A new approach to professional liability reform: placing obligations of stakeholders ahead of their interests

Article Outline

• Abstract
• Multiple stakeholders
• Integrity of the judicial system
• Patient safety
• Fair compensation for injured patients
• Conclusion
• References
• Copyright

The authors utilize stakeholder theory to provide a new analysis of the professional liability crisis, by identifying the major stakeholders in our current system of professional liability, their respective obligations and self-interests, and how these interests are advanced and constrained by the current system. This stakeholder analysis reveals a core ethical obligation of all stakeholders: the preservation of the integrity of our current judicial system. The adverse impact of the pursuit of stakeholder self-interests, rather than fulfillment of their core, shared ethical obligation, on achievement of the goals of the current system, the deterrence of unsafe practice and compensation of injured patients, is then identified. The authors argue that approaches to reform of professional liability in obstetrics be based upon the common obligation of the stakeholders to fulfill the goals of the system, because attempts to align the myriad self-interests of the stakeholders will be futile.

Key words: fair compensation, malpractice, medical errors, medical negligence, patient safety, professional liability

The impact of the professional liability crisis on our specialty is well recognized.¹, ², ³, ⁴ Traditionally, obstetricians and those who practice similarly high-risk medical specialties have framed the issue of professional liability or, as often labeled, the “medical malpractice crisis,” as a conflict between physicians and plaintiff's attorneys.⁵ Obstetricians view themselves as victims, held responsible for poor clinical outcomes that cannot reliably be prevented and unfairly burdened with ever-increasing insurance premiums.⁵, ⁶ Plaintiff's attorneys and patient advocates believe instead that these same physicians are protected by a system that is unwilling or unable to take steps to prevent avoidable injury to vulnerable patients.⁷ This binomial account, while often embraced by many obstetricians and attorneys, is woefully inadequate in that it fails to take into account the many other stakeholders, ignores the tort system's ultimate purpose and goals, and overlooks a core, shared ethical obligation that provides ethical justification for needed reform.

This paper will use stakeholder theory to explore that inadequacy and to evaluate our current system of professional liability by identifying the major stakeholders, many of whom are not readily apparent, by enumerating their major self-interests, and identifying how these self-interests are constrained by the core ethical obligation that all stakeholders share to preserve the integrity of the system by promoting its purpose and goals.

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Multiple stakeholders 

Stakeholder theory identifies the multiple parties whose interests can be advanced or harmed by change in practice and policy, defines the interests of the parties and how those interests are advanced or constrained, and defines the obligations of parties affected by practice and policy. Stakeholder theory was introduced as a tool of corporate leadership and management by Freeman⁸ and has been adapted for health care leadership and management.⁹, ¹⁰ Ethical conflict is understood to be a function of incompatible interests or incompatible interests and obligations.

There are at least 12, not just 3, groups of stakeholders, with multiple subgroups, in this system (Table 1). The stakeholders are: patients and patient's families and dependents; practicing physicians, physician leaders, educators, and residents; plaintiff and defense attorneys; health care organizations and their leadership and risk managers; insurance companies; professional organizations of physicians; professional associations of attorneys; judges, juries, legal support personnel, and organizations providing services to them; expert witnesses; state licensing boards and regulatory agencies; government officials; and society. It is apparent from Table 1 that these groups of stakeholders have conflicting interests (Table 2) that are not mutually satisfiable. Moreover, any proposed reforms seeking to align these myriad and incompatible interests are doomed to failure. Put colloquially, someone's ox will always be gored.

TABLE 1. Stakeholders' interests and obligations

ACOG, American College of Obstetricians and Gynecologists.

Chervenak. A new approach to professional liability reform. Am J Obstet Gynecol 2010.

TABLE 2. Definitions

Chervenak. A new approach to professional liability reform. Am J Obstet Gynecol 2010.

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Integrity of the judicial system 

Despite the incompatible interests overall, there is a common obligation of all stakeholders: to uphold the integrity of the judicial system. All of the individuals and organizations in our list of stakeholders have this obligation as individual or corporate citizens. In the American system of the rule of law, the integrity of the judicial system is essential for protecting the interests and rights of all citizens. Referring to one of the classic textbooks of tort law, Siegal et al¹¹ identified the 2 main goals of the current system as “deterrence” and “compensation” for patients injured through medical negligence.¹²

All stakeholders therefore have an ethical obligation to act in ways that promote the goals of deterrence of unsafe practice, to enhance patient safety, and fair compensation of the injured. The nature of an ethical obligation is that it constrains self-interest. While the various stakeholders can be expected to act in ways that will maximize their self-interests, they are universally constrained by their obligation to uphold the integrity of the system. We will address some ways in which the interests of the individual stakeholders currently impact patient safety and fair compensation of injured patients.

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Patient safety 

Patient safety, 1 component of which is deterrence of unsafe practice, is an obligation but not an interest of all stakeholders. In particular, patient safety is not an economic or noneconomic interest of attorneys, plaintiff or defense, or their organizations; of expert medical witnesses in their capacity as witnesses; or of the judicial system except when these individuals or families are patients themselves.

While very early tort law was “chiefly concerned with making injurers pay for the losses of their victims,” legal scholars since the 1940s have seen tort law as a method to encourage potential injurers to avoid liability by taking action to reduce injury and as “an accident insurance for victims.”¹³ Therefore, our current system of professional liability encourages patient safety to the extent that the threat of litigation results in attempts to prevent negligent injury to decrease costs by discouraging lawsuits, large verdicts, or settlements.

How does the current system perform in this regard? Most studies have shown that “tort liability does little to improve health care quality and safety” and there are many who believe that it actually “jeopardizes patient safety by creating an intimidating liability environment.”¹⁴ Medical error, adverse events, and near misses (Table 2) impact upon patient safety. However, they are different from each other and from the tort of negligence in medical care. “Medical error focuses on the process of care while an adverse event addresses the outcome,” while the tort of negligence requires a deviation from the standard of care (process) in addition to injury (outcome).¹⁵ While the 3 may overlap, this overlap is not great. “Most medical errors are not associated with harm and most adverse events are not due to medical errors.”¹⁵ In addition, the vast majority of medical negligence does not result in claims in our current system. The best data we have on the subject indicate that there are anywhere between 7-10 times as many negligent injuries as claims and that only approximately 2% of negligent injuries result in claims.⁵, ¹⁶

Health care workers are reluctant to expose incompetent peers. In “Silence Kills” it is estimated that 53% of nurses were concerned about a peer's performance, however only 12% shared their concerns.¹⁷ It was also estimated that 68% of physicians were concerned about another physician's competence but <1% shared their concern with their colleague.¹⁷ Similarly, 81% of physicians were concerned about a nurse's competence but only 8% shared their views with that nurse. Of nurses, 34% were concerned about a physician's competence but <1% shared their concerns with this physician.¹⁷ Under our current system, these professionals may be concerned that exposure of a colleague will lead to resentment and retribution rather than any actual improvement in the colleague's knowledge base or performance. They may also be concerned about the threat of litigation if the colleague whom they report loses his or her privileges or job.

While anesthesia has been cited as a field in which patient safety has improved, it can be argued that the major impetus for change was not simply a plaintiff's attorney nor a large damage award but Dr Ellison Pierce. When Dr Pierce became the president of the American Society of Anesthesiologists he sought to improve safety measures–galvanized by the death of a friend's 18-year-old daughter under general anesthesia for a wisdom tooth extraction.¹⁸ Dr Pierce recognized that the death was preventable and sought the input of an engineer, Jeffrey Cooper, who helped him recognize and design machines and techniques to prevent these accidents.¹⁸ Similarly, in the commercial airline industry one of the initial motivators for instituting safer practices was what was determined to be a preventable crash with experienced pilots and not the lawsuits that followed. These efforts were motivated by dedicated and honest individuals whose primary motivation and incentive was to save lives. While it may be argued that the threat of litigation and increasing awards and insurance premiums add motivation, we also need to consider if these are the best and only possible incentives for positive change.

The American Association of Justice (AAJ)¹⁹ and the New York State Trial Lawyers Association⁷ frequently cite patient safety as a means to curb rising insurance premiums but have proposed few if any changes that would significantly diminish either their legal advantage or their incomes (in the way of a decreased contingency fee or number of hours billed) to reward health care workers for early disclosure and settlement. The time between a negligent act when a claim is brought and its resolution in a verdict or settlement is estimated at 5 years and in some obstetrical cases may be as much as 20 years, secondary to the prolonged statute of limitations and the tendency to settle on the courtroom steps.²⁰ A plaintiff who claimed he negligently acquired polio from a vaccine given to his child was awarded $22.5 million a full 30 years after the incident, a verdict that the defendant intended to appeal.²¹ Of note, the type of vaccine given to his child has not been used in the United States for 10 years.

An ethical and legal imperative to disclose medical error already exists. According to the American Medical Association Code of Ethics, Section 8:12, “concern regarding legal liability that might result from truthful disclosure should not affect the physician's honesty with a patient.”²² Full disclosure (of unanticipated outcomes) is also required by the Joint Commission (formerly the Joint Commission on Accreditation of Healthcare Organizations).²³ Under the current system, errors that did not result in injury or near misses are harder to track and easy to overlook despite their potential as learning tools. In many states, the system discourages prompt disclosure of error for fear of liability and damage to reputation. Thirty-six states have “apology laws” that protect expressions of sympathy but 28 of those states do not protect admissions of fault.²⁴ While there is some evidence that early disclosure and settlements save money and that patient safety can be enhanced,²⁵ such data are far from conclusive. Currently, no approach to error disclosure is without legal risk. There are those that predict that it would indeed heighten liability,²⁶ because the percentage of those patients who are injured by negligence and sue, might increase as a result of routine disclosure of errors.

President Obama recently announced a series of grants “… to launch a national experiment on alternatives to costly medical malpractice suits … including programs in which doctors quickly acknowledge a mistake, offer an apology and restitution, and pledge to take corrective action ….”²⁷ The AAJ is opposed to this plan. However, its president does admit that the “goals outlined by the White House, such as reducing the number of injuries, etc, moves the debate in the right direction.”²⁸

Clearly, despite the threat of litigation and despite ethical and legal imperatives to the contrary, the current system has not succeeded in efficiently and effectively encouraging fulfillment of the ethical obligation to provide a safer environment for the patients. The delay between the bringing of a claim and its eventual resolution does little to influence behavior at the time of the error or to change the behavior of the tortfeasor in a timely manner.

Proposals for reform to the system should therefore openly recognize and address the economic and noneconomic interests of health care workers that discourage prompt acknowledgement and reporting of error and colleagues. Proposals for reform must also recognize that, while attorneys, both plaintiff and defense, and legal personnel may advocate for patient safety improvements and indeed want it for themselves and their families, they have no interest in altering the system to benefit the health care profession in ways that might encourage early disclosure and compensation. Such changes would work against attorneys' interests by diminishing their incomes, by inhibiting their ability to obtain large verdicts for their clients or to bill clients for prolonged defense processes. Therefore, improvements in safety will only come from the health care profession, with incentives and protection from legislatures, while openly acknowledging and addressing the negative impact of such measures on the interests of the other stakeholders.

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Fair compensation for injured patients 

It has been estimated that only three-quarters of litigation outcomes were consistent with the merits of the claims, leaving a significant percentage of those with negligently caused injury not compensated after a lengthy legal process.⁵ There are many conflicts of interests (Table 2) and conflicting interests among the stakeholders that often work against the achievement of this goal.

Whether our current system adds significantly to the cost of health care in this country by encouraging the practice of defensive medicine or as a percentage of the overall amount spent on health care is frequently debated and cannot be answered here. What is more easily demonstrated is the percentage of dollars that are spent on administrative costs, rather than on compensating patients. It has been estimated that on average “for every dollar spent on compensation, 54 cents went to administrative expenses (including those involving lawyers, experts and courts).”²⁹ This results in a system that is obviously neither very efficient nor effective.

It is in the economic interest of plaintiff attorneys to take only those cases in which the economic damages are significant. In some cases, patients or their families may have a meritorious case, but the monetary value of their damages is not significant enough for an attorney to take on a contingency basis. Because of the high cost of litigating a case, plaintiff's attorneys are given incentive to take those cases with the potential for large damages, such as in obstetrics. At a recent New York State Bar Association continuing legal education course, a plaintiff's attorney, Laura Doolittle, suggested that cases where there may be malpractice, but in which the damages do not justify the significant cost in time and money required, should be rejected. She gave as an example a death claim involving a young child that was compelling but “absent conscious pain and suffering, is not of considerable value in light of the wrongful death statute in the State of New York.”³⁰ Although these plaintiffs can still pursue cases on their own, they may not have the resources, ability, or time to effectively do so.

In 1989, Freeman and Freeman³¹ noted that <10% of children with cerebral palsy received compensation from tort suits and proposed “a system that would compensate all children born with CP for most … expenses.” The Woodhouse Commission, the architect of New Zealand's injury compensation scheme, concluded that fairness would dictate that “equal losses be given equal treatment” and thus they were concerned about a system that provides compensation “based upon the cause of an injury rather than its effect.”³² It is beyond the scope of this paper to provide an analysis of no-fault reforms of professional liability. But it can be legitimately asked whether the patient whose abruption was unpredictable and occurs outside of the hospital resulting in delivery of a severely damaged infant immediately upon arrival is any less in need and deserving of financial compensation than the patient whose symptoms were ignored and whose expert opines that earlier intervention would have resulted in a normal outcome, especially in cases where there is no way to prove what might have happened.

Even in the 73% of cases in which awards are given for true medical errors,²⁹ there are vast differences in the amounts awarded for the same injury. Factors that can influence this are the strength of a plaintiff's case, the attorney's advocacy skills, the venue in which the case is tried, and whether the jury sympathizes with the plaintiff or with the physician.

It is commonly believed that trials are searches for the truth. As Fine³³ puts it, “Many lawyers express this belief. The problem is that there is no real ‘truth’–at least ascertainable and verifiable truth–in cases that actually make it to trial. If there were, those cases would either not be brought, or, if brought, they would be tossed out on a motion to dismiss or on summary judgment.” Expert witnesses are compensated for their time, which can discourage objective testimony. Studdert et al²⁹ also estimated that 37% of claims did not involve errors.²⁹ If we presume that these suits were brought in good faith, we must assume that some experts were either incompetent or unethical in their testimony.³⁴ As Judge Learned Hand³⁵ wrote, “How can we expect jurors to decide between experts when the jurors' ignorance is the premise for allowing the expert to testify in the first place.” While the Daubert decision³⁶ (Table 2) attempted to keep “junk science” out of the courtroom, the decision on any motion is still left to a judge with little or no scientific training.

In cases in which a “correct” verdict or settlement is reached, the costs in time to plaintiffs and their families and to defendants can be significant, because defense attorneys and their clients, hospitals or insurance companies, often have an economic incentive to delay payment for as long as possible. This problem is compounded by the fact that there is no limit to the number of cases a senior defense attorney can handle, although it is undeniable that the more cases they accept, the less time and effort he or she can devote to any 1 case. There is also no need for them to disclose to the physician or the insurance company how many cases they are already handling, an important consideration when insurance companies and hospitals will only pay for a senior attorney at trial. Indeed, “firms that charge by the hour can suffer if they are too successful and end a lawsuit.”³⁶

“You are not the client” Ellen Parsons, a character on the television series, Damages, advises her father who is being sued as the result of an auto accident for which he feels responsible.³⁷ As an attorney herself, Ellen knows that the automobile insurance company has hired her father's attorney and that it is the company's interests that the attorney seeks to protect. Obstetricians in particular should recognize Ms Parson's father's error. Professional liability insurance companies have a strong interest in settling cases in which the financial exposure is high, despite the merit of the suit. This can have the effect of encouraging nonmeritorious suits, which then can have a damaging and potentially unfair effect on an obstetrician's record and morale.

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Conclusion 

Stakeholder analysis shows that there are multiple parties involved in malpractice litigation with multiple and often incompatible interests. This incompatibility cannot be eliminated. Interests-based reforms should be abandoned because they cannot solve the problem of incompatible interests among all of the stakeholders. However, it is possible to diminish their intensity by basing change on the shared ethical obligation revealed by stakeholder analysis: to protect the integrity of the judicial system by pursuing its 2 goals of patient safety and fair compensation.

The authors therefore call for a crucial conceptual shift on the part of all stakeholders, away from interests, and toward their shared obligation to improve patient safety and ensure fair compensation. To put this change into practice, physicians should lead change in the medical system and lawyers should lead change in the legal system.

Physician leaders should lead change by promoting objectivity and education as a matter of obligation. One actionable change, to blunt the self-interests of current experts, would be to appoint experts from academic medical centers to review a limited number of redacted records and provide an outside, objective assessment of cases for which claims are brought as well as near misses. These experts could make timely suggestions for appropriate compensation and corrective action. Selected case reviews could also be published and would serve as invaluable educational material for other obstetrician/gynecologists. These experts would be committed to educating their peers and improving national standards of care, rather than in maximizing their own compensation. Academic legal scholars, who are not stakeholders, should lead similar change to better align the legal system with its goals rather than the interests of powerful legal stakeholders. We believe that the results of the conceptual shift for which we have called will be a professional liability system that maximizes patient safety and fair compensation.

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