STANFORD, Calif., October 30, 2014 – A new study co-authored by two professors from Stanford and one from Harvard documents a sharp reduction in the rate of paid medical liability claims and identifies six developments that are likely to shape medical liability policy during the next decade.

The study, published today in the Journal of the American Medical Association (JAMA), is the work of Stanford Professors Michelle M. Mello and David M. Studdert, who share joint appointments with Stanford Law School and the Stanford University School of Medicine, and Allen Kachalia, an associate professor with Harvard Medical School.

The JAMA article says the researchers found that rates of paid claims against physicians decreased from 18.6 to 9.9 paid claims per 1,000 physicians between 2002 and 2013, with an estimated annual average decrease of 6.3 percent for medical doctors and a 5.3 percent decrease for doctors of osteopathy. It is based on data from the National Practitioner Data Bank and the American Medical Association’s Physician Masterfile.

Among claims that resulted in some payment, the authors found that the median amount paid increased from $133,799 in 1994 to $218,400 in 2007, an average annual increase of 5 percent per year. Since 2007 the median payment has declined slightly, reaching $195,000 in 2013, an average annual decrease of 1.1 percent. These data came from the Medical Liability Monitor’s Annual Rate Survey.

Good time to consider improvements

The study notes that the current stability in claims makes this the ideal time to be thinking about reforms in the medical liability system. “After years of turbulence, the medical liability environment has calmed,” said Mello. “Although many aspects of the malpractice system are dysfunctional, causing angst for physicians, the cost of malpractice claims and insurance have been stable for the last few years and the number of claims has been declining.”

She added, “Usually, attention is only focused on reform during ‘malpractice crises,’ but highly charged political environments are not conducive to cool-headed policy decisions. This current period of calm is a good time to be thinking about reforms that could improve our medical liability system.”

The authors report that traditional liability reforms fail to address problems with the malpractice system’s two core functions: compensating negligently insured patients and deterring substandard care. For example, they note that studies of tort reforms—law changes such as caps on noneconomic damages that are designed to reduce the volume and cost of malpractice litigation—suggest that they are only modestly effective in controlling costs.

“These traditional reforms have been disappointing, especially in light of the political battles that have to be fought to pass them,” said Mello. “Increasingly, policy makers are interested in finding better approaches.”

The authors describe seven nontraditional approaches to medical liability reform, noting they are “more politically and ethically appealing because they stand to benefit not just physicians and insurers but also patients.”

Among the most promising innovations, they say, are communication-and-resolution programs in which health care practitioners and institutions openly discuss adverse outcomes with patients and proactively seek resolution, which may include offering compensation before the patient files a claim. Early programs pioneered by the Lexington (Ky.) Veterans Affairs hospital and the University of Michigan Health System have reported substantially lower malpractice claims and costs. Stanford University reported a 36 percent decrease in claim frequency and a 32 percent average annual reduction in insurance premiums in the first three-and-a-half years of its program.

Future trends over next 10 years

The authors predict six forces will reshape medical liability policy during the next decade:

• Continued debates and disagreement about traditional tort reforms, especially damages caps, in courts, in legislatures and on ballot initiatives, which “sap political energy and divert attention from alternatives that may achieve what caps will never deliver: a more just, reliable and accessible liability system that promotes patient safety”
• Expansion of communication-and-resolution programs. For starters, the Agency for Healthcare Research and Quality is planning to support a nationwide scale-up of this approach.
• Greater emphasis on laws that facilitate rapid private resolutions of medical injury disputes
• More consideration of “safe harbor” laws that give health care practitioners and institutions a defense to a malpractice claim if they can show they followed an applicable clinical practice guideline in caring for a patient
• Growing interest in leveraging the national movement toward consolidation in health care to improve resolution of medical injuries. As more physicians are employed by hospitals and health systems, those organizations can play a more prominent role in the liability system.
• The next malpractice insurance crisis. Liability insurance crises have recurred in regular cycles since the expansion of malpractice litigation in the 1960s and, the authors say, “another may well be in the near future.”

The report concludes, “Action now to reduce the amplitude of the next medical liability cycle is both prudent and feasible. Further testing of nontraditional reforms, followed by wider implementation of those that work, holds the most promise. Prospects for permanent improvement in the medical liability climate depend on it.”

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