Malpractice, Medical

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MALPRACTICE, MEDICAL

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Medical malpractice is a legal system that permits victims of certain medical errors to sue for their injuries. It is a branch of tort law and, like tort law generally, is intended to achieve several policy objectives. (The discussion below focuses on medical errors committed by physicians, but the medical malpractice system may hold accountable other types of healthcare professionals as well as institutions such as hospitals and managed-care organizations.)

Objectives of the System

The first objective of the medical malpractice system is to compensate the victims (or in some cases their families) for the losses they sustained as a result of the malpractice. Although some of these losses, such as pain and suffering, are non-economic in nature, the malpractice system awards only money damages. The idea is to use money to restore the victim as much as possible to the condition the victim would have been in if the malpractice had not occurred. Along with pain and suffering, a successful plaintiff can recover the additional medical expenses necessitated by the malpractice episode, lost earnings (including both lost wages from having missed work and reduced earnings in the future as a result of diminished earnings capacity), and monetary compensation for other types of emotional deprivations, such as loss of enjoyment from being unable to engage in certain activities like sex or sports. It follows from these measures of damages that the same act of medical misfeasance—for example, the failure to correctly diagnose a treatable illness in a timely manner—can yield dramatically different damage awards for different victims. Someone who is old, for example, will have fewer years of work left than someone who is young, and therefore will receive less for diminished future earnings capacity.

A second objective of the malpractice system is to deter physicians from making medical errors that injure patients. The premise is that medical mistakes can be prevented by taking greater care, such as by spending more time with patients, employing more sophisticated diagnostic tools, and so forth. Taking greater care, however, consumes greater resources. The malpractice system gives physicians an incentive to invest these additional resources in order to avoid being liable for damages.

The third objective of the malpractice system is retributive justice—to punish wrongdoers and to enable victims to exact revenge. Along with sanctions imposed by criminal law, tort liability reduces the risk that victims will take the law, so to speak, into their own hands.

Functioning of the System

A plaintiff in a malpractice case must prove certain propositions in order to recover damages, including that the physician actually caused harm to the plaintiff and that the defendant was negligent, meaning that the defendant's behavior deviated from the applicable standard of care— that of a reasonable physician under the same circumstances. Typically, the plaintiff must prove through the testimony of expert physician witnesses how a reasonable physician would have behaved. At one time, before courts adopted more flexible approaches, only a physician from the same locality could testify about the standard of care, which made it difficult or impossible for plaintiffs in small towns to find suitable expert witnesses. The expert testimony, including testimony from opposing experts for the defendant, is supposed to describe how physicians should behave. In practice, however, experts may testify about how physicians do in fact behave, and judges and juries typically accept this evidence of professional custom as the standard of care. A notable exception is the case of Helling v. Carey, in which the Supreme Court of Washington State held that the entire profession of ophthalmology was failing to meet the standard of care by not routinely testing younger patients for glaucoma.

In theory, establishing whether or not someone is negligent involves a cost–benefit analysis; actors are negligent if the cost of preventing the injury is less than the risk of the injury, measured in terms of its probability and severity. In order to avoid being negligent, physicians therefore should expend enough resources to reduce patient risk to the point that any further expenditure on prevention would exceed the value of the risk being prevented, and therefore be inefficient. But because the value of a risk can be expected to vary from one patient to another, how is it to be calculated?

Here is where the doctrine of informed consent enters into malpractice law. In addition to promoting patient autonomy, informed consent assists patients and physicians in making accurate calculations about how much to spend to reduce the risk of error. By assigning a high cost to a particular injury, for example, risk-averse patients will demand greater risk-reduction expenditures. This raises a difficult question concerning how far the law will allow patient preferences to control the standard of care. Suppose a patient opts for a treatment approach that is contrary to mainstream medical practice. Does the patient's choice relieve the physician of malpractice liability? Traditionally, the law has recognized the need to permit physicians to deviate from customary practice in appropriate circumstances, such as when the mainstream approach has failed to provide a benefit to a specific patient; physicians who deviate from the mainstream approach are not negligent if, in addition to obtaining the patient's informed consent, they can prove through expert testimony that their approach would have been followed by a "respectable minority" of other physicians.

But why should a fully competent and informed patient not be permitted to agree to an alternative and complementary treatment that no other physician would employ? To what extent should malpractice law protect patients from their own folly? A related question is whether a patient ought to be permitted to waive the physician's malpractice accountability, in return, say, for a discount in the price of care. The law traditionally has frowned upon such releases from liability, fearing perhaps that patients who made such agreements must not be able to afford to pay for needed services, and therefore they should not be deemed to be acting voluntarily. But from the physicians' perspective, this traditional view may no longer be feasible in the era of managed care, where patients may be covered by low-cost plans that do not pay for some services that the medical profession considers to be customary.

Physicians are covered by malpractice insurance, which pays the damage award, up to the policy limits, if plaintiffs are successful, and also covers the costs of the physicians' defense attorneys, who typically are hired and controlled by the insurance companies. Insurance covers only a portion of the physician's malpractice costs, however; physicians also incur uninsurable costs in the form of time lost from practice while defending cases, emotional costs, and possible loss of membership on hospital medical staffs and in managed-care networks. Malpractice insurance premiums are based principally on the physician's geographic location and area of medical specialty, rather than on the physician's past malpractice history ("experience rating"). Increasing premiums for physicians who are repeatedly and successfully sued for malpractice would seem to be an obvious means of helping to deter future misfeasance, but insurers contend that they cannot experience-rate physicians because the number of claims is too small.

Evaluation of the System

How well does the malpractice system perform its intended functions? According to the Harvard Malpractice Study, which examined hospital records in New York State from 1984, only about one out of eight patients whose records revealed that they had suffered a malpractice injury filed a claim, and only about half of these claims resulted in compensation. Other empirical data, however, have shown that the more severe the injury, the more likely the victims are to be compensated, and the greater the amount of recovery. Critics of the current system assert that the awards recovered are excessive, but others disagree. The system is clearly time consuming; claims take an average of twenty-five to thirty months to be resolved after they are filed with the insurer, which can create severe economic problems for victims who lack healthcare or disability insurance. In the United States, plaintiffs' lawyers take cases on a contingent fee basis, receiving an average of approximately 33 percent of the plaintiff's recovery if the case is successful. If the case is not successful, the attorney not only recovers nothing, but typically must pay out-of-pocket for court costs and expert fees. Attorneys therefore can be expected to refrain from taking cases that are marginal on their merits or that do not involve a substantial amount of damages. Because, as noted earlier, the amount of damages is contingent on such factors as the victim's age, some victims accordingly have difficulty finding lawyers to represent them. On the other hand, there are anecdotal reports that some plaintiff's attorneys file frivolous lawsuits in the hopes that the defendants will settle in order to avoid litigation costs. Unlike in Great Britain, where a plaintiff who loses a malpractice suit must pay the defendant's attorneys' fees and court costs, defendants in the United States must bear those costs themselves, and defense attorneys, unlike attorneys for plaintiffs, get paid regardless of whether they win or lose.

There is little empirical information on why so few malpractice victims assert claims. Clearly one reason is that they do not realize that they have been the victims of malpractice. Studies also have shown that patients who have positive interactions with physicians are less likely to file claims despite becoming aware of malpractice, and that patients are less likely to sue after physicians have apologized for mistakes. The latter practice is discouraged, however, by the fact that, in all but a handful of states, the physician's apology is admissible in a lawsuit as an admission of liability.

There are no good data on how well the malpractice system performs its deterrence or retributive functions. Some critics point out that medical errors persist despite the malpractice system and that the number of claims is growing. Others argue in effect that the system is overdeterring physicians by causing them to practice defensive medicine.

Malpractice insurance premiums comprise a substantial portion of the overhead of the practice of medicine. Premiums have tended to increase over time, due at least in part to significant increases in the number of suits filed (known as frequency) and the size of damage awards (known as severity). Premiums also reflect the cost of defending suits, including the costs of attorneys and expert witnesses. It is estimated that for every dollar of malpractice insurance premium, only 30 cents actually goes to victims.

Malpractice premiums also have gone through periods of rapid increase, especially around 1975, 1985, and beginning again in 2001, leading these periods to be characterized as malpractice crises. In addition to large premium increases, these crises are marked by insurance companies exiting certain markets, and anecdotal evidence suggests that some physicians switch from higher to lower risk specialties, move to geographic locations with lower premiums, or retire from practice prematurely. The malpractice crisis of 1985, for example, has been blamed for physicians leaving rural practices and abandoning obstetrics. The semicyclical nature of these crises, and their proximity to economic downturns, suggest that at least a partial explanation for why they occur can be found in the behavior of the malpractice insurance industry itself, which creates what are termed insurance cycles. These begin when insurance companies reduce premiums to attract more business. As claims frequency and severity continue to increase, the amount of premium funds becomes too small to pay claims, and a weak economy decreases the return on the insurance companies' investment portfolios, which they had counted upon to make up the shortfall. This leads to sudden, rapid increases in premiums, insurer insolvencies, and withdrawal of companies from less profitable markets. Eventually the market stabilizes, and insurers once more decrease premiums, beginning another cycle.

These crises have led to two main types of legislative responses. In reaction to the malpractice crisis of the mid-1970s, state legislators took steps to help ensure that healthcare providers had access to medical malpractice insurance. They provided for the creation of physician-owned mutual insurance associations, joint underwriting associations and similar entities called reinsurance exchanges, and state-run reserve funds, intended to augment the coverage provided by the market. The second major legislative response was that a number of state legislatures changed the rules governing the malpractice system to make it more difficult and less remunerative for victims to sue. These so-called reforms include caps, or statutory limits on the amount of damages or the amount of non-economic damages that a successful plaintiff can collect; reductions in the maximum length of time (set by statutes of limitation) that victims have in which to file suits; prerequisites to filing suits (such as first having the claim reviewed by a panel of physicians); and repeal of the collateral source rule, which allows plaintiffs to recover medical and other expenses from defendants even though these had been paid by third parties, such as health insurers. (The collateral source rule typically does not result in a windfall for successful plaintiffs, because insurers usually are "subrogated" to the plaintiffs' claims, meaning that the plaintiffs have to reimburse the insurers from the proceeds of their recovery. The effect of repealing the collateral source rule is that healthcare costs that once were shifted from health insurers to malpractice insurers must now be borne by the health insurers.) One of the broadest sets of reforms was enacted in California by the Medical Injury Compensation Reform Act (MICRA), which limits damages for pain and suffering to $250,000, places restrictions on attorney contingent fees, repeals the collateral source rule, allows health plans to require enrollees to submit malpractice claims to binding arbitration, and requires large damage awards to be paid in installments rather than in a lump sum.

Of all of the changes in the traditional malpractice system, only caps on damages and repeal of the collateral source rule appear to have reduced malpractice cost indicators, such as premiums. Many of the caps have been over-turned by state courts as unconstitutional violations of equal protection laws or deprivations of the constitutional right to a jury trial. Courts have questioned, for example, why it should be more difficult or less remunerative for victims of medical malpractice to receive compensation than for persons who have suffered other types of injuries covered by tort law.

Another malpractice crisis is taking place in the early 2000s. Renewed calls are being made for state legislative action. One recurrent proposal is some form of "no-fault" system, whereby the current tort approach would be replaced with an administrative scheme similar to workers' compensation. Victims no longer would have to prove that a physician was negligent in order to recover damages; instead, an administrative body would promulgate a list of compensable events and a schedule of associated compensation amounts. Proponents argue that more victims would receive compensation, and do so more quickly and with lower administrative costs, than under the current system. Opponents point out that, in order to be affordable, no-fault proposals would have to reduce the maximum amount of damages that victims could recover, with some proposals eliminating compensation for pain and suffering altogether. Critics question the fairness of depriving those who are most seriously injured of the large recoveries they are entitled to under the current system.

So far, the no-fault program has been adopted only in a limited fashion, in Florida and Virginia. In both states, one set of malpractice claims—those that stem from birth-related injuries—has been withdrawn from the traditional tort system, and victims are compensated under an administrative system similar to workers' compensation. Neither state program provides compensation for pain and suffering. Florida provides no award for lost future earnings. Nevertheless, some studies suggest that if attorneys' fees are subtracted and if the portion of the no-fault award that is placed in reserve for future expenses is included, the Florida program provides the same amount of compensation to victims as comparable cases do under the tort system. It remains to be seen, however, whether a no-fault program extending to a wider set of malpractice claims would be economically feasible without more significantly reducing the size of recoveries.

One legislative development that has affected the medical malpractice system is the National Practitioner Data Bank. Mandated by federal law, the data bank receives reports of all payments made by insurers in response to malpractice claims, including settlements, as well as adverse actions by state medical boards, hospitals, and managed-care plans. Hospitals are required to check the database in the course of making privileging and credentialing decisions, and state medical boards are permitted to access the data bank when considering applications for medical licenses. The purpose of the data bank is to prevent physicians (and other healthcare professionals) who have had their licenses or hospital medical staff privileges revoked, suspended, or limited, or who have been involved in a number of malpractice actions, from concealing these facts when they seek licensure, hospital privileges, or membership in a managed-care physician network. One result is that physicians may be reluctant to settle malpractice cases, preferring instead to go to trial and hope to be vindicated, in which case no report will be filed with the data bank. This in turn may place physicians in conflict with their malpractice insurers, who may prefer settlement as a means of keeping down their litigation costs.

troyen a. brennan (1995)

revised by maxwell mehlman

BIBLIOGRAPHY

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Bovbjerg, Randall R.; Tancredi, Laurence R.; and Gaylin, Daniel S. 1991. "Obstetrics and Malpractice: Evidence on the Performance of a Selective No-Fault System." Journal of the American Medical Association 265(21): 2836–2843.

Harvard Medical Practice Study. 1990. Patients, Doctors, and Lawyers: Medical Injury, Malpractice Litigation, and Patient Compensation in New York. Cambridge, MA: President and Fellows of Harvard College.

Helling v. Carey. 83 Wash.2d 514, 519 P.2d 981, 67 A.L.R. 3d 175 Wash (1974).

Studdert, David M., and Brennan, Troyen A. 2001. "Toward a Workable Model of 'No-Fault' Compensation for Medical Injury in the United States." American Journal of Law and Medicine 27(2,3): 225–252.

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Encyclopedia of Bioethics