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Nov 03

To Reduce Healthcare Costs Eliminate, Don’t Reform, Malpractice System

by Wayne Oliver, JD and Jeffrey Segal, MD
Originally published in “The Hill” on October 23, 2014

health-reform2There is nothing more time consuming and expensive for a patient than undergoing extra tests or procedures during a trip to the emergency room, doctor’s office or urgent care center.

Often a physician will know exactly what a patient’s diagnosis is but will order an x-ray, CT scan, blood work or MRI to reaffirm his clinical judgment. The common rationale is to back up his opinion in case there is a lawsuit.

According to Gallup, one in four healthcare dollars can be attributed to the cost of defensive medicine – tests or procedures that are not clinically necessary. The independent healthcare economics firm BioScience Valuation says the annual cost of defensive medicine exceeds $480 billion annually.

According to a new report by the RAND Corp. released last week, three states adopted tort reform measures that hoped to eliminate defensive medicine in emergency rooms. But those measures failed to cut spending. We believe that’s because no matter what kind of traditional curbs we put on our legal system, physicians in these states and elsewhere are still subject to potential malpractice suits.

If we really want to put an end to defensive medicine – and its enormous impact on our overall healthcare costs – we need to completely eliminate our broken medical malpractice system and replace it with a more efficient administrative system.

That concept is behind the Patients’ Compensation System or PCS – a proposal now before state lawmakers in Florida and Georgia. The PCS proposal would replace the current adversarial medical litigation structure with one that would bring quicker access to justice for injured patients and actually protect physicians from meritless lawsuits.

Under this no-blame, administrative model, physicians and hospitals would never be sued again. Instead, the patient would request an investigation from a panel of healthcare experts. If the panel found a preventable “medical injury” had occurred, the injured patient would be compensated.  The patient would receive predictable compensation in months as opposed to the five to seven year process patients must endure under the current, adversarial court system.

Taxpayers would benefit as well. Researchers at Emory University in Atlanta found Georgia physicians would likely reduce the practice of defensive medicine which would result in nearly $7 billion savings for the state during the first 10 years of a PCS. That’s money saved in that state’s Medicaid program and its program that insures state employees.

The RAND study published in the New England Journal of Medicine reviewed records of 3.8 million Medicare patients from 1,166 hospital emergency rooms from 1997 to 2011. The researchers looked at how doctors ordered CT or MRI scans before and after tort reform legislation was enacted in each of three states. Such tests are common during ER visits.

In Texas and South Carolina, the malpractice reform law had no effect on the amount of tests ordered, according to RAND. In Georgia, the report found a very small reduction in the amount of emergency room charges.

The research reaffirms the conclusions of a nationwide survey of physicians conducted by Jackson Healthcare in the fall of 2012.  Of 1,548 physicians who responded to the survey, 62 percent said they believed an administrative compensation system like PCS would reduce the practice of defensive medicine. The doctors ranked a system such as PCS as the number one option among choices to reduce defensive medicine – defeating alternatives such as caps on non-economic damages, physician safe harbors and disclosure and apology options.

Physicians indicate that the only way to reduce defensive medicine is to eliminate the current litigation system. Under a PCS model, our current medical litigation system would be transformed from an adversarial system to one that gives patients fairer and quicker access to health justice. Additionally, physicians would be free to admit mistakes and they would be provided a foundation to develop better standards and protocols to reduce medical errors.

To get there, we must acknowledge that RAND’s research is on target. No amount of traditional tort reform will significantly reduce healthcare spending caused by defensive medicine. We must scrap our dysfunctional medical malpractice system and replace it with a no-blame, administrative solution that works for all parties.

Oliver is executive director of Patients for Fair Compensation, a non-profit working in several states to replace the malpractice system with a no-blame, administrative system that reduces the practice of defensive medicine, increases access to justice and allow for more patient safety. Segal, a neurosurgeon, is CEO of Medical Justice and a board member of Patients for Fair Compensation.

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