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Reform focus shifts to health courts

AMA's William A. Hazel. Jr., M.D.
AMA's William A. Hazel. Jr., M.D.

By Christopher Guadagnino, Ph.D.

A major shift in emphasis on the medical malpractice reform front seems to be occurring. A cap on non-economic damages in malpractice trials has long been the cornerstone of organized medicine’s attempts to bring stability to malpractice jury awards, modeled after the success of California’s Medical Injury Compensation Act of 1975 (MICRA). In late June, the American Medical Association (AMA) issued policy guidelines noting that, while many states have enacted caps with varying limits and exceptions, “limiting non-economic damages has remained politically elusive in the other states and at the federal level as well.”

While the AMA maintains that MICRA-based reforms continue to be the best option for fixing the medical liability crisis, its board of trustees has put the reform onus back at the state level by promulgating policy guidelines to stimulate pilot projects for what it calls a promising reform proposal that merits further investigation: health courts.

Health courts are envisioned as an alternative to a tort system that does not hear or compensate the vast majority of injured parties, that routinely plays on the volatile emotionalism of non-expert juries who are asked to adjudicate highly complex medical issues, and whose unpredictable award spikes keep physicians’ liability insurance costs high – to the detriment of cost efficiencies in health care delivery – and which jeopardize ready availability of medical care to patients, particularly high-risk medical services.

Proponents of the health court concept believe that it will bring more consistency, reliability and fairness to malpractice dispute resolution by incorporating the expertise of adjudicators who are specially trained and educated in the content of malpractice cases, as well as bring a more accessible and systematic patient injury compensation infrastructure. The AMA is now actively promoting the health court concept as a way to bring fairer and more expedited resolution of medical injury disputes, verdicts based more on deviation from the standard of care and less on emotional appeals to jurors, a higher percentage of victims compensated, and a higher percentage of frivolous claims dismissed.

Perhaps viewed as theoretical and unrealistic in the past, the health court concept is being treated with a new level of seriousness and enjoys growing support from new quarters, including AARP and quality organizations such as the Joint Commission.

Federal legislation in both the House and Senate would direct the Department of Health and Human Services to issue grants to states to launch health court pilot projects.

Six states currently have bills pending in their legislatures to implement the health court concept – including Pennsylvania and New Jersey. Those bills appear to face uphill legislative battles, however, and would likely encounter fierce resistance from the legal community. While the New Jersey’s governor’s office appears open to the concept of health courts, Pennsylvania’s does not. Nevertheless, the health court concept now occupies a conspicuous place in medical liability reform policymaking.

AMA Shifts Focus

While there is strong evidence that MICRA-style tort reform leads to lower malpractice insurance premiums, “the political environment is not conducive to getting a large-scale reform at the federal level,” with the Senate having repeatedly blocked a bill that includes a $250,000 cap on non-economic damages in medical malpractice jury verdicts, says William A. Hazel, M.D., AMA’s board secretary. In past years, the Senate Republican majority has failed to achieve the 60 votes required to invoke cloture on debate over the legislation, which the Democratic minority has been able to keep bottled up with filibuster threats. Now, with the Senate Democratic majority in opposition to a caps bill (a version of which has been reintroduced), the chances of it passing are even more remote, notes Hazel.

“Some in Congress have expressed interest in health courts, so we have responded with guidelines to clarify how the concept should work,” says Hazel, pointing to bipartisan legislation introduced in the House and Senate proposing to alleviate the medical liability crisis by awarding grants to states for the development, implementation and evaluation of alternatives to current tort litigation for resolving disputes over injuries allegedly caused by health care providers or health care organizations.

The Fair and Reliable Medical Justice Act, co-sponsored by Sens. Max Baucus (D-Mont.) and Mike Enzi (R-Wyo.), calls on the Department of Health and Human Services to award up to ten $500,000 demonstration grants to states that develop alternatives to the current tort system for resolving medical malpractice claims, with the goal of delivering quick and fair compensation to injured patients while helping physicians eliminate the practice of defensive medicine and learn from medical errors. To receive funding, states would have to encourage early disclosure of medical errors and collect data on patient injuries to help health care providers form “best practices” polices to improve patient safety. Companion legislation was introduced in the House by Reps. Mac Thornberry (R-Texas) and Jim Cooper (D-Tenn.).

The AMA is ready to support any state to get health court pilot projects off the ground, and can help to shape the appropriate legislation, says Hazel. Its policy includes six key legislative guidelines:

· Health courts should be structured to create a fair and expeditious system for the resolution of medical liability claims – with a goal of resolving all claims within one year from the filing date.

· Health court judges should have specialized training in the delivery of medical care that qualifies them for serving on a health court.

· Negligence should be the minimum threshold for compensation to award damages.

· Health court judgments should not limit the recovery of economic damages, but non-economic damages should be based on a schedule, and injuries should result in consistent non-economic damage awards based on the schedule. One option for the schedule is to base it on type/severity of the injury, while another option is to have the schedule link non-economic damage awards to the amount of economic damages included in the judgment. Health court judges should give jury instructions that provide clear delineations between the purposes of economic damages (for economic loss), non-economic damages (for pain and suffering), and punitive damages (for punishment to prevent future bad behavior, and applicable only when clear and convincing evidence is presented of oppression, fraud, malice or intent to do harm).

· Qualified experts should be utilized to assist a health court in reaching a judgment, chosen by a judge from an established list to help clarify or interpret medical testimony given in legal proceedings. A court-appointed medical expert must, at a minimum, meet the same qualifications as the medical experts who testify on behalf of a party in the presiding lawsuit.

· Health court pilot projects should have a sunset mechanism in place to ensure that participating physicians, hospitals, and insurers do not experience a drastic financial impact based on the new judicial format. Given that the costs are unknown and could potentially be charged to physicians, a health court system should include appropriate funding from government or foundation sources to protect participants from significant financial losses based on their participation under a health court format rather than the traditional medical liability system.

One option for a health court is to have a bench trial before a specially-trained judge, while another is for a health court to have a jury trial under the authority of a specially-trained judge. Health courts utilizing a jury should provide juries with a specialized educational session on the basics of medical care delivery and the distinction between negligence and adverse outcomes as well as appropriate guidelines on the purpose of awarding non-economic damages, according to the AMA’s new guidelines.

An alternative model to the specialty court approach is an administrative system established by a hospital or insurer, having jurisdiction over patients and providers who choose to opt into the system.

Over the past year and a half, the health court concept has garnered support by a variety of physician organizations and other interest groups, including the American Academy of Family Physicians, the American College of Obstetricians and Gynecologists, the American College of Emergency Physicians, AARP, the National Committee for Quality Assurance, and the Joint Commission, according to Paul Barringer, Esq., general counsel for Common Good, a nonpartisan legal reform organization which has championed the health court concept for several years.

AARP believes that the tort system does a poor job of compensating most people injured by medical errors – especially older Americans who can recoup little in economic damages – and supports the Fair and Reliable Medical Justice Act, according to AARP spokesperson Drew Nannis. “Malpractice reform needs to move beyond the doctors vs. lawyers debate and focus on patients. The reality is patients injured by medical errors are badly served by the tort system. It’s slow, expensive and most injured people get nothing at all. It also encourages doctors and hospitals to hide mistakes rather than learn from them.” AARP supports testing non-judicial, no-fault alternatives to the tort system, and Nannis says the Baucus and Enzi legislation would also require thorough evaluation and promote full consumer participation in developing and evaluating these tests.

The Joint Commission supports testing the feasibility and effectiveness of alternative injury compensation systems that are patient-centered and focused on decreasing patient injury, and the agency maintains that the current medical liability system, by its basic design, chills the identification and reporting of adverse events in health care and undermines opportunities for learning that could provide the basis for significant safety improvements. In testimony delivered last summer before the Committee on Energy and Commerce, the Joint Commission supported the creation of predictable, fair and patient-centered compensation systems “to begin the process of mitigating the periodic medical liability crises that, aside from economic factors, result from the delivery of unsafe care, unreliable adjudication of claims, and unfair compensation for injured patients.”

State Approaches

Bills introduced in New Jersey and in Pennsylvania would implement different approaches to the health court concept – New Jersey’s would establish a statewide specialty court, while Pennsylvania’s would establish an administrative medical liability system with expert adjudicators as an alternative to litigation for resolving malpractice disputes.

New Jersey currently has two health court bills pending. A-721, sponsored by Assemblyman David C. Russo, would create a Special Medical Malpractice Part of the Law Division having jurisdiction with respect to any action for injury against a health care provider based on professional negligence. The Special Medical Malpractice Part would also hear any action concerning disputes surrounding medical malpractice liability insurance, and would have jurisdiction over disputes where the parties have agreed in writing to such jurisdiction. Matters in the Special Medical Malpractice Part would be heard by a judge sitting without a jury.

A similar bill in the state Senate, S.B. 671, sponsored by Sen. Thomas H. Kean, Jr., would establish a Medical Malpractice Court as a court of limited jurisdiction, and seeks to create a more equitable process of resolving medical malpractice cases by having judges chosen for their special qualifications, knowledge and experience in matters involving all aspects of medical malpractice. The specialty court would have jurisdiction with respect to: disputes concerning medical liability insurance, actions where parties have agreed in writing that any matter arising out of the agreement would be resolved in Medical Malpractice Court, actions for injury against a health care provider based on negligence, as well as other medical liability disputes as provided by the Rules of the Supreme Court. Judgments of the Medical Malpractice Court may be appealed to the Appellate Division of the Superior Court pursuant to Rules of the Supreme Court.

Under Kean’s bill, the governor would nominate and appoint six to 12 judges with the advice and consent of the Senate, while New Jersey’s Chief Justice would assign one of the Medical Malpractice Court judges to be the presiding judge who would, subject to the supervision of the Chief Justice and the Administrative Director of the Courts, be responsible for the administration of the court. The presiding judge would also submit annual reports to the Chief Justice of the Supreme Court containing information and statistics concerning the operation of the Medical Malpractice Court, as well as recommendations regarding the clarification or revision of legislation, rules and regulations relating to medical malpractice, or the practice and procedure in the Medical Malpractice Court.

While the legislation doesn’t speak directly to the issue of jury trial, it is modeled after New Jersey’s Tax Court, which operates under Supreme Court rules which dictate that all tax court matters are heard by a single judge sitting without a jury, which Kean believes would likely instruct the Supreme Court as to rules for a new Medical Malpractice Court. The bill is silent on which standards, e.g., negligence or avoidable injury, the malpractice court would use as a basis for its verdicts, and leaves it up to the court to determine appropriate standards based on current statute and case law.

Given the complexity of facts and issues raised in medical malpractice cases, says Kean, a specialty court is needed to bring consistency of opinions and approaches to those issues, as well as to ensure appropriate accountability for negligent medical actions, and to protect against inappropriate impacts on physicians who have not been negligent.

Kean says New Jersey’s recent Chief Justice nominee has not had the chance to review the bill, and he concedes that the state Senate President and Assembly Speaker do not regard it as one of their priorities. “My hope is that this approach would not be opposed the way that a caps bill has been. I want New Jersey to be in the forefront of innovative ideas, and I think we will be able to see beyond the partisanship that arose previously. I will continue to push this bill,” especially as financial incentives may become available from the federal level, adds Kean.

New Jersey’s Medical Care Availability Task Force, which began meeting two years ago, has been studying malpractice insurance cost impacts and a variety of reform concepts, and at press time had not yet released an anticipated report of its findings and recommendations to the governor and the legislature.

The Medical Society of New Jersey (MSNJ) believes that the state’s medical liability crisis has only been addressed at the margins, and it continues to support exploration of alternative dispute resolution models, according to General Counsel Larry Downs, Esq. While MSNJ has not taken a formal position on the health court bills, it welcomes discussion on any reform that inject fairness into the system, makes patients whole by compensating them fairly, and brings rationality to non-economic damage awards, says Downes. A health court is designed to do that, although Downs does not know whether the concept has a legitimate chance of being implemented in New Jersey, given the State Supreme Court’s strong opposition to the specialty courts in the past.

While he has not discussed the health court concept with Gov. Jon Corzine, state Health Commissioner Fred M. Jacobs, M.D., J.D. says he believes the concept is worth trying, from a policy standpoint. The current “trial by combat” tort system is ineffective for technical areas such as medical malpractice cases, says Jacobs, because it does not compensate the majority of those who suffered damages; so few cases make it to trial; it exacts a huge cost on medical liability premiums; and experts become advocates and “hired combatants,” instead of providing unimpeachable, evidence-based, honest expertise.

Jacobs says he is a strong supporter of using highly trained judges and experts for malpractice cases, which would address the biggest complaint by the medical community – juries awarding verdicts and damages based on their emotions, while the public would get more cases resolved, with a better chance of receiving compensation for damages, he believes.

New Jersey’s legal community seems less receptive to the health court concept. While the New Jersey State Bar Association does not have a specific position on the malpractice court bills, its Director of Legislative Services Valerie Brown, Esq., notes that such specialty court bills have been around for a few years and were vehemently opposed by the state’s former Chief Justice, who believed they would dilute the authority of the Court, and that well-rounded judges should be capable of adjudicating in all courts. While a malpractice court could bring special expertise to cases and allow judges to develop a focused body of malpractice case law, says Brown, it could also disperse the state Superior Court’s decision-making authority by creating a bifurcated body of case law – emanating from the malpractice court and from the state Superior Court – making it difficult to determine appropriate legal precedents for cases. Specialty courts may also negatively affect the ability of litigants to have a trial by jury, she adds.

State judiciaries, in general, have not embraced the specialty health court approach, notes Barringer, of Common Good. An alternative to the specialty court approach is for state legislatures to create demonstration projects for an administrative liability system, he adds. While a more complete “transformational” court model would bring the most benefits, Common Good also supports the more incremental approach of demonstration projects with more limited jurisdiction, says Barringer. An approach that allows patients to opt into an administrative system voluntarily would have the greatest chance of surviving constitutional challenges by opponents, he believes.

Pennsylvania’s S.B. 678, sponsored by Sen. Jane Orie, would establish an administrative medical liability system as an alternative to litigation for resolving malpractice disputes, granting up to three pilot projects that would create a uniform schedule of compensation for injuries related to medical treatment. The bill would establish an administrative medical liability commission – consisting of representatives from the state Supreme Court, Insurance Department and Attorney General’s Office; as well as designees appointed by the Governor and the Legislature – which would administer and monitor the three-year demonstration project, awarding up to three grants to self-insured hospitals whose affiliated physicians and medical staff agree to a joint defense agreement, agree to disclose incidents and serious events in accordance with current law, and agree to participate in a uniform and comprehensive risk management plan. The hospital and physicians’ insurance carriers, including risk retention groups and similar organizations, would need to agree to participate in the program.

Participating health care providers would offer early mediation following disclosure of an avoidable error. Patients may opt into the program prior to or at the point of care, while the opt-in process would become an integral part of participating providers’ existing informed consent policies and procedures. All patients who suffer temporary or permanent injury as a result of an avoidable medical error by a participating provider would be compensated for economic and non-economic damages, and would agree to accept the determination of the adjudicatory panel, which would consult with qualified medical experts from a commission-approved list to determine compensable injuries.

Participating providers would appoint an independent administrator which would:

· Recruit the qualified medical experts and adjudicatory panelists.

· Collect documents needed to determine if a claim is compensable.

· Select the independent panel.

· Determine compensation based on the opinion of the adjudicatory panel and the adopted uniform schedule of compensation.

· Approve any agreement for binding arbitration between the patient and the participating health care providers.

· Develop analysis and feedback to the participating providers for improving care processes and reducing the incidence of avoidable errors.

Participating hospitals, physicians and patients would agree to a uniform schedule of compensation for injuries based on type of injury, severity of the injury, age, life expectancy, past and future medical costs not covered under other programs and lost past and future wages. Eligible claims would be paid in a timely and uniform manner using a fixed benefits schedule including compensation for both economic and non-economic losses, while compensation to patients would be the responsibility of the participating physicians and hospitals’ health care providers. Providers would continue to participate in the MCARE Fund, which would accept the independent panel decisions and pay its assigned share of damages up to its statutory incident and aggregate limits. Fees to any attorneys retained by a participating patient would be limited to 20 percent of the total award.

Hospitals and physicians participating in the pilot projects could target their scope of jurisdiction to a designated geographic region, a designated area of health care practice or a designated group of health care providers. To evaluate the effects of the program, the commission would consult with a review panel of experts, patient advocates, health care providers and organizations, attorneys, insurers and state officials. The evaluation would include an analysis of the effect of the alternative system on the number, nature and costs of health care liability claims; a comparison of the claim and cost information of each entity receiving a grant; and a comparison between entities receiving a grant and entities that did not receive such a grant, matched to ensure similar legal and health care environments.

Pa.’s medical community supports the Orie bill, while the bill provokes a chilly reception by the state’s executive branch and legal community.

The Hospital & Healthsystem Association (HAP) helped to develop the bill, which grew out of a recommendation by the Joint State Government Commission – the research agency of the legislature – to develop demonstration projects for establishing alternatives to the existing liability system for malpractice cases, according to Jim Redmond, HAP’s senior vice president of legislative services, who served on the Commission’s medical professional liability advisory committee.

A bill to establish a specialty medical liability court in Pa. never got anywhere when it was introduced in the House in 2003 and has not been re-introduced, notes Redmond. Attention has since shifted to non-binding mediation models as promising mechanisms of alternative dispute resolution, while the mechanism in Orie’s bill is different because it would require parties to agree to the binding judgment of expert adjudicators and forgo the possibility of a malpractice lawsuit in the traditional court system, says Redmond.

Redmond says the bill appears to have moderate support in the Senate, whose members generally find it hard to argue against a limited demonstration project of this sort, but he says the House Democratic leadership has not been supportive of any more changes in the state’s medical liability system.

While the AMA policy guidelines say that negligence should be the minimum threshold for awarding damages, Orie’s bill uses the more lenient standard of avoidable medical error, which Redmond says is viewed to be a critical tradeoff: “If you limit the amount of compensation, you’ve got to expand the number of injured parties who could potentially receive compensation. Otherwise, it would never fly, politically.”

The Pennsylvania Medical Society (PMS) supports the Orie bill, especially since it gets away from the adversarial relationship of the court approach, and the Society would like to see demonstration projects in different markets across Pa., says PMS President Mark Piasio, M.D. Results from a similar approach being modeled around the state – voluntary, non-binding mediation, under which patients sign an agreement prior to treatment saying that if they later pursue a claim against the facility, they must attempt to resolve it through mediation before filing a lawsuit – appear promising, in terms of frequency of claims and overall payout costs, says Piasio.

Impacts of a voluntary administrative system for medical injury dispute resolution may not be easy to ascertain, given the self-selection bias of participating patients – and that the most litigious patients would not opt-in – but the model is worth piloting and can still provide useful data, Piasio believes.

The need for additional reform still exists in Pa., says Piasio. Even though increases in malpractice insurance premiums have leveled off, their dollar amount remain huge, many physicians are still getting sued, and the private insurance market is not yet stable, he notes. That last observation was borne out by the Pa. Insurance Department’s recent decision that there is insufficient ability of commercial medical malpractice insurance carriers to step-up their coverage level to $750,000 as part of a phase-out of the MCARE Fund.

The PMS is still exploring the negligence v. avoidability issue, says Piasio. Replacing the “negligence” with “avoidable error” as the threshold for compensation does open up providers to many more claims, but a viable price point can be found for an administrative medical liability system if reasonable limits were set for compensation levels, perhaps using the system to carve out a limited scope of medical practice, such as obstetrics, says Piasio. A negligence standard retains the status quo’s undesirable aspects of blame and punishment, he believes, while an avoidability standard facilitates a patient advocacy stance: seeking to reduce errors and compensate more injured parties. Multiple compensation standard options could be tried in different demo projects, to see which works best, Piasio adds.

Orie’s bill has not received a warm reception from Pa.’s legal community and executive branch.

While neither the Pennsylvania Trial Lawyers Association (PaTLA) nor the Pennsylvania Bar Association (PBA) have institutional positions on Orie’s bill, leadership of both organizations raise fundamental concerns about it, particularly the administrative system’s opt-in mechanism that they believe would require patients to waive their constitutional rights to a jury trial before care is rendered and without a full and fair opportunity to understand the implications of doing so.

“We do not support the concept of special courts carved out of the traditional court system. This is more offensive – trying to carve out potential medical negligence claims before a patient even has a claim,” says PaTLA President Tim Riley, Esq. “What kind of knowing waiver will be given? Will a patient be adequately advised before waiving their rights,” he asks. The current system provides the opportunity for an injured patient to find out what happened, and whether care was properly rendered, rather than “a workers’ comp-type scheme in which you go to some grid and look up what their claim is worth,” says Riley, who believes the administrative system would probably result in less litigation, but not more fair and appropriate compensation to injured patients.

Riley says that, in studies he has seen, only eight to ten percent of victims of medical negligence actively pursue claims. Although the lower “avoidability” standard of an administrative compensation system would offer compensation to a greater number of injured patients, Riley believes it would pay individuals a fraction of their just compensation, and by spreading diluted compensation across greater numbers of patients, he questions whether it would cut overall costs.

“The current jury trial system is not broken, and is not in need of further changes since Pa. enacted the MCARE Act, which made significant changes that are just beginning to work their way through the case load,” says PBA President Andrew Susko, Esq., citing data from the state Supreme Court that malpractice case filing volume and MCARE Fund payouts are both down significantly. PBA has generally supported voluntary mediation and alternative dispute resolution models which do not forfeit the right of a patient to pursue a jury trial, but Susko questions whether waiving the right to a jury trial before or at the point of care – as required under the Orie bill – provides patients with full knowledge of the extent of rights they are giving up.

The Governor’s Office of Health Care Reform (OHCR) has no present interest in the Orie bill, and believes that existing reforms are beginning to work effectively. Voluntary mediation and arbitration programs at hospitals around the state are successfully resolving disputes that otherwise would have been filed as medical malpractice lawsuits, says OHCR Chief of Staff and Deputy Director Susan L. Anderson. She also points to lower case volume and MCARE payouts as evidence that existing reforms are having positive impact.

When the Joint State Government Commission was exploring malpractice reform options, “we tried to come up with a schedule of non-economic damages, but it was almost impossible to achieve a consensus,” says Anderson, who was on the Commission’s advisory committee.

Pa. has already begun to offer special training in malpractice cases to its judges, Anderson notes. The Supreme Court of Pennsylvania has strongly recommended that all judges who hear malpractice cases attend a two-day Court of Common Pleas training program to educate judges on substantive law issues and changes brought by the MCARE Act and new Rules of Civil Procedure that bear on malpractice cases, says Anderson. As of 2006, 332 judges had registered for the program, and the Court has also created a book” resource on these topic, Anderson notes.

A health court or administrative medical liability system is “dealing at the wrong end,” by addressing the end result of avoidable harm to patients, according to Anderson. “The vast majority of these cases occur because of system failures,” and Pa.’s patient safety initiatives focus on pre-empting errors by reporting, studying and educating providers about their root causes, Anderson says.

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