Malpractice mediation poised to expand

By Christopher Guadagnino, Ph.D.

While physicians look to caps on noneconomic damages in medical malpractice cases as a key tool in securing relief from spiraling malpractice costs, expanded relief from an existing tool is being promoted from high places in Pa.

Voluntary and nonbinding mediation, which offers an alternative dispute resolution mechanism to trials, has to-date been used for a relatively small percentage of medical malpractice cases in Pa. As a tool to settle litigation between plaintiffs and defendants, mediation can reduce the number of malpractice cases that go to trial and avoid the risk of high jury awards for plaintiffs, while also greatly expediting case resolution and saving on protracted legal costs for plaintiffs and defendants.

The tool is getting a promotional jump-start and has begun to see material growth in resolving malpractice disputes in Pa. In his plan for medical malpractice liability reform released last June, Gov. Rendell promoted mediation with three recommendations, each of which has already produced results:

· Use the Chicago Rush Hospital mediation model for early settlements.

·  Improve communication between MCARE and primary insurance companies to facilitate early settlements, and direct MCARE to participate in voluntary mediation programs when all parties consent.

·  Request the Pa. Supreme Court to issue a rule implementing voluntary mediation.

The Chicago Rush Hospital model of mediation involves simultaneous participation of practicing medical malpractice litigators from both the plaintiff’s and defense sides as neutral, co-mediators. The approach has an impressive track record in Chicago and is being integrated with the risk management programs of a medical school in Philadelphia and a medical malpractice insurer in Pa., while other health systems and insurers are exploring its use.

The MCARE Fund has in the last eight months begun to use mediation far more frequently than it had (as the CAT Fund) in the past.

A Pa. Supreme Court panel has completed its study of mediation and has sent its recommendations to the Court, which is expected to release a rule that every county in the state make available to malpractice litigants a court-overseen mediation program.

A separate mediation pilot project funded by the Pew Charitable Trusts has also produced favorable results for one hospital in southeastern Pa.

Whether mediation will significantly lower overall malpractice liability costs of physicians and hospitals is not yet certain. It is not appropriate for all malpractice cases, and obstacles remain that may retard its expanded use. Traditionally, mediation settlements resulting in payouts on behalf of physicians to plaintiffs are reportable to the National Practitioner Data Bank (NPDB), chilling physician enthusiasm for making settlements. Early and systematic use of the co-mediation model may facilitate avoidance of that reporting requirement, although the model may produce the unintended effect of driving up settlement amounts in future cases. Geographical barriers and an apparently skeptical attitude may also slow the expansion of the co-mediation model throughout the Commonwealth.

Co-Mediation Model Promoted

Rendell’s plan for medical liability reform noted that defense costs for medial malpractice cases that go to trial can average $100,000 or more, and argued that substantial savings could be achieved if disputes can be settled or mediated at an early stage in the case, and that victims of medical error would be spared the ordeal of trial and receive needed compensation earlier.

The Pa. Office of Health Care Reform (OHCR) had learned about a voluntary mediation program used by the Rush Presbyterian-St. Luke’s Medical Center in Chicago since 1995 that had successfully expedited resolution and lowered legal costs associated with medical malpractice cases, according to OHCR Deputy Director Susan Anderson. About one-third of the malpractice suits at Rush Hospital go into the voluntary mediation program each year, of which 90 percent are successfully settled, producing a 50 percent reduction in annual defense costs and a 40 to 60 percent savings in payouts as compared to comparable cases that have gone to trial, she says.

What distinguishes the model from traditional mediation is that two co-mediators are used instead of a single mediator, and that they are practicing medical malpractice attorneys – one plaintiff’s and one defense – who are experts in that area of the law and are trained in mediation, whereas traditional mediators often are not experts in malpractice law, says Anderson, who in prior years was a federal mediator in Philadelphia. Selected from an assembled panel of leading malpractice trial attorneys in a region, the co-mediators bring expertise from both sides of the bar in appraising the merits and valuation of malpractice cases, which Anderson says adds credibility and trust among litigants during the resolution process.

The Rush model can also integrate co-mediation into a health system’s risk management system more programmatically than is traditionaly done. Under the model, the hospital’s counsel reviews cases brought against it and/or its employed physicians and selects the ones that are most appropriate for mediation, such as those with the potential for a runaway jury verdict, or those that are not easily defensible, says Anderson. The hospital’s counsel then contacts the plaintiff’s attorney to ask if the plaintiff is interested in mediation. If so, the plaintiff picks the two mediators, one plaintiff’s attorney and one defense attorney, from a panel. Most mediations are conducted within a year of the lawsuit being filed and are concluded within a day, or even a few hours, says Anderson. The OHCR believes that the co-mediation model is the most effective way to achieve early settlement of malpractice cases.

Not only does the Rush model have the support of Pa.’s executive branch, but it has also been promoted by a subcommittee of the Pa. Supreme Court task force, which was formed early last year to study whether there were viable mediation alternatives that should be implemented in Pa., according to former Justice William H. Lamb, who headed the task force. Late last year, the subcommittee convened a meeting to discuss mediation approaches with invited CEOs and chief counsels from eight health systems across the state, including Drexel, Children’s Hospital of Philadelphia, Penn, Jefferson, Crozer-Keystone, Pinnacle, Penn State Hershey and UPMC, according to Lamb.

Lamb and Pa. Supreme Court Chief Justice Ralph J. Cappy identified those eight institutional systems because they are located in areas of concentrated medical malpractice lawsuits and they employ a sizable number of physicians for whom they provide malpractice coverage – a factor that Lamb says is important because bringing parties to the mediation table is easier when a hospital can also represent its physician defendants, rather than requiring additional layers of consent from privately insured physicians and their insurance companies.

The Supreme Court’s mediation task force had asked Gov. Rendell to encourage the MCARE Fund to try mediation, and Lamb notes that the Fund is now engaging in early identification of cases that merit mediation and has had 30 successful mediations since mid-summer of last year, reflecting a “change in culture.”

A statewide judicial rule on mediation is also expected to be announced by the Pa. Supreme Court. Lamb says his task force has completed its study of possible mediation implementation plans, and has sent its recommendations to the Court to implement a rule requiring every county in the state to come up with a structured mediation process as an available option in malpractice cases.

Lamb’s committee also convened an informational presentation on the Rush mediation model that was facilitated by the OHCR and the Hospital & Healthsystem Association of Pennsylvania (HAP). The session included presentations by representatives from the Chicago Rush Hospital and was attended by some 60 hospital representatives from across the state, says Jim Redmond, HAP’s senior vice president of legislative services. HAP has also notified its membership by posting information about the Rush model on its website, Redmond notes.

The first institution in Pa. to adopt a formal co-mediation program is Drexel University College of Medicine in Philadelphia, which recently became self-insured after its previous malpractice insurer pulled out of the medical malpractice line of business, according to Drexel’s Chief Counsel Tobey Oxholm, Esq. Drexel learned from its prior carrier that half of the malpractice cases against its employed faculty physicians were filed at least in part because physicians won’t talk with patients about adverse incidents, says Oxholm. “Even in cases we win,” he adds, “Families told us they just wanted information about what happened to their loved one.”

Drexel has earmarked 12 cases, all of which are scheduled to go to trial within six months, to go through the co-mediation process, after which it hopes to select additional cases further back in the pipeline for co-mediation, says Oxholm. Cases not chosen for mediation, he says, are ones Drexel is confident it would win.

Drexel eventually hopes to reach a stage where mediation can occur before a lawsuit is filed, reducing the inflow of cases. When a patient or a patient’s family has questions regarding medical care, Drexel involves patient advocates who attempt to resolve the situation, notes Oxholm. “When the patient advocate cannot resolve the situation and/or when the medical issue is significant enough, we will ask the patient or family if they would like to involve professional mediators. We have developed written materials using plain language that explain mediation and provide ideas on how they can go about finding an expert med mal attorney to represent them in the mediation process. It is not mandatory. They can sue us if they want to, and we will then propose mediation,” Oxholm adds.

Under Drexel’s co-mediation program, all costs are paid by the defendants, divided equally among them, and the plaintiff picks both co-mediators. The defense has a limited right to reject the choice, e.g., if the particular individual chosen raises a conflict of interest issue for the defendant, says Oxholm.

The nonbinding aspect of the co-mediation process is necessary to avoid discouraging participation by making it less risky to the parties, he believes. The process is confidential, and any “secrets given up” are not allowed to be used in a trial, although Oxholm says such information would be given up in litigation later, anyway.

Although Drexel, as the employer and insurer, does not require a physician’s consent to go to mediation or to settle, Oxholm says that a management group composed of all Department Chairs of Drexel’ medical school faculty supports the co-mediation model, making it a bottom-up initiative rather than a top-down mandate. Drexel is also making the model available to every physician at the university, including private physicians, according to Deborah Lorber, Drexel medical school’s director of risk management.

Further, if all parties can be brought to the mediation table soon enough, before a written demand for compensation is presented by the plaintiff’s attorney to the physician defendant, a settlement payment is not reportable to the NPDB, notes Oxholm, who says it is the “written demand for compensation” aspect that triggers reportability. A mediation program with prior physician buy-in, combined with a system to encourage early dialogue of adverse events between physicians and patients, may be more likely to produce settlement payments – when they are appropriate – that are not reportable to the data bank, removing one of the traditional impediments to mediation.

If not all defendants agreed to co-mediate, Drexel would approach the plaintiff to mediate with a subset of defendants, says Oxholm, while Drexel could even decide to use a defense-only mediation to resolve disputes among co-defendants in a case. Oxholm adds that the Philadelphia Court of Common Pleas said it would recognize the legitimacy of co-mediation by excusing Drexel from judicially sanctioned settlement conferences.

Oxholm believes the co-mediation model will be superior to traditional mediation. He recounts a failed mediation case involving an injured mother and an obstetrician, in which he says both sides wanted to settle and a mediator was chosen from a large law firm in Philadelphia. Although highly skilled in the mediation process, the mediator did not have a specialized knowledge of medical law, which Oxholm believes robbed legitimacy from the process and contributed to its failure. The case remains in litigation.

In a project similar to the Rush model, Abington Memorial Hospital in southeastern Pa. recently participated in a pilot mediation program funded by the Pew Project on Medical Liability. Working with Columbia Law School faculty, Abington identified two cases in which it appeared that a clear error had occurred that deserved compensation, says John J. Kelly, M.D., Abington’s chief patient safety officer and Chair of the Department of Medicine.

One case involved a lawsuit that had been filed, and the other was recognized by Kelly after reviewing medical charts three months after a seriously ill patient had “missed a chance to survive” as the result of an error, says Kelly. In the latter case, Kelly contacted the attending physician, who later called the victim’s family and arranged a voluntary, nonbinding mediation session.

Each mediation involved two attorneys who functioned as neutral third parties. “It wasn’t acrimonious. It was civil; it was humane. In one case it resulted in the creation of a perennial lectureship on patient safety,” says Kelly. “One party at the end of the mediation literally hugged us. Money was awarded, but that wasn’t the healing power of it,” he adds.

Abington is developing a document which patients would be required to sign before elective surgery saying that they agree to try voluntary mediation prior to filing a lawsuit if something goes wrong, Kelly says. Abington is still determining how to roll out the document, and Kelly says it is likely to be piloted on a smaller scale before being tried institution-wide, such as for OB/GYN patients, or in a few physician practices.

Co-Mediation Expansion and Its Obstacles

A panel of co-mediators has been assembled by Health Care Resolutions, a private mediation and training company in Conshohocken, composed of 10 to 15 actively practicing medical malpractice defense attorneys and an equal number of plaintiff’s attorneys, according to the company’s CEO Jane Ruddell, Esq. The start-up company also offers trained personnel for traditional mediation in malpractice and other types of health care disputes, such as medical staff or physician partnership issues.

Either model of mediation is available for use by physicians in any practice setting, regardless of insurance arrangement, Ruddell notes.

Ruddell had been General Counsel for the Philadelphia-area’s Main Line Health from 1987 to 1995, after which she was Chief Counsel for the Jefferson Health System until a year ago, when she became interested in exploring alternative dispute resolution methods, including the Rush mediation model. Attorneys from the Philadelphia region were invited to participate on the co-mediation panel, says Ruddell, based upon their stature among colleagues in the bar and among hospitals, physicians and the MCARE Fund. All enthusiastically accepted, and each has received training in mediation, she notes.

The communication process used by parties in co-mediation, as well as the style used by the co-mediators themselves, differ from those in traditional mediation in advantageous ways, Ruddell believes. Whereas the single mediator in a traditional approach largely acts as a facilitator – eliciting information and interaction between the parties, but not actively probing the strengths and weaknesses of the case unless requested – co-mediators will actively participate in case appraisal by offering substantive evaluation, drawing upon their expertise in medical malpractice issues, says Ruddell. The process thereby becomes more of a dialogue about the merits of the case which can lend more confidence, trust and commitment to the process, in place of the bargaining and caucusing in separate rooms that typically occurs in standard mediation, she adds.

Both standard mediation and co-mediation differ from the traditional settlement process, notes Ruddell, which she says is protracted and inefficient, and typically occurs when the parties’ backs are against a trial date, and their positions are entrenched and their cases prepared. Settlements often take weeks or months to accomplish and involve offers and counteroffers sent among multiple parties, often in a chaotic and fragmented manner, typically without offering a forum for complete conversation among all of the parties.

The legal community is not hostile to an expanded use of mediation. The Pennsylvania Trial Lawyers Association (PaTLA) believes that there will be more mediation of malpractice cases in Pa. in the future and supports the concepts of mediation and co-mediation as tools that can offer fair compensation to plaintiffs, as long as mediation is kept voluntary and nonbinding, so as not to compromise a plaintiff’s right to trial if mediation does not work, says PaTLA’s Legislative Counsel, Mark Phenicie.

Phenicie believes that mediation can lower costs because it may reduce the number of high jury award verdicts, it cuts out “friction costs” (legal fees) to both sides, and because plaintiffs often accept less money if they are compensated quickly. Most malpractice plaintiffs don’t want to wait five to six years for a trial, and few want to testify at a trial, Phenicie maintains. “They still feel sympathy for physicians and hold them in high regard, even when they’ve been malpracticed on,” he adds.

Although the Pennsylvania Medical Society supports mediation as a tool for speedy resolution of cases without an adversarial court system and its emotional cost on physicians, it is skeptical that mediation will save money. According to PMS General Counsel Ken Jones, plaintiffs’ attorneys are unlikely to settle cases that they believe are worth more than they would be if tried before a jury. “I think that’s what drives the system, and won’t change,” he says. Although mediation will save on defense costs, it may not produce lower payouts than would occur during the traditional settlement process, and could also result in payment on cases that otherwise would be won at trial, adds Jones, noting that six out of seven malpractice cases are closed with no payment by a malpractice insurer. Mediation is best done in tandem with reforms that address the total size of the award, such as caps on noneconomic damages, says Jones.

Mediation is currently used very rarely in Pa.’s medical malpractice cases, according to Ruddell. Relative to the volume of lawsuits represented in the caseloads of hospitals and some large defense firms in Philadelphia, mediation represents “a drop in the bucket,” and Ruddell believes that may be because not many mediators are experienced in the field of medical malpractice.

The demand for mediation is growing, Ruddell believes, as she has begun to schedule mediations with other hospitals and says she is currently in discussions with another health system about developing a program, similar to Drexel’s, to integrate mediation into its malpractice claims management system in an attempt to expedite investigations of malpractice cases and their candidacy for mediation to seek early resolution.

If the demand for the co-mediation model and its panel of mediators is as high as she expects, Ruddell says she will consider expanding it to other regions, and she is currently talking with the trial bars in York and Lehigh counties, as well as a defense attorney in Pittsburgh, to discuss the possibility of training co-mediator panelists in those regions.

Pa. health systems, even those that attended the informational session about the Rush model, appear to be adopting a wait-and-see attitude toward co-mediation.

The University of Pennsylvania Health System acknowledges that the model represents a creative approach to case resolution and appears to have achieved some success at the Chicago hospital. “Although we are open to considering mediation in appropriate cases, at this juncture, we favor a case-by-case approach over the Rush model,” says Mary Ellen Nepps, Esq., Penn’s senior counsel for claims and risk management.

Crozer-Keystone Health System has no formal mediation program and views mediation as “one option among many that we consider and use to resolve meritorious claims and suits,” according to system spokesperson Grant Gegwich.

Pinnacle Health System, in the Harrisburg region, uses mediation on a small scale – once or twice a year out of roughly 20 cases per year – but wouldn’t mind doing it for a larger percent of its cases if obstacles could be overcome, according to Chris Markley, Pinnacle’s senior vice president of community relations. He notes that it is easier for an academic medical center to adopt a mediation model because they have a joint defense arrangement with their employed physicians and can represent both hospital and physician at the mediation table. Although Pinnacle’s hospitals are self-insured through a risk retention group, they use an open staff model with their physicians, who are insured by their own malpractice companies. “It would be more difficult for us. We need to get the cooperation and participation of the independent physicians, or mediate without them involved, which would only give a partial result,” says Markley.

Still, such cooperation could be accomplished and Markley says that Pinnacle would be willing to try the co-mediation model if buy-in could be achieved by the local plaintiff’s and defense bars, and if an effort is undertaken to develop and train a local co-mediation panel. The health system has not talked about that possibility internally, says Markley. “If we do something, it would be with the Hershey Medical Center. We haven’t spoken with Hershey about it. It’s not at the top of our to-do list,” he adds, noting that Pinnacle has not suffered from large plaintiff verdicts in malpractice trials, as hospitals in Philadelphia and other urban areas have.

Penn State Hershey Medical Center has used mediation for about three years as part of its approach to dealing with medical malpractice, regards it as one option when appropriate, and does not favor any particular model of mediation, according to spokesperson Sean Young. He says the institution’s director of risk management is not familiar with the Rush mediation model.

There may not be sufficient urgency in Allegheny County and surrounding areas to drive an expanded use of mediation, or co-mediation. While the UPMC Health System has used mediation to a limited extent, “We believe that the plaintiff’s and defense bars in Allegheny County and in western Pennsylvania are very open with one another as to the strengths and weaknesses of their malpractice cases and have been successful in reaching resolution, if settlement is appropriate, without going to trial,” according to George Huber, Esq., UPMC’s senior director of corporate relations and regional programming.

“The environment potentially is different in Allegheny County, compared to Delaware and Philadelphia counties. If you look at the malpractice verdicts and adversarial approach in those environments, it may be that co-mediation is more appropriate there,”notes Huber.

Nevertheless, UPMC believes the co-mediation model has merit and is contemplating the idea, but has not made a decision whether it will utilize the model, given the satisfactory fashion in which it has been able to resolve its cases, says Huber. Because the region’s plaintiff’s and defense bars have historically worked well together, Huber believes that it should not be difficult for a co-mediation panel to be assembled in western Pa., but does not know whether the effort would be worth it from a cost standpoint. “I don’t know that the Chicago Rush folks, or anyone else, has statistics to show that co-mediation has reduced what settlement or verdict ranges would have been without it,” says Huber, noting that not even co-mediators skilled in malpractice litigation can predict what amount of noneconomic damages a jury will award in a given case.

Payouts in mediations may even go up, as co-mediation panel members of both sides of the bar become more aware over time of what cases are settling for, and as members of the defense bar agree to higher settlements, believes David F. Simon, Esq., senior vice president and general counsel for Jefferson Health System. Simon is skeptical that the logic would work in reverse – that case valuation will go down if co-mediation panel members of the plaintiff’s bar agree to lower settlements over time: “There may be a reason why the plaintiff’s bar likes this model.”

Simon also believes the co-mediation model will potentially lead to conflicts of interest when members of the panel represent other clients. “If a lawyer who might be representing me in another trial case puts a number on a similar mediation case, that may come back to haunt me. The role of advocate is not compatible with the role of a judge,” according to Simon. “If used on a widespread basis, the co-mediation panel’s talent pool is not as deep as you’d like.”

Properly conducted mediation can lead to a more objective assessment of case valuation than litigation, and can provide a forum for resolving differences between the parties, says Simon. “If the co-mediation model works successfully,” says Simon, “It is because both parties came to the table and wanted to settle. The procedure is irrelevant.” Simon believes that mediation is most effective when done by objective, impartial judges. “I see no compelling reason for abandoning the neutral mediation model in favor of this new model,” notes Simon.

Jefferson Health System has no current plans to pilot the Rush model, but remains strongly supportive of mediation and would use the Rush model if parties demanded it, says Simon.

Other malpractice insurers in Pa. may be willing to adopt the co-mediation model. The upstart Pennsylvania Healthcare Providers Insurance Exchange, which covers 750 Pa. physicians, requires in its contract that insureds report adverse medical outcomes or face nonrenewal, according to Thomas Gaudiosi, the company’s president. The company hopes to pre-empt lawsuits before they are filed by proposing mediation as early as possible after adverse outcomes, and plans to use the Health Care Resolutions co-mediation panel as “another arrow in our quiver” to reduce the impact of runaway jury awards, says Gaudiosi. The insurer’s policy requires a physician’s consent to settle a case, and Gaudiosi says the company will explain the advantages of mediation to its members, as well as its voluntary and nonbinding nature.

PMSLIC is also interested in dispute resolution techniques that promote the efficient and cost effective disposition of meritorious claims. “We are interested in the Chicago Rush approach and look forward to reviewing the experience of those who use that model,” according to Anna Lavertue, PMSLIC’s director of communications and quality. “We have used mediation and believe it’s most effective in cases where all parties agree that the case should be settled but they are not able to agree on a dollar amount or the proportionate share of liability if multiple defendants are involved,” she says, noting that PMSLIC insureds have the “consent to settle” right.

PMSLIC’s enthusiasm for mediation is qualified by its observation that the number of cases taken to mediation is very small, and that only one in seven cases brought against PMSLIC insureds results in payment to a defendant. In addition, says Lavertue, have not seen any data that demonstrates that mediation does or does not reduce costs.”

Also open to exploring the co-mediation model is the Community Hospital Alternative for Risk Transfer (CHART), a risk retention group that insures 34 community hospitals in rural regions of eastern and western Pa. and their employed physicians, who number about 600, while the insurer has just opened its business to private physicians, according to Robert Curry, a consultant with Marsh USA who helps manage CHART’s claims processing.

The insurer has only begun to write business in May 2002, is open to considering alternative dispute resolution processes to effect early settlements and reduce liability exposure, and will explore the feasibility of creating a model similar to Rush if regionalized panels of co-mediators could be assembled, particularly in areas where hospitals are concentrated, says Curry. Even though CHART’s hospitals are generally located in regions that do not have the high malpractice payout history of more urbanized regions, Curry believes the legal expenses saved through early resolution could make the model worthwhile.