To n Co stTrends , An

Internatio nalPerspective, Tillinghast The U.S. to rtsystem co st$ 132 billio n in 1992 .

Between 1933 and 1991 , U.S. to rtco sts ro se by a facto ro f almo st400. By co ntrast, U.S.

eco nomic o utput(GNP) grew o nly o ne hundredfo ld o verthe same period . Thus , to rtco sts

have grown almo stfo urtimes fasterthan the U.S. eco no my o verthe past58 years ,

acco rding to Tillinghast.

Despitethe magnitude o f spending , o urto rtsystem functio ns very po o rly in meeting

its twin o bjectives o f compensating victims and impro ving patientsafety by deterring careless

o rwro ngfulbehavio r. No where is this truerthan in whatthe RAND Co rporatio n has

accurately dubbed the”

high stakes”

world o fmedicalliability and productliability litigatio n.

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96

1992 survey shows that44 percento fthe public believes thato nly abo uthalf o f the plaintiffs

in civilliability lawsuits have justcause to file suit. A growing number now athird o f the

po pulatio n (34 percent) say thatthe majo rity o f civilliability lawsuits ean’

tbe justified .

Many juro rs also feellawsuits are abused . In interviews with 269 jurors in the

No rtheast, Valerie Hans , a pro fesso ratthe University o f Delaware, says she was struck by

the juro rs’

Spo ntaneo us referrals to”

frivo lo us lawsuits ”

and"litigatio n ex plo sio n.

”

The

juro rs’

attitudes showed in their verdicts . The juro rs agrwd o rstro ngly agreed with the

fo llowing statements : There are to o many frivolo us lawsuits today (83 peo ple are to o

quickto sue (81 and thethreato f lawsuits is so prevalentto day thatitinterferes with the

develo pmento f new and usefulpro ducts (See, Appendix E, fo ra humo ro us

commentary o n o ur so ciety’

s litigio us climate.)

The PPRC Repo rt, the Harvard MedicalPractice Study, and repo rts by the General

Acco unting Offi ce (GAO) and the Departmento f Health and Human Services Task Fo rce o n

MedicalMalpractice and Insurance, justto name a few, co ncurwith the fo llowing co nsensus :

The currentto rtsystem, witho utmo dificatio n, is unableto reso lve liability claims co st

effectively and makes a haphazard co ntributio n to deterring negligentbehavior o rimpro ving

the safety o f health care.

There is a broad co nsensus abo utthe objectives o f health care liability refo rm:

PatientSafety Sho uld be Promoted .

TheHCLA believes thatany meaningfulrefo rm o f the liability system mustco ntain

meaningfulpatientsafeguards againstmalpractice o rharm frommediealpro ducts o r services .

The health care community is committed to co ntinuing effo rts to reduce the incidence o f

injury and stro ngly suppo rts refo rm effo rts to promo te patientsafety and identify incompetent

pro viders o runethicalpractices . Oureffo rts alo ne,ho wever. are noteno ugh to remedy the

many harms thatthe currentto rtsystem perpetuates .

The System’s Fo cus Sho uld be C ompensatio n fo r Injured Patients , not

Lawyers .

Peo ple injured in the co urse o f receiving health care treatmentare entitled to fairand

promptcompensatio n. No o ne disputes this . Unfortunately . the currentto rtsy'stem has’

failed the patientpo pulatio n.

A Febniary 1991 study by Harvard Schoo lo f Public Health o f ho spitaladmissio ns in

1984 shows thato f the o ne percento f patients who se medicalreco rds indicated some

negligenttreatment, o nly filed liability claims . Signifi cantly . o nly half o f

-

tho se

patients received co mpensatio n fro mthe to rtliability system. (Harvard Medical

Practice Study , Harvard Scho o lo f Public Health ,

Otherdata show thateven when patients pursue compensatio n, otherparties to the

system reap dispro po rtio nate benefits . The RAND Co rpo ratio n esnmates thato nly 43 cents

o f every dollar spentin medicalliability o rpro ductliability litigatio n reaches injured

patients . The remainderis Spento n administrative"transactio n

"co ss . largely atto rneys fees

and ex penses .

When o ne actually compiles atto rney fees and ex penses , a clearerpicture o fwho m the

litigatio n system truly benefits emerges . Attached as Ex hibitD to my testimo ny is a final

judgmento rderco nfirming a settlementagreementwhich invo lveda cash payment

to the plaintiffs (parents and injured mino r) , to getherwith mo nthly payments fo r20 years to

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100

insurance fo rphysicians and health care facilities has been placed atmo rethan $9 billio n in

1992 and co ntinues to grow.

A seco nd factoris the co stattributable to'

defemivemedicine.

“

thetermused to

describe diagno stic tests and services motivated primarily by the fearo f litigatio n and the

perceived need to build amedicalrecord thatdo cuments a health care pro fessio nal’

s

judgment. While difficultto precisely quantify, defensive attitudes and practices are realand

entirely understandable when physicians have a38% average chance (up to 78% for

obstetricians)‘

o f incurring a claim regardless o f the quality o f carethey provide. The AMA

estimates thatthis practice added an additioml$15. 1 billio nto tbe costo f health care in

1989. Lewin-VHI estimatesthe combined costo f physiciam’

and ho spitals’

defensive

pracuces to be as high ass z s billio n in 1991. (Estimating the Co sts of DefensiveMedicine,

Lewin-VHI, imam-April1994 studynheHudso n Imtitute’

s Competitiveness Center

malarge urban ho spitalinlndiana, representing an aven ge o f 5 .3% o f the patient’

s health

Ac ding wme Iewin

Iewin-VI-Ilstudy predicts'

thattortreform u vings willaccrue atan accelerated rateas

practice panermbegin to'

change.

101

The liability co sts bo rne by makers o f medicines and medicalpro ducmco ntribute

additio nalbillio ns to the natio nalhealth care bill. In 1990. billio n was paid to

claimants in allhealth care productliability cases in the U.S . and thatdo es notinclude

asso ciated adminisuative and legaldefense co sts .

Adding these compo nents to gether, thetotalco stof physicians'

and ho spitals liability

premiums, defensivemedicine, and co veragefo rmakers of medicines and medicaldevices, is

mo rethan $45 billio n annually .

A finalco stfacto rthatis potentially eno rmo us , buthas no rvetbeen adequately

measured , is the liability o f managed care systems fo rtheirutiliz atio n review activities that

resuictpaymentfo rhealth care services thatpatients demand . Recentverdicts and settlement

repo rts suggestthatpayo rs who refuseto pro vide services may be ex po sed to multi-millio n

dollar suits , even ifthe medicalservice demanded by the patienthas no rbeen pro ven

effective and is clearly ex cluded by theterms o f the managed care plan . (g Patients’

page A I , attached as Appendix G . ) Itis difficultto imagine any scenario in which co st

co ntainmentinitiatives can be successful, ifthe business risk in denying such benefits is a

virtually unlimited jury verdict.

MedicalInno vatio n Sho uld be Enco uraged notDerailed .

Thethreato f liability acts to inhibitmedicalinno vatio n and deprives health care

pro fessio nals o f certain medicines and medicaldevices needed fo r o ptimalpatienttreatment.

Thethreato f litigatio n prompted seven o f eightpertussis vaccine manufacturers to withdraw

fromthemarketbetween 1960 and 1985 , even tho ugh no so und scientific study has even

102

co nfirmed a cause and effectrelatio nship between the vaccine and any adverse neurolo gical

reactio n. To preventa dangero us sho rtage o fthe vaccine, the federalgo vernmentestablished

a compensatio n fund financed by an increase in the co sto f the vaccine. Ex cessive litigatio n

co sts were also the reaso n thatthemanufacturer o fthemo rning sickness drug Bendecti:

withdrew its pro ductfromthemarket, eventho ughthere is no credible scientific evidence to

this day linking itto birth defects . Patients sufferneedlessly because no substitute therapy

fo rmorning sickness has been developed the pro ductliability litigatio n risk is justto o

Acces s to the Comprehensive Health Care Sho uld bePromoted .

Perhaps themo stserio us so cietalharm caused by theliability system is reduced

access to health care. Increasing premiums and thethreato f liability have caused physicians

to abando n practices and/o rto stop pro viding certain services in vario us areas o f the co untry .

I have already testified to my own ex perience, which is notunliketho se o f many

otherphysicians treating the ruraland urban po o r. Almo sto ne o uto f eight

o bstetrician/gyneco lo gists (12 has dropped obstetricalpractice as aresult.o f liability risks .

American College o f Obstetricians and Gynecologists , Morethan a half millio n

residents o f ruralco unties are witho utany physicians who pro vide o bstetric services .

(Health Care in R uralAmerica, Office o f Techno logy Assessment, September No ris

this phenomeno n limited to ruralareas . An ex ample o fthis problemwas presented by

Senato rR iegle (D-Ml) while chairinga 1991 hearing o n health system refo rm, when he

indicated thathis family was unableto remain with its o bstetrician o f cho ice becausethat

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104

Untilsome reaso nable limits are puto n the liability ex po sure o f defendants in health

care injury cases limits thatpro vide fair, butam unlimited compensatio n fo rinjured

patients these access pro blems willnotbe abated.

FEDER A L LEADER SBE [S NEEDED

Every shareho lder in themedicalliability system has the oppo rtunity and the

respo nsibility to makethe systemwo rk better. The health care community is actively

carrying o utits respo nsibility to identify and address high-risk o f injury situatio ns thro ugh a

variety o f patientsafety and lo ss preventio n pro grams in virtually every medicalsetting .

Unfo rtunately ,we can do littleto remedy thewaste in o urco untry

’

s to rtsystem. We ho pe

thatotherparticipants in the system willheed the callto participate in this effort. As the

federalgo vernmentfashio ns a natio nwide o verhaulo f the health care delivery system, it

sho uld actto realiz e a viable and co nsistentsolutio nto the panoply o f issues raised by health

care liability .

The litany o f pro blems with the currentto rtsystem do es notnecessarily mean thatthe

system mustbe abando ned . The HCLA believes thata fault-based system which wo uld

permitmerito rio us claims , screen o utclaims with no meritand lowertransactio n co sts can

wo rk. Refo rms such as tho se adopted in the state o f Califo rniatellus thatthe currentsystem

can be impro ved thro ugh refo rm, and thatmoderate refo rm can produce dramatic effects by

promoting settlemento f valid claims , disco uraging frivo lo us litigatio n, and reducing thetime

required fo r claims reso lutio n and its asso ciated co sts .

105

FederalPreemptive To rtR efo rm

Federalpreemptive to rtrefo rm represents a bo ld appro ach . butthe o nly o ne thatcan

advance a natio nwide so lutio n to this complex pro blem.

Virtually every health system refo rm billintroduced to date. includlno the Clinto n

Administratio n’

s Health Security Act(S. 1757/H. R . 3600 ) inco rpo rates a federalpreemptive

liability refo rm title. (See Appendix K fo ra compariso n o f liability titles o f majo rhealth

system refo rm bills . ) 1 had the privilege o f being invited to speak to the Clinto n

Administratio n’

s Health Care Task Fo rce, and to ld them abo utmy ex periences with the

liability system in Tex as . Altho ugh the Presidentand the FirstLadi sho uld be co mmended

fo rincluding liability refo rm co ncepts in S . 1757 . the liabilit) refo rm sectio ns o f theirbill

fallsho rto f actio ns needed to accomplish meaningfulliability refo rm. 1 had ho ped they

wo uld do mo re.

In any federalpreemptive scheme, states sho uld be leftwith substantialpo werto

implementadditio nalo ralternative refo rm pro grams thatare equally effective atmeeting

federalo bjectives , and to ex perimentwith awide variety o f alternative dispute reso lutio n

approaches to injury co mpensatio n . State-based demo nstratio n pro jects like tho se no w

underway in Maine and a handfulo f other states to evaluate the use o f clinicalpractice

parameters/guidelines in litigatio n sho uld also be helpfulin evaluating whether such

guidelines can reduce liability co sts .

R ef rm visio Su o rted b the HCLA .

T he members o f the HCLA agree thateffective health care liability refo rm willnotbe

achieved unless the refo rm pro visio ns described belo w are ado pted atthe natio nallevel.

106

These pro visio ns are based o n Califo rnia’

s MICRA legislatio n, in place in thatstate since

1975 . The Califo rniamo delensures fulland faircompensatio n fo rallactuallo sses , yet

limits co sts thro ugh vario us co ntro ls ex erwd o n the'

lottery'

aspects o f themedicalliability

system, notably a ceiling o n iro n-eco nomic damages and graduawd limits o n atto rney

co ntingency fees as claimants’

awards rise. Afternearly 20 years o f ex perience in

California, we can co nfidently co ncludetintCalifornia’

s limits o n co sts in high stakes cases

have snbiliaed medicalliability ex penses overall, despite apater-n o f lo ng mm growth in the

frequency o f liability claims inmeam .

Many lidlility reform

titles, imlwimme fld mm m W Iyw y wmm m w tm

dmgs and nwdicaldevu s, pwvidas o f blmd and tbstn m vbes a mo dm , andmmed

care organin tio ns are allatr'

sk o f lawsuitas wellwhen apatiemis injmed. ltsho uld also

be nomd dm ho spiuls , d inics and omerimdmfiomlpmviders u emed notjtm for

malpractice, butiorpertomlinjury allegedto resultfromtheirdish-ibutio n o f inedical

devices, pharmaceuticaland blo od/tissue inater'

ul. Addressing theliability pro blems in just

o ne parto f the healdi care secto rmay acnlally sdmuhte litigatio n in o dierparts which are

then perceived tlo have'

f'

deeperpo cltets This detfimentally impacts medicaltechnology

manufacturers by deterring the developmento f new inno vative, co steffective pro ducts . For

allo f these reaso ns , the liability reform umbrella sho uld encompass allpotentialdefendants

in claims arising from injuries ex perienced inthe co urse o f health caretreatment.

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108

in the“

big ticket”

cases . The system wo uld be impro ved ifthe atto rney co ntingency fee

were calculated with some“

relative value,

“

similarto whattheMedicare system no impo ses

with respectto physician fees .

Allo fthe majo rhealth system reformpropo sals limitthe amo untan attorney can

reco veras parto f amalpractice award . However, HCLA members cannotsupportthe

Health Security Act’

s co ntingency fee sectio n which limits theattorney fees to aflato ne

third o fthe award, merely preserving the status quo . HCLA supports California’

s co ntingent

feelimitschedule: 4096 o fthe first 33 and'

1/3% o f the nex t 25 % o f the

nex t and 15% o f any amo untby which the reco very ex ceeds

health ordisability imurers {orothers fo rlo sses resulting froman injury . Claimants are

pem ined w pmvideevidence o f amo unts paid w secuwmewlhmalso urce benefit.

Security Act’

s‘

is notas effective as o urpropo salto informthe jury o f such collateralm

payments priorto theirdeliberatio ns .

6. W . Funne damage as merSSOJDOsho uld be paid

perio dically.

‘TheHealth Security Actincorporates aperio dic paymentreform pro visio n, but

‘

faiis to establish'

amo netary threshold atwhichitwo uld beginto apply .

7 . W m . A unifo rm statute o f limitatio ns sho uld be enacted that

(i) establishes a standard rulethatclaims mustbe filed within o ne vear from the date an

injury is disco vered , but(ll) pro vides an o utside limito f three years fromthe datethe injury

o ccurred . Ex ceptio ns to these generalrules allowing ex tratime sho uld be made (iii) fo r

children underage six who may notbe ableto communicate the ex istence o f an injury . and

(iv) in the instancewhere a foreign bo dy with no therapeutic purpo se is leftin a claimant’

s

bo dy and notdiscovered fo rmany years .

The Health Security'

Actco ntains a number o f additio nalrefo rm co ncepts thatmay o r

The ADR sectio n o fthe Health

Security Actis ex pressly non-binding,'

presumably-ih deferenceto the cherished righto f

access to ajury trial. Yet,thecentralo bjective o f.ADR is .to d ivertcases fromlitigatio n.

This tension can o nly be addressed by i

giving parties'

to ahealth care injury dispute some :

incentive’

to vo lunmril

approaches sho uld be implemented.

tFirst, theADR decisio n mustbe admissible as evidence

in co urt. The jury sho uld bednformd thatthedisputealready'

ih'

as been thro ugh some

Seco nd,

“

adopta fee-shiftingfrule;whereby

’

a‘

claimantor‘

defendantwho rejects the ADR ‘

decisio n and go es forward professio nalfees o fthe Oppo sing

pro visio ns enacted by the states sho uld notbe preempted by federallaw .

110

Many HCLA members believethatfederalleadership in this area is bestex ercised by

enco uraging state o rfederaldemo nsu'atio n pro jects utiliz ing vario us ADR models. Because

so little is clearpresently as to the effectiveness o f ADR , itmay be appropriateto enco urage

state”

labo rato ries“

to try and evaluate differentADR approaches.

M . The Health Security Actwo uld establish a pilotpro gram

to enco urage the use o f clinicalpractice guidelines fo rthe purpo se o f ex pediting the

reso lutio n o f claims arising from care delivered in acco rdance with such guidelines . The

HCLA wo uld notoppo se such demo nstratio n projects , so lo ng as they requirethatpractice

guidelines be used ex clusively as an afi‘irmative defense by dq

‘endarus in liability cases . This

approach is co nsistentwith demo nsu'atio n projects already underway in Maine and Other

states.

M No n-merito rio us suits willbe disco uraged if plaintiffs are

required to have a qualified ex pertsubmitan affidavitstating thatthere is alikely breach in

the standard o f care. Inthe Health Security Act, the plaintiff’

s claimmustbe supported by a

qualified ex pert. The Actsho uld be strengthened by requiring a separate affidavitfo reach

defendantand apenalty fo rex perts who file affidavits in b“ faith.

enterprise liability“

propo salwo uld immuniz e physicians , nurses and otherindividualhealth

care pro viders from. respomibility fo rtheiractio ns and shiftliability ex po sureto the health

services'

plan.

’

This wo uld o nly shifttheasso ciated liability co sts, and inswad o f reducing

them, co uld lead to higherlo sses because o fthe'

deep po cket”

theory. TheHCLA

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112

Mr. Chairman, o urliability system needs to be fi x ed to meetthe needs o f injured

patients who deserveto be fairly compensated , the health care secto r, whichis willing to

assume its fair snare o f the respo nsibility fo ravo idable patientinjury , and so ciety ,which

needs to reduce transactio n co sts , eliminate windfalljudgments, and assure thatphysicians

can stillo ffermedically necessary services in an atmo sphere o f fairness to allparties . Yo u

are in a unique po sitio n to make refo rm happen by putting pressure o n allparties including

the legalpro fessio n to makethe system wo rk better fo rboth claimants and defendants .

I appreciate the oppo rtunity to appear befo rethe Committee and wo uld be pleased torespo nd to questio ns .

HEALTH CAR E LIABILITY ALLIANCEMEMBER LIST (C ompanies Asso ciatio ns)

American Academy o f Dermatolo gyAmerican Academy o f Ophthalmo lo gyAmerican Home Products Co rpo ratio n

American Ho spitalAsso ciatio nAmerican MedicalAsso ciatio n

AMA/Specialty So ciety MedicalLiability Pro jectAmerican So ciety o f Healthcare Risk Managers

Biotechnolo gy Industry Organiz atio nCalifo rnians Allied fo rPatientProtectio n

Co o perative o f American Physicians, Inc ./ MutualProtectiveTrust

Co uncilo f Community Blo o d Centers

The Do cto rs’

CompanyHealth Insurance Asso ciatio n o f America

Health Industry Manufacturers Asso ciatio n

MedicalProtective CompanyMedicalMutualLiability Insurance So ciety o f Maryland

MEDMARC Insurance CompanyMMI Companies, Inc .

Natio nalAsso ciatio n o f Manufacturers

Natio nalCo uncilo f Community Ho spitalsPharmaceuticalResearch Manufacturers o f America

Physician Insurers Asso ciatio n o f AmericaPhysician Insurance Company o f Michigan

[Notez Thetex to f Dr. Falco n’s Appendix B is to o vo lumino us to

include in the bo dy o f the hearing tex t. See Appendix l. ]

1 14

Mr. BR OOKS . Dr. Keller.

STATEMENT OF R OBER T B . KELLER , M .D ., VICE CHAIRMAN,

PHYSICIAN PAYMENT R EVIEW COMM ISSION

Dr. KELLER . Thank y o u ,Mr. Chairman ,

Members o f the committee, I am R obertKeller

,an o rtho pedic surgeo n from Belfast, Maine,

and to day I representthe Phy sician PaymentR eview Commissio n .

The Phy sician PaymentR eview Commissio n was created by theC o ngress in 1986 to advise ito n issues related to phy sician paymentin the medicare pro gram . Its 1989 pro po salfo r phy sician paymentrefo rm was enacted and was implemented in 1992 .

The Co ngress’ mandate to the commissio n was substantially

bro adened in 1990. One o f its new charges was to advise o n medi

calmalpractice refo rm . Alth o ugh the commissio n’

s membership ineludes phy sician s from severalmedicalspecialties and practice settin s , a majo rity o f the 13 members come from other backgro unds ,inc uding bu siness , co n sumers , nursing ,

HMO o rganiz atio n s, andhealth eco n omics .

The pro po sals o f the commissio n ,which are presented in this tes

timo ny ,have the unanimo u s sup o rto f allmembers o f the PPR C .

We believe thatthe medicalmalpractice sy stem needs to becomem o re effective and efficientin limiting the rates o f medicalin

'

uries

and compen sating injured p atients . R efo rm sho uld also a dresswidespread co ncern s thatthe sy stem prom otes the practice o f defen sive medicine and impedes many effo rts to impro ve the co st-effectiveness o f health care.

The commissio n has o utlined a malpractice sy stem fo rthe futurethatwe sho uld wo rk toward . We also suggestsome steps to impro vethe fun ctio ning o f the current5 stem .

A future malpractice sy stem wo ul have two compo nents . First,an efficientadministrative sy stem to compen sate patients wh o ex

perience medicalinjuries , and seco nd, a complementary sy stem fo rmo nito ring quality and fo r designing and implementating measures

to reduce the rate and numbers o f injuries .

Separating decisio ns o n compen satio n from review o f quality o f

care w o uld enable each to be accomplished by a sy stem bestsuitedto thatpurpo se. This wo uld permitpatientcompen satio n to be impro ved while in creasing phy sician s’ co nfiden ce in judgments o f

their quality o f care.

This new sy stem cann otbe implemented atthe presenttime becau se ex ten sive develo pmentand ex perimentatio n are needed fo rkey compo nents , butinitialsteps sho uld betaken n ow .

First,better data o n medicalinjuries sh o uld be collected and em

plo ed to preventinjuries and to impro ve the quality o f care. Seco nd: alternative dispute resolutio n sy stems fo r compen sating injured patients sho uld be develo ped and tested. Third, mo re reliable

standards fo r compen satio n and negligence sho uld be fo rmulated.

To immediately impro ve the fu nctio ning o f the currentsy stem;the commissio n recommends the ado ptio n o f certain to rtrefo rms .

These include ratio naliz ing damage awards b the ado ptio n o f rea

so nable schedules fo r n o neco n omic damages . nterim limits may beemplo yed u ntila schedule is ado pted .

Nex t, o ffseto f award fo r collateralso urce payments , perio dic payments o f large awards, and assignmento f punitive damages to

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116

StatementOn MedicalMalpractice Refo rmbefo re the Subc ommittee o n Eco nomic and Co mmercialLaw

Co mmittee o nthe JudiciaryUnited States Ho use o f Representatives

June 22 , 1994

R o bert8 . Keller, M.D Vice ChairmanPhys ician PaymentReview Commis sio n

I am pleased to appearbefo re this subcommittee o n behalf o fthe Physician PaymentR eview

Commissio n. The Commissio n was established bythe Co ngress in 1986to pro vide advice and

recommendatio ns o n metho ds to refo rm paymentto physicians underthe Medicare pro gram.

The C ommissio n'

s wo rk helped pave the way fo rthe Medicare physician paymentrefo rms

enacted in 1989 and implemented in 1992 . The Co ngress subsequently ex panded the

Commissio n’

s mandate to include a wide range o f health po licy issues , including medical

malpractice refo rm. The C ommissio n submits a series o frepo rts to the Co ngress each year,the

mo stcomprehensive being its annualrepo rtwhich yo u received o n March 31 .

During the pastfo uryears , the Commissio n has co nducted an extensive analysis o fthemedical

malpractice pro blem and ex plo red a range o f ideas fo rrefo rm. Italso commissio ned the first

empiricalresearch to be co nducted o n the ro le o f practice guidelines in malpractice litigatio n.

The Commissio n appreciates the o ppo rtunity to summariz ethe results o f its wo rk o nthis to pic .

Additio naldetails and suppo rting do cumentatio n can be fo und in a chapter o n medical

malpractice refo rm in o ur1994 AnnualRepo rtto Co ngress .

The pro blems with the malpractice system have received widespread attentio n. Altho ugh

medicalcare in the United States is generally o f high quality, the incidence o f preventable

medicalinjury is greater than acceptable. Few patients who are negligently injured are

f

117

compensated . and the awards are variable. The ex isting malpractice system promotes the

practice o f defensive medicine and impedes effo rts to impro ve the co steffectiveness o f care .

Further, the system'

s inefficiency results in high administrative co sts and lo ng delays in claims

reso lutio n. The go als o f refo rm areto address these deficrencues .

The Commissio n has fo rmulated a‘

seto f recommendatio ns thatinclude specuficto rtrefo rms to

impro ve immediately the functio ning o fthe currentsystem In additio n the Commissio n has

identified steps thatsho uld be taken in the neartermto pave the way fo rmo re fundamental

refo rm of.themalpractice system inthe future. To rtrefo rms are discussed first. fo llowed by an

analysis o fthe ro le'

o f practice guidelines in malpracticelitigatio n A future malpractice system

envisio ned '

by the Commissio n is then described. alo ng .with recommendatio ns fo rbeginning

wo rk o nthe building blo cksto fthis system. These include bettersystems «to preventmedical

-injuries .adminis‘trative systems fo rhandling‘

mal'

practice claims . and alternative standards'

fo rthe

compensatio n {ifmedicalinjuries .

ro arRemnants

To rtrefo rms arechfangeswinthe legalrules‘

go veming malpractice lawsuits . The Commissio n

recommends certaino fthese refo rms to imprcive the-functio ning o fthe currentsystem. They

wo uld make ‘

damage awards mo re co nsistentand predictable , speed the'

settlemento f cases .

directmo re reso urces to compensate injured patients , and reduce the o ccurrence o f

inappro priate and ex cessive awards . While some versio ns o fto rtrefo rms havethe potentialto

inappropriately disadvantage injured patients .the Commiss io n has taken care to fo rmulate its

to rtrefo rm recommendatio ns so as to impro vethe system'

s fanmess o verall.

118

Schedules fo rNo nec o no mic Damages

R easo nable schedules sho uld be develo ped fo r no neco nomic damages . Much o f the

unpredictability and inco nsistencythatcharacteriz etoday'

s malpractice awards are because o f

no neco nomic damages pain and suffering). which acco untfo rabo ut50 percento ftotal

payments . Reducingthe subjectivity o f no neco nomic damages and eliminating the potentialfo r

unreaso nably high awards wo uld impro ve decisio nmaking during the co urse o f a lawsuitand

promote settlement.

The schedules wo uld setacceptable ranges fo r awards fo r carefully defined catego ries o f

injuries . Schedules wo uld establish adifferentlimitfo reach grade o finjuries , which is preferable

to a single abso lute limitthatmay beto o high fo rsome injuries and to o low fo rothers . Untila

s chedule is develo ped , however, itmay be necessaryto ado pta single interim abso lute limito n

no neco nomic damages .

S chedules fo rAtto rneys’C o ntingency Fees

Thetypicalco ntingency fee paidto the claimant’

s atto rney o uto fan award is abo uto ne-third o f

the reco very. A sliding-scale schedule fo rco ntingency fees wo uld betterappro x imatethe fee

to the wo rk perfo rmed bythe lawyer. so thatmo re o falarge award go es to the injured patient.

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120

Reductio ns in Lo ng Statutes o f Limitatio n

Overly lo ng statutes o f limitatio n create uncertainty, delay, and ex pense in insuring against

malpractice claims . Birth-related injuries arethe principalso urce o f pro blems . Eightyears is a

safe perio dto allow detectio n o fperinatalinjury, and sho rterperio ds are defensible. States that

have lo ngerstatutes o flimitatio ns fo rmino rs sho uld be required to reducethemto eightyears

atmo st.

Punitive Damages

Parto rallo f punitive damages awards sho uld be diverted to quality impro vementactivities .

Punitive damages , by definitio n, are notco mpensato ry in nature. Their purpo se is to deter

others fromsimilar co nduct, thus protecting future patients from injury . This end wo uld be

furthered if the mo ney fromthese awards were used directly fo rinjury preventio n o rquality

impro vementactivities .

OTHER PROPOSALS FOR TORT R EFORMS

Some otherpro po sed to rtrefo rms have promise, butcurrentknowledge o ftheireffectiveness

is notsufficientto justify thatthey be federally mandated. These include a certificate o fmerit

requirementand amandate fo renterprise liability.

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Certificate o f Merit

A certificate o fmeritis a requirementthatan independentmedicalex pertreview the medical

reco rd and certify thata claim is wo rthy befo re a fo rmallawsuitcan be filed Itis o ften difficult

to judgeata case’

s inceptio nwhetheritis likelyto be successfulbecause key info rmatio n is not

available in the medicalreco rd . If the requirements fo r determining men’

tare lo o sened to

respo ndto this pro blem, itwillsimply add anotherstepto the litigatio n pro cess . co nsuming time

andmo ney. This may be a barrierto somemerito rio us claims being bro ught, particularly fo rlow

income plaintiffs who wo uld have to incurthe additio nalco sts o fthis initialevaluatio n. Ifthe

certificate o f meritrequirementis to o strict, some cases thateventually wo uld be successful

mightbe screened o utsimply because o f incomplete info rmatio n Altho ugh the idea has

promise , mo re needs to be learned abo uthowto make certificate o fmeritpro grams wo rk well

befo rethey are federally mandated .

Enterprise Liability

Under enterprise liability, a health care o rganiz atio n assumes financialrespo ns ibility fo r all

negligentinjuries to patients underits care, thereby relieving indiVidualpractitio ners o f any

perso nalto rtliability fo rsuch injuries . This is tho ughtto save administrative co sts and to better

fo cus effo rts to preventinjuries . Itis presentlywo rking wellfo rho spitals owned and staffed by

o ne o rganiz atio n. As verticalintegratio n spreads thro ughthe delivery system, enterprise liability

is likelyto fo llow naturally fo rreaso ns o fefficrency. Altho ughthetrend toward enterprise liability

is enco uraging , the Commissio n co nsiders itunwise to impo se enterprise liability o n

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o rganiz atio ns and physiciansthatare notsufficiently integrated fo rthe po licyto wo rkwell: e.g . ,

third-party indemnity payers and independentfee-fo r-service physicians .

THE ROLE OF PRACTICE GUIDELINES INMALPRACTICE LITIGATION

Practice guidelines are a key elemento fthe natio n'

s effo rts to impro ve the quality and co st

effectiveness o f medicalcare. How guidelines are treated in the malpractice system has

impo rtantimplicatio ns fo rtheirsuccess . Practice guidelines may helpto impro vethe functio ning

o fthe malpractice system. This is because guidelines canmake clearthe applicable standard

o f care, which is atro ublesome issue inmany malpractice cases . They mightlessenthe need

fo rex perttestimo ny o nthe standard o f care, thus avo iding a battle o fthe ex perts . Guidelines

may appro priately increasethe amo unto fmalpractice litigatio n by helping make clearto injured

patients ,theirlawyers , o rjuries thatastandard o fcarewas breached , while reducingthe number

o fmeritless cases filed .

Severalfacto rs , howevermightpreventpractice guidelines fromimpro vingthe functio ning o fthe

malpractice system. Theto pics o nwhich guidelines are being develo ped pro bably are irrelevant

to the circumstances leading to mo stmalpractice claims . Guidelines mightbe co nstrued to

create a firm standard o f care when o ne is neitherintended no rappro priate. While practice

guidelines co uld pro vide an impo rtantlegalsuppo rtfo rphysicians and health care o rganiz atio ns

thatusethem, theirrevisio n bythe judicialsystem co uld renderguidelines ineffective in helping

to co ntro lco sts and impro ve quality. Such revisio ns co uldtaketwo fo rms : an ex plicitrejectio n

o f the co ntento f the guideline, o ra carving-o uto f ex ceptio ns thateffectively vitiates it. In

additio n , increased litigatio n mightresultfrom questio ning the validity o f guidelines o rthe

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124

disco vertheways they were used . The lastwas a surveymailed to alarge sample o f plaintiffs'

and defendants'

lawyers .

Severalco nclusio ns can be drawn fromthis study (the findings are described in detailin the

Commissio n’

s AnnualRepo rtto Co ngress Practice guidelines are playing amo destbut

increasing ro le in malpractice litigatio n. Abo uthalf o fthe malpractice atto rneys surveyed had

atleasto ne case each yearin which guidelines played a role, and a high pro po rtio n repo rted

thatthe use o f guidelines was increasing . Still, o nly 7 percento fthe 259 claims reviewed from

the malpractice insurers'

files invo lvedthe use o fguidelines . Obstetric guidelines arethe o nes

mo stfrequently being used , pro bably because they are amo ng the oldestand bestknownto

physicians and lawyers .

Guidelines are being intro duced mo re o ften by plaintiff than by defense atto rneys , po ssibly

because guidelines may pro vide cheaper o r stro ngerevidence o fthe standard o f care than

ex perttestimo ny. The use o f guidelines by eitherside is usually, butnotalways , successfulin

malpractice litigatio n. In published judicialdecisio ns , fo rex ample, plaintiffs wo n 17 o fthe 23

cases in which theirlawyers used the practice guidelines , while in 6 o f 9 cases a practice

guideline was used successfully bythe defense.

Guidelines helped lawyers , judges , and juries reach decisio ns . Ofthe atto rneys representing

plaintiffs , o ne~quarterstated thata guideline had influencedtheirdecisio n notto take a case in

the pastyear;o ne-quartero fallthe atto rneys notedthataguideline had influencedtheirdecisio n

to dro p o rsettle a case. One-quarteralso said thata guideline had influenced the decisio n o f

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atriero f fact(jury o rjudge) in atleasto ne case during the preceding year. The lawyers did not

repo rtmuch change inthe need fo rex perttestimo ny.

Altho ughthe effects o fguidelines o nthe litigatio n pro cess are varied, o verallthey seempo sitive.

Future mo nito ring and research are needed to assess whether guidelines are being used

appro priately in co urt, including whether disputes abo uttheir applicability o r co ntentare

tro ubleso me. The results sho uld info rm ho w guidelines are derived and drafted .

DEVELOPING A FUTUR E MALPRACTICE SYSTEM THATWOULD BETTER ACHIEVE ITS

GOALS

The to rtrefo rms recommended by the C ommissio n are essentialto impro ve the ex isting

malpractice system, butthey are notsufficientto amelio rate allo f its pro blems . To rtrefo rm is

unlikely,fo rex ample, to reduce substantially the practice o f defenswe medicine,

impro ve the

preventio n o fmedicalinjuries , o rcompensate mo re o fthe negligently injured patients who are

notcompensated to day. Mo re fundamentalchanges are needed to accomplish these go als .

These changes are embo died in a future malpractice systemthatthe Commissio n has o utlined .

The pro po sed systemwo uld havetwo compo nents . Onewo uld be afast, efficientadministrative

compensatio n mechanism thatwo uld pro vide adequate awards to patients who ex perience

preventable medicalinjuries . The otherwo uld be a complementary system fo rmo nito ring ,

quality review, and design and implementatio n o f measures to reduce the rate o f injury An

impo rtantfeature o fthe pro po sed system is thatdecisio ns abo utcompensatio n and quality o f

care in individualcases wo uld each bemade by a pro cess des igned speCifically fo rthatpurpo se.

8 4 -7 1 A

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Clear criteria fo r compensability and fo r damages awards wo uld be established , whereas

judgments abo utquality o f care wo uld be made in fo rums better suited to make tho se

determinatio ns .

These compo nents co uld be develo ped in an evo lutio nary manner. To pave the way fo rthis

system o fthe iuture ,the Co mmiss io n

’

s recommendatio ns fo cus o n.

impro ving systems to preventinjuries ,

develo ping and using effiCientalternative dispute reso lutio n systems fo r

compensating injured patients , and

fo rmulating and testing mo re reliable standards fo rco mpensatio n decisio ns .

Preventing MedicalInjuries

A systematic appro ach to injury preventio n is likelyto be mo steffective in reducing the rate o f

injury . The federalgo vernmentsho uld suppo rta variety o f initiatives thatare needed to puta

systematic appro ach into actio n. Effective injury reductio n pro grams require the co llectio n and

analyS is o fdata, as wellas the design and implementatio n o feffective interventio ns . Betterdata

are needed to help detectpreventable injuries and determine their causes . Early warning

systems and active s urveillance are neededto detectas many preventable injuries as po ssible,

notjusttho se thatresultin claims . The basic epidemio lo gy o f medicalinjuries sho uld be

delineated . Co ding systems sho uld be develo pedto permitthis mo re abstractinfo rmatio nto be

entered into ccmputenz ed databases . Becausemany events needto be co llected and analyz ed

to detectpatterns o frare events ,lo caldatabases mustbe compatibleto permitmerging . Health

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by ADR metho ds . Little is known abo utthe efficacy o f ADR in medicalmalpractice . The

ex perience o f some health plans with binding arbitratio n repo rtedly has been favo rable, butat

leasto ne has disco ntinued arbitratio n because o f a sho rtage o f qualified arbitrato rs .

There are potentialdisadvantagesto ADR . The quality o fanyADR pro cess depends heavily o n

the pers o nnelinvo lved . Itis unlikelythateno ugh high-quality ADR services wo uld be available

immediately if allmedicalmalpractice cases had to use this technique. Finally, ADR systems

may evo ke co unterpro ductive behavio ralrespo nses , which are difficultto predictin advance .

Fo rex ample, if finaladjudicato ry hearings are cheaper, easier, and fasterthan jury tnals , mo re

cases mightpro ceed to such hearings , lengthening rather than sho rtening delays in

compensatio n. Demo nstratio ns and evaluatio ns sho uld be suppo rted bythe federalgo vernment

to learn mo re abo uthow ADR systems can bestOperate.

ADR mustbe binding to have a po sitive effect. Otherwise, itwo uld merely impo se additio nal

delays and co sts o n an already slow and ex pensive litigatio n pro cess . An idealscenario wo uld

be the develo pmento f ADR systems advantageo us to plaintiffs and defendants alike, so that

both wo uld vo luntarily agreeto using them and being bo und bythe result.

Alternative Standards fo rCo mpensatio n

The negligence standard do es notappearto be a go o d guideto decisio nmaking by pro viders

and junes . Mo re reliable standards fo rliability co uld po ssibly be develo ped. Such standards

mustbetested fo rtheirreliability and theireffects o nthe numberand siz e o f claims paid . One

standard thathas been pro po sed is no -fault, which wo uld compensate patients who se injuries

were caused by medicalcare, regardless o f whetherthe care was substandard o rnot. The

determinatio n o f eligibility fo r compensatio n wo uld be simplified and made mo re reliable by

dispensing withthe need to determine the standard o f care and whetheritwas breached . The

principalfearraised by a no-faultsystem is thatvastly largernumbers o f injuries mightbecome

eligible fo rco mpensatio n. A no -faultstandard sho uld be tested firstin a demo nstratio n.

Anotherstandard mightbe based o n avo idability, to compensate patients fo rinjuries thatneed

nothave o ccurred . S ome erro rs in care are notnegligent. Fo rex ample, amistake in co nsidered

pro fessio naljudgementis o ften deemed notto be negligent. This standard wo uld fo cus

preventio n effo rts o nthe fullrange o fpreventable injuries , ratherthan justnegligento nes . Fewer

claims wo uld be co mpensated than underno -fault. Fo rex ample, a particulartreatmentmay

entaila known butunavo idable risk o f serio us injury o rcomplicatio n. Patients who ex perience

an adverse o utcome fromthattreatmentwo uld be compensated underano -faultsystem, butnot

undera standard based o n avo idability . This standard shares with no -faultthe advantage o fnot

co nditio ning compensatio n o n a judgmentabo utwhether the care was substandard .

C ompensatio n fo r an injury wo uld notitself mean thatthe care was substandard; that

determinatio n wo uld need to be made thro ugh anothermechanism bettersuited to thattask.

This co uld reduce inappro priate defensivemedicme practices and impro ve pro viders'

co nfidence

in the system. Itis pro bably easierto determine simply whetheran injury was avo idable than

whetherfailure to avo id was dueto negligence, butthere is no info rmatio n o nthe reliability o f

a standard based o n avo idability. R esearch is needed to develo p and testsuch a standard .

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Mr. BR OOKS . Dr. Hannan .

STATEMENT OF DAVID T. HANNAN, M .D ., MEDICAL SOCIETY OFTHE STATE OF NEW YORK

Dr. HANNAN . Thank y o u ,Mr. Chairman . Go o d mom in My

name is Dr. David Hannan ,I am a bo ard-certified practicing family

phy sician in Newark ,NY

, a village with appro x imately resi

dents which is lo cated 30 miles easto f R o chester, NY.

I currently serve as a member o f the go verning co un cilo f theMedicalSo ciety o f the State o f New Yo rk ,

and I am also chairmano f o ur State So ciety

’

s FederalLegislatio n Committee.

On behalf o f the State so ciety and its n early members , Ithank y o u fo r allo wing me the o ppo rtunity to speak with y o u to day .

As o n e o f the few remaining family phy sician s in New Yo rk Statewh o co ntinu es to pro vide obstetricalservices to my patients , andlastyear I delivered 80 babies , I believe I am as qualified as anyo ne to speak abo uto ur medicalliability sy stem ,

its impacto n the

practice o f medicine, and the need fo r meaningfulFederalto rtreo rm .

Ju stlastweek in New Yo rk,the State in suran ce departmentan

n o un ced a so -called stabiliz ed rate increase fo r the 1994 ,1995 pre

mium year averaging 8 percent. This comes o n to p o f lastyear’

s“

stabiliz ed rate”

increase o f 14 percent.

The autho rity to setthese stabiliz ed rates was established by theState legislature in 1986 in o rder to m o derate ex cessively high li

ability premium in creases .

Acco rding to the State’

s Superintendento f In suran ce,ho wever

,

the State’

s actuarialas sessmento f data supplied to the departmentby the State

’

s medicalliability in suran ce carriers ju stified rate increases o f atleast20 percentfo r both lastyear and this year.

An d, sin ce under the law allo wing fo r these so -called stabiliz edrates itis the phy sician s , n otthe in surers , n o rthe State,

who are

subjectto a surcharge o n their future premium s if there is anysho rtfallo f funds . We believe stro ngly thatphy sician s in New Yo rkState are merely living o n bo rro wed time.

Even with the litan o f refo rm s enacted during the mid-1980’

s,

phy sician s in New Yo r State n ow pay some o fthe highestmedicalliability premiums in the Natio n with obstetrician s o n Lo ng Islandpaying in ex cess o f per year, and even tho se who practicein ru ral

,upstate New Yo rk paying clo seto per year.

However, itis n oto nly the actualpremium dollars paid by phy sician s thatmu stbe taken into acco untwhen co n sidering the needfo r refo rming the medicalliability sy stem . There are indirectco sts ,attributable to defen sive medicine, decreased access to care,

and

perhaps m o stimpo rtant,the perpetuatio n o f a sy stem which pay s

o n average les s than 40 cents o n the dollar to tru e victims o f mal

practice. Allo f these facto rs compelCo ngress to enactmeaningfulto rtrefo rm s n o w .

Ho wever,I mu stcautio n y o u thatmany o f the refo rms which are

n o w being co n sidered by Co ngress and thathave been tried in NewYo rk State,while impo rtant

,have simply n otpro ven adequate to

the o verwhelming pro blem which the medicalliability sy stem has

ecome.

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136

INCORPORATES MEANINGFUL REFORMS TO ADDRESS INEQUITABLE AND

PROH IBIT IVELY EXPENS IVE SYSTEM BY WH I CH WE CUR R ENTLY ADJUD I CATECAS ES AND COMPENSATE V I CTIMS I NVOLVED I HI MEDI CAL L I ABI LITY ACT IONS .

YOU, AGAIN , FOR PROV I D ING ME THE OPPORTUNITY TO SNAR EWITH YOU MY THOUGHTS ON TH I S PRESS ING MATTER .

137

Mr . BR OOKS . Now ,some ho ld o utthe Califo rnia medical mal

ractice reform,kn own as MICRA, as a m o del fo r Federal actio n ,

Buthow do es this square with Mr . Keener’s testimo ny as a malpractice defen se lawyer that malpractice premiums have n otdiminished in Califo rnia as a resu lt o fMICRA?How do y o u square that? I think Mr . Co rbo y or Dr . Keller said

itdidn’t go up anyhow . Yo u didn

’t agree with that? What do y o uthink abo u t that, Dr. Hannan?Dr. HANNAN . I think the medical malpractice premiums speak fo r

themselves when y o u compare what the co st is in Califo rnia compared to New Yo rk and the difference in the laws in the two States ,that shows itself. There may be ju st as many suitsMr . BR OOKS . Shows what?Dr. HANNAN . It sho ws that the co st o f settlin cases and the

awards to plaintiffs are higher in New Yo rk and t erefo re the co stto physicians o f do ing bu siness , the co st o f malpractice liability ishigher in New Yo rk simply becau se o f the difference in the lawsbetween the tw o States .

Mr . BR OOKS . ButMr. Keen er tho ught that the restrictio n s underM IICIIRA,

which had many all eged refo rm s , didn’t seem to fun ction

weDr. HANNAN . Well , that certain ly is n oto ur po sitio n and we

think the rates speak fo r themselves .

Mr . BR OOKS . A recen t Harvard medical practice stu dy co n cludedthat fewer than 2 percen t o f medical malpractice victims ever filedsuit and an even smaller percentage u ltimately reco ver any damages .

How can we increase access to ju stice fo r these 98 percen t o f people wh o have damages and never even file? Maybe itis a smal ldamage o r a big damage . I do n

’t kn ow . How do they get any co v

erage,Dr. Falco n ?

Dr. FALCON . Yes , sir, that is why I say the system is broken .

Mr . BR OOKS . The 98 percen t slipped?Dr. FALCON . Thatis right.Mr . BR OOKS . They didn’t do anything.

Dr. FALCON . Yes , sir. Those numbers I think come from the Harvard study .

Mr . BR OOKS . Yes , sir.

Dr . FALCON . And I wo u ld like to men tio n a co uple o f things o n

it. I have had the o ppo rtunity to review this and let me ju st telly o u that I review itfrom the po int o f somebo dy wh o has do n e quality assu rance in the State o f Tex as fo r 7 years .

This study was co ndu cted in the State o f New Yo rk . It is a

1994— I mean 1984 stu dy, . In medicine , 10 years is a lo ng time .

Things have changed tremen do u sly since then . These are n otpraotitio ners . If y o u lo ok at page 370 o f their study, then o npractitio ners train ed the physician s that reviewed the cases fo reviden ce of adverse events and negligence , peo ple that weren o npractitio ners telling peo ple what to lo ok fo r and charge when itcame to n egligen ce

,and let me tell y o u ,

ithas been o ur experien cein Tex as that y o u cann o t do — y o u have to have active practitio n ersreviewing th o se cases .

An adverse even t in this stu dy was defin ed as inju ries cau sed bymedical management. Ladies and gentlemen , under this study, if

138

we— if I gave y o u an aspirin while y o u were in the ho spital and y o udevelo ped an upset stomach , that was co n sidered an adverse even t,and that is n otqualityMr . BR OOKS . If y o u are allergic to aspirin like I am ,

itwo u ld be .

Dr. FALCON . I am n otsaying that itis n ota pro blem . I am saying that that is n ota quality pro blem . Peo ple are go ing to have reactio n s to medicatio n s . If a patient comes to me and says , I havea so re thro at and I give them penicillin and they have a reactio n ,

that is an adverse effect, especially if I didn’t kno w they were aller

c.gl

They are problem s , butthey are n otproblems that were cau sedby negligence .

The study invo lves patien ts,and ithas been o ur ex perien ce

in the State o f Te x as that if y o u to o k charts and reviewedthem fo r qu ality issu es , itwo u ld take fi ve physician s wo rking fu l ltime for 1 year to do that, and

'I do n’t kn o w h ow much time Harvard to ok to do this , butthat is a tremendo u s effo rt from a loto fphysician s to do a loto f review .

The o ther thing that I wo u ld like to address abo u t this study isthat the way that the adverse events and n egligen ce were described depended o n two do cto rs that were reviewing charts , anditis interesting to n o te that bo ard-certifi ed in ternists and su rgeo n sreviewed these cases and they talk abo u t n ewbo rn s with adverseeffects .

Ladies and gen tlemen,my children are taken care o f by family

do cto rs and pediatrician ,n otin ternists o r surgeo n s

,and so there

is a loto f flaws in this stu dy .

Mr . BR OOKS . Any lawyers have any commen t? M s . Wittkin , do

y o u have any commen t o n h o w they co u ld get mo re pro tectio n fo rthe peo ple wh o never even file

,wh o may suffer damages? They say

98 percen t do n’t even file .

M s . WITTK IN . Certain ly . I think o ne o f the issu es that wasbro ught up by Mr . Keener is something that we sho u ld lo ok at.

I do n’t n ecessarily agree with the so lutio n abo u t how we get faster settlemen t o f lo w-end cases o r cases that aren ’t highlycompen satable, butthere is an o ther way to do it, and that is to setup ,

within the alternative dispu te reso lu tio n mechanism, somefo rm o f binding arbitratio n atthe requ est o f the p laintiff fo r caseswo rth un derThat wil l do several things . It will allo w the victims who have

cases that are n othighly compen sable , butcertain ly merito rio u sand who are having great difficu lty getting atto rneys , an avenu e o fl egal redress and itsho u ld be a swift avenu e , itsh o u ld be less expen sive and itis s omething that I think we sh o u ld lo ok at

,an d I

think that actually itis Senato r Kennedy’s health care bil l has language abo utrMr . BR OOKS . It is an in teresting idea. Who wo u ld y o u have o n

an arbitratio n pan el? Les s than a damage and the lawyers make a deal . The plain tiff s lawyer gets itco st him

to do the case and ittakes a loto f time . He might makehe might n otmake anything, so he do esn

’t want to do it.

Defen se lawyers make the same right?

Ms . WITI‘KIN . Defense lawyers make mo ney ho urly .

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140

s ome in stan ces pro vides an even better deal fo r malpractice do cto rsthan Califo rnia do es .

The depu ty commissio n er o f insu ran ce in New Yo rk State metwith the State senato rs and many do cto rs from the Medical S o cietyo f the State o f New Yo rk several mo n ths ago to discu ss this veryissu e , and what she said was simply that do cto rs in New Yo rkwo u ld n otbenefit by having a cap o n no n eco n omic damages , andI can tell y o u from a public po licy perspective ju st lo oking atwhatto rt refo rm do es in general , the American peo ple will n otben efitfrom a cap either .

Mr . BR OOKS . Mr . C o rbo y , y o u had a commen t . The gen tleman isreco gniz ed .

Mr . COR R OY . Yes , sir, thank y o u .

The u se o f arbitratio n subsequen t to filing a lawsuit , itcan’t

be

Mr . BR OOKS . Is that micro ph o ne o n? Pardo n me, sir.

Mr . COR BOY . I am s o rry . Ex cu se me. I apo lo giz e . Wayn e Co un ty,

MI,has mandato ry arbitratio n in allcases . I am familiar with it

becau se I have advo cated , altho ugh I am a trial lawyer and itmayso un d in co n sisten t, I have advo cated befo re yo u r legis latu re .

We have been turn ed do wn by o ur legis latu re , I have advo catedADR in all cases , n ot$50 cases , n ot cases , all cases .

Wayn e C o un ty , MI , which is Detroit, has the same type o f litigatio n medical malpractice climate as do es Co ok Co un ty

,IL. Wayn e

C o un ty is Detro it, itis a large community.

The differen ce is that in Wayn e Co un ty ittakes a year-and-a-halfto dispo se o f litigatio n . In C o o k Co un ty , ittakes years . The reaso n being, acco rding to the lawy ers in Detroit, that they have twothings in Michigan and that po rtio n o f Michigan which mo st Statesdo n othave . They have prejud entinterest, which is o ne way o f

keeping cases from go ing to jug-

gment, and they also have mandato ry arbitratio n ,

n o nbinding, and with that as a basis , the litigatio n

that has to go to trial is defined and determined earlier and casesget to suit earlier, and we in the ABA wo u ld have abso lu tely no

o bjectio n to mandato ry arbitratio n as lo ng as itis n otbinding o r

the parties argu e to binding arbitratio n .

Obvio u sly y o u can’t do away with the right to trial by a ju ry , so

there has gotto be an agreement by the parties to have bindingADR . If the parties wan t to do that, n otas a co n ditio n preceden tto being treated by a do cto r o r to get the health care pro vidinfrom any medical care pro vider, butafter a relatio n ship is createas lo ng as the parties kn o w itis mandato ry , the ABA has n o objectio n to it.Mr . BR OOKS . That is in teresting.

Mr . Keen er, did y o u wan t to comment?Mr . KEENER . Yes , Mr . Chairman . My o f fice and my partn ers

have, o ver the years , literally tried hundreds o f medical mal

practice cases . We have also arbitrated many.

I cited earlier a o verall su ccess rate o f 80 percen t fo rmalpracticedefen se cases . My fi rm has been lu cky en o ugh that in trying medicalmalpractice cases , we have w o n in excess o f 90 percen t o f tho secases .

Mr . BR OOKS . Which side have y o u been o n?

14 1

Mr . KEENER . The defen se side . We have wo n in excess o f 90 per

cen t o f the ju ry trials . We have a eatdeal o f faith in'

ury trials .

We n ever ever ask fo r a co u rt tria becau se we have aloto f faithin the Am erican public .

We have also tried many, many arbitratio n s in which the partieshave co n tracted— ithas n otbeen compelled o n them , butthey haveco n tracted— o r do cto rs have co n tracted with their patien ts , andthat su ccess rate dro ps down to abo u t 65 percen t.So what I recommend to my physician clients is do n’t arbitrate .

Go in fro n t o f a ju ry . Nine times o uto f ten , we are go ing to winthat case .

And arbitratio n is n otcheap . Peo ple talk abo u t h ow quick itisand h ow in e x pen sive itis . That is n oto ur experience . So I firmlybelieve that the American peo ple sho u ld have the right to civil jutrials , and I think o ur physician s are better o ff with a ju ry triaMr . BR OOKS . Now ,

h ow wo u ld y o u expect health care pro vidersand co n sumers to alter their behavio r in the even t that the co llateral so u rce ru le was eliminated?What do y o u think abo u t that?Mr . COR R OY. I cann o t ima

'

ne any defen dan t, whether he beairline pilo t , a cab driver , a o u sewife o r a do cto r changing his o r

her behavio r becau se o f the co llateral so u rce ru l e .

Allthe co llateral so u rce ru le do es is shift expen ses from o ne in

suran ce company to an o ther. I can’t imagine a ho u sewife being

mo re carefu l fo r the benefit o f the mailman if she kn o ws there isa co llateral so urce ru le . I can

’t imagin e an airline pilo t being mo recarefu l fo r his passengers o r her passengers becau se he kno wsthere is a co l lateral so urce ru le .

I wo u ld like to think— and I do think— that the do cto rs o f Am erica are h o n o rable peo pl e and their behavio r is n ot o ing to be anyless o r any mo re carefu l ju st becau se o f a collatera so u rce ru le . Ican

’t imagin e their behavio r being any differen t.Mr . BR OOKS . Yo u do n’t think that itwo u ld make peo ple wh o

bo ught in surance reco ver less than tho se who did n ot?Mr . COR R OY. Oh , yes , sir, yes . That may happen . There may be

an eliminatio n o f damages to the individual perso n , yes, sir.

Mr . BR OOKS . Pruden tMr . COR R OY. Yes , sir, and they may have co n tractual rights .

They have satdown atthe .table with management, as a resu lt o flabo r and managemen t agreements , that may be a nu llity if theco llateral so u rce ru le is do n e away withButI do n’t believe that the co l lateral so urce ru le wo u ld affect the

perfo rmance o f do cto rs any mo re than any o ther po ten tialto rtfeaso r .

Mr . BR OOKS . Mr. Keener .

Mr . KEENER . Mr . Chairman ,I do n’t think that the co l lateral

so urce ru le is an issu e . If y o u do away with it, as we have in Califo rnia,

where in medical malpractice we can bring o utthe fact thatthe patien t has health in suran ce— o f co urse they cann o t bring o utthe fact the defendan t has malpractice in surance . Butif that isbro ught o ut, and if the health care pro vider, that is the in su rancecarrier

,wan ts to file a lien o n that case , they get that m o n ey . So

the defen dan t is go ing to have to pay the mo ney .

It is ju st n otgo ing to the victim ;itis going to an o ther in su ran cecompany .

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Mr . BER MAN . Wo u ld the Chairman yield fo r o ne questio n?Mr . BR OOKS . Mr . Berman .

Mr . BERMAN . Butwhere there was n o subro gatio n ,there can be

n o do ubt that allowing the evidence that the plain tiff has been paidfo r his medical damages wo u ld redu ce the am o un t o f the recoveryand preven t the plain tiff from reco vering twice fo r the same medicaldamages , right?

1'

Mr . KEENER . That is right, where there is n o subro gatio n or n o

Ien .

Mr . BERMAN . Where there is n o subro gatio n o r n o lien ,if y o u

can’t in tro du ce eviden ce o f co llateral so u rces

,then itis po ssible the

p lain tiff , who is suppo sed to be made who le from this actio n ,will

actually reco ver twice from his health in su rer and from the malpractice in surer fo r the medical damages;isn

’t that co rrect?Mr . KEENER . What we are seeing is mo re and mo re health care

coming in , buty o u are co rrect .Mr . BER MAN . Thank y o u .

Mr . BR OOKS . Yo u agree , Mr . C o rbo y?

COR R OY. No ,sir

,I do n’t. He is n otreco vering twice . He is

reco vering o n ce . His in su ran ce company is getting paid , so he is n otgetting paid . His in su ran ce company is getting paid . He is gettingpaid o n ce fo r the medical expen ses .

Mr . BER MAN . Will the chairman yield ju st to fo llowu p?Mr . COR BOY . Pardo n , sir

?

Mr . BERMAN . Evidence comes in abo u t medical damages , medicalexpen ses already aid, ho spital ex pen ses , do cto r

’

s bill , fu ture medicaldamages . He has already been paid that by his health in surance pro vider.Mr . COR R OY . Which he gives back . He pays fo r it. He

'

ves

Mr . BERMAN . Notun l ess there is a subro gatio n . Ackn ow edge thefact— I understand yo u r point, y o u made itin yo u r testimo ny, ifthere is subro gatio n ,

he'

ves itback . If there is n o subro gation ,

he reco vers twice,do esn

’

t e?

Mr . COR R OY. He reco vers o n ce . He do esn’t reco ver atallif he

do esn’t get paid . Let’s assume I have gota bill fo r $10 and my in

su ran ce company pays the $ 10,I am n otgetting it. The do cto r is

getting it.So I am n otgetting paid twice . I am going to get paid o nce fo r

that $ 10.

Mr . BER MAN . And then when y o u presen t the evidence that y o uhad medical bills fo r $10, yo ur award includes that $ 10.

Mr . COR R OY . Yes , sir. I am o n ly saying he gets ito n ce . The do cto r gets itthe first time .

Mr . BERMAN . Come o n . He is getting $10 mo re than he wo u ldn eed to get to be made who le .

Mr . COR R OY. Yes , sir, y o u are abso lu tely co rrect. Butin the

mean time,he may have been payin a do llar a year and he has

n ever co llected o n it, and n ow he co lects that do llar in $10 paymen ts later .

Ms . WITTKIN . May I ju st make a brief commen t?Mr . BR OOKS . Ms . Wittkin .

Ms . W I'I‘TK IN . I think that a go o d so lu tio n to this is to have the

kind o f co llateral so urce ru le in o ur Federal health care refo rm thatCalifornia do es, where, information aboutco llateral sources can be

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Mr . Co rbo y .

Mr . COR R OY . Yes , sir, I think I can an swer you r qu estio n specifi

cally , and I wil l supply them later with some do cumentatio n . I believe that the co st o f medical malpractice premiums last year o r theyear befo re , when ever the latest figures are, are $9 bil lio n .

I believe the in su ran ce companies co llected $9 billio n . Outo f that$9 billio n , they paid somewhere in the neighbo rho o d o f $3 billio nin paymen ts .

Now ,what happen ed to that $6 billio n differen tial , I can

’t answer, butI will give o u the statistics that I ju st supplied yo u .

Now , o uto f that 3 bil lio n , atto rn ey’s fees are paid to bo th de

fen se lawyers and plain tiffs’ lawyers and administrative co sts , and

everything else o uto f that $6 bil lio n . The co st o f run ning the in surance bu siness comes o uto f the $6 billio n . So I do n’t kn o w wherethe $6 billio n go es .

In yo u r inquiries as to whether medical malpractice refo rm or defo rmatio n sho u ld be ex amin ed in to to , I suggest y o u also fi nd o uth ow much mo ney the in su rance companies are making.

The in surance company in Illin ois , the do cto r-suppo rted in surance company, paid back mo ney to their subscribers last year . Thedo cto rs paid premium s, yes , butthey gotmo n ey back , and I suggest to y o u that yo u find o utwhat amo un t o f the do llars that areactually co ll ected are go ing in to the profits o f in su rance companiesand how mu ch o f tho se do llars are spent fo r administrative co stsrather than fo r lawyers which comes o uto f the co rpu s o f the paymen t.Mr . BR OOKS . Dr . Keller .

Dr. KELLER . Thank y o u . This is an in teresting questio n , and the$6 billio n and $9 billio n is in teresting. Of co u rse , mu ch o f that $6billio n is being held in reserves fo r po ten tial claims .

I happen to be o n the bo ard o f directo rs o f a small physicianowned and directed in su rance company in Main e , and itis a mu

tual company, so we are— we canno t make a profit. We have fo r 2years retu rn ed small am o un ts o f mo n ey to physician s becau sethere were extra funds o ver reserves fo r po ten tial claims .

Fo r years o f co u rse , that didn’t happen , and allo f o ur indicato rs

are sho wing that that trend is n ow reversing. The frequen cy o f

suits is go ing up and clearly the awards are go ing up ,so that I

do n ’t think that we can attribu te the amo un t o f m o ney go ing in tothe malpractice arena to in su rance company pro fits since mo stcompanies are n ow physician owned .

I fo rget the exact percentage , butthe maj o rity o f malpracticecompanies in this co un try are n ow physician o wn ed becau se o f theprio r malpractice crises when the commercials pu lled o ut. I do n

’tthink there is a loto f e x cess profit. I think a loto f tho se mo niesare u sed .

Ms . WITTKIN . Mr . Chairman ,may I ju st add something?

Mr . BR OOKS . Yes , ma’

am .

Ms . W ITTKIN . I agree with Dr. Falco n . I think that we definitelyn eed to fi nd a way to get mo re o f the mo n ey to the victims o r theirfamilies , and some o f the things that o ur o rganiz atio n is suggesting, I think , will do that.

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First o f all, States like Califo rnia have a statu te o f limitatio n o n

the dispo sitio n o f cases, so o nce a case is filed , itmu st be dispo sedo f in o ne way o r an o ther within 5 years .

We are recommending that there be a statu te o f limitatio n o n thedispo sitio n o f allcases within 3 years , plu s Special co n sideratio n fo rterminally illpatien ts and children in e x pediting the handling o f

tho se cases .

R ight now , as y o u heard earlier, malpractice cases have tales o f

7, 10, o r 12 years in some States,and if y o u are lo o king atwhy

so little mo ney is go ing to victims, y o u have g otto lo ok atthat as

o ne o f the leading cu lprits , becau se defen se fees ju st keep piling upas the case drags o n becau se defense atto rn eys get paid ho urly win ,

lo se , o r draw .

I think the o ther thing we sho u ld take a lo o k atis we are co n

stantly talking abo u t the need to redu ce atto rne’

s fees, butwe areo n ly talking abo u t reducing plain tiff atto rn ey fi

l

es , and I think itis time we talked abo u t fin ding a fair so lu tio n and redu ce defen seatto rn eys fees as well . That W il l also fil ter mo re m o ney back in tothe system fo r victims and their families .

The o ther thin is that there was a study do n e in New Jerseylast year by the merican C o llege o f Physician s based o n a reviewo f 15 years o f malpractice in su ran ce claims by o ne malpractice insurance company, and as I said earlier, this stu dy fo und that 58percen t, clo se to 60 percen t o f allindefen sible cases by malpracticing do cto rs were n o netheless wo n by th o se do cto rs and their atto rn eys attrial as o ppo sed to 5 percen t o f defen sible cases wo n attrialby plain tiffs .

That suggested to me that while itmay definitely suit do cto rs tog o to jury trial allthe time;itcertain ly is n otin the best in teresto f patien ts . When we talk abo u t frivo lo u s lawsuits in this co un try,why aren’t we o u traged that almo st 60 percen t o f cases that do cto rssho u ld be lo sing

,they are winning atju ry trial . There sh o u ld be

some so rt o f punitive actio n o r penalty attached to that practice toeliminate that kind o f abu se .

Also , I think if y o u o u tlaw o r prohibit do cto rs and ho spitals fromen tering in to secrecy agreemen ts as a requiremen t o f settlemen t,y o u will mo ve cases alo ng mu ch mo re quickly . R ight n o w , victims

are being held h o stage by these agreemen ts . They are pu shed tothe wall . It do esn ’t matter if ittakes victim s 2 years to fo ld o r 3

years to fo ld , the defen se can affo rd to wait.It is in the in terest o f the do cto r and the ho spital to keep many

o f tho se agreemen ts secret and they do it. They do n’t settle the

cases un til the end, un til the family says

,I have this child , he o r

she has g otallthese medical needs , what am I go ing to do , I haveto settle

,and I have to go alo ng with the secrecy agreemen t which

mean s n o bo dy will ever kn ow abo u t what this do cto r o r this substandard ho spital did to my child and my famil and myself.

I think allo f these things are definitely via le alternatives andso lu tio n s to the system and will help bring mo re mo n ey to theplain tiff . That co upled with mandato ry bindin arbitratio n atplaintiff s requ est fo r cases under will efi nitely bring mu chmo re mo n ey to the plain tiff .

Mr . BR OOKS . Mr . Fish ,the entleman from New Yo rk .

Mr . FISH . Thank y o u ,Mr . airman .

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Mr . Keen er, I wo u ld like to get in to the qu estio n o f en terprise liability . Yo u did n otspecifically address the provisio n in the Presiden t’s bill regarding en terprise liability, as y o u may kn o w ,

the provisio n wo u ld substitu te the physician with the health care en terprise sho u ld the physician be su ed fo rmalpractice .

And my qu estio n is : Do es o ur o rganiz atio n have an o pinio n o n

that pro po sal and if so , wo ul y o u commen t o n it?

Mr . KEENER . Co ngressman,that is o ne o f the few aspects o f the

pro po sal that we have n otas yet taken a po sitio n o n .

Mr . FISH . OK. Wo u ld y o u let u s kn o w what and when y o u do?Mr . KEENER . Abso lu tely .

Mr . FISH . We are n otsu re how lo ng the Co ngress wil l be atthis .

C o u ld be a while .

Dr. Keller, in yo ur Physician s Paymen t R eview Commissio n R epo rt, y o u stated that y o u co ndu cted an exten sive analysis o f themedical malpractice pro blems prio r to making its recommendatio n sfo r refo rm in the 1994 annual repo rt to Co ngress . Co u ld y o u tellu s mo re abo u t ju st what research was co n ducted and mo re abo u tthe analysis

,

? On what eviden ce was the commissio n’

s rec

ommendatio n o n malpractice refo rm based?Dr. KELLER . The commissio n had its own hearings o n this issu e

and had e x pert testim o ny from a number o f so u rces acro ss theco un try . We have o n o ur staff a phy sician/atto rney wh o is an expert in these fields and has do ne a great deal o f his own researcho n vario u s aspects o f the malpractice issu e . In additio n

,fo r this an

nual repo rt, 1994 , the commissio n underwro te a study by some o fthe researchers in the same Harvard gro up that has been ref

erenced in terms o f the famo u s New Yo rk repo rt who lo oked atseveral aspects o f the malpractice issue , particu larly the guidelinesissu e . They fo cu sed o n whether guidelines were go ing to be helpfu lin this who le arena o f trying to better defin e what is a compen sableinju ry and how better to handle it.That stu dy sh owed that the guidelines are n otbeing very mu ch

u sed atthis point, o n ly abo u t 7 percent o f cases repo rted. An analysis o f files that invo lved guidelin es showed that where they wereu sed , they seemed to o ffer some o ptimism fo r co n tro lling, as y o uwill , the number o f cases .

In o ther wo rds , where there is a u sefu l guidelin e , cases may n otbe bro ught o r cases may be settled . So ithas been that combinatio no f o ur own in ternal research ,

testimo ny, and o ur own commissio ner

’

s analysis that has resu lted in the recommendatio ns that wepresented to y o u .

Mr . FISH . With regard to yo u r suppo rt fo r practice guidelines , isityo u r o pinio n that su ch guidelin es , when u sed to defend do cto rssho u ld co n stitu te an abso lu te defen se o r merely an affirmative defen se? Fu rthermo re

,if such guidelines are u sed by plaintiffs to

bring suit again st do cto rs , sho u ld they be able to be u sed to establish a prima facie case?Dr. KELLER . I can ’t an swer that questio n very well . Our o pinio n

o n guidelines is that we do n’t have the final an swer yet . The ex perimentin Main e u ses guidelin es as an affirmative defen se , that is ,in the demo n stratio n u nder the law physician s may u se the guidelines

,butplaintiffs can

’t.

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148

Dr. HANNAN . That is co rrect, and that is an average . As I statedin my testimo ny, down state in the metro po litan New Yo rk Cityarea, the co st is n ow going to be per year . In ru ral upstate New Yo rk where I practice, the o bstetrical premium is

per year .

I understand in Flo rida,the co st may exceed that in the ran e

o f in certain areas , butI do n’t have the specific detai s

regarding the geo aphicalareas o f Flo rida that that has effect .Mr. FISH . Co u l y o u an swer my qu estio n abo u t what States have

the highest premiums?

Dr. HANNAN . It is my understanding that New Yo rk is o ne o f thehighest. I think Flo rida also carries a high malpractice premiumthat may exceed New Yo rk

’

s rate .

Mr . FISH . Who sells medical malpractice in suran ce in o ur co un

try? Are there many private carriers that o ffer su ch co verage? Do esthat co n stitu te mo st o f the malpractice in suran ce o r is ittru e thatitis so ld in o ur co un try thro ugh n ot-fo r-pro fitcompanies established by medical so cieties?Dr. HANNAN . Well , in New Yo rk State there are fo u r insu rance

companies that are certified by the Superin ten den t o f In su rance tosell malpractice co verage , and in o rder to have ho spital privileges ,a physician wo u ld n eed to be insu red by o ne o f tho se companies .

There are so -cal led o ffsho re o r o ut-o f-State carriers wh o can pro

vide malpractice in suran ce fo r tho se physician s wh o are n oto n h o spital staffs , butin general , the vast majo rity o f physician s practiceo n ho spital staffs and wo u ld be in su red by o ne o f the fo u r carriers ,and these are n otfor-pro fitin su rance companies , mu tual companies , as was previo u s ly allu ded to .

Mr . FISH . Thank y o u very mu chThank y o u ,

Mr. Chairman .

Mr . BR OOKS . Mr. Co nyers .

Mr . CONYER S . Thank o u ,Mr . Chairman ,

and my co ngratu latio nSto y o u o n ho lding this hearing becau se this is o ne o f the collateral issu es to health care that is very impo rtant that we viewa

lo ng with the develo pmen t o f health care refo rm as itis moving

a o ng .

I wo u ld like to ask Ms . Wittkin abo u t her impressio n s o f them edical malpractice pro visio n s in the Clinto n bill , H.R . 3600

,if y o u

have had a chance to lo ok atthem .

Ms . W ITTKIN . Yes , as I said earlier, allo f these pro visio n s are

antico n sumer and regressive . They are refo rms that wil l do n o thingto lo wer health care spending in this co un t will do n o thing to increase acces s to care fo r underserved po pu atio n s . The o n ly thingitis go ing to do is make the practice o f malpractice mo re affo rdablefo r do cto rs wh o commit it. And what is m o st irrespo n sible abo u twhat we are seeing in this bill labeled health care refo rm is thatwe are o n ly lo oking atthe liability end o f malpractice , like , h ow doy o u divvy up the mo ney o n ce the victim has already been harmed .

Why aren ’t we in this co un try lo oking atways to prevent malpractice? Our o rganiz atio n lo oks atState medical bo ards allo verthe co un try

, and dangero u s do cto rs do have licen ses to kill . State

i‘nedicalbo ards do virtually n o thing to discipline o r o versee the proessio n .

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Last year fewer than do cto rs were disciplin ed, and maybe10 percen t o f tho se were disciplined fo r ne ligen ce o r in competence ,and mo st o f tho se do cto rs never sto ppe practicing and in thisco un try . Do cto rs can easily mo ve from State to State . They can lo sea licen se in o ne State and g o to an o ther State and become licen sedo r o ften times they can carry licen ses in fi ve o r six States ata time .

Cu rren tly , we speak 50 differen t languages when itcomes toState medical bo ards becau se there is n o co ntinuency o r unifo rmity . We mu st do something to make them mo re respo n sive , mo reaggressive , and al low them to fu lfill their mandates .

Mr . CONYER S . D o yo ur recommendatio n s in clu de a Federal list o fminimum standards that wo u l d be applicable to allthe bo ards inthe several States?M s . W ITTK IN . Yes , the do

, and what we attempted to do is lo o katevery State medical ho ard’s regu latio n s and statu tes and pu llo utthe best that we fo und in each State pro gram and so rt o f makethe new flo o r the old ceiling, and as a resu lt , we think that itdefinitely go es a lo ng way to give the States what they have n othadup to this p o in t .State medical bo ards have been ign o red by State legislatu res .

They have been underfunded , understaffed . They have been run

largel by the medical pro fessio n , and I think that what we haveseen o r decades in this co un try is they have failed to do their jo b .

It do esn’t matter if we stand o n o ur“

heads and beg do cto rs , andwe have , to take respo n sibility fo r their o wn pro fessio n . They failto do it, and I think itis time that the American peo ple g otinvo lved pro tecting the quality o f their o wn health care

,and I think

that itis time that C o ngress suppo rt that .Mr . CONYER S . C o u ld y o u tell me ju st briefly h ow yo u r rec

ommendatio n list was putto gether becau se itis quite impressiveand pretty comprehen sive .

M s . W ITTK IN . Well,essen tially , I have been lo oking atthe mal

practice qu estio n sin ce my malpractice o ccu rred o ver 13 years ago ,

and in doing research and wo rking with a variety of . o therco n sumer gro ups that are invo lved and in terested in

“

this issu e ,what we have do ne is lo oked atthe malpractice issu e witho u t o urheads in the sand .

If there are legitimate gripes abo u t the system n otbeing fair too ne side o r the o ther

,we wan t to kn o w abo u t them becau se we

wan t the best system po ssible . What we are seeing, ho wever, is a

system so far tilted in o ne directio n that we can’t even get o n level

playing gro und to talk abo u t h ow to mo ve that system and impro vethat system .

Butthe recommendatio n s that we made reflect the j o in t effo rtso f a variety o f citiz en gro ups o utthere , public citiz en ,

citiz en actio nand so o n , wh o have l o oked atthe issu e , lo oked atto rt refo rm ,

lo oked atthe effects o f to rt refo rm ,studied research ,

read every re

po rt that was do n e o n it, and what we have come up with , wethink , places u s o n the ro ad to a so lu tio n to this crisis .

Mr . CONYER S . Thank y o u very mu ch .

Mr . C o rbo y , do I understan d that arbitratio n is yo u r majo r rec

pmmendatio n to this committee in terms o f dealing with the probem .

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Mr . COR BOY . No , sir. I have some n egative recommendatio n s , butwe have go n e thro ugh tho se . No . What I am saying is that theAmerican Bar Asso ciatio n is in favo r o f s ome type o f ADR in all

types o f to rt litigatio n .

There is n o reaso n why ADR sho u ld n otbe applied in automo bileaccidents , in pro duct liability cases , in railro ad accidents . Mal

practice is ju st an o ther, and I realiz e— I am n otbeing dero gato ryo f the genre , butmalpractice is ju st ano ther type o f to rt, and itsho u ld n otbe singled o utand given any type o f specific differen tiatio n in the litigatio n pro cess .

We are in favo r o f alltypes o f to rts being arbitrated o r mediatedo r doing something so that the cases that have to be tried . Thisamo un t is a small number . In every urban communit in the co untry

,less than 5 percen t o f the cases go to verdict . That is tru e in

Detro it , MI . It is the same in Chicago . It is in New Yo rk , al so .

No matter what system we have , 4 to 5 percen t go to verdict.Therefo re , if y o u can delineate and iso late tho se 90 percent o f thecases that never reach the litigatio n system by way o f settlemen to r verdict, I say 90,

and I realiz e the differen tial o f 5 o r 6 percent.Tho se o ther 5 o r 6 are abando n ed o r they are kicked o uto f co u rt

becau se o f summary judgments , butlet’

s assume that 85 to 90 percen t go o uto f the system by way o f settlement. One way to iso latetho se cases is to have some type o f ADR as a co nditio n preceden tto go ing to trial , butn otas a co n ditio n preceden t to filing a law

suit .Mr . CONYER S . Have y o u fo und that caps are sometimes an easy

way to try to so lve a very difficu lt problem? I mean ,eco n omic caps,

itseems to me,wo u ld in some ways hu rt patien ts a co uple o f times .

Mr . COR R OY . Abso lu tely,sir. Yo u kn o w,

itis very easy to redu cea premium . If I were in the in surance bu sin ess and I setabo u t toissu e an in su rance po licy wherein o n ly Co ngressmen o r Co ngress

1perso ns wo u ld be eligible to buy the premium and they had to beilled o n the quarter o f 42nd and Bro adway in the middle o f theaftern o o n in the summer mo n ths , y o u can appreciate h ow small thepremium wo u ld be .

Yo u co u ld buy that po licy fo r practically n o thing and get a $10millio n compen satio n if y o u fit the system ,

if y o u fit the co ntingenoy .

Obvio u sly, if y o u take o uto f the po tential fo r a medical malpractice o r any to rt award , if yo u take o uto f that po ten tial com

pen satio n fo r payments fo r n o n eco n omic damages , we will take theo u sewife, we will take the child , we will take the elderly perso n ,

where the medical damages and medical expen ses have been determined

,there is n o futu re medical expen ses fo r the blin d ho u sewife ,

itis very easy fo r that case to have a lesser premium than the casewhere compen satio n is go ing to be awarded as we kn o w itto day.

So pu tting a cap o n any type o f reco very fo r the victims o f a to rt,whether itbe automo bile , airplan e , railro ad , o r anything else , obvio u sl is o ing to have the po ten tial fo r redu cing premiums . Whether t ey o reduce the premiums is within the co nfin es o f the car

rier, butatl east ithas the premium .

If they are go ing to have to pay o utless , the po ten tial fo r thepremium is less . Ho wever, butthe o n ly perso n that can be hu rtcertainly the insurance company can

’

t be hurt by paying outless .

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Mr . KEENER . What we actually did,Co ngressman

,was two

things . One, we to ok the Co n sumer Price In dex . That -gotu s do wnto We also to ok triple A bo nds , and that valu e wo u ld be

o r so there has been an en o rmo u s dro p sin ce 1975in what is wo rth .

And I commented earlier abo utunfairness to certain parts o f o urpo pu latio n .

Mr . CONYER S . Butthere wo u ld be an argumen t again st itanyway , even if we had— suppo se there was an adju stable pro visio n inthere so that the co st o f living wo u ld be facto red in . Wo u ld yo u rargumen t disappear then?Mr . KEENER . It is the same . In fact, if I may ,

let me give y o ua quick e x ample o f a gen tleman that wen t to trial again st a do cto rwe represen ted in the early 1980’s . He was a man in his early 6o’s .

He was atthe end o f his wo rking career. He came in to have a can

cero u s kidn ey remo ved .

There was a mistake in the OR . They switched the x -ray , and rem o ved the heal thy kidn ey . Then he had to go back later and havethe cancero u s kidn ey remo ved . That man has lived to this day o n

dialysis every day . His to tal reco very was becau se he hadn o lo ss o f earnings since he was retired .

That,I submit

,is n otfair . The ju ry actually retu rn ed a verdict

o f ju st o ver $2 mil lio n ,butthat was cutby MICRA to

Mr . CONYER S . Thank y o u very mu ch .

Dr . Falco n .

Dr. FALCON . Thank y o u ,Mr . Co ngressman . I wo u ld like to men

tio n o ne thing that M s . Wittkin has men tio ned that has n otbeento u ched o n ,

and that is quality .

We cann o t have any changes in health care with o u t assuring o urpatien ts that quality wil l remain in place , and I wo u ld ju st like toto uch o n a few is su es to tel l y o u what o ur pro blems are in dealingwith quality and physician s that do have a pro blem .

There are several things in place right n ow that help to insurequality fo r patien ts . We haveh o spital medical staffs atthe lo call evel that do u tiliz atio n and quality assu rance review . It becomesa real pro blem

,tho ugh ,

when y o u try to get rid o f a bad do cto r, becau se itgo es to the co urts au tomatically .

Sometimes the do cto rs that do things in OR are afraid they are

go ing to turn aro und and be su ed , so that is something atthe Federal level that co u ld be do ne to try to help do cto rs in po licing theirown atthe lo cal level .We have in su ran ce carriers wh o do u tiliz atio n review, so whenI admit a patien t with pn eum o nia,

I have to call the in su ran ce carrier and ju stify that that patien t has pn eumo nia and needs h o spitaliz atio n . We have the Bo ard o f Medical Examiners . I agree thatfo r a very— in Texas abo u t do cto rs are san ctio ned a year bythe BME

, butthere is an o ther bunch that is sanctio ned by the,

PRO, and that is a system that I think is very effective as a watchdo g o ver quality o f care .

We have a to rt law system which pro bably is the least effectiveand the m o st co stly in having a sentinel effect o n medical malpractice . I do n otkn ow o f a single do cto r wh o has been sanctio nedas a resu lt o f a medical malpractice case

,and we have laws in

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Texas that fo rce the EME to lo o k atdo cto rs who have had severalmedical malpractice cases .

Mr . CONYER S . So y o u suppo rt some o f the recommendatio n s o fthe Cen ter fo r Patien ts’ R ights that wo u ld create mo re severe san ctio n s and m o re effective review o f do cto rs wh o practice po o rly?Dr. FALCON . Yes , sir, butI think itis also real impo rtant

, andwe have n o ticed this in Texas , quality do es notequal medical malpractice , and itis really unfo rtunate becau se that is a misunderstan ding that a loto f peo ple have .

We do n othave the same do cto rs that are san ctio n ed fo r qualityreaso n s that are san ctio n ed— that come up as a resu lt o f medicalmalpractice . Two -thirds o f o ur n eu ro su rgeo n s get su ed in Texasju st abo u t every year , and that do es n otmean that two -thirds o f

o ur neu ro su rgeo n s have quality pro blems .

I wo u ld like to add ju st o ne thing. The data bank . The FederalGo vernment co u ld tu rn the data bank into a very co nstructive sy stem . If we are co llecting data allo ver this co un try o n what is cau s

ing malpractice , why n otu se that info rmatio n to edu cate the medicalpublic abo u t what is being do n e wro ng and what can be do n eto impro ve it?Mr . CONYER S . Well , why n otu se itin the way that they pro p o se

to u se itas well?Dr. FALCON . I am so rry , which was?Mr . CONYER S . Well , under— I tho ught that was a pretty go o d

idea making the data bank mo re available fo r peo ple to u nderstandwh o is doing the wro ng thing where .

Dr. FALCON . Well , I mean , that is an o ptio n that y o u have , butlet’s carry ita step fo rward . If we reco gniz e— last year in Texaswith o ur PRO, we reco gniz ed that there was a problem with putting nasal gastric tubes in to patients .

There were three cases that we picked up where the tube wasputin to the wro ng place , and two resu lted in patients

’ death s . Immediately we n o tified the practitio n ers o f the State o f Texas thatthe stan dard o f care had to in clude a chest x -ray to make su re thatthere was pro per placemen t.We to o k the initiative to edu cate physicians and say ,

this is a

pro blem and this needs to be changed . I wo u ld like to see that do n ewith data bank info rmatio n al so .

Mr . CONYER S . Dr . Keller .

Dr. KELLER . Thank y o u ,sir. In an o ther part o f the commissio n

’s

repo rt, we talk abo u t mo del practice acts and that may get to someo f the issu es o f standardiz atio n o f standards fo r physician s acro ssthe co un try and the o bjectio n s , with which I agree , regarding 50State bo ards o f licen su re with standards that are very u neven .

They are clearly,atleast the o n es I kn ow abo u t, underfun ded .

They can’t do the job they wan t to do . We sho u ld also co n sider the

fact that there are lo ts o f o ther peo ple wh o pro vide health careo ther than physician s , alth o ugh physician s are certain ly o n thefo refro n t

, certain ly o n the fo refro n t o f litigatio n . Butthere wil l bemo re and o ther kinds o f pro viders who will be also subject to litigatio n in the fu ture , su ch as nurse practitio n ers , certified nu rse spe

cialists , physician assistan ts , and the like .

So we have advo cated the develo pmen t o f some mo del practiceacts o n the Federal level that might indeed help to address some

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o f these issu es . I think we n eed to refo rm the who le 8 stem andwe advo cate this in o ur repo rt. We do n ’t believe that t e cu rren tto rt system is atallefficien t o r effective , and co n tinuing to suppo rtthat in amajo r way pro bably isn

’t going to help very much .

So we have advo cated in o ur re ort, as I indicated , some fairlymajo r lo ng-term restru cturing o f t e system which o ught to makeitbetter . Notsimple to do , can

’t be do ne o vernight, lo ts o f researchand demo n stratio n s need to be do ne to pro duce that.That is pro bably the best an swer. We think mo re patien ts o ught

to be covered than are atthe moment . The cu rrent system isn’t

gging to do itthat well becau se do cto rs are fo rced to try to defen d

t emselves , even in in stances where they may n otwish to , as hasbeen su

ggested .

We a so make a differen t recommendatio n abo u t ca 8 that Ithink is impo rtan t. We do n’t agree with a single cap att is poin t,

o r whatever amo unt. We have advo cated a schedu le o f

caps , reco gniz ing that there are some inju ries and even ts that aremuch wo rse than o thers , and in which case a higher cap for n o n

eco n omic dama es might be very appro priate . There are somewhere that is c early n ottru e and a lo wer cap wo u ld be appropriate.

Again ,we need to do research and develo p some demo n stratio ns

to decide what tho se levels o f caps o r specific schedu les might be .

As an interim o ne to try to get co n tro l o ver this very expen sivecompo nen t o f the system , and I agree that itis , a single cap mightbe putin place , butwe do n

’t think ito ught to stay there . We thinkwe o ught to wo rk towards these schedu les . And a very imp o rtantelemen t in allo f this is the need fo r mo re info rmatio n , and I do n

’tthink this has been emphasiz ed en o ugh .

We certain ly do in o ur repo rt. We n eed a lotmo re info rmatio nabo ut malpractice events

,and n egligen t care than we curren tly

have . That requires new data systems which in fact wo u l d help theen tire health care system . We ju st do n ’t kn ow a lotabo u t thesekinds o f even ts , and we do n’t have large data bases to severaltrends and profiles which allow peo ple to see where the pro blems

are. I think itis a very impo rtant compo nen t.Mr. CONYER S . Thank y o u very mu ch .

Thank y o u ,Mr. Chairman .

Mr . BR OOKS . Mr. Gall egly .

Mr . GALLEGLY , Thank yo u ,Mr . Chairman . This has been a mo st

in teresting hearing this m o rning. I think we have really had an o p

po rtunity to hear some excellen t testimo ny .

On this issu e o f caps , and I think Mr. Keener had a go o d example a few minutes ago abo u t the retired individual wh o didn

’t haveany real financial o r eco n omic damage , let me ask y o u this: D o y o ubelieve that there sho u l d be any type o f caps o r a schedu le cap o n

pain and suffering? D o y o u think itsho u ld be complete] 0 en

en ded? I think Dr. Hannan po in ted o uta case in New Yo r w ere.

there was a $90 millio n ju dgmen t fo r pain and suffering. Is thateasy to

'

u stify?

Mr . ENER . I wo u ld have to lo ok atthat verdict to understan dit. I can first an swer yo u r qu estio n . I do n otbelieve we sho u ld havecaps . Let me also say that from o ur own experience in having triedhundreds of medical malpractice cases, we have on ly had two ver

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Dr. FALCON . I think every single o ne that has been filed in o ur

community , buto ne has been from patien ts from acro ss the bo rder .

Mr . GALLEGLY . Yo u are saying that every malpractice lawsuitthat y o u are aware o f, and that acco unts— l et

’

s back up a seco nd .

Abo u t a third o f yo u r patien ts are illegal immi an ts yet 100 er

cen t o f all the lawsuits that have been filed ave een fil e byillegals rather than citiz en s?Dr. FALCON . Not100 percent, butvery clo se to it.Mr . BERMAN . Will the gentleman yield?Mr . GALLEGLY . So , the likelih o o d o f hayin a case filed again st

y o u fo rmalpractice is greater o n a per capita asis by someo ne wh ois here illegally than a citiz en o f this co un tDr. FALCON . Abso lutely . Becau se what

1

happen s , mo st o f tho sepatien ts are walk-in s . The o ne that I can remember that was ju stfil ed recen tly is a patien t that spent 7 days seein do cto rs in Mexico , had a ruptu red appen dix, develo ped a huge a scess, came in too ur community septic , almo st dead , was resu scitated , had su rgery ,had to have a perman en t co l o stomy, and is suing u s becau se he hasa co lo stomy .

If this fello w hadn’t go tten to o ur h o spital within a few ho urs ,

he wo u ld have been dead . Butthat is the kind o f gratitude thatsome o f tho se patien ts have .

Mr . BER MAN . Will the entleman yield?Mr . GALLEGLY. Certainfiy .

Mr . BERMAN . So from that, I gather itwo u ld be safe to co nclu de ,atleast in so u thern Texas

,if y o u co u ld get rid o f malpractice cases

by undo cumen ted peo ple , y o u wo u ld n othave a malpractice pro b

em .

Dr. FALCON . We wo u ld have a much smaller pro blem , yes , sir.

Mr . BERMAN . Well , y o u talked abo u t a hell o f a loto f refo rms

when the who le pro blem , acco rding to y o u , or a big part o f itiscoming from peo ple coming acro ss the bo rder.Mr . GALLEGLY. I thank the gen tleman and I wan t to thank all

the witn esses this mo rning.

Thank y o u ,Mr . Chairman .

Mr . BR OOKS . Thank y o u .

Mr . Berman .

Mr . BER MAN . Mr. Chairman ,thank y o u .

I wan t to echo my co lleagu e from Califo rnia’s commen ts andthank y o u fo r ho lding this hearing. It has been very in teresting.

I had the misfo rtune'

to chair the Select C ommittee o n MedicalMalpractice in 1975 when Travelers In suran ce decided to raise thepremiums o n ,

I think itwas Ob/G’

s by 476 percent, thereby precipitating a physician strike and t en a maj o r effo rt to change theto rtlaws as well as to lo o k atal ternative ways o f dealing withmedical malpractice in surance co verage .

While I suppo rted -a certain number o f the changes in the law atthat time

,I have to say that the legislatio n that wen t thro ugh g ot

away from me, to say the least, and was far mo re sweeping, andI think in s ome way injurio u s , than is appro priate .

ButI fi nd the who le thing very,very funny in a wa Becau se

o n the o ne hand,I have n ever seen a repo rt which wo u d indicate

that the health care inflatio n index in Califo rnia sin ce 1975 interms o f co sts o f health care for consumers is substantially lower

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as a resu lt o f tho se sweeping, sweeping refo rms that we un derto okand which the ph sician s o f this co un try are asking u s to n ow federaliz e in effect. o u may talk abo u t premiums nothaving go n e upmu ch , butn o o ne makes any case that heal th care co sts in Califo rnia are significan tly lo wer than they wo u ld have been witho u ttho se refo rms , o r Significan tly lower than anywhere else in theco un try . If anythin the very , very recen t deescalatio n o f inflatio nin Califo rnia may he prompted by the fact that itis leadin thewa in the area o f managed care and leverage by differen t iu dso f ealth maintenan ce o rganiz atio n s on h o spitals and physician sand o ther health care service ro viders .

So I wo u ld l o ve to see han s o utto come to the Co ngress to saythat this is atthe heart o f co st co n tainmen t, itis n otabo u t medicalmalpractice in su rance , given the lack o f evidence o f that in Califo rnia o ver 20 years;we are n ottalking abo u t a co uple o f years here .

Ifi

gd that to be very misleading, I think unin tentio nally , butmis

ea In

On tie o ther han d , fo r tho se wh o talk abo u t medical malpracticeas the key way o f deterring bad do cto ring, I have seen no eviden cethat do cto rin in Califo rnia is significan tly wo rse becau se reco veries are so tig tly capped , atto rn eys

’

fees are so harshly restricted,

the ru l es o f eviden ce and the mandato ry arbitratio n pro visio n s areso o nero u s

,and that therefo re physician s practicin in Califo rnia

are wo rse , mo re careless , mo re negligen t,mo re reckfiess than they

are in o ther States .

Basical ly I think what yo u ’

ve gothere is a to rt system which ,in

the end, is designed to try to compen sate the inju red plain tiff fo rth}?1

n

egli

gen

tacts o f a pro vider and to try to make the perso n

w o e .

It is n ota great system fo r deterrin n egligence , and itis n otthekeyto redu cin health care co sts , an so I think there is a hyper

bo e o n bo th si es .

What I am in terested in,th o ugh

,is

,from any physician wh o

wo u ld like to commen t o n it, in Califo rnia atthe time , the who lething was premised o n this so rt o f tripartite deal . Do cto rs in healthcare

,ho spitals , are allgo ing to get a break , a massive change in

the to rt law : These very harsh caps , which ,as somebo dy has point

ed o ut,have n otbeen changed by inflatio n and n ow are massively

disco u n ted from what they were in 1975 , very tight restrictio n s o n

atto rn eys’ fees which prompt and promo te certain kinds o f settlemen ts becau se the atto rn ey’s in cen tive to pu rsu e the case to co nclusio n is vastly diminished , and o ther changes .

Butthe quid pro qu o is go ing to be a meaningfu l and effectivedisciplinary system that is n otgo in to depend o n malpractice insu rance to screen o ut substandar physician s, butis go ing tostrengthen the system

,and thirdly, we are go ing to deal with the

insu ran ce indu str’

s windfall profits and their who le situatio n . Butn ow

, allo f a sud en,we have sprung lo o se the o ne aspect o f mal

practice refo rm o r to rt refo rm from the o ther two refo rms .

It wo u ld be an o ther sto ry if the physician s o f this co un try cameto Co ngress and said

,give u s to rt refo rm and federaliz e and to u h

en up the disciplin e o n do cto rs , and pro vide alternative mec a

nisms fo r licen sing and— either in term s o f federaliz in ito r settingstandards that allStates wo u ld have to comply with , ave a majo r

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ity o f public members , n o nphysician members o n the bo ards o f

these medical bo ards that regu late physician ractices , and takeover regu latio n o f the in su rance indu stry as well?If the chairman’

s M cCarran-Ferguso n bill passes , ma be we wil lhave a start o f that, butI have n ever heard anybo dy ta king abo u tthat side o f the federaliz atio n . I wo u ld like to kn o w, first from thedo cto rs , if y o u wo u ld suppo rt a significan t federaliz ing o f disciplina pro cedures fo r hy sician s atthe same time that we n ow suckup om every o ne o the 50 States their ability to regu late to rt lawand federaliz e itin the area o fmedical malpractice?Dr. FALCON . Mr . Berman ,

that s stem is already in place withyo u r PRO’S . The PRO’

s are chargedy reviewing quality o f carefo rmedicare providers .

Mr . BERMAN . Fo r Medicare pro viders . I am talking abo u t fo r allm edical pro viders .

Dr. FALCON . Yes, sir, I understand that, butthere is already a

system in

fplac

ethat pro vides what y o u are asking abo u t to a small

segment 0 the po pu latio n .

Mr . BERMAN . Explain to me. Do es ithave the ability to delicen sedo cto rs?Dr. FALCON . Yes , sir, itdo es .

Mr . BER MAN . Show me where .

Dr. FALCON . OK Basicall what happen s is that if, after a chartreview

,itis fo un d that a p y sician has a quality pro blem and the

quality pro blems are tiered into level 1 , level 2 , and level 3, wherelevel 3 pu ts the patien t atsignifican t risk and po ssibly death , tho seare reviewed by the State committee . Less o f the quality pro blems

are reviewed atthe regio nal committees .

If after a hearing with that physician we fi nd that he has a signifi cantdeficit in his fund o f kn owledge , then that physician— thatrecommen datio n from the pan el is turn ed o ver to the OfficeIn specto r Gen eral , and I can think o f pro babl atleast 40 caseswhere we have sanctio n ed physicians to n otto e able to see medicare patients fo r the rest o f their lives , and probably an o ther 60 to100 that have vo luntarily tu rned in their licen ses and retired .

Mr . BERMAN . Do y o u suppo rt ex tendin and in suring a

n o nphysician dominated agency to delicen se p y sicians with Federal standards applying to all50 States , taking o ver the licen surefunctio n s o r setting the standards fo r licen sing fo r all50 States?Dr . FALCON . I wo u ld ho pe that if a delicen sing— I mean a

n o ndo cto r committee was go in to do that, that there be o ppo r

tunit fo r physician s , specifi ca y practicing physician s , to reviewthe c artand make recommendatio n s .

Mr . BER MAN . Sure .

Dr. FALCON . Becau se sometimes the charts get very complicatedtechnically, and sometimes there are complicatio n s that o ccu r as aresu lt o f o ssible complicatio n s from pro cedu res that can be misco n stru edKy n o nphysician s as a quality problem , butthat systemis in place , and I certain ly wo u ld favo r expan sio n o f that systemif that is o ne o f the things that wo u ld happen , becau se that is a

system that is fair to physician s .

They are able to come befo re a committee and defend themselves .

In the pro cessMr . BERMAN . Who sits o n that committee n ow?

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In additio n to that , do cto rs have so many layers o f due pro cessin the PRO pro gram that itis o u trageo u s . We deal with senio r citiz en s allthe time wh o are very scared , and they are scared fo r a

variet o f very legitimate reaso n s .

If t ey have been harmed by po o r care and they wan t to complain , they are afraid o f retribu tio n . They are afraid o f n otbeingable to g o back to that emergen cy ro om o r that h o spital o r that do cto r, buttho se that have the co urage to file a complain t with o ne

o f these PRO’S is then fru strated becau se under the Federal law ,

the do cto r gets to decide whether y o u as a complainan t have a

right to see the o u tcome o f the investigatio n , and if the o u tcome o fthe investigatio n is that the do cto r has been sanctio ned o r placedin some remedial pro gram o r subject to a mo re comprehen sive review,

that acco un tability is ve im ortant.Peo ple n eed to kn ow that t ey idn

’

tlo se a family member forn o reaso n and that something that they do is going to help co rrecta pro blem , and in the PRO pro gram , what happen s is that peo plecome fo rward butthey n ever fi nd o utthe resu l t o f their complain t.Mr . BERMAN . Thank y o u . Yo u r comments are very helpfu l . There

are o ther peo p le wh o wo u ld like to qu estio n . Let me ju st finishwith two questio n s .

One, to the three physician s , do y o u think a cap fo r

pain and suffering,with o u t regard to what happen ed to the atient

and Y’Vhatthe reaso n fo r that was , is a fair limitatio n in al situa

tio n s .

Dr. KELLER . I have previo u sly said no .

Mr. BERMAN . I th o ught that isDr . KELLER . There do es n eed to be a schedu le that needs to be

devel o ped . It is n ota simple thing to do , butthere sho u ld be catego ries , if yo u will

,reco gniz ing the severity o f inju ry that sho u ld

n otnecessarily relate to n egligen ce o r liability butju st to the patients situatio n .

We do suggest that that will take a whil e to develo p and in themean time , o ne might co n sider m o re rigid caps o n the way to a better system .

Mr . BER MAN . Dr. Hannan .

Dr. HANNAN . Yes , sir. I wo u ld like to argu e the o ppo site po int,and I wo u ld say that in the curren t medical practice and malpractice enviro nmen t, that su ch a cap is fair .

Now ,itmay appear to be u nfair in the individual case , butwhen

y o u lo ok atwhat is happening in this Natio n in terms o f heal thcare co sts and what the reaso n s are fo r the increase in health careco st, ithas to do with malpractice as o ne o f many compo nen ts .

Mr . BERMAN . Pro ve that case . Tell me why Califo rnia,which has

the caps , tell me why Califo rnia’

s health care inflatio nindex is n o better than anywhere else in the co un try and frankly,Califo rnia is pro bably as high a health care co st area, atleast un tilthe last two years o r s o , as any o ther part o f the co un try.

Dr. HANNAN . I wo u ld like to state that in a recent FamiliesU .S .A Study , that the average New Yo rk family

’

s health care co stsin 1991 were Whil e in Califo rnia,

itwas That isa year differen ce .

Mr . BERMAN . What was the differen tial in 1975?Dr. HANNAN. I don’

t have that information.

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Mr . BERMAN . I wo u ld be willing to review everything if y o u co u ldsho w me that the medical malpractice changes in Califo rnia substantially assisted Califo rnia patients in redu cing their health careco sts . Then I think we can make some balan cin ju dgmen ts .

dNotright n ow ,

butI wo u l d be very in terestedin seeing that evien ce .

Dr. HANNAN . There are man facto rs o ther than malpracticewhich go in to play in terms o f w atthese co sts were based o n butI think , getting back to yo u r o ri

'

nalqu estio n,what is fair

,I think

ithas been to tally ign o red by t is panel that when an individualis compensated , so ciety pays .

Yo u may think y o u are getting in to the deep po ckets o f the ho spital and the physician , and y o u may drive an individual physicianin to bankruptcy, fairly o r unfairly, whether this was pro fessio nalmisco n duct o r n ot, butif a verdict is malpractice and it go es to thein su ran ce company , the in suran ce company pays , the rates go up ,

the o ffi ce visits and the su rgical fees in crease .

It is so ciety that is paying, and if y o u are go ing to lo ok atgettingco n tro l o f Federal health care co sts in a system that is federallydominated , there has to be atthis time a ca o n n o neco n omic dam

ges in o rder fo r the to rt system to be app ied fairly to allo f theleged .victim s .

Mr . GOODLATTE . Wo u ld the gen tleman yield?Mr . BERMAN . Sure I wo u ld .

Mr . GOODLATE . Dr. . Harman ,the info rmatio n that I have in re

gard to yo u r po int, itdo esn

’t go directly to that, butwe sho w ,and

am su re we can make these figures available to y o u ,that Califo r

nia’s pro fessio nal liability in suran ce premiums were the hi hest in

the wo rld in 1975;and by 1990,o f tho se premiums o ne-halto o ne

third were in States that had n otenacted MICRA type refo rms .

Mr . BER MAN . If I may reclaim my time , the gen tleman missedmy point. It was notthat the medical malpractice insurance premiums have notgo ne up less becau se o f th o se refo rms . It is thatmedical malpractice premiums as a facto r in the co st o f practicingmedicine has been massivel o verstated by the medical communityin its effo rt to en co u rage t e Co ngress to federaliz e the to rt lawand ado pt the Califo rnia law as the natio nal law . Notthat the premiums— I agree completely with the statistics the gen tleman cited .

Califo rnia malpractice premiums have basically stabiliz ed becau se o f the ve rigid caps . Califo rnia health care co sts have n otstabiliz ed. They ave go ne up massively .

Mr . GOODLATTE . If y o u wo u ld yield fu rther, I wo u ld be in terestedin seeing the same info rmatio n that y o u have asked fo r regardingcomparative co sts back in 1975 compared to the figures the gentleman ju st cited , becau se I wo u ld ven tu re a very stro n guess thattho se figures wo u ld n otcompare the same way then t atthey don ow in su ch a favo rable light. Eleven hundred do llars o r a 20-percen t redu ctio n is pretty substan tial .Mr . CONYER S [presiding] . Mr . Berman , are y o u n early co n cluded?

Mr . BER MAN . I am .

Mr . CONYER S . All right . Co u ld we reco gniz e the gen tleman fromVirginia fo r a while and then we wan t to get to Mr. Sco tt o f Vir

ginia befo re we clo se down . So we wo u ld appreciate ju st taking a

ew minu tes .

a

a

162

Mr . GOODLATTE . I will be brief. Thank y o u ,Mr . Chairman . Mr .

C o rboy , as a fo rmer member o f the American Bar Asso ciatio n , Iwas in terested in the ABA

’

s po sitio n o n issu es . I do n otagree withthe issu e we have ju st discu ssed . I think that some fo rm o f a s lidin

%scale cap o n n o neco n omic lo sses wo u ld be appro priate .

utI do agree with y o u o n atleast a co uple o f the o ther areas .

The alternative dispu te reso lu tio n mechanism ,perhaps in clu ding

mandato arbitratio n ,I think

,wo u ld be a si ifi cantimprove

men t . I a so a ee with y o u ,and disagree with life Califo rnia law ,

that we sho u ldrn othave price co ntro ls o n lawyers , which is whata limitatio n o n the co n tingent fee wo u ld be .

Ho wever , I am a little co ncern ed abo u t the statemen t that y o umade that the American Bar Asso ciatio n has called fo r universalco ver e fo r allthro ugh a commo n public o r a public/private m echanism ecau se every o ne o f the plan s that have been o ffered to thisC o ngress that include guaranteed universal co verage also inclu desome fo rm o f rice co n tro ls o n do cto rs . I wo nder if yo u can squarethe po sitio n 0 the ABA with the fact that price co n tro ls bein um

gesirable fo r lawyers which I believe wo u ld also be un desirab e fo ro cto rs .

Mr . COR BOY . I can’t

,Co ngressman ,

becau se I frankly am n otprivy to the differentiatio n s between the vario u s co ngressio nal billsand Senate bills that are befo re allo f y o u fo lks .

I am n otpro fessing to be even remo tely capable o f recommendingwhat typ e o f universal health care to supply y o u . I ju st do n’t kn o wthe answer becau se I have n otstu died it. I suggest, if I have anyexpertise , itis in the area o f malpractice to rt refo rm o rmalpracticedefo rmatio n .

Co u ld I supply an o ther an swer to y o u , tho ugh , that we have supplied in o ur written statemen t? Our exhibit, itis appendix C , spe

cifi cally po in ts o utwhat'

has happen ed in Califo rnia co ncerningco sts . The increase o f medical expen ses , n otpremiums , medical expen ses , has go n e up 99 percent in Califo rnia o ver a 9-year perio d .

Califo rnia is the seco n d ranking State with health care co sts increasing from 1982 to 1990,

and if y o u lo o k atthe do cumen t we

gave supplied y o u , y o u will see that the 1982 co st per family was

In 1990, itis which is an in crease o f 99 percen t. I againsuggest we have given an an swer to the inquiry that was made .

What effect has to rt changes had o n the co st o f medical care inCalifo rnia, and the an swer is , ithas had abso lu tely n o effect o therthan to al low an increase since 1982 o f 99 percen t.Mr . GOODLATTE . Well , let me po in t o ut

, however, that theMICRA refo rms wen t in to effect 7 years befo reMr . COR BOY . Yes , sir.

Mr . GOODLATTE [co n tinuing] . This stu dy was perfo rm ed , and

therefo re,the impact o f that wo u ld already have been felt by the

timeMr . COR BOY . Buty o u kn ow h ow lo ng ittakes the impact o f any

to rt system? It do esn’t affect pending cases un til tho se cases are

go ne .

Mr . GOODLATTE , Let me tu rn the tables o n the physician s n ow

and ask them and say to y o u that I wo u ld like to hear the ABA’

s

further o pinio n on price co ntro ls o n physicians . Letme suggest to

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164

fo rd to take the case . They can’t affo rd to spo n so r the case fi nan

cially becau se o f the co st o f litigatio n and expert testimo ny , etcetera, etcetera, etcetera.

Mr . GOODLATTE . I do think mandato ry arbitratio n might helpsome in that regard .

Mr . COR BOY . Again ,tho u h ,

mandato ry arbitratio n is expen sive .

The co sts o f mandato ry argitratio n are the same as the co sts o f

trialdex ceptfo r the filing o f the suit and the filing o f the ju ry de

manD o cto rs are go ing to charge

'

u stas much to appear. Witnessesare go ing to charge ju st as mu c to appear

,and I do n’t kn o w if the

mandato ry arbitratio n system will have disco very , butif ithas disco very ,

itis go ing to co st ju st as mu ch as if itgo es to co u rt .Mr . GOODLATTE . Let me ask o ne mo re qu estio n if I may ,

Mr .

Chairman .

Mr . Keen er, y o u had men tio ned that yo ur experience in Califo rnia and by the way ,

I have a family member who is a pro fessio nalliability defen se atto rney in Sto ckto n ,

CA,who gives me a differen t

impressio n o f the su ccess o f the Califo rnia refo rm s , butn o netheless

, y o u sa that 80 percen t o f the verdicts are su ccessfu l o n behalf o f the efendants .

Mr . KEENER . Yes .

Mr . GOODLATTE . Tell me further,in yo ur o pinio n

,h ow many

cases are settled o uto f co u rt fo r a de mmimis amo un t where thecase is n o nmerito rio u s?Mr . KEENER . I am n otsu re I can give y o u a number o n that. I

can tell y o u that abo u t 40 percent g o away compl etely witho u t anypayment atall.Mr . GOODLATTE . After suit is filed?Mr . KEENER . After suit is fi led .

Mr . GOODLATTE . There is a substan tial amo u n t o f co st in cu rred ,bo th by that plain tiff, the plain tiff

’

s atto rn ey,and by the defense

and the in su rance companies , so o n ,befo re that takes place in

many instances , I wo u ld su spect .Mr . KEENER . In many in stances, that is right. These cases are

very expen sive .

Mr . GOODLATTE . Let me ask everybo dy,and again

,Ms . Wittkin

may wan t to jump in to address this as well , what do allo f y o uthink abo u t requiring the lo ser in these pro ceedings to pay something. Many States provide some minimal co u rt co sts to be paid .

In Virginia,fo r example

,itis noteven the co st o f depo sitio n s, but

maybe the co st o f the ju ry and the co st o f filing the suit and so o n

that might be awarded to the prevailing party . What do y o u thinkabo u t this idea? I believe y o u have gotto limit itbecau se o therwisean in su ran ce company o r somebo dy spen ding a great deal o f m o n eyin the suit might simply price plain tiffs o uto f the market, butwhat do y o u think abo u t requiring physician s to pay the atto rn eys

’

fees o r some reaso nable award to the prevailing p laintiffs and co n

versely ,requirin plaintiffs wh o do n otprevail to pay something to

wardv

the co st 0 the atto rn eys’— the atto rn eys’ fees o f the physieian s .

M s . Wittkin,I wil l

'

ve itto y o u first.Ms . W ITTKIN . Welf,

l

unfo rtunately, based o n the New Jerseystudy by the American Co llege o f Physician s, which shows that 60

165

percen t o f n o nmerito rio u s do cto r defense cases are wo n by defen dants attrial , I wo u ld say that that is an o u trageo u sly bad thingto happen to medical co n sumers and to victims .

What we have here are to o many frivo lo u s suits o n the o ther endand we are notlo o king atit.Mr. GOODLATTE . What do y o u mean by that?Ms . WITTKIN . I mean that victims lo se cases mo re o ften as a re

su lt o f ju st go o d , slick defen se wo rk , the abilit to spend un limitedfunds as o ppo sed to what many o f the plainti atto rn eys can spen do n cases, and, in many instances , o u are talking abo u t perj u ry,y o u are talking abo u t al tered reco r 5 , y o u are talking abo u t frau d .

Tho se things go hand in han d with medical malpractice and anyo ne who tells y o u itdo esn

’t is— y o u kn o w ,is ju st n otbeing tru thfu l .

Mo st cases get settled . Well o ver 90 percent o f the cases are settledbefo re they ever go to ju ry trial and a o o d, maybe an o ther 5 o r

6 percen t are settled befo re y o u get a ver iet.So mo st o f the cases n ever get in to the ju ry system . Butthe o n es

that are getting in to the ju ry system,in 60 percen t o f the in stances

where the do cto rs are flato utguilty o f malpractice , they are win

nir

fitho se cases .

r . GOODLATTE . Can y o u supply u s with some statistics thatsho w that what yo u claim is co rrect— that there is a high percen tage o f cases where ph sician s sho u ld lo se , butthey actually win?Ms . W ITTK IN . Yes . e j o u rnal , the Annals o f In ternal Medicin e ,

published the rep o rt by the American Co llege o f Physician s lastyear. I will be happy to sup ly y o u with that, alo ng with the lettersto the edito r by o u traged docto rs o ver the 5 o r 10 percent o f co sto f frivo lo u s plain tiffs’ suits and the admo nishmen t b the au tho rso f the study, abo u t the fact that tho se do cto rs to tal missed thefact that 60 percen t o f their indefen sible cases were being wo n bythem attrial .I wo u ld further ju st like to say that o ver this same American

C o l lege o f Physician s study,which lo oked at 15 years o f mal

practice e x perien ce in New Jersey, also fo u nd that even tho ugh a

large po rtio n o f the claims are clo sed witho u t payment, o ver 70 percent o f th o se cases are clo sed either befo re disco very , o r befo re disco very is completed , so there is n otan en o rm o u s expen se .

Large expen ses are incu rred in cases that drag o utfo r years andyears and end up in the co urt system . Mo st cases , h o wever , are dispo sed o f very quickly .

[The info rmatio n fo llo ws :]

166

M E D I C I N E A N D P U B L I C I S S U E S

The Influence o f Standard o f Care and Severity o f Injuryo n the R eso lutio n o f M edicalMalpractice C laimsMark I . Taragin, MD , MPH; Laura R . W il lett. MD;A dam P. W ilcz ek, BA : R ichard Tro ut, PhD : andJeffrey L . Carso n , MD

I Objective: To ex p lo re ho w frequently physiCianslo se medical malpractice cases despite prowding standard care and to as sess whether severity o f patientinjury influences the frequency o f plaintiff payment.I Design: Retro spective co ho rtstudy.

I Setting' Physicians fro m the state o f New Jersey

insured by o ne insurance co mpany from 1977 to 1992 .

l Particrpants : Atotal o f 12 829 physiCians invo lved in8231 c lo sed malpractice cases .

I Measurements : Phys ICIan care and c laim severitywere pro spectiv ely determined by the insurance company using a standard pro cess .

l R esults : Physician care was co nsudered defensib lein 62% o f the cases and indefens ib le in 25% o f thecases . in almo sthalf o f which the physician admittederro r. In the remaining 1396 o f cases . itwas unc learwhether physician care was defensib le. The plaintiffreceived a paymentin 4396 o f allcases . Paymentwasmade 2 1 o fthetime if physician carewas co nsidered

defensib le. 9196 if co nsidered indefensib le, and 5996 itco nsidered unc lear. The severity o f the injury wasclassmed as low. medium. o rhigh in 4796. and

25% o fthe cases . respectively . Severity o f injury had asmal l butSignificantass o ciatio n (P with thefrequency o f plaintiff payment(low severity, 3996 ;medium severity , and high severity, The se

verity o f injury was notas so ciated with the paymentrate in cases reso lved by a jury (low severity, 2396;medium severity , 2596 ;and high severity ,

l Co nclusio ns : ln malpractice cases . physicians pro

vide carethatis usual ly defensib le. The defensibility o fthe case and notthe severity o f patientinjury predominantly influences whetherany paymentis made. Even

in eases thatrequire a jury verdict. the severity o f

patientinjury has little effecto nwhetherany paymentismade. Ourfindings suggestthatunjustified paymentsare pro bab ly unc ommo n.

Annals of InternalMedicare. l992 .ll7: 780-784 .

Fro m the Univers ity o f Medicme Dentistry o f New JerseyR o bertWo o d Jo hnso n Medical Sc ho o l and Co o k Co l lege, New

Brunsw ic k . New Jersey; and The New Jersey Medical InterInsurance Exc hange. Lawrencewlle. New Jersey . Fo r current

autho r addresses. see end o f text.780 © 1992 American Co l lege o f PhySiCians

The fear o f medical malpractice has resu lted in Signif

leantphysician dissatisfactio n and has co ntributed tothe decrease in the number o f perso ns entering the fie ldo f medicme (I , Further, physicians have stimu latedlegis latio n fo r to rt refo rm, increased the practice o fdefensive medicine, and avo ided “

risky patients (3

Physic ians’

apprehensio ns abo ut malpractice stem

from severalperceptio ns Perhaps fo remo stis the

co ncern thatthe malpractice reso lutio n pro cess is unfair

Because standards are unc lear and po ssib ly inco n.

Sistent, physic ians are afraid o f being sued and o f lo smgthe case despite their havmg pro vided standard medicalcare Further, juries are seen as unjustifiably rewarding patients so lely o n acco unto f the severity o f their

injuries .

We exp lo red the influence o f physician care and the

severity o f patientinjury o n the malpractice pro ces s .

Co ntrary to many perceptio ns , o ur study suggests that

physicians usual ly wm cases in which physlClan care

was deemed to meetcommunity standards and thattheseverity o f patientinjury has little bearing o n whetheraphysician lo ses a case.

Metho ds

Data So urce

We o btained o ur data fro m The New Jersey Medical lnterInsurance Exchange. a physician

-o wried insurance companyThis company insures appro rumately 60% o f the physmnans in

New Jersey . Since 197" demo graphic info rmatio n o n physiCians and detailed descriptive info rmatio n o n every malpracticec laim have been entered into a standardiz ed computer database

Study Variab lesThe insurance company 's assessmento f whether a physi

eiau'

s actio ns representstandard medical care is based o nmedicalcriteria and is no tsuppo sed to be influenced by legalco ncerns First. the physician is co ntacted , and if he o r she

admits erro r, the case is labe led indefensible— insured admitsdeviatio n. and no further review is do ne. Otherw ise, the case

is reviewed by a c laims representative emp lo yed by the insur

ance company . If the physician'

s perfo rmance is tho ughtto bec learly medically defensible. the case is labeled no peer teView . c learly defensible. Otherw ise. a peer rewew pro cess

ensues in which a physicmn fro m the same specialty is c ho sen

Study Design and Po pu latio nWe did a retro spectiv e co ho rtstudy thatinc luded phys icians

insured fo r any time between 1977 and 1992 . During this pe~

rio d. 12 829 physicians were insured and 11 934 cases werefi led , o f which 80% are currently c lo sed . Because the timefrom an incidentuntil its reso lutio n can vary greatly , we c ho s e1 January 1986 as a cuto ff po intfo rthe incidentdate because96% o f cases thato ccurred befo re this date were c lo sed by1992 . Afterexc luding 14 cases thatlac ked peer review resu lts .we evaluated 88 1 c lo sed cases .

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168

DEFENS IBLE CASESClo sed eeeee witho utpeyment

D Clo eed eeeee witn peyment

3000

2 500

2000N-5 132

1 500

1000

Befo ro Befo n >4$ dm wilds day. During Verdtclsuitfiled dleeo very pro-Mel ottriel Mel

INDEFENS IBLE CASES2 500

2000

N=2 000

1500

1000

>45 ¢m wileS deye During Verd ictsuitfiled discovery ere-Mel eline! trial

UNCLEAR CASES2 500

2 000

N=10991 500

1000

Befo re Before >es deye w/I lS deye Duringsuitfiled disco very pro-trill o ftrial Mel

Figure 1 . Stage o f reso lutio n and paymentrate fo r cases co n

sidered defensrble, indefensib le, o r unclear as to defensibllity .

w/i Within .

death, the median paymentwas $94 346 ,whereas fo r

the remaining high-severity injuries , the median paymentwas $2 10 807.

In co ntrastto the o veral l findings , in cases requiringa jury verdict, the severity o f injury was no trelated to

the likeliho o d o f payment(P Ho w ever, the se.

verity o f the injury did co rrelate With the paymentamo unt(P (Tab leDiscussio n

Severity o f InjuryAltho ugh the findings o f previo us stu dies are inco n

sistent(7, 8, 12 , we fo und thatthe severity o f

patientinjury had little influence o n the pro bability o f

plaintifi payment. We anticipated thata jury w o u l d bemo re likely to ru le in favo r o f the plaintifi if the patient

had a mo re severe injury . Similarly ,we expected that

the plamtifi’

s atto rney mightnego tiate a paymentfo r

the p laintiff mo re frequently in cases in which injurywas o f higher severity than in tho se in w hich injury waso f lo wer severity .

We also fo und thatthe assessmento f the standard o f782 1 No vember 1992 0 Annals of InternalMedicine 0 Vo lume 117 Number9

In mo sto f the malpractice cases inc luded in o ur analysrs , a physlCIan was judged to have pro wded medicalcare thatwas defensib le, and the p laintiff did no treceive any payment. Altho ugh physician care stro ng

ly

influenced the o veral l pro cess , the severity o f the pa

tientinjury had little effecto n the pro bability o f any

payment. Mo stcases c lo sed ata llearly stage, so a juryverdictwas rarely needed . Fo r the smal l number o f

cases thatrequired a jury verdict, o n ly 2470 resu lted inpaymentto the p laintiff and the severity o f injury did

no tinfluence the pro bability o f payment.

The determinatio n o f physician care was a go o d predicto r o f the o utcome o f a case. Fo rthe cases thatwere

feltto be indefensib le, the paymentrate was 9l"'c . This

high paymentrate is ex pected because the insurance

company uses the determmatio n o f physic ian care todecide Whetherto o fferto settle a case. In co ntrast, in

the cases where physiCian care was c lassified as deio nsrble, the paymentrate was

Severalfacto rs may ex p lain why paymento c curred incases c lassified as defensib le. First, the determinatio n

abo utphysician care was made very early aftera c laimwas generated and may have been inaccurate as mo re

info rmatio n became availab le. Seco nd , a physicianbased review pro c ess may be biased to ward assessingphysician perfo rmance in the physician

’

s favo r. Third ,the insurance company may err to ward an initialdeterminatio n o f physician care as defensible to avo rd umnecessary payments . The po ssibility thatnew info rma

tio n rendered the o riginal assessment o f defensibilityinco rrectwas suppo rted by the factthat68% o f defen

sib le cases thatresu lted in paymentwere settled befotrial , in half o f these befo re disco very was c omplete.

Further, o n ly 15% o f defensib le cases thatresu lted inpaymentrepresented awards made to the plaintifi by ajury . In additio n, because the physician has the rightto

refuse to settle and the insurance c o mpany is phys ician

owned , many o f the defensib le cases thatresu lted inpayment were pro bab ly misclassified as defensib le.

Therefo re, altho ugh we can o n ly speculate o n the num

ber o f cases thatwere inappro priately lo stby the physician , o ur data suggestthatinappro priate payments are

pro bab ly uncommo n.

169

Tab le 2 . R elatio n between Severity o f Injury and Phy sician Care. Pasment. and b lauu o f R eso lutio nVartable

) 10 000

$ 10 000 to $50 000

$50 000 to $200 000

$200 000 o rmo re

Stage o f reso lutio nBefo re suitfi ledAfter suit. befo re disco very co mpleteA iterdisco very . mo re than 45 days befo re trialW ithin 45 day s o f trialDuring trial , befo re verdictVerdicto rafter

care by a peer review panel was no trelated to the

seventy o f injury . Th is find ing difi'ers fro m that o f a

recentStudy . which fo und thatthe patient's o utc o me

stro ng ly influenced reviewers' o pinio ns o f the appro pri

ateness o f care The c o ntradicto ry findings mayreflectthe factthatthe physician

-reviewers in that

study had o n ly abstracted data o f se lected cases . In o ur

study . the malpractice cases were judged during theactual pro cessing o f the case, With the medical reco rdsavailab le fo r review and with the treating physic ian

availab le fo r additio nal insight.W e suspectthato ur resu lts can be generaliz ed even

tho uOh o ur Study was do ne in a subseto f physiciansfro m o ne state. In a previo us study ,

we fo und thatthedemo graphic characteristics o f the physicrans in o ur

database were Similar to the o veral l po pu latio n o f phy

5 10 3 115 in New Jersey and varied o n ly s lightly fro m

natio nal figures (10, 15. In additio n, the frequencyo f payment, average amo unto f payment. severity o f

injury , stage o f reso lutio n, and pro po rtio n o f c laimsinv o lv mg o n ly o ne physician are co nsistentWith thefindings o f o ther studies (10, 13, Th us , despite thelmpllC II nature o f judgments abo utdefenSibility . o ur

16

4~ r ( 1~

40‘

( 1

resu lts Sho u l d be generaliz ab le to o ther phy sician-pa

tientpo pu latio nsThese rc suits have impiicatio ns fo r to rtrefo rm . This

insurance co mpany felt liablllf} was unc lear fo r o n lyo i cases . and a jurx verdiCtwas required fo r o n lyo f allcases This suc c ests thatmuch o f the effo rts

in the malpractice pro cess ID\ Ol\'CS determining the

facts o f the case and nego tiatinv the amo unto f settlement rather than reso lv ino d isagreements abo ut thepresenc e o f liab ility Neither the patientno r the physi

cran IS served by this extremely inefi‘iCientand co stlypro cess .

w hich resu lts in de layed payments to injuredparties and casts a pro l o nged c lo ud o ver phy sic ians .

Our experience in determining phy SiCian defensib ilitysu o

gests thatarbitratio n panels may be successfu l inasseSSino liab ility Unfo rtunate ly . o ur data shed littlelighto n the co sts and benefits o f a no -fau lt sy stem

because mo stinjuries do no tenterthe currentmalprac

tic e reso lutio n pro cess (18)In summary . o uranaly ses suggestthat. in malpractice

cases . the phy sic ian’

s care 15 usual ly defens ib le and thatthe p laintiff usual ly do es no treceive any payment. The

severity o f patientinjury affects the paymentamo unt

Tab le 3 Cases R equiring a Verdict: R elatio n o f Physician Care and Injury Severity to FinalAward StatusAward

To tal ( 510 000

1 No vember 1992 A nnaLr o f InternalMedicare Vo lume 117 0 Number 9 783

170

buthas little influence o n whether mo netary damagesare received by a plaintifl, especial ly in cases thataredecided by a jury . Further effo rts to c larify the frequency o f unjustified payments are needed , buto ur datasuggestthatsuch payments are uncommo n.

A claio wledgmenrs The autho rs thank Sharo na Shapiro . MPA. and Susan Jaco bs. PhD. fo r rt ew o f the manuscript; and Leo na Stern formanuscriptpreparatio n.

Requests fo r R eprints : Mark I . Tan gin. MD, MPH.Univers ity o f

Medic ine atDentistry o f New Jersey . Ro bertWo o d Jo hnso n MedicalScho o l . Divisio n o f General lntemalMedicare. 97 Paterso n Street. NewBrunswick. NJ 0890341119.

CurrentAutho rAddresses . Drs . Taragin, Willett. and Can o n: Divisio no f General Internal Medicine. Departmento f Medicine. Univeisrty o fMedicine Dentistry o f New Jersey . Ro bertWo o d Jo hnso n Media lSc ho o l. 97 Paterso n Street. New Brunsmck. NJ 08903m 19.

Mr Wila ek: Medical Inter-Insurance Ex c hange, 2 Pnnceas Ro ad.Lawrencevule. NJ 08648Dr Tro ut: Statistics Department. Co o k College. P.O. BoatB l. NewBrunsWiclt, NJ 08903.

I W CL M DNI. Ch Ineu EP, Lu le I . l-low u tnfymg is tbepractice o f mentalmedic ine” A natio nalsurvey . Ann Intern Med .

1991: 114 :l-5.

Chane: SC , Wllben JR. Frank: 10 . Sued and no naued phyaiaans'

selfo repo rted reactio ns to malpractice litigatio n. Am J Psychiatry .

19853 42 4374 0.

3. Bog a18. Flo ridaneuro surgiq llawsuitpro file— 1987. 1 Ho ndaMedMme.

-73.

4 . “vets SD. The edect o f malpractice insurance costs o n familyphyswrans

' ho spital practices . J Fam Pract. memes-a.

5. SanaelFE. h abt1ity threatslo-rs pro ¢reu o f inedm ltedtno b g .

GAO/HRD U-Zl.

“ M a i nehmn between malm dam and ad

verae evenu dtte to negmence. N EnglJ Med. 1991;315:245-51.

1 No vember 1992 r ArmaLr of InternalMedacme 0 Volumg Number9;

9.

10.

11.

Charlotte Observer. in: U.S . Senate Co ngresswnal Reco rd . 18September 19863 12973 .

Amena n MedicalM u tatio n/Natio nalMedic al Spec ialty So cietx

Co o rdinatio n i ect o n Pro fes io nal Liability Th e Co ntinuingNeed fo rLegislative Refo rm o f the Medical Liability System Chk

cago : AMA; February 1987

U.S . General Acco unting Omo e. Medical malpractice. no agreemento n the pro blem or so lutio ns . Washingto n. DC . General Acco untingOb oe; 1986: Publia uon no . GAO/HRD 86 50.

. Che

aneetbena liability . JAMA .-603.

Medicare by the bo o k. Antena itMedicalNews . 6 Jan 1989 .

U .S. GeneralAccounting Olfice. Medical malpractice: characterisuea o f dams d o sed in 1984. Washingto n. DC : GeneralAcco unting0M ; Publicatio n no . GAO/HRD 87-55.

“ a J. Case-Contro l Studies New Yo rk: Oxfo rd Univerarty Pres ; 1m .

12. m u rm w m cq h ns o omm m m pm

13.

14.

15.

16.

17.

Evrdence o n tbe perfortnance o f a aelectrve no -taultsystet AM/L

M FA m CK Vanabtlity tn media lmalpn ctice paymenta is

the co inpean nm lair? h w and So ciety Ren ew . 997-1039

m u m m eney PW. Eflecto f o utcome o n physm

W o d m d m . JAMA. 19912 653 95740

TW M M JL WH AP. Kar-ML M JR . Mcran demnpwbia and themk otniedtealmalpractice. Am J Medimm inent.Am MerhealAn o ctamn. Physieiaa an n em and Dis

«mummw z bepamnentof bata kelm em mmo f Survey and Data Relatives; 1m .

studiea sbow dainn and m urancem mllme deapite ieloms

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-\G . etal. l nc idence o f adverse events and negligence in ho spitaliz edpatients R esu lts o f the Haw ard Medical PraL Ic Study 1 N EnglJMed 370-6

4 Caplan RA, Po sner KL. Cheney PW . Effecto f o utcome o n physic ianjudgments o f appro priateness o f care. JAMA . 1957-60

To the Edito rs The paymentrate in cases w here physician care was defensib le co ntradicts the co nc lusio n thatunjustified payments are pro bab ly unco mmo n. I pro po se an al

ternative analysis o i the data. Exo rbitant awards are

co mmo np lace and can exceed a physician'

s co verage. Thelitigatio n itself is an ago niz mg pro cess thatdrags o n fo r years .

Juries do no tunderstand medicalpro b lems . especial ly tho sethatare difficu lto r comp lex , and their decisio ns are arbitrary .

These fo rces frequently lead to “

to ken settlements . which

maintain privacy and are much less expensive and risky thanjury trials .

Ly nn G. Lagerqiiis r. MD

5 120 So uth Co tto nwo o d LaneSaltLake City . UT 84 117

To the Edt FS’

Annals sho u ld be co mmended fo r pub lishingartic les suc h as thatby Taragin and asso ciates (1) and ihe

co mpanio n edito rial by Bo vbjerg Yet, to o little attentio n

has been given to the pro b lem o f medical pro stitutio n. a pro blem I enco unter frequently in my practice,

which is limited tothe defense o f health pro fesswnals and health care institutio ns

accused o f malpractice. An emergency phy sician testified that,o n the strength o f a chestro entgeno gram alo ne. he was able todiagno se pneumo co ccal pneumo nia. A family practitio nertestified thatshe knew the standard o f care fo r an o rtho pedistbecause she had taken an o rthOpedics ro tatio n in medicalsc ho o l . had o bserved o rtho pedists prowding care to her own

c hildren. and had discussed the facts o f the case athand Withan o nho pedisto ver dinner. An o bstetrician-gyneco lo gisttestihed thata practitio ner o f his Specialty . o n the baSis o f a

mid-tnmeSier u ltraso und , sho u ld have been ab le to diagno sethe hyp0 g10 55 1a

~hypo dactylia syndrome in a fetus at20 weeks ’

gestatio n.

1 co u ld w e numero us o therexamp les;my experience is far

fro m unique. Phy sicians mustunderstand that 1) a p laintiffunab le to identify an expert" who is prepared to testify tobreac h and causatio n do es no tW in the case. 2) integnty is not

universal amo ng ho lders o f the MD degree; 3) testifying is fo r

so me an o ccupatio n unto itself; 4) statements thatwo u ld beseeded atby do cto rs may be believed by lay juries; and 5)un less and until tru ly masswe to rtrefo rm is undertaken. and

may be even despite such refo rm, experttestimo ny W illco n

tinue to p lay amajo rro le in malpractice litigatio n . In additio n,

certain co mpanies turn a handso me pro fitby lining up ex

perts to testify againstphysicians. and some o f these o rgani

z aiio ns actual ly perfo rm this sem ce o n a co ntingentfee. These

h a s putthe medical pro fessio n in a po suio n to do mo re abo utthe malpractice liability pro blems than merely to kvetch abo utit

If physicians do notpo lice the actM ties o f medical pro stitutes . then they mustacceptatleastso me o f the respo nsibilityfo r the spread o f the malpractice Virus . Witnesses such as

tho se 1 describe bring no creditto law o r medicme.

Jo seph P McMenamin . MD. JD

Mc re,Wo o ds . Battle. Bo o the

R ic hmo nd. VA 232 19-4030

References1 Tar-agin MI. Wil lettLR . W ilcz elt AP. Tmul R. Carso n 11. The

influence o istandard o f care and severity o f injury o n the reso lutio no f medical malpractice c laims A nn lntem Med -4 .

Bo vbjerg RR . Medical malpractice fo lklo re. facts . and future. Ann

lntem Med 199" 117 788-91

In respo ns e These letters highlightthe factthatmedicalmalpractice is a co mp lex pro cess where Simp listic descriptio nso r so lutio ns always fal l sho rt. Dr. Yaes

'

co ncern thatthenumber o f c laims is to o many depends o n o ne

'

s perspective(1) Malpractice c laims vary greatly amo ng specialties We

Mark I. Taragin. MD. MPH

Laura R . M lle“. .WDJefirey L. Cars o n. MD

University o f Medicme o f New Jersey-R o bertWo o d Jo hnso nMedical Sc ho o l

New Brunsw ic k. NJ 08903References1. Brennan TA. Leape LL. Laird NM, HebertL. lo callo AR . a thenAG. etal. Incidence o f adverse events and negligence in ho spitaliz edpatients Resu lts o f the Haward MedicalPractice Study 1. N Engl JMed .

-6.

2 . Tan gin M1, Wile-u h AP. Karns ME. Tro utR, Can o n Phy sman

demo graphics and the risk o f medical malpractice Am J Med. 199"

-42 .

3. Schro eder SA. KabcenellAI . Do bad o utcomes mean substandardcare"JAMA . 1991 765 1995.

4 . US General Acco unting Ofi ce. Medical malpracuee'

characteristics o fc laims c lo sed in 1984. Washingto n D C GeneralAcco unting Office.

1987; publicatio n no GAO/HRD5 Vldmar N. The unfair Cfl lIClsm o f medicalmalpractice juries . Judi

cature.-24 .

M o re o n MedicalMalpractice

1 June 1993 0 Annals of InternalMedicine Vo lume 118 Number 11 909

agree With Dr Oppenheimer thatthe tear utmalpractice is .i

po wertulfo rce in L'

.S medicme Tne pr: \altnc ¢ n : med icalpro stitutio n and the po ssib le deterrentedecto f filing c o un

tersuits are unkno w n

One aim o f o ur study was to co ntrastmalpractice perceptio ns With reality based o n the experience o f a phy sic ian-o wnedinsurance co mpany in New Jersey . We ex pliculy described howthe company initial ly assesses phy sic ian defensibility . We co n

curWith Dr. Po snerand co l leagues thatassessmg defensibilityis diffi cu ltand subjectto bias . W hether exp licito r imp lic itstandards are used fo r peer rewew . itmustbe reco gniz ed thatsome misclaSSificatio n Wil l o ccur W hethermisclaSSificatio nvaries With speCialty deserves further study . Our hy po thes is toexp lain why o f cases initial ly claSS ified as defensib le teSulted in payment. namely thatthese cases were pro bablymiscIaSSified as defensible, is being tested by studying tho secases .

The alternative hy po theses pro po sed by Dr Lagerquist

sho w the anger thatfue ls the fires o f an already emo tio nal lyc harged to pic . Ourwo rk and the w o rk o f o thers c learly sho wthatexo rbitantawards are rare (4) and thatjury decisio ns are

typical ly no tarbitrary Furthermo re. a phySician~o wned

co mpany Wil l no tco ndo ne and thereby pro mo te to ken settlements . No case can be settled Witho utthe written co nsento fthe physician defendant.One o f o ur co nc lusio ns With which allseem to agree is thatneither the patientno r the physician is served by this ex

tremely ineffic ientand co stly pro cess. whic h resu lts in delayedpayments to injured parties and casts a pro lo nged c lo ud o verphysic ians . To rtrefo rm is needed and requires kno w ledgeabo utthe strengths and weaknesses o f the medical malpracticepro c ess . Fo r examp le, altho ugh exo rbitantrewards are rare.

the M anu al and emo tio nal impactto the physicians and tusurers is pro fo und .Our artic le prowdes the readerWith facts . No tsurprisingly ,pro po nents o f vario us causes have used the same data to

arrive atdifierentco nc lusio ns . We believe thatthe interpretatio n and app licatio n o f these facts sho u ld generate hypo thesesto be carefu l ly evaluated

To the Edito rs We read With greatinterestand co nsiderab leapprehenswn the artic le (1) and acco mpanying edito rial (2 ) o nmedical malpractice. Dividing the number o f c laims fi led inNew Jersey o ver a 15-year period (11 934) by the number o fphysicians insured (12 829) yields an average o f 1 case perpracticing physician . Further. paymentwas made in 4370 o fthecases . If New Jersey is representative o f the w ho le co untry ,

then o ver a lS-year perio d. 40% o f the phy sicians W illhave aliability c laim againstthem. Overthe pro fessio nal life time o f

a physician, there is almo sta 100% guarantee thata malpractice c laim W illno to n ly be fi led butwo n'Further. in 15% o f the cases where the physic ian actio n was

suc h cases . the (al leged ) underly ing harm has already beendo ne. so the o n ly questio n is w ho sho u ld bear its co sts

W ro ng ly leaving them o n the p laintiff seems equallv bad as

wro ng ly shifting them to the defenseFo urth . Dr. Neiblum suggests mo v mg to ward the British

ru les thatlo sing parties pay Winners' co sts (altho ugh he wantso n ly the lo smg p laintiffs so burdened and o n ly in

“

trivo lo uscases ) and thatplaintifis be banned fro m pay ing their lawy ersthro ugh co ntingency fees (under whic h o n ly winners pay )Again. no te the asymmetry here added negative incentives fo ro ne Side o f a c o ntingency (lo smg) butsubtractio n o f a po snive

incentive fo r the o ther (w inning) The need fo r further dismcentives to c laim may be questio ned , given thatso few negligently injured patients co me fo rward (2 ) and thatNew Jerseydo cto rs are already Winning fu l ly 76% o f alljury trials . inc luding 79% their insurer thinks they sho u ld W in and theys ho u ld lo se. R eaders sho u ld also understand the busmess as

pects o f co ntingency fees . They actlike legal-fee insurance fo rthe high co sts o f litigatio n . They also make lawyers screen o ut

mo srw o u ld-be cases w hic h sho u ld p lease phvsmans . al

tho ugh also to seek maximum reco very . w hic h do es no t In

surance o f litigatio n expense is taken fo r granted by defendants , w ho se premiums are also no to nly tax deductible butalso passed o n to patients as higher fees . One can imagine the

o utcry fro m physic ians atany pro po sal to make them respo n

Sib le fo r all legal fees fro m their own perso nal . after-tax re~

so urces . in Eng land , o n ly the wealthy and legal-assistancec lients have easy access to co urts. and many questio n thesystem In the United States . legal-aid lawyers are barredfro m taking perso nal injury cases . preCise because co ntingent

fees make pnvate-pay lawyers accessib le. A less drastic ap

pro ac h is to regu late the high end o f legal fees (Califo rniasty le) and to end the unpredictability and po tential “ jackpo treco very po ssib le under vague. o pen-ended ru les o f figuringdamages , espec ial ly fo r pain and sufienng

"

Bro ader refo rms are necessary to pro duce a system thatdeals With mo re cases mo re expeditio us ly . atlo wertransactio nco st, With greater predictability and co nsistency o f findings .

and With a structured rather than o pen-ended appro ac h todamages , again. especial ly fo r pain and Sufiermg. Patients are

caughtin the cro ssfire between tho se do cto rs who wanttodec lare o pen seaso n o n allthe prero gatives to rtp laintiffs haveaccrued o ver generatio ns and plaintifi

'

s’ lawyers who wantto

retain a pro fitab le, insurance-funded enterprise fo rt0p lawyers .

buto ne thaty ie lds a mino r and delayed compensatio n fo r

negligently injured patients . Patients and do cto rs deserve better.

R andallR . Bo vbjerg , JD

The Urban InstituteWashingto n. DC 20037

References1. American MedicalAsso ciatio n. Opinio n survey o n medical malprac~tice. JAMA . 1583-94

2 . lo calio AR . Lawthen AC . Brennan TA. etal. Relatio n betweenmalpractice c laims and adverse events due to negligence N Engl JMed. 1991375 1 456 1

3. Curran WJ. How lawyers hand le medical malpractice cases: an

analys is o f an impo rtantmedico legal study R o ckwlle. Mary land 'Natio nal Center fo r Health Sem ces Research. 1977. DHEW pub

no (HRA ) 77-3152 .Whatprice justice” The Eco nomist. 16-7

Bo vbjerg RR. Sloan FA , B lumstein FA. Valuing life and limb in to rt.schedu ling “ pain and suffering NW Univ L Rev . 908-76

M

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18 Number 11

174

Mr . GOODLATTE . Mr . Keen er, do y o u agree with tho se statistics

she cited and what do y o u think abo u t lo ser pays?Mr. KEENER . Let me an swer in reverse o rder. With reference to

lo sers pay , we have in Califo rnia a pro visio n that the lo ser payscertain co sts , dep o sitio n , tran script co st, ph o to co py. Sometimestho se may o n ly be a few tho u san d do llars . Sometimes they are sev

eral th o u san d do llars .

We have fo u nd very few o ccasio n s where we have had a plain tiffin a medical malpractice case that frankly had the mo n ey to payit. So the mo n ey do esn

’

t get co llected .

With referen ce to her numbers , I really do n’t know the numbers ,butI su spect certain ly that ju st like in the practice o f medicin e

,if

y o u g o to an o u tstanding do cto r,yo u r chan ces o f getting better are

pro bably higher than if y o u g o to perhaps a medio cre physician .

Same thing with reference to the resu lts in trial . If y o u go to an

o u tstanding trial lawyer,the o dds are y o u will get better represen

tatio n , and that is o ne o f the po in ts we made . The really o u tstanding plain tiffs

’

atto rneys have left the medical malpractice field becau se there is to o mu ch risk;itco sts to o much fo r them to handlethem;and the retu rn is ju st n otthere .

M s . W ITTKIN . May I briefly respo n d to that?

Mr . GOODLATTE , Briefly . The chairman wants to mo ve alo nMr . CONYER S . We have o ne mo re Member wh o has waite very

patien tly here and has been here as lo ng as anyo n e .

Mr . GOODLATTE . Mr . Chairman ,may I ju st ask to have Mr .

Gekas’

statemen t in tro duced for the reco rd?Mr . CONYER S . Witho u t o bjectio n ,

so o rdered .

[See appendix 2 fo r the prepared statemen t o f Mr . Gekas .]Mr. CONYER S . Let’s tu rn n ow to Mr. Sco tt o f Virginia.

Mr . SCOTT. Thank y o u ,Mr. Chairman . Our go al here is to try to

reduce heal th care co sts , I guess , by reducing the co sts o f malpractice and improving health care , and itis under that co ntextthat I wan t to ask a co uple o f qu estio n s .

And also in line with what is in the bill,we have talked abo u t

a loto f things that aren’t in the bill . One thing that is in the billis al ternative dispu te reso lu tio n s , apparen tly there is nota loto fco ntroversy abo u t that. It wo u ld give some access to the 98 percen tthat aren

’t able to file right n ow . Any co n tro versy abo u t that provisio n , the o ther provisio n?Ms . WITTKIN . Excu se me?Mr . SCOTT. Yes .

M s . The ADR that is in the bill right now is also something that is go ing to disadvantage peo ple who are po o r, elderly, o rhave low-end cases

,becau se as lo ng as itis n ota binding system ,

and I am n otsuggesting that itbe binding fo r all, butas lo ng as

itis n ota bin ding system ,if the physician o r the ho spital do n’t get

the o u tcome that they wish , they can g o o n to co u rt.The victim do esn’t have that kind o f mo n ey to go ahead and dothat . First, bring o n the case thro ugh arbitratio n with experts andreview

, and then g o ahead and go to co u rt. They can’t do it, and

the do cto rs and ho spitals kn ow they can’t do it.

Mr. SCOTT. Can y o u u se the resu lts o f the arbitratio n in— isadmissible in court?

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176

that bill is added o n to the medical care expen ditu res o f the plaintiff, and the ju ry says they need becau se they had a h o spital bill o f we are o in to give themNow , o ur po sitio n is that t e p aintiff sho u ldn

’t be paid twice .

Mr. Well , then if the plaintiff do esn’t get it, whysho u ldn’t Blue Cro ss/Blue Shield be reimbu rsed?Dr. KELLER . They sho u ld .

Mr . SCOTT. They sho u ld?Dr. KELLER . Yes .

Mr. SCOTT. So o uto f the three peo ple o f in terest,yo u r po sitio n

n ow is that if y o u are oing to deny the plain tiff the ben efit o f thepremiums , then Blue ro ss-Blue Shield o ught to receive the benefito f the po ten tial windfal l?Dr. KELLER . Well , y o u can ar e itbo th ways , I ess .

Mr. SCOTT. If there is a win fall , sho u ld Blu e gfhss/Blue Shieldget ito r sho u ld the defendan t? We are comparin this to a perso nwho didn ’t have in su rance . Yo u have o ne who (fidn’

thave in surance , there is n o questio n . The defendan t pays the $10.

Yo u have somebo dy with in su rance , and the qu estio n is whetherBlu e Cro ss/Blue Shield o ught to pay the $10 o r the to rtfeaso r o ughtto pay the $ 10.

Dr. KELLER . To the exten t that the Blu e Cro ss company hadsome legitimate expen ditures fo r the care— let

’

s sa that o f the $10,$5 was appro priate health care , butthe o ther 5 was extra expen ses to that company becau se o f the malpractice event, I suppo seyo u co u ld make an argumen t then that Blue Cro ss Ought to get thefirst $5 becau se that was a n o rmal e x penditu re

, butwhen they areasked to pay the seco nd $5Mr. SCOTT. We are talking abo u t the damages , medical dama es

admitted in to evidence that are cau sed , $10 damage was cau sed ythe malpractice .

Dr. KELLER . R ight.Mr . SCOTT. Medical expen se , Blu e Cro ss/Blue Shield paid itbe

cau se itwas a medical expen se . Now , y o u gota reco very and thequestion is , sho u ld the defendant still have to pay the $10 o r do esBlue Cro ss/Blue Shield get its mo n ey back?

We have apparently ru led o utthe idea that the plaintiff o ughtto getbe

nefit o f the premium in this situatio n, so if the laintiff

isn t go ing to get it, sh o u ld the to rtfeaso r ben efit from the p aintiff sin su ran ce premium s o r sh o u ld Blu e Cro ss/Blue Shield n othave topa the bill?

ich is m o st appro priate to get the windfall o f the co llateralso urce ru le situatio n?Dr. KELLER . I do n ’t have a firm Opinio n o n that part.Mr . SCOTT . D o n’t y o u agree that the to rtfeaso r, which in this

case , is medical malpractice , in an o ther case , might be a drun kdriver , o ught to be the last perso n to benefit?Dr . KELLER . Yes .

Mr. SCOTT. OK So if we are going to deny the plain tiff the basiso f the benefit o f their reco very , then we o ught to have subrogatio nso Blue Cro ss/Blue Shield gets its mo ney back .

Dr. KELLER . I wo u ld a ee with that.Mr. SCOTT. That wo ul be the n ext fairest thing.

Dr. KELLER . That is right.

177

Mr. SCOTT. Now,we get back to what effect this has o n ma]

practice . If we deny the plaintiff $ 10 and the defendan t is go ing topay the $ 10 o ne way o r the o ther, the qu estio n is do es the in surnce company gets its m o ney back . How do es that redu ce malractice co sts?

It do esn’t becau se the do cto r’s going to pay the $ 10 one way o r

the o ther . Isn’t that right?

Dr. KELLER . If it gets paid twice,then itin creases health

careMr . SCOTT. The qu estio n is whether Blu e Cro ss/Blue Shield is

going to have subro gatio n . I think y o u agreed that that is mo re appro priate than having the to rtfeaso r benefit by the change in theco llateral so u rce ru le . The do cto r is go ing to pay $ 10 o ne way o r

the o ther, right?Mr. COR BOY . Seems simple to me.

Mr. SCOTT. So itdo esn’t redu ce yo u r malpractice co sts? So theo n ly way the co llateral so u rce ru le change can affect malpractice isif y o u give the to rtfeaso r the benefit o f the plain tiff s premium .

So if y o u have two plain tiffs , o ne with in suran ce and o ne n ot, theinsu ran ce company, and we denied that the plain tiff isn

’t go ing toben efit, the in su red plain tiff isn

’t go ing to ben efit by its po licy, andwe agree that if y o u are going to deny the plain tiff the ben efit

,

Blue Cro ss/Blu e Shield o ught n othave to pay ,the do cto r is going

to pay the same amo un t either way if y o u go in to a subro gatio n sitnatio n .

So changing the co l lateral so u rce ru l e will n otredu ce malpracticeco sts . All right .Let me get to atto rn eys’ fees . There is a provisio n in the bill that

pro vides fo r a certificate o f merit. Do n’t y o u feel that as a lawyerwho is o n a co n tingen t fee and if itis n ota go o d claim ,

I am n otgo ing to get paid and pro bably wo n

’t get my o ut-o f-p o cket ex pen sespaid , do n

’t y o u think that is a certificate o f merit?Dr. KELLER . I will an swer from the commissio n

’

s po in t o f view .

We do n otfavo r the certificate o f merit idea atthe present timebecau se we do n ’t think we kn ow en o ugh abo ut it. It is o ne o f tho seareas that o ne might explo re butthere are some real pro blems, as

y o u po in t o ut, o ne o f them being to have peo ple who can make

judgmen ts o n tho se cases frequ en tly with o u t adequate info rmatio necau se these wo u ld be develo ped very early in the pro cess o f litigatio n so that all o f the facts and all the info rmatio n that o ne

might n eed to make aMr. SCOTT. Is there any co n cern abo u t the certificate o f merit,whether itis in there o r n ot? Is itgo ing to make any differen ce?

[No . respo n se ]Mr . SCOTT . OK. On atto rn eys’ fees , we are talking abo u t limitingplain tiffs’ atto rneys fees

,and I think Dr. Falco n men tio n ed o ne

case where itso unded like abo u t 60 percen t o f the award wen t tothe p lain tiff s atto rn ey . Is thatDr. FALCON . Yes , sir, itwas actually mo re than that .Mr . SCOTT . Mo re than 60 percen t . OK,

if we are talking abo u treducing the co st o f malpractice , h ow much differen ce wo u ld ithave made to the co st o f malpractice if the atto rn ey hadn

’t beenpaid atall?

178

Dr. FALCON . That is notthe po in t, sir. The p o in t is that we wan tmore o f the malpractice premium go ing to the injured patien t.Mr . SCOTT. That is fi ne, butif the fact is that the plain tiff is pay

ing the atto rney s fees o uto f that po rtio n , I think the number y o ugave was abo u t paymen t from the defen se side to theplaintiff s side , and the criticism was that the plaintiff s lawyer g ota dispro po rtio nate share o f that award .

Dr. FALCON . That is co rrect.Mr . SCOTT. If the lawy er hadn

’t go tten anything, h ow wo u ld thathave redu ced yo ur malpractice co sts?

Dr. FALCON . It wo u ldn’

t have , butthat was n otthe issue .

Mr . SCOTT . Let me get to this . R edu cing atto rn ey’s fees will n otredu ce the co sts o f malpractice .

Dr. FALCON . In this particu lar— I guess yo ur— yes , I wo u ld haveto agree with y o u .

Mr . SCOTT. Anybo dy disagree with that? OK Perio dic paymen ts ,I think we allkn ow that if y o u have perio dic paymen ts , the amo un to f mo n ey is paid o uto ver time— the Virginia lo ttery, when theygive o uto ne o f these $1 millio n ,

a year fo r so many years ,what they do is buy an annuity o n the spo t. They buy itfo r abo u t50 cen ts o n the do llar and itpays o utthe $1 millio n o ver 20 years .

Mr . Co rboy men tio ned the fact that if y o u have already redu ceditto presen t value , cu tting itagain by spending ito uto ver timeo n ly takes the same disco un t twice . Do any o f the physicians haveany dispu te with that l o gic?

Dr . HANNAN . The o n ly o ther facto r to co n sider is the su rvival o fthe patien t well beyo n d what the pro j ectio n is , or sho rt o f what thepro jectio n is .

Mr . SCOTT. Do esn’t that wo rk bo th ways?

Dr . HANNAN . Yes .

Mr . SCOTT. I mean,if they live lo nger, the damage might have

been mo re .

Dr. HANNAN . Butif the reward is fo r a certain perio d o f time andthe victim do esn

’t su rvive that lo ng, then there is n o n eed fo r tho sedamages to be paid if itis do n e o ver a perio dic paymen t.Mr . SCOTT. Becau se o n do life e x pectancy . If they live lo nger

than life expectan cy , they didn’t get paid en o ugh . If they livedsho rter than life expectan cy , they gotpaid to o mu ch .

So o n judgmen t day , y o u take yo u r best sho t and that is whaty o u get. I think what y o u are talking abo u t is if they do n’t live lo ngen o ugh ,

then they get cutsho rt. Butif they live lo nger, they do n’t

get any mo re .

Dr. HANNAN . R ight.Mr . SCOTT. So y o u want itbo th ways . Did y o u have aMr. KEENER . Yes , Co ngressman . There are really two survivalsthat we n eed to be co n cerned abo u t there . What if the in su rancecompany o r annuity company do esn’t su rvive butthe patient do es .

The patien t has a verdict he has been to ld he is going to co llect thejud ento ver time .

e patien t might survive butif the in surance company isn’t

aro und , then the patien t really turn s o utto be the lo ser .

Mr . COR BOY . Co ngressman ,may I give y o u some info rmatio n o n

that? Sin ce 1985 ,the State o f Illinois has had a perio dic payment

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180

Mr . SCOTT. Butitmay be as mu ch as 33 cen ts?Mr . COR R OY . Yes , sir.

Mr . SCOTT. Any qu estio n abo u t that? [No respo n se ]It seems to me that a little in su rance refo rm wo u ld go a lotfur

ther than some o f the recommen datio n s in the bil l .Dr. Harman .

Dr. HANNAN . Yes , sir. The thing to keep in mind is that bo th theinciden ce o f suits and the ju dgmen t amo unts are in creasing as timego es o n ,

so the in su ran ce companies are ho lding in reserve an

amo un t in excess o f what they are paying o utthis particu lar year .

The cases that were judged this year may go back 10, 12 ,14 years .

Mr . SCOTT. Well , we have also heard that fluctuation s in medicalmalpractice premiums are mo re a fun ctio n o f the in terest ratesthan— as mu ch in terest rates as the am o un t o f mo n ey paid o utin

c arms .

Anybo dy wan t to commen t o n that?Dr . FALCON . Mr . Sco tt, I ju st wan ted to commen t that in Texas ,

we have a 2 1-year statu te o f limitatio n o n n ewbo rn s and so parto f that m o n ey is also

,I guess , go ing to— fo r fu ture o r po ssible fu

tu re lawsuits .

Dr. KELLER . I think that the amo un t o f m o n ey oing to plain tiffsis mu ch less— that the ratio is mu ch differen t. fi e company thatI am familiar with has an expen se ratio o f abo u t 14 percen t;That is what itco sts to run the company, if y o u wil l . Butthatdo es n otinclude when a case go es to litigatio n and there is a settlem en t o f o ne so rt o r an o ther. It do es n otinclude allo f the fees thatare paid to atto rneys

,bo th by the plain tiff

,wh o mu st pay whatever

fee there is , plu s what the company mu st pay fo r their own atto rney .

So that the to tal amo un t o f mo n ey getting to plain tiffs is co n sid

erably l ess .

Mr . SCOTT. What effect the plaintiff s atto rneys’

fees have o n theco st o f malpractice .

Thank y o u very mu ch,Mr. Chairman .

Mr . CONYER S . Yo u are welcome . This has been a very in terestinghearing. I wan t to commend Mr.

’

C o rbo y o f the Committee o n MedicalPro fessio nal Liability

,Mr. Keener o f the American B o ard o f

Trial Advo cates , Ms . Wittkin o f the Natio nal Cen ter for Patien ts’

R ights , Dr. Falco n o f the Health Care Liability Al lian ce , Dr. Kellero f the Physician Paym en t R eview Commissio n , and Dr. Hannan o f

the Medical S o ciety o f New Yo rk .

Yo u have been very,very helpfu l . We co u ld g o fu rther, but o u

have been here a very lo ng time . Witho u t ob'

ectio n ,I wo u ld like

the clo sing statemen t o f Chairman Bro oks to e in co rpo rated in tothe reco rd atthis po in t.[The clo sing statement o f Mr . Bro oks fo llows :]I wo uld like to thank the witnesses fo rtheir info rmatio n testimo ny .

While itis impo rtantthatthe law be fair in the respo nsibilities itimpo ses o n

health care pro viders , itis als o impo rtantthato urlegalsy stem o ffer fair protectio nsto peo ple who se lives are disrupted by injuries cau sed by medicalmalpractice . We

mu stnotme lectthese impo rtantprinciples as we mo ve into the finalstages o fthehealth care ebate.

Mr . CONYER S . The hearing is adj o u rn ed . Thank y o u .

[Whereupo n , at p m , the subcommittee adjo urned ]

181

APPENDIX 1 . MATER IAL SuBMiTrED W'I'H THE PREPAR ED STATEMENT

o rANTONIO FALCON, M.D .

Acaeadix B

182

CHAPTER 15

MEDICALMALPRACTICE R EFORM

Themedicalmalpracnce sy stem do es notadequately preventmedicalinjunes o rcompensateinjured patients . There is also widespread co ncern thatthe currentfunctio ning o f the

malpracdce sy stem may promote the practice o f defensive medicine and impede effo rts to

impro vethe appmpriateness and co steffectiveness o f care. The impo rtance o f malpractice

refo rm is underscored by its inclusio n in nearly allthemajorhealth system reform pro po sals

being co nsidered by the Co ngress.

This chapterincorpo rates theCommission ’

s priorwo rk o nmalpracticerefo rm and ex tends itsrecommendatio ns to address additio nalissues thathave been raised in the vario us health

systemreform prepo sals now being debated. These include newly pro po sed tortreforms . the

use o f pracdce guidelines inmalpracuce litigatio n. and public disclo sure o f informatio n abo ut

RECOMMENDATIONS

The Co ngress sho uld effectthe widespread ado ptio n o f certain to rtrefo rms.

reaso nable schedules fo r nomeouomic damages (interim limits may be

emplo yed untila schedule is adopted) , o ffseto f awards fo r collateral

so urce payments, perio dic paymento f large awards, and diversio n o f

liability, and reductio n to a reaso nable perio d o f lo ng statutes o f

enco uragemento f the use o f binding alternative dispute reso lutio n

methods (no nbinding alternative dispute reso lutio n sho uld no tbe

Although hfifiafives mrequhe cex fi cmes o f m itn m rd spedalhgalsmms to

pmcfiee guiddina and n isethe hurden o f pmolfor puuifive dm ngm havethe

potenfialto hnpmvemefuncfio uing o fflremalpn cfinesym mn entknowledge

o ftheh'efl

'

ecfiveuess is uOtmEdentmjusfifythatmey befeden nym ndated.

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184

'. L

star are o f care zen-erect: .1 : : inet.Gas 0 o o o c pram.cc s -cc

and pro :ess icnaipraence: thattrim be zntiuenced b\ o ther zncen z x x es to zncrei se

zne deli o : serv e-es Parado x icat1 . neaizl‘. care pracuces are 0’

s »

o s s ible 16 0 31 liability iThere is greatco nc th..tliability c o nsideratio ns

to reduce tne deiz x ery o rineftic zento rtnetz ecttye care. th is c o ncert: is o en: .c to

prc x ice s peciallegalprotectio n fo rt‘

o llomnc p ac z zce c u:delines .

Defensive med icine represents unnecessary o rinefficientcare delivered to reduce tne r:

being sued o r paymo damao es. Its ex tentand cu tare unkno wn butmay be substantialSeveralfacto rs may co ntribute to defensive medicine. The ne°lt°ence standard do es nOt

pro vide a o o o d pro spectiveo uide to decisio nmaittno Phy sicians o ften ursagre abo utthe

required Standard o f care in particularcases (Brennan etal. i989 ) . Furthermo re. zudernents o r

nec 'to ence after an injury are biased by kno s iec o e o f the edve.se o utc ome so u na: may

seem to be appro priate care befo re the fan may later be deemed neo iio ent(Caplan eral.

In additio n. physicians pro bably apply the standard differently than GO juriesJUOOa LS o f liability thatare inco nsrsrentac t

o ss Similar cases. made by lay juries meettnoo ne time. mav co ntributeto defensivemedicine. Themedicalpro fessio n s iack otagreementabo utwhatcare is effective. as wellas misperceptio ns o f phy sicians abo utthelead Standardo f care. arealso co nmbutors .

The high administrative co sts o f the currentmalpractice system resultfrom the fo rmal

pro cesses fo rdisco very o f info rmatio n. preparatio n fo rand co nducto fthetrialitself. and theuse o f ex pertW itnesses. These reflectthe need fo rex tensive info rmatio n and undersrandino

thatis asso ciated with an inquiry into medicalcausatio n and individualfault. High pro ceduralo sis are barriers to filing claims fo rmany pOtentially ,

compensable injuries. particularly

tho sethatareless serio us o rthatentailrelativelv mino reco nomic lo sses.

TOWAR D A MALPRAC TICE SYSTEM OF THE FUTURE

The pro blems with themalpractice system are so pervasive thato nly a pro fo undly differentsystem o ffers the po tentialfo r dramatic impro vement. A pro ven mo delfo r such a system

do es notex istin theUnited States . butapo ssible future system is o utlined here. The system

wo uld have tw o compo nents . One wo uld be a fast. efficientadministrative compensatio nmechanism thatwo uld pro vide adequate awards to patients who ex perience preventablemedicalinjuries . The Otherwo uld be a complementary system fo rmo nito ring. q uality

review . and design and implementatio n o f measures to reduce the rate o f injury. Self

insurance o rex perience rating wo uld pro vide Stro ng incentives to preventinjuries . An

impo rtantfeature o f the pro po sed system is thatdecisio ns abo utcompensatio n and qualityo f care in individualcases wo uld each be made by a pro cess designed specifically fo rthatpurpo se. Clear criteria fo r compensability and fo r damages awards wo uld be established.

w r e reas o rcare wo uld be mace to r pez z er sz zte: z akeo t-t fi

HOSE?5 325 177113 2 {10 05 .

The ..arntnistrative compen satio n sy stem wo uld pro vide access fo ras man} valtc clazms

as nuan tv. vetco ntro lthe compensatio n levels to keep the sy stem afto rc a'

o ie. Em.

access w o uld be achieved by lo wering eco nomic and o ther barriers to filingensur ne eo ni

repre entatto n. and helpino patients reatiz e w hen thev have ex pertencec a

po renttallv c o mp ensable injurv . Inj uries w o uld also be detected bv cata ased

surveillance and bv enco uragrn o o rrequirino the participatio n o f pro viders ir icertttvtng

and repo rting pOtentialin .iuries No nmerito rio us claims wo uld be screened o uteariv. and

the o verallpro cess w o uld be ex pedited and efficient. Itis po ssible thatan even simpler.

less fo rmalpro cess co uld be instituted fo r smallerclaims . Compensatio n w o uld be basedo n a mo re reliable Standard than neglto ence. such as avo idability o f the injury o r no

The injury preventio n and quality impro vementsystem wo uld rec eive info rmatio n from th

compensatio n sy'

stem. its own surveillance mechanisms . and vo luntary repo rting. Itwo uldco llectand analyz e data o n injuries. thereby facilitating the design and implementatio n o f

interventio ns . Health care o rganiz atio ns wo uld be self-insured o rmalpractice insurancepremiums wo uld be ex perience-rated to pro vide stro ng incentives to preventinjuries . Ideally.this system wo uld be parto f a bro ader co ntinuo us quality impro vementsystem o perating

thro ugho utthe health care svstem. The svstem wo uld have an appro priate balance o f publicand pro fessio nalinput.

To realiz e this system willentailco nsiderable develo pmentalwo rk: even then. itmay notbe

feasible as described . Its compo nents co uld. however. be develo ped in an evo lutio nary

manner and implemented o ne atatime. To pave the way fo rthis sy stem o f the future. the

Commissio n'

s recommendatio ns fo cus o n:

impro vingthe functio ning o fthe currentsystem.

develo ping and using efi cientalternative dispute reso lutio n systems fo r

compensating injured patients.

fo rmulating and testing mo re reliable standards fo r compensatio n decisio ns .

co llecting betterdata o n medicalinjuries and impro ving systems to prevent

injuries and impro ve quality o f care.

The federalgo vernmentsho uld play aro le in allfo uro ftheseareas.

186

IMPROVING THE FUNCTIONING OF THE CUR R ENT SYSTEM

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To rtRefo rms

To rtrefo rms are cl.anges in the leg alrules go verning malp cuce lawsum . Thev cerrpo se the

bulk o f the malpracttce refo rms commo nly pro po sed . Widespread implementatio n o f to rt

refo rms w o uld netin itself solve manv o f the underly ino pro blems o fthe malpracnce svstem.

which persisteven in States thath..ve alreadv ado pted manv to rtrefo rms. Some to rtrefo rms.

hovvever. co uld neip themalpractice system o perate semewhatmo re efficiently and co nsrsrentlv

untilmo re fundamentalchang es are made. and they can be instituted immed iately . In the sno rt

run. these changes wo uld be beneficialfo rthe health care sy stem as awho le. In additio n. some

to rtrefo rms are prerequisites fo rthemalpractice sv5tem o fthe future o utlined in this chapte

To rtrefo rms have been enacted inconsistently by the States. Itis unlikelv thatthev willbe

ado pted unifo rmly . and some have been declared unco nstitutio nalby state co urts. Fo rto rt

refo rms to be implemented acro ss-the-beard . either federalpreemptio n o f state law is

required. o rstates need Stro ng federalincentives to ado ptthereferrns . A third altemative is toautho riz e individuals o r c ro ups to agree by c o ntractwith phy sicians o r health care

organiz atio ns to ado ptwhichever seto f refo rms is mutually acceptable (Havto nurstThis . ho wever. w o uld netensure the widespread implementatio n o f to rtrefo rms . The

Commissio n believes the case fo r certain to rtrefo rms is suf ficientlv compellino thatthev

sho uld be federallvmandated.

If to rtreforms were m ated in iso latio n. however. their benefits wo uld come atthe ex penseo f some injured patients. Some awards wo uld be reduced. and access to legalrepresentatio nfo r some po tentialclaimants may be hindered if snietlimits o n damages and co nuno ency

fees were ado pted. Ideally . to rtrefo rms sho uld be ado pted as parto f a bro ader referrnpackage thatincludes ex panded access to well-functio ning alternative compensatio n

mechanisms . bettersystems to preventinjuries and impro ve quality o f care. orothermeasures

thatwo uld benefitpatients.

The Commissio n favo rs certain to rtrefo rms in co njunctio n with ether refo rms thatwo uldbenefitpatients . The following discussio n analy z es the merits o f pro po sed to rtreferrns . If

they are ado pted. itwo uld be impo rtantforthe Agency forHealth Care Po licy and Researchto fund studies o f the effects o f the refo rms o n patients

'

rate o f claims . access to legal

representatio n. and compensatio n fo rinjuries.

Schedules fo rNo nec o no mic Damages . Much o f the unpredictability and inco nsisrencvthatcharacteriz e today

'

s malpractice awards is because o f no neco nomic damages pain

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188

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gu mentire v fo rno 0 7 0o mie dart“. ges .

Dractztio ners w ith aded uate tnsurance o rreso urces 20 pa} .

‘

nazpracx ce awards co

“

0 : wantto pay the fullamo unto ran award when zhetr o ntributio n to mino r 0

neglig ible. Butztsh o uld be reco g niz ed thatlimits o r: thezr z zap ii;iv mav come a: tne ex pense

0 : adec uatelv compen sating iniured patients. The Commissio n recomrn no » trat balance

struck bv ado pting thresho lds fo rthe applicatio n o fjo intand severalliability .

Perio dic Payments o f Large Awards . Mo re than half the states req uire thatlargerawardsbe paid in installments o vertime. Itis beStif the payments aretailo red to meetspec x ic futureneeds . An annuity can be purchased to meetco ntinuing needs resulting fro m permanent

inj uries . Annuities also permittax -advantag ed investmento f an award . Overall.Co mmissio n co nsiders perio dic paymentbeneficial.

Reductio ns in Statutes o f Limitatio n . These laws limitthetime perio d. afteran iniurv is 0

sho uld have been disco vered. during which claimants may file alawsuit. Iftheallotted perio dex pires. a claim is barred even if itclearly has merit. Mo ststates allow a lo nger peri od fo r

mino rs. o ften untilthe age o rmajo rity. Lo ng statutes o f limitatio n create uncertainty . delay .

and ex pense in insuring ag ainstmalpractice clalrns . Birth-related injuries are the pnncrpalso urce o f pro blems . Eightyears is a safe perio d to allo w detectio n o f perinatalinju and

sho rter perio ds are defensible.

lStates thathave lo nger statutes o f limitatio ns fo rmino rs

sho uld be required to reducethemto eighty ears atmo st.

Punitive Damages . Punitive damages are rarely justified in medicalmalpractice cases . Thev

are requested farmo re o ften than they areawarded (Metz lo ff Judg es frequentlv reduceex cessive o runjusdfied punitive damages awards . Overall. punitivedamag es do n0tappeartobe an impo rtantpro blem inmedicalmalpractice cases.

Two refo rms have been advo cated with respectto punitive damag es. The firStis thatparto r

allo f punitive damages awards be diverted to quality impro vementactivities. The ratio nale

fo rthis is thatpunitive damages . by definitio n. are notcompensato ry in nature.

“

they are no r

needed by the plaintiff. Their purpo se is to deter Others from similar co nduct. thusprotecting future patiens from injury. Co nsistentwith this ratio nale wo uld be to use the

mo ney from these awards directly for injury preventio n o r quality impro vementactivities.

The Commissio n enco urages the diversio n o f some o r allo f punitive damages awards fo rthese purpo ses .

2 Plaintiffs wo uld co ntinue to allege punitive damages when warranted

Cerebralpalsy can usuallv be diagno sed by three years o fage;difficultcases can bediagno sed by meage o f five(Stanley and Watso n l985 ) .

Juries sho u l d no rbe info rmed o fthis diversio n so thattheirdecisio ns o n damages are nOtdisto rted .

x spite th.e c :versio —because their e. pected value “ 0 be z nci" dea eg o uatio ns.

n: cc 0‘

the evidenceto clearand co nvincing evidc ..ce“

IT w men: to rthis is

th atthegreaterpenalties represented by punitivedamages sho uld bemeted o uto nlv i“ t’

ismo re

certamtlan is required fo rordinan neg ligence. This plausibleratio naleappues to pun

itivedamag esin allco ntents . aptjustmedicalmalpractice. Altho ugh changing the standard o f pro ctsee..

reaso nable. the Commissio n believes thatthe case forthis mo re fundamentalchange zn lega. rules

sho uld bemade o n abroaderbasis than medicalmalpractice. Altematively. co nvincing evidencesho uld be putforwardthatthere is aspecialneed fo rthis refo rm inthemw enimalpracticearena

Certificate o f Merit. A certificate o f meritis a requirementthatan independentmedicalex pertreview the medicalreco rd and certify thata claim is wo rthy before a fo rmallawsuitcan be filed. Altho ughthis requirementappears reas o nable. thereare po tentialpro blems withit Itadds another step to the litigatio n pro cess. co nsuming time and mo ney . This mav be a

barrierto some meritorio us claims thatwo uld otherwise be bro ught. Plaintiffs' lawy ers tendto require the plaintiffs to pay fo rthis initialex pertevaluatio n. which is dif ficultfo rlowincomeplaintiffs who already sueless frequently than wealthiero nes .

Itis o ften difficultto judge atacase'

s inceptio n whetheritis likely to be successful. becausekey informatio n is notavailable in themedicalreco rd and mustbe o btained thro ugh thelegalpro cess. Ifthe certificate o fmeritrequirementis to o strict. some cases thateventually wo uldbe successfulmightbe screened o utsimply because o f incomplete info rmatio n. The teSt

sho uld no rbe whetherthe claim is likely to snow ed. Rather. the criterio n sho uld be some

minimum thresho ld o f the pro bability o f success. Itmay be difficultto develo p criteriathatwo uld aptsquelchmeritorio us claims. yetbe stricteno ugh to reduce significantly the numbero f no nmeritorio us claims thatpro ceedto litigatio n.

Completely frivo lo us lawsuits do no tappear. anecdo tally. to be a majo r pro blem fo r

defendants . and the defense can fairly easily identify gro undless claims . Altho ugh the ideahas promise. mo re needs to be learned abo utthe benefits and drawbacks o f certifi cate o fmeritpro grams beforethey warrantbeing federally mandated.

3

Practice Guidelines and Malpractice Litigatio n

With practice guidelines becoming -more integrated into medicalpractice. mo re attentio n is

being fo cused o n theirrelatio nshipto themalpractice system. Therearetwo areas o f interest.

3M m fia m o fm mmm w mmm m ’

s M fi m m d W y o nly

afmra chnn has been hugamd w a fmalco nehfi m man alm anve dispme resommn prom ltls ex tremely

unlikely thatsuch aclatmwo uld be fihdmewmme cm syaemmless a lem o ne ex pm was wn mtesdfy for

dw phindfl'

. The cernficate o fmau reqmrem mmis comex tm supu flm Pincedtn'es no screen attfnvo lom

ciamu aremo stusefularme o uueto faelam norafterithas alm dy been ex iensively litigated.

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190

One vat-ether ' r e stem impedes the .. se 0 : : . e g ide: znes by he ilth care "0 3 : .

ig—e 10

2m32'0 \ $ the appro priateness and costeffectiveness 0 : are effects the: practice

zines hax c o n the pro ces s and career es o f~

practice l s see: : o n \ 2 :

describes e results o raCommissio n-spo nso red study o rz he o f 31 1 c

guicezines in maleracnce litigatio n.

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The Relatio nship o f Practice Guidelines and the Malpractice System. he treatmento f

pra cticeg uidelines in themaipta ctice svstern has impo rtantzmplicatio ns to rtheir success i

promoting the deliverv o rapprOpriate. co st-effective care. Pactice g uidelines co uld nro x ide

an impo rtantleg alsuppo rt fo rphysicians and health care o rg aniz atio ns thatuse them to

pro vide less-co stly butappro priate care. Butrevisio ns o f practice g uidelines bv the judicialsvsrem co uld renderpractice g uidelines ineffective in helping to co ntro lto ss and imprme

duality. Such revisio ns c o uld take two fo rms : an ex plicitrejectio n o f the co ntento f the

g uideline. o ra carving-o uto f ex ceptio ns thateffectively vitiates it. In resp o nse to this

co ncern. states are pro viding o rplanning to pro vide speciallegalstatus to practice g uidelinesto facilitate their use by defense arto rnevs. and thus enco urage their use bv phy sicians

(GeneralAcco unting Office l993) .

Practice g uidelines may help to impro ve the functio ning o f themalpractice sy stem (Garnick

erai. This is because g uidelines can make cleartheapplicable Standard o f care. which

is atro ublesome issue inmany malpractice cases. They mightalso lessen the need fo rex perttesrirno ny o n the standard o f care. thus avo iding a battle o f the ex perts . Guidelines mayappro priately increasethe amo unto fmalpractice litigatio n by helping make clearto injuredpatients. theirlawyers. o rjuries thata standard o f care was breached. Butseveralfacto rsmightpreventany impro vementin themalpractice system resulting fromthe use o f practice

guidelines. Theto pics o n which guidelines are being developed pro bably areirrelevantto thecircumstances leading to mo stmalpractice claims . Guidelines mightberevised o rreversed bythe judicialsy srerh . eitherex plicitly o rby the creatio n o f ex ceptio ns . In additio n. increasedlitigatio n mightresultfrom quesrio nihg the validity o f guidelines o rthe circumstances underwhich ex ceptio ns are warranted . Further. guidelines mightbe co nstrued to create a firm

standard o f care when o ne is neitherintended no rappro priate. l need fo r ex perttestimo ny mightstay the sameo reven beincreased.

The Harvard Study. Because little is kno wn abo utthe use o f practice guidelines inmalpractice litigatio n. the Commissio n engaged Harvard University researchers to co nductaStudy to pro vide empiricalinformatio n o nthis to pic (Hyams etal. The snidy had three

compo nents. The firstwas a review o f published judicialdecisio ns thatco ncern practiceguidelines . The seco nd was a review o f malpractice claims files to determine how o ften

guidelines were used in actualmalpractice cases. and to disco verthe wavs thev were used.

Thelasrwas asurvev mailed to asample o f plaintiffs'

and defendants‘

lawyers .

A computeriz ed search o f allpublished judicialdecisio ns lo cated 32 cases in which practiceguidelines were used: 23 by the plaintiff (claimant) and 9 by the defendant. Plaihu

'

ffs wo n 17

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cases . ru iuremc nzto riae anc research are needed as ses s whether g enres arere

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e as ses sed. pay ing a rticularattentio n to whetherthese actio ns nay e promo se: o r .m peded

se o f guidelines in litig atio n and if: patientcare.

idles naie g iy en guidelines specialiegai status in malpractice Cd sé s .

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(2

Enterprise Liability

Enterprise liability refers to the situatio n when a health care o rganiz atio n assumes financial

respo nsroilitv fo rallnegligentinjuries to patients underits care. thereby relieving ind ii idual

practitio ners o f allperso nalto rtliability fo r such injuries (Weller This 13 tho ug htto

o ffertwo benefits. First. enterprise liabilitv results in clear say ings in admrnrsrratix e co sts.

Instead o f multiple defendants— each o ften requiring separate law y ers and ln\éSil2 2 l:OnS

there is o nlv o ne defendant: the enterprise. Additio nalsay ing s also resultfrom eiiminating

the many separate individualand c o rpo rate malpractice insurance po licies thatmust

Otherwise bemaintained.

Seco nd. enterprise liability is tho ug htlikely to resultin fewermedicalinjuries . itplaces the

burden o f injury detectio n and preventio n o n an entire entity o rsy stemthatdeliy ers care. o ne

thatcan mo re effectively use reso urces— and devore mo re reso urces —to accomplish these

tasks than individualphysicians acting separately . Others argue. however. thatenterprise

liability deprives individualphysicians o fthe deterrence incentive Stemming fromtheirneedto purchasetheirown malpractice insurance. The debateis theo reticalbecause o fthe absenceo fempiricalevidence relevantto the issue.

The fo rmatio n o f acco untable health plans under sy stem refo rm wo uld undo ubtedlyaccelerate the trend toward integrated delivery sy stems and Other entities thatincreasinglylo o k like unified enterprises . Enterprise liability already ex ists fo r ho spitals owned andStaffed by o ne o rganiz atio n. such as a health maintenance o rganiz atio n (HMO). o ratypical

university o rco unty ho spital. and fortho sethatpro vide. o rchannel. malpractice insuranceto

their afi'

iliated staff. As verticalintegratio n spreads thro ugh the delivery sy stem. enterprise

liability is likely to fo llow fo rreaso ns o f efficiency. Enterprise liability is also the end result

o f the trend in legaldo ctrine toward ho lding ho spitals and Other health care o rganiz atio ns

respo nsible fo rneg ligentinjuries to patients (Weller

Enterprise liability is pro bably an inevitable resulto f legaltrends and the incentives

sharpened by increased competitio n in the medicalmarketplace. The po licy questio n iswhetherits spread sho uld be enco uraged o rrequired so o nerthan wo uld o ccur Otherwise.

There are some practicaldifficulties with impo sing enterprise liability. Itrequires anenterprisethatis tied financially and pro fessio nally to the care fo rwhich itis respo nsible. Ifa

ho spitaland its medicalStaff were co nsidered an enterprise. for ex ample. this relatio nship

wo uld be presentforinpatientbutnoto utpatientcare. Third-party payers are financially but

193

no : pmfessro naiiv . .alted with phy srcians . atleasz atthis time. itwo uld also be difficultto~

3iibrate malpractice insurance Premiums and :ees . o r phy src :ans who .."3 no rpractice

ex c :usrvelv within ..ii enterprise.

Several steps co uld be taken shorto f impo sing enterprise liability . Policvmaidng wo uld beimpro ved if there were empiricalevidence thatenterprise liability reduced co n s andenhanced cuaiitv o f care. Federalsuppo rtis thus warranted fo r demo nstratio n pro jects and

evaluatio ns o fex isung ex amples o fenterpriseliability .

Anotherpo ssible Step wo uld beto require acco untable health plans to rep ortinfo rmatio n o naggregate malpractice payments made to their patients fo r co nsumers to use in comparing

plans. This appro ach w o uld notinvo lve plans in defending physicians o r pay ing damageawards o n theirbehalf. butitwo uld give plans an incentive to selectdo cto rs mo re carefully .

mo nito rthemalpractice claims ex perience o ftheirphysicians . and help them avo id claims .

Phy sicians wo uld have a greaterincentiveto ensurethattheirpro fessio nalcolleagues wo rk

to preventnegligentinjuries . Itwo uld be usefulto supplementmalpractice claims

informatio n with a requirementthathealth plans actively mo nito rfo rpreventable injuries totheirpatients as parto f their quality assurance activities . Fo rrem ns discussed later in thischapter. impro vements in data and measures o f comparability are needed befo rethis sho uldo ccur.

Finally. enterprise liability co uld be enco uraged by the way in which quality assurance

activities are Structured within health plans . Health plans co uld be required to conductsuchactivities in amanneranalo go us to thato f ho spitals. thro ugh the equivalento fmedicalstaffquality assurance committees. Each plan wo uld be respo nsible forensuring the

“

successful

Operatio n o f its committees . butthe physicians—the health plan’

s medicalStaff— wo uldperformthe peerreview and quality impro vementactivities. A gro up o f plans co uld delegatethis functio n to a single lo calentity. so thateach plan wo uld no tneed its own qualityassurance commitlee. Quality assurance sn

'ucmres thatlink physicians and engage them in

quality review eo uld pave die way for bener quality impro vementactivities and an easier

COMPONENTS OFA FUTUREMALPRACTICE SYSTEM

These recommendatio ns wo uld help impro ve some o f the deficiencies o f the malpractice

system They wo uld notho wem address two mdedymg eames o fme pmblems wimmemalpractice system: reliance o n the co urtsystem. and use o f the negligence standard todetermine bath the standard o f medicalcare and eligibility fo r compensado n lbe fimire

system to reso lve claims o n the basis o f a standard for compensatio n thatis more reliable

than the ctn'rentnegligcnce standard. Such a systemwo uld be helpfulformo nitonng quality

194

Alternative Dispute R es o lutio n Systems

z rniizcantinterm ent-ent o ces s ine.

rZCI ICe’ claims can o ccur o nly

Admin s x g zae and etheralternatiye dispute reso Wo n -.DR : metho ds

o fferth e po rentiaifo rreso lving maipracuce claims mo re q uickly . efficien tly . and co nsisten iiv

(Jo hns o n ci ai. A variety o f ADR mechanisms hay e been develo p such as

arbitratio n and med iatio n. Administrative systems no ro nly may o ne potentialclaimants

easieraccess to compensatio n. butalso use alternarive standards fo rcompensatio n ic iscuSsed

in the fo llowing sectio n ) . The future compensatio n sy'

stem anticipate d by the Commissio n

wo uld rely o n an administrative systemto pro cess claims. Mo stmalpracticereform pro po sals

enco urage orrequire using altemative disputereso lutio n.

Severalpo ssible features o f ADR mechanisms may impro ve the reso lutio n o f malpractice

suits. If decisio ns weremade by someo ne with ex perience (as co uld bethe case with ADR l.they mightbe o f betterquality. have mo re precedent-setting value. and be mo re co nsistent.

By co ntrast. ajury meets o nly o nce: ithas no firsrhand ex perienceto draw upo n in decidingcases and no access to written decisio ns fo rOther similarcases. A jury do es no rhave tojustify its decisio n. no ris itacco untable fo rits performance. If decisio ns were wntten and

accessible. they wo uld likely be mo re co nsistentand predictable. lnco nsisrencies amo ngcases co uld be reso lved by an appeals pro cess. and the relevantstandard o f practice wo uldthen be known pro spectively by health care pro viders . An administrative decisio nmalcermay

bemo re likely to undersund and ho no rtherecommendations o f go o d pn cdee guidelines and

to condone co st-effective cure.

Little is known abo utthe efficacy o f ADR inmedicalmalpractice. altho ugh the ex perience o f

KflserPennamnu is hd pfid. SeW o f is hefl¢ phm meW bmding aminaum wreso lve allmalpractice claims . Their ex perience repo rtedly has been favo rable. in that

liugaum cms m wm whn wss bea us me ha nngs m mmh shmu m mmemjmytrials . In additio n. compared with public trials. private arbitratio n hearings are lessburdensome fo rKfi serphysicM Cases appw w bereso lved fasterman compamble caseslitigated in the courts (Felsenthnl Kaiserhas discontinued arbitratio n in atleasto ne

regio n. however. becausethe quality o ftheavailablearbitrators was co nsidered insuffi cient.

Despiteits porentiaLalternative dispumresolutio n has anumbero f po ssibledrawbacks. Ifthe

resultreached thro ugh ADR is notbinding. the metho d wo uld merely impo se significant

the co nstitutio nalrightto ajury nialis a porentialbarrierto requiring the use o f bindingADk And fimny. whether shifdng anorneys

'

fees w dt party who lo ses m apped mmeco urts truly disco urages resortto the co urts is unmown. On the o ne hand. lower-income

claimants mightbemhdvely disadvantaged beceuseanmneys wadd requhethemmassume

me nsk o f paying their oppo nent’

s legalfees. 0n the 0ther. the fee-shifting pro visio n might

be waived formem and thus nm have its desired efi'

ea o f discomaging refidgado nmmeco urts. An idealscenario wo uld be the develo pmento f ADR systems advantageo us to

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prineipalfearraised by .i ro -taai. s} stern is that largernumber o f imam-gt misfitbecome ettgtbie to r compensatio n. Awards wo uld have to be restricted to keep the s } s

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attcrc’

eble. in estimating the co sto amo o rheticalno-faultsy stern in New Yo rk. fo rex ample

t..e Harvard .\lec ic.iiPractice Study restricted compensatio n to ne

lo s ses ex per:enced mo re theitsitmo nths atterthe : njury. with no no neco n omic carriages

permitted iliarvard MedicalPra ctice Study In additio n. the ex perience o verseas is that.

with a no—faultsy stem. the number otclaims increases steadily (Hellner l985l. A no -fault

standard sho uld be tested firstin a demo nsrratio n in the United States . When comparingresults acro ss sy stems o f care. demo nstratio ns sho uld emplo y metho ds to adjustrates o f

injuries and levels o f compensatio n fo rdifferences inthe health sy stems ‘

patients— espec ially

ac e— thatinfluencethelikeliho o d and severity o finjuries.

Avo idability. Some erro rs in care are notnegligent. For ex ample. amistake in co nsideredpro fessio naljudgmentis o ften deemed n0tto be negligent. Whereas in hindsightan injurymighthave been avo ided. having missed the Oppo rtunity to preventitis no rnecessarilvneo ligent. Itmay be easier

'

to determinewhetheran injury was avo idable— by somemeasuref pro bability— than whetherfailureto avo id itwas dueto negligence.

A standard based“

o n avpidability is appealing because itcompensates pir'

ients fo rinjuriesthatneed npthave o ccurred. italso wo uld fo cus preventio nefforts o nthe fullrange o fpresentableinjuries . Fewerclaims wo uld becompensatedthan underno-fault.which wo uld help ito

'

co the

svstem7

affordable. Fo rex imple. aparticulartreatmentmay entaila known butunavo idable

o n avo idability. More claims would qualify forcompensatio n. however. underan avo idability

standard than underanegligence standard

An avo idability standard wo uld o fferOtheradvantages as well. Itshares with no -faultthe

advantage o f'

notco nditioning compensatio n’

o n aj udgmentabo utwhetherthe care was

medicine practices and-impro ve pro viders'

co nfidence in the system. Atthe presenttime.

there is no informatio n o n’

the reliability o f such a standard. butitmay bemore reliablethan

t'

l'

amediand Bovbjerg lfi l: Bovbjerg etal. l991). Then wmprtsealisto f avpidableadvg se o imomes o f earemat

forallomerinjuries . Anao cdamedm pemado nwentsyuemum apphes onlymanmm o f hum m .may

197

BETTER PREVENT|0N OF MEDICAL INJUR IES

e creveritio n o fmed icalth i-cries ts a difficuittask thatrecaires co n siderabie resccrce

a s v stematic appro ach. The generaldeterrence incentive pro x ided b the threato f legal

is notsufficientto reduce preventable injuries to a this . s becaus

the g eneralincentive fo rphyl ians n0tto be neaiigentmustbe tranSiated by ind ividualphysicians into the particular u ays l“ which tney try to avo id inj ury . iso lated lap ses in

vigiiance inevitably happen. and itis difficultfo r individualphysicians to learn gro g: the

relativelv few o ccurrences abo utwhich thev mav be aware. In any case. since the c enerai

deterrence incentive is alreadv in effect. specific measures deSigned to preventtjunes ar

neededto reducetheirrate o f o ccurrence further.

A Sy stematic approach to injury preventio n is likelv to bemo re effective than rely ing purely

o n o eneraldeterrence. R isk managementactivities W ithin h05p itals. fo rex ample. have beenshown to be asso ciated with fewermalpractice claims (Mo rio ck and Malitz Effective

injury reductio n pro grams require the co llectio n and anaivSis o f data. as wellas the designand implementatio n o f et

’

t’

eCtive interventio ns .

Data Co llectio n

Better data are needed to help detectpreventable injuries and determine their causes .

Data usable fo r injury reductio n have c o me principally from clo sed claims files o f

malpractice insurers . Only a smallpercentage o f avo idable injuries is included in such

files: o ften. the info rmatio n abo uteach claim is limited (Harvard MedicalPractice

Study There is also a substantialtime lag fo r claims files to accumulate

info rmatio n. since they depend o n the legalpro cess . The Natio nalPractitio ner Data

Bank (NPDB ) in theo ry c o ntains a complete listing o f malpractice claim payments . but

the info rmatio n o n each claim is no tco ded in a way thatis usefulfo r preventio n

activities .

Early warning systems and active surveillance are needed to deteCtas many preventableinjuries as po ssible. notjusttho se thatresultin claims . The basic epidemio lo gy o f medicalinjuries needs to be delineated. Metho ds to describethe etiolo gy and nature o f injuries are intheirinfancy. Coding systems need to be developed to permitthis moreabstractinfo rmatio nto be entered into computeriz ed databases . Because many evea nee d to be collected andanalyz ed to detectpatterns o f rare events. lo caldatabases mustbe compatible to permitmerging . Health system refo rm may pro vide an o ppo rtunity for develo ping standardiz edco ding and databases (seeChapter

Despite its impo rtance. however. data-based surveillance— no matter how welldesigned— isnotsufficient. The bestinformatio n so urce co ncerning care-related pro blems is the caregiversthemselves. Early warning and repo rting systems fo rmedicalinjury have been efi

'

ective in

identifying, so o n aftertheiro ccurrence. many o fthe injuries thatresultin claims (Lindgren ci

o s0.

o' o . u n a

9 9 . mam Oi the prevenza ma rt-ex . eco rtc; are no .

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ntfi ez z zai so rting o rno . preventab le to

rec o nn aie o rganz z azao n has promise (Petersen etai. Vo lunzar repo rtznv o f ingest-es .

e o artx c zpatzo : in o eerreview and inj ury prex enuo r. ectr. zties usmetab s-e caza. nee

to be protected and enco uraged bv stateand federallaw.

Design and implementatio n o f interventio ns

When preventable med icalinjuries are detected and their causes understo o d. way s mUSlbe

devised to preventsuch o ccurrences . These interventio ns can be either c o g nitive o r

pro cedural. The educatio n o f pro viders is impo rtant: co gnitive interventio ns make sense

intuitively to address co gnitive mistakes. Erro rs thatcause injury. however. are o ften due to

iso lated lapses thatare d ifficultfo rindividualhealth care w o rkers to eliminate. In additio n.

some injuries are caused by pro blems in health care deuverv svstems and pro cedures rather

than bv an individualcareOtver'

s mistake.

Sy stems o rpro cess interventio ns are likely to be even mo re effective atpreventing injuriesthan educatio n alo ne. Administrative po licies and med icalpractice guidelines can be

desx o ned to minimiz ethe risk o f avo idable injury. and checks can be instituted to make surethatpo licies are fo llo wed . Guidelines fo r intrao perative mo nito ring o f blo o d o x y gen

saturatio n. fo r instance. have reduced the number o f hypo x ic injuries during anesthesia(Kee nan and Bo van

Integratio n with Quality Impro vement. These activities are bestperfo rmed in co njuncuo nwiththequality assurance and impro vementpro grams o fhealth care o rganizatio ns . Structures

to co nductthese functio ns do netet fo r fee-fo r-service plans . Ho spitals are natural

lo catio ns fo rsurveillance and early warning fo rinpatientcare pro blems . buto utpatientcare

may bemore difficultto mo nito r. The Standardiz ed datarepo rting thatmay be required under

health sy stemrefo rm. however. co uld facilitatethe detectio n o f preventable injuries stemmingfrom o utpatientcare (see Chapter

Afterpo ssible preventable injuries are idetm'

fied. individualcases mustthen be reviewed.

Sometho ughtis needed o n how peerreview can bebetterconducted. especially foro utpatientcare. As described abo ve. o ne way in which health plans co uld co nductbetterquality

assuranceand impro vementactivities mightbe forthepro fessio nalstaff o fahealth planto be

respo nsible forpeerreviewwithin thatplan in the samemannerin which themedicalstaff o f

a ho spitalis respo nsible forquality assurance related to physicians. The health plan wo uld

ensure thatquality assurance committees and strucntres ex istand are functio ning pro perly .

s '

t'

lierieaneaclrlirio nalbenefitsmmrly identificano n o f panents injtned by medicaleme. Any nmed remedialor

M m u m m m wkh m h lp immve dn m m wmch w hy dau num w m

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pilo r. o r

each negligenteyento ften d o es noto ermtta tu" understand ing 0 . me c

issues o rcausatio n and neo nge. cc are o nen cuite difficultand co rnc zex z n mottldua

nc‘

: can be pro blematic to allo cate ind ividualrespo nsibility fo ramedicalznjurtes.

lance o tthe data 15 o uesrio nable. Paid malpractice claims ire o nly rno'

estly

predictive 0 . future claims. Th is is eno ugh to ex perience-rate o ro ups o rphy src : 5 butno

\Uffi€ 2entto pred ictthe future ex perience o f anv o ne physician (R o n paid

maipractiec claim do es notnecessarily representpo o rquality o f care. and ex en po o rcare I

any particuular instance do es n0timply inco mpetence with respectto thatco nditio n o r

pro cedure. Finally. itwo uld be d ifficultfo r co nsumers to use the dry to avo id receiving

neg ligen. medicalcare. because erro rs o rpo o rcompetenc e in o ne aspecto f care are pro bablyn0tpred ictive o f pro blems in Others (Sanaz aro andWo rth

Permitting public access to the SPOE wo uld likely adversely affectthe underlying pro cessesthatgeneratethe info rmatio n. Thereareanec talrepo rts thatmo rephy sicians are re th e to

settle cases in o rderto avo id being repo rted to the no w-co nfidentialSPUE. The allo catio n o f

faultamo no individualphy sicians involved in a case is pro blematic and difficultto co nvev in

NPDB repo rts . The need to assign individualfaultand repo rtphy sicians to the SPOE can

cause unnecessary co nflicts within enterprises. These effects wo uld be greatly ex acerbated if

the SPOE were Opened to the public. The incidence o f defensivemedicine. particularlv the

avo idance o frisks by refusalto pro vide high-risk scn ices. wo uld likely beincreased.

These pro blems wo uld be lessened if aggregate malpractice claims ex perience. ratherthan

phy sician-specific info rmatio n. were repo rted yearly fo r health plans . Perhaps this

info rmatio n co uld be included o n the quality perfo rmance repo rts thatare parto fmanaged

competitio n pro po sals to aid co nsumers when cho o sing amo ng plans (see Chapter

Individualphysicians’

behavio rw o uld be less likelv to be affected. buthealth plans might

become less ag o resslve in searching fo r preventable injuries and mo re interested inpro lo ng ing litigatio n when po ssible. Befo re such aggregate malpractice data co uld be

repo rted. ho wever. appro priate measures mustbe develo ped to ensure comparability o f the

pro files amo ng plans. including themix o f services they pro videand the pro pensities o ftheir

enrolled populatio ns to fileand reso lve claims. With some ex perienceand research. however.

meaningfulindicators mightbe developed thatwo uld n0tcause adverse behavio ralreacdo ns

by plans orpractitio ners. Fo rex ample. o ne po ssible measure o f a plan'

s perfo rmance in

detecting negligentinjuries mightbe the number o rproportio n o f injuries thatresulted insuccessfulmalpractice claims butwere notfirstdetected by the plan ls elf. Mo sthealth plans

°The Administration‘

s health rcformpro po salwo uld limitdisclo snre co physicim with multiple claims that

ex eeed athresho ld to be setby the Secretary o f Health and Human Services. Although thrs wo uld benertarget

physicians more Ukely w han hm m lpncdce chhns uu malpm dce rkk u posme o fmc phyfidm mm bc mken

into acco untThe thresho ld fordtsd o sme sho uld vu y depcnding o nme number of yec s o f pracda . whetherme

phy sician wo rits fullnme me phyuaan'

s spedd ty . and de mume mk wm dm spedahy ofmem wes pro vmedby thephysictan.

201

0 no rnow th ese access to info rmatio n o n malpractice czairns against c :

so data so urces wo uld need to be develo ped and refined.

in timately. ces ‘sio us co ncerning public disclo sure o f

'

o rtnatio n c ciazms

depend o n judgments abo utwhetherquality o f care it: general— and the rate 0 . neg l igentmedicalinj uries in particular— wo uld be impro ved and atwhatm y -\tpresent.

Commissio n belies-es thatthe pro blems relatedto public disclo sure o utweigh. the benefits .

REFERENCES

Bo vbjerg . R andallR Laurence R . Tancredi. and DanielS . Gay iin . Obstetrics andMalpractice: Evidence o n the Perfo rmance o f a Selective No-FauitSy srern. Jo urnal

of rheAmerican MedicalAsso ciatio n 2650 1 -2843. June5. 1991

Brennan. Tro ven A R ussellJ. Lo calio . and Nan M . Laird. Reliability and Valid ity o f

Judgments Co ncerning Adverse Events Suffered by Ho spitaliz ed Patients. Med ical

Care -1158. December 1989.

Caplan. R o bertA Karen L . Po sner. and Frederick W . Cheney. Effecto f Outcome o n

Physician Judgments o f Appropriateness o f Care.

“

Jo urnalof the American Medical

Asso ciatio n 265(15) :l957-l96o . April17. 1991.

Felsenthal. Edward.

“WhatHappens When Patients Arbitrate Ratherthan Litio ate.Wall

StreetJo urnal. February 5. 1994 . p. B-l.

Garnick. Deborahw. Ann M . Hendricks. and Tro yen At Brennan. “

Can PracticeGuidelinesReduce the Number and Co sts o f Malpractice Claims?

"Jo urnalof the American

MedicalAsso ciatio n -2860. No vember27. 1991.

GeneralAcco unting Office. MedicalMalpractice: Maine'

s Use of Practice Guidelines to

ReduceCo sts. GAO/HRD-94-8(Washingto n. DC :

Harvard MedicalPractice Study. Patients . Do cto rs. and Lawyers : MedicalInj urv.

Havighurst. Clark C“

Malpractice Reform: Getting There by Private Vehicle.

"

inM . Martin

Halley. R o bertJ. Fowks. P. Calvin Bigler. etai. . eds MedicalMalpracticeSolutio ns:

Systems and Propo sals fo r Injury Compensatio n (Springfield. IL: Charles C . Thomas.

202

'ies z en : Euro pe { Berizn Springer-Vermeer. Z

E x ams. Andre“ Jennzt

'

erBrandenburg. StuartLips itz . and Tro yen A . Brennan. P. e

Guid elines and .

‘slztipracru

‘

e Lillg'tllim z . repo rtto the Patmen: Ren e“

Commis s io n. under co ntractno . 92-004 tBOsto n: Hattard L'nix ersitv Sci-to oto fPublic Health. Januarv i994 ) .

Jo hnso n. Kirk 8 CarterG. Phillips . David Orentlicher. etal A Fault-Based Admlnh lmihtSystem fo rReso lving MedicalMalpracticeClaims. limderbil: Law Review -31 3365

l406. 1989.

Keenan. Richard. and C . PaulBo y-an. Decreasing Freq uency o f Anesthetic Cardiac Arrests .

Jmmra!of ClinicalAtresrhesio luey -357. September-Octo be r E99l.

Lindgren. Oriey l-l R o nald Christensen. and Do n HarperMills. Med i

calMalpra ctice Risk

ManagementEarlv Warning Systems.

“

Lair-.wtd Co ntempomrv Pro blems

1. Spring l99l.

Metz lo fi . Thomas B Reso lving Malpractice Disputes: Imaging the law‘

s Shado w. Law

and Co ntempo rary Pro blems 54lllz43-129. Spring 1991.

Mo rlo clt. Laura L.. and Faye E. Malia .

”

Do Ho spitalRisk ManagementPro grams MakeDifference? Relatio nships Between Risk ManagementPro gram Activities and

Ho spitalMalpracticeClaims Ex perience.

"

lo w and Co ntempo rary Pro blems l

22. Spring l99l.

Petersen. L A .

“

LA . Brennan. A.C. O‘

Neil. etal. .“

Reporting by Residents o fAdverseEvents

o n a MedicalService.

“

abStractpresented atthe American Federatio n fo rClinical

Research AnnualMeeting. l992 .

Physician PaymentReview Commissio n. AnnualRepo rtto Co ngress 1991 (Washingto n. DC :

l991) .

Physician PavmentReview Commissio n. AnnualRepo rtto Co ngress 1992 (Washingto n. DC :

R o lph. Jo hn E“

MeritRating fo rPhysicians’

Malpractice Premiums : Only a Mo destDeterrent.

“

law and Co ntempo rarvPro blems Spring 1991.

Sanaz aro . PaulJ and Wo rth. R o bertM Measuring ClinicalPerfo rmance o f Individual

internists in Offi ce and Ho spitalPractice.

“

MedicalCare 23l9 ) : 1097-ll14 .

Septemberl985.

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TABLE OF CONTENTS

Chan z

Chart3

Chart4

Charts 5A

to SC

Cnart6

Chart?

Chart9C

R epo rt

Frequencv o f Claims AgainstPhysicians

Frequency o f ClaimsAgainstPhysicians (graph)

Claims AgainstPhysicians (graph)

Illustratio n 6 : Claims f requency AgainstPhysiciansFo rCo rmties Over Po pulatio n

Frequency Of Claims AgainstPhysicians By Co untyOver Po pulatio n Fo r 1992 (So rted 3 ways)

Claims AgainstPhysicians by Specialty, 1988, 1990,and 1992

and 1992, Unduplicated number o f'physicians

Analysis o f Claims AgainstPhysician Defendants,Adjuswd To Co nstantDollars Using the General

Analysis o f Claims AgainstPhysician Defendants,

Analysis o f Plaintifi liability Claims, UnadjustedDollars

Chan 1OC

Char-i ll

Chartlz

Chart13

206

MedicalPro fes sio nalLiabiiitv

Analysis o f Plaintifi Liability Claims, Adjusted ToCo nstantDollars Using the GeneralCo nsumer PriceIndex

Analysis o f Plaintifi Liability Claims, Adjusted ToCo nstantDollars Using theMedicalCo nsumer PriceInt

Two Years AfterThe Date o f Incident

Claim Filing Number o fDays from Incident, 1980

Physician DefendantClaimOutcome

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METHODOLOGY

208

Med icalP ro fessio nalLiabilirv

TheStateBo ard o fMed icalEx aminers gathers a comprehensive

seto f claims data fo ralllicensed physicians in the state. Tex as

law requires thatclaims be rep o rted when a physician o r his

insureris no dfied o f a claim which seeks damages relating to

the insured’s co nductin providing o r failing to pro vide medical

o rhealth-care services"

(Article 4495b, Sec

A simple requestfo r medical reco rds do es n0tmeetthis

definitio n. itsho uld be n0ted thata no dce o f claim, as defined

abo ve is the eventthatcommo nlv causes a physician o r his

insurerto begin preparatio ns fo ra legaldefense by Opening aninvestigatio n or retaim

’

ng legalco unsel. Therefo re, the claims

repo rted to the Bo ard o f

-

Media lEx aminers co mprise an

appro priate measure o f the impact o f medicalmalpracn’

ce

claims o n physicians.

In analyn'

ng the data, itwas po ssible to iso late three different

units o f analysis. The file is compo sed o f reco rds o f individual

claims againstphysicians, the firstlevelo f analysis. In some

eases, severalclaims againstphysicians may have arisen from

the same incident. These claims can be gro uped to getherto

representa plaintifi'

claim, the seco nd unito f analysis. Finally,itis po ssibleto identifythe number o f individualphysicians whoare afi ected by claims, witho utregard to the number o f claims

againsteach individual. Thisthird unito fanalysis is referred toas the

”

unduplicated physicians receiving claims".

209

Wh en analyz ing

.

the claims data fo ra sp ecific y ear o ra so cci’

co unty, itis di cultto fully reco ncile allthe data. x arz z ple,

a claim initiated in a spedfi c vear and co untv mav inv o lve

defendantswho practiceinmo rethan o ne co unty and additio nal

defendants mav be named to the same claim in subs

repo rting years. Despite these o ccasio nalsmalldiscrepancies ,the large number o f claims pro vides an indicatio n o ftrends fo r

both frequencv and severity.

MAIOR FINDINGS

210

Med icalPro fessio nal ability

Claims frco uena"has increased atan alarming rate fo r 1990,

1991. and 1992 o n a statewide basis and in many co unties . In

particular, claims frequency has increased to unprecedented

levels in a number o flarge co unties includ ing Hidaio o where in

1992 , nearly 3 o f every 10 physicians received atleasto ne claimagainstthem. Other co unties with high claims freo uency

included Mo ntgomery, Camero n, W ebb, Nueces, Tarrant,

Lubbo ck, Jefferso n, Smith, and Harris co unties.

Even afteradjusting fo rinflatio n, there is a significantincrease

in the totalindemnity dollars paid in the early 1990’

s o verthe

late 1980’s fo r bo th claims againstphysicians defendants and

A large percentage o f the claims thatare filed resultin no

indemnity paid by physicians. These claims ca use co stto be

incurred with no ultimate benefitto plaintifi s .

There is a need to further identify and research the facto rs

causing high claims frequencies. The resulto f this further

research co uld have implicatio ns fo r:

public po liq afi ecting the legaland medicalframewo rk o f

medicalpro fessio nalliability in Tex as,

medicalscho o lcurriculum develo pment,

physician-patientrelatio ns

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FREQUENCY o rCLAIMS

212

To better assess the trends o f claims o uencv, claims

data were assembled based o n claims againstindividual

physicians and claims tied to particularplaintiffs . This is

significantsince o ne plaintiff may file a claim against

severalphysicians. Therefo re, trends regarding activity

in a given area o f the state can be ex amined based o n

the number o f claims againstphysicians and by the

number o f plaintifis initiating a claim.

Even tho ugh the ex actnumber o f claims may varv o u

to some reporting difi erences, the trends attributable to

co nnu'

es with large populatio ns indicate claim frequencyhas been increasing ata rapid pace during 1991 and

The Ten reportindicated thatclaim frequency had

increased substantially during the mid 1980’

s and

perhaps wasleveling cfi in 1989 and 1990. However, the

1991 and 1992 data now suggestthatthe ratio o f claims

physicians have reached unprecedented levels. Chart1

reflects the ratio s as percentages. The ratio s are also

presented graphically in Chart2. The data indicate thateven tho ugh the number o f physicians and the

po pulatio n has been increasing, the ratio o f claims,

particularly fo r 1991 and 1992, has stillbeen increasingatan alarming rate. Th e ratio o f plaintiff claims to

213

physicians in 1988was percentand in 1990 the ratio

had actually declined to p ercent.'

Ioweve as Tom

repo rted during the presentatio n o f the earner findings,

insurers had raised co ncerns to him thatthey wereex periencing highernumbers o f claims during 1992 . In

fact, the ratio o f plaintifi claims to physicians increasedto percentin 1991 and to in 1992. Chart3

graphically illustrates the claims activity as rep o rted

Therehavealso been quesd o ns as to howmany difierentphysicians are being afiected by pro fessio nalliabilityclaims . .To ex aminethis questio n, a detailed analysis wasconducted to .alculate the unduplicated number o f

o ver 100,000. Chart4 rank o rders the co nnu'

es and

indiu tes that in 1988, fo r ex ample, 19% o f the

physicians in .Hidalgo cOtmty received a claim, in 1990,

213% received cbims, md m1992 ,me percenmge had

increased to These numbers compared

respectively to a smewide average o floz percent,

l

inereased from l990to l992

catmdes fo r 1992 and are so rted orranlted as noted at

themp o f each chart. An alphabedtallisting o f co unties

is presented in Chan 6 depicting similar data fo r

co unties in which claims were filed in 1992.

214

MedicalPro fessio nalLiability

To ex amine freq uencv o f claims againstp hysicians by

specialty, Chart7 was prepared co mparing 1988, 1990.

and 1992 . In additio n to the large number 0 . claims

againstplastic surgeo ns, many o therspecialty catego rieshave ex perienced significantincreases . Some o f these

phys 0?

specialty. Itis significantto pcte thatthe Tex as State

Bo ard o f Medical Ex aminers is not req uiring full

repo rting fo rpro ductliability claims and as a resultan

cases is not

reflected in the number o f tOtalclaims.

ex p

specialties include radio lo gy to

cardiovascular diseases to emergencymedicine to generalsurgery to

Ob/Gyn to and o nco lo gyto Chart8 presents a similar compariso n with

an unduplicated numbero f phy sicians eccivrnv claims by

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216

Med icalPro fess io nalIia'

o illrv

co nstant dollars. Chart 10C shows that average

payments have fluctuated since 1990wimethe paymentsatthe twenty fifth, fiftieth , and seventy fifth percentiles

have increased. Plaintiff liability claims atthe ninetyfifth percentile have declined. However, t0taldo llars fo r

plaintifi liability claims have increased significantly fromthe late 1980

’

s.

217

R ISK IN RELATION 30 TIME: THE LONG TAIL

Since 1980, twenty percento f allclaims have been filedmo rethan two y ears afterthe date o finjury. Amo ngth

high risk specialties, the perce ntage o f delay ed cases is

higher fo r plastic surgeo ns, mo stlikely the resulto f a

recentsurge in breastimplantclaims, and lower fo r

emergency physicians (Chart Chart12 illustrates the

number o f days from incidentdate to claim filing date

fo r claims filed from 1983 to 1992.

Fo rty-nine percento f allplaintiff claims rep o rted in 1991and thirty percento f allplaintiff claims repo rted in 1990remained Open by August o f 1993, and atleas: six

percento f claims againstphysicians filed in evcrv yearsince 1980 remain o pen.

218

CLAIMS CLOSED W ITH NO INDEMNITY PAID

’

I‘

nere co ntinue to bemany claims repo rted to the State

Bo ard o f MedicalEx aminers thatare ultimately clo sedwith no indemnity payments . Fo r claims filed in 1989

which have been clo sed, seventy-o ne percento f claimsagainstphysicians were clo sed with no indemnity (Chart

in some cases, physicians are named in a claim to

mom the claimam and subsequently are dro p ped asinformatio n is develo ped which indimtes thathewas nOt

negligently invo lved. The claims frequency pro blem

co ntinues to co ncern physicians because o f the

physician ’

s time and defense co sts asso ciated with

reso lving a claim. When a physician receives a no dee

letter, itis commo n fo rthe physician to fo rward such

notice letterto theirinsurer. When an insurerreceives

such notice, an investigatio n and related co sts startto be

incurred. If the plainfifi’s atto rney later determines

therewas no negligenceand so advises the claimant, who

files no suitthe clahn wfllbe rcpo rted as having been

clo sedwith no indemn ity being paid. In additio n, partieswho are potenfially liable are listed as parties to a

lawsuiteven tho ugh they may be dro pped from the suit

befo re trial. Physicians and insurers co ntinue to be

co ncerned abo utthe large numbers o f such claims being

iniu'

ated because o f the time and co sts asso ciated with

clo sing claims even tho ugh no indemnity payments are

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225

30

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230

no n-m o nov-o fl tfl ifl l

o . ‘z!lO uN t' N 'M n -d—" Q

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l~ 00~ 0N'N g-o-o

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980

6

250

as cottand af fect o f same. After considering ail o f the facts and

ctrcu stances and studying the Coops-misc SettlementAgreenantex ecuted by

the Parties ; their respective attem ys o f rec o rd and the Guard ian Ad

Line , and with the " em anatio n o f the GuardianAd Lites ;the Court ts

o f the o pinio n and f inds thatthe comm ise Sam e-entsaw : it, under

all o f toe facts and circumstances. fair and reaso nable. that itis is the

bestinteresto f the nicer child. um M an n .and thatsuch w e

sho uld be ratif ied sad appro ved by the Co urt.

The Co urt further tions . after hearing all o f the evidence, that the

settles entconsideratio n. both the presentpam ats and future pm ts as

herein satforth. are to be paid as rm and fins! sectio n-n : o f all cian-s

o f Piaiotiff. sum o and som e Aim e . woman-m} . and as Nest

Friend Fo rm aA WARE . atrim .

1T 15 W om en. m mno DECREED by the Courtthat the

Compromise Settieo eat Agreement filed with the Co urt is ratified and

appro ved 1. all respects .

“

itis turrets m m: by the co urt that

pim mrs mem o m ROSARIO amass. individually and as nex t friends

fo r mm mm . a litter, do have and reco ver o f and fro. ROBERTO ii.

toasts-z . R .D. . OR . ROBERTO ii. M ALE! C029 . 9 o . . GONZALEZ tleman.

SURGICAL £91782 and m im 009125112 M ica-M ica m m? Ctitllc. the sua

o f m HUNDRED mm “ M S o ut o f W ith sum an

atto rney’s fees and ex penses o f Plaintif fs herein , melodic;tho se o f the

d iner Plaintiff . are to be paid.

it Is rm mom by the Co urtthe; o ereseauts such case future

payee-sits to the mo or ” aintif f Aim Adm . ity and thro ugh her legs!

guardian. in the saouato f startm mmm no os/iooms mu ss

per so oth. Said'

aottthly payo u ts than commence on “ .

with all futo n m any pay-eats co ntinuing thereafter payable o n the first

day o f each and every math througho utthe'

lifetiae o f the nicer Plaintif f.

AURORA ALVAREZ. o r fo r treaty (20) years (260 math] : patients) .whichever

'

is longer. “ginning co m m the mathtv oay-ents viii be

increased atthe rate o f 3! par m . am ended s om e“; and iam au d

every year thereafter o n the anniversary “ to ” Apr“ . 2 6 curing the total

tine thatsuch pay-eats sum bem . in the eventthe ainor Plaintiff.

M M ALVAREZL dies orio r to starch 2 6. 2007. then atfuture mutiny

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253

have and reco ver the sun o f S in‘

cash as

etterueys’fees fo r representing the Ptaietiffs , Gi

‘LBKRi

’

O

and ROSARIOmm . and the eiaor ” aintif f AW mm z . in

this action. said w e to include reimburse-ento f m ex penses

incurred and to be incurred on the ?1s intiffs '

behalf ia this

suit.

IT is m m mm . m mmo Dtcnfm by the Co urtthat an

co sts o f Courtherein snail be paid by an Defeo cn te . m emo ii. ma nta .

PLEJ 02 . ROBERTO ii. m um CORP. P.A GONZALEZm um W IN CENTER

and mma-eoum ez ammo-“

SURGICAL EASILY CLINIC. inclediag a fee o f

0a,"thick siwil be paid to the Guardian A5 Lu ca,

Gene ‘bo sceno fo r his services as such , and which said tee is

hereby tax ed as parto f the Co urtco sts in this suitand Should be paid by

said Defendant.

swam (r ow o f {QE’

gAg f

APPROVED:

State Ber 5504 52 5 0 Q 0

GUARDIANAB LITE! FOR m mANABEZ.Aman

nm am ea, ATLAS tRALL1900 nationalBank o f Camera 8149. P. 0. Drawer 3725San Anto ine. Tex as 78205; M ik e. Tex as 78502

(512) 225-sin (522 )

sate it? No . 17909900 State Bar No . 09834200

AM YSm mmms ATTORNEYS FOR DEFM S MD

TEXAS HEDICAL LIABILITYM ST

84-7 14 0 — 94 — 9

254

Yo u’

veheard abo uttho se craz y damages suits, tho se hugeawards, the insurance rates crun cb . Well, it

’

s an z’

llliability Crisis

.fbatblo ws n o o neany go o d billio n a year

’

s wo rt/9.

The plaintiff atto rneys’

great

“reare/reeds ” .

-gaters We allco n

s aer cwsd z a sacral mgr.free s We are arm : 0] go o d

No ne of as do a far we mo rtar. who !

ecaus eo fhisma de. butFo n ts

tan 3 va r.

allo ver. WallSaree: MeettherealM acias o fthem : Amm a n

g ee: game: the emn z z'

x'

attorneyslawyers who specializ eix;suing.To ; z o neym x e: in 1988.mom-dung

s lhz d e’

emdmg m uaetto buy Ceay Ofl x x ;w a sho ugix there was no ebmg o n papa J-fis vwmTex ac o , the co untry

‘s third-largestmlm y ,

was

farced xneo bankmpecy j utlamad tem vedmly afiaaimo fme pubhc wMLkeMdkm gotfmthe SSSOfi lfio n hemadewith Den e}. Bumhm lu ck in 1987.

lam d x s x nen iy zhema po wu i

'

ul

1987 and 1988. And io u es ha idennfied atla s: 15m e

Sl-rmlhan-avycz x -plusm eta .withM e sain the$ 1million-m sl-mxll

‘

mn u sage. The : the : ax e sheath :

53.000 91n nnfl ammey m bus oithe wmD .C.

-based Asso ciatio n 01 TrialLawyees o f Amen: idespite x c m eaphmnfi smmcys

'

lo bbyd m eh wyers

m ehg ble o uiy io rm vom g m bersh ptcx vea ehem éh umm ed theem ck-hwyc bum m oimm ghtsmke xtnch with a single cz se.

One n a sm of she m ey fiowmg to phmafi m r

neys: YeshivaUmversity‘s Cardcz o Scho o lo f Lam fesso : Lessee Badman esmnz m thattheir totalincomefromm ungmtim -ehex x shax e oithe seala m apm

FORBES. cam 16. mo

rush

0 .

And the: bo om: as g o v/mg ta:cp z o nes

-a x es o n

ees. mquo eeaizmo us w lym mz lhm .

{JamelWehssez . In o ne o f tho se m amm alm ents

inm essm hz ve b iled.m a mm a hold the m toithem omy m merm a z mplc z smdthwkm mthe

’

im .who wereable

byHow has tlns happened!m w m s m le rwo dism mvd

'

y

“83‘

am . And plaintiff steamers thereax e elatpo orer.A startlingly largem oiehe m m ve

awu ds go es to thelawyen . Ph xnnfi zm m mo nly

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256

ave surgeo ned. And“

punm y e damages tn pro ductlieases, upheld o nly threetzmes tn thehrs: 200 years

C: U S_ h: 'Ofi

’

. r, V : totem: 3 3 epicem c .

Q

z ‘e. ‘” 0 0

0p als-o n

Q .wo u -e have etc the sno re po itttcal.

s a teeizng o n the part cr. no thav zng a comprehena has becomea sy

'

stem

S o u p . 0o n . y -o h 0

say s Schwartz .

zucges tha e U 5 15'

2 firms :

swe so c za'weifare sys: ern . r

o rsee surance.

Jud ges o pen c th ho ney bee us they wanted to

te t'

.ewealth. I’latnttr'

: atto rneys wantt help.

Pu tty . plarnttr

'

r tto rneys help to kee p the h o ney flo w

mg b y sheer relentless pressure. Th ey are zntenselyment-areato come up t h ew mo neymaktng gamu ts.

W o uld y o u belx eve"

hedo nic camages"— the value an

cctuenty tcttrn w o uld haveplaced o n hrsturntehapptnesso n to artlo ss 0 . eamtngssufr

'

enng , hts spo use‘

s lo ss o r

etc etc ? Ho w abo ut

th e : us part: and surfertr:

New Yo rk 5 R o eert Sullz y ar: zFo aecs

'

tncerne e a!" re. 5 1 rntlho n'

: o nce

w e: 5 iiro n tn ex tra damages fo rseco n

‘ tn w hz ch a truck

centy x cnm umec to death ("We

gotd o cto rs o tesnry nts bra-to ex plo d

Btg Apple Po thole

pnvate poth o le census

by Manhattan plat. ttft'

acto r

nev Queller .Po aets‘

tacerne es

rnrllto n .to co unterNew 1

it'

s attemptto res:r: : ttts habtittyo n

ly to accte'

nts tnvo lvtng potholesc : w hz ch h d been tnro rmed.

nanntv co unts as wellas quahty .

ciaznttr'

fatto rney hrm t'

ttn has few

and many suppo rt scarf because o f us ltt: tro n can be 0

mass-pro cuced ellet~ota some: zmes des z g z ed szmpiy to o verwhelmth e c

’

erense.T

'

hese a n be class ac

has an other 5. tu re o f the

"

legal

reso u rce butp'

" tiff lawyers pret’

er hlmg tndnndualer: rnas se. Class actz o n fees can be ltmxted by th e

"edge !'

t’

hts mas s or cuenco . presumably, ts ho w MelvmSen : i525 mrllto nlcame to file a elsarn tn the Dupo ntI’laca 'HOtelttre case o n behalf o f an tntured woman

'

s

hus oan“ who had been dead fo ryears .

And th erhes‘

campatgn to ro cktheho ney ports helpedby zts accumulanng financialmomentum. Fo rex ample.mo nles w o n by platnnfi atto rneys agatnstthe Balkan

Shreid co ntracepnve casewentdtrectly to finance furtherlaw sutts agamstOtherand safer}co ntracepn y es andmore»mgs rcitness d

r

ugs .

A mo re complex fatto rz'

the dtstntegrantm of thetradrro nalco de o f legalethtcs . Ln hrs bo o k o n the hngano nex plo sx o n due nex tyear from £ 2 . Dutton, ManhattanlnstttuteSenso rFello w WalterOlso n argumthatthe

“legal

revo lun o n"has also seen the effecuve ero sto n o f lo ng

standx ngrules agatnstbam ny lmcrnng cheats to board .

The o ld rules to ld lawyers to Sitaro und passtvely and

wartfo rbttstness. says Olso n.”Th e new rules enco urage

them to recruttcltents . sto kethetrgnevancm and runmestartfo rman mum dollar

o utput."

G A O

( a .

v

9 h e 0 ”o n o s o .

p o n e “

o r; —a

POM S . OCTOBER l6 I9”

7 5

Som e W m m u m m n

Ctr-d rum“ . Estimation

Thetracttto nalcode was enfo rced partly by Statutesuitczai "tn butalso by Co nsensus wrthtn the protess.o z No w , ho wever. many ptax nnr

'

f tterneys are o penlyo sttieto u s restratnts: Tats yearlo h

n O'

Quzrn .nuz z x r

3. $8 mutto n : tusnttechls hrnng no nlawyers to SOllCl

ch ents o n the p o unds thatthts“

caserucntng“

sho uld blegattaed tn Tex as: An atta ptto dtsbarhurtruled.

Butthe piarnttttatto rneys'

mo sttmpo rtantleverage othe no ney po : ts pren ded by then tnterlo clttng reianomstun wrt

'

r. tw o key gro ups : tueges and po uu ctans .

e fello w-techng between lawyers and zudges ts o ne o'

themo re o ovx o us tacts o fltre. So c o n curthat me y earsago a audgeadnntte

d frankly tn an optmo n ttavandartng ennuagentfees was

"an unpleasanttask fo r co urts .

espec ally tnts o ne. fo rrthas pracnced law to : so lo ng tnthe w eyard beforetomang to the be rth and reco gntz esthedrh

'

tculnes o r'

mammtntng alaw otho e. Symbo l;caily. New Yo rk‘

s laco b Fuc‘

hsberg .

ex o

prestdento r

'

am and fo undero fmagaz ne Tru L spentso me years as alo dgeon New Yo rk’

s Co urtorAppealsbefore returmng to hrs ytneyard no

ho us es ytneyaro esttmate. buthe sayslt

‘

s a“mulcmrlho n-do llar" o ne

‘

In some states. and atthe rederal

level. nudges are appetntee'

. Butthe

Amer-lean BarAsso cu tro n ranng system. whsch has become a cramaltesfornudictalnommees . ts wetgnted towardtnala perx eno e—eyent

'

o rappel

late co urts, altho ugh they fo cus ex

clustvely o n po rnts o flaw . Thrs c o yt

o usly favo rs bo rh the plamctt'

r'

an

defense bars o ver co rpo rate lawyers

and legalacademrcs .

Wheretuages areelected. therole0

theplatnnfi atto rneys has becomenoto rto us : campu gn conntbun o ns . In

Tex as, the r'

undrarstng drx ye support

ed by Ice [analand PatMalo neymtllso nlwas so successfulthat. se~

1 1

lastyearthe pla ntar: bar o wned and

co ntro lled the Tex as Supreme Cou r.

"And Malo ney lS

co nhdmtthat1988’

s electro n reversalv rllbe co rrected u:

1990 :"We are restlx ent. and wewtllbetmoeback.

"

Irls anOthero bvto ustaeto flir'

ethatmany po hneransarelawyers. Smry o utof lOOUS . senamrs and 186mrt0t4SSHousemembers hayelaw deg em mleastw senamts anclGll-io usemembers bave been lawyers. thelo d~

tng max o n nes o n both Sm te and Ho use ludretary Com

mtttees . Perhaps themo stng nfimnt: Senato rErnestHo l

ltngs lD a thalatto rney and a fo under o f arm'

s

predecesso r. now chart-man o ftheSenateCommerceComo

mrttee. where he ts td=lly plamd to stop tortrerormlegislatto n.

Am has gtven mnney to lASS C Demo

crats and 656 aepuhlrcans same 1977. In 1987-88. ltdts:bursed mtlho n And thrs do esn

'tmelude platnn

h

atto rneys‘

tndm dualeo nmbunons.

"

They'realughly (parsed lo bby ,

"says to rtrerorm lo b

bytstVretotSchwartz usefully .

"They

‘vemete lo sto n an

tssue beto re Congress.

Platnttr'

r'

attorneys are also mnmately tnvolved wttn

state po ltttcs.

“

I am o n a lust-name bass with allthe

257

sans-m cg o rganz arro n could askthepiamtu

’

f

5"

as : is ; .ere en o ugn compentro n betw een the:

sea. . n us g as“ a :

ccnttngenttees tent: to-p"a

an d 4 3 96 o rthe award— rus e so rt o f su m

o us"

parallelin hayro thas caused platntrf.

‘arc o r

ney s to sue o h erthe" tnes. allegrng anntrustvro'

tro ns

S o plarnru: atto rney s drscio se eno ugh to pto spccnve ell“ ts—sho uld they o r: a cno rce o : co nungent fees o r

no urty bulmgl’.tdee d. why are plarntrr

'

t'

atto rneys allowed0 c

'

emanc ccnung n ties atall“

tn cases where there rs

platnly n o co nttngency— sueh as arrcrash cases . to whrch

lrabtlrty rs no ttn do ubtas a pracn calmatter, wtth theresultthat some plarnnfr

'

atto rneys have receryed feesec urva

lentto an ho ur! Or

w rth successful plalnnff atto rneysregularly c

ho o stng cherrcases so care

rally that95% settle o uto r'

co urt?Or

tn commu eraicases . when the cheat

as no : rndrgent? Do cl.ents nave

ugh co n tro lo vertheex p enses that

p.a: n ti.n atto rn eys o eductfrom a set

rte-ment? Whatabet.tpractrces likecurt-mgallperso nalrnrury extents to

attorney tn any malpracn cesuns ,

= What abo rrt allegacro ns

tna: atto rneys repre

ennng unro n clrents somees pay krcltbaclts to the

un

z o n husmess manager!Puhlrc Clnz en

'

s Claybro olt

sure.

"Iamnotatrtallawyer. and I

've

never gone mm the tssue.

"Public

Cruz en has sard that co ntingencys sh o uld notex ceed o ne-third, and

ho pe the lawyer w o uld take 15 s.

Otherwrse Claybro o ltdefends co n

ttngency fees o n the Standard

g o na ds thatsome ellenm can

‘tai

fo rt‘. ho urly rates and"aplalntrfr

'

law

yergets pard o nly when he ru ns .

"

Claybro o ltwrllhavean Opportunity to“

go mto thes etssues the nex ttimeTrialLawyers forPuhlrc Iustrce andATLA '

S Civrllust'

ree Potmnatlon have board meenngs .

She'

s o n both.

saw yo u earliertoday , lake sneak threwes in themght,slipptng tn here wttho utnametags to sno o p o n o ur

pro ceedrngs . A messageto you . yo u medrelnemen or'

the

o rlslrek. y o u fo rk-tongued serpents o fthedollar. Yo u have

no needto snmlttn here,

‘cu z rrghtarterthrs meenng.

we

are c omrng arterro u. l'm an-d o f playmg defense . All

the platnur'

f lawyers o fAmen ca are coming afteryo u. yo u

rm urance demago gues, becausewe oweyo u o ne"

So uthern o ratory is notdead. New Orleans'R ussell

ljlerman (Po rters income’

esrrmate: mlllto nlto o ktrrnecunng hrs prestdentraladdress to luly

's Am AnnualC o n

venn on to drrectthese fraternalwo rds atan oth erlo bby .

th e Nan o ealC onference o f Insurance Legrslato rs . co nven

a s by unhappy co rnerdeneetn the sameBo sto n betel.

17.

m m m m wm m n

cu . o s e-v :

”g

poo

pro fesstonalgro up who se po hn cs

o n average are decrsrvely to melefto f Others c x

'

comparable rn

come.

"Thero n : afew Republr

can triallawyers . but few tn

number,"

says Pat Malo ney .

"Yo u can prcltthem o ut, because

they wearpecultarclothes .

"Mo sto f us are lrberalDemocrats

"says Mrlte Gallagher

mrllio nl, recommended to Fo n ts asa to ken Repuhlrean. (Buthe says hesuppo rted Edward Kennedy anc

Llo yd Bens on—and o o nrn o utes to

RalphNader.lDo es hekno w any 0th

erRepublrean plalntrir'

lawyers;Cal

lagher chuckls z"I saw o ne Other

o ne, o ne rune.

"

Amo ng some plar'

nnff atto rneys,

po litic lallenano n runs very deep

mdod 'ltlnnk rt‘s a brrter shame

abo utthrs so clety , the Russrans have gOtamore rmpo nsty epolinmlsystemthan wedo ,

"says HerbHahr

’

, wo uld

be cleansero fAmerrca'

s defiensemdarscry .

I hrs ho srrirry to ward Amencan insomnons somenmes

evenmcludeaBo n es.

"Whywo uldFo n tsmagz z rnewantto be here?

"aslted am Secretary R o x anne Canito lean

mamdlnmmers750ON ).”

Immn. we sueyo urreao ersnrpregularly, and weenio y doing

'

rtvery much .

“

Plarnnfiatto rneys unquesnonably beheve their o wn

rhero nc. Atla stam ‘s Civillustre: Po undarro n thrnlts

so . lts hmdralsing leafletatthe o onventro n began :“

As a

tnallawycr, yo u profitlromyo urworltmmany way s— z z

sweersumess oinghtrng anegregio uswrorrgthe c rump h

ot'

empowering the po werless , the o ertarn kno wledge o f

yo urrole“

tn wrongdo ers.

Allrim and $ 10 brllro n. to o .

A specterrs in unnng the plalntrff attorney s—the spec

ter o rto rtrerorm. After 30 ymrs the fires ro clttng

POM OG'

OBER 16 1939

Abo ut plan atto rney-s cas e b’

o ve: tne c to fle e weeh o ng ecnvenn o n.

z enéee a vastsu eeno n o f lectures o n teenmeu suo zeez s .

Tney ho no red fnen ciy 10 33 21 11515 an d zudgey iam

x ee Paula eo s o fMassachusetts , an : {usnee PascaiCal:20 o f Lomsunn,

who thanked Am Pres zden

: H er

fo r"2: Epmg zneeo nanueto win eleeno ns .

"

Thevag e-nee:35 seo a nte

“

.ingz u o n g o o ns" m en names hke l z snc

GelBreastlrnpiants an o"Bxe Ligneers

"wnere z :

swapped mfo nnnz x o n o n e sc z z egz es .

” cru x : anno unce

aalargerd ennngno use. theAm Ex change. x s to 5 :

mak e: acavalcade o f ho rro rs" fo ruse by Am men ses

in pez so nnlinxmy and cake: eases .

No rwunstnncnng a luncheo n ad

dress by co o lco nservanve co lm nsr

Geo rge W111, t‘

ne co nvenn o n'

s ann o

spnez e was rather kite a hbetai vetsx o n o fafunm entnhstten valn ee

ing: m o n omi. evangehcal, c o ulisne. Bo b Cibbzns o esen oed hz

s

accenang arm ’

s vx ee “res x o encv as

takxng o n me cause fo r ene m ax ed

and sufiezmg , n emmz ed, m mo n c esand women .

"

atto rneys are an anc z z iy ,

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Gilben am in o SeZ s Tun e:

h one-itLa wc Levin Mice co ree

'

as . Mabie. Thomas Maves n Mitchel

Philip Corbo y /Carney A be-heme

l-lai-rv Ups iy mpsig a Zelman

Pat.fi aieneyiu w Omens et?atbalo ney n Asso ciate

lacs Ole fi n-haw C z sccs o : lacs (hence: a Asso ciates

ingene h walo cih vu e: o i Caner

Sheldon sw immer/Sheldo n 1 Sch-.esmge

261

Pensaco la Fl.

New York NY

Saa Antonio . 17

Washingto n. DC

W Pahn Bamtl.

Net-Ya k. ”

w e

Lau nched

Univ e: fi ttest-rm

ST-Chisago Kent

Univ atHo usto nDc PaulU

North-e tc :

Unsv eiMaami

Univ o i'

Deneit

Univ eiTn as

Umv eiflenda

Univ ef S Calif

Umv olSm Prannisee

New Yetk Unrv

De PaulUuiv

Utuv otTa as

FORBES. ec rem 16. 1989

. Q

61

262

: s c : .v 3.3 13 : s attorney in a:

bid line ce ensc tum . Se ven as ieca. cheese: to r y inscn a Eaten: to £751 satin-estcase sp ans : 5 rais es-4 .

resume: 3 Vere-c: o : S : 3 buz zer: A $ 88 te nementwith a of the m o o ds w eed $135 e. bus tan . He 393 3

z cetxm ncv tees with his arm lie-steame d T Bo one interns in 1979 Cities Service ho stiletanouy e

cyan tamed a vearas C e; Pow erCo agenera; 11 23133 08 counse . 2983-89 We: a$5milli o n verd ictin oneday as May ref tne o fa

ma: i-iz s t'v sno w "Law Lane. ha s made him aleca. ceieenty Co unselfo rbesetRo y lone l: Memo : oilime Circ e o rAdvo cates .

Carney is o ne c : the o est~e z o w n eg mo rzev nomin ee: r. w e : in tntco untry . tie beasts m ien; io sronly o ne case in 17 yu rs 11!w as o vertim e o :

septa" Turns co v e. i9 c : 20 rednes s terra re-sensatio n in men ts . malpractice. MemberorLos erCircle orAdvo cate-s.

Salome stance asbesto s litigatio n in U S with 1978 case againstPz rtsaurgh Corning. were: settled for$20 miums; One o : lead co imse: in 1987

aseeom caseagamsradeeen cempames w h a x uled io rSllS e-eliten. Fm '

s staslot15 u nce m pflou le his pnvatepiaee m g otfg e

um : newmm amo re ee'astabzede m oniz e: orth epro ne . Ce re niy suing Mike Tyso n en cfMitch Greene 2m mulino (o raw a

itand

Maloeev preees ses o vethm cascs avear. PL-rne 's are nis-ueand “ M um mem Tez atSuprm-ec cpurte een en tamem en oenais o

e paints : ea: Was embro iled in recentscandalinventing Tex as Sam e Co urtiusuce C L. Ray. 2: wh ich be donated mo ney to the ranges

campaig n : recs-siren prete ennalm meentm return Memberoe'

L-me C-rclc etAdvo eai-es.

Oleeee: itthe mar o : medica. malpractice in D C Mayo rMamb o harry deem-cc Feb. 18 1987 to be lacs Greece Day in s co p e-so : o : in :

Semen-n is Carney s pat-me and hearapparent. 2989 presides : e: lllsno z s Tnai

“

. awye s Asso ciatio n. Am e in AI L». l-irand Co rbo y have

sam e-n ee; .ea senarate case hea pete ro win swmiilieeto n smzliio nmrtnetameiy otteeceea sed clic c hem me s teraiaward to ao o e:

Prm cc Sea o e ettee fi A Memoe o iiz e Ciscie otAo i/ecam .

an io n-rat0987-88ATcA presideatis cuneatprmieente theRo aeoePeimc Feuenanon Ac'

s mu tant. Sea m s w oeg uideatnao oe case

aeamst eea: His talte iromme casetsé 7millio n

Sch lesinger” o ee otmeeig estmedicaiealpz aeneespectaints m iio nda Wee assmailio e pruoecteaeihty vemez in 1987.m e ctr—“ x

.‘x liiso c maeemo eemonev rn a l988 case aeamstCeee alMomz man CM haepamhimmme25m s ee reme e=ted itbetween 1962 2 4 198

Zen spemas ces zn mvo ree case . tor-hieh his ree are deoemm d mpastey mere uito otnned Conmngmey ree m e-vmce cases u e in m tmn ei

ASA rules Reermenccd Craw ford. w e eiHmry Fo od E mww diveree Memhe eilnne Circle o l

v ice-e nemy Fo rd s. Splitm e m im m e w m m mem w w su M d m cm em

tem-c h ml989 m a mnly o f aemm hlld by anx eoem ondm am Membe d b e Q rd €d

Sio ux Ciw assum e cash o fluly 1989

im m m u m m m tm m w m um . M a mm m em

Oz on n amam u c rme otM W Wfi M d M n m t M Q m m h m m

Am e-sw am abandbeo k o n insum oe

'

bad iasm.

“

OCTOBER 16. 1989

O

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264

. J craz vc a n : a: g nu-4 : and asbesto s lz z z y z c : For-a cegrea se : c : 2 : Sat: 84: 3!Tu Mea n 0 : an : Cam e oiM m

955 we: a $ 15 s au ce. set-Jen a: m a bran-em u : Lu n e: M= bcro f theTex as SupremeConn can: m m m m

96? The m «a nd? genecan a cu te: nau s ea . Met-noes o z Ina: Camea “ mu m

em s : Co o dvu : a : me 0: m en: «we: Max : 3000c wo o was fi led 1: a seede rwhale p a ; V ia gra. Ha u ntied a n y truc e:

smn m z m z‘n n SiSOm pm n zhc am mm a m m .

saw s

c a vm g ulda z‘

am m rdev vm fi w Innn'Cud ed Adm m .

m a m m w w o m m c d m kp c fim am au é vM s u m d swm

FORBES. 0m m 16. 1989

265

June 1990

Media lMalpractice InsuranceandActessto ObstetricalCare

Intro ductio n

Pro blems with medicalmalpmaice insuranceforo bsx em

'

calpro vider;aredueazeningto

reverserecentgains in infantmo rtality prevention. In the Inn five years. awax eness o f the

pro blemo finfammomlityintbeUnitedStatues.and particularly in the So uth. has risen. Many

po licymakersand co ncerned citiz enskno wthatzo o mz ny babies z z e bo un to o smalLto o so o n.

andihax to o manydiebeforetheirfim binhday.

Initialefi'

orts to address the pro blem ax tne

federzland smelevelhaveeemered o ninereasingao oess to px enatalw e forpregnamwomensince early. high quality prenzmlcare is tbesinglemo stefi ecnveway to ensm the binh o fa healthy baby . However. altho ugh finandal

allpregnm women is being thm xened by a

shortage o f pro viders available and willingto

Facto rs behindtheSho rtageo fObstetric !Providers

The percentage o f o b/gyns who aweptMedia idnanents islowand isdmpping,

caicL In 1976. o ver63% o f o b/gyns ac

cepted Medicaid. while 74% o f Other

physicians sexveMedicaid patients.

The number o f family physicians. who

including o bStetrics— in ruralareas. is

dropping. In 1963. there were

lege o fObsmricians and Gynec olo giss

350% between 1982 and 1988. from an

m ge o f SllN Oto S‘

Q DOOJ n somemetro politan m o b/gyns pay in ex .

m o f Slwm peryw .

malpractia d z imwillbefiled againstano bstetrician during his orherw o er. A

1988smvey done fortheAmen’

can Col

lo go o fObstetricians and Gyneco lo g'

srs

(A006 ) fo undthax M Of o b/gyns bad

a pex-leaned o ne ormoremedialmal

m od dnoe orm e clz im

Thediffi cuhy infindingan o bsmxiealprovideris pmficnlnlym forwom o nMedic

is apex oepfion thax has nmbeen oonfirmed byresem h so xdm ma po orwomen so em e.

pmeo cing family physicians natio nwide.

By 1989.therewen: fewetthan

Many o blgyns are dropping o bstetricsfi omtheirpn aieeJ n 1982 805 ot e

chim e in the somh azlanne stanes and93% o f the o b/gyns in tbe eastso uih

centralStates practice d o bstetrics. By1989.tho sepercentages had dro ppedto72% and 86% respectively.

The o o sz o fmedicalliability insuranceis

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InfantM o rtality R ates .

Impro vementin the So uth

Cbmmma

Mmflmm

hh nt mma

Oflawma

can vass ;

itr mme dmfi k d emmmmgdsmqmd unme dn n ahwt tx o n pmg mm; «mfi h fi u t S mme o f

u a x a a cmnd se ns L-sme u o‘

W u fi qmn IMZ ZHnl

“

J .Her b ert

6 5 0 Penn

was h lfl gtcn '

a n a l” G.

lMPlANTINDUSTRY

ISFACINGCUTBAGK

BYTOPSUPPLIERS

mam T0msmcnl. GEAR

Giants LikeD'

u'

Porzf

andDow

fearThey'

llBeDrawnintoProductLiabilitySuits

s y n m sr n o as

Big chemicalW and othermaeulieiun rto f materials used to

vessels and omerlmplanu havebeenquietly warncig medicalewlpmemtcompanies thatthey intend to as o f!deliveries because of tears of law

Whee tha arppuerx‘u w pnuaes

ucttiromtbtmaflmmodlcaleqd pmmimm s mu m m moung w

protec themselvs iromtheimpending eiuo fls sey cicy are nam umible ucmg up ah emsie ssppu'ii. tu

dunry a cclaim and doctors sayM tbemnd o und evesuallymm

come by and bavea dcvamtm d

b u m develo om d m devia a

Abo ut loo W e st on-rmhave already had supply wo blems.acco rdlng to repcfl treeeiw d by tlu

em s-m om m a

The materials manufacturers. includieg giams like i l du llo otde

New and the Dow c umin ]Company. m dropplng tse modla lmmw h responsato aebignrlfltelbeing dragged into bum medagainstim plantm kef s by m mers wno n y may have besnmiuredby dd eu ive pro ducttSupplm heve

already been namo d inmmdrfl s d

breastimplants and otherdevicesSanteria-n: makes: say thatthe

litigationthathas prompted the sunpliers to m a v has also made ii

harderto down thematerials sidirattry through d

'

strmutoraor othermiddlemen. lo addition. some equipmentcompanies say electronles co inpmims and other upper

-tam Sweet:trad ers that ass emble laugh-teencotrim 10? the in ertW eatao implants are lmm y n ua

tantto take o n such business.

. A J L‘

n

285

34 , 199-1 , page A 1

“y ou can see s r oar-er scenario

was this pea to tally o uto f hand.

"

a idaim Holmes.Vleapresldc u {o r

m at. Cro at-batch Ltdacum en a supplier of llihi

urn new forheartpacemakers

Wilson ll m mhlu b f 3 n ot“

” an {arm phfi lof PentTeam

Co ouieued FromPageAl

. usa ia cech batteryd leplsm ms‘

d loo could ultimately ou tup n:

m ono m testing and madamm eand talie m earehers m yamm u'lg pro dud s butmatsmerc ifu lly-lorries “: Helmet.“M arin e-muttonm arinadeidemcy do n

’twantmaellto us?" he“ fi rme d “ , salales nul

rtmnitm m ?”

g q slpmentmakm and m walrams haveeo lar ralsed liuh ouo »

ommw aben ths trend

o .

broader a mpam oy toress ire Cnn to umi

‘

ttne re

u n availab m omen tu m

m urlttenenCfl nclhm.

velveteed sutaru letlia the body

ne wsstand

so m lltbalDod ltdid ws me lled

mallar mandamus :m u s eum-ne nt!

lliar Dacro n

gom poly: mlrumand82003003 m adam e!lpaw n!

the$0 balm market{oreach yammmm m mcu m accordmg to arecentstudy {orthe x eemalndunry Ma nnh eim An odtm4 0m laonmAnothermeterw was withdrawn

lromnfie xmmm w m by oumand am Q lenese as pa!m m. The actomeuve.pintam 0mm Drama sm m buy ” : bulimic!aM y ;the tau

-lentmacs . have M 550

bea ds. valued at 300 to : use ir.

heat! valva ,

esd res -ms u nable t: median eca

u m u um uvd by warmthetlrty bad mtbam tes zec m ggy

my as establish their w lu bww(or

mo de ultwin-mmwa

s?”a m mlecwn c to :

ladw ‘ e costu mer gamma .

"

and mora ine Kno x . man ger

o versees“ 00 Porn“

: “1 5 5c to

mam: allallsuch sales.“ But

lcr you : webed x 90l an we

wo uldn'tWithheld materials fromthe

meda lm ar beam we didn't

«run: to mhlbltdeveloamml.

"

mmmm ?m

vm m m rmmwm ku m

Big co mpanies

do n’tW antany

blamefo rmisuseo ftheirpro ducts .

lmpumm oevia m uwd by onlta m mm M EmOu uenu

286

p lyfi x erm u m mthe Unlu d Sumsend Em: butthe as : rum

m w w amm wmu m -h o u n d u wmm m m Dr. Sid

b a lm “

M m mm m u a z

mwe uneasem m swy

m s g tmwym ma

x is-true» in

as

0

donu ttwo-alm a nac

by . m"

m (he W am agaicshy cum tro n m all comm a .

may buy and : smallamo unts cl

eatenalsthtlthey do omdealdamu mumSUM mu n g u tu rd

.crsnoo ker: to mo nito rhow (salo n .

m an an d

So m e “ spun : o n w

tinge deal“ wit: tarsam ssree to y (er s llusn lca

was th e: m g, lcome r Do w Co :

nmg. fo r ex ample, can W ises alu

ccne rubberis: custom 3 like Bu .

terlntem ucnatthew! id‘

s largestBulllncv

m hehl:

Cm i m am-c u

fi lm the ApsM imi!m

“M ara th on v m ummyWeld llnmewrld.“ lld Alu mtM M W O W ed Slll‘

m mm a vmm

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289

APPEND IX 2 .— MATER IAL FOR THE HEAR ING RECOR D

STATENIENT FOR THE HEAR ING R ECOR D

OF THE AMER ICAN BAR ASSOCIATION

Submitted to the Subcommittee o n Eco nomic and CommercialLawHo use Committee o n the Judiciaryo nH .R . 3600 Health Security Act

July 15, 1994

The American Bar Asso ciatio n respectfully submits the following views

co ncerning the propo sed revisio n to sectio n 507 o f title ll, United States Co de as setfo rth inH.R . 3600 Hcalth Security Act. The propo sed legislatio n wo uld give prio rity status to any"

payments undersubtitleB o ftitle IVo ftheHealth Security Acto wed to aregio nalalliance (asdefined in sectio n 1302 o f such

“

payments owed to aco rpo ratealliance hcelth plan under

tr'usteeship o f the Secretary o f Labo r under sectio n 1395 o f the c lth Security Act“

and"assessments and related amo unts owed to the Secretary o f Labo r under sectio n 1397 o f the

Health Security Act."Sectio n 5234 o fH.R . 3600 Health Security Act(

“

Sectio n Fo r

the “m ans mo re fully setfo rth herein, the American Bar’

Asso ciatio n is o ppo sed to such

revisio n .

Thepro po sed legislatio n wo uld give certain claimsrelated to theHealth SecurityActprio rity in paymentto other unsecured

,

claims in a bankruptcy case. Altho ugh itis

reco gniz ed thatthe legislature desires to develop a stro ng natio nalhealth insurance system,

giving these claims prio rity in bankruptcy will o nly deterio rate the effectiveness o f the

bankruptcy reo rganimtio n pro cess .

The American Bar Asso ciatio n has adopted blanketauthority to o ppo se any

pro po sed prio rities to the United States Bankruptcy Co de, ex cept under ex ceptio nalcircumstances. No ne o f the propo sed priorities under Sectio n 5234 are warranted by the

presence o f ex ceptio nalcircumstances andtherefo re, ifenacted wo uld notadvancetheimpo rtantunderlying principals upo n which the American bankruptcy system is predicated.

Oneo fthemo stimportantprincipals o ftheAmerican bankruptcy systemis equaltreatmento f creditors. Upo nthefiling o fabankruptcy petitio n, allactio nsto collectdebts from

the debto ra'

re stayed so thata debto rcan co ncentrate o n aplan fo rreo rganizatio n. This stayalso prevents a

“raceto the co urtho use”

by credito rs who wo uld otherwiseattemptto attachthedebto r

’s property befo reany othercredito r. Theresulto f arace isthatcertain credito rs wo uld

receivea distributio n o ntheirclaim,whileothercreditors, fo rno justifiable rcaso n,

wo uld not.

This impo rtantand powerfulelemento f the American bankruptcy system is reduced by the

additio n o f prio rities, which give perso ns, who are otherwise generalunsecured credito rs,

prio rity in paymentto othercredito rs similarly situated. In asense, prio rities producethe same

resultas a”

raceto the co urtho use,“ thatis, unequaldistributio n to credito rs, sometimes fo rno

justifiable reaso n.

290

Altho ughthecurrentBankruptcy Codeco ntains certain carefully cho senprio rities,

the success o f the American bankruptcy system can be credited in part, to the factthatthe

system is relatively free o f prio rities . Recentdevelo pments in Internatio nalInso lvency Law

serve as alesso n when amendments to theUnited States Bankruptcy Co de are co nsidered . Fo r

ex ampie, the recentpropo salfo rrevisio n o fthe German bankruptcy system attempts to make

Germany’s system more similar to the United States bankruptcy system especially as to

limitatio ns placed upo n prio rities . Upo n unificatio n, Germany so ughtto revise its bankruptcysystem, which allowed broad catego ries o f debts to receive preferentialstatus including : a)cla

‘

ms o f emplo yees and otherlabo rco sts;b) fiscalo rgo vernmentclaims;c) clericalclaims o r

claims o f churches, etc d) claims o f medicaldo ctors, veterinarians, surgeo ns, pharmacists ,etc and e) claims fo r children. Hans-Jo chem Liier, Hans-Gerd Jauch, Foreign and

MultinationalBusiness Insolvency In Germany, W M

(1993) There is littledo ubtthateach and every o ne o fthese prio rities

viewed individually arewo rthy o f preferred treatment. However, the cumulative effecto fthese

prio rities was to deny otherwo rthy credito rs a distributio n on theirclaims. The draftsmen o f

thenew German Inso lvency Code fo undthatthepreferentialtreatmentwas arbitrary and witho ut

justificatio n, andtherefo reabolished allpreferentialclaims, so thatnow, allunsecured credito rs

willrank equally as a class. Stefan Vol2

Internatio nalInsolvency Review, 29, 3S”

The ex perience in Europe and elsewhere has

beenthatengraftingwelfare prio rities into thereo rganiz atio n pro cess had destro yedthepro cess.

Chapter 11 rstheenvy o fmo stnatio ns because itworks;itwo rks tn large partbecauseprio ritiesare limited and parties are compelled to negotiate.

”

100th Co ng . , lstSess . 160 (1987)(testimo ny o f Nathan B . Feinstein.)

If every specialinterestis given prio rity in bankruptcy, other no n-priorityunsecured creditors, which mo re o ften than notare trade creditors who are vitalto a debto r

’s

co ntinued ex istence, willhaveno desire orreaso nto participateinthebankruptcy pro cess. Once

alarge netwo rk o f prio rity claims is established, which includes claimsthattend to beunusuallylarge, suchas tax es and health care claims, the generalunsecured creditors willunderstand fromthe firstday o fthe reo rganiz atio n thatthere is no hope forany distributio n to them. Noto nlywillunsecured credito rs be unwillingto helpthedebto rthro ughthereorganizatio n, butthey willbe unlikely to co ntinueto wo rk with a company thatis o n the verge o f bankruptcy . This will

certainly decreasethe numbero f successfulreorganiz atio ns.

The establishmento f mo re prio rities willnoto nly decrease the willingness o funsecured credito rs to dealwith a debto r o rapotentialdebto r, butitwillero de co nfidence intheAmerican bankruptcy system. Itrs also impo rtantto realiz ethatunsecured creditors canalso

co nsisto f claims o f, fo rex ample, wo rkers injured by ex po sureto asbesto s as in theMau i“:bankruptcy case and women who were injured by defective intrauterine devices as in theAJ LR obbins bankruptcy case. Further, unsecured claims are o ften held by smallbusiness thatdepend o n a distributio n o n their claim fo rthe very survivalo f their business . As the late

l98o’

s filing numbers reflect, many more Americans have been to uched by the bankruptcysystem. Altho ugh ithas become more acceptable to file fo rbankruptcy, the belief stillex ists

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301

are o f f ered by s ingle emplo yers General Mo to rs )

o th ers have multiple emplo yers acting to geth er und er th e

aeg is o f un io n c o ntracts . The HSA wo uld allo w th es e types

o f plans to c o ntinue , under new regulatio ns , whereas smaller

emplo yers o r gro ups with les s than emplo y ees wo uld

have to dis band their plans and purchas e ins uranc e th ro ugh

reg io nal allianc es .

To pro tect wo rkers f ro m ins o lvenc y o f c o rp o rate

allianc es , the HSA c reates a Co rp o rate Allianc e Health Plan

I n s o lvenc y Fund (5 l39 6 (o ) ) des igned to play the s ame ro le

f o r health plans that the FDI C play s f o r banks . That is ,

the emplo yers pay as s es sments to build up an ins uranc e f und

and the fund c an be drawn o n to c o ver the liab ilities o f

ins o lvent plans (5 Itwo uld appear f rom s 1 39 6 that,

in e f f ect, the full faith and c red it o f the United States

stand s beh ind the o bligatio ns o f thes e plans to health

claimants . See 5 l39 6 (a) . This is c o ns istent with the

un ivers al c o verag e o b j ectives o f HSA .

Sectio n 1 39 5 pro vides that the Sec retary o f Lab o r

s hall be app o inted by the appro priate U . S . District Co urt!

as the trustee f o r a c o rp o rate-allianc e health plan if it

“will be unable to pro vide bene f its when due o r is o therwis e

in a f inanc ially hazard o u s c o nd ition"

! See

302

Wh en the o nly c redito rs are health c laimants , it

d o es no t s eem to u s to be s ens ible to pro v ide f o r the

administratio n o f thes e ins o lvent plans under th e Bankruptc y

C o de: f o r two reas o ns : (1 ) the Code d o e s n o t n o w c o ver

d o mestic in s urers (s ee 1 1 U . S . C: and d o es no t

c o ntain any pro vis io ns wh o se applic ation has ever been

th o ught o ut o r applied in the c o nte x t o f a de f unct insuranc e

o blig o r : and (2 ) given the evident liab ility o f the United

States to guaranty and pay all liab ilities o f the ins o lvent

plan , it d o e s no t s eem likely that any c red ito rs will s u f fe

any lo s s . It f o llo ws that the pro tectio n s o f the Bankrupt

C o de f or cred ito rs in the public are no t c alled f o r .

‘

Ho wever , when the co rp o rate allianc e has o ther

s ignif ic ant liab ilities , no t guaranteed by the f ed eral

g o vernment, we believe the allianc e 's ins olvency s h ould be

administered under the f ederal Bankruptc y Co d e .

‘

We s ugg est

that the thres h o ld f o r applic atio n o f the Bankruptc y C o de b

o r mo re in pro bable liab ilities to c laimants

o ther than health c laimants f'

The f o reg o ing is needed

bec aus e the applic able pro vis io ns o f HSA d o no t addres s a

'

h o st o f is s ues invo lved in a pro c eed ing under the Bankruptc

c o de , s uc h as pro rata distributio n , v o idable pref erenc e ,

f raudulenttrans fer , entitlementto v o te o n plans o f

re o rganizatio n , d is c harg eab ility o f debt, etc .

With regard to 5 l39 s (t) ("J uris dictio n o f

we s ee all manner o f p o s s ib ility f o r un-needed

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13 sac . 5234. Pmo amro rcan't/(m BANKRUPTCY cu ms.

Sectio n o f title 11 , United States Code, is15 amended to read as fo llows

(8) Eighth, allowed unsecured claims(A) based upon any commitmentby the

debtor to the Federal Depo sitInsurance Co r

poration, the Reso lutio n TrustCorpo ratio n, the

Directo r o ftheOffice o f ThriftSupervisio n, theComptro ller o f the Currency, or the Bo ard o f

Governors o f the Federal Reserve System, o r

their predecessors or successors , to maintain

the capital o f an insured depo sitory institutio n;(B ) fo r payments under subtitle B o ftitle

IV o f the Health Security Actowed to a re

0. 117. PC.

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SEC. 1395. TRUSTEESHIP BY THE SECR ETAR Y OF INSOL

van-rCORPORATEALLIANCE m m ru ns.

(a) Ay romTMEN'r o p SECR ETARY AS TRUSTEE FOR

INSOLVENT Films — Whenever the Secretary o f Labo rdetermines thata co rpo rate alliance health plan which is

a self-insured plan will be unableto pro vide benefits whendue o r is otherwise in a financially haz ardo us co nditio nas defined in regulatio ns o f the Secretary , the Secretary

shall , upo n notice to the plan , apply to the appro priate

United States districtcourtfor appointmento f the Secretary as trustee to administer the plan forthe durationo f the inso lvency . The plan may appear as a party and

atthe discretion o fthe court. The courtshallappo intthe

Secretary trustee ifthe courtdetermines thatthetrusteeship is necessary to protectthe interests o f the enro lled

individuals or health careproviders orto avoid any unreaso nable deterioration ofthe financial conditio n o fthe plan

or any unreaso nable increase in the liability o f the Cor

po rateAllianceHealth Plan Inso lvency Fund. Thetrustee

08 1178 PCS

309

ship o f the Secretary shall co ntinue until the co nditio nsdescribed in the firstsentence o f this subsectio n are rem

edied ortheplan is terminated .

(b) POWERS AS TRUSTEE .— The Secretary o f Labo r,

upo n appo intmentas trustee under subsectio n (a) , shallhavethepower

(1) to do any actautho riz ed by the-

plan, this

Act, or other applicable provisio ns o f law to be do neby the plan administrato r or any trustee o fthe plan,

to require the transfer o f all(or any part)

o f the assets and records o f the plan to the Sec

ratery as trustee,

(3) to investany assets o f the plan which the

Secretary ho lds in accordance with the provisions o fthe plan, regulatio ns o fthe Secretary, and applicable

(4) to do such other acts as the Secretary

deems necessary to continue Operation o f the plan

withoutincreasing the potentialliability o f the Cor

porate Alliance Health Plan Inso lvency Fund, ifsuch acts may be do ne under the provisions o f the

(5) to require the corporate alliance, the plan

administrato r, any co ntributing employer, and an

yemployee organiz atio n representing covered individ

310

ualato furnish any informatio n with respectto the

plan which the Secretary as trustee may reaso nablv

need in o rderto administerthe plan ,

(6) to co llectforthe plan any amounts duethe

plan and to reco verreasonable ex penses o f thetrust

(7 to commence,pro secutef o r defend o n behalfo f the plan any suito r proceedinginvo lving the plan,

(8) to issue, publish, o r file such notices , state

ments, and reports as may be required under regulations -

o f the Secretary or by any order o f the court,

(9) to terminate the plan and liquidatethe planassets in accordance with applicable pro visio ns o f

this Actand other provisio ns o f law, to resto re the

plan to the respo nsibility o f the corpo rate alliance,

orto continuethetrusteeship,

(10) to provide forthe enro llmento f individuals

covered underthe plan in an appro priate regional al

(11) to do such other acts as may be necessary

to comply with this Actor any order o f the court

and to protectthe interests o f enro lled individualsand health care providers.

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I serve, or liquidate such plan or its pro perty , o r any pro

2 ceedingto enforcea lien againstproperty o ftheplan.

(f) JUR ISDICTION o rCOURT.

(1) IN GENERAL — Upo n the filing o f an appli

cation fortheappointmentas trustee orthe issuance

o f a decree underthis subsection , the‘

co urtto which

the application is'

made shall have ex clusive jurisdic

tio n,

o f the plan involved and its pro perty wherever

lo cated with the powers , to the ex tentco nsistent

with the purpo ses o f this subsection, o f a courto f

the United States having jurisdictio n over cases

under"

chapter 11 o f title 1 1 , United States Co de.

Pending an adjudicatio n “

under this section such

courtshall stay, and upo n appo intmentby ito f the

Secretary o f Labo r as ‘

trustee, such court“

shall con

tinnethe stay o f, any pending mortgage fo reclo sure,equity receivership,

‘

or other pro ceeding to reo rga

nice, co nserve, o r; iiqu’tlate the plan ,

we spcnso fing

alliance, o r property o f'

such plan or alliance, and

any other suitagainstshy receiver, co nservato r, or

trustee o fthe plan, the spo nsoring alliance, or prop

erty o f the plan or alliance. Pending such adjudication and upo n the appointmentby ito f the Sec

retary as trustee, the co urtmay stay any pro ceeding

to enforce a lien againstpro perty o f the plan orthe

08 1176 PC!

313

spo nso ring alliance o r any other suitagainstthe

plan o rthe alliance.

(2 ) VENUE.— Ah actio n under this subsectio n

may be bro ughtin the judicial districtwhere theplan administrator resides or do es business o rwhereany asseto f the plan is situated . A districtco urtinwhich such action is broughtmay issue pro cess with

respectto such actio n in any other judicial district.(g) PERSONNEL.

— In acco rdance with regulatio ns o f

the Secretary o f Labo r, the Secretary shall appo int, retain,

and compensate accountants , actuaries, and other pro fes

sio nalservice perso nnel as may be necessary in co nnectio n

with the Secretary’s service as trustee underthis sectio n.

SEC . 1398. GUARANTEED BENEFITS UNDER TR USTEESHIP

0 1?THE SECR ETAR Y.

(a) INGENERAL — Subjectto subsectio n (b) ,the Sec

retary o f Laborshall guaranteethepaymento f allbenefitsunder a corpo rate alliance health plan which is a self-in

sured plan while such plan is underthe Secretary’3 trust

eeship undersectio n 1395.

(b) LIMITATIONS.— Any increase in the amo unto f

benefits underthe plan resulting from a plan amendmentwhich was made, or became effective, whichever is later,

within 180 days (o r such other reaso nable time as may

be prescribed in regulatio ns o fthe Secretary o f Labo r) be

08 1178 70.

314

l fore the date o f the Secretary’

s appo intmentas trustee

2 o fthe plan shall be disregarded for purpo ses o f determin

3 ingthe guaranteeunderthis sectio n .

(c) CORPOR ATE ALL IANCE HEALTH PLAN INSOL

5 VENCY FUND

(1 ) ESTABLIsmrENT.— The Secretarv o f Labor

shallestablish a Corpo rate Alliance Health Plan In

so lvency Fund (hereinafter in this partreferred toas the Fund from which the Secretary shall au

thoriz e paymento f all guaranteed benefits underthis section.

(2 ) R ECEIPTS AND

(A) BECEm s .— The Fund shallbe cred

ited with

(i) funds borrowed under paragraph

(11) assessments co llected under sec}

tio n 1397, and

(iii) earnings on investment o f the:

Fund.

(B) DISBUR SEMENTS.— The Fund shall-Be)

(i) for making such payments as tfi

Secretary o f Labor determines are nee

. 0. 177.m

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316

chase any notes or other o bligatio ns issued bv theFund under this paragraph , and fo r thatpurpo se

the Secretary o f the Treasury may use as a publicdebttransactio n the pro ceeds from the sale o f anv

securities issued under chapter 31 o ftitle 31 , UnitedStates Code and the purpo ses fo r which securities

may be issued under such chapter are ex tended toinclude any purchase o f such notes and o bligations.

The Secretary o f the Treasury may atany time sell

any o f the notes o r other o bligatio ns acquired bysuch Secretary under this paragraph . All redemp

tio ns , purchases , and sales by the Secretary o f the

Treasury o f such notes or other o bligatio ns shall be

treated as public debttransactions o f the UnitedStates .

(4) INVESTMENT AUTHOR ITY.— Whenever the

Secretary o f Labor determines thatthe mo neys ofl

the Fund are in ex cess o f currentneeds, such Sec

retary may requestthe investmento f such amounts

as such Secretary determines advisable by the Secretary o fthe Treasury in o bligations issued orguarcanteed by the United States, but, until allbomings under paragraph (3) have been repaid, the obi?gatio ns in which such ex cess moneys are invests?

08 1175 908

317

may notyield a rate o f return in ex cess o f the rate

o f interestpayable on such borrowings .

SEC . 1397. IMPOSITION AND COLLECTION OP PER IODIC AS

SESSMENTS ON SELF-INSUR ED COR POR ATE

ALLIANCE PLANS .

(a) IMPOSITION o r ASSESSMENTS — Upo n a determinatio n thatadditio nal receipts to the M d are nec

essary in o rderto enabletheFund to repay amo unts bo r

rowed by the Fund under section while main

taining a balance sufficientto ensure the so lvency o f the

Fund, the Secretary o f Labor may impo se assessments

underthis sectio n. The Secretary shall prescribe fromtime

to time such schedules o f assessmentrates and bases forthe applicatio n o f such rates as may be necessary to pro

vide fo r such repayments .

(b) UNIFORM!“ OF ASSESSMENTS — The assess

mentrates so prescribed by the Secretary for any periodshall be uniform for allplans, ex ceptthatthe Secretarymay vary the amounto f such assessments by catego ry ,

orwaivethe application o f such assessments by catego ry,taking into accountdifferences in the financial so lvencyOf, and financial reserves maintained by, plans in each category .

(c) LIMITATION ON AMOUNT orASSESSMENT.— The

totalamountassessed againsta corporate alliance health

84-7 1 4 0 — 9 4 1 1

318

1 plan underthis sectio n during a vear may notex ceed 22 percento fthetotal premiums paid to the plan with respect3 to co rpo rate alliance eligible individuals enro lled with the4 plan duringtheyear.

(d) PAYMENT OF ASSESSMENTS.

(1) OBLIGATION To PAY.— The designated

payor o f each plan shallpay the essessments im

po sed by the Secretary o f Labo r under this section

with respectto thatplan when they are due. Assess

ments under this sectio n are payable atthe time,

and o n an estimated , advance, o r other basis, as deterrnined by the Secretary . As sessments shallcon

tinueto accrue until the plan’s assets are distributed

pursuantto a termination pro cedure or the Sec

retary is appo inted to serve as trustee o f the plan

under section 1395.

(2 ) LATE PAYMENT CHAR GES AND INTEREST.

(A) LATE PAYMENT CHARGES — If any as

sessmentis notpaid when itis due, the Secretary Of Labo r may assess a late payment

charge Of notmo re than 100 percento f the as

sessmentpaymentwhich was nottimely paid.

(3) WAIVERs .— Subparagraph (A) shall

notapply to any assessmentpaymentmade

within 60 days afterthe date on which payment

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M

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charge, and interest, and pro cess may be served in any

other district. The districtco urts o f the United Statesshall havejurisdictio n overactio ns broughtunderthis subsectio n by the Secretary witho utregard to the amo untinco ntroversy.

(f) GUAR ANTEE HELD M ESS — The Secretary

o f Labor shall notceaseto guarantee benefits o n account

o fthe failure o f a designated payo rto pay any assessmentwhen due.

(g) DESIGNATED PAYOR DEFINED .

(1) IN GENERAL — For purpo ses o f this section,theterm designated payo r means

(A) the employer or plan administrato r inany case in which the eligible spo nsor o f the

corporate alliance health plan is described insubparagraph (A) o f section and

(B) the contributing employers orthe planadministrato r in any case in which the eligible

spo nso r o fthe corpo rate alliance is described insubparagraph (B) or (C) o f section(2 ) CONTROLLED GROUPS — If an employeris a

member o f a' co ntro lled group, each member o f suchgroup shallbe jointly and severally liable for any assessments required to be paid by such employer. For

purpo ses Of the preceding sentence, the term con

321

tro lled gro up means any group treated as a single

employer under subsectio n (b) , (c) , (In), or (o ) Of

section 414 o f the Internal Revenue Co de o f 1986.

C A P-M P T

COOPERATIVI 0?AMER ICANPHYS ICIANS . INC

MUTUAL PROTECTIONTRUST

25b W ILSHII'Ih BOU'#EEVARO1

LOS ANGELES . CA 900 102 1

FAX I2 131 380-8205

NORTHERN CALIFORNIAMI 5) 348-0072

ORANGE COUNTYI7IAI 9300 777

SAN DIEGOIOI 9) 506-3132

BOARD OFTRUSTEESJ . Mic haelWo e-rub y . MD

Chl’

lfltm

Marlene M. Co leman, MOHarvev E. Kno emsehlld . MO

Mann A. Mas o nIc , MOPhillip Unq u . MD

GOARD OFDIRECTORSOw ned 8. Hence. MDPresident Chi-mm

CarlA . mo mma-tChief Ex ecutive Officer

Audrov A. WEx o euuw Vice Pro vider-rt

PROVIDING TN! HIGHESTQUA LITY PR OFI SS IONA L

322

TESTIMONY OF ROBERT REI D ,

FOR THE JUDI C I AR Y SUBCOMMI TTEE ON

ECONOMI C AND COMMER C I AL LAW

UNI TED STATES HOUSE OF REPRESENTATI VES

ON H . R . 3600 , HEALTH SECUR I TY ACT

MED I CAL MALPRACTI CE I SSUES

2 2 , 1 994

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338

VENABLE. B .\ETJER . HOWARD 8: CIVILETI'

I

charitable institutio ns , o f supplies fo rthe institutio n’

s own use. ThatActals o allows

Plan,Inc . , 743 F.2d 1388, 1393 (9th Cir. cert. denied, 469 U.S . 122 9

ButSectio n 2003(e) pro vides no similarex emptio n fo rsales to no npro fitinstitutio ns

Thus , its passage wo uld repealthe No npro fitInstitutio ns Actand wo uld likely resultin

immediate, upward pressure o n prices charged these institutio ns and ultimately co nsumers ,

the very oppo site resultfromthe goalof health care refo nn.

Sectio n 2oos(e) also differs fromthe R obinso no Patman Actby falling to includetwo

otherimpo rtantdefenses . defenses which helpto ensurematme Actw ramer

than o bstructs price competitio n.

Seeminglythe o nly certainty is thatifthls provisio nwere enacted. pharmaceutical

manufacturers co uld lo ok forwardto years of lltigatio nto determlnewhatprlclng

restrictio ns Co ngress intended forpharmaceuticalmanufacturers by enacting this provisio n

wo uld be autho rized by R o binso n-Patman. Mo reover.the incentive formanufacturers to

devise co stefficiencies . savings and marketing strategies based upo n differing customer

needs and purchasing powerwo uld be dulled co nsiderably ifthe same disco untmustapply

to allcustomers .

Evenmo retro ublesome, however, is the absence from Sectio n 2003(e) o f perhaps

the mo stfundamentaldefense available underthe R o binso n-Patman Act the meeting

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346

VENABLE. BAETJER .HOWARD 8: CIVILETTI

Recently released info rmatio n by HHS reveals thatthis go vernmentprice

co ntro leffo rtnoto nly raised prices fo rpurchasers otherthan Medicaid, butiro nically also

increased co sts fo rMedicaid, even afterthe rebates were deducted from its o verall

pharmaceuticalco sts .

'In fact, the Medicaid drug pro gram (netafterrebate co llectio ns )

has increased by abo ut30 percentfromCY 1990thro ugh CY

This ex periencewith alimited restrlctio n o n disco unts does not, o f co urse.

necessaflly pmdid m o utcome d a difiemnmdmuch bmaderlimhafim matwo uld appw

acro ss the entiremarket. lts powerfuleffecton lmportantpharmm uticalcustomers . such

m o saitowevet. provides a clearwaming ofthe risks o f an

even broadergovernmentprice co ntrols intended to overridethemarketplace.

rm .m éieeo o amm mm w amm ay smmoomon ns% j

ofthe pharmaceuticalmarket. Butits emm ry hnpacto nmo restoim mm w

powedulefldence d me ex uemem mwymd vdaumy d phamaeeuucd dbco unts and

the pewersities created by govemmentlntenerence inthemarketplace. According to the

HHS lnspectorGeneral. appro x imately 90% of alldrugs sold to bulk buyers had increased

prices dueto OBRA, nearly athird o fwhlch increased by mo rethan

The U.S . Co ngress Office of Technolo gy Assessmentdescribedthe OBRA‘90

situatio n as follows

“The powero f certain classes o f purchasers to ex actdisco unts was

rec ognized bythe framers o fthe 1990 Medicaid Rebate Law, which attempts to

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350

VEx mtE BAETJER .HOWAR Dstcmuzrri

“

Underrefo rm, withthe additio n o fprescriptio n drug co verage, Medicare will

becomethe wo rld‘s largestpurchasero f drugs . Andthe Medicare pro gramwulluseits negotiating powerto getdisco unts fromthe pharmaceuticalcompanies . In

additio n, with competing health plans tryingto become mo re efficient. mo re andmo re buyers willusethe same successfulnegotiating techniques .

"37

Iro nically ,altho ugh the President

'

s HealthSecurity Repo rtto the American Peo ple

uses the ex ample o fthe effects o f increased bargaining powerinthe pharmaceutical

industry as amo delfo rco stco ntainmentin otherareas o f health care, the Administratio n‘

s

billals o seeks to precludethe disco untingthe Repo rtlauds .

Co ngress'

Office o f Technology Assessmentalso co ncluded that

“The mo steffective co st-co ntro lmechanisms are availableto tho se private

secto rplans thatcan co ntrolprescribingthro ugh fo rrnularies . Hospitals and staff

mo delHMOs have usedthis powerto ex actprice disco unts frommanufacturers

even whenthe manufacturers are single-so urce pro ducers o f a specific

compo und.

"as

To day, large and smallpurchasers o f pharmaceuticals have access to and fo llow as

clo sely as Co ngress andthe GAOan amazing amo unto f informatio n co ncemlngthe

prices . co sts and margins o f individualdrug sales aro und the world. As a result.theterms

o f individualpharmaceuticalsales are determined by powerfulmarketforces .Greater

co nso lidatio n o f purchasingpowerand increased use o fthe vastnewamo unts of datawill

enable evenmorewidespread discounts to co nsumers.

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352

ABLE. BAETJER . howanp aan ism

successfully. Prices inthe drug marketare especially complicated;drug prices vary

in many dimensio ns (do sage, fo rm, and packaging, to name o nlythree). any o ne o f

which co uld be used to maska price increase. Giventhe hundreds o f drugs and

manufacturers and thetho usands o f do sage and packaging fo rms , the federal

agencies in charge o fmo nito ring drug prices wo uld haveto rely o nthe basic .

compliance o fthe drug companies , as they do now fo rthe Medicaid rebate. Such

reliance o ften leads to incompletecompliance.

“ oApparently, itcannotbe do ne

currently undertheMedicaid Rebate Program o fOBRA

V. Co nclusio n.

The anti-discountban inthe Administratio n‘s pro po sed billcannotbe justified as an

antitrustmeasure. Indeed, itco nflicts with and ho pelessly complicates and co nfuses lo ng

standing antitrustlaw and enfo rcementpo licy underthe R o binso n-Patrnan Act.

The ban is also ill-advised public policythatwo uld lead eitherto increased prices fo r

pharmaceuticals fo rallco nsumers (and especiallytho sewho po oltheirpurchasing power

to reducetheirco sts ), o ritwillsignificantly reducethe investments in research and

develo pmentthathave madethe U.S . pharmaceuticalindustrythe world‘s leader.

And, by making illegaland subjectto substantialpenalties the pro visio n o f disco unts

to co nsumers who can now demand them, the pro visio n'

irvo uld require an impo ssible

bureaucracy, requiring massive papenlvo rk repo rting, to administer.

The pro visio n sho uld be deleted fromany legislatio n co ncerning health care.

1 . Sectio n 2003(e) is quite ambiguo us . The Co ngressio nalBudgetOffice apparentlyinterprets Sectio n 2003(e) to notapply whentheterms o fthe sale are different:“

Apparently, this equal-pricing pro visio n may notpreventmanufacturers from grantinggreaterdisco unts to ho spitals and health maintenance o rganizatio ns thanto retailpharmacies .

" “

How Health Care Refo rmAffefi Pharmag utjgé lBgseargh and

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360

S OC IETY FO R

R l-ZS‘tll' R C I-Z

Vl AC I HI I'ZVT

TESTIMONY SUBMI TTED BY

MI CHAEL R . LOSEY , SPHR

PRES I DENT CEO

SOC I ETY FOR HUMAN R ESOUR CE MANAGEMENT

HEALTH CAR E REFORM

THE COMMI TTEE ON THE JUDI CI AR Y

SUBCOMMI TTEE ON ECONOMI C AND COMMER C I AL LAW

U . S . HOUSE OF REPR ESENTATI VES

JUNE 2 2 , 1 99 4

606 NOR TH ‘A SH I NGTON STR EET

A L EXA NDR I A. V I R G I N I A 2 2 3 1 4-1 9 9 7 L SA

” 0 2” 54 8-344 0 FAX f70 3l836-0 36

TDD I 70 1 l5 48-6 9 99 TEL EX' 6 5 0 39) 2 4 9 l

BOSTONPUBLIC LIBRARY

362 3 9999 05983 053 7

The Ho u s e s h o uld act ac c o rdingly and not allo w unlimited punitivedamage award s to be available as a wind f all to litigants . SHRM

b elieves that if the h ealth c are re f o rm s y stem inc ludes practic e

parameters , c hang es to the c o ntingent f ee stru cture , and c ap s o n

punitive damages th ere will b e a s ignif ic ant p o s itive impact o n

th is natio n 's health c are s y stem.

A study by Lewin-VHI has s h o wn thatmed ic al liab ility re f o rmc o uld s ave b illio n o ver f ive y ears . Thes e s av ing s wo uld be

ac h ieved by reduc ing premium c o sts and dec reas ing the amo unt o f

de f en s ive med ic ine practic ed by health c are pro v iders . Th e mo neys aved f rom malpractic e re f o rm c o uld in turn b e u s ed to pro vide

s ub s id ies f o r the p o o r o r health c are c o verage to th e unin s ured

to help reac h the Pres ident's g o al o f univers al c o v erag e .

SHRM apprec iates the o pp o rtunity to s hare its v iews and th e v iews

o f th e human res o urc e pro f es s io n with th e Sub c o mmittee . We lo o k

f o rward to wo rking with the Co mmittee to ens ure that th isc ritic al element o f health c are re f o rm is inc luded in the f inal

leg is latio n .

84-714 (368)