Medical Malpractice Tort Reform - The Health Law Partners, P.C.

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Medical MalpracticeTort ReformBy David M. Ottenwess, Esq, Meagan A. Lamberti, Esq,Stephanie P. Ottenwess, Esq, and Adrienne D. Dresevic, EsqThe credit earned from the Quick CreditTM testaccompanying this article may be applied to theAHRA certified radiology administrator (CRA)operation management domain.Executive Summary A tort is generally defined as a civil wrongwhich causes an injury, for which a victimmay seek damages, typically in the formof money damages, against the allegedwrongdoer. An overview of the tort system is detailed,specifically in the context of a medicalmalpractice lawsuit, in order to provide abetter understanding of the practicalevolution of medical malpractice litigation and its proposed reforms. Risingpremiums and defensive medicine arealso discussed as part of the tort reformdialogue. Because medical malpractice litigationwill never disappear entirely, implementing sound risk management andcompliance programs are critical toevery radiology department in order toimprove the safety and quality of thecare that its radiologists and technologists provide.The mere mention of theterm “tort reform” is enough to evokegreat passionate response from its myriadproponents and detractors.* For the pastthree decades, medical malpractice tortreform has remained a highly polarizing,heavily contested legal issue which affectsnot only physicians and attorneys, butalso the great many Americans seekinghealthcare each year. But why does thislegislation inspire such fervency in thosethat revile it and in those that championit? Ask its critics, which typically includemuch of the plaintiffs’ bar, and the answer is simple: medical malpractice tortreform strips individuals of their abilityto redress injuries that they have incurredand right the perceived wrongs that havebeen committed against them. To itsadvocates, the answer is equally clear:medical malpractice tort reform is themechanism by which defensive medicineis prevented, doctors’ personal and pro*Tort reform is a term that is often used interchangeablywith medical malpractice reform. As will be described below, there are many different types of torts. Medical malpractice, also referred to as professional negligence, is onlya subset of the tort family. For our purposes, however, theterms tort reform, medical malpractice reform and professional negligence will all be utilized within this article andwill all mean the same thing.30March/April 2011RM332 p30-36 Features.indd 30 fessional livelihoods are protected andlitigious plaintiffs with frivolous lawsuitsare deterred from bringing suit. Whileboth sides make convincing arguments,the reality of medical malpractice tort reform lies somewhere in the middle.An Introduction to Tort LawMedical malpractice, or negligence law,is just one subset of the legal behemoththat is tort law. A tort is generally definedas a civil wrong which causes an injury,for which a victim may seek damages,typically in the form of money damages,against the alleged wrongdoer.1 Tort lawis that body of law that serves as the vehicle by which tort liability can be soughtin a court of law against such wrongdoersand generally serves to award damages toa victim sufficient to restore him to theposition he would have been in, had thetortious conduct not occurred.1 Tort lawtypically governs three legal theories ofa lawsuit: negligence, strict liability, andintentional torts.The element of damages in tort law isof major significance and is integral tounderstanding the overall concept of tortreform, mainly because the “runawayjuries” have been the subject of greatmedia attention and scrutiny. In tort law,radiology management3/14/11 4:25:20 PM

While medical malpractice reform legislation was introduced at both the stateand federal levels, attempts to pass real reform have taken hold on the state level,while attempts at passing federal legislation have been unsuccessful.compensatory money damages can besought by a victim for both economicand noneconomic losses.1 Economicdamages seek to compensate an individual for quantifiable economic losses,such as lost income and medical bills,while noneconomic damages are morespeculative and seek to compensate anindividual for noneconomic losses, suchas mental distress and pain and suffering.1 In certain rare scenarios, generallyinvolving egregiously reckless conduct orbehavior, a victim may also seek punitivedamages against a wrongdoer.1A significant medical malpractice crisis in the United States occurred in the1970s and 1980s.1 During this time period, there was a rapid rise in the number of medical malpractice claims filed,as well as the size of awards made inmedical malpractice actions. It has beenestimated by the American Medical Association that in 1975 as many as 14,000malpractice suits were filed against physicians. The average jury award in thesesuits was 171,000.1 The influx of medicalmalpractice claims and their subsequentjury awards created a chain reaction thathad a far reaching effect. Many privateinsurance companies began withdrawingfrom providing insurance coverage, andthe insurers that remained responded byraising malpractice premiums. In 1975, itwas documented that malpractice premiums had increased from anywhere from100% to 750%.1 The sudden increase ininsurance premiums, coupled with theloss of many private insurance companies from the market, resulted in somephysicians leaving particular practice areas, or retiring from the practice of medicine altogether. It was the culmination ofthese factors that sparked a call for policychange at both the state and federal levels, and with that, modern medical malpractice tort reform was born.Tort Reform: What Has Been DoneIn response to the criticisms of medical malpractice litigation and the medical malpractice crisis of the 1970s and1980s, physicians and malpractice insurance carriers began to lobby heavily forchanges to reduce medical malpracticetort liability. Proponents of medical malpractice tort reform argued that as a result of changes to laws governing medicalmalpractice claims and their associatedawards, malpractice insurance premiumswould decrease. They further argued thatlower insurance premiums for healthcareproviders would increase the number ofpracticing physicians, lower the costs ofhealthcare for consumers and result in anoverall improvement in available medicalcare. These arguments obviously struck achord in state legislatures throughout thecountry because by the mid 1980s, medical malpractice tort reforms had beenwidely adopted. It is important to notethat while medical malpractice reformlegislation was introduced at both thestate and federal levels, attempts to passreal reform have taken hold on the statelevel, while attempts at passing federallegislation have been unsuccessful.State ReformTort law is a function of state law, witheach state providing different rules forbringing about a tort claim. Procedurally,various states may approach tort claimsdifferently; however, the basic premiseof a tort claim and the elements that aplaintiff must prove in order to bring asuccessful cause of action remains consistent across all 50 states.State laws capping noneconomicdamages has been just one of the legislatively implicated medical malpracticetort reforms. Advocates of tort reformargue that noneconomic damages arearbitrary and unpredictable and, assuch, complicate the settlement process.Further, it is argued that losses for emotional distress and pain and sufferingare intangible and exceedingly difficultto assign a dollar value. Currently, over 30states have caps on noneconomic damagesas applied to medical malpractice actions.3These limitations on noneconomic damages vary across jurisdictions: some statesemploy caps on both economic and noneconomic damages in medical malpracticeawards; some states apply noneconomicdamage caps only to certain types of malpractice claims, such as obstetrics; and,other states allow for increased recoveryin particular scenarios, such as where thepatient has died or has substantial physical injury.1 Typically, the limit on noneconomic damages varies on a state bystate basis, with caps on damages rangingfrom 250,000 to 500,000.1The tort law concept of joint andseveral liability has also undergone significant tort reforms in the context ofmedical malpractice claims. Traditionally, joint and several liability allows aplaintiff, who has been injured by twoor more wrongdoers, to recover the fullamount of his damages from any one ofthe defendants that may have been involved in the tortious conduct. This hashistorically resulted in a injured partyseeking damages against the defendantwith the most financial resources. Aparty sued under a theory of joint andseveral liability may then seek contribution from the additional parties at fault,so that the other defendants have to sharein the payment of damages. Often times,however, contribution cannot be achievedbecause the additional at fault parties lackthe financial means to contribute. As a result, proponents of tort reform argue thatjoint and several liability is an inequitableconcept because one defendant, generallyradiology managementRM332 p30-36 Features.indd 31 march/april 2011313/14/11 4:25:20 PM

Medical Malpractice Tort Reformthe defendant with the most financialresources, is required to pay damages inan amount considerably more than hisshare of the total liability. This criticismhas caused over 40 states to enact tortreforms to the joint and several liabilitysystem, either outright abolishing jointand several liability or requiring an individual defendant to pay an amount ofdamages proportionate to his share ofthe overall fault.4Michigan serves as an illustrativeexample of how specific states have addressed medical malpractice tort reform.In recent years, Michigan has passedsweeping legislation curtailing frivolouslitigation in the context of medical malpractice. For example, in 1986 the statepassed a rule allowing a court to assessattorneys’ fees and costs for filed actionsthat are perceived as frivolous.5 In 1993,Michigan also enacted noneconomicdamages caps in medical malpracticeactions, limiting the award of noneconomic damages in medical liability casesto 280,000 for ordinary occurrencesand 500,000 in cases where the plaintiffhas suffered serious damage to the brain,spinal cord, or reproductive organs.5 In1995, the state passed a reform to the ruleof joint and several liability, barring theapplication of joint and several liabilityin the recovery of all damages, except incases of medical malpractice where theplaintiff is determined to have no allocation of fault.5 The Michigan state legislature additionally passed reforms tothe collateral source rule in the contextof medical malpractice litigation.5 Priorto passage, the collateral source ruleprohibited the presentation of evidenceat trial that an injured party has receivedcompensation for his losses from anothersource, such as an insurance policy. Thecollateral source rule reform passedby the state of Michigan as part of theoverall medical liability reform packagenow provides that medical malpracticeawards be offset by the amount of collateral source payments received by theplaintiff.5Through the adoption of comprehensive medical malpractice tort reform,32March/April 2011RM332 p30-36 Features.indd 32 Michigan has achieved the near totalelimination of all medical malpracticelitigation. Indeed, reform began to gaintraction in Michigan in the early 2000sfollowing a series of conservative holdings by the State’s Supreme Court strictlyinterpreting the key medical malpracticereform statutory provisions. Reportedclaims for the period 2000-2007 showa 77% decrease in court filings.6 Thisis a significant drop in cases which hasresulted in a modest drop in insurancepremiums.Federal ReformDespite the adoption of tort reformmeasures throughout a variety of UnitedStates jurisdictions, tort reform has yetto gain momentum on a federal level.Attempts at passing federal legislationrestricting medical malpractice liabilityhave failed since the 1970s. While contemporary politicians have campaignedfor the adoption of far reaching federaltort reform, all have failed in their efforts. In 2004, President George W. Bushproposed tort reforms affecting the liability exposure of physicians and drugand medical equipment manufacturers; however, opposition in the UnitedStates Senate prevented the enactmentof this federal legislation.7 Additionalproposals made in 2005 sought to capnon-economic damages in medical malpractice actions, restrict the availabilityof punitive damages, restrict the statuteof limitations for medical malpracticesuits, and limit contingency fees collected by plaintiffs’ attorneys in jury awards.7Again, this federal legislation failed to getout of Congress.With efforts at federal tort reformlegislation stalled, it is impossible to determine the effect federally implicatedrestrictions on medical malpractice liability would have on overall nationalhealthcare costs. It is, therefore, criticalto consider whether medical malpracticetort reform at the state level has achievedthe movement’s stated goal: to reducehealthcare expenditures.Rising Premiums and DefensiveMedicineOne of the greatest criticisms leveled atthe medical malpractice tort system isthat the defense of medical malpracticeactions needlessly increases the costs ofhealthcare in the United States. Advocatesof reform have long argued that the everpresent threat of litigation forces healthcare providers to charge higher rates tooffset the costs of rising malpractice insurance premiums, as well as promotesthe practice of defensive medicine (theoveruse of diagnostic testing and healthservices in order to minimize a physician’s liability exposure). The contentionthat medical malpractice tort reform isthe soundest means by which to stabilizemalpractice insurance premiums andgenerally lower healthcare costs remainsa controversial stance among both thelegal and medical communities.Much of the research conducted onthe medical liability system suggests thatcosts surrounding medical malpracticelitigation are a small fraction of overallhealthcare spending in the United States.The overall cost of defending medicalmalpractice claims and compensatingvictims of medical malpractice in 2007was estimated at 7.1 billion, a mere0.3% of the annual healthcare costs forthat year.8 Even when these figures account for the use of defensive medicine,as well as the expense of defending medical malpractice claims and compensatingplaintiffs, the total costs associated withmedical malpractice litigation are modestrelative to overall healthcare spending. In2008, the annual medical malpractice tortsystem costs, which included the costs ofCosts surrounding medical malpractice litigationare a small fraction of overall healthcare spendingin the United States.radiology management3/14/11 4:25:20 PM

defensive medicine, were estimated to be 55.6 billion, or 2.4% of the total healthcare costs for the year.9So why have rising healthcare costsbeen routinely evoked to demand theadoption of medical malpractice tortreform? The answer may lie with theperception that the practice of defensivemedicine, as well as increased malpractice insurance premiums, are the directresult of increased litigation. Empiricalevidence has shown, however, that malpractice insurance premiums are muchless affected by medical malpractice litigation than commonly believed and thatthe costs of defensive medicine are oftenexaggerated.The Rising Costs of “Doing Business”Advocates of medical malpractice tortreform point to insurance premiumincreases as evidence that medical malpractice claims drive the rising cost ofhealthcare. While there is no questionthat rising insurance premiums place anadditional financial burden on physiciansseeking malpractice coverage, premiumrates are not based solely, or even in largepart, upon medical malpractice claimor settlement payouts.7 This is becausemost insurance companies’ profits arenot generated from the premiums theyreceive from their insured physicians.7Most malpractice insurance carriers facea delay between the time they receive premium payments from their insured physicians and the time they have to pay outmedical malpractice claims. Due to thisdelay, many insurance companies investthe premiums they receive in bonds orother financial securities.7 It is the returnon these investments, not malpracticeinsurance premiums, that generate aninsurance company’s profits. Therefore,even if the number of malpractice claimpayouts an insurance company makes isstable, the company may still be forced toraise premiums if their investments failto yield adequate returns.7In addition, premiums do not onlyrepresent a malpractice insurer’s indemnification costs. Malpractice insurancepremiums represent a variety of costs[Research] indicates that rising malpractice premiums are nottied to an influx of medical malpractice filings.assumed by an insurance company andpassed on to their insured physicians.These costs may include a company’sestimated indemnification costs, defensecosts, operating fees, reinsurance costs,and profit or surplus building.9 Tortreform opponents argue that even withlegislature in place to limit jury awardsor settlements in medical malpractice actions, rising insurance premiums wouldstill be a financial hardship faced by themedical community, as the underwritingcycle and malpractice premiums are affected by much more than the threat ofmedical malpractice litigation.Research performed in states thathave enacted tort reform in the contextof medical malpractice litigation also indicates that rising malpractice premiumsare not tied to an influx of medical malpractice filings. In 1986, Florida enactedmedical malpractice tort reforms; however, despite this legislation, malpracticepremiums in the state have increased onaverage from 30% to 50% since 2000.7In 2003, Florida, after a second bout oftort reform measures, experienced anincrease in insurance premium rates byas much as 45%.7This evidence challenging the connection between tort reform and malpracticepremiums is not just limited to the stateof Florida. In 1995, Texas passed legislation limiting the amount of punitive damages available in jury awards.7 Despite thismeasure, insurance premiums in the statecontinued to increase. These statistics castdoubts on the claim that tort reform is themost effective way to manage skyrocketing malpractice premiums rates and reduce overall healthcare costs.The Real (Or Perceived) Costs ofDefensive MedicineTort reform proponents also typicallycite the rise of defensive medicine as theother major negative residual effect ofmedical malpractice litigation. Those favoring reform argue that litigation wearyphysicians order unnecessary and exhaustive tests on their patients, which inturn, drives up the cost of healthcare. Evidence appears to suggest, however, thatboth the impact and the prevalence ofdefensive medicine has been overstated.Much of the support for the proposition that the practice of defensivemedicine is the costly offshoot of medical malpractice litigation comes from acontroversial 1996 study. In it, the costsof care for hospitalized elderly Medicarepatients with heart disease in states bothwith and without medical malpracticetort reforms were analyzed.7 Based onthe findings, it was concluded that tortreforms resulted in hospital costs savingsof 5% to 9%.7 These findings were thenapplied to the entire healthcare system,hypothesizing that tort reform could leadto a reduction of over 50 billion annuallyin healthcare expenditures.7 Tort reformsupporters used this study to buttresstheir claim that without the ever looming fear of litigation, physicians are freerto order fewer diagnostic tests which, infact, reduces their medical spending andlowers overall healthcare costs.While these findings became vindication for advocates of medical malpracticetort reform, subsequent research has criticized many of the hypotheses containedwithin the study. In 2003, the UnitedStates Government Accountability Office(GAO) issued a statement questioningthe applicability of the findings to the entire healthcare system.7 The GAOs reportargued that due to the limited scope ofthe study and its examination of patientbehavior in the specific clinical situationof elderly patients with cardiac issues,“the study results cannot be generalizedto estimate the extent and cost of defensive medicine practices across the healthcare system.”10 The report also concludedradiology managementRM332 p30-36 Features.indd 33 march/april 2011333/14/11 4:25:20 PM

Medical Malpractice Tort Reformthat while members of the medical community admitted that defensive medicineexists to some degree, the instance of itsactual practice is extremely difficult tomeasure.10 This difficulty in quantifyingthe prevalence of defensive medicine inturn makes it more onerous to hypothesize any sort of costs savings for its reduction in practice.More recent studies also reflect thetenuous connection between tort reformand its impact on the practice of defensive medicine. A 2004 study performed bythe Congressional Budget Office (CBO)applied the methods employed by the1996 study to a wider set of medical ailments.7 It was concluded by the agencythat there is no evidence linking restrictions on tort liability to reduced medical spending. A second analysis of thelink between defensive medicine andhealthcare costs performed by the CBOadditionally confirmed no significantstatistical difference in medical spendingbetween states with and without medicalmalpractice tort limits.7One of the major reasons that medicalmalpractice tort reform has not definitively been found to effectively managethe practice of defensive medicine is because defensive medicine has been shownto be motivated by more than just a fearof litigation on physicians’ parts. Somebehavior that could be characterized asdefensive medicine may be motivatedmore by the increased income additionaldiagnostic testing can generate for physicians, or the benefits a patient receivesfrom additional testing, and less by fearsof liability exposure.7 Additionally, it isunclear exactly how strongly concernsover medical malpractice liability actuallyaffect a physician’s treatment decisions.Medical malpractice tort reform mayalso do little to curtail the practice ofdefensive medicine because empiricalevidence seems to suggest that physicianstypically have high levels of malpracticeconcern, in states both with and withouttort reform. Research has shown thatphysicians in states with high malpractice risks have reported nearly the samelevel of concern over liability exposure34March/April 2011RM332 p30-36 Features.indd 34 as physicians in states with the low malpractice risks due to heightened medicalmalpractice tort reform.11Risk Management and ComplianceProgramsNo matter the level of success in instituting tort reform, medical malpracticelitigation will never disappear entirely. Assuch, every radiology department mustfocus its efforts at reducing risk by establishing a comprehensive risk managementand compliance program to improve thesafety and quality of the care that its radiologists and technologists provide. Akey component of any program is thecontinuous assessment of the department’s quality management processeswith the focus on implementing changeswhere necessary to ensure patient safety,to ensure the provision of high qualityand accurate medical care, and to allowthe imaging department to achieve andmaintain a competitive edge.The structure of any risk management and/or quality and performanceimprovement program will certainlyvary depending on the size of the radiology department or group. However, it iswidely accepted that with varying degreesof focus, any risk management programmust include implementing processes tomonitor performance; analyzing and depicting data; implementing change andmeeting regulatory requirements in theareas of patient safety, process implementation and improvement, qualityand compassionate customer service,and professional staff education and assessment.12Importantly, although voluntarily implementing these quality related programsin order to reduce risk to avoid allegations of medical malpractice is necessaryfor success, many of these processes arerequired by the very organizations thatregulate the radiology profession—thusmaking such implementation of theseprograms mandatory.Every radiology department or groupmust focus considerable effort and investtime in the development and maintenance of a comprehensive risk management and compliance program to improve patient safety and quality of carenot only for the welfare of patients andto maintain a competitive edge, but toreduce the ever present risk of and exposure related to medical malpractice.ConclusionWhether a champion of comprehensivetort reform or a critic, tort reform is hereto stay. The question that remains is whatform tort reform will take in the future.With recent federal healthcare reformcreating sweeping changes to the American healthcare landscape, there is a question of how state legislatures will respondto an environment where healthcare services are more widely available to a vastnumber of Americans. Will the greateraccessibility to healthcare create an onslaught of medical malpractice litigation?Will additional tort reforms be adoptedprophylactically to defend against such apossibility? At this point in time, it is toosoon to discern exactly how states andlobbyists alike will attempt to addressthis conceivable increase in medical malpractice litigation across a variety of physician practice areas. However, no matterwhat changes federal healthcare reformbrings to the area of medical malpracticelitigation, it is prudent to employ a broadgauge risk management and complianceprogram that offers future protectionfrom needless litigation.Medical malpractice litigation will never disappear entirely.As such, every radiology department must focus its effortsat reducing risk by establishing a comprehensiverisk management and compliance program.radiology management3/14/11 4:25:21 PM

References1Hubbard FP. The Nature and Impact of the“Tort Reform” Movement. Hofstra LawReview. 2006;35:438,439.2Black’s Law Dictionary. Second Pocket ed.2001.3American Tort Reform Association. Available at:http://atra.org/issues/index.php?issue 7338.Accessed December 6, 2010.4Shepherd JM. Tort Reforms’ Winners and Losers:The Competing Effects of Care and ActivityLevels. UCLA Law Review. 2008;55(4):905,920.5American Tort Reform Association. Availableat: http://www.atra.org/states/MI. AccessedDecember 6, 2010.6State of Michigan Office of Financial andInsurance Regulation. “Evaluation of theMichigan Medical Professional LiabilityInsurance Market.” October 2009.7Kysar DA, McGarity TO, Sokol K. MedicalMalpractice Myths and Realities: Why anInsurance Crisis is Not a Lawsuit Crisis.Loyola of Los Angeles Law Review. 2006;39(2):785,789.8National Association of Insurance Commissioners. “Countrywide Summary of Medical Malpractice Insurance Calender Years1991–2008.” 2009.9Mello M, Chandra A, Gawande AA, StuddertDM. National Costs of the Medical LiabilitySystem. Health Affairs. September 2010;29(9):1569–1577.10Government Accountability Office. “MedicalMalpractice: Implications of Rising Premiums on Access to Health Care.” August 29,2003.11Carrier ER, Reschovsky JD, Mello MM, Mayrell RC, Katz D. “Physicians’ Fears of Malpractice Lawsuits Are Not Assuaged by TortReforms.” Health Affairs. September2010;29(9):1585–1592.12Kruskal JB, Anderson S, Yam CS, Sosna J.Strategies for establishing a comprehensivequality and performance improvementprogram in a radiology department. RadioGraphics. 2009;29:315–330.13American College of Radiology. Available quality safety. Accessed January10, 2011.14American Board of Radiology. Available at:http://www.theabr.org/moc/moc landing.html. Accessed January 10, 2011.David M. Ottenwess, Esq is the founding partner ofthe Detroit law firm, Ottenwess, Allman & Taweel,PLC. Mr. He is a civil litigation specialist, concentratinghis practice on the defense of medical professionalliability cases with an added interest in radiologymatters. David is a frequent speaker at hospitals beforeradiology staff physicians and residents on mattersinvolving risk prevention and management, litigation,documentation, and insurance alternatives. He maybe contacted at dottenwess@ottenwesslaw.com.Meagan A. Lamberti, Esq is an associate withOttenwess, Allman & Taweel, PLC. She focuses herpractice in the areas of general litigation and healthlaw. She graduated from Wayne State University LawSchool in 2009, where she served on The Wayne LawReview’s editorial board. Meagan can be contactedat mlamberti@ottenwesslaw.com.Stephanie P. Ottenwess, Esq is a partner with TheHealth Law Partners, PC. She has been a litigator andappellate practitioner since 1994 focusing primarilyon medical legal issues, successfully defending majorhealthcare institutions and practice groups as well asindividual practitioners. In addition, she is consultedby both healthcare facilities and practice groups for hercritical evaluation of any issue affecting complianceand risk management. Stephanie can be contacted atsottenwess@thehlp.com.Adrienne D. Dresevic, Esq is a founding partner ofThe Health Law Partners, PC. She graduated MagnaCum Laude from Wayne State University Law School.Practicing healthcare law, she concentrates in Starkand fraud/abuse, representing various diagnosticimaging providers. Adrienne can be contacted atadresevic@thehlp.com.radiology managementRM332 p30-36 Features.indd 35 march/april 2011353/14/11 4:25:21 PM

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An Introduction to Tort Law Medical malpractice, or negligence law, is just one subset of the legal behemoth that is tort law. A tort is generally defined as a civil wrong which causes an injury, for which a victim may seek damages, typically in the form of money damages, against the alleged wrongdoer.1 Tort law -

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