Medical Liability and the Disclosure-Offer Approach: Transforming How Arkansans Should Think About Medical Malpractice Reform

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1 Medical Liability and the Disclosure-Offer Approach: Transforming How Arkansans Should Think About Medical Malpractice Reform I. INTRODUCTION Over the last forty years, the United States health-care system has experienced periods of crisis times when the medical-malpractice system is catapulted to the front of the U.S. domestic policy agenda. 1 These episodes of alarm, caused by spikes in medical-malpractice insurance premiums and insurers withdrawing from the market, are accompanied by assertions that the medical-malpractice system is broken. 2 Pleas of relief to public policymakers create pressure to implement reform that is aimed to solve commonly perceived problems. 3 Traditional reform has typically been marked by stateimplemented measures that seek to change the rules that govern the litigation of malpractice claims. 4 By the 1990s, every state had adopted some form of traditional medical-malpractice The author would like to thank Robert B Leflar, Ben J. Altheimer Professor of Legal Advocacy, University of Arkansas School of Law, Chris M. Warzecha, J.D. 2011, University of Arkansas School of Law, and Clark J. Brown, J.D. 2011, University of Arkansas School of Law. This comment would not have been possible without their help and support. 1. See TOM BAKER, THE MEDICAL MALPRACTICE MYTH 1-2 (2005); William M. Sage, Malpractice Reform as a Health Policy Problem, in MEDICAL MALPRACTICE AND THE U.S. HEALTH CARE SYSTEM 30, 30 (William M. Sage & Rogan Kersh eds., 2006); FRANK A. SLOAN & LINDSEY M. CHEPKE, MEDICAL MALPRACTICE vii (2008). 2. SLOAN & CHEPKE, supra note 1, at vii, See id. at vii; Fred J. Hellinger & William E. Encinosa, Review of Reforms to Our Medical Liability System, AGENCY FOR HEALTHCARE RES. & QUALITY (Dec. 31, 2009), 4. See SLOAN & CHEPKE, supra note 1, at vii, 85-86; Hellinger & Encinosa, supra note 3. For a good summary of traditional state reforms, see Michelle M. Mello & Allen Kachalia, Evaluation of Options for Medical Malpractice System Reform 3-23 (Apr. 2010), available at OR.pdf.

2 1058 ARKANSAS LAW REVIEW [Vol. 64:1057 reform. 5 Arkansas followed suit, culminating in the Civil Justice Reform Act of 2003 a measure that, although parts have been ruled unconstitutional by the Arkansas Supreme Court, 6 typifies the type of reform that has been taking place all over the country. 7 But rising premiums, numbers of medical-malpractice claims, and payments per paid claim may not be valid indicators that the system is broken. 8 And the effectiveness of traditional reform, besides limiting the number of claims being brought and payout per claim, is lacking. 9 Today, the medicalmalpractice system continues to have its problems. It is a poor compensator when harm occurs, it is excessively long and burdensome for patients, and it fails to make the delivery of health care safer. This comment, therefore, advocates a new type of reform as well as a new way of thinking about the medical-liability system. Specifically, it centers around discussions in the medical community on patient safety and advocates a new system of dealing with injuries caused by medical errors called disclosure-offer. Disclosure-offer is a type of medical-liability reform by which mistakes that occur in the delivery of health care that are clearly compensable are taken out of the tort system. 10 Under this alternative to legal action, the occurrence of an error 5. Rogan Kersh, Medical Malpractice and the New Politics of Health Care, in MEDICAL MALPRACTICE AND THE U.S. HEALTH CARE SYSTEM, supra note 1, at 43, 47; SLOAN & CHEPKE, supra note 1, at See Johnson v. Rockwell Automation, Inc., 2009 Ark. 241, 308 S.W.3d 135; Ryan Kent Culpepper, Justice Reformed: Johnson v. Rockwell Automation, Inc., Torts, and the Separation of Powers in Arkansas, 63 ARK. L. REV. 283 (2010). 7. See infra Part IV. 8. SLOAN & CHEPKE, supra note 1, at One commonly mistaken indicator of successful tort reform is the effect on claim frequency. See id. at Mello & Kachalia, supra note 4, at 36. Disclosure-offer is the term this comment employs to refer to the lowest common denominator of medical-liability reforms that takes many shapes but whose basic premise is a philosophy of risk management that holds that being candid about medical injuries, apologizing when appropriate, and providing for the patient s financial needs... through a quick, accessible process will eliminate the impetus for most patients or families to sue and will spur institutional learning and safety improvement through increased information on mistakes. Michelle M. Mello & Thomas H. Gallagher, Malpractice Reform Opportunities for Leadership by Health Care Institutions and Liability Insurers, 362 NEW ENG. J. MED. 1353, 1354 (2010).

3 2011] DISCLOSURE-OFFER 1059 automatically triggers a chain of events that includes disclosure of the mistake to the patient (or the family of the patient) who is harmed, and an offer of compensation by the health-care institution or liability insurer. 11 This type of medical-liability reform directly addresses some of the most troubling aspects of the current system and has recently shown promise in hospitals that have implemented it. 12 It is also distinct because it is a reform that can be implemented by private parties of the healthcare system, as opposed to more traditional types of reform that have been spearheaded by state legislatures. 13 As this comment shows, the disclosure-offer system s advantages far outweigh its potential pitfalls, and a wait-and-see approach, by which Arkansas can wait for demonstration grants made possible by the Patient Protection and Affordable Care Act to be published, relieves some of the concern critics have outlined as disadvantages of the system. 14 That being said, health-care institutions must take care to implement a system that will work in the current climate in Arkansas. Hospitals and liability insurers that have implemented disclosure-offer systems are increasing in number but are also diverse there are often a particular set of attributes that make each state or system uniquely qualified for a disclosure-offer system. The goal of this comment is to identify the circumstances, and possible hurdles, of implementation in Arkansas and evaluate the fertility of Arkansas for a similar system that retains the core principles and values of those currently in place. This comment begins with a discussion of national medicalmalpractice reform; 15 addresses what disclosure-offer contributes to that discussion; 16 surveys the development of current systems; 17 catalogs common criticisms of disclosureoffer; 18 provides examples of, and empirical data from, systems 11. See Mello & Kachalia, supra note 4, at See infra Part III.D. 13. At this stage, reform is being implemented by insurance companies, public Veterans Affairs hospitals, and most recently private hospitals. See Mello & Kachalia, supra note 4, at See id. at 42; infra at Part III.E. 15. See infra Part II. 16. See infra Part III. 17. See infra Part III.C. 18. See infra Part III.D.

4 1060 ARKANSAS LAW REVIEW [Vol. 64:1057 currently in place; 19 and outlines the challenges Arkansas will face when implementing similar reform. 20 It concludes that disclosure-offer can make it to Arkansas, but only after a concerted effort by all players in the Arkansas health-care system. II. United States Medical Liability Reform To understand disclosure-offer, it is important to have a grasp on traditional approaches to medical-malpractice reform, as well as more recent discussions on the ability of medicalliability reform to promote other goals of the health-care system. The following sections help to explain the perceived problems of the malpractice system, highlight some of the traditional ways of solving those problems, and examine more recent revelations in the medical community that have had an impact on recently proposed reform. This survey will help show how the disclosure-offer approach is different from traditional reform and how it attempts to tie improvements in the delivery of medical care with the normal functions of the medicalmalpractice tort system. A. Traditional Reform Since the late 1970s, reforms to the medical-liability system have been influenced by misperceptions of the medicalliability insurance sector and the malpractice system. These misperceptions have, time and again, led skeptics to the conclusion that the system is broken. 21 This belief has been further supported by characterizations of the malpractice system that today appear to be anecdotal, exaggerated, or outright false. 22 In order to understand traditional reform it is important to review what we know about these misperceptions today. As recent scholarship suggests, traditional reform has suffered because of its reliance on these misperceptions and future reform will need to rid itself of these often repeated, but frequently unhelpful, ideas of medical malpractice. 19. See infra Part III.E. 20. See infra Part IV. 21. See SLOAN & CHEPKE, supra note 1, at See BAKER, supra note 1, at 1.

5 2011] DISCLOSURE-OFFER Medical Malpractice Insurance The most important impact of medical-malpractice insurance on malpractice reform is that it is the chief reason that reform reaches both national and state public-policy agendas. Liability insurance and malpractice are inextricably tied together because widespread media and public-policy attention on the medical tort system rise and fall with the availability and cost of medical-malpractice insurance. 23 It is during periods of low availability of insurance coverage and high premium costs to health-care providers times of crisis that political pressure for legislative change is at its highest. 24 The connection can be seen during the inception of each crisis period and the political response thereafter. 25 A few years before the crisis of , a steep rise in the cost of liability insurance for some specialties led the United States Senate and Executive Branch to officially address malpractice for the first time. 26 In 1971, President Nixon denounced the growing menace of malpractice suits and called for an intensive program of research and analysis in this area. 27 When the crisis hit in 1974, insurers were driven out of the market, leading the cost of premiums to increase dramatically. 28 This led officials in many states to seek policy change that concentrated on remedies designed to increase insurance availability and reduce provider liability in malpractice litigation. 29 Less than a decade later, liability premiums again rose sharply in many states. 30 This time federal involvement was stronger and Presidents Ronald 23. See Kersh, supra note 5, at 44-49; SLOAN & CHEPKE, supra note 1, at See SLOAN & CHEPKE, supra note 1, at See Kersh, supra note 5, at See id. at Id. For a historical comparison of what held the attention of critics of medical malpractice during the 1970s, see INSTITUTE OF MEDICINE, BEYOND MALPRACTICE: COMPENSATION FOR MEDICAL INJURIES 1 (1978). It has been noted that: During recent years, attention has been drawn to the increased frequency of medical malpractice claims, the size of settlements and jury awards, and the rapid rise in premiums for malpractice liability insurance. The high cost and unavailability of liability insurance during the period 1973 to 1975 became characterized as a crisis in medical care. Id. (footnote omitted). 28. See Kersh, supra note 5, at See id. 30. Id.

6 1062 ARKANSAS LAW REVIEW [Vol. 64:1057 Reagan and George H.W. Bush demanded limits on lawsuits, which were seen as a major cause of increasing health-care costs. 31 Beginning in 1985 and continuing into the mid-1990s, states led the way. They implemented more reforms targeted at limiting plaintiffs abilities to bring successful suits. 32 In 2002, another malpractice crisis surfaced, characterized by spiraling insurance premiums, which threatened some providers financial viability. 33 This time the legislative response was unparalleled, and between 2002 and 2004, forty-four states introduced bills either to cap noneconomic damages for the first time or to lower existing ceilings. 34 Another trend this connection reveals is that the flux in insurance costs and decrease in availability are often blamed on the medical-malpractice system. The common belief is that increases in the amount of money being paid out for malpractice cases lead directly to increases in malpractice-insurance premiums. 35 Therefore, during times of crisis, the tort system is repeatedly labeled as out of control and measures are implemented to curb plaintiffs abilities to recover through litigation. 36 Although some reform has successfully reduced the frequency and severity of medical-malpractice claims, there is little evidence that traditional reforms reduce insurance premiums. 37 Perhaps the best evidence is the fact that crises continue to occur. In fact, recent scholarship indicates that crises in malpractice insurance are caused by the boom-and-bust cycle of 31. See id. at See id. ( The next three Congresses introduced more than sixty malpractice bills.... By the waning of the second crisis in the early 1990s, more than forty states had debated damage caps, but only twenty actually had statutory limits on noneconomic damages. (Five more would cap damages by 1995.) Perhaps more telling, by that time just four states (Arkansas, Kentucky, North Carolina, and Pennsylvania) had not enacted malpractice tort reform legislation of some type; all four would eventually fall into line. ). 33. Kersh, supra note 5, at See id. at 49 ( During the first half of 2005 alone, forty-eight states introduced more than 400 bills on medical liability and malpractice. More than 80 percent of these were exclusively or primarily first-generation policies, most of them conceived twenty-five years ago or more. ). 35. See BAKER, supra note 1, at See SLOAN & CHEPKE, supra note 1, at Id. at 100.

7 2011] DISCLOSURE-OFFER 1063 the insurance industry not lawyers, judges, and juries. 38 These cycles of the industry are likely caused by underpricing of insurance as well as shocks that may differ during each crisis. 39 Two studies, one by the United States General Accounting Office (GAO) 40 and another by Americans for Insurance Reform (AIR), present recent evidence of this. Both conclude that the apparent impact of medical-malpractice claims on the most recent insurance crisis is not supported by data. 41 Specifically, the GAO s study found that natural disasters and stock-market fluctuations affect insurance premiums. 42 When falling interest rates caused the market to decline from 1998 to 2001, malpractice insurers left the market, and the decrease in competition led to increased premiums. 43 Similarly, AIR, an advocacy group for insurance reform, found that malpractice payouts have been stable over the years, while premiums that doctors paid rose and fell with the state of the economy. 44 AIR stated that this fluctuation merely reflect[ed] profitability of the insurance industry, including gains or losses experienced by the insurance industry s bond and stock market investments. 45 As for the 1970s and 80s, the shocks were likely characterized by substantial changes in interest rates and prices. 46 It is still not entirely clear what has caused each insurance crisis. 38. BAKER, supra note 1, at See SLOAN & CHEPKE, supra note 1, at In 2004, after eighty-three years as the General Accounting Office, the agency maintained its acronym but changed its name to the Government Accountability Office. 41. U.S. GEN. ACCOUNTING OFFICE, GAO , MEDICAL MALPRACTICE INSURANCE: MULTIPLE FACTORS HAVE CONTRIBUTED TO INCREASED PREMIUM RATES 1 (2003), available at [hereinafter GAO REPORT]; AMS. FOR INS. REFORM, MEDICAL MALPRACTICE INSURANCE: STABLE LOSSES/ UNSTABLE RATES (2007), available at pdf [hereinafter AIR REPORT]. 42. GAO REPORT, supra note 41, at See id. 44. AIR REPORT, supra note 41, at AMERICANS FOR INS. REFORM, Medical Malpractice Insurance: Stable Losses/Unstable Rates 2007 (2007), available at see also Richard C. Boothman et al., A Better Approach to Medical Malpractice Claims? The University of Michigan Experience, 2 J. HEALTH & LIFE SCI. L. 125, 131 (2009). [T]he insurance industry goes through a boom-and-bust cycle that creates medical malpractice insurance crises like this past one. Lawyers, judges, and juries have little or nothing to do with it. BAKER, supra note 1, at See SLOAN & CHEPKE, supra note 1, at 50.

8 1064 ARKANSAS LAW REVIEW [Vol. 64:1057 While insurance cycles reflect a number of factors, and like business cycles they may change in amplitude, one thing is distinctly clear: we can expect the cycles to re-occur Medical Malpractice Myths Because traditional reform has been ineffective at containing the booms and busts of the insurance cycle, the question becomes, what aspects of the current medicalmalpractice system need to be changed, if any? Once an insurance crisis occurs, the medical-malpractice system comes under the microscope because it is wrongly seen as the chief cause of the crisis. This is when the second problem with traditional medical-malpractice reform surfaces. The problem is that the malpractice system has frequently been mischaracterized and these distortions have been used to justify the most common goals of traditional reform. The most common assumptions reformers have worked off of since the 1970s are that frivolous litigation and runaway juries will drive doctors out of the profession. 48 These, no doubt, will sound familiar to any reader. And these assertions have led to a second goal of reform to decrease a patient s and his or her lawyer s ability to sue and to reduce the payout of successful suits. 49 But as Tom Baker has written, these assertions, coupled with several other misperceptions of the medical-malpractice system, make up what is called the medical malpractice myth. 50 In the medical-malpractice myth, as Baker explains, the malpractice system is characterized as a place where billions of dollars are wasted on defensive medicine; where greedy lawyers and plaintiffs have created an explosion of tort litigation; where doctors, hospitals, and insurance companies are forced to pay eye-popping sums that juries award to undeserving 47. Id. at See BAKER, supra note 1, at 1; see also SLOAN & CHEPKE, supra note 1, at See BAKER, supra note 1, at Id. at 1; see also David A. Hyman & Charles Silver, The Poor State of Health Care Quality in the U.S.: Is Malpractice Liability Part of the Problem or Part of the Solution?, 90 CORNELL L. REV. 893, (2005); David M. Studdert et al., Claims, Errors, and Compensation Payments in Medical Malpractice Litigation, 354 NEW ENG. J. MED. 2024, 2031 (2006).

9 2011] DISCLOSURE-OFFER 1065 claimants; 51 and where efforts to improve health-care quality are hindered by an environment that encourages health-care providers to hide mistakes in care. 52 As Baker states, these assertions have been built on urban legend mixed with the occasional true story, supported by selective references to academic studies, and repeated so often that even the mythmakers forget the exaggeration, half truth, and outright misinformation And the myth has led doctors, patients, legislators, and voters to be instilled with the kind of fear that short circuits critical thinking. 54 The following section explores these often repeated characterizations of the system and presents some of the empirical evidence that has led Baker and other thinkers to declare those characterizations myths. In truth, the more likely reality is that the problem of defensive medicine is overblown, 55 that the vast majority of patients harmed by medical negligence do not sue, 56 that juries do not favor plaintiffs, 57 that the system can be relatively good in its function of separating out claims without merit, 58 and that malpractice lawsuits do not cause the quality of health care to decline. 59 a. There Are Too Many Medical Malpractice Claims The first myth is that United States patients sue their doctors at the drop of a hat. 60 This myth has been promulgated by the term frivolous lawsuit a term often used in public discourse about medical malpractice. 61 The myth implies that too many claims are brought and that most of those claims have no merit. 51. BAKER, supra note 1, at See Hyman & Silver, supra note 50, at BAKER, supra note 1, at Id. 55. See id. at Id. at Id. at Studdert et al., supra note 50, at Hyman & Silver, supra note 50, at BAKER, supra note 1, at SLOAN & CHEPKE, supra note 1, at 17, 20.

10 1066 ARKANSAS LAW REVIEW [Vol. 64:1057 But most patients who have legitimate malpractice claims do not sue. 62 One study by Harvard researchers found 280 patients whose records showed conclusive evidence of a serious injury from medical malpractice out of a random sample of 31,429 hospital records. 63 Of those 280 patients, only eight brought a claim. 64 Another team in Utah and Colorado looked at about 15,000 hospital records and found conclusive evidence of serious injury from medical malpractice in the records of 161 patients. 65 Of those 161 patients, only four brought a claim. 66 There is also evidence that the medical-liability system might perform more accurately than once believed. 67 One study surveyed a random sample of 1452 closed malpractice claims from five liability insurers in order to determine whether an injury actually ocurred, and if so, whether it was caused by a medical error. 68 Of the claims brought that had evidence of injury from the delivery of health care, 63% of those were determined to be the result of error. 69 Of these claims dealing with error, 73% received compensation. 70 On the other hand, only 10.4% of the claims that involved neither error nor injury received compensation. 71 Overall, 73% of all claims for which determinations of merit were made had outcomes concordant with their merit. 72 These findings led to two general conclusions: (1) portraits of a malpractice system that is stricken with frivolous litigation are overblown ; and (2) the malpractice system performs reasonably well in its function of separating claims without merit from those with merit See BAKER, supra note 1, at A. Russell Localio et al., Relation Between Malpractice Claims and Adverse Events Due to Negligence, 325 NEW ENG. J. MED. 245, (1991). 64. Id. at David M. Studdert et al., Negligent Care and Malpractice Claiming Behavior in Utah and Colorado, 38 MED. CARE 250, 250 (2000). 66. Id. at See Studdert et al., supra note 50, at Id. at Id. at Id. at See id. at Studdert et al., supra note 50, at Id. at 2031.

11 2011] DISCLOSURE-OFFER 1067 b. Medical Malpractice Claimants Are Overcompensated for Their Losses Another myth of the medical-malpractice system that may be exaggerated is that juries favor plaintiffs and that their overgenerosity is driving malpractice-insurance costs through the roof. 74 The anecdotal reference of the runaway jury is particularly popular in the media. 75 One reason this myth may be overblown is the fact that although a disproportionate number of extremely high verdicts are discussed by the media, most awards are subsequently reduced, either by the trial judge, on appeal, or through post-verdict settlement. 76 Several studies have discredited the myth. 77 One study examined whether the perception of juries in medicalmalpractice trials as incompetent, antidoctor, and irresponsible when awarding damages to patients is justified. 78 The study found that in 2001, of the 1100 malpractice cases tried before juries in the seventy-five largest counties of the United States, plaintiffs won only 27% of the time. 79 When plaintiffs won, the median award was $422, But the jury awards that are most likely to make the newspaper headlines are those that exceed $1 million. 81 In Florida, using statistics obtained from medical insurers closed claim files that were required to be reported between 1990 and 2005, there were 801 cases involving a payment of $1 million or more. 82 Interestingly, only 54% of these payments were made after jury trial and 115 of these payments were triggered without a lawsuit even being filed. 83 The study concluded that while [m]ost settlements of 74. BAKER, supra note 1, at See SLOAN & CHEPKE, supra note 1, at Id. 77. See SLOAN & CHEPKE, supra note 1, at ; see generally FRANK A. SLOAN et al., SUING FOR MEDICAL MALPRACTICE (1993). 78. Neil Vidmar, Juries and Medical Malpractice Claims, 467 CLINICAL ORTHOPAEDICS & RELATED RES. 367, 367 (2009). 79. Id. at 368. This number may overstate plaintiffs poor luck due to those patients who bring a claim only to settle out of court. Id. Verdicts, however, are taken out of the hands of juries when they settle. 80. Id. 81. Id. 82. Id. 83. Vidmar, supra note 78, at 368 ( Thus, voluntary settlements without a lawsuit were twice as common as payments following jury verdicts. ).

12 1068 ARKANSAS LAW REVIEW [Vol. 64:1057 malpractice claims occur around the negotiation table rather than in the jury room[,] [w]idely held views of irresponsible and incompetent juries held by doctors and by the general public do not stand up to empirical evidence. 84 c. Malpractice Claims Lead to Poor Quality in Health Care The final myth highlighted here is that the malpracticeliability system leads to poor quality in health care. 85 The argument reasons that lawsuits force health-care professionals to hide mistakes for fear of liability. 86 The reality is that this depiction has been accepted uncritically. 87 An article by David A. Hyman and Charles Silver explores the empirical evidence on the subject and finds that it fails to support the assertion that malpractice lawsuits lead to poor health-care quality. 88 To prove that lawsuits hide medical mistakes, it is important to first prove that mistakes would be out in the open without the medical-malpractice lawsuits. 89 The study finds disclosure of medical mistakes to be even less prevalent in three instances where liability was not an issue. 90 The most convincing is in the United Kingdom, where malpractice litigation is rare. 91 It was found that preventable, adverse health-care events occur more frequently there than in the United States and that health-care providers are similarly reluctant to disclose medical errors to patients. 92 In addition, in terms of safety, the findings were contrary to the conventional wisdom. The authors found that although [m]any providers have failed to adopt patient safety measures 84. Id. at See BAKER, supra note 1, at 93; Hyman & Silver, supra note 50, at See Hyman & Silver, supra note 50, at 893, ; see also BAKER, supra note 1, at This argument is a justification for federal and state reform efforts that push to insulate providers from liability. 87. Hyman & Silver, supra note 50, at Id. at BAKER, supra note 1, at See id. at The first instance was in the United States before the rise of medical-malpractice litigation in the 1960s and 1970s. Id. at 97. The study also compared disclosure rates at U.S. VA hospitals where doctors cannot be sued for medical malpractice and found that VA doctors are less likely to disclose and VA hospitals are less safe. Id. at Hyman & Silver, supra note 50, at Id. at

13 2011] DISCLOSURE-OFFER 1069 of proven effectiveness, and they have similarly failed to use information already in their possession to protect patients from harm, 93 health-care providers are actually (all else being equal) more likely to attend to problems that are sources of liability than to problems for which the costs are externalized. 94 d. Medical Care Is Costly Because of Defensive Medicine As Sloan and Chepke write, defensive medicine presumably occurs to the extent that the legal system causes too much care to be provided. 95 The idea is that a doctor s fear of potential lawsuits leads him or her to prescribe medicines and order tests that he or she may actually feel are unnecessary, to gain protection from legal liability. 96 As a result, defensive medicine is said to be a major driver of health-care cost growth, 97 and some studies have estimated that defensive medicine expends $50 billion a year. 98 But while defensive medicine exists, the problem is hard to quantify and is often exacerbated by how broad a definition is used by a particular study. 99 While most people see defensive medicine as unnecessary tests and procedures that squander time and money, statistics that report defensive medicine often use a much broader definition. 100 One study used the definition of the U.S. Congress Office of Technology Assessment: when doctors order tests, procedures, or visits, or avoid certain highrisk patients or procedures, primarily (but not solely) because of concern about malpractice liability. 101 Like other commonly 93. Id. at Id. at SLOAN & CHEPKE, supra note 1, at See BAKER, supra note 1, at SLOAN & CHEPKE, supra note 1, at BAKER, supra note 1, at See id. at For a study on the effect of medical-malpractice reform on physicians malpractice concerns, see Emily R. Carrier et al., Physicians Fears of Malpractice Lawsuits Are Not Assuaged by Tort Reforms, 29 HEALTH AFF (2010) BAKER, supra note 1, at Michelle M. Mello et al., National Costs of the Medical Liability System, 29 HEALTH AFF. 1569, (2010) (quoting U.S. CONGRESS OFFICE OF TECHNOLOGY ASSESSMENT, DEFENSIVE MEDICINE AND MEDICAL MALPRACTICE 1 (July 1994), available at This study estimates that defensive-medicine costs for 2008 accounted for $45.6 billion of the total $55.6 billion in costs of the medical-liability system.

14 1070 ARKANSAS LAW REVIEW [Vol. 64:1057 used definitions, this one illustrates the fact that not all practices by physicians that are characterized as defensive medicine are bad medicine. In other words, there is such a thing as good defensive medicine, 102 and in order to accurately measure the wastefulness of defensive medicine, the good, injury-preventing effects of malpractice lawsuits should be separated from measures that are truly wasteful. 103 Perhaps a more telling sign that the cost problem of defensive medicine is overblown is the fact that the entire medical-liability system, including estimates of defensive medicine that employ a broad definition, makes up only a small fraction of the total cost of the U.S. health-care system. 104 One study estimated that the medical-liability system in 2008 cost $55.6 billion a figure that accounted for only 2.4% of total national health-care spending Attempts to Reform The crises in malpractice-liability insurance premiums and insurance availability over the past forty years has typically led to two types of reform. 106 First, a variety of changes in the structure of the insurance industry helped enhance the availability of insurance. 107 A second type is tort reform at the 102. See SLOAN & CHEPKE, supra note 1, at 17, See BAKER, supra note 1, at ; SLOAN & CHEPKE, supra note 1, at SLOAN & CHEPKE, supra note 1, at 82; see also Katherine Baicker et al., Malpractice Liability Costs and the Practice of Medicine in the Medicare Program, 26 HEALTH AFF. 841 (2007); Daniel Kessler & Mark McClellan, Do Doctors Practice Defensive Medicine?, 111 Q. J. ECON. 353 (1996); J. William Thomas et al., Low Costs of Defensive Medicine, Small Savings from Tort Reform, 29 HEALTH AFF. 1578, 1578, 1583 (2010) (citing physicians surveys that range from twenty-one percent to ninety-eight percent of respondents admitting to practicing defensive medicine, but concluding that its impact on medical care costs is small. ); Darius N. Lakdawalla & Seth A. Seabury, The Welfare Effects of Medical Malpractice Liability 3-4 (NAT L BUREAU OF ECON. RESEARCH, Working Paper 15383) (Sept. 2009), Letter from Douglas W. Elmendorf, Dir., Cong. Budget Office to Orrin G. Hatch, U.S. Senator (Oct. 9, 2009) [hereinafter CBO Study] (available at 106xx/doc10641/10-09-Tort_Reform.pdf). For a recent discussion of defensive medicine, see Defensive Medicine Practices Could Signal a New Norm in the Climate of Fear, 31 ORTHOPAEDICS TODAY, Sept. 2011, at See Mello et al., supra note 102, at See BARRY R. FURROW ET AL., LIABILITY AND QUALITY ISSUES IN HEALTH CARE 503 (West 6th ed. 2008); SLOAN & CHEPKE, supra note 1, at SLOAN & CHEPKE, supra note 1, at 90.

15 2011] DISCLOSURE-OFFER 1071 state level. 108 Tort reform can be further classified into firstgeneration and second-generation reforms. 109 First-generation reforms are modifications to the existing tort-liability system. 110 Second-generation reforms are more recent proposals and involve more fundamental change to the tort system typically involving basic changes to dispute resolution. 111 While firstgeneration reforms have been widespread, second-generation reforms have been enacted only rarely. 112 This comment highlights first-generation reforms because they: (1) have been the reforms that most frequently prompt legislative action; (2) are based on many of the underlying misperceptions highlighted in the preceding sections; and, most importantly, (3) make up the majority of reform in Arkansas. First-generation reforms can be subdivided into four categories: (1) those that affect the number of malpractice claims filed; (2) those that limit the award recoverable by the plaintiff; (3) those that increase a plaintiff s difficulty of being successful; and (4) those that affect the operation and cost of the judicial process. 113 Reforms that affect the number of malpractice claims filed are pretrial screening panels, arbitration, statutes of limitations, attorney-fee controls, certificates of merit, and costs awardable. 114 Statutes of limitation and repose, for instance, restrict the time a potential plaintiff has to file a malpractice claim. 115 One justification for this reform is to avoid the problem of evidence growing stale, but its primary rationale is to curb the uncertainty liability insurers face when claims are brought a long time after the incident date. 116 Attorney-fee limits cap the amount a plaintiff s attorney may take as a contingency fee from a malpractice award. 117 The reform is designed to discourage plaintiff s attorneys from bringing claims 108. See id. at See id. at See id See id. at See SLOAN & CHEPKE, supra note 1, at See id. at Id. at See id. at See id See SLOAN & CHEPKE, supra note 1, at 147. Twenty-three states currently have limits on attorney s fees. See id.

16 1072 ARKANSAS LAW REVIEW [Vol. 64:1057 of little or no merit by limiting the attorney s expected return on investment in a case. 118 Caps on awards, periodic payments of damages, collateralsource offset, joint-and-several-liability changes, punitivedamage limits, and ad damnum clauses attempt to limit the size and type of recovery. 119 For example, caps on noneconomic damages limit the amount of money that a plaintiff can take as an award for pain and suffering in a malpractice suit. 120 Jointand-several-liability reform eliminates or modifies the commonlaw rule that each defendant in a medical-malpractice case is liable for the entire judgment amount in the event other defendants cannot pay. 121 In order to increase plaintiffs difficulty or costs of winning, states have implemented expert-witness requirements, informed-consent limits, professional standards of care, res ipsa loquitur restrictions, and statutes of frauds. 122 For example, placing limits on the res ipsa loquitur doctrine can make a typically easy claim like leaving a surgical sponge in a patient s body much more difficult because proving that the sponge was left in the patient s body is much easier than proving the actual occurrence constitutes negligence. 123 Finally, reforms that change the function and cost of the judicial process are mediation, notice of intent to sue, precalendar conference requirements, and preferred scheduling. 124 One example of notice of intent to sue is the requirement in Michigan that requires a plaintiff must give notice of 182 days before filing suit Why Traditional Reform Is Ineffective The success of traditional reform has often been measured by its ability to reduce the frequency and severity of claims See id. at Id. at Mello & Kachalia, supra note 4, at 3. Twenty-six states currently impose a cap on noneconomic damages. Id See id. at SLOAN & CHEPKE, supra note 1, at See id. at Id. at See Boothman et al., supra note 45, at See SLOAN & CHEPKE, supra note 1, at 100.

17 2011] DISCLOSURE-OFFER 1073 Among the reforms, caps on damages have produced limited data that support their ability to do each of these. 127 But because the goals of reform are often based on the commonly held misperceptions of the malpractice system, targeting these indicators does not produce results commensurate with the type of effort that has gone into the implementation of traditional measures of reform. 128 Proponents of medical-malpractice reform also argue that reform should ultimately address two cost issues: (1) rising malpractice insurance premiums; and (2) the high cost of defensive medicine. 129 The significance of premium spikes is that they increase the pressure on policy makers to implement malpractice reform. Keeping premium prices low may be a goal worth pursuing, but this connection is most likely a fallacy. Traditional reforms have typically been unable to meet this goal, 130 and the evidence indicates that the crises in the medical-malpractice insurance industry are more the result of a cycle, not malpractice suits. Finally, while the cost of health care is perhaps the greatest challenge that faces the overall health-care system today, malpractice even factoring in defensive medicine is merely a drop of water in a pool of expenses. Some conservative evaluations of the system estimate that defensive medicine makes up approximately 10% of total health-care costs, which is consistent with the common criticism of the system; 131 however, recent analysis shows that, as part and parcel of the entire cost of the nation s health care, the medical-liability system costs are relatively small. 132 The medical-liability system is estimated to 127. Id Reducing the number of claims brought is a target of reform because of the belief that too many patients sue, but evidence shows that most patients harmed do not sue. See infra Part II.A.2.a. Reducing the severity of claims attempts to keep doctors and insurance companies from overcompensating plaintiffs, but the myth of overcompensation is mainly anecdotal; juries do not favor plaintiffs, and most claims are settled out of court. See infra Part II.A.2.b Mello et al., supra note 102, at For a discussion of the change in premium prices, see Marc A. Rodwin et al., Malpractice Premiums and Physicians Income: Perceptions of a Crisis Conflict with Empirical Evidence, 25 HEALTH AFF. 750 (2006) PRICEWATERHOUSECOOPERS, THE FACTORS FUELING RISING HEALTHCARE COSTS (Jan. 2006), available at See Mello et al., supra note 102, at 1569.

18 1074 ARKANSAS LAW REVIEW [Vol. 64:1057 cost $55.6 billion annually, or 2.4% of total health-care spending. 133 This dollar figure is far from trivial and future reform can aim to reduce costs, but the traditional means of reform will likely be incapable of doing this significantly because of the belief that the high cost of medical care is caused by defensive medicine. 134 B. The Patient Safety Movement Simultaneous to the discussion of the malpractice system, a dialogue centering on the quality of care and patient safety was happening within the medical community. 135 While initial response to the movement garnered institutional-level reforms, like hospital-implemented measures to improve the quality of health care 136 and local and national systems of error reporting, 137 the movement has also led to reforms that bring the patient into the discussions of safety and more sweeping reforms like those to the medical-liability system. Today, patient safety has moved to the top of the health-policy agenda, 138 and widespread interest in the topic can be traced back to the 133. Id. at Defensive medicine is still seen to be the primary component of this calculation: indemnity payments ($5.72 billion), administrative expenses ($4.13 billion), defensive medicine costs ($45.6 billion), lost clinician work time ($200 million), effects on health-care prices (not calculated), and reputation and emotional toll on clinicians (not calculated). See id. at 1570 Exh See id. at 1575; see also CBO Study, supra note 105, at See Boothman et al., supra note 45, at 131; Henry Huang & Farzad Soleimani, What Happened to No-Fault? The Role of Error Reporting in Healthcare Reform, 10 HOUS. J. HEALTH L. & POL Y 1, 29 (2010) See Boothman et al., supra note 45, at 200. On a micro level, proposed improvement in the delivery of care included routine investigation when errors occur, reducing reliance on memory (check lists and protocols), improving information access (computerization of medical records), error proofing (the use of forcing functions like using a computer system for medication orders), standardization (like methods for common practices such as surgical dressings and the geographic location of equipment and supplies in a patient-care unit), and training (teaching physicians, nurses, and pharmacists about errors and how to prevent them); see also Lucian L. Leape, Error in Medicine, 272 J. AM. MED. ASS N 1851 (1994). For a recent example of this type of measure that might be tied to cost savings, see Marcus E. Semel et al., Adopting a Surgical Safety Checklist Could Save Money and Improve the Quality of Care in U.S. Hospitals, 29 HEALTH AFF (2010) See SLOAN & CHEPKE, supra note 1, at SLOAN & CHEPKE, supra note 1, at 189.

19 2011] DISCLOSURE-OFFER 1075 publication of an Institute of Medicine (IOM) report in 2000, titled To Err Is Human Error The impetus for the patient-safety movement was the investigation into medical errors. Studies like the Harvard Medical Practice Study laid the groundwork for this discussion, and the movement gained national attention with the IOM report. 140 To Err Is Human emphasized patient safety with its finding that as many as 98,000 deaths occurred each year because of preventable medical errors. 141 This figure was staggering and meant medical errors represented the eighth leading cause of death in the United States. 142 The major cause of the deaths found was not isolated physician negligence, but instead failed hospital systems and procedures leading to nine out of every ten deaths published in the IOM study. 143 Years after To Err is Human, evidence of the frequency of medical-care mistakes in hospitals continues to be uncovered. 144 In November 2010, the DHS published a new report that studied the incidence of error among Medicare beneficiaries. 145 The report estimated that of nearly one million Medicare beneficiaries, 13.5% experienced an adverse event during their hospital stays. 146 In a single month, it was projected that 15, Id Id THE INSTITUTE OF MEDICINE, TO ERR IS HUMAN: BUILDING A SAFER HEALTH CARE SYSTEM 1 (Linda T. Kohn et al. eds., 2000) [hereinafter TO ERR IS HUMAN]. For criticism of this study, see Maxine M. Harrington, Revisiting Medical Error: Five Years After the IOM Report, Having Reporting Systems Made a Measurable Difference?, 15 HEALTH MATRIX 329, (2005) See TO ERR IS HUMAN, supra note 141, at Hillary Rodham Clinton & Barack Obama, Making Patient Safety the Centerpiece of Medical Liability Reform, 354 NEW ENG. J. MED. 2205, 2205 (2006) For a recent example of a preventable system error, see Walt Bogdanich and Kristina Rebelo, X-Rays and Unshielded Infants: Radiation Errors Tied to Poor Training and Oversight, N.Y. TIMES, Feb. 28, 2011, at A DEPT. OF HEALTH AND HUMAN SERVS., ADVERSE EVENTS IN HOSPITALS: NATIONAL INCIDENCE AMONG MEDICARE BENEFICIARIES i (2010), available at [hereinafter MEDICARE STUDY]. This study uses a slightly different term for error called adverse event. Id. The term is defined simply as when a patient is harmed as a result of medical care. Id Id. at i-ii.

20 1076 ARKANSAS LAW REVIEW [Vol. 64:1057 patients experienced an event that contributed to their death 147 a figure that equates to 180,000 deaths per year. The DHS also found that 44% of the adverse events were clearly or likely preventable. 148 The study also reported that in October 2008, the hospital care associated with adverse events cost the Medicare system $324 million Disclosure of Medical Errors to Patients Because of the publicity following the publication of the IOM report, administrators in private and public sectors, and legislators at both state and national levels, came under pressure to address and implement safety initiatives. 150 While error reporting has received substantial attention, 151 the patient-safety movement has also brought patients into the fold by encouraging the disclosure of medical errors by health professionals to patients. 152 In 2001, the Joint Commission on the Accreditation of Healthcare Organizations issued a nationwide disclosure standard mandating that [p]atients and, when appropriate, their families are informed about the outcomes of care, treatment, and services that have been provided, including unanticipated outcomes. 153 While the standard does not specify what disclosures should contain, or require the disclosure of whether error contributed to an adverse outcome, 154 it was a national standard that heralded a shift from mere endorsement of the 147. Id. at ii Id Id See SLOAN & CHEPKE, supra note 1, at See id Thomas H. Gallagher et al., Disclosing Harmful Medical Errors to Patients, 356 NEW ENG. J. MED. 2713, 2713 (2007). For an in depth look into disclosures, see Carol B. Liebman & Chris Stern Hyman, Disclosure and Fair Resolution of Adverse Events, in MEDICAL MALPRACTICE AND THE U.S. HEALTH CARE SYSTEM 191, 191 (William M. Sage & Rogan Kersh eds., 2006) JOINT COMM N ON THE ACCREDITATION OF HEALTHCARE ORGS., HOSPITAL ACCREDITATION STANDARDS, Standard RI.2.90 (2001); Doug Wojcieszak et al., The Sorry Works! Coalition: Making the Case for Full Disclosure, 32 J. ON QUALITY & PATIENT SAFETY 344 (2006); see also Gallagher et al., supra note 152, at See Gallagher et al., supra note 152, at

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