Tort reform: Where's the balance?

January 19, 2007

New research shows that the courts get it right most of the time. But the monetary and other costs are still out of sight.

Recently, academic observers with no clear ax to grind subjected this debate to closer scrutiny. In an article that appeared this past spring in The New England Journal of Medicine, David M. Studdert and colleagues at the Harvard School of Public Health, Brigham and Women's Hospital, and Harvard Risk Management Foundation asked: How well does the current medicolegal system sort out and compensate meritorious claims from nonmeritorious ones? To get the answer, Studdert and his fellow researchers subjected 1,452 closed claims-collectively involving about 33,000 physicians, 61 acute care hospitals, and 428 outpatient facilities-to what they called "structured retrospective reviews."

Their findings give ammunition to those on both sides of the med-mal divide.

Almost all of the claims (97 percent) involved injury. Of these, the majority-63 percent-involved injury due to error. The AMA jumped all over that finding, declaring "40 percent of medical liability claims [are] filed without merit."

But critics cried foul, arguing that claims in which there's no evidence of injury (3 percent) are a very different kettle of fish from claims in which there is injury but no determination of error (37 percent). The first category should never see the light of day, almost everyone agrees. The second category is more problematic, since a court needs to decide whether the injury was the result of physician error. And that's precisely why this category of claims warrants greater scrutiny.

And, in fact, say Studdert and his colleagues, the legal system gets this second category of claims (those involving injury but no error) right most of the time, denying payment in more than eight in 10 cases. When there is injury due to error, the system gets this group mostly right as well, offering compensation roughly three-quarters of the time. That's a fairly good track record, which is one reason the trial bar embraced the NEJM study as warmly as it did.

But, for some, the system's relatively good track record comes at too high a price. "Sure, the adversarial system can get to the correct answer three-quarters of the time for meritorious claims, but it does so at a tremendous cost to both physicians and patients," says neurosurgeon Jeffrey Segal, CEO and founder of Medical Justice, which offers insurance plans that supplement traditional med-mal policies.

Studdert himself thinks the financial and other costs of the system are very high. The average cost of defending a claim, he and his colleagues found, was just over $52,000. For claims that went to trial, that number more than doubled, to $112,968. In a related finding, the authors note that "the average time between injury and resolution was five years, and one in three claims took six or more years to resolve. . . . These are long periods for plaintiffs to await decisions about compensation and for defendants to endure the uncertainty, acrimony, and time away from patient care that litigation entails."

Studdert also points to two other shortcomings of the system. First, it leaves uncompensated a significant percentage of meritorious claims. Indeed, of the 27 percent of the claims that had outcomes out of sync with their merit, 16 percent resulted in no payment, despite the presence of error.