1 New York s Innovative Approach to Medical Malpractice HON. DOUGLAS E. MCKEON * ABSTRACT To combat budgetary constraints, New York Governor Andrew Cuomo and Chief Judge Jonathan Lippman, developed a working partnership between the executive and judicial branches, formed with the goal of reducing medical malpractice premiums and Medicaid costs while promoting a culture of patient safety. To this end, New York is utilizing two programs, more middle ground than tort reform, to address economic realities of the medical malpractice debate, while adhering to the fundamental right of fair compensation to victims. These programs are the Judge Directed Negotiations Program and Medical Indemnity Fund. A Judge Directed Negotiation Program has, at its core, a rather basic philosophy: promoting discussion about a case, analyzing its legal and medical pros and cons, and creating an environment in which lawyers view the court as credible, fair, and willing to be involved in the settlement process. Following this philosophy, cases settle. Judge Directed Negotiations are a process where meritorious claims are promptly identified and resolved and, just as importantly, where meritless claims against physicians are promptly identified and dismissed. The Medical Indemnity Fund was officially enacted October 1, 2011 after Governor Cuomo appointed a Medicaid Redesign Team to find ways to save Medicaid money. The Medical Indemnity Fund saves Medicaid money as it pays the cost of future medical expenses for infants injured by medical malpractice who would otherwise receive Medicaid benefits. These programs are new methods to deal with old problems, and more importantly, they are innovative approaches that seem to be working. * Justice, Supreme Court, Bronx County, NY; J.D., New York University School of Law, B.A., City University of New York, Hunter College. 475
2 476 New England Law Review v INTRODUCTION U nder the leadership of New York s Governor Andrew Cuomo and its Chief Judge Jonathan Lippman, an exceptional working partnership developed between New York s executive and judicial branches that provides real solutions and substantive results in reducing medical malpractice premiums and Medicaid costs while promoting a culture of patient safety. 1 As a result of this union, two programs unique to New York State (the State ) the New York Medical Indemnity Fund ( MIF, the Statute, or the Fund ) 2 and Judge-Directed Negotiation ( JDN or JDN Program ) are operating coactively in New York courts to promote the expeditious handling of medical malpractice litigation. These programs all but eliminate the use of Medicaid-funded devices, such as Supplemental Needs Trusts ( SNT ), 3 to resolve obstetrical malpractice suits at a considerable savings to the Medicaid program. 4 1 See New York State Medical Liability Reform and Patient Safety Model: The NYS Model, N.Y. UNIFIED CT. SYS. & N.Y. DEPARTMENT OF HEALTH (Oct. 17, 2011), health_care/medicaid/redesign/docs/ _nys_model_medical_liability.ppt. The NYS Model is the project developed as a result of an Agency for Healthcare Research and Quality ( AHRQ ) grant from the Obama Administration in June The New York State Unified Court System, the New York State Department of Health, and five academic medical centers in New York City are collaborating to achieve the following goals: (1) Develop a culture of patient safety ; (2) Enable *and+ promote complete adverse events reporting ; (3) Create a disclosure and early settlement program ; (4) Expand a Judge-Directed Negotiation Program ; (5) Demonstrate the effectiveness of the model ; (6) Disseminate reports and lessons learned ; and (7) Expand the NYS Model. 2 See N.Y. PUB. HEALTH LAW 2999-g-j (McKinney Supp. 2012). 3 See LEE S. KREINDLER ET AL., 16 NEW YORK LAW PRACTICE SERIES 21:44 (2011) ( When a seriously injured person receives a large award or settlement, the proceeds may be placed in a supplemental needs trust to ensure that the funds recovered are not considered an asset of the plaintiff for purposes of eligibility for certain government benefit programs and are not exhausted for payment of medical expenses that would be otherwise payable by governmental entities under programs such as Medicaid. ). 4 See Barbara Benson, Hospitals Get Half a Fix for Medical Malpractice Woes, CRAIN S N.Y. BUS. (Mar. 28, 2011, 3:33 PM), It is estimated that by year eight, the Fund will reduce Medicaid payments by $37.5 million annually. ; see also N.Y. STATE BAR ASS N, MEMORANDUM SUPPORTING GOV. CUOMO S MEDICAL MALPRACTICE PROPOSALS 3 (n.d.), available at cfm?section=home&contentid=47619&template=/cm/contentdisplay.cfm ( The result is a system where at least half of successful infant plaintiffs, who have been awarded amounts for future care, are enrolled in Medicaid and the Medicaid Program pays for the care. ).
3 2012 New York s Innovative Approach to Medical Malpractice 477 I. Background Nationally, medical malpractice reform proposals generally fall into two categories: (1) use of damages caps or collateral-source offsets to place monetary ceilings on categories of recoverable damages, usually pain and suffering; 5 or (2) fundamentally restructuring the recovery process by using administrative tribunals: for example, using health courts in lieu of jury trials as the avenue for injured patients or their loved ones to receive compensation for damages caused by a healthcare provider s negligent medical care. 6 Such propositions have never enjoyed meaningful support in New York s legislature. 7 Historically, legislative initiatives in New York concerning so-called medical malpractice reform have sparked keen, often intense partisan debate over issues that have become as much political as legal or medical. The resulting statutory pronouncements generally in response to some looming crisis related to rising medical malpractice premiums have generally been disappointing: more political compromise than remedial measure. 8 This changed in On January 1, 2011, the day of Governor Cuomo=s inauguration, five New York hospitals or hospital systems were each paying in excess of $100,000,000 per year in medical malpractice costs. 9 Of the five, two were paying in excess of $130,000,000, and two were paying in excess of $120,000, One hospital was losing $8,000 each time it delivered a baby whose medical expenses, inclusive the of mother=s, were paid by Medicaid. 11 Malpractice premiums for an obstetrician practicing in Suffolk or Nassau Counties (New York City suburbs) averaged $186,772, while premiums in Bronx County averaged $176,573 and Kings County averaged 5 Gil Siegal et al., Adjudicating Severe Birth Injury Claims in Florida and Virginia: The Experience of a Landmark Experiment in Personal Injury Compensation, 34 AM. J.L. & MED. 493, 494 (2008). 6 at See Michael Monaco, Note, New York s Medical Malpractice Insurance Crisis A New Direction for Reform, 14 FORDHAM URB. L.J. 773, (1985); Greg David, New York State of Malpractice, CRAIN S N.Y. BUS., June 21, 2010, at See Monaco, supra note 7, at ; see also David, supra note 7. 9 MRT Adopts Four Work Groups Recommendations, GREATER N.Y. HOSP. ASS N, (last visited Mar. 30, 2012) [hereinafter GNYHA] Mendez v. N.Y. & Presbyterian Hosp., 934 N.Y.S.2d 662, (N.Y. Sup. Ct. 2011). This figure comes from remarks made on December 1, 2009 by Lisa Kramer, President and CEO of Hospitals Insurance Company, Inc. ( HIC ) before the New York State Senate Standing Committee on Insurance, Health and Codes.
4 478 New England Law Review v $171, To make matters worse, the State faced a record budget gap. 13 Medicaid costs had to be reduced, and a Medicaid Redesign Team ( MRT ) was appointed by the Governor to make recommendations. 14 In response to escalating medical malpractice premiums and Medicaid costs in certain regions of the State due to obstetrical malpractice litigation, one of the recommendations was the creation of the MIF. 15 Unlike Virginia s and Florida s voluntary obstetrical funds, which substitute an administrative-compensation program for a claimant s right to sue in court, 16 New York s Fund is mandatory and only available to those qualifying health providers who have resolved a lawsuit, either by settlement or judgment, on or after April 1, In fact, New York s Fund does not restrict a litigant s right to sue it requires it. 18 The Fund substitutes services for cash as the measure of damages for the future medical expenses component of any court-obtained award, i.e., settlement or judgment. In other words, as will be explained in detail below, the MIF eliminates the need for an insurer or healthcare provider to pay cash up front for future medical expenses. Instead, services are paid by the Fund on an accrual basis. 19 The savings to insurers and healthcare providers will presumably reduce malpractice costs and lower malpractice premiums. Based on the template in Mendez v. New York and Presbyterian Hospital, 20 the first published opinion interpreting the Fund, and actual savings achieved in post-april 1, 2011 Fund settlements, major hospitals in 12 EXCELLUS, THE FACTS ABOUT NEW YORK STATE MEDICAL MALPRACTICE COVERAGE PREMIUMS 1 (2011), available at https://www.excellusbcbs.com/wps/wcm/connect/ 5c0c0d c9afa0ff7bd97e1c48/Medical+Malpractice+FS+2011-EX+FINAL.pdf? MOD=AJPERES. 13 See Within Our Means, N.Y. TIMES, Jan. 31, 2011, at A Redesigning New York s Medicaid Program, N.Y. STATE DEPARTMENT OF HEALTH, (last visited Mar. 19, 2012). 15 See Benson, supra note See Siegal et al., supra note 5, at 499, 519 & n N.Y. STATE DEP T OF HEALTH, NYS MEDICAL INDEMNITY FUND 11 (2012), available at pdf. 18 Daniel S. Ratner, New York State s New Medical Indemnity Fund, MARTINDALE.COM (Aug. 11, 2011), -bach-llp_ htm (stating plaintiffs must bring suit and prevail or settle to be eligible for payment from the MIF). 19 GREATER N.Y. HOSP. ASS N, OVERVIEW OF THE NEW YORK STATE MEDICAL INDEMNITY FUND FOR NEUROLOGICALLY IMPAIRED NEWBORNS 1 (2011), available at /10711/File.aspx N.Y.S.2d 662 (N.Y. Sup. Ct. 2011).
5 2012 New York s Innovative Approach to Medical Malpractice 479 New York are projecting significant reductions (in the millions of dollars range) in medical malpractice premium costs. 21 JDN is a judicially created settlement tool and method of medicalmalpractice case management, originally implemented in the Supreme Court, Bronx County, in collaboration with the New York City Health and Hospitals Corporation ( HHC ). 22 Since 2006, when HHC established its own Law and Claims Departments, 23 there have been 695 HHC medicalmalpractice dispositions in the Supreme Court, Bronx County, only four of which required jury selection. 24 Of those four, only two resulted in a jury verdict. 25 The JDN concept is quite simple. One judge, well versed in medicine, is assigned to a malpractice action from inception to jury selection. Cases are analyzed early on as to whether they have the potential to settle. If the facts warrant settlement (or the discontinuance against a blameless medical provider) even before discovery commences, discussions among the parties are initiated. Each case is closely monitored to reduce court appearances and lower defense costs. This is significant since researchers estimate that fifty-four percent of the dollars paid to plaintiffs in medical-malpractice suits goes to the administration of the system. 26 II. Judge-Directed Negotiation New York s Chief Judge Jonathan Lippman and the two Chief Administrative Judges who have served during his tenure, Honorable Ann Pfau 27 and Honorable Gail Prudenti, have been visionaries in creating 21 Interview with Donald Ashkanese, Vice President, Montefiore Med. Ctr.; Interview with Brian Noonan, Esq., Vice President, New York and Presbyterian Hosp. 22 Alicia Gallegos, Medical Liability: Cutting Costs from the Bench, AMEDNEWS.COM (Oct. 31, 2011), New York City s municipal healthcare system is the largest municipal system in America. 23 See Joel Stashenko, New York Program to Target Medmal Cases for Early Settlements, N.Y.L.J.,http://www.newyorklawjournal.com/PubArticleNY.jsp?id= &slreturn=1 (Dec. 27, 2011). Prior to 2006, lawsuits against the City of New York and related agencies, including HHC, were defended by the New York City Corporation Counsel ( Corporation Counsel ). Any settlement required the approval of the New York City Comptroller ( Comptroller ). Today, HHC defends its own cases, but still requires the approval of the Comptroller to settle them GNYHA, supra note Judge Pfau is currently the Statewide Coordinating Judge for Medical Malpractice Matters. In announcing Judge Pfau s appointment, Chief Judge Lippman stated: The eyes of the country are focused on our efforts to improve the administration of justice in medical malpractice litigation.... State Courts in N.Y. Changing Leadership, INSURANCENEWSNET.COM,
6 480 New England Law Review v specialized courts and programs which marry administration of the law with adequate response to society s needs. In furtherance of this philosophy, they have created programs which promote early resolution of medical malpractice claims without and this is critical diminishing the judiciary s role as a neutral magistrate or depriving litigants of their right to a trial by jury. A good example is the highly successful JDN Program created in conjunction with HHC, which originated in the Supreme Court, Bronx County, to address municipal hospital malpractice claims. Because of its success in the Bronx, the JDN Program was expanded to other counties in New York City. On June 23, 2009, Crain s Health Pulse reported that HHC s malpractice indemnity costs had dropped from a high-water mark of $190,000,000 in 2003 to $144,000,000 in Impressed by the results of the JDN Program, the New York State Department of Health ( DOH ) reached out to New York s Office of Court Administration ( OCA ) to explore whether the JDN Program could be expanded to private hospitals. As a result of that dialogue, a meeting of the various stakeholders and interested parties was conducted by Commissioner Richard Daines, M.D., on September 26, At this meeting, Doctor Daines described the JDN Program and the parties gauged whether there was interest in expanding it beyond the confines of New York City s municipal hospital system. The New York State Trial Lawyers Association ( NYSTLA ), whose members include some of New York s elite plaintiffs medical-malpractice trial lawyers, had long been supportive of the JDN-HHC Program, viewed the model favorably, and did not oppose its expansion, provided that litigants retained their fundamental right to adjudicate malpractice claims in court and by a jury. 29 Efforts were ongoing to expand the JDN Program when, in the fall of 2009, President Obama announced the creation of a fund to provide grants to applicants to encourage the development of innovative approaches to reduce medical malpractice costs. 30 Working cooperatively, DOH and OCA submitted a joint proposal that contained a patient-safety component, an early disclosure and apology pilot program, and an expansion of the JDN Program to five private New York City hospitals, including the worldrenowned Columbia Presbyterian Center. On June 10, 2010, OCA was (last visited Feb. 23, 2012). 28 Barbara Benson & Gale Scott, Median Plan Cuts HHC s Med Mal Costs, CRAIN S N.Y. (June 23, 2009), 29 Interview with Jeff Korek, Esq., former President of N.Y. State Trial Lawyers Ass n. 30 See Emily P. Walker, Medical Malpractice Reform by President Obama and the White House, KEVINMD.COM, president-obama-white-house.html (last visited Mar. 30, 2012).
7 2012 New York s Innovative Approach to Medical Malpractice 481 awarded $2,999,787 the largest AHRQ grant to implement this program. 31 Soon, other courts utilized the model. For example, the Supreme Court of Westchester County developed a JDN-type program in conjunction with the Westchester County Medical Center, a municipal hospital. Based on its successful program with HHC, the New York State Health Foundation awarded a grant to establish a JDN Program in the Supreme Court, Erie County, to deal with medicalmalpractice claims involving three major private health systems. 32 The JDN model has, at its core, a rather basic philosophy: If you promote discussion about a case; analyze its legal and medical pros and cons; and create an environment where lawyers view the court as credible, fair, and willing to become actively involved in the settlement process, you will settle cases. JDN s aim is to establish a process where meritorious claims are promptly identified and resolved and, just as importantly, where meritless claims against physicians and health providers are just as promptly identified and resolved. Our experience with the Program supports the notion that suits which settle sooner generally settle for less; moreover, there is the additional benefit to all parties that litigation costs are significantly reduced. Under the JDN method, once a suit is commenced, a single judge supervises the case from inception to jury selection. 33 This permits the judge to become invested in the case and use every court appearance as an opportunity to explore settlement. There are medical malpractice actions which, because of their unique facts, are particularly amenable to early disposition without the necessity and expense of protracted discovery. Cases involving shoulder dystocia/brachial plexus are a good example of the unique factual scenarios. Shoulder dystocia occurs when a baby s head is delivered through the vagina, but his shoulders get stuck inside the mother s body. 34 Erb s Palsy can occur after shoulder dystocia, causing weakness in the arm or loss of use. 35 Liability for brachial plexus injury is 31 Medical Liability Reform and Patient Safety: Demonstration Grants, AGENCY FOR HEALTHCARE RES. & QUALITY (June 2010), demogrants.htm. 32 Stashenko, supra note See, e.g., Michelle Andrews, N.Y. Court Program Aims to Ease Malpractice Bottlenecks, WASH. POST, Nov. 22, 2011, at E4. 34 Pregnancy Complications: Shoulder Dystocia, MARCH OF DIMES (Dec. 2007), [hereinafter Pregnancy Complications]. 35 Henry Lerner, Is All Brachial Plexus Injury Caused by Shoulder Dystocia?, SHOULDER DYSTOCIA (2006), (citing Dominico Pecorari, A Guest Editorial: Erb Palsy Without Apparent Shoulder Dystocia, 57 OBSTETRICAL & GYNECOLOGICAL SURV. 547 (2002)).
8 482 New England Law Review v created by two means: (1) the doctor s failure to appreciate the large size of the baby or risk factors, for example, the mother is obese or diabetic, making shoulder dystocia more likely to occur; 36 or (2) the doctor s use of excessive lateral traction to free the impacted shoulder. 37 Generally, these issues are identifiable from the hospital record or by a physical exam of the child. When combined with a full and frank discussion of the legal and medical pros and cons of the suit the hallmark of the JDN approach and an opportunity to view the child s damages, defendants are often prepared to make a settlement offer quite early in the process. In the typical JDN/HHC settlement conference, the court benefits from the presence of HHC and New York City Comptroller s Office representatives, who have actual authority to settle cases. This is key. By having people at the table with real authority, the plaintiff s bar views the negotiations as a genuine opportunity to settle cases. Replicating these periodic settlement sessions with private hospitals has been challenging. Culturally, private-medical-malpractice insurers have not, for the most part, come to court to discuss an inventory of cases at one sitting. Refining that process is a work in progress. Unlike HHC where all physicians are employees of the municipal entity, private attending physicians often have their own coverage with the right to withhold consent to settlement. Even so, the Federal Grant Program has achieved more settlements early in the process than was previously the case. 38 III. Medical Indemnity Fund On January 1, 2011, New York Governor Andrew Cuomo took office confronting a record-budget deficit. Committed to ameliorating the state s worsening economic woes, the Governor appointed a Medicaid Redesign Team to find ways to save Medicaid money for the fiscal year. 39 Subsequently, on February 24, 2011, the Redesign Team approved a package of recommendations, including Proposal 131 proposed, inter alia, caps on noneconomic damages for medical-malpractice awards and urged the establishment of a Neurologically Impaired Infant Medical Indemnity Fund, designed to reduce medical-malpractice costs, principally borne by 36 Pregnancy Complications, supra note JAMES A. O LEARY, SHOULDER DYSTOCIA AND BIRTH INJURY: PREVENTION AND TREATMENT 204 (3d ed. 2009). 38 See Interview with Donald Ashkanese, supra note 21; Interview with Brian Noonan, Esq., supra note Press Release, Andrew M. Cuomo, Governor of N.Y., Governor Cuomo Issues Executive Order Creating Medicaid Redesign Team (Jan. 5, 2011), available at press/ medicaid; see also EXCELLUS, supra note 12, at 3.
9 2012 New York s Innovative Approach to Medical Malpractice 483 hospitals, for obstetrical claims. 40 Under the proposal, the Fund pays the cost of future medical expenses for infants who would otherwise receive Medicaid benefits. 41 On December 1, 2009, Lisa Kramer, President and CEO of Hospitals Insurance Company Inc. ( HIC ), proposed the establishment of an obstetrical fund before the New York State Senate Standing Committees on Insurance Health and Codes. 42 Her testimony explained the rationale for the Fund and its economic benefits to certain hospitals: In the past five years, inflation in malpractice premiums far exceeded inflation in consumer prices and, more important, the reimbursement hospitals receive for the critical care they provide to the public. By way of example, malpractice premiums for one of our hospitals increased from $53 million in 2005 to $115 million in The single biggest driver of hospitals= malpractice costs is obstetrics the delivery of babies. Over 40% of our payments are made in cases involving neurologically impaired infants. Taking into account the malpractice premiums attributable to obstetrics cases, one of our hospitals has calculated that it loses over $8,000 per Medicaid-delivered newborn In the spring of 2011, New York s Assembly and Senate enacted the MIF statute; however, caps limiting pain and suffering awards to $250,000 were never considered. Crain s New York Business reported that about 50% of med-mal costs in New York were due to suits involving neurologically impaired infants. 44 Medicaid is the insurer for an estimated 50% of New York state deliveries and pays the medical costs of a significant number of children affected by neurological impairment, including many who received a settlement or award in a medicalmalpractice action. 45 In the Bronx and Brooklyn, Medicaid pays for about 70% of baby deliveries. 46 The creation of an obstetrical fund achieves Governor Cuomo s multiple goals of reducing Medicaid costs and medical malpractice 40 MEDICAID REDESIGN TEAM, PROPOSAL TO REDESIGN MEDICAID: PROPOSAL NO. 13 (2011), available at of_recommendations.pdf; Benson, supra note EXCELLUS, supra note 12, at 3 (explaining that the Medical Redesign Team advanced the Fund as a way to reduce medical malpractice costs). 42 Mendez ex rel. Mendez v. N.Y. & Presbyterian Hosp., 934 N.Y.S.2d 662, 665 (N.Y. Sup. Ct. 2011). 43 at Benson, supra note
10 484 New England Law Review v premiums. On a human level, the Fund provides a lifetime of guaranteed care, geared to obstetrical mishap victims, and the comfort that comes to parents by knowing that help will be available to their child if they are gone. The Fund provides other tangible benefits as a Medicaid cost-cutting device. With considerable regularity, successful litigants in obstetrical medical-malpractice actions establish Supplemental Needs Trusts ( SNT ) statutorily created trusts that permit tort-recovery recipients to receive settlement cash, while remaining eligible for Medicaid benefits. 47 Based on this Court s experience, the SNT is used, when a child requires significant future medical care, and settlement proceeds are inadequate, usually because liability problems require a settlement at a reduced amount. Under the MIF statute, the Fund pays for the same services as Medicaid. 48 However, unlike Medicaid, no lien is created from the receipt of Fund services. 49 Thus, the Fund permits a plaintiff to settle an action for up-front cash, buy a home, and receive a lifetime of care without encumbering the cash or the home, which is the legal consequence of an SNT. As will be discussed below, because enrollment in the Fund is mandatory for successful post-april 1, 2011 obstetrical plaintiffs, the Fund pays the cost of future medical expenses for which Medicaid would have been responsible prior to its enactment. How does the Fund work? The MIF statute relieves defendants, in certain specified obstetrical medical malpractice actions, from paying the future medical expenses component ( Fund damages ) of any post-april 1, 2011 judgment or settlement. Instead the MIF statute requires qualified plaintiffs be enrolled in the Fund, which pays for future medical expenses as incurred. 50 The statute contains a collateral source provision, which mandates that qualified plaintiffs make use of any existing private insurance before resorting to the Fund. 51 Prior to the statute s enactment, medical malpractice insurers or selfinsured medical providers settled obstetric malpractice actions, including claims for future medical expenses, with up-front lump-sum cash. Prepaying for future medical expenses came with an obvious drawback: if a successful infant plaintiff died sooner than expected or required a level of 47 See KREINDLER ET AL., supra note 3, 21.44; Joseph A. Rosenberg, Supplemental Needs Trusts for People with Disabilities: The Development of a Private Trust in the Public Interest, 10 B.U. PUB. INT. L.J. 91, (2000). 48 See KREINDLER ET AL., supra note 3, N.Y. PUB. HEALTH LAW 2999-j(10) (McKinney 2012) ( Payment from the fund shall not give the fund any right of recovery against any qualified plaintiff.... ) j(6) j(12).
11 2012 New York s Innovative Approach to Medical Malpractice 485 future care less than projected at the time of the settlement, unspent or surplus funds went to the child s estate or nonmedical uses rather than being returned to the insurer or medical provider. The Fund eliminates this shortcoming by paying only for those services actually utilized, 52 a method of compensation that has the potential to significantly reduce the cost of future medical care to qualified infants. Several years earlier, New York s Civil Practice Law and Rules was amended by the addition of Article 50-A. In Mendez v. New York and Presbyterian Hospital, the first published opinion addressing the Fund, the court wrote: The notion that the payment of future damages should have some temporal relationship with the future, not exclusively with the present, is consistent with CPLR Article 50-A, about which the Advisory Committee on Civil Practice wrote: The legislative history indicates that the provisions were intended to avoid payment of unwarranted, windfall damages and to thereby reduce the liability costs of the defendants found liable, but without depriving victorious plaintiffs of fair compensation. 53 Under the statute, the Fund pays for the following: [F]uture medical, hospital, surgical, nursing, dental, rehabilitation, custodial, durable medical equipment, home modifications, assistive technology, vehicle modifications, prescription and non-prescription medications, and other health care costs actually incurred for services rendered to and supplies utilized by qualified plaintiffs, which are necessary to meet their health care needs as determined by their treating physicians, physician assistants, or nurse practitioners For actions covered by the statute, payments of future medical expenses by the Fund are obligatory and courts are required to amend settlement agreements or judgments to comply with its terms. 55 The Fund, which is capitalized by deposits from the State and assessments on obstetrical revenues of New York hospitals, became operational on October 1, Rules and regulations have been promulgated to implement and amplify the statute=s legislative purpose. 52 Stephen G. Schwarz, Implications of the New Medical Indemnity Fund in New York State, LAWYERS.COM (Apr. 27, 2011), 53 Mendez ex rel. Mendez v. N.Y. & Presbyterian Hosp., 934 N.Y.S.2d 633, 634 (N.Y. Sup. Ct. 2011) (quoting ADVISORY COMM. ON CIVIL PRACTICE, REPORT OF THE ADVISORY COMMITTEE ON CIVIL PRACTICE 18 (2004), available at civilpractice_04.pdf). 54 PUB. HEALTH LAW 2999-h(3) j(6).
12 486 New England Law Review v The Fund is administered by the New York Department of Financial Services (formerly the Department of Insurance). It defines a birth-related neurological injury as follows: [A]n injury to the brain or spinal cord of a live infant caused by the deprivation of oxygen or mechanical injury occurring in the course of labor, delivery or resuscitation or by other medical services provided or not provided during delivery admission that rendered the infant with a permanent and substantial motor impairment or with a developmental disability [or both].... This definition shall apply to live births only. 56 Under the statutory scheme, cases are settled, as it was prior to the enactment of the Fund, for lump sums. Plaintiffs attorneys fee are calculated pursuant to Judiciary Law section 474-a (sliding scale for medical-malpractice actions), based upon this lump sum. 57 Unlike other medical-malpractice actions, the defendants in a Fund case pay a portion of the attorney=s fee. 58 Damages, other than future medical expenses (Fund damages), are paid with lump-sum cash. The amount of non-fund damages (the damages to be paid in cash) is determined by an allocation of the lump-sum settlement. 59 The allocation also determines how much of the attorney s fee is paid by defendant. 60 Under the statute, the defendant is responsible for paying the portion of the fee allocable to Fund damages and the plaintiff is responsible for the remainder. 61 The statute is silent as to the criteria to apply in allocating a settlement. In Mendez, the court allocated a $5,500,000 settlement for a profoundly brain-damaged child on a 50/50 basis 50% for Fund damages and 50% for non-fund damages. 62 There, the court reviewed appellate authorities in which damaged infants required custodial care (usually the most costly element of future medical expenses) and concluded that in a braindamaged-baby case, future medical expenses ranged from 53.7% to as high as 89% of a damage award. 63 In allocating the settlement amount, as required by the MIF statute, the Mendez court concluded that the Fund change[d] the dynamics of the h(1) j(14) Mendez ex rel. Mendez v. N.Y. & Presbyterian Hosp., 934 N.Y.S.2d 662, 664 (N.Y. Sup. Ct. 2011) at 668 (discussing future medical expense damage awards from Lovett v. Interfaith Med. Ctr., 860 N.Y.S.2d 172, 173 (N.Y. App. Div. 2008) and Flaherty v. Fromberg, 849 N.Y.S.2d 278, 280 (N.Y. App. Div. 2007)).
13 2012 New York s Innovative Approach to Medical Malpractice 487 settlement process by reducing, often significantly, the amount of net cash available to settle a case. 64 Thus, the court adjusted the typical allocation in an obstetrical action (weighted in favor of future medical expenses) to maximize cash. Hence, the Mendez court suggested that in an obstetrical action governed by the Fund, involving a profoundly damaged child requiring custodial care, an appropriate allocation is 50/50. Using the settlement amount in Mendez, the defendant pays one-half of the $5,500,000 settlement, or $2,750,000, plus one-half of a $700,000, or $350,000, for a total cost of $3,100,000 to settle a suit which pre-fund would cost $5,500,000 a savings of $2,400,000. Clearly, the Fund does what it was set up to achieve create a significant savings to those hospitals and/or insurers whose disproportionately high malpractice costs are due to obstetrical malpractice claims. Early reports on the efficacy of the Fund s administrative structure are quite good. Applicants receive prompt responses and each child s case is assigned to a case manager. Moreover, the Fund s administrators are anxious to work closely with the trial courts, whose Infant Compromise Orders, resolving obstetrical actions, determine eligibility for the Fund. 65 CONCLUSION It is hard to imagine a conversation about the rising cost of healthcare in America without some reference, justly or unjustly, to medical-liability litigation. Ironically, it is routinely a discussion defined less by finances (okay, there is some of that) than by partisanship and emotion. Partisans who rigidly adhere to positions are resistant to change or any effort to achieve consensus. Unfortunately, this results in the debate being shaped more by terms such as caps, defensive medicine, and patient safety than by dollars and cents. Against that backdrop, New York State is utilizing two programs, more middle ground than tort reform, to address economic realities while adhering to the fundamental right of victims of medical malpractice to be fairly compensated, preferably sooner rather than later. New York=s Medical Indemnity Fund and Judge Directed Negotiation are new methods to deal with old problems, and more importantly, innovative approaches which seem to be working. 64 at See id. at 663. Sedgwick Claims Management Services, Inc., a highly regarded national claims management company, has been retained to serve as the Fund s administrator. Medical Indemnity Fund: General Information for Providers, N.Y. DEPARTMENT OF FIN. SERVICES, (last visited Mar. 30, 2012).