Medical Malpractice:A Simple But Powerful Proposal For Malpractice Reform

American Health Lawyers Association:  Health Law Weekly January 16, 2009 Vol. VII Issue 2

Malpractice litigation has led to countless calls for tort law reform and has
often been blamed for driving physicians from practice in high-risk fields,
such as obstetrics and gynecology, because of the resulting high costs of
insurance. In Pennsylvania, for example, malpractice premium increases
have caused significant concern about the future availability of physicians in
high-risk specialties.[2]

Recent case studies of dispute management by certain progressive
hospitals, however, suggest that malpractice litigation (and its extraordinary
costs) can be dramatically reduced through dispute management programs
that include mediation, apologies, and expressions of concern to affected
patients and their families. Just as leading consumer products companies
have dramatically reduced product liability litigation by treating injured
customers with respect and offering a prompt avenue for addressing their
concerns,[3] healthcare systems—like the University of Pittsburgh Medical
Center, the University of Michigan Health Systems, Veterans’ Administration
Hospital, and others—have dramatically reduced malpractice claims by
similar measures.

In view of the extraordinary success of medical dispute management
programs based on mediation in large health systems and the simplicity of
such programs, the key question is why such systems have not been more
broadly adopted. Impediments to broad-based adoption of medical dispute
management programs—all of which can be addressed with a modicum of
planning and oversight—include lack of knowledge, inadequate
infrastructure, and poor coordination among providers, insurers, and
regulators.

Indeed, the healthcare market is especially well suited for the adoption of
cost-effective dispute resolution mechanisms. The first two necessary
elements of an effective malpractice reform program are:
Require patients and their families, by advance agreement, to engage
in confidential mediation of claims in advance of filing suit, and
Provide ready and timely access to skilled mediators focused upon
early and fair resolution of claims and potential claims.

The first element—agreements to mediate in advance of filing suit—can be
seamlessly integrated into the forms routinely executed by patients upon
intake. The second element—a mediation panel—can be developed with
modest effort and little cost because of the opportunity it provides to panel
members to increase caseloads.

Because of the different, and sometime conflicting, incentives of providers
and payors who are not affiliated with large health systems, widespread
adoption of cost-effective dispute management programs is likely to require
incentives to deploy and participate in such programs (notwithstanding their
simplicity and their benefits). Most significantly, although large health
systems tend to be self-insured, and therefore, directly realize the financial
savings from early dispute resolution, providers who are not self-insured
may not realize comparable direct benefits. To encourage widespread
adoption of cost-saving mediation programs, therefore, providers will need
to be given incentives to do so.

The simplest and most powerful incentive is likely to be direct financial
benefit in the form of reduced malpractice premiums. In other words, a
third necessary element for successful malpractice reform based upon
mediation and dispute management is:

Providers who adopt and implement dispute management programs
based upon early mediation would be granted discounts on
malpractice premiums.

Like discounts to homeowners who install alarms, discounts to providers
would encourage protective safeguards that both benefit the insured and
reduce claim costs. In the short run, an effective reform program would
need to discount malpractice premiums at least enough to offset costs of
establishing and/or participating in a mediation program and, in the long
run, to reflect improved claims experiences.

This simple three-step reform program would dramatically reduce both the
procedural cost of resolving alleged medical errors and the size of
settlement payments. Extraordinary savings are almost inevitable
because:

Many, if not most, malpractice litigation results not from an alleged
medical error but from insensitive and non-communicative dealings
with affected patients and their families after a problem arises.
Mediation provides a safe forum in which providers and patients can
freely communicate without fear that their statement and admission
will be used against them in subsequent proceedings.
Early mediation provides to all parties information about the
wastefulness and harmful consequences to all parties of prolonged
litigation.

In view of inherent human characteristics and biases that affect
perceptions of a dispute and negotiations, mediation is more likely to
achieve an efficient and just settlement of a dispute than direct
negotiations between the parties.
Even if early mediation fails, it may open a line of communication
that can shorten litigation with an early settlement.

A. An Overview of Mediation

Mediation is “a process in which a neutral person or persons facilitate
communications between the disputants to assist them in reaching a
mutually acceptable agreement.”[4] Because a mediator has no decisionmaking
authority, he cannot render a binding decision on the parties. A
mediator does not hear testimony or evidence, and has no authority to
impose a decision on the parties. Nonetheless, even when mediation does
not result in a complete settlement, it may enable the parties to narrow the
scope of their dispute or decide upon expedited procedures for resolving
remaining areas of conflict.
Mediation typically proceeds in three main stages. If the mediation does not
result in a complete settlement, the parties may extend the process based
upon progress made during the initial session.
First, the parties (and their counsel) and the mediator convene in a joint
session. After opening remarks by the mediators, the parties are given the
opportunity to state their respective positions and objective for resolving
the dispute.

Second, the parties separate and the mediator engages in shuttle
diplomacy. The mediator will relay proposals and responses between the
parties after helping them to frame their dialog in a constructive manner.
The mediator also may serve as an impartial sounding board and provide
each side with a “reality check” as to their respective view. In addition, the
mediator probes for common ground that may provide a basis for
resolution.

Third, the parties and mediator will reconvene in a joint session to iron out
final details of an agreement. If a full settlement has not been reached, the
parties may nonetheless agree to remove certain of the issues from the
case, to an efficient procedure for resolving remaining issues (in lieu of
litigation), to exchange a limited range of information and thereafter to
reconvene, and so on. In many cases, mediation initiates a continuing
dialog and process for achieving a settlement in a cost-effective manner.
Like other forms of alternative dispute resolution (ADR), a hallmark of
mediation is confidentiality. Statements made during mediation are not
typically admissible in litigation, and the parties (and mediator) can further
assure confidentiality by agreement. Because a skilled mediator can filter
confidential information and frame the parties’ discussion in ways that
enhance the likelihood of success, mediation can enable parties to reach a
mutually beneficial agreement in circumstances in which direct negotiations
would fail.

In most cases, the benefits of mediation far outweigh its risks and costs.
The principal risks related to failed mediation are: (i) its comparatively
modest cost and time commitment; and (ii) its potential for educating an
opponent about a party’s strengths, weaknesses, and strategies. In most
malpractice cases, the cost of mediation is immaterial to the cost of the
overall dispute. The risk of disclosure can be addressed by clearly
instructing the mediator as to information that can, and cannot, be shared
with the opposing party.

The benefits of mediation are, by contrast, potentially substantial. It is well
known that over 95% of litigated cases settle prior to judgment. Indeed, in
2004, the Litigation Section of the American Bar Association (ABA)
undertook a “major project” termed the “Vanishing Trial” project to better
understand the causes of the decline in trial rates over the past 50 years.

The ABA’s analysis demonstrates how rarely, in fact, the filing of a
complaint leads to trial:
In federal courts, the decline in trials has been steep and dramatic. In
1962, there were 5,802 civil trials in the federal courts and 5,097
criminal trials, for a total of 10,899. In 1985, total federal trials had
risen to 12,529. By 2002, however, trials had dropped to 4,569 civil
trials and 3,574 criminal trials. Thus, our federal courts actually
tried fewer cases in 2002 than they did in 1962, despite a
five-fold increase in the number of civil filings and more than
a doubling of the criminal filings over the same time frame. In
1962, 11.5 percent of federal civil cases were disposed of by
trial. By 2002, that figure had plummeted to 1.8 percent.[5]
To the extent that mediation expedites the settlement process, it can
generate substantial cost savings. Further, and unlike court rulings and
arbitration, mediation may enable the parties to renew or develop mutually
beneficial arrangements based on areas of common interest identified in the
mediation process.

Because mediation affords the parties substantial flexibility in fashioning
settlements, it can provide an especially powerful forum for resolving
medical disputes. Many potential claims can be resolved by providing
apologies, recognition of family members, medical monitoring
commitments, or other actions suited to the needs of the specific patient
and his or her family. Mediation allows the parties to explore such
alternatives to the purely monetary awards of litigation.

B. Dispute Management Programs in Healthcare: A Track Record of
Success

1. University of Pittsburgh Medical Center

The University of Pittsburgh Medical Center (UPMC), the largest health
system and employer in Western Pennsylvania, has achieved stunning
success within the first three years of its program to address healthcarerelated
disputes with prompt intervention and mediation. UPMC’s program
is designed to reduce uncertainty and lower costs, while promoting patient
safety.

From October 2004 through January 2008, UPMC resolved 90% of the 117
cases that entered its mediation program in advance of trial. Of those
cases, 101 either settled during mediation or shortly thereafter. Further, as
explained by UPMC counsel Richard P. Kidwell and Robert Voinchet, the
settlement rate was reflected in substantial reductions of legal
expense.[6]

In February 2005, after the first few months of the mediation
program, the expenses incurred in mediated cases were compared
against those in cases that were tried to plaintiffs’ verdicts or were
settled in the same dollar range as the mediated cases. Mediation
expenses averaged approximately $75,000 less per case than the
expenses in cases tried or settled. When this same analysis was done
in February 2006, the savings averaged about $65,000 less per
mediated case. This slight decrease is attributable to increased
efficiency in overseeing litigated cases. Another analysis compared
the timing of the mediation process in two sets of mediated cases.
The first set consisted of cases that were reported prior to the
initiation of the UPMC mediation program but were resolved at
mediation. The second set consisted of cases that were reported after
initiation of the UPMC mediation program and were settled at
mediation. The average length of time between opening and closing
the files in the first set was 1,126 days and the defense costs
averaged slightly in excess of 569,000. Those same averages in the
second set of cases were 276 days and just under 523,000.[7]
The success of UPMC’s program, moreover, demonstrates the significant
savings and related benefits that can be realized with only modest changes
to a healthcare organization’s processes and orientation. UPMC’s dispute
management program rests on four main elements: (1) inclusion of a
mediation agreement in the documents to be executed by patients upon
intake; (2) identification of mediators available to address disputes in a
timely manner; (3) educational materials about the program for patients;
and (4) an easy mechanism for patients and their families to enter into
mediation.

Based on a similar mediation agreement used by Johns Hopkins University
Hospital, UPMC requests patients to execute the following:

AGREEMENT TO MEDIATE CLAIMS
By initialing below, I agree that any claim which may result from the
care provided to me by the doctors, nurses and other healthcare
providers in any UPMC facility shall be subject to the laws of
Pennsylvania. I also agree that before any lawsuit is filed related to
the care provided to me, I must attempt to resolve any claim through
mediation, which must take place in the Commonwealth of
Pennsylvania. I am not waiving my right to a jury trial. Mediation is a
process in which a neutral third person tries to help settle a claim.
This agreement is binding on me and any person making a claim on
my behalf.[8]

Dispute resolution programs are likely to succeed only if they are easy for
parties to access and use. UPMC addresses these key issues by providing
patients with education materials about the program, accessible program
administrators (who also serve as gatekeepers), and ready access to
mediators at no charge.

2. University of Michigan Health System

The New York Times recently reported on a similarly successful dispute
management system used by the University of Michigan Medical Center:
For decades, malpractice lawyers and insurers have counseled
doctors and hospitals to “deny and defend.” Many still warn clients
that any admission of fault, or even expression of regret, is likely to
invite litigation and imperil careers.
But with providers choking on malpractice costs and consumers
demanding action against medical errors, a handful of prominent
academic medical centers, like Johns Hopkins and Stanford, are
trying a disarming approach.
By promptly disclosing medical errors and offering earnest apologies
and fair compensation, they hope to restore integrity to dealings with
patients, make it easier to learn from mistakes and dilute anger that
often fuels lawsuits.
* * *
At the University of Michigan Health System [UMHS], one of the first
to experiment with full disclosure, existing claims and lawsuits
dropped to 83 in August 2007 from 262 in August 2001.
[9]
It has also been reported that, after implementing its program, UMHS’
defense litigation costs decreased from an average of $65,000 per case to
$35,000 per case for a cumulative savings of $2 million annually.
Consequently, the UMHS’ annual attorney fees have dropped from $3
million in 2002 to $1 million in 2005.[10]

3. Veterans' Administration Hospital and Rush Medical Center
Among the first healthcare institutions to adopt a proactive approach to
dispute resolution was the Veterans’ Administration Hospital in Lexington,
Kentucky. The hospital has a policy to share with patients and their families
any medical error or mistake and, in fact, to inform them of their right to
seek relief. The policy has been remarkably successful. In the 17 years
since the Lexington Hospital adopted its policy of communicating medical
errors, it has an average claim payout of $16,000. By contrast, the national
average settlement for a medical malpractice case by a VA Hospital is
$98,000.[11]

A somewhat different, but similarly effective, program was initiated by
Chicago’s Rush Medical Center in 1995 to respond to increasing legal costs.
Rush Medical Center uses a mediation agreement that provides for an
exchange of submissions and brief presentations by each side at a
mediation conference, which is then followed by discussions in caucus with
each side. The unique feature of the program is that it provides for
co-mediation (i.e., mediation with two mediators), with each side selecting
one of the mediators. The mediators are chosen respectively from lists of
trained plaintiffs and defense malpractice attorneys. In the first five years of
the program (1995–2000), 80% of the 55 malpractice cases submitted for
mediation were resolved in much less time than comparable nonmediated
cases in the area, and the settlement payments were generally less than in
nonmediated cases. Further, although Rush Medical Center was concerned
that the relatively quick and cost-effective co-mediation program might
result in an increase in the number of lawsuits, there was actually a slight
reduction in the number of lawsuits filed during this time.[12]
In short, dispute managements systems based on mediation have proven
extraordinarily successful in reducing the cost of malpractice disputes.

C. Impediments to the Adoption of Dispute Management Programs

for Medical Errors

Although the impediments to developing dispute resolution programs have
not been as rigorously studied as such programs themselves, a few
impediments seem likely: (i) misconceptions about mediation and aversion
to admissions; (ii) stakeholder conflicts; and (iii) unrealistic overoptimism
about the prospects for a malpractice claim. Each of these impediments is discussed below.

1. Misconceptions and Traditional Aversion to Disclosures

Perhaps the greatest impediments to the adoption of progressive dispute
management systems are lack of knowledge, fear of making admissions
that could be used in court, and fear of inviting additional lawsuits
A provider may believe that proactive engagement, communication, and
especially apologies may be considered signs of weakness that will
encourage groundless or weak claims to be initiated. Some commentators
have argued that our legal system discourages apologies on the theory that
“what you say can, and will, be held against you.”[13] On the other hand,
studies suggest that the most important factor leading to medical
malpractice lawsuits is ineffective (or nonexistent) communications with
injured patients and their families.[14]

One outgrowth of the realization that communication (as opposed to lack of
communication) discourages malpractice claims has been the adoption of
“medical apology statutes.” Approximately 30 states have adopted laws to
prevent the use of apologies as an admission of guilt or liability.[15] Most of
the “apology” laws, however, provide immunity only for “expressions of
sympathy” and the like, but not admissions of fault. The tenuous distinction
may, to a significant extent, undermine the effectiveness of such laws in
promoting frank communication at the outset of a dispute.

In comparison to medical apology statutes, mediation offers far greater
assurances of confidentiality. Most states have adopted statutes that
establish privileges and/or confidentiality for all disclosures in
mediation.[16] In addition, statutory protections for confidentiality in
mediation can be bolstered by contractual agreements prohibiting the use
of information exchanged in mediation for any purpose other than the
mediation itself. Moreover, the courts have aggressively protected the
confidentiality of mediation sessions to protect the public’s interest in the
efficient resolution of disputes.[17]

In perhaps the most comprehensive study of corporate strategies for
addressing workplace disputes, the authors explained that “the choice of an
organization’s conflict management strategy [or lack of strategy] we
discovered, often reflects the [key] decision makers’ dominant disposition
regarding the nature of conflict.”[18] Some companies opt to fight every
battle to the hilt, believing that conflict implies pure winners and pure
losers and that aggressive responses to conflict are needed to discourage
future claims. Other companies recognize that many disputes admit a range
of possible resolutions—many of which may be beneficial to both sides.

2. Stakeholder Conflicts

Reluctance to initiate a dispute management program and/or ADR generally
also may stem from conflict among stakeholders, such as provider
organizations, physicians, and insurers. Although all of the stakeholders
might benefit from ADR, physicians may have strong incentives to litigate,
rather than to reach negotiated settlement.
First, once a dispute arises, the physicians may not have a direct financial
incentive to reduce the cost of the dispute, because malpractice insurance,
rather than the physician, is likely to bear the direct costs.
Second, and perhaps more importantly, since 1990 all payments made on
behalf of a physician to settle a malpractice claim are reported to the
National Practitioner Databank (NPDB).[19] Intended to keep dangerous
practitioners from migrating from state to state to avoid detection, in
practice the NPDB serves as a severe impediment to the efficient settlement
of disputes. Many physicians refuse to consent to cost-saving settlements
for fear that a listing in the NPDB will damage their careers.[20] Although,
in theory, listings in the NPDB are confidential and can be accessed only by
appropriate authorities, such as credentialing committees, hospitals, and
licensing boards, physicians are often obligated to “self-report” any listing
when seeking new employment or insurance. In addition, cynicism abounds
about the confidentiality of the NPDB.

3. Inertia and Undue Optimism

Perhaps the most significant impediment to adopting an efficient dispute
management system is good, old fashioned, inertia. History is replete with
examples of good (and even essential) ideas that were ignored or ridiculed
for challenging the status quo.[21]
In addition, providers are prone to be overoptimistic about their ability to
control outcomes and avoid malpractice claims. No physician is apt to admit
that his or her patients can expect only “average” results. Just as,
according to Garrison Keillor, all of the children of Lake Wobegon are “above
average,” almost all physicians would not only characterize themselves as
“above average” but would also be insulted at the suggestion that they fall
anywhere below the top 10% of their peers.
Self-deceptive overconfidence is perhaps endemic to human nature. One
study found that fully 94% of university professors believe they do a better
job than their colleagues.[22] Similarly, most people think that they are
more intelligent and fair-minded than average.[23]
Overconfidence may be closely related to irrational forces affecting
decision-making: individuals often believe they have more control over
outcomes than is possible. The New Jersey lottery provides a good
illustration of this phenomenon. The lottery was a failure when ticket
purchasers were given computer-selected numbers; it became a huge
success when it was revised to permit purchasers to select their own
numbers—even though the odds of winning were the same in either case.
Similarly, physicians—like people in other circumstances—are prone to
overestimate the likelihood of positive outcomes and underestimate the
likelihood of negative ones. In a seminal study, college students rated
themselves much less likely than their peers to suffer from a drinking
problem, have a heart attack, be fired from a job, or divorce a few years
after getting married, even though statistics show otherwise.[24] Similarly,
one review of the academic literature revealed the following:
Second-year M.B.A. students overestimated the number of job offers
they would receive and their starting salaries.
Students overestimated the scores they would achieve on exams.
Almost all the newlyweds in a U.S. study expected their marriages to
last a lifetime, even while aware of the divorce statistics.
Professional financial analysts consistently overestimated corporate
earnings.
Most smokers believe they are less at risk of developing smokingrelated
diseases than others who smoke.[25]

D. A Practical Approach to Malpractice Reform

In explaining the conditions and strategies necessary for organizations (and
societies) to change long-standing, but inefficient or even destructive
behaviors, research in behavior science and insights from innovators in
business and nonprofit organizations have identified three essential
requirements for beneficial change.[26] Most significantly, research
demonstrates that it is not enough for a business or nonprofit to explain a
good (or even great) idea to its workforce, customers, patients, suppliers,
or partners and wait for it to be understood and adopted; instead, change
requires:
Identification of the two or three critical behaviors that serve as
triggers for the targeted process or practice. Critical or “vital”
behaviors often act like one-way gateways to either entrenched but
misguided pathways or innovative, better, ones.[27] When you return
your rental car and cross the one-way spikes in the driveway, even
though it is possible to drive around the parking lot and re-exit the
front gate, for most of us it is simply too late to fill-up the tank on
your own and thereby avoid the penalty for bring back a less-than full
tank. Human interactions and processes work much the same way: if
you can identify the key behaviors that serve as gateways to paths
that avoid waste and promote productivity, and persuade people to
adopt those behaviors, the preferred paths become seemingly
unavoidable and inevitable.
1. Deploying multiple, reinforcing, influence strategies to both educate
and persuade the relevant parties to adopt the critical gateway
behaviors.[28] For dispute resolution systems, the focus of such
2. education and persuasion will be the parties and potential parties to
disputes leading to wasteful and often unnecessary litigation such as
suppliers, customers, employees, and patients.
Why are multiple strategies needed to promote beneficial and seemingly
simple changes? Because people are not computers with on/off switches,
but have multiple and often competing traits affecting both motives and
behaviors. Often it is not enough to win over someone’s mind to a new
idea, but you must also win over his or her heart and instincts.
In The Happiness Hypothesis, Psychology Professor Jonathan Haidt uses the
metaphor of a person riding an elephant to explain why it can be so difficult
to stop even destructive behaviors that we fully understand to be harmful
(like smoking, overeating, etc.). The person (i.e., the rider) represents the
rational, most modern (in an evolutionary sense) part of the brain, while
the elephant represents the more primitive emotional and instinctive.
Modern theories of rational choice and information processing don’t
adequately explain weakness of the will. Older metaphors about
controlling animals work beautifully . . . . The image that I came up
with for myself as I marveled at my weaknesses, was that I was a
rider on the back of elephant. I’m holding the reins in my hands, and
by pulling one way or the other I can tell the elephant to turn, stop,
or go. I can direct things but only when the elephant doesn’t have
desires of his own. When the elephant wants to do something, I’m no
match for him . . . . To understand the most important ideas in
psychology, you need to understand however the mind is divided into
parts that sometimes conflict. We assume that there is one person in
each body, but in some ways we are each more like a committee
whose members have been thrown together to do a job but who
often find themselves working at cross purposes.[29]
In Influencer,[30] the authors identify six distinct, but overlapping
strategies that help align rational, emotional, and instinctive sentiments in
favor of beneficial organization change. Those “influence strategies” include
(1) providing positive and negative personal incentives to encourage the
critical behaviors that precipitate change; (2) training to facilitate use of,
and comfort with, the new process; (3) providing direct personal and
vicarious experiences with the new process to overcome distrust and risk
aversion; (4) providing mechanisms for social support (and peer pressure)
to encourage the desired behaviors; (5) providing tools for, and easy access
to, new methods, and (6) creating organization or program structures that
align with, rather than impede, the desired changes. While successful
implementation of a new program that changes long-standing practice may
not require deployment of every potential influence strategy, reliance on a
single strategy alone is unlikely to succeed.

E. Practical and Powerful Malpractice Reform

With respect to malpractice reform, the vital requirements necessary for
productive change are easy to identify. Providers must expect and plan for
disputes by adopting a mediation program of proven efficacy. The challenge
is to persuade providers to adopt a program and both providers and
patients to participate in good faith.
Indeed, healthcare is especially well suited for dispute management
because the key mechanism for promoting mediation (in advance of
litigation) is already in place. Patients expect, and routinely sign, a multiple
of forms in advance of treatment. The addition of a mediation agreement,
which fully preserves a patient’s access to the courts, provided mediation is
given a chance, is unlikely to be objectionable and, indeed, may not even
be noticed.

A mediation agreement alone, however, would be ineffective if the cost (in
time and money) to initiate mediation discourages prompt participation.
Accordingly, an effective malpractice reform program should provide an
infrastructure (such as a panel of mediators on call) that allows for prompt
initiation. In addition, because mediation is likely to promote cost savings
for providers to a greater extent than for patients and their families, and
because patients may have little meaningful power to refuse to sign a
proper mediation agreement, the cost of malpractice mediation should
generally be borne by the provider.

Just because a mediation program would encourage efficient resolution of
medical disputes and save potentially extraordinary sums, does not mean
such programs will be adopted. Healthcare and hygiene provides the most
notable examples of the inability of good ideas to spread of their own
accord. For example, scurvy was the bane of sailors for centuries. When
Vasco de Gama successfully circled the Cape of Good Hope in 1498-1499,
over half of a crew of 160 died from scurvy during the voyage. In 1601, a
British sea captain named John Lancaster discovered that he could
completely prevent scurvy by giving sailors a little lime juice every day. This
cure, however, was not fully adopted by the British Navy until 1865.[31]

Similarly, by the late 1840s, Dr. Ignaz Semmelweis had demonstrated the
unequivocal effectiveness and importance of hand washing for avoiding
infections in clinical settings. His efforts to encourage hand washing, and
those of other early hand washing proponents like Dr. Oliver Wendell
Holmes, were rejected for decades, until well after his death from infection
in 1865. [32]

To address malpractice claims efficiently, the key practice that must be
accepted and incorporated into common practice is simply the addition of a
mediation agreement into patient intake forms. Without incentives
specifically directed at this practice, however, it is unlikely to be adopted. As
noted above, physicians will inevitably underestimate the likelihood, and
consequences of, malpractice claims. In the abstract, it is easy to dismiss
the risk of an action and assume that, since it will be covered by insurance
in any event, it will not disrupt a physician’s practice or life.
In addition, physicians may mistakenly assume that providing an easy
forum for raising malpractice concerns will invite disputes that would
otherwise be avoided. Although this issue has not been formally studied,
anecdotal evidence suggests that it is wrong. Hospital systems adopting
mechanism that promote open and caring communications report
reductions in the number of claims ultimately filed.[33]

Overcoming such barriers could require a combination of education,
governmental and regulatory support, and financial incentives. The latter
two categories require elaboration.

Assuming that a simple mediation program would generate savings, why
would financial incentives to adopt the program be needed? Although
mediation is likely to generate savings over time, the cost, however
modest, of implementing a program would not generate any immediate
savings. Faced with an out-of-pocket cost in the short run to set up a
program, and the mere prospects for savings in the long run, many if not
most providers would simply do nothing. Further, financial savings from a
mediation program may provide greater financial benefits to a malpractice
insurer than to the physician or provider who establishes a program. Finally,
disincentives to settle as a result of NPDB reporting might discourage
physician adoption of even the most cost-effective dispute management
program.

How then could financial incentives be deployed to encourage adoption of a
beneficial mediation programs? Malpractice insurers could follow (and/or be
encouraged to follow) the model of liability insurers who provide discounts
for home alarms, car alarms, and other circumstance that are likely to
reduce insurance losses.

In short, for the marketplace to adopt programs that have tremendous
opportunity for savings with little downside, it is likely necessary for
malpractice insurers to grant discounts to providers who implement
reasonable mediation programs providing prompt communication and
opportunity for early settlements with patients and their families. The
discounts, moreover, would likely need to fully offset any program costs.
Because the cost of implementing a mediation program is unlikely to be
very high, the threshold for economic viability of such a reform program is
also unlikely to be very high.

On the other hand, there is unlikely to be sufficient data to identify the
appropriate discount rates during the initial years of such programs. For this
reason, it may be necessary to obtain governmental support for such
programs until they achieve an equilibrium or tipping point that allows them
to be self sustaining.

F. Conclusion

Malpractice litigation has inflicted a heavy toll on the national healthcare
system by driving up insurance costs, promoting costly defensive medicine,
and discouraging providing from practicing in states that have been
severely affected. Reform based upon proactive dispute management with
early mediation would not solve the healthcare crises but, in view of the
track record of successful programs, it would dramatically reduce the
harmful consequences of costly and often needless malpractice litigation.
Further, the suggested reform is compatible with the needs and interests of
all stakeholders. For patients and families, early mediation would open an
otherwise unavailable channel of communication to express feelings and
reactions to poor outcomes and learn of the circumstances giving rise to the
unwelcome result. For physicians and providers, early mediation offers a
safe environment in which to answer questions, express sympathy, and
work with patients and families quickly to resolve concerns and/or identify
alternatives to costly litigation. For payors, early mediation is likely to
reduce payouts both for unnecessary and costly litigation and awards.
As amply demonstrated by the Clinton Administration’s healthcare reform
proposals of the early 1990s, overly ambitious programs—however well
intended and designed—are likely to fail from the weight of their own
complexity. By contrast, the proposed dispute management reform has
three simple elements:
Require agreements to mediate in advance of malpractice litigation.
Provide timely access to skilled mediators.
Insurance incentives to implement a program of early mediation for
claims related to alleged medical errors.
This simple reform plan has potential to save extraordinary sums related to
wasteful litigation while improving quality of care as the result of better
communication and, in the long run, a reduction in the need for costly
defensive medical practices.

WORKS CITED AND BIBLIOGRAPHY

Deason, E. E. (2001). The Quest for Uniformity in Mediation Confidentiality:
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Footnotes

[1] Mr. Kaplan is a Partner in the Pittsburgh law firm of DeForest Koscelnik
Yokitis Kaplan & Berardinelli, and his practice focuses on dispute resolution
and information technology. He serves as a Neutral on panels of the
American Health Lawyers Association, the American Arbitration Association,
and other organizations. A graduate of the University of Chicago Law School
(JD 1983), and Yale University (B.A. 1980), Mr. Kaplan teaches as a
Professorial Lecturer at The George Washington University Law School, and
he is the author of "Executive Guide to Managing Disputes: Using ADR to
Save Time and Expense in Business, Healthcare and the Workplace" (Beard
Books, 2009) (forthcoming). Mr. Kaplan can be reached at
This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
[2] See (Mello & Kelly, 2006); (Mello, Studdert, Schumi, Brennan, & Sage,
2007).
[3] For example, the Toro Company has had remarkable success in reducing
the cost of production liability disputes and payment after adopting a
proactive alternative dispute resolution program in the early 1990s. See
(Rooney, 2008).
[4] California Evidence Code § 111.5.
[5] (Refo, 2004). Although less accurate data were developed with respect
to state courts, the data studied from 22 states indicated a 28% decline
from 1976 and that 99.4% of filed cases were resolved in advance of trial.
[6] (Kidwell and Voinchet, 2008).
[7] Id.
[8] Id.
[9] (Sack, 2008).
[10] (Atwood, 2008).
[11] Id.
[12] See (Cooley, 2002) and (Guadagnino, 2004).
[13] See, e.g., (Tyler, 1997).
[14] (Leibman & Hyman, 2004).
[15] See, e.g., California Evidence Code § 1160 (2001).
[16] (Deason, 2001, p.79) (identifying numerous state statutes protecting
confidentiality of communications in mediation).
[17] E.g., Foxgate Homeowners Assoc., Inc., v. Bramalea Cal., Inc. 26
Cal.4th 1 (2001) (holding that there are no exceptions to the confidentiality
of communications in mediation under the applicable California statutes).
[18] (Lipsky & Seeber, Emerging Systems for Managing Workplace Conflict,
2003, p. 119).
[19] Even a settlement payment of $1 on behalf of a physician obligates the
payor to report the subject physician to the NPDB.
[20] Physicians can sometimes take advantage of exceptions to the
reporting obligation. First, if a physician belongs to a professional
corporation of at least two physicians or employed by a group or other
entity, a settlement in the name of the corporation or organization rather
than in the name of the physician is generally not reportable. Second, a
payment made by a physician on his or her own behalf is not reportable.
Third, a payment made in advance of a written demand or claim may not
be reportable. See generally 45 C.F.R. Part 60 (National Practitioner Data
Bank For Adverse Information On Physicians And Other Health Care
Practitioners).
[21] (Rogers & Rogers, 2005).
[22] (Cross, 1999).
[23] (Birke & Fox, 1999, p. 7).
[24] (Weinstein, 1980).
[25] (Armor & Taylor, 2002).
[26] See generally (Patterson, Grenny, Maxfield, McMillan, & Switzer, 2008).
[27] Id.
[28] Id.
[29] (Haidt, 2006, p. 4-5).
[30] (Patterson, Grenny, Maxfield, McMillan, & Switzer, 2008).
[31] (Berwick, 2003).
[32] (Larsen, 1989).
[33] Telephone conversation with Richard Kidwell, Risk Manager, UPMC
Health System, November 16, 2008.
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