Disclosing Errors, Offering Compensation May Keep Physicians Out of Court

August 16, 2010

August 16, 2010 — Nine years after it began disclosing medical errors to patients and offering to compensate them, the University of Michigan Health System (UMHS) has seen its rate of malpractice litigation and total liability costs drop dramatically, according to a study published today in the Annals of Internal Medicine.

The UMHS exercise in transparency is just the sort of tort reform that President Barack Obama and Congressional Democrats have pushed to spare both physicians and patients long, painful slogs through the court system. The new healthcare reform law authorizes the US Department of Health and Human Services to give states 5-year grants to test alternatives to malpractice litigation that encourage disclosure of medical errors, prompt and fair resolution of disputes, and overall improvement of patient safety. The Department of Health and Human Services can begin awarding the grants next year.

The so-called disclosure-and-offer program at UHMS is not unique. Other healthcare organizations such as the University of Illinois Medical Center in Chicago, the Lexington (Kentucky) Veterans Affairs Medical Center, and a hospital system called Catholic Healthcare West have also taken to revealing medical errors, apologizing, and offering compensation when appropriate. To some experts, such policies represent a second generation of tort reform that tries to bypass the judicial system, as opposed to refashioning it with the likes of caps on noneconomic damages.

Time to Claim Resolution Decreased by Almost 5 Months

The study looked at claims for compensation reported to UMHS risk management from July 1, 1995, to September 30, 2007. In 2001, roughly at the midway point of the study, UMHS began implementing its disclosure-and-offer program, in which it admitted fault and offered compensation when an internal inquiry revealed medical error. Full implementation ensued February 1, 2003. At first, UMHS applied its new policy to all new and pending malpractice claims, but it now relies on its own employees in addition to patients and their attorneys to identify cases of patient injury.

Lead author Allen Kachalia, MD, JD, and colleagues found that the mean monthly rate of new claims — including those never filed in court — per 100,000 patient encounters decreased from 7.03 claims before the advent of the disclosure-and-offer program to 4.52 claims after full implementation. Likewise, the mean monthly rate of lawsuits per 100,000 patient encounters fell from 2.13 to 0.75.

The UMHS program appeared to speed up the claims process. The time from when a claim was reported to when it was resolved dropped from 16.2 to 11.4 months.

The study also compared how much UMHS spent on liability costs, which included fees for attorneys and experts, as well as amounts paid to patients and their families. As a percentage of monthly operating revenue, those costs declined from a median 0.084% before the disclosure-and-offer program to 0.04% after it was fully implemented, although the percentage of monthly operating revenue costs more than doubled — 0.01% to 0.025% — for a subset of claims that never became lawsuits.

Disclosure-and-Offer May Not Work in All Settings

The authors of the study acknowledge 2 limitations that prevent their findings from being the last word on medical error disclosure. First, malpractice claims against Michigan physicians statewide were declining during the second half of the study, when UMHS was in disclosure-and-offer mode. The state had implemented several tort reform measures in 1994, including a cap on noneconomic damages, which may have contributed to this trend. Second, a disclosure-and-offer program may achieve less stellar results in healthcare organizations that operate differently than UMHS. The Michigan health system employs its physicians, pays for their malpractice coverage, and accepts responsibility for claims on a system-wide basis. As a result, individual UMHS physicians are rarely reported to the notorious National Practitioner Data Bank — a repository of medical liability payments and disciplinary actions that otherwise is viewed as a medical Hall of Shame.

"For disclosure programs that do not adopt this approach [toward the National Practitioner Data Bank], the willingness of physicians to settle may be limited," the study authors write.

The study was supported by the Blue Cross Blue Shield of Michigan Foundation. Dr. Saint was supported by an Advanced Career Development Award from the Health Services Research & Development Service of the Department of Veterans Affairs during a portion of the time this study was conducted.

Ann Intern Med. 2010;153:213-221.


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