Medical Professional Liability: Whither Goest?

From the July 2012 issue of the PLUS Journal – Author Paul A Greve, Jr., JD, RPLU analyzes the trend drivers in the medical professional liability market.

The Legal Environment

Large malpractice verdicts still occur with some regularity, but not as much as in the past. The most difficult venues are New York, Pennsylvania, New Jersey, Illinois, and Florida, all states without noneconomic damage caps. Shock verdicts of $10 million or more still occur, even in states with favorable legal climates like Minnesota and Wisconsin. There were some “jumbo” verdicts in 2011 and the first quarter of 2012. This is a trend that must be watched closely but has had no effect on market pricing to date.

The most volatile cases tend to involve severely injured children in obstetric and pediatric cases. Damage caps do not help much in those types of cases. Survivability has improved due to advances in medicine. Poor investment returns severely compromise the application of annuities to resolve these types of claims. While there is some compelling evidence that many in the trial bar are no longer as focused on medical malpractice litigation, the types of cases involving injured children are sought after through diverse advertising strategies, chiefly over the Internet.

There is no meaningful trend towards overturning favorable reform laws enacted over the last two decades. While there have been a few losses in this regard (such as Georgia and Illinois), there have been just as many, if not more, wins. A few states have even enacted more favorable legislation in recent years. Malpractice cases have become very expensive for the trial bar to pursue. This has discouraged filings unless the liability is more apparent and the damages significant.

Perhaps the most puzzling aspect of the current legal environment is that it has occurred during one of the worst economic downturns since the Great Depression. Patients have not been turning to the courts to seek financial compensation as evidenced by historically low frequency patterns. Some defense lawyers think the economic downturn has caused juries to be more reluctant to award money and thereby limited the size of verdicts. The struggling economy has not created increased malpractice litigation for perhaps the first time in history.

The questions raised are whether there has been a shift in the public’s attitudes towards malpractice litigation and if that shift will endure over time. The sustained period of low claim frequency attests to this shift in public perception. The trial bar’s volume of patients seeking advice for potential litigation has dropped off significantly over the last ten years. Some plaintiff’s firms are focusing on other types of civil litigation such as products liability and class action suits.

Malpractice reform laws have worked and the attendant publicity of the need for reform laws appears to have changed public perception. The recent debate over the need for health care reform often highlights discussions of malpractice reform laws, particularly efforts to reduce the practice of defensive medicine. This media focus serves to keep the topic of malpractice before the general public.

There very likely are no factors on the horizon that would cause a dramatic shift in public attitudes to malpractice litigation. This should continue to influence favorable claim frequency trends. The wild card could be claim severity trends. Malpractice litigation is still volatile, especially when egregious medical errors occur, no matter the age of the patient. Cases involving children who incur lifelong disabilities are the most expensive. Noneconomic damage caps have helped industry results by limiting awards, but cases involving severely injured children remain the most dangerous.

The Impact of Reform and Technology: More Liability?

Many industry observers and underwriters are fearful of the effects of health care reform and technology, such as the electronic medical record (EMR), will have on medical professional liability. But reform and continuing technological developments may also bring significant improvements in patient care and patient safety that will prevent adverse outcomes resulting in claims.

Reimbursement cuts have driven down many hospital balance sheets. The pressures will likely increase under reform and the transition from a fee-for-service model to a bundled payment model. A concern of HPL underwriters has been and will be the hospital’s financial commitment to patient safety represented particularly in the budget for staffing, technology, and organizational initiatives dedicated to patient safety and risk management.

The trend towards increased consolidation in the health care industry will likely continue unabated. Hospital systems will continue to get larger through mergers and acquisitions, including other hospitals and physician practices. Health care is big business as evidenced by aggressive hospital bill collection strategies. A key concern is that the delivery of care will become more impersonal, thereby creating issues of patient satisfaction, especially when adverse events occur. This could translate into larger verdicts in the future. Health care organizations will need to manage the public’s expectations as to the future delivery of care.

As health care organizations grow in size and acquire, manage, or joint venture to achieve clinical integration strategies, the potential for enterprise liability results. There is more potential for ostensible agency and vicarious liability, especially now for employed physicians.

Hospital claims strategies become trickier with employed physician co-defendants.

Hospitals are not used to defending physician claims. The hospital’s higher limits are now more exposed for physician liability. Offsetting this potential increase in liability are the opportunities for a more coordinated defense and focused risk management and quality initiatives with physician hospital employees.

The EMR is seen as a potential cause of increased claims. Implementation of the EMR will no doubt create many glitches and some may well result in harm to patients. Some think the EMR will be a bonanza for the trial bar making it easier to demonstrate that the standard of care was not met. But the reverse can also more easily be proven as well. It is safe to say that the EMR will help the defense in some litigation and hurt it in others.

Telemedicine is another relatively new technological development and it has caused underwriters some nightmares with the complexity of care delivered across multiple sites, especially across state and national borders. But telemedicine should continue to improve care by providing expert opinion not previously or timely available. There have been very few cases to date involving telemedicine.

Technology driven initiatives, like clinical informatics, will aid patient safety and represent an exciting future. So does the potential use of super-computers to search the vast medical literature for answers that may improve the care for specific patients. Patient simulation labs are another important advancement in patient safety.

PLUS members can read this entire article in the PLUS Journal archive.

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About plushq

The Professional Liability Underwriting Society (PLUS) was founded in 1986 by industry professionals who recognized the need for a forum for individuals involved in the field of professional liability. The Society is a non-profit organization with membership open to persons interested in the promotion and development of the professional liability industry. Membership consists of over 6,500 individuals, representing over 1,000 companies active in the many fields of professional liability. PLUS currently receives the support of more than 200 companies through corporate membership. PLUS is recognized as the primary source of professional liability educational programs and seminars, assistance to its members to help serve clients, and information regarding professional liability. The Society is continually seeking new means to fulfill its mission statement and better serve its members.

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