COVER STORY

Malpractice: Do other countries hold the key?

We may be able to learn a lot from the methods other countries have for handling malpractice litigation.

By Robert Lowes
Senior Editor

Driven to despair by skyrocketing insurance premiums and malpractice woes, US physicians are marching in the streets for tort reform. They're demanding federal legislation that, for starters, would limit noneconomic damages in malpractice suits to $250,000.

Some legal experts, however, say America should look beyond its borders for a more drastic solution. So what can we learn from how the rest of the world handles malpractice cases?

Stunned by huge awards handed out by juries? In Canada, judges try the vast majority of malpractice cases.

Outraged by the contingency fees of plaintiffs' attorneys that gobble up one-third or more of court-awarded damages? Germany bans them, while the United Kingdom limits a victorious plaintiff's attorney to twice his customary fee.

Skeptical of dueling expert witnesses? German judges appoint their own neutral experts.

Sick and tired of litigation, period? In New Zealand, malpractice cases bypass the courthouse. They're adjudicated through a no-fault system run by the government.

To be sure, foreign legal systems may not hold the key to resolving the US malpractice insurance crisis. Some experts argue that steep premiums stem more from the business cycles of malpractice carriers and the financial fallout of the Sept. 11 terrorist attacks than from frivolous suits and swollen jury verdicts. And the approaches that other countries take don't always produce the results you'd expect. Nevertheless, the way the rest of the world treats malpractice claims challenges long-held assumptions about the American justice system.

Here's a quick look at a few key features of other legal systems, particularly those in the United Kingdom, Germany, Canada, and New Zealand.

Are doctors better served by judges than juries?

The United States is one of the few countries where a jury routinely decides whether a doctor committed malpractice. The norm elsewhere is for a judge to try malpractice claims and other civil litigation, says David Bernstein, a professor at the George Mason University School of Law in Arlington, VA. That's true in Germany, the UK, and most Commonwealth nations. In Canada, every province except Quebec gives warring parties the jury option. However juries heard only 4 percent of cases going to trial in 2002, according to the Canadian Medical Protective Association, which provides malpractice coverage for 95 percent of the nation's physicians.

Bernstein and others argue that judges usually render better decisions than juries because their education and experience enable them to understand complex cases, arrive at sound conclusions, and resist purely emotional arguments. "Plaintiffs' lawyers want ignorant juries that they can manipulate," Bernstein says.

Unlike juries, judges must put their decisions in writing—another plus. "It forces them to be more methodical and logical," says anesthesiologist John Hickey, CEO of the Medical Protection Society, which provides malpractice coverage to physicians in the UK and dozens of other countries. Written decisions also give plaintiffs and defendants a clearer basis for appeal, and clearer precedents for other courts as well as for the medical profession.

However, not everybody believes that juries can't be trusted. Social psychologist Neil Vidmar, who teaches at the Duke University School of Law in Durham, NC, points to studies showing that outside medical experts tend to agree with jury decisions, and that judges tend to agree with juries in all manner of civil litigation. "Most malpractice cases aren't rocket science," notes Vidmar, author of Medical Malpractice and the American Jury: Confronting the Myths about Incompetence, Deep Pockets, and Outrageous Damage Awards (University of Michigan Press, 1995). "They usually boil down to a communication breakdown or some organizational matter."

And some proponents of trial-by-judge temper their support. "I've heard the 'dumb jury' argument, but our experience hasn't proven that to be the case," says FP John Gray, CEO of the CMPA in Canada. Likewise, John Hickey in the UK says court decisions didn't tilt noticeably in favor of physicians after Ireland switched to nonjury civil trials several decades ago.

Proponents of trial-by-judge in the United States face a huge obstacle. The Seventh Amendment in the Bill of Rights—and most state constitutions—guarantees the right to a jury trial in civil suits involving more than $20. "I don't think a constitutional amendment to eliminate civil jury trials would have a chance," says Kenneth Suggs, secretary of the Association of Trial Lawyers of America, which represents the plaintiffs' bar. "Thomas Jefferson thought this was one of the most important rights that citizens had."

It would be possible for US judges to wield more power—even without a constitutional amendment, says Bernstein. They could grant more pretrial summary judgments in cases where one side can't prove the facts are contestable. And state legislatures, he says, could authorize judges to award damages if the plaintiff wins, bumping the jury aside.

Court-appointed experts: nothing but the truth

Expert witnesses are often called "hired guns" because they're seen as weapons for plaintiff and defendant alike in the adversarial setting of the courtroom. Juries may view their testimony as partisan, and therefore not entirely credible.

But what if a truly neutral expert witness added his two cents' worth? Wouldn't that contribute to a fair verdict? Germany thinks so. Its judges routinely pick their own expert witnesses in malpractice cases, although plaintiffs and defendants can hire experts as well. "This prerogative gives a judge a more unbiased view," says gynecologist Bernhard Gibis, director of quality for the National Association of Statutory Health Insurance Physicians, which represents 142,000 German physicians who treat patients in the government health insurance system.

Having judges appoint experts isn't an alien concept in the United States. "It's permitted under the Federal Rules of Evidence, and many states have copied the federal rules," says Ken Suggs. "However, court-appointed experts are the exception rather than the rule in this country. Courts generally can't afford them."

Even if taxpayers did pony up more money for court-appointed experts, their value shouldn't be overestimated. "Even a supposedly neutral witness will have biases," says Vidmar.

Clamping down on attorneys' fees

An attorney who charges a contingency fee is taking a gamble. He'll collect nothing if his client loses. But if his client receives court-awarded damages or a settlement, the attorney receives a pre-determined share—usually 30 to 40 percent.

Germany prohibits attorneys from taking civil cases on contingency. True, German lawyers can charge more for cases involving larger sums of money, but only according to a government fee schedule. And the fee schedule isn't generous by American standards. A lawyer handling a case valued at $600,000 and actually tried before a judge would normally collect only about $7,500.

The UK bans percentage-based contingency fees, but in the 1990s, it introduced what's called a conditional fee. As in the United States, the plaintiff pays his lawyer only if he wins. However, the lawyer can collect no more than double what he would normally charge—not a formula for a million-dollar payday.

Critics of US contingency fees say they divert too much money away from injured patients. They also steer lawyers away from solid cases involving low damages and toward speculative suits worth millions. "An attorney has an incentive to take on a lot of cases with a high dollar value, but a low probability of success," says law professor David Bernstein. "If he files enough of them, he's bound to win one and strike it rich."

To Neil Vidmar, though, contingency fees are a necessary evil, because most patients can't afford to pursue a malpractice claim on their own. And since contingency-fee attorneys must invest tens if not hundreds of thousands of dollars in a lawsuit, he says, lawyers choose only those cases with the best chances of winning. "Contingency fees improve the quality of cases filed," adds Ken Suggs. "You don't have a motive to file a frivolous case."

Tort reform pending in Congress would put contingency fees on a sliding scale to minimize the attorney's cut, but if Canada's experience is any indication, this measure may not amount to much. Canada's provinces have gradually embraced contingency fees over the years, with the last holdout, Ontario, coming on board in 2002. "In our view, it's made no difference," says the CMPA's John Gray. "We don't see a lot of nonmeritorious claims being pursued regardless of how the attorneys are paid."

The loser-pay rule: a judicial speed bump?

One gripe about American justice is that even if you triumph over a plaintiff, you (or your insurer) still have to shell out big bucks to defense attorneys. In Germany, the UK, and other Commonwealth countries, the loser pays the winner's legal bill.

"This rule would dampen our fervor for speculative suits," says law professor David Bernstein. "And it would discourage plaintiffs from trying to wear out the other side with excessive discovery."

Opponents of the loser-pay rule, of course, challenge the assumption that doctors are beset by a tidal wave of flimsy lawsuits. Ken Suggs says the loser-pay rule would discourage plaintiffs with legitimate claims. However, there's a way to make the rule less risky for plaintiffs. In the UK and Germany, they can buy special insurance that will cover what they'll owe a defendant if their suit fails.

Alaska is the only state that observes the loser-pay rule in some form. Florida tried it out with malpractice litigation during the early 1980s, but dropped the rule after doctors there were disappointed with the results. They found that while their costs went up when they lost a case, they often couldn't collect from insolvent plaintiffs when they won. So much for deterrence.

Florida's experience mirrors that of Canada, where the loser-pay rule is on the books. "We seldom attempt to collect costs from plaintiffs when we win," says John Gray. "Frequently, the families who sue aren't well off to begin with, and they're attempting to care for someone who is severely injured."

The no-fault approach: End the blame game

Several countries, Sweden and New Zealand among them, have a no-fault system of evaluating and paying medical malpractice claims, similar to the way car accidents and workplace injuries are handled. If someone is injured by medical treatment and meets certain criteria, the government cuts a check.

The word "no-fault" is a bit misleading, though. In Sweden, an injury must be deemed "avoidable" to merit compensation. In New Zealand, about 10 to 15 percent of compensated injuries are each year classified as medical errors. The rest are "mishaps," or very bad outcomes. The physician didn't make a mistake, but the bad outcome is severe enough and rare enough to warrant compensation (there are criteria for severity and rarity). But whether an injury is considered avoidable, the result of error, or just bum luck, the no-fault approach spares physicians the ordeal of litigation.

Meanwhile, injured patients reap significant benefits. The streamlined nature of no-fault translates into speedy decisions and payments within months. In contrast, plaintiffs in a malpractice suit might have to wait years for their money. In addition, the ease of no-fault systems encourages small claims that might otherwise be shunned by plaintiffs' attorneys. That's an important consideration to legal experts who say that contrary to conventional wisdom, the US tort system doesn't do enough for victims of malpractice. Only one in eight actually files a claim and only one in 15 receives any money, according to a landmark study of hospital patients in New York published by Harvard University researchers in 1990.

A mandatory no-fault system for medical malpractice in the United States probably would meet tremendous resistance from trial lawyers who'd see it as an infringement on the public's right to file suit and their ability to earn a living. Some scholars question whether it would adequately deter medical negligence, given that nobody's taking the rap for mistakes. And it's not clear whether the United States could afford no-fault.

However, a 1997 study published in Law & Contemporary Problems suggests that a no-fault system in the US is within our economic reach. The study concluded that no-fault could compensate two to three times more victims than the court system, while costing the same or less than what doctors and hospitals pay in malpractice premiums. The researchers came to this conclusion by hypothetically applying the Swedish avoidability test to Colorado and Utah patients injured by medical care in 1992.

Affordability, though, is a real-life issue for New Zealand's no-fault system. Outlays for patients injured by medical errors and mishaps rose 82 percent from 1997-'98 to 2001-'02. The cost per claim has been rising dramatically, and the system piles on new claims even while it continues to pay on old ones. Some New Zealanders are so concerned about the level of spending that they've proposed having physicians reimburse the government for what it pays injured patients.

New Zealand's situation doesn't surprise health care economist Patricia Danzon, a professor at The Wharton School of the University of Pennsylvania. "I don't think there's an advantage in moving away from a fault-based system," she says. "It's hard to define a compensable injury if you eliminate the idea of error. You don't want to pay for all bad outcomes, but where do you draw the line? The cost can go through the roof."

Overseas physicians pay high premiums, too

Even if the US wanted to imitate other countries in their approaches to medical malpractice, there are a number of caveats to be considered first. For one thing, cultural differences can make it hard to transplant features of foreign legal systems into ours. It's said that Germans respect authority more than Americans do. So while Germans may be content with judges issuing verdicts, Americans may not.

Plus, any success that other countries have in avoiding an American-style malpractice crisis can't be solely attributed to their legal systems. Germany, the UK, and Canada have various forms of universal medical coverage that tend to reduce damages doled out by courts, says social psychologist Neil Vidmar. "A big proportion of awards are for past and future medical care, and in these countries, these costs are paid by the state."

As it is, the malpractice blues are a worldwide phenomenon, infecting countries that US doctors would consider models for tort reform. Australia has a legal system like that in the UK, for example, but it's been experiencing a malpractice meltdown similar to ours—skyrocketing premiums, bankruptcy for the nation's main carrier (now on government life support), and cries for tort reform from doctors. United Medical Protection, the distressed carrier, has attributed its woes to a downturn in investment income and higher reinsurance costs following Sept. 11 as well as increased litigation and higher court awards.

Lawsuits also are on the rise in Germany, says gynecologist Gerhard Gibis. "People are less likely to view the doctor as a superman who always does the right thing," he says. Gerhard Bester, a plaintiff's attorney in Munich, says a newfound willingness of doctors to testify about each other's mistakes has also contributed to the surge in litigation.

What concerns malpractice carriers in the UK and Canada isn't so much an increase in malpractice claims as an increase in their monetary value. The average award or settlement for Canada's primary malpractice carrier rose 38 percent from 1997 to 2001, despite an inflation-indexed cap on noneconomic damages now set at close to $290,000 (in Canadian dollars). The average payment per claim for the UK's Medical Protection Society rose by 48 percent in roughly that same period.

Bigger payouts are cited as one reason high-risk specialists in both countries have been jolted by sharp hikes in malpractice coverage. The MPS upped its rates 18 percent for ob/gyns and 17 percent for neurosurgeons in 2003, although many nonsurgical specialists such as pediatricians saw theirs drop 10 percent. CMPA rates in Ontario, Canada's most populous province, rose 10 percent for orthopedic surgeons, neurosurgeons, and heart surgeons in 2003. Ontario internists and FPs who don't perform hospital procedures also got hit hard with rate increases of 24 percent and 19 percent, respectively.

Canadian doctors are largely insulated from malpractice sticker shock because provincial governments foot much or most of the bill, says John Gray. "The rate for an ob/gyn in Ontario is $75,000, but the government pays about $70,000 of that." You'd think Canadian doctors would be more content than their US peers, but Gray reports that some ob/gyns in Ontario are leaving practice, while neurosurgeons no longer perform certain high-risk procedures—shades of the United States.

"It isn't about the cost of malpractice coverage," says Gray. "It's about the emotional trauma of being sued."

In other words, the grass in Canada isn't as green as US doctors might think.

"Americans may believe that tort reform and reducing the cost of insurance will fix their problems," says Gray, "but I worry that it might not happen."

 

Robert Lowes. Malpractice: Do other countries hold the key?. Medical Economics Jul. 25, 2003;80:58.