Malpractice Insurance and Malpractice Avoidance
Fact: The number of lawyers in the USA exceeded 1 million for the first time in 2003. And the number of
people taking the Law School Admission Test (LSAT) in 2003 is near the record 152,242 set during the last
recession Source: USA Today Dec 26, 2003
Fact: The NEJM estimated Nov 11, 2004 that 44,000-98,000 preventable deaths are caused each year by
medical negligence. (Read an excellent analysis refuting these numbers here. )
Combining the effects of the above 2 facts has resulted in the fact below:
Fact: In early January 2005, Towers Perrin released its U.S. Tort Costs: 2004 Update. The study found that
over the 28 years since 1975, when they were first identified separately, medical malpractice cost increases
have outpaced other tort areas, rising at an average of 11.8 percent a year, compared with 9.2 percent for
all other tort costs. In 2003 medical malpractice costs, at almost $27 billion, cost each American an average
$91 a year. This compares with $5 a year in 1975.
The current medical malpractice crisis has its origin in several foci which overlap to produce a confluence of
conditions that perpetuate the current climate of staggering increases in malpractice rates and increased fear
of litigation. The factors that appear to be most responsible are 1. drastic increases in the average "award"
paid by malpractice carriers [The cost and frequency of medical malpractice claims continue to rise. A study by Aon Risk Services,
released at the beginning of 2004, finds that hospital professional liability and physician liability claims costs have increased at a steady 9.7
percent since 2000 and are likely to rise at the same rate in 2004. Frequency, or the number of claims, is growing at 3 percent a year; claim
severity (the dollar amount) is increasing 6.5 percent annually]., 2. poor investment return of malpractice carriers due to
recession, 3. underpricing of malpractice insurance for several years [According to data from the National Association
of Insurance Commissioners, medical malpractice insurers’ return on net worth was a negative 7.4 percent in 2002, down from a negative
4.7 percent in 2001. Results have deteriorated steadily from 1998 when the rate of return was 7.6. Results in 2002 were worst in the
following states: Arkansas, Nevada, Montana, Mississippi, Illinois, and Missouri, with return on net worth ranging from minus 33.7 percent in
Arkansas to minus 24.4 percent in Missouri.], 4. an adversarial tort system with lawyers permitted to create class
action suits without scientific evidence of merit, 5. advertising by lawyers regarding specific events or
products which had the potential to cause injury, 6. declining consumer confidence in the health care industry
partially influenced by increasing out-of-pocket costs each year for health insurance, 7. the departure of
many malpractice carriers (including St. Paul's, the second largest in the US) from the market due to lack of
profitability in light of astronomical malpractice "awards" (their departure effectively reduced the numbers of
remaining carriers which often refuse to insure new physicians or charge astronomical rates for physicians
who have been previously sued whether liable or not) and 8.. the "me" mentality of Americans in which there
is a perception that life should be free of risks even when the patient engages in a treatment with known and
patient-accepted risks of injury. There certainly are unnecessary patient deaths and injuries from medical
malpractice but these may be uncommon [Prevalence of Medical Malpractice: A study (generally known as the Harvard study)
commissioned by New York State in 1986, and released in 1990, showed that actual malpractice is relatively rare. Of the New York hospital
cases examined, the incidence of adverse events, or injuries resulting from medical "interventions" or treatment, was 3.7 percent. The
percentage of adverse events due to what the physician team characterized as "negligence" (not necessarily a legal definition) was 1
percent. However, only one in eight who suffered from an adverse event due to negligence filed a medical malpractice claim, and only one
in 15 received compensation. Most adverse events resulted in only minimal and transient disability and most of the patients' medical care
expenses were paid for by health insurance. This helps to explain why only a small percentage of patients who are injured as a result of
negligence file medical malpractice claims. However, a significant portion (22 percent) of patients who did not file medical malpractice
claims suffered moderate or greater incapacity. In a second phase of the study, researchers confirmed that some of the tort claims filed
provided little or no evidence of medical malpractice or even an adverse event, suggesting that the tort system is "very error-prone," at least
in its initial stages.] .
Malpractice coverage is available in claims made and occurrence types, however occurrence is increasingly
difficult to acquire:
Claims Made Policy:
When you first purchase a Claims Made Policy the premium is artificially depressed. The premium is increased in steps over
the first four years.
When a Claims Made Policy is canceled a "reporting endorsement" or "tail" is offered by the company. The cost of the "tail"
over recent years has been two to three times the annual premium.
If you choose to purchase the "tail" you will have coverage for an indefinite period of time for incidents which occurred
between the beginning of the Claims Made Policy and the cancellation date.
If you do not purchase the "tail" there will be no coverage for any claim that is made after the cancellation date - even though
the incident may have occurred between the beginning of the claims made policy and the cancellation date.
Occurrence Policy:
An Occurrence Policy does not have artificially reduced premiums. You pay the amount of premium that the actuaries
determine is appropriate for the policy period. Once you purchase the policy and pay the premium you will always be covered
for incidents that occur between the beginning of your Occurrence Policy and the cancellation date.
Policy Specifics:
1. Policy rates are determined based on several factors including the prior claims against you,
the area of specialization, the area of subspecialization, specific procedures or surgeries
performed, etc.
2. Most carriers have a stratified "class" of insurance, usually one of eight classes depending
on the practice specialty. This will be the starting point in the computation of the malpractice
insurance rates. Some carriers will amalgamate pain management into the rates charged for
the primary ABMS specialty (such as pain management with a background in
anesthesiology). This may lead to absurd differences in malpractice rates for physicians of
two different backgrounds performing the same pain management techniques and with
otherwise identical practices. Progressive malpractice carriers have therefore created a pain
management/pain medicine specialty rates. Because of the diversity in pain management
risks and procedures, further stratification is seen by the adoption of subclasses based on
specific procedures performed. My insurer has 4 levels of pain management with the highest
level including cordotomy as a performed procedure.
3. Certain carriers are now excluding perceived high risk procedures. Due to a massive
litigation crisis in WV, radiofrequency zygapophyseal neurotomy is excluded by some
insurance companies. This trend is expected to grow.
4. Payment of the malpractice carrier rate may not be the sum total of insurance costs.
Some states have a "patient compensation fund" which covers claims between the limits on
the malpractice policy and that of any state caps on malpractice awards. There are
limitations on accessibility of patients to these funds. Other states have a surcharge which is
a fund used to pay claims if insurers go out of business. Whereas states are supposed to
segregate these funds and pay back to the physician the amount paid to these funds when
the physician retires, often states simply absorb the funds into the state budget and the funds
are spent on non-medically related items.
5. Some insurance policies remove the physician from the decision-making on whether to
settle a claim or to litigate. A settled claim, even if protested by the physician, is counted as
a claim to be permanently entered in the National Practitioner Data Bank, and may be
accessible to patients from state medical board sites and commercial sites on the internet.
6. Some insurance rates have become so high that physicians are doing without malpractice
insurance and instead using asset protection strategies, placing ownership of their assets in
an offshore trust or given to a (trusted) wife. Not all states require malpractice coverage,
however in order to perform procedures in a hospital or ASC (unless you own the ASC),
malpractice insurance is usually required.
Avoiding Malpractice Suits
Informed consent can help reduce the risk of malpractice litigation. List the risks and do not
downplay the risk to the patient. Most complications occur during common procedures, not
the uncommon ones. For uncommon procedures, be especially cognizant to list unusual or
rare complications. It may also be prudent to list your experience and training background,
including the fact that you do not have residency training as a surgeon if you are performing
surgical procedures.
Patients who are overtly hostile to you prior to a procedure, insist on a 100% success rate or
expect a 100% success rate, or those who threaten you prior to a procedure with litigation if
you "screw up" should not have procedures and should be referred to other physicians for
these procedures. Those who threaten you with litigation if you do not give them narcotics
should be immediately dismissed from the practice, and the local police contacted regarding
an attempted narcotic extortion at your center.
The number one cause of malpractice suits against a physician is a comment made by
another physician. It is prudent to avoid loose talk about a procedure or complication, and
under no circumstances should these issues be discussed without a thorough chart review of
the procedure or event.
Patients who believe physicians are hiding something are more likely to litigate. It is
important therefore to understand how to approach a patient or family regarding a
complication in order to frame such in that light rather than as a mistake. Be forthcoming,
do not delay in expressing an obvious occurrence of a complication to a family. Select your
words carefully and avoid phrases "I wish I hadn't done that" or "It was a bad decision to
...". Instead express the fact that a complication has occurred, always mentioning that it is
a known risk of the procedure, and that you will take all possible steps to aid in its resolution
if possible. Demonstrate sincere concern for the patient without panic. Approach the family
quickly after a complication and do not delay during the workup of the complication.
Continue to see the family everyday or call them everyday to report on the progress after the
complication. If the patient is treated as an outpatient, have frequent visits with the patient
in your clinic. If the patient is under the care of other physicians, consult frequently with
them regarding the patient and report back to the family to assure them you are actively
involved in the resolution of the complication. Abandonment of the patient is a sure fire way
to instigate litigation.
Maintain your own disaster file separate from the hospital or clinic records with potential
litigations. In each, note the contents of each conversation you have with the family and
patient regarding the complication. Note your efforts, telephone calls (times, dates, content),
lab reports, etc. Specifically note details about patient progress including quotes from the
patient such as "I am doing much better, I was able to go shopping for the first time in 3
months today". These disaster files may ultimately be the best source of data outside the
medical record which should be kept as complete as possible. Such detailed files can also
have the effect of swaying an opposing attorney into settlement rather than litigation.
Dictate the course of events promptly into the medical record. Do not wait for weeks or
months. Be very very detailed about the specifics of the events leading up to the
complication and the steps taken to rectify or moderate the severity of the situation.
Do not hesitate to use consultants immediately after the complication. Consultants from
several specialties may be required, and can help present the fact that you are concerned and
are doing everything possible to improve the chances of complication resolution.
If a severe complication has occurred, call your malpractice carrier and they will take a
statement and open a file on the subject. If there is no litigation, the file is closed without
any response, but if there is litigation, the carrier has a head start on the data acquisition.
Insurers will sometimes tell the physician to not talk to the patient after a complication,
especially if there is another physician primarily involved in the treatment. This is profoundly
poor advice. Stay involved, do not admit culpability, but remain remorseful about the
unfortunate occurrence of a complication. Your involvement with the patient needs to
continue for potentially years.