    [Senate Hearing 109-710]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 109-710

      MEDICAL LIABILITY: NEW IDEAS FOR MAKING THE SYSTEM WORK BETTER FOR
                                    PATIENTS

    =======================================================================

                                    HEARING

                                     OF THE

                        COMMITTEE ON HEALTH, EDUCATION,
                              LABOR, AND PENSIONS
                              UNITED STATES SENATE

                           ONE HUNDRED NINTH CONGRESS

                                 SECOND SESSION

                                       ON

    EXAMINING ALTERNATIVES TO IMPROVE THE MEDICAL LIABILITY SYSTEM TO WORK
       BETTER FOR PATIENTS, FOCUSING ON S. 1337, TO RESTORE FAIRNESS AND
    RELIABILITY TO THE MEDICAL JUSTICE SYSTEM AND PROMOTE PATIENT SAFETY BY
           FOSTERING ALTERNATIVES TO CURRENT MEDICAL TORT LITIGATION

                                   __________

                                 JUNE 22, 2006

                                   __________

     Printed for the use of the Committee on Health, Education, Labor, and
                                    Pensions

     Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                     senate

                        U.S. GOVERNMENT PRINTING OFFICE
    28-417                      WASHINGTON : 2007
    _____________________________________________________________________________
    For Sale by the Superintendent of Documents, U.S. Government Printing Office
    Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512�091800
    Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001

              COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                       MICHAEL B. ENZI, Wyoming, Chairman

    JUDD GREGG, New Hampshire            EDWARD M. KENNEDY, Massachusetts
    BILL FRIST, Tennessee                CHRISTOPHER J. DODD, Connecticut
    LAMAR ALEXANDER, Tennessee           TOM HARKIN, Iowa
    RICHARD BURR, North Carolina         BARBARA A. MIKULSKI, Maryland
    JOHNNY ISAKSON, Georgia              JAMES M. JEFFORDS (I), Vermont
    MIKE DeWINE, Ohio                    JEFF BINGAMAN, New Mexico
    JOHN ENSIGN, Nevada                  PATTY MURRAY, Washington
    ORRIN G. HATCH, Utah                 JACK REED, Rhode Island
    JEFF SESSIONS, Alabama               HILLARY RODHAM CLINTON, New York
    PAT ROBERTS, Kansas

                   Katherine Brunett McGuire, Staff Director

          J. Michael Myers, Minority Staff Director and Chief Counsel

                                      (ii)

                                C O N T E N T S

                                   __________

                                   STATEMENTS

                            THURSDAY, JUNE 22, 2006

                                                                       Page
    Enzi, Hon. Michael B., Chairman, Committee on Health, Education,
      Labor, and Pensions, opening statement.........................     1
    Kennedy, Hon. Edward M., a U.S. Senator from the State of
      Massachusetts, opening statement...............................     3
    Cornyn, Hon. John, a U.S. Senator from the State of Texas,
      statement......................................................     5
    Letters from the Alliance for Justice, Center for Justice and
      Democracy, USAction, Public Citizen............................     8
    Studdert, David, Associate Professor of Law and Public Health
      Department of Health Policy and Management, Harvard University
      School of Public Health; Philip K. Howard, Founder and Chair,
      Common Good: William M. Sage, Professor of Law, Columbia Law
      School; Richard C. Boothman, Chief Risk Officer, University of
      Michigan Health System; Susan E. Sheridan, Co-founder,
      President, Consumers Advancing Patient Safety (CAPS); Cheryl
      Niro, American Bar Association, Standing Committee on Medical
      Professional Liability; and Neil Vidmar, Russell M. Robinson II
      Professor of Law, Duke University School of Law................    12
        Prepared statements of:
            Mr. Studdert.............................................    15
            Mr. Sage.................................................    36
            Mr. Howard...............................................    41
            Mr. Boothman.............................................    48
            Ms. Sheridan.............................................    58
            Ms. Niro.................................................    63
            Mr. Vidmar...............................................    69

                              ADDITIONAL MATERIAL

    Statements, articles, publications, letters, etc.:
        Clinton, Hon. Hillary Rodham, a U.S. Senator from the State
          of New York, prepared statement............................    99
        Questions of Senator Clinton for Mr. Boothman................   100
        Response to Questions of the Committee on Health, Education,
      Labor,
          and Pensions by:
            Mr. Studdert.............................................   100
            Mr. Sage.................................................   103
            Mr. Howard...............................................   105
            Ms. Niro.................................................   107
            Mr. Vidmar...............................................   109
        American College of Obstetricians and Gynecologists (ACOG)...   116

                                     (iii)

                        MEDICAL LIABILITY: NEW IDEAS FOR
                         MAKING THE SYSTEM WORK BETTER
                                  FOR PATIENTS

                                  ----------

                            THURSDAY, JUNE 22, 2006

                                           U.S. Senate,
           Committee on Health, Education, Labor, and Pensions,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 10:02 a.m., in
    Room SD-430, Dirksen Senate Office, Hon. Michael B. Enzi,
    chairman of the committee, presiding.
        Present: Senators Enzi, Hatch, and Kennedy.

                       Opening Statement of Senator Enzi

        The Chairman. Good morning, and thank you for coming to
    this hearing of the Senate Committee on Health, Education,
    Labor, and Pensions. I appreciate the time our witnesses have
    taken to be with us and to be a part of this important
    discussion.
        Today, we'll be focusing on our medical liability system
    and looking at new ideas for making the system work better for
    patients. We are looking to our witnesses for suggestions, good
    ideas, and observations based upon experience of how to make
    our medical liability system more efficient and effective for
    everyone involved.
        As you know, Senator Baucus and I have introduced a bill to
    encourage and support State efforts to develop new ideas for
    resolving disputes over medical errors. Senator Clinton has
    also introduced a bill, and Senator Cornyn is working on one as
    well. I'm sure I speak for all of us when I say, we welcome
    your thoughts on those bills today. There's no doubt that we
    need a medical justice system that delivers quick and fair
    compensation to injured patients. But it must also provide
    consistent and reliable results so that doctors can eliminate
    the practice of overly defensive medicine and learn from the
    medical errors of colleagues.
        Right now, our system fails to deliver on either of these
    goals. Earlier this year, when the Senate debated legislation
    to provide flexible caps on noneconomic damages, I noticed
    something interesting: no one stood up to defend our current
    system of medical litigation. In fact, even the lawyers in this
    body agreed that our medical litigation system is broken and
    needs to be fixed.
        Now, why didn't we hear anyone defend the merits of our
    current medical litigation system? It's because everyone knows
    our current system doesn't work like it should. It doesn't work
    for patients, and it doesn't work for healthcare providers.
    Under our current medical litigation system, many patients who
    are hurt by negligent actions receive no compensation for their
    loss. Those who do receive compensation end up with only about
    40 cents of every premium dollar after legal fees and other
    costs are subtracted.
        Outcomes of litigation may not bear relation to whether a
    healthcare provider was at fault. Therefore, our current
    litigation system masks underlying medical errors.
    Consequently, we are not learning from our mistakes. It seems
    clear that the medical litigation system can and must be
    improved so that we can learn from the medical errors that
    occur and use that knowledge to improve our delivery system.
        Any new and improved medical litigation system should not
    encourage the wasteful use of medical resources. It must
    compensate injured patients in a fast and fair fashion. It
    should keep more doctors in the operating and emergency room,
    not testifying in the courtroom. When someone has a medical
    emergency, they want to see a doctor, not a lawyer. Everyone on
    this committee, I think, shares these important goals.
        Now, the medical liability system is losing information
    that could be used to improve the practice of medicine.
    Although the goal of having zero medical errors is lofty, the
    significant reduction of medical errors should be our true
    objective in medical liability reform. The Institute of
    Medicine, in its groundbreaking study, called ``To Err is
    Human,'' found that preventable medical errors are responsible
    for the deaths of between 44,000 and 98,000 Americans this
    year.
        In the 7 years since that study, little progress has been
    made, as the practice of medicine has become more specialized
    and complex, and the tort system has forced more and more focus
    on individual blame than on the safety of the system.
        Although we would expect our tort system to lead to fewer
    medical errors, it has not. Perhaps we could live with this
    flawed system if litigation served to improve quality or
    safety, but it doesn't. Litigation discourages the exchange of
    critical information that could be used to improve the quality
    and safety of patient care.
        The randomness and delay associated with medical litigation
    does not contribute to timely, reasonable compensation for most
    injured patients. Some injured patients get huge jury awards,
    while others get nothing at all. It is important to patients
    and doctors that our justice system is perceived as both
    efficient and fair.
        In addition, the constant threat of litigation also drives
    the inefficient, costly, and even dangerous practice of overly
    defensive medicine. Simply stated, overly defensive medicine
    means the doctor has departed from doing what is best for the
    patient because of a very real fear of a lawsuit. Defensive
    medicine can mean ordering more tests or providing more
    treatment than might otherwise be necessary; for instance, a
    doctor might order an unnecessary and painful biopsy.
        Some estimates suggest that Americans will pay $70 billion
    for defensive medicine this year. While some have argued this
    figure is overstated, even if it is half of that amount, it is
    way too much. Several of our witnesses appearing before the
    committee today will testify to the facts and figures that show
    how our system fails to compensate patients quickly and fairly,
    and as one of our witnesses will point out, injured patients
    actually receive less than half of the compensation paid out.
    Most of it goes to the lawyers, experts on both sides, court
    costs or elsewhere.
        Our medical litigation system is in need of repair. It
    fails to achieve its two objectives: to provide fair and fast
    compensation to injured patients and to effectively prevent
    future mistakes. At its worst, it replaces the trust in the
    provider-patient relationship with distrust.
        Fortunately, the system can be repaired. We can make it
    better, and with your help and support, we will. We have
    several witnesses today who are experts on these issues, and I
    look forward to hearing their testimony and recommendations on
    how we should improve the system.
        Senator Kennedy.

                      Opening Statement of Senator Kennedy

        Senator Kennedy. Thank you very much. It is probably useful
    at this time to mention the leadership that, Mr. Chairman, you
    have provided the committee in our medical error legislation
    that we have been able to achieve through the Senate in the
    recent last year or two. That was very important. A lot of good
    ideas went into that legislation to help in the reduction of
    medical errors, and we certainly hope that that will be an
    asset in terms of the kind of statistics that you mentioned
    here in terms of the medical errors in our system.
        Today's hearing is entitled, ``Medical Liability: The New
    Ideas Making the System Work Better for Patients.'' Fair
    treatment for seriously injured patients is certainly the
    yardstick we should use to evaluate both the current system and
    proposals that would dramatically change it. Under close
    scrutiny, it becomes clear that many of the proposed reforms
    would actually harm seriously injured patients and deprive them
    of their basic rights.
        The historic rights of injured persons, including the
    victims of medical negligence, to have their claims for
    compensation decided by a jury is a fundamental part of our
    democratic process. It is the American way. The medical
    liability system cannot be made to work better for patients by
    denying them their basic guarantee of justice.
        The right to a jury trial is important to ensure fair
    treatment in practice as well as in theory. It is the best
    assurance that an average citizen who has been injured will
    receive a fair hearing when he or she brings a case against
    often wealthy and powerful defendants. Numerous empirical
    studies, including those conducted by two of the witnesses
    today, Professor David Studdert the Harvard School of Public
    Health and Professor Neil Vidmar of the Duke Law School, have
    shown that most juries are conscientious and do render a
    decision based on the evidence.
        Even though only 1 medical malpractice case in 10 actually
    goes to trial, the fact that defendants know their conduct will
    be scrutinized by a jury is a major factor in producing fair
    settlements. In many cases, without the imminence of a jury
    trial, there would be no reasonable offer of a settlement made
    by the defendant. The availability of a jury trial benefits
    injured patients who settle their claims as well as those who
    try their cases to verdict.
        There are several myths that opponents of the jury system
    rely on that are clearly false and should be rejected at the
    start of the hearing. First myth is that medical malpractice
    cases are somehow responsible for the high cost of healthcare.
    There is no basis in fact for such a claim.
        The cost of medical malpractice premiums constitutes less
    than \2/3\ of 1 percent of the Nation's healthcare expenditures
    each year. Malpractice premiums are not the cause of the high
    rate of medical inflation. Legislation changing the medical
    liability system will not make the healthcare more affordable.
    We have gone up from spending $1.3 trillion a year, which was 5
    years ago, up to $1.9 trillion, $600 billion more, on the
    healthcare system. At the time, we had seen 6 million Americans
    that had healthcare coverage through the employer-based system
    who have lost their coverage, so those indicators are going
    exactly in the wrong way, and we should address them. But this
    isn't the problem.
        The second myth is that restricting an injured patient's
    right to recover compensation will reduce malpractice premiums.
    This claim is also false, and comprehensive national studies
    show that medical malpractice premiums are not significantly
    lower on average in States that have enacted damage caps and
    other restrictions on patients' rights than in States without
    the restrictions. Insurance companies are merely pocketing the
    dollars which patients no longer receive when tort reform is
    enacted.
        The third myth is that capping how much compensation a
    seriously injured patient can receive will eliminate frivolous
    lawsuits. This, too, is false. In reality, such a provision
    only serves to hurt those patients who have suffered the most
    severe life-altering injuries and who have proven their cases
    in court.
        One legitimate concern about the current medical liability
    system is that in some jurisdictions, victims must wait for
    years for their day in court before a jury. But the answer to
    the problem of delay is certainly not to deprive the victims of
    their right to that day in court. To do so would be both
    unreasonable and unjust. The appropriate response is to provide
    greater resources to our courts, so that cases, especially
    those involving disabling injuries, reach trial more quickly.
        Mediation programs that are truly voluntary and do not
    deprive the victims of their right to a jury trial, should
    efforts to quickly resolve the dispute fail, are also
    worthwhile. A number of States are already using some form of
    pretrial mediation and doing it very successfully. However,
    there is an enormous difference between voluntary mediation
    programs that can make the system work better for patients and
    mandatory alternatives such as administrative tribunals and
    health courts that deprive injured patients of their historic
    right to a jury trial.
        Voluntariness is the first and most fundamental standard by
    which we should evaluate all alternate dispute resolution
    proposals. We should reject any proposal that would deny the
    injured patient the option of taking his malpractice claim
    before a jury. The patient must be given a genuine choice
    between a traditional court proceeding and the alternative
    process.
        That choice by the patient must be an informed choice with
    a full understanding of the rights being relinquished, made
    after the injury has occurred. That is important. Merely
    obtaining the patient's signature on one more consent form at
    the time that he or she visits the physician or enters the
    hospital is not sufficient. Such pro forma procedures make a
    mockery of informed consent, turning the principle of voluntary
    participation into a sham.
        Another important standard for evaluating proposed
    alternatives is whether they permit an individualized
    determination of the compensation that an injured patient
    should receive. Imposing a defined compensation schedule will
    deny the fact-finder the ability to consider the full impact of
    the injury on the victim's life; will result in an arbitrary
    ceiling on compensation for those who have suffered the most
    severe and permanent damages. This would be grossly unfair. Any
    proposal that will truly make the system work better for
    patients must meet these standards. Proposed alternatives that
    fail these basic tenets will only harm the patients they
    purport to help and should be rejected.
        I thank the Chair for having these hearings and look
    forward to our witnesses.
        The Chairman. Thank you, and I thank you for mentioning the
    patient safety bill that we worked on together that passed both
    houses unanimously and will make a difference. I also thank you
    for your willingness to take a look at other ways that we might
    expedite or help patients in one way or another. I think we
    have about 28 healthcare bills that we're working on together.
    It's quite a load for any committee.
        We offered the two groups of people that are working on
    bills in this area the opportunity to testify. Senator Cornyn
    has taken us up on that, so it is my pleasure to have Senator
    Cornyn here to make a statement. He's been drafting his own
    legislation that will address the issue that we are discussing
    today, and prior to becoming a U.S. Senator, Senator Cornyn was
    a lawyer, a district court judge, and then a member of the
    Texas Supreme Court. I welcome your testimony and look forward
    to your observations.
        Senator Cornyn.

                          Statement of Senator Cornyn

        Senator Cornyn. Thank you, Chairman Enzi and Ranking Member
    Senator Kennedy. I really appreciate the opportunity to discuss
    alternatives to our current medical justice system, which I
    believe has impaired access to healthcare on behalf of many of
    our citizens. It is enormously inefficient, as Chairman Enzi
    noted in his opening statement, with tremendous transactional
    costs, and it is unreliable in terms of its ability to
    appropriately compensate people who have genuine grievances. So
    I think we need to look at other alternatives.
        I do come to this with some background in the area.
    Chairman Enzi mentioned my experience as a district court judge
    and U.S. Supreme Court judge. Before that--I shudder to think;
    it's 30 years ago when I graduated law school, but when I was
    in private practice, I represented healthcare providers in
    medical liability lawsuits, trying to do jury cases. And then,
    of course, presiding over many of these cases as a judge, trial
    judge, and then as an appellate judge on the Texas U.S. Supreme
    Court.
        And all of this experience leads me to believe that the
    current system is irretrievably broken. The incentive structure
    is perverse. When a mistake occurs, doctors and hospitals are
    not persuaded or encouraged to come forward, admit the mistake,
    and work out an amicable solution. Instead, our adversarial
    civil justice system is corrupting the practice of healthcare
    in our Nation.
        Indeed, the current system fosters widespread errors and
    decreases patient safety, causes overall healthcare costs to
    skyrocket, drives up insurance premiums for doctors and
    hospitals, and worst of all, causes doctors to simply retire
    early or refuse to go to certain parts of the country that are
    known as litigation hellholes, and that impairs access on
    behalf of all of us to healthcare.
        Consider the cost of defensive medicine. I think this is
    really one of the hidden costs that no one really takes into
    account. The cost of defensive medicine to the Federal taxpayer
    is estimated to be roughly $28 billion a year. The additional
    added cost to the health economy is roughly $100 billion a year
    in unnecessary, preventable defensive medical care costs. And
    if you think about the usual healthcare provider, let's say an
    emergency room physician who has never met a patient before but
    encounters them in a hospital emergency room, certainly, they
    are going to provide every sort of diagnostic test that could
    possibly be conceived by the mind of modern medicine, lest they
    be held to account years later when this same patient, who they
    perhaps helped, perhaps even saved their life, sues them and
    challenges them for not exhausting every possibility, even
    though that doctor's best healthcare judgment and the standard
    of practice in the area would say that some of those tests were
    not necessary.
        Furthermore, according to the Department of Health and
    Human Services, a majority of doctors say that they recommended
    invasive procedures and painful tests they consider unnecessary
    in hopes of avoiding litigation; in other words, too many of
    our healthcare providers are not practicing their profession
    based on what they consider to be sound medical judgments but
    rather in fear of litigation; and adding to the costs, as I
    say, of our healthcare services in this country.
        As we know, one solution that's been offered is to cap
    noneconomic liability damages. That's been one of the solutions
    that my State has adopted with enormous success. We have added
    nearly 4,000 physicians to our State who have come back into
    areas where they had formerly refused to go and practice
    because of these liability reforms, because the cost of medical
    liability insurance has come down. But, medical liability caps
    are just one piece in a much larger puzzle and frankly do not
    address the systemic problems with our healthcare system. And
    that is, to simply put it, unreliable, unpredictable, random
    medical justice.
        And that is why I have embraced the concept of specialized
    health courts. I can tell you, as a former judge of a court of
    general jurisdiction, I have sort of a built-in bias against
    specialized courts, but as we all know, we do have specialized
    courts in taxes, bankruptcy, just to name a couple, and I
    believe the time for healthcare courts or at least a pilot
    project to test this innovative idea could pave the way to a
    medical justice system that would promote greater fairness and
    reliability while also providing reasonable compensation on a
    reliable basis to patients who are injured due to healthcare
    treatment.
        I know the Chairman of this committee, Chairman Enzi, has
    joined Senator Baucus to introduce bipartisan legislation that
    would authorize the Secretary of Health and Human Services to
    award grants to States for the development of alternatives to
    resolving disputes over medical errors, alternatives to the
    current, broken status quo. This bill, your bill, Mr. Chairman,
    specifically authorizes the creation of special health courts
    and I welcome and embrace that idea. And really, the
    legislation that I hope to introduce shortly will build on that
    idea.
        States should be encouraged to find alternative solutions
    as the laboratories of democracy. The legislation that I am
    working on would provide for a Federal pilot health court
    system through the Department of Health and Human Services for
    voluntary participating hospitals around the Nation. Responsive
    to the concerns raised by Senator Kennedy, this would provide a
    system, as I currently contemplate, that would require an
    administrative process, but if someone is dissatisfied with the
    administrative process, it would not cut off their right to
    access the court system and a jury trial under appropriate
    safeguards.
        But these health courts would provide incentives for
    providers to make early offers in order to promote quality
    improvement and patient safety through early disclosure of
    adverse medical events. It would call for the immediate
    development of pilot alternatives to the current medical tort
    litigation system and eligible institutions through
    administrative health courts and provide for a hearing and a
    written opinion from an administrative judge advised by neutral
    experts. The judges would make written rulings in every case to
    provide guidance on proper standards of care.
        And I would say in conclusion, that's one of the areas that
    in my experience both as a lawyer trying medical liability
    cases and as a judge presiding over these cases is the greatest
    source of random justice in our system. Everyone knows that for
    a fee, you can hire an expert to come in and testify to just
    about anything in a court of law. And it's one thing to have
    competing witnesses testify who had the red light at an
    intersectional collision. It is entirely another thing to have
    experts for hire come in and testify to a standard of care that
    is not recognized anywhere else in the country, have a swearing
    match, and then ask a lay jury, without that expertise, to
    resolve. And it provides no sort of reliable standard that can
    be used by healthcare providers to determine what, indeed, is
    demanded of them in our civil justice system.
        I hope to introduce this legislation soon. Patients and
    providers deserve access to care and access to a reliable
    system of justice. The current system fails on both counts. I
    support the efforts of this committee to explore alternatives
    to this broken system and look forward along with you to
    listening to the testimony. Thanks very much for allowing me to
    come here today and offer these few words in support of the
    committee's efforts.
        The Chairman. Well, I thank you for being here and sharing
    that with us, and if you have a longer statement you'd like to
    submit for the record, please do so. I'll be making this offer
    to the witnesses today, and also, to Senator Clinton and
    Senator Obama, so that we can get their ideas and put them in
    the record unless there is disagreement.
        Senator Cornyn. Mr. Chairman, if I could just interject one
    thing, I would be remiss if I did not acknowledge the great
    contribution that Common Good has made in this effort, as you
    know, to introduce this concept of specialized health courts,
    and as you know, there is an ad in the New York Times today, a
    half-page ad: it's time to create special health courts, noting
    that Duke University School of Medicine, Emory Health Care,
    Johns Hopkins Medicine, and the Yale Hospital Health Care
    System have indicated their interest in participating in a
    voluntary pilot project should Congress create a system whereby
    they could do so.
        Thank you very much.
        The Chairman. Thank you.
        Senator Kennedy. Chairman, could I just introduce a paper
    also by the Alliance for Justice, Center for Justice and
    Democracy, USAction, Public Citizen that is on this subject?
        The Chairman. Sure.
        [The information follows:]

          Alliance for Justice, Center for Justice and
                                             Democracy,
                                      Public Citizen, USACTION,
                                                         June 20, 2006.

    Hon. Michael B. Enzi, Chairman,
    Committee on Health, Education, Labor, and Pensions
    U.S. Senate,
    Washington, DC. 20510
    Hon. Edward M. Kennedy,  Ranking Member,
    Committee on Health, Education, Labor, and Pensions,
    U.S. Senate,
    Washington, DC. 20510
        Dear Chairman Enzi and Senator Kennedy: We understand the Health,
    Education, Labor, and Pensions Committee will be holding a hearing this
    week on several bills to promote patient safety and reduce litigation
    stemming from medical error and injury.
        We are supportive of the concept envisioned in S. 1784 of a
    national patient safety database that would permit the comprehensive
    collection and analysis of data about medical error. The disclosure and
    compensation program also proposed in S. 1784, which draws on the
    experience of existing voluntary programs including the Rush Mediation
    Program in Chicago, appears to be a common sense reform in cases of
    medical error where liability is clear. These programs have been
    successful because the parties participate voluntarily using a mediator
    to resolve compensation issues. They do not take away the claimant's
    right to litigation if the parties fail to come to agreement.
        The State demonstration programs proposed in S. 1337, on the other
    hand, would eliminate medical litigation entirely. In order to apply
    for the demonstration funding, States must ``develop an alternative to
    current tort litigation for resolving disputes over injuries allegedly
    caused by healthcare providers or healthcare organizations.'' Injured
    patients would be subject to a mandatory alternative system for
    resolving compensation claims, and their right to a jury trial would be
    eliminated. Experience with other alternative compensation systems, on
    which these programs are based, strongly suggests that they will
    provide worse protection for patients than the civil justice system
    currently provides.
        While S. 1337 gives States a choice of three different
    demonstration models, they all share the same characteristics. The jury
    trial is replaced by a vaguely defined administrative bureaucracy run
    by political appointees charged with developing uniform schedules of
    compensation for specific medical injuries. These schedules in reality
    act as the kind of damage cap that a number of State courts have found
    unconstitutional. The development of a rigid payout schedule for
    compensation is particularly problematic because it remains unclear
    whether the schedule can be determined in a fair manner.
        All three of these models may be unconstitutional under both
    Federal and State law because they preempt all constitutional
    guarantees to trial by jury without providing the constitutionally
    necessary quid pro quo of eliminating the injured parties' burden of
    proving fault. While the models appear to mimic the workers'
    compensation no-fault administrative concept, injured parties would
    retain the burden of proving fault.
        Finally, we are deeply concerned about replacing State civil
    justice systems, some of which have functioned for centuries, with what
    are frankly unknown quantities lacking any kind of established
    operating procedures. One key question is how patients will get access
    to information regarding their claims and injuries. In civil
    litigation, parties are entitled to discovery of facts from the other
    side. With respect to the models in S. 1337, it is unclear whether
    patients would be entitled to review medical records and interview
    potential witnesses. It is also unclear how much information patients
    will be entitled to obtain before filing a claim, how much information
    patients will be provided after a claim is filed, what kind of evidence
    will be allowed, whether expert witnesses may be called, and what
    standards would be used to determine admissibility.
        Given the dearth of information about how these models would work,
    it is difficult to understand how S. 1337 achieves its purpose ``to
    restore fairness and reliability to the medical justice system.'' The
    civil justice system is not perfect, but like democracy, it's better
    than the unknown alternative. Problems with the way medical injuries
    are processed through the civil justice system can be resolved, and the
    system improved, by common sense reforms, some of which are
    conceptualized in S. 1784.
        Thank you for taking time to understand our concerns. We look
    forward to working with you on legislation to improve patient safety in
    the healthcare system. Please do not hesitate to contact Dick Woodruff
    at Alliance for Justice, 202-822-6070 if we may be of further
    assistance.
                Sincerely,
                                                      Nan Aron,
                                       President, Alliance for Justice.
                                     ______

                                         June 21, 2006.
    Hon. Michael B. Enzi, Chairman,
    Committee on Health, Education, Labor, and Pensions,
    U.S. Senate,
    Washington, DC. 20510.

    Hon. Edward M. Kennedy, Ranking Member,
    Committee on Health, Education, Labor, and Pensions,
    U.S. Senate,
    Washington, DC. 20510.
        Dear Senators Enzi and Kennedy: As survivors of medical negligence
    who once used the legal system to obtain compensation and justice, we
    are strongly opposed to the establishment of ``Health Courts'' to
    resolve malpractice claims. While ostensibly being for the benefit of
    victims like us, the outline of this proposal shows misguided concern
    for what is best for patients and, particularly, the most severely
    injured patients.
        First, please note that we have no problem with pre-trial
    settlements, in which both parties voluntarily agree to take
    malpractice cases out of the civil justice system. In fact, many of us
    took advantage of a voluntary settlement process to resolve our cases.
        However, schemes like Health Courts, which require that cases be
    heard in an informal setting, without the option of having either
    juries or unbiased judges make decisions, and with compensation
    judgments determined by political bodies who can be lobbied by
    insurance and health industry representatives, would be highly unjust.
    Though promising to be a quick, fair and cost-effective method of
    obtaining resolution, Health Courts will actually obstruct the most
    seriously injured patients' path to justice, making it more likely that
    he or she will drop a legitimate claim altogether. This is especially
    true because the burden of proof on patients who are forced into the
    Health Court process is little different than would be required in a
    court of law. And, our experience with similar alternative systems,
    like mandatory arbitration, shows that insurance defense lawyers can be
    abusive toward patients when there is no unbiased judge to ensure
    fairness.
        Moreover, removing the possibility of litigation would disrupt
    other critical functions of the legal system, most importantly the
    deterrence of unsafe practices, especially in hospitals. On May 11,
    2006, the New England Journal of Medicine published an article showing
    how litigation against hospitals improves the quality of care for
    patients. The article also confirmed that removing the threat of
    litigation, as this proposal contemplates, would do nothing to improve
    the reporting of errors since fear of litigation is not the main reason
    doctors do not report errors.
        Instead of taking compensation decisions away from juries and
    putting them in the hands of those who may be biased against patients,
    we should look for ways to improve the quality of healthcare services
    in our country and to reduce preventable medical errors. It is well
    established that State disciplinary boards do little to weed out the
    small number of doctors responsible for most malpractice. This is not
    the time to establish a new process, which will only protect
    incompetent doctors even more from meaningful liability exposure and
    scrutiny, including the most egregiously reckless healthcare providers.
        Health Courts will not only fail to fully compensate patients, but
    they will also undermine restraints the civil justice system now
    imposes on dangerous conduct. Mechanisms that shield grossly negligent
    doctors from accountability by intruding upon the legal system and
    eliminating individual's right to sue should not be tolerated by a
    society that believes in our constitution and democracy.
                Sincerely,
                                               Joanne Doroshow,
                    Executive Director, Center for Justice & Democracy.

        ;(For: Paula Andrasko, Akron, OH; Sheila Austin, St. Elmo, IL;
    Barbara Becker, Evansville, IN; Michael Bennett, Baltimore, MD; Alan &
    Christian Buckley, New York, NY; Bob Carmody, Chicago, IL; Diane
    Carter, Galena, IL; Deborah K. Dick, Kenton, OH; Mark & Michelle Geyer,
    Antioch, CA; Elie & Kathy Ghawi, St. Charles, IL; Deborah Gillham,
    Gaithersburg, MA; Lisa & Michael Gourley, Valley, NE; Melinda Hause,
    Palm Coast, FL; Marlene Jacobson, Omaha, NE; Garret & Julie Koleszar,
    Fallbrook, CA; Leslie Lewis, New York, NY; Justin Mattes, Woodcliff
    Lake, NJ; John J. McCormack, Pembroke, MA; Dianne K. Meyer, Las Vegas,
    NV; Patricia Nelson, North Yarmouth, ME; Susan P. O'Bernier, Naugatuck,
    CT; Patti O'Regan, Port Richey, FL; Tammy Schilt, West Salem, IL; David
    & Patricia J. Skolnik, Centennial, CO; David Snow, Colchester, CT;
    Kelly Spetalnick, Atlanta, GA; Sue & Jay Stratman, Chesterfield, MO;
    Mary Steinberg, Chicago, IL; Debi Surlas, Aurora, IL; Stephen K. &
    Karen E. Swain, Gahanna, OH; Pamela Thomas, Illiopolis, IL; Lisa
    Waligorski, Albers, IL.)

        Senator Kennedy. Could I ask one question?
        On these courts that you mentioned, mediation, do you have
    them in Texas? Are you personally familiar with them? I know
    that they do exist in a lot of the States. I was just wondering
    whether you had any familiarity with any of the ones.
        Senator Cornyn. Senator Kennedy, I am very familiar with
    the introduction of what has generally been known as
    alternative dispute resolution, which is designed to address
    the problems that we have identified here in a general context;
    that is, the cost of people resolving their disputes in the
    current court system, because we know that cost frequently
    freezes some people out and the delays associated with our
    civil justice system.
        We don't have health courts or anything quite like that in
    Texas now, but this is another effort to build on, I think, the
    alternative dispute resolution approach to try to provide more
    efficient, more timely, less expensive justice.
        Senator Kennedy. Good, good. Thank you.
        Senator Cornyn. Thank you.
        The Chairman. Thank you very much for your testimony today
    and for taking the time to be here. Thanks.
        And we will now call to the table our panel of witnesses. I
    will go ahead and introduce the panel as they're taking their
    places. Again, I appreciate the time you've all taken to come
    today to testify and answer some questions. And we do have a
    vote that--actually, several votes that start at about 11:00,
    so any help that you can give us by condensing your testimony
    will be very much appreciated. Your full statement and any
    other comments you want to expand on will be a part of the
    record, and of course, we will ask that you answer any
    questions that we submit to you in writing as well. Sometimes,
    those are as beneficial as ones that we would get to ask in the
    open hearing.
        So on this panel of witnesses, from my left to right, we
    have Professor David Studdert. Professor Studdert is an
    associate professor of law and public health in the Department
    of Health Policy and Management at Harvard University School of
    Public Health. Professor Studdert will tell us about his most
    recent study on the outcomes of medical malpractice.
        Then, we have Philip Howard. Mr. Howard is a partner at the
    law firm of Covington and Burling and is the chair and founder
    of the organization Common Good. Mr. Howard is the author of
    the book The Death of Common Sense. Mr. Howard will discuss the
    health court model that Common Good has developed.
        Then, we have Professor William Sage, who is a professor of
    law at Columbia Law School. Professor Sage provides us with a
    unique perspective on this discussion, as he is both a doctor
    and a lawyer. Professor Sage will discuss alternatives to
    medical litigation.
        Next to Mr. Howard, we have Richard Boothman, who is chief
    risk officer at the University of Michigan Health System. Mr.
    Boothman has brought his son with him, whom I would also like
    to welcome to the hearing.
        Senator Kennedy. Can you stand up?
        The Chairman. Yes, would you stand up?
        [Laughter.]
        Thank you, and thanks for being here.
        Mr. Boothman will discuss the model that's been developed
    at the University of Michigan and its applicability to other
    places.
        Then, we have Susan Sheridan, who is the cofounder,
    President of Consumers Advancing Patient Safety, CAPS. Her
    organization advocates for making changes to the medical
    malpractice system in order to improve patient safety. Ms.
    Sheridan will provide a personal account of our medical
    litigation system and will share her views on how it might be
    changed to better serve patients. I respect and thank her for
    her willingness to speak today on an issue that has affected
    her family so directly.
        And then, next to her, we have Cheryl Niro, who is an
    attorney for the law firm of Quinlan and Carroll. Ms. Niro is
    the former president of the Illinois Bar Association. Today,
    she's speaking on behalf of the American Bar Association, which
    is the largest association of lawyers in America. At the ABA,
    she is on the Standing Committee on Medical Professional
    Liability. She will describe the ABA's concern about health
    courts.
        And finally, we have Professor Neil Vidmar, who is the
    Russell M. Robinson II professor of law at the Duke University
    School of Law. He is also the author of the book Medical
    Malpractice and the American Jury. Professor Vidmar will share
    his thoughts on the issue, specifically on the role of juries
    in medical litigation.
        At this time, I will ask for unanimous consent that the
    testimony of the American College of Obstetricians and
    Gynecologists be entered in the record. I thank each of you for
    taking the time to join us today, and again encourage you to
    condense as much as possible so that we will have time for some
    questions.
        Mr. Studdert.

     STATEMENTS OF DAVID STUDDERT, ASSOCIATE PROFESSOR OF LAW AND
       PUBLIC HEALTH DEPARTMENT OF HEALTH POLICY AND MANAGEMENT,
      HARVARD UNIVERSITY SCHOOL OF PUBLIC HEALTH; PHILIP HOWARD,
     FOUNDER AND CHAIR, COMMON GOOD; WILLIAM M. SAGE, PROFESSOR OF
    LAW, COLUMBIA LAW SCHOOL; RICHARD BOOTHMAN, CHIEF RISK OFFICER,
      UNIVERSITY OF MICHIGAN HEALTH SYSTEM; SUSAN E. SHERIDAN, CO-
    FOUNDER, PRESIDENT, CONSUMERS ADVANCING PATIENT SAFETY (CAPS);
     CHERYL NIRO, AMERICAN BAR ASSOCIATION, STANDING COMMITTEE ON
      MEDICAL PROFESSIONAL LIABILITY; AND NEIL VIDMAR, RUSSELL M.
      ROBINSON II PROFESSOR OF LAW, DUKE UNIVERSITY SCHOOL OF LAW

        Mr. Studdert. Thank you, Mr. Chairman, for the privilege of
    testifying, Senator Kennedy, on options for improving the
    medical liability system in the United States. I'm honored to
    be here, and I commend the committee for taking up this very
    important issue.
        I am an associate professor of law and public health at the
    Harvard University School of Public Health. The chairman gave a
    little bit about my background, so I won't say much more about
    it. I've been conducting research on the malpractice system and
    on medical injury for about 10 years. In the mid-1990s, I was
    part of a research group at the Harvard School of Public Health
    that did work in Utah and Colorado to try to estimate the
    incidence of medical injury there. That work, together with our
    earlier work in New York formed the basis of the Institute of
    Medicine's 2000 report on medical error, ``To Err is Human.''
        I believe that patients stand to benefit from improvements
    to the way the legal system compensates and prevents injury. I
    also believe that real improvements in this area depend on
    moving the policy discussion, as this committee is doing,
    beyond the debate over the pros and cons of traditional tort
    reforms like caps on damages, screening panels, attorney fee
    limits.
        What these traditional reforms will achieve is
    controversial and hotly disputed, including in this place.
    However, two things that they will not achieve are relatively
    clear and I would submit beyond serious debate. They will not
    make healthcare safer, and they will not grapple seriously with
    several fundamental problems that the system has. Those are
    different goals, and they call for more creative solutions.
        Last month, the New England Journal of Medicine published
    results of a study by my research group on the performance of
    the malpractice system. Our study involved review of about
    1,500 medical records and claims files from five liability
    insurers. We tackled two main questions: How often did
    malpractice claims lack merit, and How often did claims which
    lacked merit receive compensation?
        What did we find? We found that nearly every claim involved
    some kind of injury from medical care, but about a third of
    these injuries could not be linked to errors in the care. In
    resolving the claims, the system got it right about three-
    quarters of the time; that is, about three out of four claims
    that lacked merit were denied compensation, while three in four
    meritorious claims got paid.
        Now, one conclusion from the study is that the malpractice
    system appears to be doing a reasonable job in the task of
    directing compensation to the right claims. To infer that
    study's message is that the liability system is working well,
    however, as a number of commentators have done, is simply not
    correct. Compensating litigated claims correctly is one item in
    the overall systems scorecard. There are other important items,
    and looking at the whole picture shows up some troubling
    issues. I want to very briefly touch on four of those issues
    that have emerged from our recent work, our previous work, and
    also from the work of other researchers across the country over
    the last 20, 25 years.
        Problem No. 1, the process is just simply too costly.
    Resolving malpractice claims is an expensive business. Our
    recent study suggests that for every dollar paid in
    compensation to plaintiffs, 54 cents goes toward administrative
    costs; that is, the costs of lawyers, experts, insurers, and so
    forth, and there are other studies to support a figure in that
    range.
        Compared to other compensation systems, this is a
    tremendously high overhead rate. The equivalent figure for
    workers compensation schemes, for example, is generally in the
    20 to 30 percent range. For many disability insurance schemes,
    it runs as low as 10 to 15 percent. The National Vaccine
    Compensation Program spends around 15 percent of its budget on
    administrative expenses and attorneys' fees. The system is also
    slow, taking 4 to 5 years on average to resolve claims.
        Problem No. 2, many patients who sustain injury due to
    negligent care don't get compensated. In fact, this is true for
    the vast majority of them. Only a tiny fraction of negligently
    injured patients, about 3 to 5 percent, based on our research
    in New York in the eighties and in Colorado in the nineties,
    will have any contact with the legal system at all. The rest
    either don't know they've suffered an injury or are unable to
    navigate their way through the system. Consequently, they must
    shoulder the financial burden themselves.
        Now, in debating the merits of tort litigation and juries,
    I would urge the committee not to lose sight of this invisible
    population, literally thousands of people who suffer
    preventable injuries every year and don't get help. The current
    system doesn't serve them well. To be effective, reformers will
    need to link more of them with compensation.
        And I might digress for a moment and say what about juries.
    I don't consider juries to be one of the chief vices of the
    current system, and the reason is because of a couple of very
    important statistics: we think that there are about 60,000
    malpractice claims closed in the country every year. Now, about
    3,000 to 4,000 of those will go before a jury, so for the rest,
    55,000, 56,000 claims a year are resolved out of court.
        Now, it is very important that the system work well for
    that large body of claims, and I would urge discussion around
    this issue not to hold the interests of the many hostage to the
    interests of a few when there are questions, in fact, about how
    well juries, patients, and plaintiffs sometimes--Professor
    Vidmar will talk about the ways in which juries are not biased
    in favor of plaintiffs, and I would readily agree with much of
    what he has to say. I worry about the opposite, that they, in
    fact, are biased against plaintiffs, and this is the other
    statistic which I would urge the committee to consider:
    plaintiffs lose four in five jury verdicts. They don't do well
    in front of juries, and we need a system that will ensure that
    they do well, however their claim is resolved.
        Problem No. 3 is defensive medicine. That's been discussed,
    so I won't go into it in any depth. We don't really know how
    prevalent defensive medicine is. There are not good statistics
    on that. We don't really know what its health impact is, and we
    don't know how much it costs, but there is solid evidence that
    it exists, and a number of studies have suggested that its
    adverse impact may be quite substantial.
        Problem No. 4, our liability system is not terribly
    compatible with quality improvement and transparency about
    error. This friction here between the malpractice litigation
    system and healthcare system efforts to improve quality and
    safety; trial attorneys believe that the threat of litigation
    is needed to make doctors accountable and make doctors think
    seriously about safety. Physicians and most patient safety
    experts think it has the opposite effect.
        Randall Bovbjerg has called this a problem of two cultures.
    Which culture is right? This is the subtext, I would suggest,
    in the ongoing debates between organized medicine and much of
    the trial bar. In the absence of evidence from alternative
    approaches to compensating medical injury, this is surely an
    unending and unwinnable debate. Do injured patients do better
    in healthcare environments where adversarial tort litigation
    governs access to compensation? Or do they do better under
    alternative arrangements? We simply do not know the answer to
    that question, but we could find out. Innovative demonstration
    projects would help us find out.
        So I would suggest there is a need for reforms that address
    these four problems. I believe that real and lasting
    improvement in the system depends on it. The reforms should
    have the following central goals: make compensation more
    accessible to patients who are injured by preventable medical
    errors; make the process faster and cheaper; ensure more
    accurate and reliable decisions, more accurate and reliable
    than we already have; and strive to make the system less
    threatening to doctors if possible and compatible with
    transparency about errors.
        I believe that demonstration projects at the State level to
    evaluate alternatives to medical tort litigation are a very
    good place to start. How successful they are and how well they
    deliver on the goals I mentioned will depend on the details of
    their design.
        With support from the Robert Wood Johnson Foundation and in
    collaboration with Common Good, our research group at Harvard
    has been working on the design of an alternative structure, one
    that has the potential to deliver on the goals I enumerated and
    to address these key shortcomings that I've mentioned. There's
    a draft of that. It is a work in progress, but there is a draft
    of that, and we hope it might be useful to States that take up
    this type of experiment if, in fact, legislation is passed that
    allows them to do that.
        In summary, the key design features of the model we outline
    are a focus on preventability rather than negligence; a
    nonadversarial structure with an administrative law judge in
    charge of compensation decisions to be made on the basis of
    advice from a neutral panel of medical and scientific experts;
    and ties to other agencies and actors engaged in patient safety
    improvement activities.
        For the model to work properly, I believe that it must
    operate as an exclusive avenue for compensation among patients
    and doctors who are covered by the program. Allowing opt-ins or
    opt-outs after an injury has occurred would undercut the
    program's ability to make a difference.
        So in conclusion, besides health courts, there are a
    variety of other innovative alternative dispute resolution
    mechanisms. Some have been mentioned. There's the early offer
    program, which has the potential to avoid the passion play of
    litigation, and in general, I think that these ADR approaches
    are good. I think they're less ambitious than health courts,
    and in my opinion, they do not carry quite the same potential
    for broad system improvement. Nonetheless, I think reducing the
    time and cost would be a valuable step forward.
        There are many unknowns about how well these alternatives
    such as health courts and early offers will work, but they have
    tremendous promise. Therefore, I think the appropriate next
    steps are launching demonstration programs and carefully
    evaluating how well these models have performed relative to
    tort litigation.
        [The prepared statement of Mr. Studdert follows:]

              Prepared Statement of David Studdert, LLB, ScD, MPH

                                    SUMMARY

        I believe strongly that patients in the United States would benefit
    from improvements to the way the legal system compensates and prevents
    medical injury. I also believe that real improvements in this area
    depend on moving the policy discussion beyond debate over caps on
    damages.
        One of the perplexing aspects of the tort reform debates of recent
    years is that they rarely engage over the system's true failings.
    Instead, they tend to fixate on the pros and cons of damages caps and
    other traditional tort reforms, and ponder what these reforms might
    accomplish. Even if these reforms are highly successful in
    accomplishing their objectives--namely, reducing the number of claims,
    the size of payments, and growth over time in the premiums physicians
    pay for liability insurance--they will not make healthcare safer, nor
    will they grapple seriously with the medical liability system's
    fundamental problems. Those are different goals that call for more
    creative solutions.
        What are the medical liability system's fundamental problems? There
    are good reasons to criticize the system's performance, but it is
    important to do so for the right reasons. The diagnosis matters because
    it informs the treatment. A considerable body of empirical research
    into the workings of the medical malpractice system has highlighted the
    following three problems as especially troubling:

        1. Many patients who sustain injury that is both severe and
    preventable do not receive compensation.
        2. The process of deciding whether a claim is compensable is too
    slow and expensive.
        3. The threat of litigation provokes defensive medicine, but does
    not stimulate improvements in the quality of healthcare services.

        An alternative to medical malpractice litigation that focused on
    preventable injuries (rather than negligence and provider fault) and
    was nonadversarial (with an administrative body making compensation
    decisions with advice from neutral experts) has tremendous potential to
    address these ills. It could achieve significant advances in making:

         Compensation more accessible to patients who sustain
    preventable injuries;
         The process of determining eligibility for compensation
    faster and cheaper;
         Compensation decisions more accurate and reliable (ideally
    through incorporation of the best available clinical evidence into
    decisionmaking);
         Assessments of damages more accurate and reliable; and
         The system less threatening to doctors, while encouraging
    transparency about errors.

        Much is unknown about how well such an alternative would work.
    Therefore, the appropriate next steps are the launching of
    demonstration programs followed by careful evaluation to assess how
    well the alternative models perform relative to tort litigation. If
    States are given latitude and incentives to do this, and the
    alternative models are carefully and thoughtfully designed with the
    interests of injured patients as their guiding principle, there is
    tremendous potential to address the current system's fundamental
    shortcomings and provide patients in the United States with a better
    system for compensating medical injuries.
                                     ______

        Thank you for the opportunity to testify before you today on new
    strategies for improving the medical liability system in the United
    States. I am honored to be here, and I commend the committee for taking
    up this important issue.
        I am Associate Professor of Law and Public Health at the Harvard
    School of Public Health. I am a lawyer and health services researcher.
    I have been conducting research on medical injury and the malpractice
    system for more than 10 years. In the mid-1990s, I was part of a
    research group at the Harvard School of Public Health that investigated
    the incidence of medical injury in Utah and Colorado. Findings from
    this work, together with the group's early work in New York, formed the
    basis of the Institute of Medicine's 2000 report on medical error, To
    Err is Human.
        I believe strongly that patients in the United States would benefit
    from improvements to the way the legal system compensates and prevents
    medical injuries. I also believe that real improvements in this area
    depend on moving the policy discussion beyond debate over the pros and
    cons of caps on damages. Although there has been a good deal of
    consideration of malpractice reform in Congress and State legislatures
    over the last few years, damages caps and other conventional tort
    reforms (e.g., screening panels, attorney fee limits) have tended to
    dominate the discussion.
        How well these conventional reforms work is controversial. The
    empirical research evaluating their efficacy has produced conflicting
    results.\1\ A generous interpretation of the results might concede that
    a few (but not most) of these reforms return modest gains on their
    objectives--namely, reducing the number of claims, the size of
    payments, and growth over time in the premiums physicians pay for
    liability insurance. What is clear about conventional tort reforms such
    as damages caps, however, is that they will not make healthcare safer,
    nor will they grapple seriously with the medical liability system's key
    problems. Those are different goals that call for more creative
    solutions.
        In the first part of my testimony, I will outline a series of
    problems with the performance of the medical liability system--problems
    that, in my view, have been established as important and enduring
    beyond any reasonable doubt by empirical research over the last 30
    years. I will begin by reviewing findings from a recent study by my
    research group at the Harvard School of Public Health. In the second
    part of my testimony, I will discuss some promising reforms, including
    ones currently before Congress, and their potential impact.
          findings from recent harvard study of the malpractice system
        Last month the New England Journal of Medicine published the
    results of a study I conducted, with collaborators from the Harvard
    School of Public Health and the Brigham and Women's Hospital, on the
    performance of the medical malpractice system.\2\ The findings
    generated considerable media interest, especially in the press. What
    did we find? That may depend on which story you happened to read.
        Some outlets ran headlines like, ``Most malpractice claims are
    legitimate, study says.'' Others announced, ``Study asserts many
    medical malpractice suits groundless.'' The American Medical
    Association's response began, ``Today's study is proof positive that
    meritless medical liability lawsuits are clogging the courts . . .''
    The Association of Trial Lawyers for America (ATLA) declared, ``New
    study shows courts not clogged with frivolous medical malpractice
    lawsuits.''
        These reactions are not surprising. The warring parties--typically
    the medical profession and their liability insurers versus the
    plaintiffs' bar and various consumer advocacy groups--are prone to
    extreme claims about the system's vices and virtues. Often, these
    claims are little more than partisan rhetoric, unsupported by hard
    evidence about how the system actually performs. Even when that
    evidence is at hand, each side tends to spin it to their own advantage.
        What did we find? Our study involved review of nearly 1500
    malpractice claim files from 5 liability insurers. Claim files consist
    of documents gathered by defense insurers during the life of the claim.
    They include descriptions of the allegation and outline what happened.
    They usually include the testimony of experts from both sides. Each
    plaintiff 's medical record was also examined. The reviews were
    conducted by specialist doctors whose training matched the clinical
    issues in the claims.
        The study addressed two questions: How often did malpractice claims
    lack merit? And how often did claims which lacked merit receive
    compensation? Claims were classified as lacking merit if the reviewer
    determined that, in his or her clinical opinion, the plaintiff had not
    sustained an injury attributable to medical error.
        We found that nearly every claim involved some kind of injury from
    medical care, but that about a third of these injuries could not be
    linked to errors in care. In resolving claims, the system ``got it
    right'' about three quarters of the time--that is, three in four claims
    that lacked merit were denied payment while three in four meritorious
    claims got paid.
        Do these results represent a passing grade for the system or a
    failing one? The answer depends partly on one's expectations going in.
    Those who believe the system should attract only legitimate claims and
    reject every single illegitimate one will see red flags. But these are
    unrealistic expectations. Sometimes patients and their attorneys don't
    understand what has happened. They know a serious and unexpected
    adverse outcome has occurred, but not why, and litigation may be the
    only way they can find out. Also, the reviewers felt that some error
    judgments were ``close calls.'' It seems wrong to label such claims as
    frivolous.
        The bottom line from the study is that the malpractice system
    appears to be doing a reasonable job in two specific aspects of its
    performance: (1) it is not consistently or predominantly attracting
    claims that are patently spurious; and (2) it is usually directing
    compensation to meritorious claims and denying compensation to
    nonmeritorious ones. These findings are supported by a number of other
    previous studies which suggests that the malpractice system does okay
    in ``sorting the wheat from the chaff.''
        To interpret this pair of findings as indicating that the medical
    liability system ``works,'' however, would be wrong. Compensating
    litigated claims accurately is just one item in the system's overall
    performance scorecard. There are other important items, and an
    examination of evidence regarding the system's performance in these
    areas paints a more sobering picture.
        Three additional findings from our recent study point to
    shortcomings that are both serious and well-documented in malpractice
    research.

    1. The process is too costly.

        Resolving malpractice claims is an expensive business. Our findings
    suggested that for every dollar paid in compensation to plaintiffs, 54
    cents go toward administrative costs--that is, the costs of lawyers,
    experts, insurers, and so forth. (A RAND investigation of the tort
    system the mid-1980s found similar levels of administrative costs.\3\)
        Compared to other compensation systems, this is a tremendously high
    overhead rate. The equivalent figure for workers' compensation systems,
    for example, is generally in the 20-30 percent range.\4\ For many
    disability insurance schemes--public and private--it runs as low as 10-
    15 percent.
        If a more efficient system existed for determining eligibility for
    compensation, the money currently absorbed by administrative costs
    could be redirected toward compensation. A worthy target for that money
    would be patients who experience medical injuries that are both severe
    and preventable but don't receive a dime in the current system because
    their claims never come forward. Thousands of patients each year face
    this plight; it is a major problem to which I will return shortly.
        Another telling feature of administrative costs in medical
    malpractice litigation is where they get spent. Among the claims we
    investigated in our recent study, 80 percent of the administrative
    costs were absorbed in the resolution of claims that involved harmful
    errors. In other words, most of the high overhead costs go toward
    resolving legitimate claims, not unjustified aberrant claims. This
    finding highlights the fact that the process of working through the
    question of medical negligence in an adversarial framework is lengthy
    and costly. It also suggests that reform efforts that focus on
    whittling down the amount of frivolous claims will have limited
    potential to reduce direct system costs. (Tallying the compensation and
    administrative costs of claims without error, we estimated that
    eliminating all of them would save no more than 13-16 percent of the
    system's total direct costs.) Instead, major savings depend on reforms
    that reconfigure the entire process in ways that improve efficiency in
    handling reasonable claims for compensation.

    2. Unpaid errors outnumber paid nonerrors.

        Although the number of nonmeritorious claims that attracted
    compensation in our study was fairly small, the converse form of
    inaccuracy--claims with error and injury that did not receive
    compensation--was substantially more common. One in six claims was an
    unpaid error. Plaintiffs in such situations must shoulder the hardships
    that flow from preventable injury.\5\ Moreover, unpaid errors among
    litigated claims add to a larger phenomenon of underpayment generated
    by the vast number of negligent injuries that never surface as claims
    (see below).

    3. Plaintiffs tend to do poorly in medical malpractice jury trials.

        In a forthcoming paper, we have analyzed risk factors for the
    discordant outcomes--that is, claims without errors that were paid and
    claims with errors that were not paid--identified in our study.\6\ We
    were particularly interested in whether claims involving unpaid errors
    exhibited any distinctive characteristics.
        We were somewhat surprised to find that one of the strongest
    predictors of unpaid errors was resolution by jury verdict. The odds
    that a claim involving error would be denied compensation were about 4
    times higher in cases decided by juries. This finding held even after
    controlling for some of the other factors that may have made claims
    that went to trial different from their out-of-court counterparts. (For
    example, litigation theory suggests that cases that proceed to trial
    will involve closer calls about whether negligence occurred, so we
    controlled for case complexity in our analyses).
        What does this finding mean in the real world? It means that,
    contrary to the popular wisdom, juries tend to be tough on plaintiffs.
    Jury trials are an important part of our civil justice system in many
    respects: they help set acceptable standards of care; they are free
    from the influences of governments, businesses, and special interests
    (in theory, at least); and they are truly democratic institutions.
    However, none of these virtues should be confused with the evidence
    that plaintiffs in malpractice litigation do not do well in front of
    juries. Malpractice claims data indicate that plaintiffs lose about
    four in five trials. Moreover, for plaintiffs who do win, trials are an
    expensive way to obtain compensation because the substantial costs
    incurred by plaintiff 's lawyer in moving the litigation to this point
    are borne by the successful plaintiff, removed from their award through
    contingent fees.
        Finally, and perhaps most important to keep in mind evaluating
    different reform options, the vast majority of medical malpractice
    claims will not go before a jury. National statistics suggest that only
    about 5-10 percent of claims reach trial, and this statistic has held
    fairly steady over time. In other words, approximately 55,000 of the
    60,000 patients who seek compensation for medical injuries each year
    will resolve their claims out of court. It is imperative that the
    system work well for them. Therefore, in designing and choosing among
    reforms, we should be careful not to hold the interests of the many
    hostage to the interests of the few, especially when serious questions
    surround how well the interests of the few are served by the current
    system.

                     PROBLEMS IDENTIFIED IN OTHER RESEARCH

        The insights into the malpractice system that flow from our recent
    study join those from other empirical research that has assessed how
    well the system performs in its various functions. By and large, the
    picture is not a positive one. Three shortcomings stand out.

    1. Many patients who sustain preventable injury don't get compensation.

        Although the spotlight usually shines on the malpractice system's
    excesses, the reality is that the vast majority of patients who sustain
    injury due to negligence never sue and never receive compensation. Only
    a tiny fraction of patients injured seriously by medical care--about 3-
    5 percent based on our research in New York in the 1980s and Utah and
    Colorado in the 1990s--will have any contact with the legal system.\7\
    The rest either do not know they have suffered injury, or are unable to
    navigate through the system to get their claim filed and paid.
    Consequently, these patients must shoulder considerable financial and
    personal burdens.
        Policy debates and research (including our own) tend to focus on
    how well the system does in compensating patients who step forward with
    legitimate claims. However, we should not forget the thousands of
    injured patients who are invisible. The current system does not serve
    them well. To be effective, reforms will need to link more of these
    patients with compensation.

    2. Defensive medicine is a problem.

        Defensive medicine refers to changes in the way care is delivered--
    the ordering of unnecessary tests, for example, or ceasing to perform
    high-risk procedures--which are motivated by fear of litigation, rather
    than good medical practice. It is not known with any reasonable degree
    of certainty how prevalent defensive medicine is, what its health
    impact is, or how much it costs the healthcare system. But there is
    solid evidence that it exists, and its adverse impact may be very
    substantial.\8\ Our recent research in Pennsylvania suggests that
    doctors in specialties like orthopedic surgery and obstetrics are
    especially prone to this behavior, and that it gets worse during so-
    called ``malpractice crisis'' periods.

    3. Our liability system is incompatible with quality improvement and
            transparency about error.

        There is friction between malpractice litigation and the quest to
    improve the quality and safety of medical care.\9\ Trial attorneys
    believe that the threat of litigation is needed to make doctors
    accountable, and that it ultimately makes doctors practice more safely
    (even though most empirical research has not found evidence of such a
    deterrent effect.\10\) Physicians do not believe the litigation
    contributes to the quality of care.\11\ On the contrary, they argue
    that the malpractice system threatens quality, both by chilling
    interest in openness and quality improvement activities and by
    stimulating the kind of defensive medical practices described above.
    Hospital executives appear to share this view, an outlook exemplified
    by the fact that many hospitals continue to conceive of risk management
    and quality improvement as substantively different enterprises.
        Randall Bovbjerg has aptly called this a problem of two
    cultures.\12\ Tort law's punitive, individualistic, adversarial
    approach is antithetical to the nonpunitive, systems-oriented,
    cooperative strategies espoused by patient safety leaders. Litigation
    entails secrecy and blame, whereas modern quality improvement
    strategies demand transparency and focus on systems of care, not
    individuals.
        Which culture is right? This is the subtext in ongoing battles
    between organized medicine and the trial bar. In the absence of
    evidence from alternative approaches to compensating medical injury,
    this is surely an unending and unwinnable debate. Do injured patients
    do better in healthcare environments, where adversarial tort litigation
    governs access to compensation, or do they do better under alternative
    arrangements? We simply don't know, but we could learn. The time to
    test reforms that help us to find out is past due.

                               NEW REFORM OPTIONS

        In summary, the medical liability system is plagued by five
    fundamental problems: (1) the process is too slow and costly; (2) many
    patients with severe injuries miss out on compensation, sometimes
    because their legitimate claims are not paid but much more often
    because they are unaware of their injury or are unable to bring a
    claim; (3) juries do not decide the vast majority of claims, and when
    they do, plaintiffs usually lose; (4) defensive medicine drives up
    costs and reduces quality; and (5) the current system is in tension
    with goals of quality improvement and transparency about error.
        This set of problems strikes the malpractice system at its core.
    They cannot be addressed by tweaks. Damage caps are a tweak. The same
    is true of screening panels, which aim to weed out illegitimate claims
    at an early stage. (Incidentally, studies consistently find that these
    panels don't save much.)
        What is needed are reforms that grapple seriously with the system's
    fundamental problems. The goals should be to make:

         Compensation more accessible to patients who sustain
    preventable injuries;
         The process of determining eligibility for compensation
    faster and cheaper;
         Compensation decisions more accurate and reliable (ideally
    through incorporation of the best available clinical evidence into
    decisionmaking);
         Assessments of damages more accurate and reliable; and
         The system less threatening to doctors and encourage
    transparency about errors.

        I believe that State demonstration programs to evaluate
    alternatives to medical tort litigation are a good idea. How promising
    and successful these alternatives are will depend on their design
    features.
        With support from the Robert Wood Johnson Foundation, our research
    group at the Harvard School of Public Health, in collaboration with
    Common Good, has been working on the design of an alterative structure
    that has the potential to deliver on the goals enumerated above and
    address the current system's key shortcomings. We have sketched out the
    structure of what we believe is a promising ``health court'' model. The
    design was informed by extensive consultation with stakeholder groups.
    It is described in the attached document (Appendix A).
        In summary, the key design features of the model we have outlined
    are: (1) a focus on preventability, as opposed to negligence or fault,
    as the central criterion for determining eligibility for compensation;
    (2) a nonadversarial structure, with an administrative decisionmaking
    body in charge of compensation decisions to be made on the basis of
    advice from a neutral panel of medical and scientific experts; and (3)
    ties to other agencies and actors engaged in patient safety improvement
    activities.
        If legislation were passed allowing demonstration projects to go
    forward, we hope this model will be useful to States that become
    interested in testing an alternative approach.
        Besides health courts, there are a variety of innovative
    alternative dispute resolution (ADR) approaches that warrant serious
    consideration. ADR approaches have the potential to avoid the passion
    play and cost of full-blown litigation, and in so doing they promise
    returns on a number of the goals set forth above. The ADR approach that
    has enjoyed the widest appeal in recent years is the ``Early Offer''
    program, in which patients and the healthcare organization would have
    incentives to negotiate private settlements immediately after an event
    occurs.\13\ Such a program is less ambitious than health courts and, in
    my opinion, does not carry the same potential for broad system
    improvement. Nonetheless, contracting the time and cost of litigation
    in this way would be a valuable step forward.
        Much is unknown about how well alternatives to traditional
    malpractice litigation will work. Therefore, the appropriate next steps
    are the launching of demonstration programs followed by careful
    evaluation to assess how well the alternative models have performed
    relative to tort litigation.

                                   CONCLUSION

        One of the perplexing aspects of the tort reform debates of recent
    years is that they rarely engage over the system's true failings.
    Instead, they tend to fixate on the damages caps and other traditional,
    oft-tried reforms. From a long-term, system-wide perspective, the
    problems these reforms seek to solve are quite narrow.
        There are good reasons to criticize the system's performance, but
    it is important to do so for the right reasons because the diagnosis
    informs the treatment. To be effective, reforms must tackle the core
    problems. The considerable body of research into the workings of the
    medical malpractice system's over the last 30 years has highlighted the
    following three problems as particularly serious:

        1. Many patients who sustain injury that is both severe and
    preventable do not receive compensation.
        2. The process of deciding whether a claim is compensable is too
    slow and expensive.
        3. The threat of litigation provokes defensive medicine, but does
    not stimulate improvements in the quality of healthcare services.

        Alternative approaches to compensating medical injury, such as the
    health court model, have the potential to improve performance in each
    of these areas and provide patients in the United States with a better
    system for compensating medical injuries.

                                   REFERENCES

        1. Mello MM. Medical malpractice: impact of the crisis and effect
    of State tort reforms. Research Synthesis Report No. 10 (Princeton, NJ:
    The Robert Wood Johnson Foundation, 2006).
        2. Studdert DM, Mello MM, Gawande AA, Gandhi TK, Kachalia A, Yoon
    C, Puopolo AL, Brennan TA. Accuracy of the medical malpractice system:
    relationship between claims, errors, and outcomes of litigation. N Engl
    J Med 2006;354:2024-33.
        3. Kakalik JS, Pace NM. Costs and compensation paid in tort
    litigation. R-3391-ICJ. Santa Monica, CA: RAND, 1986.
        4. Weiler PC, Hiatt HH, Newhouse JP, Johnson WG, Brennan T, Leape
    LL. A measure of malpractice: medical injury, malpractice litigation,
    and patient compensation. Cambridge, MA: Harvard University Press,
    1993; Bovbjerg RR, Sloan FA. No-fault for medical injury: theory and
    evidence. U Cincinnati Law Rev 1998;67:53-123.
        5. Johnson WG, Brennan TA, Newhouse JP, Leape LL, Lawthers AG,
    Hiatt HH, Weiler PC. The economic consequences of medical injuries.
    Implications for a no-fault insurance plan. JAMA 1992;267:2487-2492;
    Thomas EJ, Studdert DM, Newhouse JP, Zbar BI, Howard KM, Williams EJ,
    Brennan TA. Costs of medical injuries in Utah and Colorado. Inquiry
    1999;36:255-264.
        6. Studdert DM, Mello MM. Predictors of discordant outcomes in
    medical malpractice litigation (unpublished manuscript, 2006).
        7. Localio AR, Lawthers AG, Brennan TA, Laird NM, Hebert LE,
    Peterson LM, Newhouse JP, Weiler PC, Hiatt HH. Relation between
    malpractice claims and adverse events due to negligence. Results of the
    Harvard Medical Practice Study III. N Engl J Med. 1991;325:245-51;
    Studdert DM, Thomas EJ, Burstin HR, Zbar BI, Orav EJ, Brennan TA.
    Negligent care and malpractice claiming behavior in Utah and Colorado.
    Med Care 2000;38:250-260.
        8. Kessler D, McClellan M. Do doctors practice defensive medicine?
    Q J Econ 1996;111:353-390; Studdert DM, Mello MM, DesRoches CM, Peugh
    J, Zapert K, Brennan TA, Sage WM. Defensive medical practice by
    physicians at high risk of malpractice litigation. Journal of the
    American Medical Association 2005;293:2609-2617.
        9. Studdert DM, Brennan TA. No-fault compensation for medical
    injuries: the prospect for error prevention. JAMA 2001;286:217-223.
        10 Mello MM, Brennan TA. Deterrence of medical errors: theory and
    evidence for malpractice reform. Tex Law Rev. 2002;80:1595-1637.
        11. Lawthers AG, Localio AR, Laird NM, Lipsitz S, Hebert L, Brennan
    TA. Physicians' perceptions of the risk of being sued. J Health Polit
    Pol Law. 1992;17(3):463-82.
        12. Bovbjerg RR, Miller RH, Shapiro DW. Paths to reducing medical
    injury: Professional liability and discipline vs. patient safety--and
    the need for a third way. J Law Med Ethics 200 Fall-Winter;29:369-80.
        13. O'Connell J. Offers that can't be refused: foreclosure of
    personal injury claims by defendants' prompt tender of claimants' net
    economic losses. Northwestern Law Rev 1982;77:589-632; Office of the
    Assistant Secretary for Planning and Evaluation, Department of Health
    and Human Services. Addressing the New Health Care Crisis: Reforming
    the Medical Litigation System to Improve the Quality of Health Care.
    March 3, 2003.

                                   APPENDIX A

     Design of a ``Health Courts'' System Demonstration--Executive Summary
                                    (draft)

                                   BACKGROUND

       The Harvard School of Public Health and the advocacy organization
    Common Good have been working to develop a proposal for the design and
    operation of ``health courts''--special courts for resolving medical
    injury cases and compensating injured patients. This document
    summarizes the current proposal. The proposal is a work in progress,
    and will continue to evolve as we conduct research and testing of
    particular aspects of the system design.\1\
    ---------------------------------------------------------------------------
        \1\ The Harvard School of Public Health and Common Good are
    conducting this work during 2005-2006 with the support of the Robert
    Wood Johnson Foundation, the Commonwealth Fund, and the Harvard Program
    on Health System Improvement.
    ---------------------------------------------------------------------------
        The Harvard-Common Good proposal starts from the point that
    America's medical liability system works poorly for both providers and
    patients. Substantial and growing malpractice insurance premiums strain
    physicians and hospitals, threatening access to health services in some
    areas. The system compensates few injured patients, and has very high
    administrative costs. As the Institute of Medicine has noted, it also
    adversely impacts healthcare quality, by discouraging reporting of
    information about errors and near misses in treatment.
        Notwithstanding the substantial and well-documented failings of the
    current system, little political consensus for reform has developed. To
    the contrary, debate over medical malpractice reform remains very
    polarized, with most Republicans vocally calling for caps on
    noneconomic damages and most Democrats equally vocal in protesting that
    caps will hurt injured patients. Fresh policy approaches to malpractice
    reform are needed, and health courts offer a new, bipartisan approach.

                     ELEMENTS OF THE HEALTH COURTS PROPOSAL

        As currently envisioned, health courts would include the following:

         Trained judges with expertise in adjudicating medical
    malpractice disputes. These judges would consult with neutral medical
    experts to determine the standard of care in medical injury cases.
    Health court judges would issue written rulings of their decisions.
         Compensation decisions based on ``avoidability,'' a
    standard that is broader than negligence but does not approach strict
    liability. In essence, injuries would be compensated if they could have
    been avoided if care had been provided according to best practice. This
    differs from the negligence standard, which focuses on whether care
    fell below customary practice.
         Evidence-based guidelines to aid decisionmaking. Medical
    experts and key stakeholders would review the best available scientific
    evidence about how adverse events occur and the extent to which they
    are preventable, and develop compensability recommendations for health
    court judges to apply. Clear-cut cases would be fast-tracked for
    compensation, and efforts would be made to encourage early offers of
    compensation.
         Predictable damages paid to claimants. A schedule of
    noneconomic damages would specify a range of values for specific kinds
    of injuries.
         Patient safety improvements facilitated by the system.
    Information from the adjudication process would be made available for
    root cause analyses, and standard event reporting would facilitate
    development of preventive practices.

                               KEY DESIGN CHOICES

        State policymakers interested in implementing health court pilot
    projects face a number of design choices with respect to jurisdiction,
    selection of judges and experts, and a range of other issues. The
    following table summarizes the most significant of these choices, and
    offers the current Harvard-Common Good recommendation.

    ------------------------------------------------------------------------
                                                                Current
              Design Choice                 Options         Recommendation
    ------------------------------------------------------------------------
    Jurisdiction....................  1. Federal          A voluntary
                                       mandatory system.   demonstration
                                      2. Statewide         project covering
                                       mandatory system.   only medical
                                      3. Voluntary,        malpractice
                                       insurer-based       claims will
                                       state               likely be most
                                       demonstration       feasible. Federal
                                       project.            demonstrations
                                      4. Possibility of    through Medicare
                                       covering medical    may also be
                                       malpractice         possible. Claims
                                       claims, or          involving
                                       broader scope of    obstetrics and
                                       coverage.           anesthesia may be
                                                           particularly
                                                           appropriate
                                                           starting points
                                                           for demonstration
                                                           projects.
    Decisionmakers and Experts......  1. Expert panel at  Resolution of
                                       the involved        claims should
                                       hospital or         begin with an
                                       insurer,            internal review
                                       operating under     at the involved
                                       regulatory          hospital or
                                       oversight.          insurer by an
                                      2. Administrative    expert panel
                                       law judge           using decision
                                       supported by        aids and
                                       independent         schedules to make
                                       medical experts.    early offers of
                                      3. State-appointed   compensation. If
                                       judge with          the internal
                                       medical expertise.  review did not
                                      4. A combination     lead to
                                       of the above.       resolution, then
                                                           an administrative
                                                           law judge would
                                                           make the
                                                           determination in
                                                           the health court,
                                                           assisted by
                                                           neutral experts
                                                           with appropriate
                                                           expertise.
    Compensation Standard...........  1. Strict           The avoidability
                                       liability: all      standard is
                                       treatment           desirable because
                                       injuries are        it reduces the
                                       compensated.        emphasis on
                                      2. Avoidability:     individual fault
                                       injuries are        and acknowledges
                                       compensated if      the role of
                                       they were caused    system failures
                                       by treatment (or    in contributing
                                       lack of             to injuries. To
                                       treatment) and      help define
                                       they could have     avoidable events,
                                       been avoided had    experts will
                                       best practices      generate a series
                                       been followed.      of ``accelerated-
                                                           compensation
                                                           events'.
                                                           Compensation
                                                           decisions will be
                                                           recorded in a
                                                           searchable
                                                           database that
                                                           health court
                                                           judges can refer
                                                           to in future
                                                           cases.
    Claims Process..................  1. Administrative   Many cases will be
                                       review of           deemed eligible
                                       relevant            for compensation
                                       documents.          based on an
                                      2. Live hearing...   administrative
                                      3. Combination of    review of the
                                       the above.          medical record.
                                                           Disputed cases
                                                           will proceed to a
                                                           live hearing,
                                                           similar to an
                                                           administrative
                                                           law hearing.
                                                           Claimants may,
                                                           but need not, be
                                                           represented by an
                                                           attorney.
    Damages.........................  1. Based on past    Economic damages
                                       jury awards.        will be paid in
                                      2. Scheduled......   full. Non-
                                                           economic damages
                                                           should be limited
                                                           to maximize the
                                                           predictability of
                                                           the system and
                                                           contain costs.
                                                           Noneconomic
                                                           damages will be
                                                           paid according to
                                                           a schedule tied
                                                           to severity of
                                                           injury and based
                                                           on decision
                                                           science research
                                                           about utility
                                                           losses and public
                                                           deliberation
                                                           about reasonable
                                                           compensation.
                                                           Collateral source
                                                           offsets and
                                                           restrictions on
                                                           subrogation will
                                                           also help to
                                                           control costs.
    Appeals.........................  1. Judicial review  A high standard of
                                       if health court     review--such as
                                       judge's decision    the ``arbitrary
                                       was ``arbitrary     and capricious''
                                       and capricious''.   standard--will be
                                      2. Judicial review   cost-minizing and
                                       based on            consistent with
                                       ``substantial       the standard used
                                       evidence''          in other appeals
                                       standard.           of administrative
                                                           agency decisions.
    Financing.......................  1. Financed         Financing through
                                       through general     the existing
                                       tax revenues        insurance system
                                       (social insurance   with state
                                       model).             assistance for
                                      2. Financed          start-up and
                                       through existing    administrative
                                       private insurance   expenses will
                                       arrangements,       likely be most
                                       with state          desirable. With
                                       assistance for      experience
                                       start-up and        rating, strong
                                       administrative      incentives can be
                                       costs.              provided for
                                                           organizational
                                                           safety
                                                           improvement. Fees
                                                           paid to attorneys
                                                           representing
                                                           claimants should
                                                           be based on a
                                                           multiple of hours
                                                           worked rather
                                                           than a
                                                           contingency.
    Relationship to Patient Safety    1. A single agency  Each of these
     Initiatives.                      processes claims    elements are
                                       and is              desirable.
                                       responsible for
                                       patient safety.
                                      2. De-identified
                                       information from
                                       the adjudication
                                       process is shared
                                       with patient
                                       safety regulatory
                                       bodies, research
                                       entities, and
                                       quality
                                       initiatives,
                                       including JCAHO,
                                       NCQA, Leapfrog,
                                       and others.
                                      3. Claims
                                       information is
                                       provided to
                                       hospitals.
                                      4. Drug/device
                                       information is
                                       shared with the
                                       FDA..
    ------------------------------------------------------------------------

        For more information about the health court proposal, please
    contact Paul Barringer at Common Good [pbarringer@cgood.org, or 202-
    483-3760, x11].
            Health Courts Proposal Skeleton (Version Date: 10/17/05)

                                CORE PRINCIPLES

        1. Compensation decisions are made outside the regular court system
    by trained adjudicators. An explicit record of decisionmaking is kept
    in order to provide greater clarity in key areas (for example, expected
    levels of compensation, what constitutes acceptable/optimal care) to
    improve reliability of decisionmaking.
        2. Compensation decisions are based on a standard of care that is
    broader than the negligence standard, but does not approach strict
    liability.
        3. Compensation criteria are ``evidence-based,'' in the sense that
    they are grounded in experts' interpretations of the leading scientific
    literature. To the maximum extent feasible, compensation decisions are
    guided by ex ante determinations about the preventability of common
    medical adverse events made through a process of deliberation and
    review of scientific evidence involving clinical experts and other key
    stakeholders. Certain kinds of injuries would be ``fast-tracked'' for
    expedited compensation.
        4. Guidelines for compensating both economic and noneconomic losses
    are created for the system and applied to each claim that is judged
    eligible for compensation. Valuations of noneconomic damages are made
    using methods that are explicit, rational, and consistent.
        5. De-identified information from the adjudication process is made
    immediately available to caregivers for root cause analysis and
    development of preventive practices. Information is also extracted from
    standardized event reporting for epidemiological analysis to understand
    new prevention strategies.

                               KEY DESIGN CHOICES

        1. Jurisdiction. Define the range of covered disputes, including
    the scope of the demonstration project (government versus
    institutionally based; all clinical areas or select clinical areas) and
    the mandatory or voluntary nature of the system.
        2. Decisionmakers and the role of experts. Explore qualifications
    for ``judges'' and possible appointment processes. Explore methods for
    using rulings on standards of care and compensation to provide guidance
    to stakeholders going forward. Consider merits of designated panels of
    experts from which judges can draw in each case. Define qualifications
    for experts, possible compensation structure, and appointment process.
        3. Claims process. Critically review the experiences of other
    compensation systems, including procedural and structural methods for
    increasing efficiency and reducing administrative costs. Understand the
    method of disclosure used in countries with existing administrative
    systems for medical injury compensation. Outline possible streamlined
    procedures and timetable to final decision. Design appropriate notice
    and consent procedures for patients covered by the system.
        4. Compensation standard. Define and operationalize the
    compensability standard. To the extent possible, pre-designate common
    adverse events as compensable or noncompensable based on expert
    consensus.
        5. Damages. Select structures for determining economic and
    noneconomic damages.
        6. Appeal. Determine the scope of appeal rights and possible
    structures for hearing appeals of the administrative health court's
    decisions.
        7. Financing. Determine how the system, including administrative
    costs and claims costs, will be funded. What relationship will it have
    with existing forms of liability insurance and the institutions that
    write this insurance?
        8. Relationship to other patient safety structures. Integrate the
    system with other structures designed to promote patient safety, in
    particular with hospital and medical group efforts to undertake root
    cause analyses, and State or Federal reporting facilities to identify
    epidemiological insights into patient safety. As well, outline the
    future roles for the State medical licensure boards, and the National
    Practitioner Data Bank.

                           PROPOSALS AND ALTERNATIVES

    1. Jurisdiction
                a. Administration
        Alternatives.--(1) Federal mandatory system; (2) Statewide
    mandatory system; and (3) State demonstration project with voluntary
    participation of one or more liability insurers or hospitals.
        Current recommendation.--A voluntary demonstration project is
    probably most feasible as a starting point, although the possibility of
    a Federal demonstration through the Medicare program is also worthy of
    exploration. To some extent, political factors will determine the
    choices made on this dimension of system design. At this point, there
    might be some interest in a Medicare program that would serve all
    Medicare beneficiaries. Alternatively, the Congress might make funds
    available for a State demonstration. States will likely be more
    comfortable with an approach in which insurers/provider organizations
    elect to participate, rather than one in which participation is
    mandatory statewide. This is the approach chosen by the inter-
    governmental working committee in Pennsylvania currently exploring the
    feasibility of a pilot administrative compensation program.
                b. Covered Disputes
                              i. Nature of Claims
        The demonstration project would cover ordinary medical malpractice
    claims only. Intentional tort claims, medical product liability claims,
    and mixed coverage/treatment claims against managed care organizations
    would remain in the jurisdiction of the tort system.
                               ii. Clinical Areas
        Alternatives.--(1) All clinical areas; (2) Select clinical areas
    such as obstetrics and surgical/anesthesia.
        Current recommendation.--If a demonstration project approach based
    on voluntary participation is chosen, it would be possible to start
    with just a few clinical areas in which the types, range, and causes of
    adverse outcomes are relatively well understood. Ideally, we would also
    like clinical areas that allow prospective consent on the part of the
    patient, as the patient will have to be offered the opportunity to
    participate. Anesthesia and obstetrics make the most sense based on
    these two parameters. The claims arising from these two areas are
    relatively homogeneous, and in many cases, there is ample time before
    the event in which providers can seek informed consent from the patient
    to participation in the demonstration project.
        However, if an entire State, or the national Medicare system, opts
    for a mandatory approach, it is probably not useful to start with a
    partial approach, given the problem of boundary disputes.
    2. Decisionmakers and the Role of Experts
        Alternatives.--(1) A panel of medical and/or claims experts at the
    involved hospital or insurer, operating under State oversight and with
    discretion constrained by a legislative mandate to apply pre-
    established decision aids and damages schedule; (2) An administrative
    law judge who has no medical training, but who specializes in the
    adjudication of medical injury claims, and who is supported by
    independent medical experts; (3) A state-appointed judge with medical
    expertise; and (4) A combination of #1 with #2 or #3.
        Current recommendation.--The first level of review would be an
    internal process at the involved hospital or insurer. This level of
    review is not intended to be a neutral adjudicatory process, but rather
    a formal mechanism for encouraging expeditious settlement of claims. A
    panel of experts convened by the involved hospital or insurer would
    review the event and, using decision aids and schedules make an early
    offer of compensation within 4 weeks. This would be done in concert
    with disclosure of the event by the caregivers. Counseling for patients
    would proceed along the lines developed by the insurer COPIC (the ``3-
    R's'' program) in an effort to resolve as many claims in this early
    stage.
        If the early offer did not lead to resolution, then a health court
    hearing would be held on a prompt basis. As described in option 2
    above, an administrative law judge who specializes in health court
    claim adjudication would be assisted by medical experts with relevant
    expertise who come from a panel constituted through volunteers or
    selection by the court.
    3. Claims Process
                a. Locus of the System
        Alternatives.--(1) Statewide, mandatory system; (2) Voluntary,
    insurer-based program.
        Current Recommendation.--This will be a political decision. A
    statewide program would have fewer boundary issues, but would likely be
    difficult to gain approval in a State legislature at present. The
    latter would involve individual hospitals, or care systems, opting into
    the program, along with their insurer (likely self-insurer) in an
    enterprise liability format. We outline both below in detail in
    Appendix 1.
                b. Claimant Rights
        Claimants would have full access to their medical records and the
    right to be represented by an attorney, though representation would not
    be needed in many cases as the health court process would be consumer-
    friendly in design. The opinion of the hospital or insurer panel at the
    first stage of review would also be part of the claim record available
    to the claimant. Claimants would also have a right of appeal as
    described in Section 6.
        In the context of a system in which an initial decision about a
    claim is made by the involved hospital or insurer, patients should have
    access to any materials used in a peer-review investigation (as they do
    under current law). In addition, since any peer-review committee report
    would likely influence the decision made on the claim, patients should
    also be able to access any sections of such a report that relate to
    their own injury (a limited reduction in peer-review protection as
    compared to present law).
    4. Compensation Standard
                a. Liability Rule
        Alternatives.--(1) Strict liability for defined treatment outcomes
    that are shown to be causally related to medical management; (2)
    Avoidability, as determined by a general definition plus lists of
    accelerated-compensation events (ACEs).
        Current recommendation.--The notion of avoidability seems to be the
    best choice. This criterion could be modified by additional criteria
    based on the injury's severity, its rarity, or a focus on particular
    types of outcomes (e.g. birth injuries).
        Avoidable events are injuries that are caused by treatment (or
    omission of treatment) and that could have been avoided had care been
    provided according to best practice. In other words, an injury is
    deemed avoidable if it might have been prevented had a better system of
    care been in place. The decision as to whether the injury is avoidable
    is made in light of the circumstances as known at the time care was
    delivered.
        To help define what events will be avoidable, a series of ACEs will
    be generated. The ACEs lists will describe injuries that are
    automatically deemed avoidable based on strong ex ante inferences about
    the relationship between the treatment-outcome pair. Events that match
    the specifications and clinical circumstances of an item on an ACE list
    would be eligible for expedited compensation. The ACE lists would be
    developed by an expert consensus process, relying on the best available
    evidence.
        The concept of avoidability occupies a middle ground between the
    concepts of strict liability (in which all injuries caused by medical
    care are compensable) and negligence (in which only those events due to
    provider fault are compensable). To obtain compensation, claimants must
    show that the injury would not have occurred if best practices had been
    adhered to, but they need not meet the more exacting negligence
    standard and show that a defendant acted as ``no reasonable
    practitioner'' would have.
        The avoidability standard is desirable because it moves away from
    the notion of individual fault and the negative connotations that the
    medical profession associates with negligence. It comports with the
    notion of preventability, which is critical to the patient safety
    movement's insistence on lack of blame. But it does not have the
    onerous financial implications associated with a move to strict
    liability. We recognize that delineating avoidable from unavoidable
    events will not be straightforward in all situations. However, the
    negligence distinction itself is not clearcut. Moreover, compensation
    systems abroad have successfully made the avoidability/unavoidability
    distinction in thousands of cases. In addition, the use of accelerated-
    compensation events will facilitate appropriate decisionmaking.
                b. Use of Guidelines
        The system would incorporate guidelines and precedent by:

         Recording compensability determinations made by the
    administrative panels in a written decision and compiling decisions
    into a searchable electronic database that can be accessed by
    adjudicators in future cases involving similar injuries.
         Preparing lists of accelerated-compensation events based
    on expert reviews of the best available medical evidence about injury
    causation, frequency, and preventability.

        Current Recommendation.--Both developments are critical to an
    efficiently functioning compensation system.
    5. Damages
                a. Economic Damages
        Economic damages would be compensated in full except:

         There might be a deductible period or out-of-pocket amount
    (we suggest that eligibility begin when patients reach 4-6 weeks lost
    work time or $3,000-$4,000 in medical expenses).
         Payments would be made on a periodic basis.
         Awards that include a future loss component would be re-
    examined every few years.

        Methods for valuing the different components of economic losses
    would be based on those used in the tort system. The valuations would
    be made by an expert employed by the decision panel, based on
    information provided by the plaintiff. As outlined above, the insurer/
    hospital would be subject to a financial penalty if it did not make a
    damages assessment in good faith, with such a breach being determined
    by reference to the extent of divergence insurer/hospital's offer and
    the valuation subsequently made by the independent expert.
                b. Noneconomic Damages
        First, a matrix of levels of injury severity would be generated,
    based on one of the following:

        1. National Association of Insurance Commissioners' 199-point
    disability scale;
        2. AMA Guides to the Evaluation of Permanent Impairment;
        3. Decision science research about utility losses associated with
    different health states; or
        4. Any of the above scales plus age categories.

        Second, a dollar value range would be assigned to each cell in the
    matrix. The adjudicator would select a value in the range depending on
    the specific facts of the case compared to other like cases.
        Alternatives.--(1) Values based on jury verdict data, with or
    without an existing statutory cap.
        (2) Values based on public deliberation about (1) reasonable
    compensation for the various levels of noneconomic loss; and (2) what
    the maximum total costs of the compensation system should be.
        Current Recommendation.--Values should be based on decision science
    research about utility losses and public deliberation about reasonable
    compensation. Academic research into utility valuations can be used to
    inform public deliberation.
                c. Subrogation
        Alternatives.--(1) Defendants in health court demonstrations pay
    the full damages award and third party payers (e.g. health or
    disability insurers) may exercise rights of subrogation. (2) Defendants
    serve as secondary or tertiary payers paying the balance of damages
    after contributions by collateral sources, and subrogation rights may
    not be exercised by third party payers.
        Current Recommendation.--Collateral source offsets and restrictions
    on subrogation activities will help contain the costs of a health court
    demonstration. Statutory amendments at the State level and possibly
    also at the Federal level will be required, however, to preserve
    defendants' status as secondary or tertiary payer. This is because
    Medicare and Medicaid both enforce second payer rules of their own, and
    the Employee Retirement Income Security Act may limit the ability of
    States to place first-payer mandates on employment-based insurance
    plans.
    6. Appeal Standard
        Alternatives.--(1) Judicial review based on ``arbitrary and
    capricious'' standard. (2) Judicial review based on ``substantial
    evidence'' standard.
        Current Recommendation.--The judicial review is not intended to be
    a de novo review. Anything but a rather high standard for review would
    lead to large lawyering costs at the appeal level. Therefore, we
    recommend an ``arbitrary and capricious'' standard for review from the
    ALJ/appointed expert health court.
    7. Financing
                a. System Financing
        Alternatives.--(1) Social-insurance model financed through tax
    revenue from individual and/or corporate taxes. (2) Privately-financed
    model utilizing existing insurance arrangements plus an annual
    surcharge to the State to finance the administrative costs of the
    system. An initial public appropriation would be required to cover the
    costs of getting the system up and running.
        Current Recommendation.--Privately-financed model with modest
    annual surcharge for State administrative expenses. As noted above, the
    financing would be based on an experience-rating system that gives
    sharp incentives for improvement.
        The participants would likely make participation contingent on some
    protection against major losses in the early years of a demonstration
    project. From an actuarial standpoint, the avoidability standard will
    create an element of uncertainty that would limit voluntary
    participation, especially if there were insufficient numbers of
    participants to provide actuarial stability. Some type of stop-loss
    guarantee from a re-insurance entity will be a key issue in securing
    liability insurers' participation.
        In a voluntary demonstration, large self-insuring systems might
    choose to go wholly over to the new approach and underwrite based on
    the avoidability standard. Commercial malpractice insurers might need
    to set up a subsidiary to accommodate hospitals and physicians
    interested in participating in the demonstration.
                b. Attorney Fees
        Because the health court system will be quicker and more efficient,
    attorneys fees should be based on a multiple of hours worked rather
    than a fixed percentage. This is fair to lawyers and will result in
    patients keeping a much higher proportion of the damages.
    8. Relationship to Other Patient Safety Structures
        Alternatives.--(not mutually exclusive) (1) Create a single State
    (or Federal) agency, the Administrative Compensation Agency (ACA),
    which would have responsibility for both claims processing and
    fostering safety improvement activities. (2) Share de-identified claims
    data compiled by the ACA with other patient safety regulatory bodies,
    including State offices of patient safety and the Joint Commission on
    Accreditation of Healthcare Organizations, and research organizations;
    and purchasing/quality initiatives such as the Leapfrog Group and NCQA.
    (3) Share identifiable claims data organizations with responsibility
    for physician discipline, licensure, and certification. (4) Feed
    information on claims back to patient safety offices at hospitals. (5)
    Share drug- and device-related information with the FDA.
        Current Recommendations.--We suggest a combination of points #1,
    #2, #4, and #5. We would suggest that the hospitals share de-identified
    claims data with external patient safety organizations such as the
    JCAHO. We would recommend that the State fund a claims database with
    standard reporting and data fields which would facilitate
    epidemiological analysis of the claims data by approved researchers.
    Either a local staff, or experts identified through grants, would
    analyze the data for new prevention strategies. We recommend that the
    State fund at least a modest health court administrative staff to
    maintain the database, liaise with researchers around data requests,
    and disseminate analytical findings to hospitals and other healthcare
    providers.
        Information would also be fed back to patients safety teams at each
    place of original occurrence so that they could undertake root cause
    analyses at the same time that patients were being informed. This
    marries the notion of disclosure to full information.
        Additional specific recommendations include the following:

         Patient safety activities.--In addition to relaying
    critical and relevant information to the appropriate agencies, the
    health court system administrative staff may undertake its own patient
    safety improvement activities. Many of the current regulatory or
    research organizations working to improve patient safety often can
    issue only recommendations regarding best practices. In certain
    instances where a more immediate benefit to patient safety and welfare
    may be gained, consideration can be given to providing the health court
    with the ability to require remediation or improvement in an underlying
    contributing factor. Health court mandates for remediation or
    improvement would be taken without placing blame on an institution or
    provider and generally kept confidential. Disclosure would be made only
    in circumstances of egregious patient harm or if there is a failure to
    comply with a health court request. Potential patient safety activities
    are provided.
         Database maintenance.--For purposes of patient safety, the
    health court administrative staff would maintain a database of all
    claims filed and all claims paid. With the presence of proper patient
    incentives for reporting, this database could serve as a repository for
    information of all medical injury for covered providers. This database
    would be searchable (many fields would be predetermined), permitting
    epidemiological research and periodic reports on medical injury.
         Medication- and device-related events.--The health court
    administrative staff would be able to monitor for claims related to
    medications and devices. Whether paid or not, claim patterns may
    provide early warning on the dangers of medications and devices. If
    related to specific products, notification could be provided to the
    FDA.
         Egregious professional misconduct.--In cases of egregious
    provider misconduct, in which the health court determines that a risk
    of significant harm continues to exist for other patients or that this
    event was clearly outside of the bounds of professional behavior, the
    health court may opt to notify the appropriate regulatory,
    disciplinary, or licensing agency. Because the intent of this system is
    to keep compensation decisions separate from decisions of
    responsibility and blame, disclosure would be permitted only in narrow
    circumstances where the danger to patient safety is clear, ongoing, and
    significant.
         Providers with multiple paid claims.--It may become
    apparent to the health court that a certain provider (entity or person)
    has a pattern of claims or repeated injury. In these circumstances, the
    health court administrative staff may undertake an independent
    investigation by reviewing all of the claims made. If the investigation
    determines that the pattern rises to the level of egregious
    professional misconduct, action may be taken as described above. If the
    pattern of injury does not rise to that level, but demonstrates a need
    for further training or, in the case of an entity, correction of a
    certain practice or risk, the health court may order such remediation.
    Reporting will not be made to a disciplinary or regulatory agency
    unless the provider fails to comply with a request. Fines may also be
    issued for repeated injuries for which the provider has been on notice
    and has had sufficient time to remedy a contributing factor.
         Nosocomial infections.--Due to patient incentives to file
    claims, the health court administrative staff may be able to more
    readily gather rates of nosocomial infection with significant patient
    adverse outcomes. To encourage reporting of infections, the health
    court could provide automatic or scheduled compensation for certain
    types of infections which are considered highly preventable. If
    repeated patterns are noted within a provider, action may be taken as
    described above.
         Prioritization of patient safety measures.--The health
    court may help overcome the problem of prioritizing patient safety
    measures. During investigations, questions regarding which specific
    patient safety practices may have prevented the injury may be asked.
    Practices could be taken from Leapfrog measures, NQF measures, AHRQ
    practices, or JCAHO patient safety standards. Based on the data
    gathered, recommendations could be made to individual institutions.
    These recommendations may come with deadlines for implementation.
         Provider-specific information.--At the request of a
    healthcare organization, the health court administrative staff may
    provide detailed claim and compensation information of that
    organization compared with that of all other claims. This would permit
    large organizations to initiate improvement activities in specific
    areas and to learn from organizations with lower rates of injury.
         Periodic publications.--The health court administrative
    staff may periodically publish de-identified claims information for the
    benefit of the public, researchers, providers, and/or payors. Some
    examples are types and rates of injuries reported and percentages
    compensated; relationships between volumes and rates of compensated
    injury at medical centers; and rates of unexpected deaths.

                     Appendix One: Detailed Claims Process

                     STATEWIDE, MANDATORY SYSTEM (FIGURE 1)

        1. When an adverse event occurs, the hospital makes an initial
    determination whether the event falls within the class of adverse
    events covered by the system. If so, the hospital is required by State
    law to notify the patient and/or family of their right to seek
    compensation under the system.
        2. The patient or family files a claim with the hospital by
    completing a simple form describing from their own perspective what
    happened. Such forms are widely available at the point of care, and
    displayed prominently. They have the option of involving legal counsel
    if they wish, and they have the right to review their medical records.
        3. The hospital is required to notify the health court system that
    it has received a claim within the system's jurisdiction.
        4. The hospital has responsibility to make an initial determination
    on the disposition of the claim. An expert panel convened by the
    hospital renders a judgment on the compensability of the event and with
    claims adjusters' advice, makes an offer. This internal review is not
    intended to be a neutral adjudicatory process, but rather a formal
    mechanism for encouraging expeditious settlement of claims. The
    decisionmaking process is guided by pre-established decision aids,
    including a definition of avoidability and a compendium of accelerated-
    compensation events that carry a presumption of avoidability. There are
    three possible outcomes of the expert panel's decision: (1) clearly
    compensable; (2) clearly not compensable; (3) uncertain compensability.
    The claimant receives a written report from the panel including an
    explanation of its reasons for decision, and has the right to review
    the documents the panel consulted in reaching its decision.
        5. If the hospital panel judges the claim to be clearly
    compensable, the hospital makes an offer of compensation. The panel's
    determination of the amount of compensation is guided by a schedule of
    damages.
        6. If the patient/family feels that the hospital did not correctly
    apply the damages guidelines or failed to take into consideration some
    factor in their case that affected damages, they may request a
    redetermination of damages from the health court. If the health court
    finds that the hospital had made a clear error in applying the damages
    guidelines, it may assess a financial penalty on the hospital, in
    addition to awarding the patient/family the correct amount of damages.
        7. If the claim is judged to be clearly not compensable, the
    patient/family has the option of appealing the hospital panel's
    decision to the health court. The health court consists of an
    administrative law judge assisted by court-appointed experts, and is
    intended to be a neutral adjudicatory process. The health court reviews
    the claim de novo using all available materials and a process similar
    to that of the hospital panel. The health court holds a live hearing.
    Basic but relaxed rules of evidence are observed, similar to an
    administrative law hearing. The involved clinicians and the patient
    appear and present information. The panel may invite experts to give
    opinions in person or in writing. Patients and the providers may be
    represented by counsel.
        8. The same process occurs if the initial decision is that the case
    is judged to be of uncertain compensability in the first stage. The
    health court evaluation in this situation is automatic, and is not
    conditioned on the patient's decision to appeal.
        9. If the health court judges the event to be compensable, it
    assesses damages using the same guidelines as the hospital panel. It
    issues a written explanation of its reasons for decision which is
    provided to the parties. If the health court overturns the hospital's
    decision and makes a finding that the case was clearly compensable, it
    may impose a financial penalty on the hospital. (A penalty would also
    be imposed if it came to light that the hospital or its healthcare
    providers failed to disclose information known about the injury to the
    patient/family.)
        10. The patient/family may appeal an adverse determination of the
    health court to a judicial court, which would apply a deferential
    standard of review. The claimant has the right to review the documents
    the health court consulted in reaching its decision.
        11. If the final determination in the case is that the patient/
    family is entitled to compensation, the payments are made out of a
    provider-financed, state-administered compensation fund on a periodic
    basis. The final disposition of the case is recorded by the health
    court administrative staff and all written decisions in the case stored
    in health court's database. A health court administrator has
    responsibility for periodically contacting the patient/family to query
    whether any adjustment to compensation for future medical expenses,
    rehabilitation, custodial care, home care, or other expenses is
    required due to unforeseen circumstances. The patient/family may also
    apply for such an adjustment directly.
        12. An experience rating system is used for determining hospital
    contribution to the health court system.

               VOLUNTARY, INSURER-BASED DEMONSTRATION (FIGURE 2)

        1. The State passes authorizing legislation establishing the
    compensation system as the exclusive legal remedy for patients who
    suffer medical injuries that are covered by the demonstration. The
    statute has detailed requirements for notice and consent procedures for
    patients.
        2. Pursuant to the statutory requirements, the participating
    hospitals or care systems compose informational materials for patients.
    The brochures describe how the system works, explain the advantages and
    disadvantages of the system from a patient's perspective, and inform
    patients that the system will be their only remedy if they decide to
    seek care from a covered provider. The brochures are widely available
    and prominently displayed in participating healthcare facilities.
    Patients are given a copy of the brochure at the time of first contact
    or whenever they seek care from a hospital or provider covered by the
    scheme.
        3. The malpractice insurer for the hospital, doctor group or care
    system acts as the initial decisionmaker on claims, much as it does
    under the current liability system, although applying the new standard
    and compensation approach.
        4. When an adverse event occurs, the hospital determines whether it
    falls within the class of events covered by the demonstration. If so,
    the hospital must report the event to the insurer and notify the
    patient or family of their right to seek compensation under the
    demonstration. Just as above, the provider group, supported by the
    insurer, would make an early offer. The insurer may impose a premium
    surcharge on the hospital and/or its health care providers if it comes
    to light that they failed to disclose information known about injury to
    the insurer or the patient in a timely fashion.
        5. The patient/family files a claim with the insurer by completing
    a simple form describing from their own perspective what happened. They
    have the option of involving legal counsel if they wish, and they have
    the right to review their medical records.
        6. The insurer submits the claim to its in-house panel of
    clinicians and/or claims adjusters to render a judgment on the
    compensability of the event. The decision procedures would be similar
    to those described above for the hospital panel. As above, this stage
    of review is intended to encourage settlement offers rather than serve
    as a neutral adjudicatory process. The claimant receives a written
    report from the insurer including an explanation of its reasons for
    decision, and has the right to review the documents the insurer
    consulted in reaching its decision.
        7. If the insurer panel judges the claim to be compensable, the
    insurer makes an offer of compensation. The amount of compensation is
    determined with the aid of a schedule of damages. If the patient/family
    feels that the panel did not correctly apply the damages guidelines or
    failed to take into consideration some factor in their case that
    affects damages, they may request a redetermination of damages from the
    State health court. If the health court finds that the insurer panel
    made a clear error in applying the damages guidelines, it may assess a
    financial penalty on the insurer, in addition to awarding the patient/
    family the correct amount of damages. The insurer would pay a surcharge
    into a State fund that would be used to finance the administration of
    the health court.
        8. If the claim is judged to be not compensable, the patient/family
    is given an explanation of the decision. They have the option of
    appealing the decision to a State health court, which serves as a
    neutral arbiter of the dispute. The health court reviews the claim de
    novo using all available materials and a process similar to that of the
    insurer panel. A live hearing is held. Basic but relaxed rules of
    evidence are observed, similar to an administrative law hearing. The
    involved clinicians and the patient appear and present information. The
    panel may invite experts to give opinions in person or in writing.
    Patients and the providers may be represented by counsel. The health
    court issues a written explanation of its reasons for decision which is
    provided to the parties. If the health court judges the event to be
    compensable, it assesses damages using the same guidelines as the
    insurer panel. If the health court overturns the insurer's decision of
    noncompensability and makes a finding that the case was clearly
    compensable under the rules and compensation guidelines of the
    demonstration, this finding triggers a financial penalty for the
    insurer. The insurer would pay a surcharge into a State fund that would
    be used to finance the administration of the State health court.
        9. The patient/family may appeal an adverse determination of the
    health court to a judicial court, which would apply a deferential
    standard of review. The claimant has the right to review the documents
    the health court consulted in reaching its decision.
        10. If the final determination is that the patient/family is
    entitled to compensation, they receive periodic payments from the
    insurer. The final disposition of the case is recorded in the health
    court database and all written decisions in the case stored in the
    database. An administrator at the insurance company, under guidelines
    and oversight from the health court, periodically contacts the patient/
    family to query whether any adjustment to her compensation for future
    medical expenses, rehabilitation, custodial care, home care, or other
    expenses is required due to unforeseen circumstances. The patient/
    family may also apply for such an adjustment directly.
        11. Again, experience rating is employed in determination of
    premiums paid by participants to fund the system.

        The Chairman. If all of you can summarize with efficiency,
    we will be able to have a shorter hearing. I appreciate all of
    the information you gave us. All of it will be included in the
    record, and as you can tell, we learn more from the record than
    we do from the actual oral transmission of the information. So,
    anything you can do to help condense would be very much
    appreciated.
        Mr. Sage.
        Mr. Sage. Do you want to do Mr. Howard first, perhaps?
        The Chairman. No, go ahead, Mr. Sage.
        Mr. Sage. Thank you, Mr. Chairman, members of the
    committee. I'm a law professor. I'm also a physician.
        In 2002, when the third medical liability crisis of the
    past 30 years was declared, the Pew Charitable Trusts asked me
    to lead a project on medical liability research. That same
    year, the Institute of Medicine invited me to serve on its
    committee on Rapid Advance Demonstration Projects, for which I
    helped design some of the malpractice reform models included in
    S. 1337, which this committee is considering.
        Four years later, political debate remains polarized,
    mainly over the desirability of caps on noneconomic damages and
    other traditional tort reforms. Despite the passage of time,
    advocates of these measures have attempted to sustain a crisis
    mentality, while their opponents have argued that the crisis is
    ending and that reform is unnecessary.
        I do not believe this is a productive debate. There is an
    expression that aspiring surgeons learn in medical school and
    residency: all bleeding stops. What matters, of course, is
    whether the patient is still alive when the bleeding stops.
    Similarly, all crises end. In communities across the United
    States, healthcare providers and patients are struggling with
    the shortcomings of the medical liability system that go far
    beyond intermittent spikes in physician malpractice premiums.
    Many good ideas have surfaced, and some are being tested, but I
    believe Federal leadership is needed to stop the bleeding
    quickly and to heal the malpractice system so that gaping
    wounds will not reopen.
        I'm greatly encouraged by this hearing, because the
    committee of the U.S. Senate with the most direct jurisdiction
    over healthcare is engaged with the malpractice system. To me,
    the greatest challenge for liability reform is that little
    connection has been made between the malpractice system and the
    healthcare system. Malpractice reform should begin with
    improvements in the processes of care that keep patients safe
    and in the ways that providers help patients deal with injury.
    Insurance mechanisms and legal standards are important, but I
    believe that malpractice reform should focus more on the
    bedside and less on the courtroom.
        Current stresses to the malpractice system are the product
    of the tremendous success of modern medicine, not its failure.
    Technology has enabled physicians to detect and treat diseases
    earlier but also far more expensively. The bleeding in the
    malpractice system continues because it has not kept pace with
    these trends in medicine. Periodic malpractice insurance crises
    make liability seem epidemic to medicine when, in fact, it is
    endemic.
        The existing system potentially compromises healthcare in
    this country for three principal reasons: first, there is a
    two-sided mismatch between negligence and the threat or event
    of litigation. Many claims turn out not to be justified, but
    rates of medical error are disturbingly high, and most
    avoidable injuries go uncompensated.
        Second, the process for resolving medical injuries is
    simply appalling. Intimate bonds between patients and
    physicians are often shattered, with third party liability
    insurers regarding those who file claims as both strangers and
    adversaries. Information is routinely withheld, delays are
    extreme, and complex relationships are reduced to dollars and
    cents. Healthcare providers are also victims. Isolation, fear,
    anger, and shame take a toll, while opportunities for learning
    and improvement are rare.
        Third, conventional malpractice litigation and conventional
    malpractice insurance focus on individual physicians rather
    than the systems of care in which they practice. The Institute
    of Medicine made a compelling case for system-based safety
    improvement. To rely exclusively on individual physician
    accountability is to provoke gross misdeterrence, clinical
    responses to perceived risks of liability that fail to advance
    quality of care.
        What are the paths to improvement? There is substantial
    consensus among academic experts that the United States should
    test comprehensive malpractice reforms. A better medical
    liability system would have two core elements: no-trial dispute
    resolution and a health system rather than individual physician
    focus. Initial dispute resolution processes would be a routine
    part of good clinical care. As in S. 1784, providers would make
    immediate disclosure of errors and would apologize when
    appropriate; mediated discussions would begin promptly, with
    providers offering compensation in all clearly eligible cases
    and transmitting information readily to internal patient safety
    improvement processes. Only the relatively few cases that
    cannot be resolved near the bedside would be referred to a
    formal administrative system of adjudication.
        There are several avenues for testing reforms of this type,
    many of which are incorporated into S. 1337. In my opinion, the
    key is to associate malpractice reform with and thereby
    leverage existing regulatory and professional self regulatory
    organizations charged with protecting healthcare policy.
    Administrative health courts might be established under State
    agencies that regulate healthcare or patient safety through
    sponsorship of health coverage under ERISA, within governmental
    systems such as the Veterans Health Administration, or within
    the Center for Medicare and Medicaid Services, and I would like
    to emphasize in my written testimony the desirability of
    conducting some malpractice demonstration projects within the
    Medicare program.
        I believe that testing reforms on a demonstration basis in
    a variety of settings is preferable to committing in advance to
    a single national model. Debates over comprehensive malpractice
    reform tend to get mired in the aggregate budgetary
    implications of potentially surfacing and compensating a
    greater number of claims. By testing reforms limited to
    particular providers and locations, sponsors could make the
    terms of reform attractive to patients, could hold providers
    harmless for the financial burden exceeding their current
    liability expense, if any, and could measure the actual costs
    and benefits to the participants in society.
        Let me conclude by mentioning my father, Dr. Harold Sage,
    who is celebrating his 92nd birthday today, June 22. My father
    graduated from medical school in 1937 and retired from surgical
    practice about 20 years ago. He's alive today because of what
    medicine can do, but he has also been a victim of medical
    error. Now, the IOM, in its successor report to ``To Err is
    Human'' called upon the healthcare system to become safe,
    effective, patient-centered, timely, efficient, and equitable.
    I would argue that the existing medical malpractice system
    advances none of these goals.
        Crises are definitional. The current malpractice crisis
    will end. Premiums will fall, and lawsuits may even drop. But
    errors are still frequent; compensation remains uneven; and the
    litigation process is unacceptable. Change is possible with
    Federal leadership, and for that reason, I ask you to help us
    stop the bleeding by supporting innovative demonstrations like
    S. 1337 and S. 1784.
        Thank you.
        The Chairman. Thank you very much.
        [The prepared statement of Mr. Sage follows:]

                     Prepared Statement of William M. Sage

        Mr. Chairman and members of the committee, I appreciate the
    opportunity to speak with you about the role that medical liability
    reform can play in U.S. health policy. I am a lawyer and law professor.
    I am also a physician.
        In 2002, when the third ``medical malpractice crisis'' in the past
    30 years was declared, The Pew Charitable Trusts in Pennsylvania asked
    me to head a comprehensive Project on Medical Liability. The same year,
    the Institute of Medicine invited me to serve on its Committee on Rapid
    Advance Demonstration Projects in Health Care, for which I helped
    design the malpractice reform models included in S. 1337, the Fair and
    Reliable Medical Justice Act. Since then, I have discussed medical
    liability with physicians, patients, hospital administrators, lawyers,
    and others; I have planned and conducted empirical research on the
    performance of the medical malpractice system; and I have developed and
    evaluated possible solutions to the problems that have been identified.
        Four years later, political debate remains polarized, mainly over
    the desirability of caps on non-economic damages and other traditional
    ``tort reforms.'' Despite the passage of time, advocates of these
    measures have attempted to sustain a crisis mentality, while their
    opponents have argued that the crisis is ending and that reform is
    unnecessary.
        I do not believe this is a productive debate. There is an
    expression that aspiring surgeons learn in medical school or residency:
    ``All bleeding stops.'' What matters is whether or not the patient is
    alive and stable when the bleeding stops. Similarly, all crises end. In
    communities across the country, healthcare providers and patients are
    struggling with the shortcomings of the medical malpractice system,
    problems that go beyond intermittent spikes in physicians' liability
    insurance premiums. Many good ideas have surfaced, and some are being
    tested. But Federal leadership is needed to stop the bleeding quickly,
    and to heal the malpractice system so that gaping wounds will not open
    again.

                       MALPRACTICE REFORM AT THE BEDSIDE

        I am greatly encouraged by this hearing, by the fact that the
    committee of the U.S. Senate with the most direct jurisdiction over
    American healthcare is engaging with the malpractice system. To me, the
    greatest challenge for medical liability reform is that,
    notwithstanding high public visibility, little connection has been made
    between the malpractice system and the healthcare system. Malpractice
    reform should begin with improvements in the processes of care that
    keep patients safe and in the ways that providers help patients deal
    with unanticipated injuries that occur nonetheless. Insurance
    mechanisms to reduce and spread the financial risks from these injuries
    are important, as are legal standards to frame and resolve disputes
    over the causes and consequences of injury. But malpractice reform
    should focus more on the bedside, and less on the courtroom.
        An important insight is that current stresses to the malpractice
    system are the product of the tremendous success of modern medicine,
    not its failure. Technology has enabled physicians to detect and treat
    diseases earlier and more effectively than was the case during the
    first malpractice crisis of the 1970s, though also more expensively.
    Similarly, length and quality of life have improved for patients with
    chronic health conditions. To achieve these results, physicians
    frequently practice in interdisciplinary teams, and depend on
    increasingly sophisticated facilities and supplies. This process of
    industrialization has brought corporate skills, and corporate risks,
    into healthcare delivery. Public expectations of healthcare have risen
    accordingly, as have salvage costs if something goes wrong. All of
    these factors increase the likelihood of malpractice litigation and
    worsen its financial implications for physicians.
        The bleeding continues because the malpractice system has not kept
    pace with these trends, in large part because medical liability tends
    to hold the attention of policymakers only when problems surface in the
    cost or availability of physicians' liability insurance. In other
    words, malpractice insurance crises make liability seem epidemic to
    medicine, when in fact it is endemic.
        The existing malpractice system potentially compromises access to
    healthcare, reduces its quality, and increases its cost for three
    principal reasons. First, there is a two-sided mismatch between actual
    negligence and the threat or event of litigation. Many claims turn out
    not to be justified, but rates of medical error are disturbingly high,
    and most avoidable injuries go uncompensated.
        Second, the process for resolving disputes is appalling. Intimate
    bonds between patients and health professionals are often shattered,
    with third-party liability insurers regarding those who file claims as
    both strangers and adversaries. Information is routinely withheld,
    delays are extreme, and complex medical relationships are reduced to
    dollars and cents. Healthcare providers are victims as well. Isolation,
    fear, anger, and shame take a toll, while opportunities for learning
    and improvement are rare.
        Third, conventional malpractice litigation, and conventional
    malpractice insurance, focus on individual physicians rather than the
    systems of care in which they practice. In To Err is Human, the
    Institute of Medicine made a compelling case for system-based safety
    improvement. To rely exclusively on individual physician accountability
    is to provoke gross ``misdeterrence''--clinical responses to perceived
    risks of liability that fail to advance quality of care. Fear of harm
    to personal reputation and financial stress over insurability not only
    reduce responsiveness to patient injury should it occur, but also lead
    physicians to practice ``defensive medicine'' on a daily basis. This
    can manifest itself either as costly overtesting and overtreatment, or
    as unwillingness to accept challenging cases and ``difficult''
    patients.

                              PATHS TO IMPROVEMENT

        There is substantial consensus among academic experts that the
    United States should test comprehensive malpractice reforms that would
    remove most medical injuries from conventional tort litigation, and
    place them instead in a customized compensation system that is closely
    connected to real-time patient care and clinical quality assurance.
    Recent reform proposals draw on a rich literature of policy innovation
    that emerged from previous malpractice crises, including early offers
    in settlement, accelerated compensation events (ACEs), guidelines for
    appropriate damages, specialized tribunals, fault-based and no-fault
    administrative systems, and enterprise liability for hospitals or HMOs.
        A better medical liability system would have two core elements:
    ``no-trial'' dispute resolution and a health system rather than
    individual physician focus. The phrase ``no-trial'' (rather than ``no-
    fault'') is used to denote procedures that are distinct from
    conventional litigation but that retain, and in fact strengthen,
    healthcare providers' legal accountability for error. Initial dispute
    resolution processes would be a routine part of good clinical care.
    Providers would make immediate disclosure to patients who have suffered
    unexpected harm and would apologize when appropriate. Mediated
    discussions with the patient or family would begin promptly, with
    providers offering compensation in all clearly eligible cases, and
    transmitting information rapidly to internal patient safety and injury
    prevention systems.
        Only the relatively few cases that cannot be resolved near the
    bedside would be referred to a formal administrative system of
    adjudication. ACEs--lists of adverse outcomes that are almost always
    associated with error--would serve as a foundation for developing a
    system that keys accountability to compliance with scientific ``best
    practices.'' Patients who suffer avoidable injuries would receive
    compensation for economic damages not covered by other sources, plus
    capped non-economic damages using a sliding scale that takes into
    account the severity and duration of injury.
        There are several avenues for testing reforms of this type, many of
    which are incorporated into S. 1337. In my opinion, the key is to
    associate malpractice reform with, and thereby leverage, existing
    regulatory and professional self-regulatory institutions charged with
    protecting healthcare quality. Administrative health courts might be
    established under the auspices of State agencies that regulate
    healthcare or patient safety, through private employers acting as
    sponsors of health coverage under ERISA, within governmental systems of
    care such as the Veterans Health Administration, or within the Center
    for Medicare and Medicaid Services.
        There is also a role for private healthcare standard-setting bodies
    in malpractice reform. The Joint Commission on Accreditation of
    Healthcare Organizations, for example, could require hospitals to
    improve their error detection, disclosure, and dispute resolution
    processes. According to a 2005 JCAHO White Paper, a well-functioning
    liability system would assure (1) prompt disclosure of medical errors
    to injured patients, (2) apology, (3) analysis of the error to inform
    future prevention efforts, (4) an early offer of compensation for
    losses, and (5) alternative dispute resolution to bring disputed claims
    to a swift, fair, and efficient conclusion.
        I would like to emphasize the desirability of conducting some
    malpractice demonstration projects within the Medicare program.
    Medicare policy often sets the standard for the healthcare system
    generally. Medicare is experienced at sponsoring demonstrations of
    health policy innovations. Medicare is essential to the hospital
    sector, and can foster voluntary enterprise liability within those
    institutions. Medicare already operates contractor-based and external
    systems of medical review, and utilizes an administrative law model for
    resolving disputes over benefits that raise similar issues of
    disability and valuation of injury. Medicare can connect malpractice
    claims to consumer information, quality improvement, and patient safety
    through various ongoing initiatives. Medicare is a pioneer in pay-for-
    performance, which could include financial incentives to respond
    effectively to unanticipated injury. Finally, conventional malpractice
    litigation is unavailable or unattractive to many Medicare
    beneficiaries, making their voluntary participation in experimental
    reform more likely.
        I believe that testing reforms on a demonstration basis in a
    variety of settings is preferable to committing oneself in advance to a
    single national model. The effectiveness of liability reform depends to
    a considerable extent on the clinical and administrative capacities of
    particular healthcare providers and on the reactions of both
    malpractice plaintiffs and malpractice defendants to changed incentives
    and procedures. For example, the Institute of Medicine recommended
    Federal funding of demonstrations involving hospitals and other
    institutional providers that meet safety-related criteria for
    participation and that could assure their patients of a prompt,
    compassionate response to unexpected injury.
        Furthermore, debates over comprehensive malpractice reform tend to
    get mired in the aggregate budgetary implications of potentially
    surfacing and compensating a greater number of claims than currently
    attract the attention of plaintiffs' lawyers. Proposals for large-scale
    change that emerge under these constraints are often stacked against
    claimants in order to guarantee overall affordability. By testing
    reforms limited to particular providers and locations, sponsors could
    make the terms of reform attractive to patients, could hold providers
    harmless for any financial burden exceeding their current liability
    expense, and could measure the actual costs and benefits to the
    participants and to society.

                                   CONCLUSION

        Let me conclude by mentioning my father, Dr. Harold Sage, who is
    celebrating his 92nd birthday today, June 22. My father graduated from
    medical school in 1937. He retired from surgical practice about 20
    years ago, and now experiences the healthcare system mainly as a
    patient. He is alive because of what modern medicine can accomplish,
    but he has also been a victim of medical error. And he understands that
    today's complex and expensive healthcare system requires careful
    governance, including with respect to medical liability.
        The successor report to To Err Is Human called upon the healthcare
    system to become safe, effective, patient-centered, timely, efficient,
    and equitable. The existing medical malpractice system possesses none
    of these qualities. I often receive inquiries from physicians and
    hospitals asking if funding is available for the demonstrations that
    the IOM recommended in 2002. In Pennsylvania, for example, the hospital
    association has worked hard to develop a comprehensive reform program,
    but it lacks the financing needed to test it.
        Crises are definitional. The current malpractice crisis will end:
    Premiums may fall, and lawsuits may even drop. But errors are still
    frequent, compensation remains uneven, and the litigation process is
    miserable. Yet change is possible with Federal leadership. Please help
    us stop the bleeding by supporting innovative demonstration programs
    like S. 1337.

        The Chairman. Mr. Howard.
        Mr. Howard. Thank you, Senator Enzi, and Senator Kennedy
    for holding these hearings.
        I think it is extraordinarily important to change the frame
    of reference of the malpractice debate, as the other witnesses
    have suggested, from focusing just on capping damages to making
    the overall system of healthcare work better, including working
    better for injured patients.
        For 4 years, we have been hosting public forums jointly
    with the AEI-Brookings Joint Center, and all constituents were
    represented in these hearings: professional groups, large
    consumer groups, patient safety experts, and such, and what we
    found is that while premiums have risen dramatically, as
    Senator Kennedy suggested, the overall cost of this was really
    quite small in the healthcare system.
        But what we also found was that that was a symptom of a
    much worse disease in the healthcare system, which is that
    there was a distrust that is literally pervasive in healthcare.
    And this distrust has changed the way doctors in America and
    hospitals practice medicine. It has chilled professional
    interaction. It is sort of like an invisible wall not only
    between patients and doctors but between doctors with each
    other, because people are afraid to speak up and use their
    peripheral vision and say are you sure that's the right
    prescription, because they don't want to take legal
    responsibility leading to tragic errors.
        It has contributed--I agree it is not the main cause of the
    rise in healthcare costs. However--we'll get back to that --it
    has contributed to the skyrocketing cost. Only last month, I
    had arthroscopic surgery on my knee. They said I had to have a
    preoperative exam. I said, ``What's that?'' And they told me
    what it was. I said, ``Well, I just went through that 2 months
    ago at my annual physical; why don't we just use that?'' No, we
    won't use it. ``I'll waive the legal requirements,'' I said.
    ``Any liability will be waived.''
        It cost $1,500, not to me, to my insurer, and it was bad
    for me. I had to go through all these exams all over again
    because of defensive medicine. They wouldn't accept even a
    legal waiver from me to do it. It is literally pervasive. And
    it also doesn't provide effective accountability against bad
    doctors. Go to licensing boards or the people who run
    hospitals. When they try to get rid of a doctor, what happens
    is the doctor threatens to sue, and there's generally a
    settlement, because people don't want to go through 5 years of
    litigation, and the settlement is generally to give that doctor
    one more chance or to let him slide out the side door to
    practice on some other patients who don't know what his record
    is.
        It's also not effective for patients, as Professor Sage and
    Professor Studdert have said: ``slow, expensive, and
    unreliable,'' and as Professor Sage has noted, in many
    jurisdictions, you can't even get a lawyer for a malpractice
    case unless it is worth several hundred thousand dollars, not
    because the lawyers are bad people but because it's just too
    expensive. It takes too many years to go through the process.
        So we ask ourselves after six of these hearings over the
    course of a number of years what system would best promote
    safe, affordable healthcare and provide a fair compensation
    system, and what we arrived at were several principles: it
    needs to aspire to consistency. It needs to offer guidelines so
    that people feel accountable if they keep up with good
    practices, but they will be affirmatively protected if they do
    keep up with good practices. And it means to have a mechanism
    for us to learn from our mistakes, none of which the current
    system does.
        Now, America, as Senator Cornyn suggested, has a long
    tradition of special courts in areas of complexity. In 1789,
    there were special admiralty courts. There are bankruptcy
    courts, tax courts, a number of administrative compensation
    schemes, of which the largest is the workers compensation
    system, which is different from this in a variety of ways but
    not so different in others.
        We entered into a joint venture with the Harvard School of
    Public Health several years ago to try to develop and refine
    the idea and, again, work with all of the interested groups,
    and what we've come up with, and there are many ways to do
    this, is the idea of experimenting with a pilot project with a
    court system which would have the following key features:
    judges dedicated to resolving malpractice cases advised by
    neutral experts; parties could have their own experts as well,
    but you would have a neutral expert who is actually trying to
    do what he thought is best; with written opinions so that
    people can see what the standards of care are, and if there is
    an error, can appeal that written opinion, say this is wrong
    for those reasons; a liberalized standard of recovery: it is
    too hard for injured patients to recover now. If somebody goes
    into a hospital with pneumonia and comes out with a staph
    infection, they shouldn't have to prove any more. They ought to
    get paid.
        And so, we have an avoidability standard; so, we believe in
    this system, many more people will recover with much lower
    costs. It will be quicker; there will be a requirement of
    transparency and penalties on providers if they don't open up
    their records when there's a problem.
        And finally, there would be schedules of noneconomic
    damages, as virtually every other developed country in the
    world provides. And the reason for this is not because it's
    fair in the abstract, because no amount of money could
    compensate me or any of us for a tragic loss or an injury. It's
    because it dramatically turns down the heat on the process. It
    reduces the fear of providers. It reduces the sense that I
    might get rich by going all the way through the system and
    saying how much would you give to lose a leg or the like?
        It provides horizontal equity among patients. Today, you
    know, 1 in 1,000 wins a huge verdict, and most people, again,
    as the studies show, get almost nothing. We think it's a fairer
    system to have it be scheduled depending on the injury, and
    again, I think that schedule should be changed from time to
    time and be determined by a base closing commission or the
    Institute of Medicine or someone like that so that it's
    trusted.
        There's an understandable reluctance to change from what we
    are so used to, the jury system. But I would suggest that what
    we're proposing, first, is only pilot projects. Second, it's
    not giving up the right to sue. It's changing it. It's creating
    a new right to sue, which we believe the test project would
    show is fairer for injured patients as well as dramatically
    better for the system of healthcare.
        Everyone knows that there's a looming crisis in healthcare,
    crisis of affordability, crisis in quality. Judgments need to
    be made to fix it: what's good care; what's not? What can we
    afford to provide? We cannot make those judgments, I submit,
    until we have a system of justice that's reliable to uphold
    them.
        And so, going back to Professor Studdert and Professor
    Sage's point, the goal here is to try a pilot of a system that
    could be the foundation from which this body can begin to make
    choices to bring order to a healthcare system that is rapidly
    trending toward a kind of nervous breakdown in this country,
    where people can't afford it and no one trusts anyone else.
        The reason--and I would just end by saying a broad
    coalition is behind us: many patient safety experts, the most
    prominent patient safety experts in the country; large consumer
    groups such as AARP have called for pilot projects. This is not
    the tort reform community. The providers support it as well,
    but this has been led by people who have not supported tort
    reform but are supporting a better system of healthcare.
        Thank you very much.
        The Chairman. Thank you.
        [The prepared statement of Mr. Howard follows:]

                     Prepared Statement of Philip K. Howard

                                    SUMMARY

        The debate over medical malpractice has focused on one symptom--the
    rise in insurance premiums--without addressing the underlying systemic
    flaws.
        Distrust of justice is tearing at the fabric of American
    healthcare, chilling open professional interaction and causing doctors
    to squander billions in unnecessary tests and procedures. The distrust
    stems from the fact that justice today tolerates inconsistent results
    for similar conduct, and appears to be inaccurate in over a quarter of
    the cases. Nor does the system work well for injured patients:
    meritorious cases often take 5 years, and consume 33 percent-40 percent
    of the recovery in lawyers' fees.
        Making the choices needed to fix American healthcare--improving
    quality, containing costs and providing predictable accountability--
    requires a reliable system of justice. That's why a broad coalition of
    consumer and patient advocates, as well as healthcare providers, have
    come together behind the idea of creating special administrative health
    courts. The goal is to create a system of justice reliable for patients
    and doctors alike, and to act as a foundation for other choices needed
    to bring order to American healthcare.
        Defenders of the system cling to the orthodoxy that each case be
    tried by a jury. But America has a mounting crisis in healthcare, and
    the goal of law is to support society, not the other way around. There
    is also a flaw in the current orthodoxy: The core idea of the rule of
    law--that like cases be decided alike--is not satisfied when juries
    make decisions in an ad hoc manner without consistent legal rulings on
    standards of care. America has a long tradition of special courts for
    disputes needing consistency and special expertise--admiralty courts,
    bankruptcy courts, workers compensation systems, to name just a few--
    and special health courts fit squarely within that tradition.
                                     ______

        Thank you for providing this opportunity to discuss alternatives to
    the current medical malpractice system.
        I appear as the Chairman of Common Good, a not-for-profit
    organization founded in 2002 to advocate reforms to restore reliability
    to American law. We are bipartisan--for example, former Senators Howard
    Baker and Bill Bradley recently joined our Advisory Board--and derive
    most of our funding from private and public foundations (our largest
    funder is the Robert Wood Johnson Foundation). The proposal to do
    demonstration projects for administrative health courts, which I will
    discuss today, follows six public forums, hosted jointly with the AEI-
    Brookings Joint Center, and hundreds of meetings with affected parties.
    The proposal was developed and refined in a joint venture between
    Common Good and a team from the Harvard School of Public Health, led by
    Professors Troy Brennan and David Studdert.
        Special health courts are intended not simply to provide a better
    dispute resolution mechanism, but to provide a foundation from which
    deliberate choices can be made to restore order to American healthcare.
    The current ad hoc system, in which cases are decided jury by jury,
    without guidelines or precedent, has contributed to a debilitating
    distrust that makes reforming healthcare almost impossible. Special
    health courts, by contrast, can offer guidance on standards of care and
    the predictability needed for trust. It is almost impossible to contain
    costs, for example, until there is a system of justice that is trusted
    to reliably uphold the costs contained.
        Key features of special health courts would include administrative
    judges dedicated to malpractice disputes, advised by neutral experts
    and providing written opinions; liberalized standards of recovery; an
    expedited process with incentives for providers to make ``early
    offers''; scheduled noneconomic damages, depending on the injury; and a
    coordinated patient safety department to collect and disseminate
    important information. We believe special health courts could serve
    three goals: first, to eliminate the distrust of justice that impedes
    quality and contributes to skyrocketing costs; second, to provide
    affirmative incentives to improve the quality of care; and third, to
    provide a reliable, efficient and quick compensation system for
    patients injured by faulty care.
        A broad coalition has come together calling for demonstration
    projects of administrative health courts. The coalition includes
    leading organizations devoted to patient safety and healthcare quality,
    including the Joint Commission on Accreditation of Healthcare
    Organization, many medical societies and physician organizations,
    including the American College of Physicians and the American College
    of Obstetricians and Gynecologists, large consumer groups, including
    AARP, large corporate providers and payers, and dozens of university
    presidents and medical school deans.
        Six of America's leading hospitals announced today their strong
    interest in participating in a health court pilot project: New York-
    Presbyterian, Johns Hopkins, Yale-New Haven, Duke Medical Center, Emory
    University Hospital and Jackson Health System at the University of
    Miami.
        Many of the organizations supporting special health courts have not
    been supporters of ``tort reform.'' But they support this effort to
    restore reliability because the goal is not just to provide relief to
    physicians but to create a system that is reliable for doctors and
    patients alike. The proposal enjoys broad editorial support in
    publications including USA Today, The Economist, Newark Star-Ledger,
    the Detroit News, and the St. Louis Post-Dispatch, among others. The
    public also seems to like the idea: a Harris Interactive survey found
    that two out of three Americans support the creation of special health
    courts.\1\
    ---------------------------------------------------------------------------
        \1\ Poll, Harris Interactive, Inc., June 14, 2004, available at:
    http://cgood.org/healthcare-reading-cgpubs-polls-7.html.
    ---------------------------------------------------------------------------
        Because this proposal involves a major shift, not only in how
    healthcare disputes are resolved, but in our approach to healthcare
    choices more broadly, we believe it is important to test and refine the
    concept. That's why we seek pilot projects. With the crisis in
    healthcare looming before our country, we hope that Congress will
    provide the authority and means to test this constructive approach to
    bringing order to healthcare.
        The Context of Reform. The debate over medical liability reform has
    not focused sufficiently, in our view, on the relationship between the
    legal system and daily choices in America's hospitals. There is little
    dispute that America's healthcare system is suffering from ill health:

         While the system provides miracle cures admired across the
    world, it tolerates too many avoidable errors--causing upwards of
    100,000 unnecessary deaths annually, according to the Institute of
    Medicine.\2\
    ---------------------------------------------------------------------------
        \2\ Kohn, Linda T., Corrigan, Janet M. and Donaldson, Molla S.
    Editors, Committee on Quality of Health Care in America, Institute of
    Medicine, To Err is Human, National Academic Press, 2000.
    ---------------------------------------------------------------------------
         Accountability is inconsistent: inept doctors often keep
    their licenses while good doctors find themselves liable on baseless
    claims; 1 out of 4 baseless claims result in payment, according to a
    recent study by Professor Studdert and others in The New England
    Journal of Medicine.\3\
    ---------------------------------------------------------------------------
        \3\ Studdert, David M., et al., ``Claims, Errors, and Compensation
    Payments in Medical Malpractice Litigation,'' New England Journal of
    Medicine, vol. 354; May 2006, p. 2029.
    ---------------------------------------------------------------------------
         Skyrocketing costs--now approaching twice that of other
    developed countries, with no better outcomes--make healthcare insurance
    unaffordable for 1 out of 7 Americans.\4\
    ---------------------------------------------------------------------------
        \4\ Income, Poverty, and Health Insurance Coverage in the United
    States: 2003, U.S. Census Bureau Report, August 2004, available at:
    http://www.census.gov/prod/2004pubs/p60-226.pdf.

        In these key respects, American healthcare is, more or less
    literally, out of control. No one seems to have the capacity to make
    the choices needed to restore order or to reign in crippling costs.
        The Effects of Law on Healthcare. The debate over liability has
    focused on the rise in malpractice insurance premiums, and whether
    noneconomic damages need to be ``capped.'' Doctors in certain
    specialties, such as obstetrics, desperately need relief. But the total
    cost of the malpractice system, about $28 billion, while huge,
    represents only about 1.5 percent of total healthcare spending.\5\ If
    doctors' premiums were the only problem, surely we could come up with a
    solution. The debate has generated more heat than light, with each side
    arguing about the fairness either to doctors or to injured patients. A
    strong case can be made, as will be discussed shortly, that the current
    system is fair to neither.
    ---------------------------------------------------------------------------
        \5\ Tillinghast-Towers Perrin, ``U.S. Tort Costs and Cross-Border
    Perspectives: 2005 Update,''
    p. 20, available at: http://www.towersperrin.com/tp/
    getwebcachedoc?webc=TILL/USA/2006/
    200603/2005_Tort.pdf; Smith, Cynthia, et. al., ``National Health
    Spending in 2004,'' Health Affairs, Vol. 25, Issue 1; 2005, p. 186-196.
    ---------------------------------------------------------------------------
        The first goal of justice, however, is to provide incentives and
    conditions for a sound healthcare system. The important question is
    this: Does the system of justice promote patient safety and effective
    use of resources?
        Without room for serious debate, the current system is destructive
    of both goals. Distrust of justice is nearly universal among physicians
    and other providers. The overwhelming majority of physicians (83
    percent) and hospital administrators (72 percent) do not feel that
    physicians can trust the current system of justice to achieve a
    reasonable result if sued.\6\ This distrust has led to a culture of
    defensiveness that diminishes quality, raises costs and corrodes human
    dealings throughout the healthcare system:
    ---------------------------------------------------------------------------
        \6\ Poll, Harris Interactive, Inc., The Fear of Litigation Study--
    The Impact on Medicine, 2002,
    p. 39. available at: http://cgood.org/healthcare-reading-cgpubs-polls-
    6.html.

         The effect of law on quality. Many tragic errors occur,
    according to the Institute of Medicine and others, because doctors and
    nurses, fearful of legal responsibility, are reluctant to intercede
    when they suspect something is amiss. More broadly, distrust of justice
    is a powerful disincentive to reporting errors and near misses.
        The theory of tort liability is that it encourages safer practices.
    But this doesn't happen in healthcare. Leading experts agree that the
    current malpractice system does a poor job of policing bad providers
    and promoting patient safety. Professor William Sage notes that ``the
    malpractice system fails to send clear signals for quality
    improvement.'' \7\
    ---------------------------------------------------------------------------
        \7\ Sage, William, ``Medical Liability and Patient Safety,'' Health
    Affairs, Vol. 22; 2003, p. 26-36, available at: http://
    content.healthaffairs.org/cgi/content/full/22/4/26?ijkey=f437af2d1c6
    ff94a693fl60a23e55bf82b3de843.
    ---------------------------------------------------------------------------
         The effects of law on healthcare costs. ``Defensive
    medicine''--the practice of ordering tests and doing other unnecessary
    activities--is nearly universal. Although the costs of defensive
    medicine are almost impossible to quantify--estimates range from a few
    tens of billions to over $100 billion--no person who has encountered
    the healthcare system has not experienced it.\8\ I was not allowed to
    have minor surgery recently until I'd gone through a complete pre-
    operative examination, complete with chest X-rays and other tests, at a
    cost to my insurer of $1,500. This was basically the same exam I had
    undergone a few months before at my annual physical, but the hospital
    would not accept those results, or indeed, even allow me to waive any
    claim. This was $1,500 not available for some person who needed care.
    Nor is the cost just monetary--unnecessary tests reduce immunity and
    increase the chance of complication.
    ---------------------------------------------------------------------------
        \8\ In a major study on the effects of liability reforms,
    researchers found that hospitals reduced their expenditures by 5 to 9
    percent within 3 to 5 years after the adoption of such reforms without
    increasing bad outcomes, leading the authors to conclude that this 5 to
    9 percent went toward defensive medicine tasks and procedures. Kessler,
    D. and McClellan, M., ``Do Doctors Practice Defensive Medicine,'' The
    Quarterly Journal of Economics, May 1996, p. 386-88. The U.S.
    Department of Health and Human Services has estimated that the 5 to 9
    percent figure amounts to $60 to $108 billion nationwide spent on
    defensive medicine each year. U.S Department of Health and Human
    Services, Confronting the New Health Care Crisis: Improving Health Care
    Quality and Lowering Costs by Fixing our Medical Liability System, July
    24, 2002, p. 7. Although there may be disagreement about the actual
    cost of defensive medicine, there is overwhelming evidence that it is
    ubiquitous. For example, a 2002 Harris Interactive poll of physicians
    found that 91 percent of physicians had noticed other physicians
    ordering more tests that they would base solely on professional
    judgment of what is medically needed, and 79 percent reported that they
    themselves do this due to concerns about malpractice liability. Poll,
    Harris Interactive Inc., The Fear of Litigation Study--The Impact on
    Medicine, 2002, p. 9, available at: http://cgood.org/healthcare-
    reading-cgpubs-polls-6.html. A recent survey of specialist physicians
    as part of the Project on Medical Liability in Pennsylvania found that
    nearly all (93 percent) reported practicing defensive medicine.
    ``Assurance behavior'' such as ordering tests, performing diagnostic
    procedures, and referring patients for consultation, was very common
    (92 percent). Defensive practice correlated strongly with respondents'
    lack of confidence in their liability insurance and perceived burden of
    insurance premiums. Studdert, D.M., Mello, M.M., Sage, W.M. et al,
    ``Defensive Medicine Among High-Risk Specialist Physicians in a
    Volatile Malpractice Environment,'' Journal of the American Medical
    Association, vol. 293, 2002, p. 2609.
    ---------------------------------------------------------------------------
        Hospitals have become a kind of slow motion zone where no choice is
    not accompanied by forms in triplicate and precautionary procedures and
    discussions that are tangential to the healthcare decision at hand. A
    pediatrician in Charlotte recently told me that on a routine visit of a
    healthy child he used to write three lines on the patient chart. Now he
    writes 20 or 30 lines describing all the things which indicate that the
    child is not sick. Multiply these procedures by over 3 million doctors
    and nurses, and you have a system that is unaffordable.\9\
    ---------------------------------------------------------------------------
        \9\ U.S. Department of Labor: Bureau of Labor Statistics, May 2005
    National Occupational Employment and Wage Estimates for the United
    States, available at: http://www.bls.gov/oes/current/oes_nat.htm.
    ---------------------------------------------------------------------------
        Let me also acknowledge that legal fear is not the only driver of
    unnecessary tests and procedures. Hospitals can also make money on
    them. But not on my unnecessary physical exam (it was not provided at
    the hospital doing the surgery), or the extra lines on the
    pediatrician's patient chart, or, I suspect, with most decisions by
    dedicated professionals.

         The effects of law on accountability. All people,
    including doctors, make mistakes, and they should fairly compensate
    those injured. The most important accountability, however, is
    licensure--bad doctors shouldn't be allowed to continue practicing.
    Although it is often stated that 5 percent of the doctors result in a
    majority of all claims, this number is misleading because high-risk
    specialties attract a disproportionately high number of claims.\10\ The
    current system makes it hard to hold bad doctors accountable--they hire
    a lawyer, threaten to drag the hospital or licensing board through
    years of litigation. A typical result is a settlement that allows the
    doctor to continue practicing.
    ---------------------------------------------------------------------------
        \10\ U.S. Department of Health and Human Services, National
    Practitioner Data Bank, 2004 Annual Report (for September 1, 1990 to
    December 31, 2004), available at: http://www.npdb-hipdb.com/pubs/stats/
    2004_NPDB_Annual_Report.pdf.

        The Sources of Distrust of Justice. Distrust drives down the
    quality of care and drives up costs, but why is there so much distrust?
    Studies over the years on the effectiveness of justice tend to vary in
    their results, but they tend to show that, if the case goes to a jury
    trial, most juries come to a reasonable result. A recent study led by
    Professor Studdert found that almost two out of five medical
    malpractice claims were baseless, and that one out of four of these
    baseless claims resulted in payments.\11\ On the one hand, this
    indicates that the system is reasonably effective in sorting the good
    from the bad. On the other hand, from the standpoint of a doctor, one
    out of four resembles Russian Roulette. People aren't willing to take
    the risk. In the case of tragic circumstances, moreover, studies
    indicate that juries are more prone to error, as with babies born with
    cerebral palsy.\12\
    ---------------------------------------------------------------------------
        \11\ Studdert, David M., et al., ``Claims, Errors, and Compensation
    Payments in Medical Malpractice Litigation,'' New England Journal of
    Medicine, vol. 354; May 2006, p. 2031.
        \12\ MacLennan, A., Nelson, K.B., Hankins, G., Speer, M., ``Who
    Will Deliver Our Grandchildren?: Implications of Cerebral Palsy
    Litigation,'' Journal of the American Medical Association, vol. 294;
    2005, p. 1688-1690.
    ---------------------------------------------------------------------------
        Distrust of justice is driven not just by the chance of error, but
    by the years-long process--an average of 5 years to get to settlement,
    in Professor Studdert's study. Even where the doctor ultimately
    prevails, a lawsuit is a horrible life-changing experience. For years
    the doctor goes to bed each night trying to figure out how to justify
    some choice made. I commend to the committee the recent essay in The
    New Yorker, ``The Malpractice Mess,'' by Dr Atul Gawande.
        Nor does the system work well from the standpoint of the injured
    patient. First, as Professor Sage has observed, it is hard to get a
    lawyer unless the claim is worth at least several hundred thousand
    dollars.\13\ Next, the litigation drags on for years for injured
    patients as well as for doctors. It is probably accurate to suggest
    that the system favors whoever is in the wrong--they gain an advantage
    merely by threatening to drag the other side through interminable
    proceedings. Most shocking is the cost--the injured plaintiff typically
    pays 33 to 40 percent of any award or settlement to lawyers.\14\ Over
    half the total cost of the malpractice system--$15-17 billion out of
    $28 billion--goes to lawyers and administrative costs.\15\
    ---------------------------------------------------------------------------
        \13\ Sage, William, online discussion at PointofLaw.com, ``Why
    Flatter The Trial Lawyers?,'' Dec. 6, 2005, available at: http://
    www.pointoflaw.com/feature/condition_critical1205.php
        \14\ U.S. Dept. of Health and Human Services, ``Confronting the New
    Health Care Crisis: Improving Health Care Quality and Lowering Costs by
    Fixing Our Medical Liability System,'', July 24, 2002, p. 10, available
    at: http://aspe.hhs.gov/daltcp/reports/litrefm.pdf.
        \15\ In a recent study, Harvard School of Public Health researchers
    found that the cost of litigating claims in the study sample consumed
    54 percent of plaintiffs' awards. Studdert, David M. et al., ``Claims,
    Errors, and Compensation Payments in Medical Malpractice Litigation,''
    New England Journal of Medicine, vol. 354; May 2006, p. 2031.
    Tillinghurst-Towers Perrin has estimated that only 22 cents of a dollar
    moving through the U.S. tort system compensates a plaintiff for
    economic loss. 54 percent of that dollar never even reaches the victim
    (21 percent goes to administrative costs; 19 percent goes to the
    plaintiff 's attorney fees; and 14 percent goes to defense costs.)
    Tillinghast-Towers Perrin, ``U.S. Tort Costs, 2003 Update,'' December
    2003, p. 17.
    ---------------------------------------------------------------------------
        Overall, while justice today eventually gets to the right result
    about three quarters of the time, this would not be considered a
    tolerable risk in other comparable professional activities (certainly
    not in healthcare). The combination of the risk of error, the harrowing
    process and growing costs has resulted in nearly universal distrust of
    American justice. This distrust, in turn, acts as a kind of acid
    corroding American healthcare. Quality, cost, professionalism, patient
    empathy, accountability and effective compensation for injured patients
    are all adversely affected by the defensive culture.
        Special Health Courts. What's required, I believe, is a system of
    justice that aspires to reliability. Doctors need to believe that a
    dispute will be resolved based on accepted standards of effective
    healthcare. Patients need a system that can not only distinguish right
    from wrong, but will do so without an agonizing 5-year process. Most
    importantly, the system of justice must provide a foundation for a
    healthcare culture that is open, aspires to continual improvement and
    does not encourage (or permit) providers to squander billions in
    unnecessary tests.
        Achieving these goals, we believe, requires creation of special
    administrative health courts. Our country has a long tradition of
    specialty courts in areas that are complex. In 1789, there were
    Admiralty Courts. We have Bankruptcy Courts, Tax Courts, and numerous
    administrative compensation systems including the Workers Compensation
    System and the Vaccine Injury Compensation Program. None of these areas
    are as complex as modern healthcare, and none is more important to our
    society.
        Creating new courts is an ambitious undertaking, and we believe it
    is prudent to test the assumptions in pilot projects. While the pilots
    could take many forms, we believe they should incorporate the following
    features:

        (1) Administrative law judges who handle only medical malpractice
    disputes, with written opinions on standards of care.
        (2) Neutral experts, drawn from approved lists, would advise the
    court.
        (3) Noneconomic damages paid according to a schedule depending on
    the injury. This achieves horizontal equity among injuries of the same
    kind, and also eliminates the incentive to keep litigating in the hopes
    (or threats) of a windfall award.
        (4) A liberalized standard of recovery based on whether the injury
    should have been avoidable. Someone who comes into the hospital with
    pneumonia and comes out with a staph infection should be able to
    recover without having to prove how it happened.
        (5) A requirement of transparency and preliminary procedures
    designed to resolve claims with a minimum of time and legal cost.
    Lawyers fees should be based on the time and investment they commit to
    the case, not a flat percentage of recovery.
        (6). Connection to a regulatory department focused on patient
    safety and disseminating lessons learned.

        The potential advantages of this system are enormous. A court that
    writes opinions based on accepted medical standards not only holds the
    promise of overcoming the debilitating distrust, but can provide
    affirmative guidelines for improving care. The regulatory body can
    collect and disseminate information to improve care. The incentives for
    defensive medicine will be sharply reduced. Moreover, affirmative cost
    containment is only possible when there is a court that will reliably
    defend the costs contained. Finally, patients will receive settlements
    much sooner, paying only a fraction of what they now pay in legal fees.
        The constitutional authority to create an administrative
    compensation system in place of a traditional jury trial is clear where
    it is part of a regulatory plan to improve healthcare. Congress has
    broad powers to authorize pilots for specialized health tribunals under
    the Spending Clause, see South Dakota v. Dole, 483 U.S. 203 (1987); and
    under the Commerce Clause because medical injury litigation is economic
    activity that is in and affects interstate commerce. See Gonzales v.
    Raich, 125 S.Ct. 2195 (2005); United States v. Lopez, 514 U.S. 549
    (1995). Contrary provisions of State law, if any, would be pre-empted
    under the Supremacy Clause. See Silkwood v. Kerr-McGee Corp., 464 U.S.
    238 (1984); Pennsylvania v. Nelson, 350 U.S. 497 (1956). Moreover,
    similar Federal administrative compensation systems have been upheld
    against constitutional challenge. Colaio v. Feinberg, 262 F. Supp. 2d
    273 (S.D.N.Y. 2003), aff 'd Schneider v. Feinberg, 345 F.3d 135 (2d
    Cir. 2003).
        Law is essential to a free society because it provides guidelines
    for reasonable conduct. Contracts will be enforced by their terms, and
    people injured by negligence will be compensated for their injuries.
    But law undermines freedom when it fails to offer predictable
    guidelines, and when it tolerates claims against reasonable conduct.
    Because law today offers no guidelines or predictability in healthcare
    disputes, physicians, nurses and other dedicated healthcare
    professionals no longer feel free to act on their best judgment. This
    in turn has tragic effects on the quality and affordability of
    healthcare in our country. By restoring reliability to healthcare
    disputes, special health courts hold the promise of bringing order and
    good sense to the vital decisions needed for effective, safe and
    affordable healthcare in America.
        Thank you.

        The Chairman. Mr. Boothman.
        Mr. Boothman. Thank you, Chairman Enzi, and thank you to
    the committee members, especially Senator Clinton, with whom
    I've worked already on her proposed bill. My name is Rick
    Boothman, and I am the chief risk officer for the University of
    Michigan. We have gotten some notoriety over the years, and I
    guess it's safe to say I bring you the view from the trenches,
    not from the ivory towers.
        I am not a scholar. I was a trial lawyer and represented
    doctors and hospitals in Ohio and Michigan for 22 years before
    coming to the university in 2001, mainly because I believed we
    could handle our claims better.
        I will depart from the witnesses you have heard already in
    one way and probably with my own constituency: I don't believe
    that the system needs radical change. I do believe it needs
    some fixing. But I think our experience has proven that we can
    reduce medical malpractice risk without major revisions and
    abandonment of a system that has developed over hundreds of
    years just by adhering to some principal ethics and by making
    one observation that is a little bit sidetracked from the
    direction of this committee, and that is this; and I say this
    out of the deepest respect and love for the profession that
    I've served for over a quarter of a century. I think the
    malpractice problem is stubborn in part because the medical
    profession has concentrated so hard on lawyers and the legal
    system that it has not paid attention to its own complicity in
    this problem.
        Patients in every study that I'm aware of that's looked at
    why patients sue their doctors really want three things:
    accountability, answers, and assurance that the mistake won't
    happen again. And built on that realization, we've created a
    claims system which has caused our claims to drop from almost
    three-quarters of our claims in less than 4 years; we're down
    to three-quarters. Our costs are less than half what they were
    before. Our reserves, the cost, the actuarial estimate of our
    claims portfolio went from $70 million in 2001 to less than $20
    million.
        And nothing's changed in Michigan. Tort reform happened in
    Michigan in 1994, not lately, and our claims have only changed
    since 2001. Our disposition time, from notice of a patient
    injury to disposition of that, has gone from 20.7 months to 9.5
    months, and it's all been based on simple changes that I think
    mostly arise out of ethics and common sense.
        The first thing we did was pass three simple principles and
    get agreement on these. First, as a system, we committed to
    compensating people who were injured by unreasonable medical
    care at the University of Michigan. Second, we committed to
    defending ourselves aggressively when the care was reasonable
    regardless of the medical outcome, because doctors and nurses
    operate in an inherently dangerous environment, where even the
    most reasonable decision can still result in catastrophic
    illness. It cannot be just about the outcome. And third, we
    committed to learning from our patients' experiences whether
    there was a medical mistake or not.
        Having made those commitments, we have designed a system
    that is relatively fearless in the medical community. We have
    committed to moving forward, because essentially what we have
    said is we will not say anything differently in court than
    we're saying to ourselves. If we've concluded that our care was
    unreasonable, then, what's the harm in talking to the patient?
        So the key is getting to that conclusion first and then
    having the guts, if you will, to step forward and talk to the
    patient. Our staff is encouraged to, in an unvarnished way,
    talk with honesty and credibility to patients at the point of
    complication. We, in our claims mechanism, talk to our
    patients, whether they are represented or not, openly and
    honestly at the point of claim.
        If the claim is defensible, we explain to them why we think
    it is, because the interesting realization is at that moment in
    time, before a lawsuit has been filed, the patient and the
    patient's lawyer have exactly the same interests we do: nobody
    wants to make a mistake. If they have a belief that a medical
    mistake has happened, and we think that's not true, why not sit
    down and talk about it?
        So we have discussions, and I have included in my written
    materials a copy of the flow of our claims management program.
    But we open the table to discussions openly and honestly
    regardless, confident in our conclusions about whether the
    medical care was appropriate or not, and that has resulted in a
    dramatic decrease in all of our claims.
        There are some points I want to make, and I understand my
    time is brief. Changes to the system I don't think have to be
    wholesale, but I do think there need to be changes. We need to
    deal with scientific uncertainty, junk science, and testimony
    from outright charlatans. Medical careers and millions of
    dollars are at stake, and too often, it becomes a beauty
    pageant of experts, not hard science, and judges need to do
    their job in dealing with that. When we select juries, we
    disqualify those with any knowledge of the subject matter and
    then expect them to recognize who's lying and who isn't when
    the experts take the stand. There has to be some mechanism for
    ferreting out what we know scientifically and what we don't.
        All parties benefit from a healthy insurance industry. Caps
    on noneconomic recovery, whether personally I find them
    abhorrent or not, allow for some predictability in the
    business, and even patients benefit from a healthy insurance
    industry. I think we have to consider that.
        Catastrophic injury insurance plans are possible. I've
    worked with some insurance folks, and I don't understand why
    States don't pull together a catastrophic injury insurance plan
    that would serve as an umbrella plan. Even low-risk specialties
    like dermatologists, at the right price, would love to have
    that kind of coverage, and it's possible. Punitive damages, on
    the other hand, have absolutely no place in this discussion.
    They feed the hysteria and are overkill.
        Speaking from experience, patients crave honesty and
    transparency. The problem is that it is a heck of a lot easier
    to be honest and transparent if you are not worried about
    financial ruin. We have to find a way to allow that discussion
    to occur without penalizing our caregivers unnecessarily.
        Litigation was never meant to be the first resort to
    resolve disputes between people. Unfortunately, it has become
    that. I think our system works because we have caused it to be
    the last resort. We say to our patients and to our staff both,
    we will do everything we can to avoid litigation without
    sacrificing our principles but reach an agreement and then use
    litigation to handle intransigent disagreements.
        I think alternatives loosely characterized as no-fault
    systems will not work. To know the difference between
    reasonable and unreasonable care, to understand whether a
    patient's outcome has changed because of the medical care still
    is going to require the kind of litigation we see anyway. Deny
    and defend is the enemy of transparency. Doctors need to
    understand how their own behavior feeds this problem, and by
    opening up and talking to patients, I think we can intercept a
    lot of people who end up going to lawyers in the first place.
        The medical community has got to ask themselves a different
    question, and that is: Why do my patients feel the need to see
    a lawyer in the first place? And I think that there are ways,
    and we are exploring those all the time at the University of
    Michigan and intercepting those things.
        Last, focusing on patient safety and patient communication
    rather than whether to discard our litigation system I think is
    the key here. And getting, and moving that discussion to how
    can we be safer is really all the answer here. How can we be
    safer, and how can we improve patient communication?
        The medical community sets itself up for failure all too
    often by establishing unreasonable expectations in its patients
    and not talking about problems that happen afterwards.
        Thank you.
        The Chairman. Thank you.
        [The prepared statement of Mr. Boothman follows:]

                   Prepared Statement of Richard C. Boothman

                                    SUMMARY

        In 2001, the University of Michigan Health System changed the way
    it responded to patient injuries, complaints and claims. Its approach
    was predicated on three simple, inarguable principles:

        1. We will compensate quickly and fairly when inappropriate medical
    care causes injury.
        2. We will defend medically appropriate care vigorously.
        3. We will reduce patient injuries (and therefore claims) by
    learning from mistakes.

        Adherence to these principles fostered transparency and honesty in
    the health system's approach to patients and their attorneys which has,
    in turn, caused a steady drop in malpractice claims and expense. In the
    process, what started as an effort to reduce claims cost has evolved
    dramatically into more substantive initiatives to improve patient
    safety and communication.
        The University of Michigan's experience yields lessons for wider
    discussion of tort reform:

        A. Medical care cannot be judged simply on outcome. The system must
    do a better job of making the distinction between reasonable and
    unreasonable care.
        B. Scientific uncertainty, junk science and testimony from outright
    charlatans must be filtered out.
        C. All parties benefit from a healthy insurance industry.

        a. Caps on noneconomic recovery. Caps on noneconomic recovery
    (elements of damage not subject to calculation) are one way to blunt
    the wide swings.
        b. Catastrophic injury insurance plans. Are possible and should be
    explored.
        c. Punitive Damages. There is simply no place for punitive damages.

        D. Honesty and transparency are easier to achieve if caregivers do
    not believe they are risking their financial lives by talking to their
    patients.
        E. Litigation was never meant to be the first resort for resolving
    disputes. Reform must offer the opportunity, incentive or if necessary,
    impose a requirement that the parties talk to each other before
    resorting to litigation as a means for resolving disputes.
        F. Alternatives loosely characterized as ``no fault'' systems will
    not work.
        G. ``Deny and defend'' is the enemy of transparency. Mainstream
    medicine must turn its attention to its own complicity in this problem
    and stop blaming trial lawyers or the system for the crisis.
        H. Gaps in the social safety net drive some litigation.
        I. Focusing on patient safety and patient communication rather than
    whether or not to discard our legal system is absolutely essential.
        J. As long as this issue is treated as a battle to be won or lost,
    it will not be fixed. I applaud the work of this committee and
    specifically, the efforts of Senators Enzi, Baucus, Clinton and Obama
    in this regard.
                                     ______

                                  INTRODUCTION

        I want to thank you, Chairman Enzi, Ranking Member Senator Kennedy
    and members of this committee, especially Senator Clinton, for the
    opportunity to appear today. I am the Chief Risk Officer for the
    University of Michigan and in that capacity, I have responsibility for
    overseeing the manner in which the University of Michigan responds to
    patient injuries, patient complaints and patient claims.
        I came to the University in July 2001 as Assistant General Counsel
    after 22 years of trial work, defending doctors, hospitals and other
    healthcare providers in Michigan and Ohio. In private practice, I
    represented a wide variety of care givers, from individual physicians
    to large group practices, from small inner city, minority-owned
    hospitals to a chain of osteopathic community hospitals to large
    academic medical centers like the University of Michigan and the
    Cleveland Clinic Foundation. I left trial practice and the law firm I
    founded because I believed the University could improve the way it
    handled patients' complaints, claims and litigation.
        In 22 years of practice, not a single client ever asked me what
    they could learn from the cases I handled for them. Driven by that
    realization, I was convinced that the University could not only save
    money in the short run through smarter claims management, but reduce
    future patient claims by learning from our patients' complaints. I
    could not have imagined that our experience would garner the national
    and even international attention it has, and I certainly never
    envisioned our work would lead to an opportunity to appear before a
    committee of the U.S. Senate. Thank you.
        I am not a scholar. I have not had much time to research and read
    what has been written on the issues this committee has undertaken to
    study. My opinions arise from my experiences representing doctors and
    hospitals in malpractice cases, my experiences with the University of
    Michigan's program and frankly, from common sense. I am not an advocate
    for a particular interest group or point of view--indeed, some of my
    views elicit vigorous disagreement from UM doctors. I am well aware
    that my opinions do not sit entirely well with either end in this
    discussion and there are those in the medical and insurance communities
    who view some of my opinions as treasonous. My trial lawyer's instincts
    strongly suggest that if my views please neither side entirely, we very
    well may be on the right track.
        What started as a focused effort to reduce claims costs at the UM
    has evolved to reveal the roles that inadequate commitment to patient
    safety and unmindful patient communication play in the stubborn problem
    which has plagued the medical community for decades. I appear today,
    not to ``win'' a fight, but to help fix this problem.

                         IDENTIFICATION OF THE PROBLEM

        This committee's interest is identification of new ideas to make
    the system, (presumably the litigation system) work better for patients
    and physicians. I suggest that clarification of the problem is a
    necessary first step. I am convinced that the problem stubbornly
    persists despite past attempts to address it in large part because the
    treatment to date has targeted the wrong diagnosis.
        Few involved in the medical malpractice arena would argue with
    Professor Sage's assessment in his March 2005 DePaul Law Review Journal
    article:

              ``For over a century, American physicians have regarded
            malpractice suits as unjustified affronts to medical
            professionalism, and have directed their ire at plaintiffs'
            lawyers . . . and the legal system in which they operate.''\1\
    ---------------------------------------------------------------------------
        \1\ Sage, William, Medical Malpractice Insurance and the Emperor's
    Clothes 54 DePaul Law Review 463, 464 (24 March 2005).

        We ask a lot of our doctors, nurses and other healthcare providers.
    They are by nature, an unbelievably committed group, driven mostly by a
    strong sense of personal reward derived from helping sick people. Yet,
    they spend every working day in an inherently dangerous environment, a
    world in which the simplest decision, like prescribing antibiotics for
    a child's first ear infection, can have devastating consequences. We
    clearly need to better understand the trauma to the caregiver when such
    a catastrophe occurs, but it should come as no surprise that physicians
    reflexively blame the messenger when a patient asserts a claim.
        Understandable human emotions may feed the ``deny and defend''
    response to patient's complaints, but few believe the strategy has been
    effective. More importantly, that strategy has exacted a heavy cost.
    Simplistically blaming the legal system and plaintiffs' lawyers for
    patient complaints has stunted earnest efforts to improve patient
    safety and skirted recognition that many complaints could have been
    avoided by more thoughtful patient communication. Improving patient
    safety and patient communication honestly and openly is treatment more
    likely to cure the malpractice crisis than defensiveness and denial.
        The University of Michigan's approach is effective in my opinion,
    because we have focused our efforts more accurately on the primary
    causes for most patient litigation: a failure to be accountable when
    warranted and a reluctance to communicate. Isolating the factors that
    comprise our approach can inform a broader debate on ``making the
    system work better for patients and doctors.''

                                   BACKGROUND

        The State of Michigan's last tort reforms took effect in April
    1994. (See attached) Among other provisions, those statutes,

         Created a compulsory 6-month pre-suit notice requirement;
         Created a two-tiered cap on noneconomic recovery, a lower
    general cap and an upper cap applicable to central nervous system
    injuries and injuries to reproductive organs rendering the patient
    incapable of procreation;
         Tightened qualifications necessary for experts testifying;
         Required an affidavit of merit by qualified experts to
    support any Complaint and Answer to Complaint filed.

        The reforms had little effect on the UM's claims experience and
    almost no impact on the way in which the University responded to
    claims. Our claims rose, modestly but steadily from 1994 to 2001 and
    our costs rose with them. Pro activity was a fairly foreign concept and
    I was aware of no hospital or insurance company in southeastern
    Michigan that systematically utilized the pre-suit notice period to
    resolve claims or even, for that matter, prepare for litigation. The
    University, for the most part, still responded in the traditional
    ``deny and defend'' mode. Coupled with a distinct aversion to the risk
    of trial, the combined strategy, typical for mainstream medicine even
    today, virtually guaranteed that resolution of patients' disputes would
    take a long time and would cost a lot, financially and otherwise. Like
    all of my other clients at the time, the University had no systematic
    way to learn from its claims.
        In August 2001, the UMHS had 262 open claims, varying from pre-suit
    notices to active litigation. Actuaries valued the portfolio for
    reserves at more than $70 million. For an institution of our size and
    complexity, ours was actually an enviable record. Though no public
    disclosures exist to my knowledge, other institutions of similar size
    in our area reportedly had two and three times as many claims.

              UNIVERSITY OF MICHIGAN CLAIMS EXPERIENCE SINCE 2001

        Claims numbers fluctuate as existing cases are settled or dropped
    and new cases arrive. But using the month of August as a benchmark, the
    UMHS's claims numbers have dropped steadily despite a considerable
    increase in clinical activity over the same period.

         In August 2001, we had 262 total claims;
         In August 2002, we had 220;
         In August 2003, we had 193;
         In August 2004, we had 155;
         In August 2005, we had 114;
         Since August 2005, we have dropped below a hundred.

        Our average claims processing time dropped from 20.3 months to 9.5.
    Total reserves on medical malpractice claims dropped by more than two
    thirds. Average litigation costs have been more than halved.
        Our approach may have achieved the unthinkable: it pleases doctors
    and trial lawyers. Surveys conducted in early 2006 of our medical
    faculty and the plaintiff's bar in southeastern Michigan yielded
    approval from both sides. In our physician survey, more than 400 UMHS
    faculty physicians responded, and:

         87 percent said that the threat of litigation adversely
    impacted the satisfaction they derived from the practice of medicine;
         98 percent perceived a difference in the University of
    Michigan's approach to malpractice claims after 2001;
         98 percent fully approved of the approach;
         55 percent said that the approach was a ``significant
    factor'' in their decision to stay at the University of Michigan;
         The only consistent criticism was that they wanted more
    attention from Risk Management to assist them in reducing the threat of
    malpractice.

        At the same time, we surveyed members of the plaintiff 's bar in
    southeastern Michigan, all specializing in medical malpractice:

         100 percent rated the University of Michigan ``the best''
    and ``among the best'' health systems for transparency;
         90 percent recognized a change in the University of
    Michigan Health Systems approach since 2001;
         81 percent said that they had changed their approach to
    our Health System in response;
         81 percent said their costs were lower;
         71 percent admitted that when they settled cases with the
    University of Michigan, the settlement amount was less than
    anticipated;
         86 percent agreed that the University of Michigan's
    transparency allowed them to make better decisions about the claims
    they chose to pursue; and
         57 percent admitted that they declined to pursue cases
    after 2001 they believe they would have pursued before the changes were
    employed.
       university of michigan health system changes between 2001 and 2005
    A Principled Approach
        Initially, a simple set of principles, (in my opinion, inarguable),
    were constructed and we began to make claims decisions immediately in
    the context of that framework:

        1. We will compensate quickly and fairly when inappropriate medical
    care causes injury.
        2. We will defend medically appropriate care vigorously.
        3. We will reduce patient injuries (and therefore claims) by
    learning from mistakes.

        These principles were publicized to our staff, our trial attorneys,
    the courts and directly and personally to plaintiff 's lawyers in
    southeastern Michigan. Adherence to these principles created
    consistency in our response to claims and began to build confidence
    among our staff.
    Distinguishing Reasonable From Unreasonable Medical Care
        Commitment to these principles was, and remains essential to every
    other aspect of our approach. Key to honoring these principles is
    understanding the difference between reasonable and unreasonable care
    and an infrastructure and system for hard claims analysis was
    constructed to utilize whatever pre-suit period we would have to arrive
    at the pivotal determination.
    The Benefits of Transparency
        Flowing directly from this commitment is transparency. Decades of
    lawyers' admonitions not to talk about claims until the cases were
    resolved disappeared when we committed to acting in accordance with our
    conclusions about the reasonableness of our care. Concerns for
    compromising litigation virtually disappeared--if we concluded that our
    care was unreasonable and harmed a patient, we would be moving to
    resolve the claim. If we concluded that our care was reasonable, did it
    really matter if those conversations were revealed through discovery?
        It became immediately apparent that our interests and the patient's
    interests at that point were exactly the same: as both faced the
    prospect of litigation, neither side wanted to make a mistake. We did
    not want to defend a claim for years only to decide the claim warranted
    settlement and the patient and his lawyer obviously do not want to
    engage in expensive, time consuming and emotionally draining litigation
    only to lose the case. Discovery eventually leads to full disclosure
    anyway; so why not simply share our conclusions early and
    inexpensively? If our conclusions prove to be wrong, we want to know
    that before litigating. We discovered that nearly every plaintiff 's
    lawyer came to the same conclusion.
        Our process then lead to open dialogue with our patient and if
    represented, the patient's lawyer. Open, honest, and robust,
    discussions occur between patients and their doctors, doctors and the
    lawyers threatening to sue them. Expert opinions are exchanged and
    agreements are reached: sometimes agreements to drop the claim,
    sometimes to settle, sometimes to apologize and occasionally, to
    disagree. Constructive engagement allows the parties to mutually
    understand what they are facing with litigation and both sides can move
    forward with ``informed consent.'' In the dynamic created, the decision
    to litigate becomes a mutual one and litigation is relegated more and
    more frequently to the role it was meant to play: a last resort for
    resolving intransigent disputes.
        Claims at the UM follow this flow:

        Commitment to these principles opens the door to immediate and
    decisive quality improvement measures and peer review opportunities. We
    are routing our patient's complaints, even those deemed without
    substance, through a process that asks in every single instance: Could
    we have done better? What improvements could be undertaken to avoid
    these kinds of complaints in the future? Why did this patient complain
    and how can we avoid the same thing happening again? Are there lessons
    to be learned? And we are not waiting until the claim is resolved.

        Commitment to these principles stimulates a more robust
    communication between our doctors and patients at the point of care and
    complication. Our staff, essentially ``finally granted permission by
    the lawyers'' as one of our doctors characterized it, to speak openly
    is also principle-based and I believe this openness, intelligently and
    sensitively accomplished, will prove to be effective at intercepting
    patients before they feel the need to see a lawyer.
        Despite widespread convictions that patients see lawyers because
    they are looking for a financial windfall, studies done to understand
    why some patients hire lawyers all yield the same results: patients are
    actually seeking accountability, answers and assurances that the same
    complication will not befall anyone else. My own experience cross-
    examining probably thousands of witnesses and litigants confirms the
    studies' findings. Rather than demonizing lawyers and the legal system,
    physicians need to ask a more difficult question: ``Why would my
    patient feel the need for an advocate?''
        None of these changes could have been implemented or accomplished
    without strong and committed leadership and robust participation by our
    physicians, nurses and other healthcare providers. Openly acknowledging
    that patient safety is at the heart of many patient complaints, our
    Chief of Staff, Skip Campbell, M.D. has undertaken bold initiatives in
    systemwide peer review and patient safety improvement with the avowed
    goal of becoming the ``safest hospital in the United States''.\2\ The
    UMHS's chief executive officer, Doug Strong, recently observed at a
    board meeting that though we may be realizing significant savings
    through more prudent claims management, real savings lies in improving
    patient safety and that would be a driving force in the future.
    ---------------------------------------------------------------------------
        \2\ Anstett, Patricia, U-M Hospital's Goal: Safest in the Nation.
    The Detroit Free Press, February 24, 2004.
    ---------------------------------------------------------------------------
        What began as a set of strategies to save costs of litigation has
    evolved dramatically in a different direction: by focusing on patient
    safety and improved communication, we are now confident that medical
    malpractice will be relegated to background noise.

                         LESSONS FROM THE UM EXPERIENCE

        A. Healthcare professionals work in an inherently and unpredictably
    dangerous environment in which the simplest decision can have
    catastrophic consequences for their patients. Medical care cannot be
    judged simply on outcome. The system must do a better job of ensuring
    that the distinction between reasonable and unreasonable care is made
    with clarity and based on sound medical and scientific knowledge. All
    too often, these conclusions turn on an expert's ``performance'' in the
    courtroom and not on scientific and medical substance. The failure of
    our system to ensure this is a major contributor to physicians' belief
    that the system does not provide justice for them.
        B. Scientific uncertainty, junk science and testimony from outright
    charlatans must be filtered out. This may mean a role for ``medical
    courts,'' but there exist in probably every jurisdiction in the country
    tools for courts to ensure claims are not based on shaky scientific and
    medical grounds. Evidentiary hearings, court-appointed masters,
    bifurcation of trials are all currently available to trial courts and
    though employed in other fields like real property litigation, are
    almost never used in medical malpractice suits. (Interestingly, the
    medical specialties have also failed to address this problem, though
    there are budding efforts underway to censure specialty board members
    that render clearly dishonest and unsupported testimony in Neurosurgery
    and Ob/Gyn.) At a minimum, judges must accept their role as gatekeeper
    of the evidence and robustly screen complicated expert opinions before
    allowing them to go the jury.
        C. An inconsistency continues to plague trial practice in this
    specialty: historically, opinion testimony deemed an infringement on
    the province of the jury and witnesses were restricted to factual
    testimony. As issues became increasingly complex, rules of evidence
    relaxed and expert opinion testimony was allowed where the court deemed
    the issues outside the experience of the average juror. We select
    juries by disqualifying those with knowledge of the subject matter,
    then expect these people to recognize which expert is lying and which
    one is accurate. With physicians' careers and millions at stake, the
    ``battle of the experts'' all too often becomes a beauty pageant.
        D. We submit these complicated issues to the very people the court
    has acknowledged cannot understand them and still expect doctors to
    feel that they are being judged by a jury of their peers.
        E. All parties to the issue are benefited by a healthy insurance
    industry. No patient's lawyer wants to find out that the doctor
    involved is un- or under-insured. Hospitals for years have served as
    excess carrier to physicians with too little insurance protection. Like
    it or not, the insurance industry requires some measure of loss
    predictability in order to remain financially healthy and in order to
    attract companies to offer this coverage. There are measures which can
    be taken to assist in this regard:

        a. Caps on noneconomic recovery. Caps on noneconomic recovery
    (elements of damage not subject to calculation) are one way to blunt
    the wide swings. They are by definition arbitrary and will pose a
    hardship on some injured patients, but may be a necessary evil. Though
    remedies to runaway verdicts like remititur and new trials also are
    available to trial courts, those remedies are rarely used, are not
    reliable nor predictable.
        b. Catastrophic injury insurance plans. There is no reason States
    could not pull together catastrophic injury insurance plans which would
    provide catastrophic injury protection over a base primary insurance
    policy. The physicians could subscribe for very attractive premium
    costs, the lower risk physicians would subsidize the higher risk
    specialists if constructed properly. Participation would be conditioned
    on the physician's agreement to peer review, quality audits and other
    requirements.
        c. Punitive Damages. In my opinion, there is simply no place for
    punitive damages. Invariably, the anomalous case reports arise in
    States with punitive damages. The existence of this form of recovery
    invites lawyers to speculate on high value--low liability cases.
    Adequate measures exist to punish physicians who deserve punishment.

        F. Honesty and transparency are much easier to achieve if
    caregivers do not believe they are risking their financial lives or
    their insurance coverage by talking to their patients. Catastrophic
    injury protection is one way to address this problem.
        G. Litigation was never meant to be the first resort for resolving
    disputes. Reform must offer the opportunity, incentive or if necessary,
    impose a requirement that the parties talk to each other before
    resorting to litigation as a means for resolving disputes. The Michigan
    scheme offered the opportunity and it is now increasingly used, but for
    the first 10 years few insurance carriers or hospital systems availed
    themselves of that opportunity. Perhaps more than any other feature to
    the UM's approach, we have found that the free and credible exchange of
    information is responsible for the UM's success. All parties deserve to
    know that every opportunity to resolve the misunderstanding, dispute,
    or claim has been made before litigation is invoked.
        H. Alternatives loosely characterized as ``no fault'' systems will
    not work. The medical and insurance communities will not be fairly
    served by creating an entitlement not based on the reasonableness of
    care. Physicians championing these alternatives and anxious to
    eliminate confrontation will not feel that justice has been served if a
    check is written on their account every time a patient's outcome is
    less-than-optimal. And the theoretical underpinning of these proposals
    is inherently flawed: whether you seek to determine if the outcome
    resulted from negligence, or preventable, or avoidable error, the net
    effect from a litigation perspective is the same. All require expert
    testimony, discovery and the rest and the legal costs allegedly saved
    by these proposals are lost in the determination.
        I. ``Deny and defend'' is the enemy of transparency. Mainstream
    medicine must turn its attention to its own complicity in this problem
    and stop blaming trial lawyers or the system for the crisis. All of the
    evidence suggests that changes in our approach to patients may
    alleviate this problem, yet as long as Medicine is in denial, those
    changes will not occur. Hospitals and doctors must confront the ways
    their own behavior actually drives patients to feel the need for an
    advocate to deal with them. This problem cannot be fixed without active
    participation and leadership from physicians.
        J. Gaps in the social safety net drive some litigation. Families
    faced with the results of catastrophic outcomes sometimes are driven to
    consider litigation as a means of financial survival. This driver needs
    to be addressed.
        K. Focusing on patient safety and patient communication rather than
    whether or not to discard our legal system is absolutely essential. The
    best way to deal with the medical malpractice crisis is to turn our
    attention in those directions which requires bold and focused
    leadership from physicians and nurses.
        L. As long as this issue is treated as a battle to be won or lost,
    it will not be fixed. The polemics must be set aside in recognition of
    the fact that we are all in this together, that persistence of this
    problem continues to cost every American money and more. Radical
    proposals like scrapping our tort system must give way to detailed,
    focused efforts designed to reach the real problems. I applaud the work
    of this committee and specifically, the efforts of Senators Enzi,
    Baucus, Clinton and Obama in this regard.

        [Editor's note--Due to the high cost of printing, previously
    published materials submitted by the witness (i.e., Appendix-Michigan
    Malpractice Laws) may be found in the files of the committee.]

        The Chairman. Ms. Sheridan.
        Ms. Sheridan. Good morning; thank you.
        First, I'd like to begin by thanking Senators Enzi and
    Baucus for their courage to jointly propose bold, new territory
    and to challenge the longstanding stalemate on tort reform. I
    also thank you for valuing the contribution of real life
    experiences in the tort system.
        I think I was further down in the trenches than Richard
    here. My family has experienced two medical errors with
    devastating impact, one that resulted in the death of my
    husband, Patrick, due to the failure to communicate a malignant
    spinal cancer which resulted in a delay in treatment for 6
    months. The tumor penetrated Pat's spinal cord, severed it,
    paralyzed him, and he died in 2002.
        The other error resulted in the permanent brain damage of
    our newborn son Cal in 1995 from the failure to test and treat
    newborn jaundice. This condition is known as kernicterus, and
    today, Cal has cerebral palsy. He is hearing impaired, speech
    impaired, and he has uncontrollable movements of his legs and
    arms.
        My family has learned from experience that the legal system
    does not serve the needs of families who have been harmed, and
    I say that even though in the end, many would say we won our
    medical malpractice cases. Cal's litigation took 8 years. Pat's
    case took 4 years. We were left on our own to take care of Pat
    and Cal with our own resources. I maxed out two credit cards
    and our home equity line to take care of both of them during
    that time.
        During those 8 years, we were in a 7-week trial that we
    lost. We were in a State U.S. Supreme Court hearing, three
    mediations, hundreds of depositions, hundreds of thousands of
    dollars, and finally settlements that amounted to a fraction of
    the total amount spent by all.
        Unfortunately, in media and tort conversations, patients
    are always characterized as greedy and eager to sue when
    medical error occurs. We sued in Cal's case because we had to.
    Cal's life care plan is several million dollars, and as
    parents, we had the responsibility to provide the best care for
    our son. In Pat's case, we made it very clear to the hospital
    and doctor that we did not want to sue, because we found the
    system dishonorable. Initially, we had sincere conversations;
    however, after the insurance companies and the legal counsel
    became involved the communication came to a screeching halt.
        After being told not to contact them anymore, we filed a
    lawsuit on the last day of the statute of limitations and
    entered into a 4-year litigation process. During that time, my
    husband Pat died, never knowing if his son's case would ever
    result in justice or if Cal would be financially taken care of.
    He also died feeling betrayed by a doctor who was once his
    hero, who disappeared instead of sitting down and talking with
    us.
        Now, as a widow and a mom to a disabled little boy and an
    8-year-old little girl, I have gained a unique insight into the
    reality of our current tort system. What I have learned from my
    position as chair of Patients for Patient Safety at the World
    Health Organization and President of Consumers Advancing
    Patient Safety, where we work for patients from all over the
    world, is that medical error is an incredibly human phenomenon
    regardless of geographical phenomenon, economic condition, or
    language, but sadly is treated in a tragically in-human manner.
        In my late husband's words, we witnessed the intolerable
    absence of integrity and honor in medical malpractice. Indeed,
    the errors caused tremendous sadness, and loss of life that I
    never would have imagined as a woman or mother. But the errors
    were undoubtedly unintentional and truly mistakes, and Pat and
    I knew that. But what happened after the medical errors and how
    my family was treated through the litigation process, a process
    that we did not want to enter and tried in every manner to
    avoid, was very calculated, deliberate, and by far the most
    disturbing experience in my life.
        But Pat and I trusted the wisdom of the jury, the integrity
    of professionals, and the long history of our judicial system.
    But what we witnessed was a system in deterioration, a system
    that we naively believed would be based on the truth, fair
    compensation, and what was right. We learned, with great
    disappointment and even alarm, that litigation is a win-at-all-
    costs blame game that is wildly inconsistent, is deviously
    strategic, and rarely makes our healthcare system safer.
        Today, kernicterus and lost pathologies happen over and
    over and over again. Our lawsuits had nothing to do with
    creating a safer healthcare system, unfortunately. We learned
    that the system where patients who file lawsuits are vilified,
    abandoned, and sometimes even denied healthcare. In Cal's case,
    there is one pediatric neurologist in the State of Idaho, and
    he sent us a registered letter stating that he will not treat
    my son, even in the event of an emergency.
        The biggest lessons learned and opportunities of the future
    include, first, we witnessed a legal system infested with
    expert witnesses able to offer unscientific and fictional
    testimony known as junk science for handsome fees. Now,
    typically, you hear about this on the other side of the fence.
    This happens to plaintiffs as well. And there are no
    consequences to those expert witnesses. Our judge stated, in a
    memorandum declaring a mistrial when we lost our first trial
    for our son that the expert witness testimony was offered for
    the mere purpose of obscuring the actual circumstances and
    misleading the jury. This is wrong, and this needs to be
    investigated.
        Second, I also witnessed a system that pressures patients
    to sign gag clauses so we can't speak openly about the case,
    which ultimately could help prevent future injuries. With
    regard to kernicterus, all but a few cases have been
    effectively buried by confidentiality agreements, a condition
    of settlement insisted upon by doctors and hospitals. They are
    just wrong, and they are very dangerous to the public health.
        Gag clauses are nothing short of bribes and intimidation. I
    can only ask myself if Cal would have kernicterus now if he
    could walk, if he could speak clearly, if some of the cases
    before his injury had been made public before his birth. We
    must incentivize transparency. Finding a way to declare
    confidentiality agreements contrary to public interest is an
    excellent place to start.
        Third, something very disturbing to me about the
    traditional tort system is the tremendous variation between
    awards for patients and families with similar needs. There has
    been a kernicterus verdict in this country of close to $90
    million. Cal got a tiny fraction of that, and I know families
    who got a fraction of what Cal got. Their children will
    inevitably become a burden to the Medicaid system, and most,
    including my son, Cal, already are. Justice should be
    equitable.
        It is my understanding that the tort system was created for
    powerful, honorable reasons, and that was for the people. So I
    ask all of you involved in tort reform to follow these
    guidelines. Do it for the right reason. Remember that people
    who experience medical error are not just dollar figures. We
    are your loved ones. We are you.
        And closing, I invite you and I challenge you to envision a
    system that is fair and reliable and ask you to use your power,
    your courage, and your sense of justice to shape innovative
    programs that mark a return to integrity and honor. For those
    of you who believe the current tort system works, it does not.
    I have witnessed the dark side and the underbelly of the tort
    system. For those of you who believe that arbitrary caps on
    noneconomic damages are the answer, well, first of all, we know
    it hurts the most severely injured, and second of all, it is a
    cowardly solution that is unwilling to drill down to the real
    problems. But most importantly, let's truly serve the people
    who are relying on you, like dads and babies.
        Thank you.
        The Chairman. Thank you very much.
        [The prepared statement of Ms. Sheridan follows:]

               Prepared Statement of Susan E. Sheridan, MIM, MBA

        Good morning. I would like to begin by thanking Senators Enzi and
    Baucus for their courage and foresight in developing S. 1337, the
    ``Fair and Reliable Medical Justice Act.'' It is my pleasure to be here
    today to share with you the experiences of my family with the medical
    litigation system, and those of other consumers who I have come to
    know.
        My name is Susan Sheridan. I live in Boise, Idaho. I am a mother
    and a widow. I also am the President of a nonprofit organization called
    Consumers Advancing Patient Safety--or CAPS--which was established in
    2003 by healthcare consumers and providers working together to create a
    healthcare system that is safe, compassionate and just. I also serve as
    the chair of a World Health Organization (WHO) initiative called
    Patients for Patient Safety, one of six programs launched in 2004 that
    together make up the WHO's World Alliance for Patient Safety. Our
    program recruits consumers from around the world to bring their wisdom
    and experience to health ministers and policymakers interested in the
    real interests of patients and families. In the past 6 months, we have
    convened workshops for proactive, partner-oriented consumers and
    healthcare leaders in the United States and the United Kingdom, with
    similar events planned in the next 6 months in Canada, Argentina,
    Africa and the Middle East.
        Through my own experience and my interaction with others, I have
    become acutely aware of the importance of aligning the signals and
    incentives of the tort system with patient safety goals. We will not
    achieve safer, more compassionate healthcare if our legal systems
    continue to tolerate and encourage behaviors that hide lessons learned
    from medical error, that convert patients and their providers into
    enemies when they need to heal, and that reduce trials into jousting
    matches between exorbitantly paid medical experts. Tort reform, as it
    is usually understood, remedies none of these problems. For these
    reasons, we applaud the fresh, forward-looking, bipartisan approach
    represented by S. 1337.
        My family has experienced two medical errors with devastating
    impact. My husband, Pat, died in 2002 due to the failure to communicate
    a malignant cancer of the spine. His pathology tests showed an
    aggressive cancer, but they seem to have been lost between the hospital
    and his surgeon's office for a few weeks, and then inserted in my
    husband's medical record without being reviewed. When the tumor
    recurred 6 months later, it had grown into his spinal cord and it was
    too late to save his life.
        In 1995, our first child, Cal, suffered permanent brain damage
    during his first week of life from the failure to test and treat
    newborn jaundice. This condition, known as kernicterus, is highly
    preventable by exposure to a spectrum of light, a process known as
    phototherapy. Today Cal has cerebral palsy, is hearing and speech
    impaired and has uncontrollable movements of his body.
        My family has learned from experience that the legal system does
    not serve the needs of families who have been harmed, and I say that
    even though in the end many would say we ``won'' our malpractice cases.
        In Cal's case, we sued because we believed in the legal system . .
    . and because we had no other choice but to seek compensation. Cal's
    lifetime medical, rehabilitative and special needs costs are estimated
    to be in the millions of dollars. As parents we had the responsibility
    to care for our son who, despite extreme physical disabilities, is not
    cognitively impaired. In fact, Cal is a bright, creative boy with both
    great potential and an extraordinarily challenging future.
        From the beginning, the hospital and doctor defendants pursued a
    two part strategy in Cal's case: vilify Pat and me by suggesting that
    we were trying to get rich off our son's injury and challenge Cal's
    diagnosis. Although we produced national experts who testified that Cal
    had classic kernicterus, the defense got past a summary judgment motion
    by producing an expert who said he was only 49 percent sure that Cal
    had kernicterus. Another stated that perhaps I had passed a virus to
    Cal through the placenta. After a 7-week trial, the jury found for the
    defense, a verdict that was subsequently set aside by the trial court
    judge based on his determination that the expert testimony offered was
    unsound. In his memorandum opinion, the judge wrote:

              The syntactical contortions which counsel and the witnesses
            wound through to deliver these opinions were wondrous to
            observe. One expert conceded that he was only 49 percent sure
            that the collection of symptoms established kernicterus, this
            therefore justified his opinion that more probably than not,
            Cal did not have kernicterus, although he could not identify
            through differential diagnosis any other condition or disease
            with the same constellation of symptoms which might exist.

        He went on to observe,

              I have great difficulty when the expert appears to be
            straining an opinion to meet the requirement of advocacy.
            Unfortunately in my experience, this latter spectre occurs far
            too frequently in medical malpractice cases, where it appears
            to me that medical witnesses are willing to bend their
            testimony . . .
              All of the experts, on both sides, viewed this case as a
            competition--a verbal jousting match between lawyer and
            witnesses. The thrust and parry between witness and examiner
            was wondrous to behold . . .
              Although technically superb, the cross examination of these
            experts truly offered little opportunity for the jury to plumb
            the depths of the expert's opinion, and measure the technical
            differences between the views offered.

        (Sheridan vs. Jambura et al, Memorandum Decision, District Court of
    the Fourth Judicial District of the State of Idaho, in and for the
    County of ADA, Case No. CV-PI 97-00266-D, July 19, 1999, attached as
    Exhibit 1.) The judge's order setting aside the jury verdict was
    appealed, ultimately to the Idaho U.S. Supreme Court, which affirmed
    and ordered a new trial. Discovery started again, but this time the
    hospital's defense strategy completely changed. They no longer
    challenged the diagnosis; the theory this time was that Cal had
    kernicterus, but it was completely his pediatrician's fault.
        I know among lawyers it is considered normal to plead alternative
    theories of causation. But I ask you to put yourself in the shoes of
    the injured party and look at that practice again. The hospital's ``win
    at all costs'' attempts to deny that Cal had kernicterus cost us
    hundreds of thousands of dollars and delayed justice for years. The
    costs of the first trial were expenses we owed to our attorneys, in
    addition to a 40 percent contingency fee. That is just not right, and
    as his mother, I worry every day that Cal just will not be taken care
    of as he should be from the net award he received.
        After more discovery and two mediations, we settled Cal's case. The
    process took 8 years. In the settlement process, I came under enormous
    pressure from my lawyers as well as the defendants' to sign a
    confidentiality agreement. I couldn't bring myself to do it. From the
    time Cal was diagnosed, I had been writing letters to the public health
    leaders in our country, trying to alert them to the fact that my son
    suffered what was then thought to be a freak accident in a hospital
    that delivers more than 5,000 babies a year. In the end, I promised not
    to name the hospital or discuss the amount of Cal's settlement in any
    communications, but retained the right to discuss his injury.
        My husband's medical problems occurred after Cal's first trial. He
    had a tumor on his spine. We sought out one of the foremost spinal
    surgeons in the country to help us. After surgery, he gave us the good
    news that Pat's tumor was benign, congratulated us for dodging a bullet
    and told us to ``Go home and live your lives.'' When another tumor
    grew, we returned to him immediately for a second surgery 6 months
    after the first. He was our hero; our hope and trust was in him.
        As we prepared for the second surgery, we were met with strange
    questions about why Pat had not gotten follow up care for the first
    tumor. We explained our understanding that there was no need as Pat's
    tumor had been successfully removed and had been benign. In the
    conversations that ensued, we were led to believe that Pat's benign
    first tumor had somehow become cancerous. I am the one who discovered
    the pathology report that said Pat's first tumor was a sarcoma.
        When Pat came to, I explained all that had happened and assured him
    that we were not going to relive the same experience we had in our home
    town, where we had been shunned by the healthcare system once we'd
    filed suit. But the truth was that we never saw Pat's surgeon again. We
    were discharged by a nurse, who stuck her head in the door and said,
    ``You can go now.''
        When I called the pathologist who had signed the report to discuss
    what it meant, and why the pathology report was dated several weeks
    after the first surgery, he referred me to the patient ombudsman. I
    explained to this man that our family had been through litigation
    before, that we thought it was a dishonorable process and that whatever
    was to happen, we did not want to litigate. This approach was initially
    welcomed, and we agreed to continue to talk.
        I believed the first response of this hospital to my request for
    open communication was sincere. However, after the insurance companies
    and legal counsel became involved, communication came to a screeching
    halt. We think the hospital and the surgeons' group, which had
    different insurers, wanted to preserve the right to point the finger at
    one another. Perhaps they wanted to wait to see if Pat would die. After
    being told not to contact them anymore because they could not talk to
    us, we filed a lawsuit on the last day of the statute of limitations
    period and entered into a 4-year litigation process.
        Pat was subsequently treated at University of Texas M.D. Anderson
    Cancer Center, where everything was done to save his life. He died
    feeling betrayed by a doctor who was once his hero--who disappeared
    instead of sitting down and talking with us.
        Our claim against the hospital and surgeon also ended in
    settlement. Throughout the negotiation, I indicated that I would not
    sign a confidentiality agreement, and that I sincerely wanted to work
    with this hospital to prevent critical test care results from being
    lost for other patients. I think it is fair to say that my lawyers, and
    probably theirs, thought this was a naive request. From their point of
    view, this was about money. We were numbers, that was it.
        I'm not sure that Pat's surgeon felt that way, however. As a
    condition of settlement, I asked to meet with the surgeon and the
    hospital CEO. I wanted to renew my request that we work together to
    prevent failures like this one from happening again. At the beginning
    of our meeting, I was told the surgeon would not be attending. His wife
    had called the CEO to say that he was too upset to talk to me.
        As a result of my letter writing, I was invited to testify here in
    Washington at the first Agency for Healthcare and Research and Quality
    National Summit on Medical Errors and Patient Safety Research in
    September 2000 (accessible at http://www.quic.gov/summit/
    wsheridan.htm). USA Today wrote a story about my family. Within days, I
    was hearing from parents around the country who also had children with
    kernicterus. We connected some dots and figured out something the
    public health authorities had not--that kernicterus had re-emerged in
    the United States in the early 1990s after having been essentially
    eradicated. Public health officers at Centers for Disease Control and
    Prevention (CDC) were stunned. Hundreds of children had experienced
    kernicterus since the early 1990s, a function in part of early
    discharge and failure to educate providers and parents alike about the
    dangers of jaundice. All but a few cases had been effectively buried by
    confidentiality agreements--a condition of settlement insisted upon by
    doctors and hospitals that didn't want the bad publicity.
        Within weeks, other moms and I were working together with anyone we
    could recruit to build a campaign to educate parents, change practice
    guidelines, increase public health surveillance and put kernicterus
    back in the history books where it belongs. The Joint Commission on
    Accreditation of Healthcare Organizations (JCAHO) issued a Sentinel
    Event Alert in 2001, the first ever generated as the result of a
    consumer-identified problem, (Kernicterus threatens healthy newborns,
    Sentinel Event Alert, Issue 18, April 2001, accessible at
    www.jointcommission.org/SentinelEvents/SentinelEventAlert/sea_18.htm).
    CDC followed shortly thereafter with a report in Morbidity & Mortality
    Weekly, (Kernicterus in Full-Term Infants--United States, 1994-1998,
    MMWR, June 15, 2001/50(23);491-4, accessible at www.cdc
    .gov/mmwr/preview/mmwrhtml/mm5023a4.htm). CDC has now identified
    kernicterus as one the three most serious emerging risks to newborns in
    the United States (See, www.cdc.gov/ncbddd/dd/kernichome.htm).
        Through partnership with the Centers for Disease Control, the Joint
    Commission, the March of Dimes, National Institutes of Health (NIH),
    Health Resources and Services Administration (HRSA) and leaders in
    other countries, I believe we can accomplish that soon.
        The expert witness who had 51 percent doubt about the cause of
    Cal's injuries was paid $34,000 for his half day of trial testimony. He
    was a member of the American Academy of Neurology, which is one of a
    handful of specialty medical societies that have a program to peer
    review its members' expert witness activities. I filed a grievance and
    was notified that I could attend as a silent observer the
    ``nonadversarial'' peer review process where this physician's conduct
    was to be reviewed. I did so, accompanied by another CAPS co-founder
    who was a former medical association attorney.
        To our amazement, the physician brought as his counsel the hospital
    attorney who had hired him to be the expert in Cal's case. While I was
    prevented from saying a single word, the panel put no restrictions on
    the hospital attorney, who painted my family as calculating strategists
    trying to neutralize the doctor as a witness in Cal's new trial. Mind
    you, this was after the hospital had already dumped this expert's
    theory of the case and was preparing for the second trial on the
    assumption that Cal did have kernicterus. We could have brought out
    this duplicity if allowed to speak. Rather than being nonadversarial,
    this peer review process became a one-sided, duplicitous smear campaign
    unfolding before my eyes. It was a travesty. After the hearing, my
    colleague and I asked for a meeting with the American Academy of
    Neurology Board of Trustees to share with them our concerns about their
    peer review process. Numerous phone calls and three certified letters
    to their general counsel went unanswered.
        I'm going to turn now from stories of the past to hopes for the
    future.
        First, one of the mantra's of the patient safety movement is the
    need for transparency. It's ironic, but safety scientists refer to
    errors as ``treasure'' because they reveal the inherent weaknesses of
    our very complex healthcare delivery processes. As a mom, I cannot help
    but wonder whether Cal and many other kids like him could have been
    saved or can be still saved if our legal system was not so intent on
    burying its treasure. We must incentivize transparency. Finding a way
    to declare confidentiality agreements contrary to the public interest
    is an excellent place to start.
        Second, we have done significant research and cannot find a single
    instance where medical societies or State licensing boards have
    disciplined an expert testifying on behalf of a defendant. The same
    financial incentives apply whether a physician is bending science for a
    hefty fee from the plaintiff or the defense. Our expert witness
    oversight is patchy at best, and apparently extremely one-sided. This
    is wrong and needs to be investigated. If specialty societies are going
    to take on the role of peer reviewing experts, they should be held
    accountable for doing it fairly. In addition, I know some of the
    specialized medical courts proposals anticipate an approach whereby
    experts will be called by and paid by the court, not the parties. That
    is an approach worth investigating.
        Third, one of the by-products of the hand-to-hand combat approach
    to medical malpractice litigation is the tremendous variation between
    awards for patients and families with similar needs. There has been a
    kernicterus verdict in this country for close to $90 million dollars.
    Cal got a small fraction of that, and I know families who got a
    fraction of what Cal was awarded. Their children will inevitably become
    a burden to the Medicaid system. Justice should be equitable, and our
    case-by-case system does not work that way. So, whether it is a
    schedule of benefits or some other mechanism for giving juries or
    judges guidelines for reasonable awards, this fairness gap needs to be
    addressed.
        If medical courts have rulemaking power and if they are overseen by
    those focused on consumer interests, I believe we could see damages
    reform that is much fairer than an arbitrary cap on pain and suffering.
    Medical associations that advocate arbitrary damage caps know that they
    disproportionately impact those claimants with the most severe
    injuries. We can come up with better solutions if we approach damages
    reform in a patient-centered way.
        Fourth, the trial judge in Cal's case characterized our trial as a
    competition. Our own lawyers repeatedly told us it's a game. One of the
    mediators--a retired judge--referred to the jousting and sparring as a
    dance. At the mediation, several of the ``dancers'' were insurance
    actuaries and claims agents, complete with calculators. At every step,
    we were expected to go along, because this is the way it is done. As a
    mom--and a wife--and a citizen, I worry that too many people use these
    analogies to distance themselves from what is really supposed to be
    going on here: helping a family that has been harmed. To make justice a
    game is to dehumanize the people who seek it.
        It is my understanding that the tort system was created for
    powerful, honorable, reasons--for the people. So I ask all of you
    involved in tort reform to follow these guidelines as you reshape the
    future of our tort system:

         Do it for the right reasons.
         Do not compromise the real interests of injured patients,
    which are fair compensation and honest investigations of what happened.
         Avoid the pressure to serve the interests of those
    professionals and organizations who are concerned more about their own
    finances than meeting the needs of the patients and clients they serve.
         Remember that people who experience medical error are not
    just dollar figures. We are your loved ones. We are you.

        In closing, I ask you to use your power, your courage and your
    sense of justice to shape innovative programs that mark a return to
    integrity. Let's craft a system that uses our hard won treasure as a
    learning tool. Most importantly, let's truly serve the people who are
    relying on you, like daddies and babies.
        Thank you. (Attachment: Exihibit 1: Sheridan vs Jambura et al.
    Memorandum Decision, district court of the foruth Judicial District of
    the State of Idaho, in and for the County of ADA, Case No. CV-PI 97-
    00266-D, July 19, 1999.)

        [Editor's Note: Due to the high cost of printing, previously
    published materials submitted by witnesses are not reprinted in the
    hearing. You may see the attachment referred to above at
    www.patientsafety.org]

        The Chairman. Ms. Niro.
        Ms. Niro. Good morning, and thank you for the opportunity
    to present the views of the American Bar Association, the ABA.
    My name is Cheryl Niro. I am one of the first lawyers in
    Illinois to become a mediator and arbitrator.
        I learned my skills at various institutions across the
    country, beginning with the Atlanta Justice Center, which was
    one of the first mediation programs in the country. I have been
    both a student and a teaching assistant at the Harvard Law
    School Mediation and Negotiation Training Programs. Over the
    years, I have mediated hundreds of cases successfully and
    trained both lawyers and judges to use those methodologies.
        I have, more importantly, trained healthcare professionals
    to use negotiation and mediation skills to resolve medical
    disputes with patients and their families at bedside, a program
    which has great potential to lower subsequent filing of
    malpractice claims. I have never filed a plaintiff 's medical
    malpractice case in my long career as an attorney.
        Mediation, by definition, is a voluntary process, whereby
    disputants work together with the assistance of a trained
    mutual facilitator to resolve disputes. Mediators, by ethical
    requirements, are prohibited from imposing a resolution on the
    parties. The ethical use of arbitration must also be premised
    on a knowing agreement to arbitrate as well.
        The ABA has reviewed proposals related to the area of
    healthcare liability. One such proposal is the creation of
    health courts. As we understand it, an administrative agency
    would oversee these courts. Judges and juries would be replaced
    by persons experienced in healthcare. Injured patients would
    then have no access to the court system or a trial by jury or
    the rules of procedure and the rules of evidence. Expert
    witnesses would be hired by the health court, and injured
    patients would be compensated according to a schedule of
    awards.
        Proponents say that the health court scheme is modeled
    after workers compensation. There is a significant difference,
    however. Injured workers do not have to prove liability. This
    legal burden was removed by the workers compensation system to
    balance their loss of right to bring an action in court, and it
    is that balance that provides the integrity and the fairness to
    our national system of caring for citizens who have been
    injured in the workplace.
        No such balance or appearance of fairness is present in a
    health court scheme. Injured persons lose their
    constitutionally protected right to a trial by jury, but they
    retain the legal burden of proving negligence, as if they were
    in a court. If they meet the burden, they are compensated
    according to a schedule of awards, which would treat all
    injuries the same. The ability of all judges and juries to
    fashion an award based on the unique facts of each case would
    be lost.
        It's sad to me that what makes proven alternative dispute
    resolution methods like mediation so very attractive is that
    the parties who use those methodologies actually get to
    participate in crafting a unique agreement to resolve it. In
    health courts, I believe and fear that the exact opposite would
    result. The great potential of mediation as an alternative to
    litigation would be lost to a system that wouldn't possess the
    ability to see the injured patient as a person, a very unique
    person.
        There is something not quite humane about a healthcare
    program that would treat us only as a collection of similar
    injuries and body parts. Moreover, I fear that predetermined
    awards are just caps in disguise and are just as unfair. Caps
    have been found unconstitutional in at least 13 States, and
    they work to disadvantage women and children and the elderly,
    typically our most vulnerable citizens.
        That situation only becomes more disturbing when one
    imagines that some of these patients may be forced to agree to
    submit their dispute to a health court before they receive
    treatment, or even worse, as a condition for receiving
    treatment.
        The ABA opposes any health court proposal that would
    prevent an injured patient from having access to a trial by
    jury presided over by an independent judiciary and would place
    an arbitrary cap on damages. We do support the ethical use of
    other alternatives to litigation, such as negotiation,
    mediation, and settlement agreements, and believe that great
    potential for innovation would be enhanced by our legal and
    medical communities working collaboratively to create new
    methodologies that preserve the constitutional rights of our
    citizens.
        Thank you.
        The Chairman. Thank you very much.
        [The prepared statement of Ms. Niro follows:]

                       Prepared Statement of Cheryl Niro

                                    SUMMARY

        The American Bar Association has supported the use of and
    experimentation with voluntary alternative dispute resolution
    methodologies as welcome components of the justice system, provided the
    disputant's constitutional and other rights and remedies are protected.
    The appropriate use of these voluntary alternatives to litigation is
    growing across the country and is becoming an important part of our
    system of justice. The ABA has contributed to the growth of this field
    by creating ethical standards, conducting training in ADR skills, and
    convening ADR professionals in ABA-sponsored programs.
        Specific to the area of medical malpractice, the ABA endorses the
    use of voluntary negotiation, mediation, and settlement agreements. In
    addition, the ABA recognizes the use of arbitration as an option for
    resolving these types of disputes under circumstances whereby the
    agreement to arbitrate is entered into only on a voluntary basis after
    a dispute has arisen and only if the disputant has full knowledge of
    the consequences of entering into such an arrangement. In order to
    protect the rights of injured patients, alternative dispute resolution
    must be voluntary.
        The American Bar Association opposes the creation of ``health
    courts'' as proposed in recent legislation. Under this proposal,
    medical malpractice cases would be removed from the court system and
    placed in health courts operated by an administrative agency. Judges
    and juries would be replaced by fact-finders with training in science
    or medicine. No procedural protections have been defined. Injured
    patients would be forced to give up their right to a jury trial.
        In the ``health courts'' proposal, a schedule of awards would be
    established, similar to the Workers' Compensation system. But unlike
    the Workers' Compensation system, injured patients would still be
    required to prove liability, whereas injured workers obtain a
    guaranteed award in a no-fault system for waiving their right to a jury
    trial. The schedule of awards is a de facto cap on noneconomic damages
    and, for that reason, could well be found unconstitutional. The ABA
    opposes legislation that places a dollar limit on recoverable damages
    and operates to deny full compensation to a plaintiff in a medical
    malpractice action. The ABA recognizes that the nature and extent of
    damages in a medical malpractice case are triable issues of fact (that
    may be decided by a jury) and should not be subject to formulas or
    standardized schedules. The ABA also opposes the creation of healthcare
    tribunals that would deny patients injured by medical negligence the
    right to request a trial by jury or the right to receive full
    compensation for their injuries.
        The ABA supports the tradition of trial by jury. Empirical studies
    have demonstrated that juries are competent in handling medical
    malpractice cases.
        The court system can improve the management of medical malpractice
    cases and make appropriate voluntary use of alternative dispute
    resolution methodologies while protecting the rights of injured
    patients to access the courts. The ABA requests that Congress reject
    the proposed health court legislation.
                                     ______

        Mr. Chairman and members of the committee, I appreciate the
    opportunity to present the views of the American Bar Association (ABA)
    on ``Medical Liability: New Ideas for Making the System Work Better for
    Patients.'' My name is Cheryl Niro, and I am an incoming member of the
    Standing Committee on Medical Professional Liability and a member of
    the House of Delegates of the ABA. I am appearing on behalf of the ABA
    at the request of its President, Michael Greco.
        I was an early proponent of alternative dispute resolution and
    sought the best education possible in the areas of mediation,
    negotiation and arbitration. I have been certified and trained by the
    founders of these fields. I began at The Atlanta Justice Center, one of
    the first three mediation programs in the Nation. I was a student and
    teaching assistant at the Harvard Law School mediation and negotiation
    training programs.
        In 1992, I was a founding director of a dispute resolution training
    program funded by a joint grant from the U.S. Departments of Education
    and Justice. That program became the National Center for Conflict
    Resolution Education and trained thousands of educators, teachers,
    parents and students to create Peer Mediation Programs in schools and
    other youth-serving organizations across the country.
        I have served on the ABA Section of Dispute Resolution Council and
    have conducted skills-based training programs for hospital
    professionals so that they may use these skills to resolve medical care
    disputes cooperatively with patients and their families. I have never
    filed a plaintiff 's medical malpractice claim in my career.
        I testify here today as a proud representative of the ABA, a lawyer
    interested in improving our legal system and an American citizen
    committed to our tradition of fairness and justice.
        For decades the ABA has supported the use of, and experimentation
    with, voluntary alternative dispute resolution techniques as welcome
    components of the justice system in the United States, provided the
    disputant's constitutional and other legal rights and remedies are
    protected. The ABA strongly supported the alternative dispute
    resolution movement in the United States through committees and in 1993
    it created a Section of Dispute Resolution. The Section promotes
    efforts that focus on education, experimentation and implementation of
    alternatives to litigation that resolve disputes economically and
    without taxing limited courtroom resources.
        As a result of the work of our Dispute Resolution professionals,
    and leaders in that field across the country, the number of courts
    utilizing these methods increases daily. Successful programs are
    replicated, new understanding of the potential offered by these
    voluntary processes is achieved, and greater numbers of judges, lawyers
    and clients find these alternatives acceptable tools with which legal
    disputes may be resolved. Over the past 15 years, the ABA has
    contributed significantly to the development of the field by creating
    ethical standards, best practices training and scholarship to this
    emerging practice. Additionally, the ABA House of Delegates has adopted
    policy directed at ensuring the efficacy and integrity of these
    voluntary alternatives to litigation.
        Mediation, by definition, is a voluntary process whereby disputants
    may work together, with the assistance of a trained neutral
    facilitator, to resolve their dispute. Mediation, as it is known and
    practiced worldwide, is not a mandatory process. Where disputants are
    compelled to mediate, the compulsion is only to engage in a mediation
    process in good faith. Agreements cannot be compelled. Likewise, the
    ethical use of arbitration requires that parties knowingly agree to
    engage in the process.
        Specific to the area of medical malpractice, the ABA endorses the
    use of voluntary negotiation, mediation, and settlement agreements. In
    addition, the ABA recognizes the use of arbitration as an option for
    resolving these types of disputes under circumstances whereby the
    agreement to arbitrate is entered into only on a voluntary basis after
    a dispute has arisen and only if the disputant has full knowledge of
    the consequences of entering into such an arrangement.
        The American Bar Association has reviewed, as part of ongoing
    efforts to improve the operation of our legal system, proposals related
    to the area of liability of healthcare providers. One such proposal is
    the creation of ``health courts.'' Under the proposed ``health court''
    system, an administrative agency would oversee the operation of
    specialized ``courts'' where medical malpractice cases would be heard
    by persons possessing experience in the healthcare field rather than
    judges and juries. Under this proposal, medical negligence litigation
    cases would be removed from the court system and the protection of the
    time-tested rules of procedure and evidence. The parties would be
    allowed to be represented by attorneys. There would be no juries.
    Expert witnesses would by hired by ``health courts,'' not by the
    injured patient. Injured patients would be compensated according to a
    schedule of awards. Patients injured by medical negligence would be
    denied the right to request a trial by jury and the right to receive
    full compensation for their injuries.
        Proponents of the ``health courts'' proposal say it is modeled on
    the Workers' Compensation system. But there are major differences
    between the two systems. It is unlike the Workers' Compensation system
    in that injured patients would still be required to prove fault on the
    part of a defendant. A similar burden to prove fault is not imposed on
    an injured worker in a Workers' Compensation case. Importantly, the
    Workers' Compensation system balances the loss of the right to bring an
    action in court with a guaranteed award that is not fault-based. In the
    ``health court'' scheme, injured patients are forced to give up the
    right to bring an action in a court with no guarantee of an award.
    Injured patients would be required to prove that their injuries are
    ``the result of a mistake that should have been prevented.'' Proponents
    call this the ``avoidability standard,'' which includes injuries ``that
    would not have happened were optimal care given.'' This is not a ``no
    fault'' standard as in the Workers' Compensation field, nor is it a
    strict liability standard.
        The ``health court'' scheme and other proposals for administrative
    tribunal schemes also include the creation of a schedule for the
    assessment of damages and would cover both economic and noneconomic
    damages. Such a schedule is inappropriate in medical malpractice cases
    where a fixed, rigid assessment would treat all patients with similar
    injuries the same. Would it be fair to award a pre-determined award for
    negligence that results in a paralyzed hand for a surgeon, or the loss
    of vision for an artist? The plan assumes that consensus would produce
    an annually adjusted schedule based upon research on similar schedules
    in the U.S. legal system and abroad. Proponents urge the comparison to
    Sweden and Denmark for regularizing the value of American injuries. The
    efficacy of that approach is doubtful, because those nations have
    health and welfare benefits that are paid for by their governments
    before consideration of the injury claim take place.
        By establishing a schedule of injuries/pay-outs, the ``health
    court'' scheme would impose a de facto cap on noneconomic damages in
    injury claims. The plan contemplates Presidential and congressional
    appointees to establish the schedule, but there is no guarantee that
    the Commission would be balanced, nor that the schedule would provide
    fair and just compensation for the injured patients. Caps on
    noneconomic damages work to the disadvantage of women, children and the
    elderly. Thirteen States have found caps unconstitutional. Courts and
    juries have a long tradition of fashioning individualized, customized
    damage awards to fit the unique circumstances of each case.
        Thus, in February 2006, the ABA adopted as policy the following
    resolution:

            RESOLVED, That the American Bar Association reaffirms its
            opposition to legislation that places a dollar limit on
            recoverable damages that operates to deny full compensation to
            a plaintiff in a medical malpractice action.

            RESOLVED, That the American Bar Association recognizes that the
            nature and extent of damages in a medical malpractice case are
            triable issues of fact (that may be decided by a jury) and
            should not be subject to formulas or standardized schedules.

            FURTHER RESOLVED, That the ABA opposes the creation of
            healthcare tribunals that would deny patients injured by
            medical negligence the right to request a trial by jury or the
            right to receive full compensation for their injuries.

        The ABA firmly supports the integrity of the jury system, the
    independence of the judiciary and the right of consumers to receive
    full compensation for their injuries, without any arbitrary caps on
    damages. It is for these reasons that the ABA opposes the creation of
    any ``health court'' system that undermines these values by requiring
    injured patients to utilize ``health courts'' rather than utilizing
    regular State courts in order to be compensated for medical negligence.
        As stated above, ABA policy has long endorsed the use of
    alternatives to litigation for resolution of medical malpractice
    disputes only when such alternatives are entered into on a voluntary
    basis and only when they are entered into after a dispute has arisen.
    Instead of creating and mandating the use of ``health courts,'' the ABA
    advocates the use of voluntary arbitrations, mediations, and settlement
    conferences, all of which are appropriate means of alternative dispute
    resolution.
        There are exciting new programs that demonstrate the efficacy of
    the use of alternative methodologies. One such program is at the Rush
    Presbyterian Hospital in Chicago, run by former judges and personal
    friends of mine. The Rush Mediation Program has successfully resolved
    more than 80 percent of filed claims. It is a voluntary and
    confidential mediation program. The mediator has no power to force the
    parties to agree on settlement. The mediator (or team of two mediators)
    has no interest in the outcome and is purely neutral. The program has
    demonstrated that voluntary mediation can save money for all parties,
    save time, settle cases and preserve the patient's right to a trial by
    jury.
        Our legal system, the most respected in the world, has procedural
    safeguards that have evolved over centuries. The proposals for ``health
    courts'' contain little information on how the system would actually
    work. Unanswered are questions about how patients would obtain
    information and/or what kind of discovery would be permitted. The plan
    does specify that the ``health court,'' not the injured patient, would
    hire expert witnesses, which is another departure from current
    practice. It appears that healthcare providers get an ``opt in''
    opportunity, but patients have no corresponding right to ``opt out.''
    Patients may be in the position of being forced to sign agreements to
    use the ``health court'' with their HMO or healthcare provider before
    they receive treatment. More information is clearly required to obtain
    any clarity on the basic fairness that may be present or lacking under
    the ``health courts'' proposal.
        I would be remiss if I did not mention the obvious problem
    contained within our Constitution in the seventh amendment. ``In suits
    at common law, where the value in controversy shall exceed $20, the
    right of trial by jury shall be preserved, and no fact tried by a jury
    shall be otherwise re-examined in a Court of the United States, than
    according to the rules of the common law.'' Proponents argue that
    because the Workers' Compensation system is Constitutional, that the
    ``health courts'' proposals would be as well. The problem with this
    reasoning, as pointed out above, is that the Workers' Compensation
    system was effectively balanced in providing a certain award without
    the burden of establishing that a mistake has been made that should
    have been prevented. The schedule of benefits may also be found
    unconstitutional if it is deemed to be caps on damages in disguise.
        Proponents of ``health courts'' argue that juries are not capable
    of understanding medical malpractice cases. There is no evidence that
    this is the case. In fact, empirical studies have demonstrated that
    juries are competent in handling medical malpractice cases. Duke
    University School of Law Professor Neil Vidmar's 1995 extensive study
    of juries found that:

            [o]n balance, there is no empirical support for the
            propositions that juries are biased against doctors or that
            they are prone to ignore legal and medical standards in order
            to decide in favor of plaintiffs with severe injuries. This
            evidence in fact indicates that there is reasonable concordance
            between jury verdicts and doctors' ratings of negligence. On
            balance, juries may have a slight bias in favor of doctors.\1\
    ---------------------------------------------------------------------------
        \1\ Neil Vidmar, Medical Malpractice and the American Jury:
    Confronting the Myths about Jury Incompetence, Deep Pockets and
    Outrageous Damage Awards 182 (Univ. of Michigan Press 1998) (1995).

        In addition, he concludes at page 259 of his 1995 publication that
    research ``does not support the widely made claims that jury damage
    awards are based on the depth of the defendants' pockets, sympathies
    for plaintiffs, caprice, or excessive generosity.'' A survey of studies
    in the area by University of Missouri-Columbia Law Professor Philip
    ---------------------------------------------------------------------------
    Peters, Jr., published in March 2002 likewise found that:

            [t]here is simply no evidence that juries are prejudiced
            against physician defendants or that their verdicts are
            distorted by their sympathy for injured plaintiffs. Instead,
            the existing evidence strongly indicates that jurors begin
            their task harboring sympathy for the defendant physician and
            skepticism about the plaintiff.\2\
    ---------------------------------------------------------------------------
        \2\ Philip G. Peters, Jr., The Role of the Jury in Modern
    Malpractice Law, 87 Iowa L. Rev. 934 (2002).

        A May 2005 Illinois study conducted in my home State by Professor
    Vidmar also concluded that there was no basis for the argument that
    runaway verdicts were responsible for increases in malpractice
    premiums.\3\
    ---------------------------------------------------------------------------
        \3\ Neil Vidmar, Medical Malpractice and the Tort System in
    Illinois, 93 Illinois Bar Journal 340 (2005).
    ---------------------------------------------------------------------------
        Our legal system has served our Nation well. Our lawyers and judges
    have been protecting the Constitution and the rights it contains, and
    have made our democracy the envy of the world. As a bar president, I
    have had the opportunity to visit nations where lawyers do not have the
    role and function of the American lawyer. I have been to Zimbabwe and
    Zambia, and witnessed first-hand countries where citizens can have no
    expectation of fairness, justice or equal treatment. I have seen the
    result of decades of unchecked power in the hands of leaders more
    interested in their own wealth than the well-being of their nations.
    Our system is not perfect, but our founders understood that perfection
    in human endeavor is not likely to be possible. I believe that is why
    our Constitution speaks of our national mission to create a union that
    is always trying to be more perfect, closer to the ideal. It is our
    legal system, our Constitution and our steadfast adherence to the
    rights of our citizens that make ours a Nation of hope above all
    others. Lawyers strive every day to do their best work to achieve
    justice. Legislators have a similar duty to create laws that will
    produce just outcomes.
        In accordance with our duty to preserve and protect our system of
    justice, the ABA opposes the ``health courts'' proposal currently being
    discussed. We support the use of alternatives to litigation in medical
    malpractice cases only when such alternatives are entered into on a
    voluntary basis, and only when they are entered into after a dispute
    has arisen. We also oppose the Workers' Compensation model in medical
    malpractice cases as proposed, because an injured patient loses the
    right to bring an action in court, but receives no guaranteed award.
        Injured patients and healthcare providers have access to a
    respected court system and fair processes to resolve disputes. Any
    proposal that would deny access to that court system should offer a
    better system than our current civil justice system. The ``health
    courts'' proposal fails to meet that standard and it should be
    rejected.
        Thank you for the opportunity to appear before you today to present
    the views of the American Bar Association. I would be happy to answer
    any questions you may have.

        The Chairman. Mr. Vidmar.
        Mr. Vidmar. Thank you very much, Senator. Let me suggest--
    --
        The Chairman. I don't think your microphone is on. There;
    thank you.
        Mr. Vidmar. Thank you very much, Senator, and the rest of
    the committee for this opportunity to speak.
        I want to introduce my comments with two points. One is my
    position on these matters is almost, well, not almost, is
    synonymous with that of the American Bar Association, which Ms.
    Niro has just spoken. I support ADR as long as it is voluntary
    with full awareness of the consequences and after a dispute has
    occurred, and in fact, I should indicate that I started Duke's
    program on negotiation and mediation at the law school, which
    most of our students then take; in fact, 80 percent of them, so
    I am a strong supporter of mediation and alternative ways of
    handling disputes.
        I have been studying medical malpractice litigation for 2
    decades. I have sat through trials, interviewed jurors, and the
    lawyers and the plaintiffs and the defendants in these cases. I
    have conducted jury experiments. I have had access to closed
    claims files from insurers and interviewed insurance adjusters.
    Recently, work that I have done with Florida, closed claims
    from the Florida Department of Insurance, has been conducted
    with a colleague who is an M.D. in the Duke medical school.
        I have also had a unique opportunity to observe real juries
    in operation. The Arizona U.S. Supreme Court allowed an
    experiment that will never be repeated again, probably, in
    which I have actually videotaped the deliberations of 50 civil
    juries. I have seen those juries deliberating and the way that
    they operate, so I have some unique experience in this.
        In this regard, Senator, I will stand up and defend the
    tort system. It is not perfect. It has a lot of costs, but I
    agree with the New England Journal of Medicine study which
    Professor Studdert has talked about, that the claims of
    frivolous litigation are vastly overblown; that the tort system
    performs reasonably well.
        And those conclusions, and I have a 31-page document that I
    have submitted in my written testimony for this, in which I try
    to summarize at least many of those findings are totally
    consistent with those conclusions from the New England Journal
    of Medicine.
        What I can tell you is that juries, from the research that
    I have done, are intelligent, conscientious, follow the legal
    rules and instructions, and it is trial by jury, and judge and
    jury, and the judges who sit on the side of those trials every
    day have the greatest respect for the jury. The studies that
    have been done with them show those kinds of consistencies, and
    the judges give them very high marks.
        The research also shows that verdicts correlate with the
    judgments of medical professionals; the New England Journal of
    Medicine study, which is the most recent and probably the very
    best study, but there are previous studies that have also shown
    that same kind of correlation.
        Now, I have covered a lot of topics in my written
    testimony, and let me just touch on two here. One is that the
    caps that have been discussed to me are unfair for the reasons
    that have already been discussed. They discriminate against the
    most severely injured patients. They discriminate against
    women, children, and the elderly, and they are also unfair in
    another sense. If an individual is hurt in an automobile
    accident this afternoon, they are entitled to fair and just
    compensation, individualized justice, by the right to trial by
    jury if, in fact, they cannot settle the case.
        Under the proposals that are being set forward now, the
    person who is injured by medical negligence, who is just as
    injured as anyone else, does not have the same right, and this
    seems to be ignored in so much of this discussion about the
    medical negligence system, and lots of people are deeply hurt.
        And in fact, this morning, in preparation for coming here,
    I arrived early, and I sat on the steps of the U.S. Supreme
    Court, and I looked up at the heading, individualized justice
    under law [sic]. And that's what our jury system provides,
    because when you have caps, you can't really describe all of
    the kinds of variations that go on in these cases. Somebody who
    is injured in one way or another way, the range of hurt is very
    difficult, and that's why we have relied upon those systems. So
    individualized justice under law is what is actually provided
    by the jury system, which we've relied on before we even had a
    Constitution.
        The proponents of streamlined procedures, I want to comment
    on, really have failed in many ways to realize the complexity,
    because I have worked in the trenches and studied the trenches.
    I am a social psychologist by training, and I have talked to
    lawyers. These are not easy cases, the serious ones that
    really, you know, the very serious injuries, these are not easy
    cases to resolve, because each side disputes what is going on.
    And I think that when we look at these alternative systems, one
    of the things that we have to ask ourselves is: Can they do it
    in these very efficient ways, especially if the system is
    designed to be fair?
        So I think we need to look at it very carefully. The
    assumption seems to be that these other systems will be fair,
    but when you have experts appointed by judges, you have people
    who are administrative judges who can become cynical in the way
    they handle these things, because you can also have changes
    that these administrative systems will be subjected to
    potential political pressure, including the pain and suffering.
        And this is one of the things that I want to make a comment
    about: the defined payment schedules under these healthcare
    systems, and I can elaborate that later in other comments in
    the healthcare courts, are very similar to the problem with
    caps on pain and suffering. You have exactly the same kind of
    problem that they do not provide that individualized justice,
    and scheduling will just not solve the problems.
        Finally, again, I covered a lot of material in my lengthy
    submission here. I want to just make one final comment about
    the doctors' exodus and so forth. You know, these are political
    kinds of problems on both sides, and I am sympathetic to
    doctors. In fact, I feel strongly that the cutbacks in Medicare
    and Medicaid have really harmed our doctors, and I think
    Congress bears some responsibility for this, and I talk to
    doctors a lot, and it really has affected the healthcare
    system, and that has not been discussed here today, and I think
    that plays an important part, and in fact, I think as a
    taxpayer, I would be willing to pay a little bit more taxes to
    help out the doctors.
        But these claims that there's a big doctor's exodus, the
    judicial hellholes from near my hometown of Gillespie,
    Illinois; that is Edwardsville and St. Clair, you know, the
    comment was that doctors are leaving; 26 percent of the doctors
    have left the area. Research that I did for the Illinois State
    Bar Association, I went and looked at the data. I used the
    statistics from the American Medical Association and actually
    found that the area had actually gained doctors, not lost
    doctors, and just recently, a report that was just released
    this week, I looked at the same issue in Pennsylvania, and
    surprise? No, I am not surprised that Pennsylvania has actually
    gained doctors despite the claims that Pennsylvania lost one
    quarter of their doctors.
        And I think we need to look at this in the whole context of
    things, and that also hasn't been discussed today, that these
    things get very clouded, the attacks on the jury system and the
    tort system. It's not perfect, but many of the claims, I think,
    are misdirected.
        Thank you for your attention.
        The Chairman. Thank you very much.
        [The prepared statement of Mr. Vidmar follows:]

                       Prepared Statement of Neil Vidmar

                                    SUMMARY

         Empirical research contradicts mythology about the tort
    system in medical malpractice litigation.
         Medical injuries resulting from medical negligence are a
    serious problem and have high economic and emotional costs for injured
    patients.
         The tort system performs well in separating meritorious
    and nonmeritorious claims.
         Research shows that jury verdicts are not biased against
    doctors, that they are consistent with judgments of medical experts,
    the opinions of trial judges that they are not ``overwhelmed'' by
    plaintiff 's experts and that awards positively correlate with
    plaintiffs injuries and economic losses.
         Caps on so-called ``noneconomic'' damage awards are unfair
    and do not reduce medical liability insurance premiums. ``Defined
    payment schedules'' in some proposed alternatives to jury trial suffer
    from the same problems as caps.
         Claims about ``frivolous litigation'' are not supported by
    empirical research.
         Research on closed claims show that allegations about
    increased litigation costs are not supported.
         Claims about a ``doctor exodus'' from States alleged to
    have ``an abusive litigation climate'' are contradicted by official
    statistics of he American Medical Association.

                                 MY BACKGROUND

        I am Neil Vidmar, I hold the Russell M. Robinson II Professor of
    Law chair at Duke Law School. I received my Ph.D. in Psychology from
    The University of Illinois (1967). At Duke I also have a joint
    appointment in the Department of Psychology. I have published over 100
    articles in scholarly journals and several books. A new book, American
    Juries, will hopefully be completed this summer.
        I have been conducting empirical research on medical malpractice
    litigation since I came to Duke Law School in 1987. Under support from
    the Robert Wood Johnson Foundation, The State Justice Institute and
    other sources, I published a number of articles on medical malpractice
    in the 1990s. This research and other studies were combined into my
    book, Medical Malpractice and the American Jury: Confronting the Myths
    about Jury Incompetence, Deep Pockets, and Outrageous Damage Awards.
    (University of Michigan Press, 1995).
        I have continued to conduct research on that subject and have
    published the following articles and reports since that book was
    published: Vidmar, N., Gross, F., & Rose, M. Jury Awards for Medical
    Malpractice and Post-verdict Adjustment of Those Awards. 48 DePaul Law
    Review 265 (1998); Vidmar N. and Brown, Leigh Ann, Tort Reform and the
    Medical Liability Insurance Crisis in Mississippi: Diagnosing the
    Disease and Prescribing a Remedy 22 Mississippi College Law Review 9-46
    (2002); Neil Vidmar, Juries and Jury Verdicts in Medical Malpractice
    Cases: Implications for Tort Reform in Pennsylvania, January 28, 2002;
    Vidmar, (Book Review) First, Do No Harm: The Cure for Medical
    Malpractice, 352 The New England Journal of Medicine 521 (2/3/2005);
    Vidmar, Lee, MacKillop, McCarthy and McGwinn, Uncovering the
    ``Invisible'' Profile of Medical Malpractice Litigation: Insights from
    Florida, 54 DePaul Law Review 315 (2005); Vidmar, Medical Malpractice
    Lawsuits: An Essay on Patient Interests, the Contingency Fee System,
    Juries and Social Policy, 38 Loyola Los Angeles Law Review 1217 (2005);
    Vidmar, Medical Malpractice and the Tort System in Illinois: A Report
    to the Illinois Bar Association, May 2005; Vidmar, Medical Malpractice
    and the Tort System in Illinois, 93 Illinois Bar Journal 340 (2005);
    Vidmar, MacKillop and Lee, Million Dollar Malpractice Cases in Florida:
    Post-verdict and Pre-suit Settlements, Vanderbilt Law Review (in press,
    2006); Vidmar and MacKillop, ``Judicial Hellholes:'' Medical
    Malpractice Claims, Verdicts and The ``Doctor Exodus'' in Illinois,
    Vanderbilt Law Review (in press, 2006); Vidmar. Medical Malpractice
    Litigation and Tort Reform in Pennsylvania: A Report for the
    Pennsylvania Bar Association, May 2006.
        I am appearing here today to provide this committee with my
    professional knowledge of medical malpractice litigation. I am
    receiving no remuneration for my testimony. My travel expenses are
    being reimbursed from my Duke Law School faculty account. The opinions
    that I offer are, however, my own and are not necessarily those of Duke
    Law School or Duke University.
                                     ______

        In May of this year the New England Journal of Medicine published
    an article authored by researchers associated with the Harvard School
    of Public Health that closely examined 1,452 closed medical malpractice
    claims in four areas of the United States.\1\ Their main conclusions
    merit direct quotation:

              Our findings point toward two general conclusions. One is
            that portraits of a malpractice system that is stricken with
            frivolous litigation are overblown. Although one-third of the
            claims we examined did not involve errors, most of these went
            unpaid. The costs of defending against them were not trivial.
            Nevertheless, eliminating the claims that did not involve
            errors would have decreased direct system costs by 13 percent .
            . . to 16 percent. In other words, disputing and paying for
            errors account for the lion's share of malpractice costs.
              A second conclusion is that the malpractice system performs
            reasonably well in its function of separating claims without
            merit and compensating the latter. In a sense our findings lend
            support to this view: three-quarters of the litigation outcomes
            were concordant with the merits of the claim.\2\

        These conclusions are a good starting point to address issues about
    medical malpractice litigation. They are consistent with my own
    research findings and that of other researchers.\3\
      some proposals for alternatives or changes to the tort system would
     abolish or severely curtail the constitutional right to trial by jury
        Some of the proposed experimental programs in the proposed Fair and
    Reliable Medical Justice Act (S. 1337), 109th Cong. (2005) would force
    patients to enter into an administrative scheme without the right to
    trial by jury: e.g. The Administrative Determination of Compensation
    Model and the Special Health Care Court Model.
        The proposal for Health Courts developed by Common Good and the
    Harvard School of Public Health \4\ also raise issues about
    constitutional rights.
        Voluntary resolution procedures, such as those discussed by
    Senators Clinton and Obama in the New England Journal of Medicine \5\
    do not raise these constitutional issues.
        I will not address the constitutional issues in my testimony,
    though I do want to call attention to the fact that the Seventh
    Amendment to the U.S. Constitution and the constitutions of the 50
    States provide all citizens the right to jury trial for all common law
    civil claims.
        Rather I want to address the commonly held myths that have been
    raised about the tort system and in particular the jury system.
    Empirical research evidence strongly goes against these myths.

            MYTHS ABOUT THE TORT SYSTEM IN MEDICAL MALPRACTICE CASES

       The commonly perpetrated myths about the tort system, in no
    particular order, are as follows:

         Jury verdicts constitute the major source of costs for
    medical liability payments and defense expenses.
         Jury verdicts drive the settlement process.
         Jury verdicts are biased against doctors on the issue of
    liability, either due to prejudice against doctors or because juries
    are confused and misled by plaintiff medical testimony.
         Juries are driven by sympathy for plaintiffs rather than
    the evidence.
         Jury damage awards are excessive and not rational.
         The major portion of jury damage awards are for ``general
    damages'' (also, inappropriately labeled ``noneconomic damages'' or
    simply ``pain and suffering.''
         Caps on pain and suffering will reduce health providers'
    liability insurance premiums.
         Jury awards and their fallout are driving doctors from
    States without caps on ``pain and suffering.''
         Many lawsuits are frivolous and driven by the expectation
    that a jury will award mega damages.
         The cost of defending frivolous cases has increased.

        I want to address these myths by describing what research findings
    demonstrate.

             MEDICAL INJURIES FROM NEGLIGENCE ARE A SERIOUS PROBLEM

        The Harvard study of medical negligence examined hospital records
    of 31,000 patients and concluded that 1 out of every 100 patients
    admitted to hospitals had an actionable legal claim based on medical
    negligence.\6\ Some of these patients' injuries were minor or
    transient, but 14 percent of the time the adverse event resulted in
    death and 10 percent of the time the incident resulted in
    hospitalization for more than 6 months. Significantly, 7 of those 10
    persons suffered a permanent disability. Generally, the more serious
    the injury the more likely it was caused by negligence.\7\ Subsequent
    research involving Utah and Colorado found rates of negligent adverse
    events that were similar to the New York findings.\8\
        There are reasons to believe that the Harvard study may have
    underestimated the incidence of medical negligence because the data
    were based solely on hospital records. Andrews conducted a study in a
    large Chicago-area hospital and studied actual incidence of negligent
    events in hospital wards.\9\ Andrews discovered that many injuries were
    not recorded on the records as required, especially when the main
    person responsible for the error was a senior physician. Other research
    is consistent with the Andrews's findings.\10\
        In 2000, the Institute of Medicine produced a report that relied on
    these studies and other data.\11\ The report concluded that each year
    98,000 persons died due to medical error and that many other patients
    sustain serious injuries.
        In 2004, HealthGrades, Inc., a company that rates hospitals on
    healthcare for insurance companies and health plans, studied Medicare
    records in all 50 States for the years 2000 to 2002.\12\ HealthGrades
    concluded that the Institute of Medicine's figure of 98,000 deaths was
    too low and that a better estimate was 195,000 annual deaths. In
    addition the HealthGrades report estimated that there were 1.14 million
    ``patient safety incidents'' among 37,000,000 hospitalizations.
    HealthGrades further concluded that ``[o]f the total 323,993 deaths
    among Medicare patients in those years who developed one or more
    patient-safety incidents, 263,864, or 81 percent, of these deaths were
    directly attributable to the incidents'' and that ``[o]ne in every four
    Medicare patients who were hospitalized from 2000 to 2002 and
    experienced a patient-safety incident died.''
        In 2005 HealthGrades released another annual report that found 1.24
    million total safety incidents.\13\ The report concluded that ``for the
    second year in a row, patient safety incidents have increased--up from
    1.14 and 1.18 million reported in HealthGrades' First and Second Annual
    Patient [reports].'' The report further concluded that ``Of the 304,702
    deaths that occurred among patients who developed one or more patient
    safety incidents, 250,246 were potentially preventable.''
        It is important to note that the patient error rates reported in
    the IOM and the Healthgrades reports do not always mean that negligence
    was involved. Additionally, some critics have charged that the various
    estimates in these studies are too high.\14\ However, there is no
    serious question that medical negligence not only occurs, but that it
    occurs at a substantial rate.

               INJURIES DUE TO MEDICAL NEGLIGENCE HAVE HIGH COSTS

        More than a dozen years ago, Frank Sloan and Stephen van Wert, two
    economists, conducted systematic assessments of economic losses
    (medical costs, income losses, and other expenses) in Florida cases
    involving claims of medical negligence that occurred as a result of
    birth-related incidents.\15\ Even though those researchers offered the
    caution that their assessment procedures probably underestimated
    losses, severely injured children's economic losses were, on average,
    between $1.4 and $1.6 million in 1989 dollars. If adjusted for
    inflation using the consumer price index, these figures in 2005 dollars
    translate roughly to $2.3 million per case. In the same study, the
    losses of persons who survived an emergency room incident were
    estimated at $1.3 million per case, or $ 2.1 million in 2005 dollars.
    For persons who died in an emergency room incident, the loss to their
    survivors was estimated at $0.5 million, which translates to $0.8
    million in today's dollars. It is important to note that there was
    considerable variability in these estimated averages: some patients had
    much higher economic losses and, conversely, others had lesser economic
    losses.
        Sloan and van Wert's estimates, moreover, did not consider
    ``noneconomic'' losses, such as pain and suffering, disfigurement or
    loss of enjoyment of life's amenities. So-called ``noneconomic'' losses
    in fact often have economic consequences as State courts have
    recognized.\16\ Disfigurement or ``loss of a normal life,'' for
    example, may affect employment or marriage opportunities.
        A more recent study of Florida closed claim data that I and my
    colleagues conducted \17\ indicated that the average payout for a
    permanent significant injury such as deafness, loss of a limb, loss of
    an eye or one kidney or lung in 2003 dollars was $601,828. For a
    permanent major injury such as paraplegia, blindness, loss of two limbs
    or brain damage, the payout was $601,828. For a grave injury such as
    quadriplegia, severe brain damage, lifelong care or a fatal prognosis,
    the average payment was $694,427. The range of payments within these
    categories was considerable; sometimes the payments were many times the
    average payment. This should not be surprising. A young person
    requiring lifelong care will cost more than an aged person requiring
    lifelong care. A professional or a business executive will have greater
    lost income than an unskilled worker.

                  ONLY ONE OUT OF SEVEN INJURED PATIENTS SUES

        There is a widespread belief that injured patients sue at the drop
    of a hat or because they are persuaded to do so by rapacious plaintiff
    lawyers. In fact, the opposite appears to be true. One of the most
    striking findings from the Harvard medical malpractice project is that
    seven times as many patients suffered from a medical negligence injury
    as filed a claim.\18\ Put in different words, for every seven patients
    who suffered a negligent injury, just one claim was filed. Claims were
    also filed in cases in which the research team of healthcare providers
    concluded that there was no negligence. However, the bottom line is
    that for every doctor or hospital charged with a claim where no
    negligence was found, there were as many as seven valid claims that
    were not filed.\19\
        There are a number of explanations as to why the rate of claiming
    for negligent medical injuries is about one in eight. The plaintiff may
    never suspect that negligence has occurred or may never be told that
    the outcome was due to negligence. The patient may be told that an
    error occurred, but that the medical provider corrected the injury.
    Even if the error cannot be corrected, the patient, or his or her heirs
    in the case of a wrongful death, may be reluctant to sue because the
    medical provider is well-liked or offers an apology.
        Another important reason is that a patient may not be able to find
    a lawyer to represent him. Sloan and Hsieh studied 220 childbirths in
    Florida in 1987 that involved death or permanent injury to the
    child.\20\ The researchers had physicians independently review the
    files and determine if negligence had taken place. The families of the
    children were interviewed. Of the 220 cases, 23 parents sought legal
    advice. These tended to be cases in which the child suffered very
    serious injuries and independent reviewing physicians had concluded
    that negligence was probably involved. However, not a single suit was
    filed in any of the 220 cases. Sloan and Hsieh concluded that:

              The lack of claimants among the 220 women whose babies had
            serious birth-related injuries and the failure of 23 women to
            obtain [legal] representation runs counter to the
            ``conventional wisdom'' that patients sue when they obtain less
            than a ``perfect result.'' In fact, lawyers filter out many
            potential claims that injury victims might lose.\21\

        Research by Herbert Kritzer examined the decisions of plaintiff
    lawyers to take or decline cases.\22\ Kritzer found that because
    lawyers working on a contingency fee basis have their own time and
    money at stake, they tend to very carefully screen cases and weed out
    those that have minor injuries, low damages potential, or that have a
    low potential of winning at trial. In ordinary cases, lawyers may
    decline as many as 9 cases in 10; in medical malpractice cases, the
    proportion of declined cases may be even higher. Economic reality
    drives lawyers' decisions to accept or reject cases. Kritzer's research
    findings are consistent with those of Sloan and van Wert.
        Combined with the factors of patients not discovering that they are
    victims of negligence or patients' reluctance to sue even if negligence
    is discovered, plaintiff lawyers' screening of cases helps explain the
    low-claiming rates found in the Harvard study and subsequent studies.
    Patients who find a lawyer and file lawsuits are more likely to have
    suffered a serious injury and have a reasonable likelihood of
    prevailing on liability and demonstrating serious economic damages.

                    MYTHS THAT ARE PERPETUATED ABOUT JURIES

        Are juries as irresponsible and incompetent as tort reform critics
    say they are? Are jury decisions responsible for medical malpractice
    insurance premium hikes? The results of more than 3 decades of
    systematic research by many scholars are not consistent with these
    claims. Critics of juries usually make their charges through anecdotes
    that are nothing more than urban legends. They ignore many research
    findings that doctors win between 6 or 7 out of 10 cases that go to
    trial, that damage awards are related to the severity of the patient's
    injury and that only a small percentage of malpractice payments result
    from jury trial.

                            TRIAL BY JUDGE AND JURY

        ``Trial by jury'' is misleading. It is ``trial by judge and jury.''
    The trial judge presides over the trial, determines which evidence is
    allowed and which is not. The judge hears and sees the same evidence as
    the jury. Before the jury's verdict can be recorded as a legal
    judgment, the trial judge must agree that the evidence was sufficient
    to support the verdict. If the judge disagrees on the issue of
    negligence, he or she can set aside all, or parts, of the verdict. If
    the judge believes that the amount of damages is too high, the amount
    can be reduced through the legal device called ``remittitur.'' If the
    plaintiff is unwilling to accept the judgment, the judge can order a
    new trial.

                        PLAINTIFFS LOSE MOST JURY TRIALS

        Many studies have examined win rates in medical malpractice trials.
    The findings contradict widespread beliefs about jury verdicts. For
    example, the Bureau of Justice Statistics systematically sampled jury
    verdicts in 1992, 1996, and 2001 in courts representing the 75 most
    populous counties in the United States.\23\ There were 1,156 medical
    malpractice cases in the sample, and 96 percent of these were tried
    before juries. In 1992, plaintiffs won 30.5 percent of jury trials, but
    in 2001, the win rate had dropped to 26.3 percent, roughly one case in
    four. Win rates vary slightly by State and by counties within States.
    The fact that doctors win two-thirds of the cases filed is not evidence
    that these suits are frivolous cases. These are cases where a judge
    concluded that a legitimate triable issue, a factual dispute, existed
    between the parties.

                  JURORS VIEW PLAINTIFF CLAIMS WITH SKEPTICISM

        The assertion that jurors decide cases out of sympathy for injured
    plaintiffs rather than the legal merits of the case is one of the most
    persistent claims of opponents of civil jury trial. Research finds
    little support for these claims.
        Interviews with North Carolina jurors who decided medical
    malpractice cases showed that jurors viewed the plaintiffs' claims with
    great skepticism.\24\ Jurors expressed their attitudes in two main
    themes: first, too many people want to get something for nothing, and
    second, most doctors try to do a good job and should not be blamed for
    a simple human misjudgment. This does not mean that in every case
    jurors held these views. Sometimes, evidence of the doctor's behavior
    caused jurors to be angry about the negligence. However, even in these
    latter cases the interviews indicated that the jurors had approached
    the case with open minds. Hans interviewed jurors who decided tort
    cases, including medical malpractice, and obtained similar
    findings.\25\ Hans concluded that jurors often penalized plaintiffs who
    did not meet high standards of credibility and behavior, including
    those who did not act or appear as injured as they claimed, those who
    did not appear deserving due to their already high standard of living,
    those with pre-existing medical conditions, and those who did not do
    enough to help themselves recover from their injuries.

                   NO EVIDENCE FOR THE ``DEEP POCKETS'' CLAIM

        Closely related to the claim of ``jury sympathy'' verdicts is the
    claim that juries are more likely to render verdicts against doctors,
    hospitals, and corporations, not because they are seen as negligent,
    but only because the jurors perceive them as having the ability to pay
    large awards--a so-called ``deep pockets'' effect. A number of research
    studies have assessed this hypothesis and find no support for it.\26\

         JURY VERDICTS AGREE WITH JUDGMENTS OF NEUTRAL MEDICAL EXPERTS

        An important study of medical malpractice litigation by Taragin et
    al. compared jury verdicts with the opinions of doctors hired by an
    insurance company to review the medical records to provide a neutral
    assessment of whether they believed medical personnel had acted
    negligently.\27\ The review decisions were confidential and could not
    be obtained by the plaintiff or used at trial. The research team
    compared the doctors' ratings with jury verdicts. The verdicts tended
    to be consistent with these assessments. Moreover, the study also found
    that juries' decisions on liability or negligence of doctors were not
    correlated with the severity of the plaintiff 's injury. The results,
    therefore, contradict the claim that juries decide for the plaintiff
    out of sympathy rather than apply the legal standard of negligence.
        The New England Journal of Medicine study that I referenced at the
    beginning of my testimony is consistent with the Taragin et al.
    research. Juries tended to reject claims that had no merit.\28\

                        JUDGES AGREE WITH JURY VERDICTS

        Some studies asked trial judges to make independent assessments of
    who should have prevailed in civil cases over which they presided.\29\
    The judgments were made while the jury was still deliberating and,
    therefore, were not contaminated by knowledge of the outcome. The
    judge's decision was then compared to the jury verdict in that case.
    Although the research did not specifically focus on malpractice juries,
    the findings indicate that there was high agreement between the judge
    and the jury. Moreover, in instances when the judge would have decided
    differently than the jury, the judge usually indicated that,
    nevertheless, the jury could reasonably have come to a different
    conclusion from the trial evidence. Other studies asked large national
    samples of judges to draw on their professional experience with juries
    and give their opinions about jury decisions.\30\ The surveys uncovered
    a general consensus that jurors accept and take very seriously their
    civic responsibility. The overwhelming number of the judges gave the
    civil jury high marks for competence, diligence, and seriousness, even
    in complex cases.

             JURIES ARE NOT ``OVERWHELMED'' BY PLAINTIFF 'S EXPERTS

        An often-repeated charge is that the plaintiff 's experts in
    medical malpractice cases overwhelm jurors.\31\ This confusion and
    deference to experts, it is alleged, plays to the advantage of
    plaintiffs because the jury simply defers to the plaintiff 's experts
    and allows juror sympathies for the plaintiff to be the basis of their
    verdict. There is fuzzy logic in this claim, however, because it
    ignores the fact that defendants also cross-examine plaintiff 's
    experts and call their own experts who offer opinions contrary to the
    plaintiff 's experts. Moreover, the defendants often call more experts
    than the plaintiff.
        Systematic studies of jury responses to experts lead to the
    conclusion that jurors do not automatically defer to experts and that
    jurors have a basic understanding of the evidence in malpractice and
    other cases.\32\ Jurors understand that the adversary system produces
    experts espousing opinions consistent with the side that called them to
    testify. Moreover, jurors carefully scrutinize and compare the
    testimony of opposing experts. They make their decisions through
    collective discussions about the evidence.

                DAMAGE AWARDS CORRELATE WITH SEVERITY OF INJURY

        Bovbjerg et al. found that the magnitude of jury awards in medical
    malpractice tort cases positively correlated with the severity of the
    plaintiffs' injuries, except that injuries resulting in death tended to
    result in awards substantially lower than injuries resulting in severe
    permanent injury, such as quadriplegia.\33\ I and two colleagues
    conducted a study of malpractice verdicts in New York, Florida, and
    California. We also found that jury awards of prevailing plaintiffs in
    malpractice cases were correlated with the severity of the injury.\34\
    In these studies, there was variability of awards within levels of
    injury. However, economic losses vary by patient. The economic loss for
    a quadriplegic who is 40-years old with a yearly income of $200,000 and
    a family of three young children would ordinarily be much greater than
    an identical quadriplegic who is retired, widowed, 75-years old, has no
    dependents, and whose annual income never exceeded $35,000. Moreover,
    losses can vary by a given location because the costs of living,
    including the costs associated with medical care and treatment, are
    higher in urban areas compared to rural areas.

          JURY DAMAGE AWARDS HAVE INCREASED, BUT THERE ARE PLAUSIBLE,
                                RATIONAL REASONS

        The Bureau of Justice Statistics study found that in 2001 the
    median verdict in medical malpractice trials when plaintiffs prevailed
    was $431,000, compared to $253,000 in 1992.\35\ Punitive damages were
    awarded in 4 percent of cases, and those tended to involve cases of
    gross malfeasance, such as sexual assaults on patients. Most State laws
    proscribe punitive damages in malpractice cases except for cases
    involving fraud, or wanton and willful behavior. My own research in
    Florida, involving a study of closed claims compiled by the Florida
    Department of Insurance also showed that awards increased between 1990
    and 2003.\36\ Claims have been made that this increase is due to
    increased jury profligacy, but there are very plausible alternative
    explanations.
        A study of the Texas closed claim data base over a 15-year period
    by Charles Black and his co-authors found the medical malpractice
    system was largely stable and generated few significant changes in
    claim frequencies, payments, or jury verdicts. The authors concluded
    that ``Average payments on medical malpractice claims rose because
    small claims were squeezed out of the system over time, not because
    payments on larger claims increased.'' \37\
        Patients may have sustained more serious injuries. Due to medical
    advancements, patients can survive negligent injuries for longer
    periods of time than in the past, and thus their medical bills have
    increased. For example, only a few years ago many brain injured babies
    died. Today, thanks to medical advancements those babies now live, but
    at enormous medical expense. Our society must and should support those
    children, but the costs can sometimes be astronomical.
        Another explanation may lie in the possibility that plaintiff
    lawyers have become more adept at ``proving'' damages by using experts
    who document economic losses better than in the past.\38\ An additional
    possible cause is that the cost of negligent medical injuries and lost
    income may have increased. During the 1990's, medical costs, and
    consequently cost for needed medical care, increased 51.7 percent and
    general inflation, which is reflected in lost wages, increased 26.2
    percent.
        Another explanation for the increase in costs is that cases with
    claims of more serious injuries may be tried to juries in 2001,
    compared to 1992. This last possible explanation needs elaboration. The
    study of medical malpractice litigation in Florida that I and my
    colleagues conducted found that, compared to the first 3 years of the
    1990s, during the first 3 years of the 2000-decade, there were more
    settled cases involving claims of negligent deaths and fewer cases
    involving less serious injuries. The change in types of cases is
    unlikely to explain all of the increase in awards, but it does appear
    to be a possible partial explanation.
        In short, like many other parts of the medical malpractice
    controversy, the questions about damages are complex, and at present
    there are not satisfactory answers to all of these questions.

               SOME EXAMPLES OF INJURIES FROM MEDICAL NEGLIGENCE

        Statistics do not tell stories of injuries as well as case
    examples. I offer some recent examples of jury verdicts from
    Philadelphia, although I can equally provide other examples from
    Florida and Illinois. The examples provide graphic illustrations of the
    sometimes catastrophic injuries suffered by patients as a result of
    medical negligence.

     Table 1.--Sample of Claims and Awards in Philadelphia's Million Dollar
                 Cases Occurring Between July 2003-December 2004
    ------------------------------------------------------------------------
                                     Verdict
             Case Number              Date       Injury Claim      Verdict
    ------------------------------------------------------------------------
    10400199.....................     9/18/03  In 1984, at 3      $1,000,000
                                                weeks old this
                                                female had
                                                surgery for hip
                                                dysplasia and
                                                suffered damage
                                                to her femoral
                                                nerve. At age
                                                19, she suffers
                                                permanent
                                                physical pain,
                                                disability,
                                                disfigurement
                                                and has had to
                                                spend money for
                                                hospitalization
                                                , medication,
                                                treatment and
                                                rehabilitation.
    10301115.....................     9/30/03  Doctor failed to   $1,500,000
                                                diagnose an
                                                intra-cranial
                                                tumor in
                                                female,
                                                resulting in
                                                loss of hearing
                                                in one ear,
                                                resulting in
                                                additional
                                                surgery,
                                                diminution of
                                                earning
                                                potential, pain
                                                and emotional
                                                distress;
                                                $37,500 to
                                                husband for
                                                loss of
                                                services,
                                                companionship.
    10201487.....................    10/02/03  Female lupus       $8,178,350
                                                patient with
                                                dialysis in
                                                severe pain,
                                                but doctors
                                                failed to
                                                conduct tests
                                                and gave
                                                improper
                                                medication and
                                                discharged
                                                patient who
                                                became a
                                                quadriplegic
                                                plus multiple
                                                hospitalization
                                                s and future
                                                medical costs.
    10402583.....................    10/28/03  Male, age 19,     $10,015,000
                                                was in hospital
                                                after suicide
                                                attempt.
                                                Intensive care
                                                nurses failed
                                                to respond in
                                                timely manner
                                                to bedside
                                                monitor alarm,
                                                resulting in
                                                severe brain
                                                damage.
                                                $600,000 in
                                                past medical
                                                expenses and
                                                life care
                                                estimated at $6
                                                to $12 million.
                                                Punitive
                                                damages of
                                                $15,000 for
                                                nurse altering
                                                records.
    10600976.....................    11/17/03  Male, age 37,      $2,910,000
                                                with two
                                                children,
                                                earning $60,000
                                                per year;
                                                elective
                                                surgery for
                                                hearing loss
                                                and died almost
                                                immediately
                                                upon
                                                administration
                                                of anesthesia.
    10601622.....................    11/25/03  Female, age 61,    $1,000,000
                                                examined for
                                                gastrointestina
                                                l bleeding, but
                                                doctors failed
                                                to diagnose
                                                cancerous tumor
                                                until 2 years
                                                later and woman
                                                dies.
    10800103.....................    12/03/03  Female, age 55,    $1,800,000
                                                claimed failure
                                                to diagnose and
                                                treat liver
                                                disease that
                                                resulted in
                                                liver cancer.
                                                Plaintiff
                                                underwent four
                                                hospitalization
                                                s, had end-
                                                stage liver
                                                disease at time
                                                of trial, and
                                                was seeking a
                                                liver
                                                transplant.
    10500659.....................    12/23/03  Female, age 48,    $1,000,000
                                                dies after
                                                failure to
                                                diagnose and
                                                treat adrenal
                                                insufficiency
                                                over an 8-year
                                                period despite
                                                more than 40
                                                visits to
                                                doctor.
    10702977.....................     1/30/04  Pregnant female,  $15,000,000
                                                age 34, in auto
                                                accident
                                                causing injured
                                                ankle; surgery
                                                performed after
                                                birth with bone
                                                graft and
                                                screws. Claims
                                                of lack of
                                                informed
                                                consent and
                                                result of
                                                severe,
                                                permanent
                                                injuries to
                                                bones, muscles,
                                                nerves and
                                                blood vessels
                                                in right leg
                                                with permanent
                                                pain,
                                                depression, and
                                                inability to
                                                care for her
                                                child plus
                                                additional
                                                surgeries and
                                                nursing care.
    10300103.....................     2/06/04  Female, age 39,   $20,500,000
                                                suffering
                                                gastrointestina
                                                l problems had
                                                bowel surgery
                                                and surgeon
                                                severed her
                                                bile duct that
                                                could not be
                                                repaired,
                                                resulting in
                                                permanent pain
                                                and spasms,
                                                gastroparesis,
                                                motility and
                                                risk of
                                                progressive
                                                liver disease,
                                                possibly
                                                needing a liver
                                                transplant.
    98060057.....................     2/11/04  Female, age 30,    $9,000,000
                                                had corrective
                                                surgery to
                                                ureter which
                                                was
                                                accidentally
                                                severed and
                                                repaired
                                                improperly;
                                                ureter placed
                                                on top of
                                                bladder instead
                                                of side
                                                resulting in
                                                reflux
                                                disorder,
                                                chronic kidney
                                                infection and
                                                will probably
                                                require kidney
                                                removal.
    10402642.....................     3/10/04  Female, age 49,    $3,200,000
                                                claimed that a
                                                neurosurgeon
                                                inappropriately
                                                recommended
                                                implantation of
                                                a device to
                                                treat multiple
                                                sclerosis and
                                                failed to
                                                obtain informed
                                                consent.
                                                Patient now a
                                                paraplegic with
                                                loss of bowel
                                                and bladder
                                                control.
    10601566.....................     3/12/04  Male, age 39,      $2,800,000
                                                with six
                                                children had
                                                abdominal
                                                complaints, but
                                                doctor did not
                                                order
                                                diagnostic
                                                tests, which
                                                would have
                                                shown gastric
                                                cancer. Cancer
                                                went from stage
                                                1 to stage 2
                                                requiring
                                                radiation and
                                                chemotherapy.
                                                Two-thirds of
                                                stomach removed
                                                and increased
                                                risk of
                                                recurring
                                                cancer.
    10902569.....................     3/25/04  Male, age 61,      $1,151,028
                                                died after a
                                                misdiagnosis
                                                with regard to
                                                a drug
                                                interaction
                                                between Lopid
                                                and Lipitor.
                                                Doctors
                                                improperly
                                                prescribed the
                                                medications
                                                together and
                                                failed to
                                                discontinue
                                                them when he
                                                showed signs of
                                                a debilitating
                                                muscle
                                                condition.
    10600854.....................     3/25/04  Female had          $2,05,000
                                                mammogram and
                                                doctors failed
                                                to detect
                                                cancer allowing
                                                carcinoma to
                                                advance
                                                resulting in
                                                mastectomy,
                                                reconstructive
                                                surgeries,
                                                chemotherapy,
                                                severe pain,
                                                and prospect of
                                                future medical
                                                expenses.
    ------------------------------------------------------------------------

        Cases go to trial because patients and doctors disagree about
    whether negligence occurred or because they disagree about the values
    of the damages resulting from the negligent injury. The above sample of
    cases were ones in which the juries ruled in favor of the plaintiff.
    Certainly on their face the damage awards seem reasonable, given the
    degree of injury.
         outlier awards tend not to withstand post-verdict adjustments
        Despite the substantial evidence indicating that juries are
    ordinarily conservative in deciding damages in malpractice cases, there
    are exceptions resulting in what are commonly labeled ``outlier
    awards.'' There are a number of reasons for outlier awards that I have
    discussed elsewhere and I need not detail here.\39\ The important point
    is that research evidence indicates that outlier verdicts seldom
    withstand post verdict proceedings.
        Post-trial reductions have been documented in a number of
    studies.\40\ I and two colleagues found that some of the largest
    malpractice awards in New York ultimately resulted in settlements
    between 5 and 10 percent of the original jury verdict.\41\ A study that
    I conducted on medical malpractice awards in Pennsylvania \42\ and a
    study of Texas verdicts \43\ found similar reductions.
        My recent research on medical malpractice verdicts in Illinois
    found that, on average, final payments to plaintiffs were substantially
    lower than the jury verdicts.\44\ This does not mean that the original
    verdict was too high. Rather, needing money immediately and wanting to
    avoid a possibly lengthy appeal process, the plaintiffs settled for the
    health providers' insurance policy limit. Generally speaking, the
    larger the award, the greater the reduction in the settlement following
    trial.

                           CAPS ON PAIN AND SUFFERING

        Advocates of change in the tort system claim that the jury system
    is broken. In addition to seeking an alternative court some have
    advocated for a cap of $250,000 for noneconomic damages that presumably
    includes not only pain and suffering, but also disfigurement and loss
    of society.\45\
        The basic assumption for caps is that juries are too generous with
    their pain and suffering awards. Consequently, it is assumed that in
    many instances jury awards need to be reduced to some ``reasonable''
    figure.
        No one disputes the fact that caps reduce the awards to injured
    persons. For example, a study of California jury trials occurring
    between 1995 and 1999 by RAND's Institute for Civil Justice showed that
    California's MICRA cap of $250,000 on noneconomic damages reduced
    awards about 25 percent in cases involving an injury and over 51
    percent in cases involving death.\46\
        But questions abound regarding the fairness of caps and about their
    effectiveness in reducing insurance premiums.

                              THE FAIRNESS OF CAPS

        David Studdert et al. examined the effects on injured patients of
    California's $250,000 cap on noneconomic damages.\47\ Their findings
    indicate that reductions under the cap affected the patients with the
    most severe injuries. Those researchers concluded:

              Imposition of greater reductions on more severe injuries may
            be justified if compensation for this particular group of
            injuries were especially prone to excess. In fact available
            evidence suggests the reverse is true: Plaintiffs with the most
            severe injuries appear to be at the highest risk for inadequate
            compensation. Hence, the worst-off may suffer a kind of
            ``double jeopardy'' under caps.\48\ (Italics added)

        In another study, Lucinda Finley systematically examined jury
    verdicts in California, Florida and Maryland to determine if caps had a
    disparate effect on the monetary recoveries of women, and elderly
    persons.\49\ She found that to be the case. Finley's research pointed
    out that cap laws tend to ``place an effective ceiling on recovery for
    certain types of injuries disproportionately experienced by women,
    including sexual assault and gynecological injuries that impair child
    bearing or sexual functioning.'' In wrongful death cases women were
    shown to be disadvantaged in awards they would receive compared to men.
        Finley separately analyzed gynecological malpractice cases
    involving misdiagnosed breast cancer, negligence in prenatal care that
    caused pregnancy loss, negligent injuries during hysterectomies, and
    malpractice resulting in infertility. Finley showed that over 70
    percent of women's awards were for noneconomic losses. When men
    suffered sexual injuries during medical treatment (e.g. partial removal
    of a bowel and scrotum, leaving a man, age 28, impotent and infertile;
    a 54-year-old male treated for genital warts with undiluted ascetic
    acid on the scrotum and penis causing severe burns, scarring and severe
    pain if sexual intercourse was attempted) the pain and suffering awards
    were similar to those of women with roughly comparable sexual injuries.
    However, women are statistically far more likely to suffer such sexual
    injuries than men. She also pointed out that elderly people, both men
    and women, tend to be disadvantaged by caps. Finley also observed that
    because of the reduced likelihood of recovery, plaintiff lawyers are
    less able to take such cases because the amount that can be recovered
    under the caps often does not justify litigation expenses.
        In 2005, the Wisconsin U.S. Supreme Court overturned that State's
    $350,000 cap on pain and suffering in medical malpractice cases.\50\
    The court reasoned that plaintiffs ``with the most severe injuries
    appear to be at the highest risk for inadequate compensation'' (italics
    added). For example, a patient suffering a severe infection for a
    period of months, but who eventually recovered, could receive $350,000
    for pain and suffering in a jury award. In contrast, a patient who was
    so badly injured that she will suffer excruciating pain the rest of her
    life would be limited to the same amount. In the Wisconsin U.S. Supreme
    Court's words, ``[t]he cap's greatest impact falls on the most severely
    injured persons.''
        The plaintiff in the Wisconsin case was a boy who was severely
    deformed at birth due to medical negligence; he can be expected to live
    for another 69 years. He was awarded $10,000 per year for pain and
    suffering. Under the cap, the U.S. Supreme Court concluded that amount
    would be almost halved. The Court further concluded that many cases
    that would be affected by caps involve children.
        In summary, two systematic studies by respected researchers and the
    Wisconsin U.S. Supreme Court arrived at the same conclusion. Caps on
    pain and suffering have a disproportionate negative impact on the
    fairness of compensation for persons injured through medical
    negligence.

                CONSIDERING CALIFORNIA'S MICRA CAP AND FAIRNESS

        An issue of fairness also arises about California's MICRA cap of
    $250,000. The MICRA bill was passed in 1975. In 2005 dollars, that cap
    was worth $899,281. In short, the MICRA cap at the time it was passed
    was almost nine-tenths of a million dollars. However, during the past 3
    decades the cap has never been adjusted for inflation. Thus, patients
    with pain and suffering awards in California have progressively lost
    ground due to inflation. What the California legislature decided was
    fair compensation in 1975 has, in real terms, been reduced by 72
    percent. This insight adds to the issue of whether the cap is fair.

                          THE INEFFECTIVENESS OF CAPS

        Research on the effectiveness of caps in reducing medical
    malpractice premiums lends, at best, equivocal support to the argument
    that they are effective.
        In 2003 a U.S. Government Accounting Office (GAO) report concluded
    that there are no data to establish the proposition that damage caps
    have an effect on the number of malpractice claims, losses by medical
    insurers, litigation expenses, or the rates charged doctors for
    insurance.\51\
        In the same year, Weiss Ratings, Inc., a highly respected insurance
    rating company, also concluded that caps do not have an effect on the
    physicians' insurance premiums.\52\ Indeed, Weiss found that in
    comparison to States without caps, States with caps had greater
    increases in median annual insurance premiums for practices involving
    internal medicine, general surgery and obstetrics-gynecology.
        An analysis of statistical information for 2003 by the Kaiser
    Family Foundation, another highly respected organization dedicated to
    healthcare, showed that the number of paid claims per 1,000 active
    physicians was unrelated to whether a State had caps on pain and
    suffering.\53\
        Catherine Sharkey analyzed medical malpractice jury verdicts from
    22 States for the years 1992, 1996 and 2001 that were collected by the
    National Center for State Courts.\54\ Sharkey found no statistically
    significant relationship between the presence or absence of caps and
    compensatory damages in jury verdicts and trial court judgments.
        I analyzed a sample of Illinois jury verdicts that provided
    breakdowns of the verdicts into their specific components, including
    pain and suffering.\55\ My analysis showed that a proposed $500,000 cap
    on pain and suffering would functionally affect very few cases.
        The Wisconsin U.S. Supreme Court decision analyzed a substantial
    body or empirical research bearing on caps with specific reference to
    the State of Wisconsin.\56\ The Court drew a number of conclusions that
    included:

              ``Based on the available evidence from nearly 10 years of
            experience with caps on noneconomic damages in medical
            malpractice cases in Wisconsin and other States, it is not
            reasonable to conclude that the $350,000 cap has its intended
            effect of reducing medical malpractice insurance premiums.
              The available evidence indicates that healthcare providers do
            not decide to practice in a particular State based on the
            State's cap on noneconomic damages.
              We agree with those courts that have determined that the
            correlation between caps on noneconomic damages and the
            reduction of medical malpractice premiums or overall healthcare
            costs is at best indirect, weak and remote.''

        In 2003, GE Medical Protective Company, the Nation's largest
    medical malpractice insurer, reported to the Texas Department of
    Insurance as follows: ``Non-economic damages are a small percentage of
    total losses paid. Capping noneconomic damages will show loss savings
    of 1.0 percent.'' \57\

        The company also said that a provision in Texas law allowing for
    periodic payments of awards would provide a savings of only 1.1
    percent. Medical Protective eventually raised the rates on its
    physician policyholders.\58\
        In California in 2003, despite the cap of $250,000, GE Medical
    Mutual sought an increase of 29.2 percent in liability insurance
    premiums. Thus, the cap did not prevent insurers seeking a major
    increase in liability insurance rates.\59\

                  EXPLANATIONS FOR THE INEFFECTIVENESS OF CAPS

        The rationale for caps is predicated on the following two
    assumptions: (1) juries are irresponsible and excessive in awarding
    pain and suffering; and (2) the fear of large jury awards for pain and
    suffering cause doctors and hospitals to settle cases for more than
    they are actually worth.
        The first problem with the caps rationale is that it ignores the
    fact that most cases with large jury awards are settled for much less
    than the verdict, often for amounts close to the plaintiff 's economic
    losses. Functionally, the plaintiff does not typically receive the
    large award for pain and suffering.
        The second problem with the rationale is that it assumes that jury
    awards directly drive settlements. More than 90 percent of cases are
    settled without jury trial, with some estimates indicating that the
    figure is as high as 97 percent. In my study of 831 Florida malpractice
    cases between 1990 and 2003, more than 92 percent of claims with
    million-dollar payments were settled without a jury trial. Thirty-seven
    cases resulted in payments over $5 million. Only two of these cases
    were decided by a jury. Five of the 831 cases exceeded $10 million
    dollars, but only one was the result of a jury trial. Of the remaining
    four cases, one settled in pre-litigation negotiations.
        A study of closed claims in Texas from 1966 through 2002 showed
    that plaintiff verdicts averaged only 3 percent of paid claims over
    $10,000.\60\ In any year, jury verdicts never accounted for more than 5
    percent of paid claims.
        To be sure, the prospect of a jury award is possible if the case is
    not settled before trial, but if the case does go before a jury, data
    from many studies show that at trial, doctors win between 6 and 8 times
    out of 10. Defense lawyers and their insurers are aware of these odds
    because they are repeat players in the litigation process. They also
    know that when there is a jury award, the case frequently settles for
    less than the verdict amount. Research on why insurers actually settle
    cases indicates that the driving force in most instances is whether the
    insurance company and their lawyers conclude, on the basis of their own
    internal review, that the medical provider was negligent.\61\ If they
    conclude negligence occurred, an attempt is made to settle; the case
    proceeds to trial only if the plaintiff monetary demand is unreasonable
    or if there is a strong disagreement over whether liability exists.
    Payments are typically not made in cases in which the defense concludes
    there is no liability.
        Finally, the rationale for caps ignores problems associated with
    the insurance business cycle that may be responsible in whole or in
    part for the costs of liability insurance premiums.

                     CAPS AND ``DEFINED PAYMENT SCHEDULES''

        The fairness problems of caps as detailed above are endemic in any
    system that proposes ``defined payment schedules'' for so-called
    noneconomic damages.\62\ My study of actual medical malpractice cases
    shows there is a great deal of variation among injured persons. For
    example, one person with a leg amputation may experience mild or no
    pain whereas another may experience constant excruciating ``phantom
    pain'' for the rest of his or her life.
        Even when some leeway is built into compensation schedules, they
    cannot take into account the number of factors and extreme variability
    of pain and suffering, physical impairment, mental anguish, loss of
    society and companionship, and other elements of damages that fall
    under the rubric of noneconomic damages. That is why these matters have
    been entrusted to juries. They provide justice on an individualized
    basis.
        Moreover, there is another form of fairness problem that involves
    types of claims. A person injured in an automobile accident will have a
    full right to have his or her damages decided by a jury. A person with
    exactly equal injuries resulting from medical negligence will not have
    this right. What possible rationale can be given for treating medical
    patients differently?

          TOO MUCH EMPHASIS ON JURIES! MOST CASES SETTLE BEFORE TRIAL

        In testimony before the Illinois General Assembly in 2005, Lawrence
    Smarr, President of The Physician Insurers Association of America
    presented data indicating that jury verdicts for plaintiffs constituted
    only about 3 percent of medical malpractice payments.\63\
        In recent research, I and my colleagues have been studying closed
    medical malpractice claims in the State of Florida.\64\ Florida has
    required medical liability insurers to file detailed reports of closed
    medical malpractice claims with the Department of Health since 1975. In
    this research we centered on cases closed between 1990 and 2003. A
    total of 21,809 claims were closed with a payment to the claimant
    during those 14 years. We found that 20.2 percent of paid claims were
    settled without the claimant even resorting to a lawsuit, 6.3 percent
    of claims were settled in arbitration and 70.8 percent settled before a
    jury verdict, leaving just 2.7 percent of paid claims that resulted
    from a jury verdict.\65\
        To pursue this insight further we singled out cases involving a
    million dollars or more.\66\ We found that 10.5 percent were settled
    without a lawsuit and 4.6 percent were settled in arbitration, 77.4
    percent were settled before or during trial and only 7.6 percent
    resulted from a jury verdict. Put in the obverse, more than 92 percent
    of claims with million dollar payments were settled without a jury.
    Going further, we found that 37 of the 831 million dollar cases
    resulted in payments over $5 million. Only two of these cases were
    settled following a jury trial. Five of the 831 cases exceeded $10
    million dollars but only one was the result of a jury trial; of the
    remaining four cases one was settled in pre-litigation negotiations,
    and three settled before a trial had commenced.
        Perhaps Florida is different than other States. It is hazardous to
    generalize because each State has its own unique set of laws and legal
    culture. Nevertheless, it is interesting to observe that data from
    North Carolina seems roughly consistent with the Florida findings. I
    compared Carolina data on verdicts and settlements.\67\ The data tended
    to show some interesting patterns. As early as the first part of the
    1990s decade there were verdicts and settlements exceeding $1 million.
    Over the period from 1990 through 2002, the number of million-dollar-
    plus settlements exceeded the number of million-dollar-plus jury
    verdicts by a factor of over 3 to 1. The average amounts of $1 million-
    plus settlements were comparable to the jury awards. A statistical test
    on the data indicated that the distributions and the magnitudes of
    payments for jury verdicts and non-jury settlements were not
    statistically different from one another. In short, the North Carolina
    findings also indicated that most of the payments exceeding a million
    dollars involved settlements rather than jury trial.
        These findings have a major implication. Whether we are talking all
    cases or just million dollar cases the process by which claims are paid
    in Florida (and, it appears, also in North Carolina) involves the
    negotiation table, not the jury room. In Florida settlements exceed
    jury trials by a factor of more than 9 to 1 for million dollar cases.

         A LOOK AT FLORIDA MILLION DOLLAR SETTLEMENTS WITHOUT LAWSUITS

        Our Florida research on million dollar cases allow further insights
    into the losses incurred in medical negligence cases. Recall again,
    that in these cases the health providers did not contest liability, and
    settled to avoid the expenses of a lawsuit they were almost sure to
    lose. Through 1998, the Florida closed claim files contained
    information on ``structured settlements.'' The details of these cases
    provide insights about the nature of the injury, the long-term costs
    and about the collateral losses such as children left without the
    services of a parent.\68\

                                                   Table 2.--Year, Case Name, Injury and Details of Settlement
    --------------------------------------------------------------------------------------------------------------------------------------------------------
               Settle Year                     Case                  Sex                  Age                 Injury         Settlement       Structured
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    1991.............................  BMH.................  M..................  0..................  Spastic quad;         $1,887,044  $1 million cash
                                                                                                        cerebral                          plus $887,044
                                                                                                        palsyriplegia.                    annuity yielding
                                                                                                                                          an expected total
                                                                                                                                          payment to child
                                                                                                                                          of $13,855,826.
    1992.............................  WCD.................  M..................  1..................  Sever brain damage,   $1,000,000  $640,000 cash plus
                                                                                                        blind, deaf,                      $540,000 annuity
                                                                                                        immobile.                         yielding $2,557/
                                                                                                                                          month for child
                                                                                                                                          plaintiff.
    1992.............................  UMS.................  F..................  0..................  Severe mental,        $3,000,000  No details except
                                                                                                        emotional                         as estimate that
                                                                                                        impairment.                       the annuity would
                                                                                                                                          yield $5,914,774.
    1993.............................  CRH.................  F..................  2..................  Severe cerebral       $6,000,000  $4,922,115 cash;
                                                                                                        palsy secondary to                plus $1,077,885
                                                                                                        hypoxia.                          present value for
                                                                                                                                          structured trust
                                                                                                                                          expected to yield
                                                                                                                                          $3,179,273 (Note
                                                                                                                                          medical expenses
                                                                                                                                          incurred to date
                                                                                                                                          of the settlement
                                                                                                                                          = $989,164).
    1993.............................  TGP.................  M..................  43.................  Renal cell            $2,000,000  $1,389,542 cash
                                                                                                        carcimona.                        plus $610,459 for
                                                                                                                                          structured
                                                                                                                                          settlement for 3
                                                                                                                                          surviving minor
                                                                                                                                          children.
    1993.............................  AHP.................  F..................  0..................  Paraplegia.........   $3,750,000  $2,300,000 plus
                                                                                                                                          $1,450,000 present
                                                                                                                                          value for annuity.
    1994.............................  AR..................  M..................  0..................  Profound brain        $1,000,000  $440,178 cash plus
                                                                                                        damage.                           $559,822 annuity
                                                                                                                                          yielding a total
                                                                                                                                          of $2,912,000.
    1994.............................  GBP.................  F..................  39.................  Vegetative state,     $3,000,000  $1,500,000 cash
                                                                                                        non-reversible.                   plus $1,500,000
                                                                                                                                          annuity expected
                                                                                                                                          to yield an
                                                                                                                                          expected payment
                                                                                                                                          to the plaintiff
                                                                                                                                          of $8,783,183 for
                                                                                                                                          plaintiff and four
                                                                                                                                          minor dependants.
    1995.............................  FHH.................  M..................  25.................  Spinal cord injury.   $2,647,617  $1,156,000 cash
                                                                                                                                          plus $1,491,000
                                                                                                                                          for structured
                                                                                                                                          annuity expected
                                                                                                                                          to yield
                                                                                                                                          $5,291,937.
    1995.............................  CHM.................  M..................  0..................  Canavan's Disease     $2,383,900  $1,092,209 cash
                                                                                                        (degenerative                     plus $1,291,691
                                                                                                        disorder of                       for annuity
                                                                                                        central nervous                   yielding lump sum
                                                                                                        system).                          payments at 5 and
                                                                                                                                          10 years totalling
                                                                                                                                          $2,000,000.
    1995.............................  HBM.................  F..................  32.................  Coma...............   $7,250,000  Cash and annuity
                                                                                                                                          cost unknown but
                                                                                                                                          annuity estimated
                                                                                                                                          to yield
                                                                                                                                          $16,129,528.
    1996.............................  RLC.................  UK.................  UK.................  Death..............   $1,500,000  $1,429,808 cash
                                                                                                                                          plus $70,192 for
                                                                                                                                          annuity yielding a
                                                                                                                                          total payment to
                                                                                                                                          plaintiff 's
                                                                                                                                          family of
                                                                                                                                          $1,422,239.
    1996.............................  CPC.................  M..................  0..................  Required              $2,500,000  $1,187,940 cash
                                                                                                        resuscitation;                    plus $1,312,060
                                                                                                        neurological                      for annuity,
                                                                                                        damage.                           yielding
                                                                                                                                          $3,307,824 for the
                                                                                                                                          child.
    1996.............................  ORH.................  F..................  0..................  Brain damage.......   $7,300,000  $5,100,000 cash
                                                                                                                                          plus paid on
                                                                                                                                          behalf of four
                                                                                                                                          defendants plus
                                                                                                                                          $2,200,000 for an
                                                                                                                                          annuity. Total
                                                                                                                                          yield of annuity
                                                                                                                                          unknown.
    1996.............................  GMI.................  F..................  0..................  Severe brain damage   $6,379,322  $5,529,332 cash
                                                                                                                                          plus $850,000
                                                                                                                                          annuity yielding
                                                                                                                                          $8,066/mo for life
                                                                                                                                          of the child.
    1996.............................  DCH.................  M..................  0..................  Cerebral palsy.....   $3,000,000  $2,600,000 cash
                                                                                                                                          plus $800,000
                                                                                                                                          annuity expected
                                                                                                                                          to yield
                                                                                                                                          $13,783,483 over
                                                                                                                                          the child's life.
    1996.............................  CKR.................  F..................  30.................  Brain herniation...   $3,000,000  $1,800,000 cash
                                                                                                                                          plus $1,200,000
                                                                                                                                          from three
                                                                                                                                          insurance carriers
                                                                                                                                          for an annuity
                                                                                                                                          expected to yield
                                                                                                                                          a total of
                                                                                                                                          $7,816,824.
    1996.............................  FHA.................  M..................  0..................  Cerebral vasculitis   $6,500,000  $4,500,359 cash
                                                                                                        and bilateral                     plus $1,999,641
                                                                                                        thalamic infarcts.                for an annuity
                                                                                                                                          yielding $7,855/mo
                                                                                                                                          for life plus
                                                                                                                                          periodic cash
                                                                                                                                          payments
                                                                                                                                          graduating from
                                                                                                                                          $50,000/yr to
                                                                                                                                          balloon at $25
                                                                                                                                          years to $250,000.
    1997.............................  SVC.................  M..................  52.................  Brain damage.......    1,000,000  $582,935 cash plus
                                                                                                                                          $417,065 for
                                                                                                                                          annuity, yielding
                                                                                                                                          expected total of
                                                                                                                                          $1,572,935.
    1997.............................  HCP.................  M..................  49.................  Death..............   $5,000,000  $4,000,000 cash
                                                                                                                                          plus $1,000,000
                                                                                                                                          annuity yielding
                                                                                                                                          projected
                                                                                                                                          $3,976,503 for
                                                                                                                                          decedent's minor
                                                                                                                                          daughter.
    1997.............................  KCM.................  F..................  37.................  Paraplegia and        $3,520,160  $1,845,160 cash
                                                                                                        cauda equina                      plus $1,675,000 to
                                                                                                        syndrome (spinal                  two annuity
                                                                                                        cord ends).                       companies yielding
                                                                                                                                          an expected total
                                                                                                                                          of $8,157,597.
    1998.............................  GJL.................  F..................  52.................  Paraplegia.........   $1,000,000  $500,000 cash plus
                                                                                                                                          $500,000 annuity
                                                                                                                                          starting at $2,500
                                                                                                                                          per month and then
                                                                                                                                          adjusted for
                                                                                                                                          inflation.
    1998.............................  COR.................  M..................  56.................  Death..............   $1,000,000  Payout of
                                                                                                                                          approximately
                                                                                                                                          $2,000 per month
                                                                                                                                          over 35 years.
    1997.............................  LMG.................  M..................  39.................  Death..............   $1,250,000  $553,359.60 cash
                                                                                                                                          plus annuities
                                                                                                                                          purchased at
                                                                                                                                          $354,456,
                                                                                                                                          $11,048.20 and
                                                                                                                                          $111,048.20
                                                                                                                                          yielding a total
                                                                                                                                          of $1,129,912.
    1998.............................  UM..................  F..................  56.................  Right ankle, left     $1,625,000  $700,000 cash
                                                                                                        below knee                        annuity providing
                                                                                                        amputation.                       $4,000 per month
                                                                                                                                          for 5 years and
                                                                                                                                          $1,000 per month
                                                                                                                                          for 7 years.
    1998.............................  GSHI................  M..................  62.................  Quadriparesis,        $1,449,032  $675,000 cash and
                                                                                                        neurogenic bladder.               annuity providing
                                                                                                                                          $9,750 per month
                                                                                                                                          for 5 years or
                                                                                                                                          life.
    1998.............................  UCH.................  M..................  2..................  Profound brain        $5,000,000  $2,500 per month,
                                                                                                        damage.                           increase 3 percent
                                                                                                                                          per year. 20 years
                                                                                                                                          guaranteed, plus
                                                                                                                                          life.
    1997.............................  CKMC................  F..................  37.................  Paraplegia and        $3,520,000  Cash payments of
                                                                                                        cauda equina                      $1,845,160 and two
                                                                                                        syndrome (spinal                  annuities
                                                                                                        cord ends).                       purchased with
                                                                                                                                          present value of
                                                                                                                                          $1,675,000: total
                                                                                                                                          payments estimated
                                                                                                                                          at $8,157,597.
    1999.............................  SPGH................  F..................  0..................  Severe cognitive      $5,500,000  Total annuities
                                                                                                        delays, requires                  yielding
                                                                                                        occupational                      $12,754.31 per
                                                                                                        therapy, physical                 month.
                                                                                                        therapy, speech
                                                                                                        therapy.
    1999.............................  PRMC................  F..................  21.................  Death..............   $2,250,000  Cash of $1,809,709
                                                                                                                                          plus annuity for
                                                                                                                                          surviving child
                                                                                                                                          purchased at
                                                                                                                                          $440,291.
    1999.............................  PRMC................  F..................  1..................  Hemorrhagic           $3,300,000  Cash of $907,829
                                                                                                        periventricular                   plus annuity
                                                                                                        leukomalacia,                     purchased for
                                                                                                        hypoxic ischemic                  $2,392,171 for
                                                                                                        injury resulting                  life care of
                                                                                                        in motor                          child.
                                                                                                        development delay,
                                                                                                        cognitive defects.
    --------------------------------------------------------------------------------------------------------------------------------------------------------

        In some instances the estimated payments were staggering,
    reflecting medical costs to the patient, income losses, and/or
    financial support for surviving minor children. Case BMH (1991) was
    estimated at over $13 million; Case GBP (1994) was estimated at almost
    $9 million; case DCH (1996) was estimated at almost $14 million. In
    case CKR (1996), which the insurer rated only a 7 in level of injury
    seriousness, the estimated cost was almost $8 million, suggesting that
    the medical injury was more serious than reported, that the claimant
    had a large income loss or a combination of both of these factors. Case
    HBM (1995) was estimated at over $16 million; and Case KCM (1997) was
    estimated at over $8 million.
        There is one additional matter to consider about these data. We
    compared these nonlawsuit settlements with the final settlements of
    cases that were settled following a jury verdict. The verdict
    settlements were comparable to the cases in which negligence was
    conceded. These data provide further confirmation that the ultimate
    outcome of jury verdicts tends to reflect actual losses incurred by
    severely injured patients.

                 THE SHADOW EFFECT OF JURY TRIALS IS MISLEADING

        Was it a fear of large jury awards--the ``shadow effect''--that
    caused defendants to settle? Alternatively, was the negligence and
    severity of loss so clear in most of the cases that it made no sense to
    go to trial because defendants' liability insurers would incur heavy
    litigation costs in the face of a likely win for the patient? Without
    question the threat of a jury trial is what forces parties to settle
    cases. The presence of the jury as an ultimate arbiter provides the
    incentive to settle but the effects are more subtle than just
    negotiating around a figure. The threat causes defense lawyers and the
    liability insurers to focus on the acts that led to the claims of
    negligence.
        Research by Peeples et al. on a sample of insurers' medical
    malpractice files indicated that insurers tend to settle cases
    primarily based on whether their own internal reviews by medical
    experts indicate the provider violated the standard of care.\69\ If
    they decide the standard has been violated they attempt to settle.
    Those authors concluded that claims proceed to trial only when the
    plaintiff cannot be convinced that there was no violation of the
    standard and cannot extract a reasonable offer from the insurer. An
    earlier study by Rosenblatt and Hurst examined 54 obstetric malpractice
    claims for negligence.\70\ For cases in which settlement payments were
    made there was general consensus among insurance company staff, medical
    experts and defense attorneys that some lapse in the standard of care
    had occurred. No payments were made in the cases in which these various
    reviewers decided there was no lapse in the standard of care.
        I used some of the same closed claim files from medical insurers in
    my book, Medical Malpractice and the American Jury. I reached a similar
    conclusion.
        At the very least the findings strongly suggest that all of the
    emphasis on jury verdicts appears misplaced.

              RISING CLAIMS AND RISING COSTS: A COMPLICATED ISSUE

        The Florida data also allow us to address the question of whether
    the frequency of malpractice claims have been rising and whether
    simultaneously so have the costs of payouts. We found that the number
    of claims involving payments to the claimant had increased between 1990
    and 2003. However, Florida's population also increased at the same time
    as did the number of licensed physicians. When we adjusted for
    population growth, the number of paid claims per 100,000 residents in
    2003 was no higher than in 1990. Similarly, we found the paid claims
    per 100 licensed physicians also were no higher. This would seem to
    support consumer groups who say there has been no increase.
        Doctors and insurers say that the number of claims began to rise
    steeply around the year 2000 and continued through 2003. Claims with no
    payment also incur transaction costs to defend. It is noteworthy, that
    data collected by the National Center for State Courts on a national
    sample of cases showed that while there was an overall decline in
    medical malpractice case filings between 1992 and 2001, filings did
    rise in 2002.\71\
        Our Florida closed claims data also revealed that between 1990 and
    2003 the inflation adjusted cost of the average paid claim showed a
    modest upward increase over the 14-year period. Part of the explanation
    might be that medical costs, which have increased at rates greater than
    the Consumer Price Index, are the cause. But there are other
    explanations. Our data also showed that on average the paid claims,
    beginning in 2002, included a greater proportion of serious injuries,
    including death.

                              FRIVOLOUS LITIGATION

        Claims about frivolous litigation are based, in part, on findings
    that in medical malpractice cases doctors prevail in approximately 70
    percent of cases that go to trial and that as many as 50 percent of
    cases filed against healthcare providers ultimately result in no
    payment to the plaintiff.\72\ Additionally, opponents of medical
    malpractice litigation argue that jury verdicts, especially those
    involving larger awards, encourage lawyers to file lawsuits in cases
    that are not meritorious because doctors and liability insurers will
    settle claims, not out of merit, but rather out of fear of a large and
    unjustified award if the case goes before a jury.\73\ These claims are
    not supported by research evidence.

             LIABILITY INSURERS TEND TO NOT SETTLE FRIVOLOUS CASES

        In interviews with liability insurers that I undertook in North
    Carolina and other States, the most consistent theme from them was:
    ``We do not settle frivolous cases!'' \74\ The insurers indicated that
    there are minor exceptions, but their policy on frivolous cases was
    based on the belief that if they ever begin to settle cases just to
    make them go away, their credibility will be destroyed and this will
    encourage more litigation.
     cases dropped by claimants before trial are not necessarily frivolous
        In Medical Malpractice and the American Jury,\75\ I reported that
    despite up-front screening by plaintiff lawyers, there is still a lot
    of uncertainty about whether negligence has occurred. This can usually
    only be determined after a lawsuit is filed, depositions are taken and
    expert opinions are obtained. As documented in that book, research into
    the files of liability insurers showed that this is as true of the
    defense side as it is of the plaintiff side: lawyers for the defendants
    and their insurers get conflicting opinions as to whether negligence
    has occurred. Sometimes, after an extensive process of consulting with
    experts and the taking of depositions, it becomes reasonably apparent
    that no legal negligence has occurred, or that, in any event, the case
    is ``not winnable'' because of the costs that would be entailed in
    pursuing it. At this juncture plaintiff lawyers tend to drop the case.
    In North Carolina nearly 40 percent of filed cases were dropped on
    these grounds. Again, the point to be made is that it makes little
    economic sense for a plaintiff lawyer to continue to invest time and
    money in a case that he or she is unlikely to win. It is true that
    occasionally lawyers misjudge the merits of cases and continue to
    pursue them, but far more often they are dropped.
        Thus, given the fact that both plaintiff and defendant are faced
    with uncertainty, it is inappropriate to call the vast majority of
    dropped cases ``frivolous.'' Rather, they should be labeled
    ``nonmeritorious'' cases in recognition of the fact that both sides
    took them very seriously at the beginning of the lawsuit.

       DOCTOR'S HIGH ``WIN RATES'' AT TRIAL DO NOT MEAN THE LAWSUIT WAS
                                   FRIVOLOUS

        As I discussed earlier, statistics indicate that, nationwide,
    doctors prevail in about 70 percent of cases that go to trial.
        Nevertheless, a plaintiff loss at trial is not grounds for
    concluding that the litigation was ``frivolous.'' \76\ Cases that go to
    trial are ones where negligence is uncertain. As discussed above, when
    pretrial investigation shows that the case is clearly not winnable,
    lawsuits tend to be dropped before trial. On the other hand cases with
    clear negligence tend to be settled, particularly if the parties can
    negotiate the amount of damages. Thus, only ``close cases'' tend to go
    to trial.
        There are a number of possible explanations, other than nonmerit,
    as to why doctor win rates at trial are so high.\77\ One reason is that
    jurors generally tend to be skeptical of plaintiff claims and
    essentially place a burden on the plaintiff that is greater than the
    legally appropriate ``balance of probabilities'' standard. Another is
    that plaintiffs often have a more difficult time obtaining and hiring
    the experts, relative to the defense. It is also important to observe
    that my research showed that in many instances, plaintiffs who lost at
    trial against one doctor nevertheless obtained settlements from other
    doctors who had been named in the lawsuit.\78\ This might suggest that
    medical negligence had occurred in the case, albeit at trial the jury
    did not think that the evidence against the remaining defendant or
    defendants was sufficient to find liability. On the other hand it is
    certainly possible that despite insurers' insistence that they do not
    make settlements for nonmeritorious claims, in some instances they may
    decide that a modest and confidential settlement payment avoids bad
    publicity for the doctor and saves expensive litigation costs. Such
    decisions could explain why some doctors settle.\79\

                    CLAIMS ABOUT INCREASING LITIGATION COSTS

        Insurers have made claims about increasing litigation costs and
    blamed them on frivolous litigation.\80\ However, there are two studies
    that have provided data on these transaction costs.
        The Florida closed claim files that we examined in our research
    also contained insurers' reports on their litigation expenses.\81\ The
    data on no-payment claims were reliable only for the years 1990 through
    1997. The mean, or average, litigation expense, adjusted to 2003
    dollars, was $22,205 per claim. It is again important to re-emphasize
    my findings that nonpaid claims should not necessarily be characterized
    as frivolous. Many unfounded claims begin as credible claims in both
    the eyes of the plaintiff and the defendant. It is only after sometimes
    lengthy periods of depositions of experts and other investigation that
    the evidence indicates that it is unlikely that negligence occurred. To
    be sure these are unfortunate transaction costs to insurers--as well as
    plaintiff lawyers.
        Our research also examined insurers' litigation costs for pain
    claims over a 14-year period covering 1990 through 2003. The litigation
    costs for these claims in the years 2000 through 2003, when adjusted
    for inflation were not statistically greater than a comparable period a
    decade earlier (1990-1993).
        Research by Bernard Black and his co-authors on closed claim files
    from Texas showed that one defense costs per each large claim that was
    paid rose steadily from 1988 through 2002.\82\ The ratio of defense
    costs relative to payout increased from about 8 percent to about 15
    percent. However, the data showed that defense costs rose gradually,
    and the absolute size of these costs remain[ed] small relative to
    payouts.'' \83\
        Litigation costs may vary from State to State depending on a number
    of factors. Nevertheless two independent studies using data supplied by
    insurers to the States of Florida and Texas do not support extreme
    claims of rising litigation costs.

                ``JUDICIAL HELLHOLES:'' THE DOCTOR EXODUS CLAIM

        The American Medical Association has identified a number of
    ``crisis States'' in which it is alleged that because of the ``abusive
    litigation'' climate doctors were leaving certain areas or certain
    States.\84\ One of those areas involved Madison and St. Clare counties
    in Illinois.\85\ Indeed President Bush traveled to those counties in
    January 2005 after being informed that these were two counties in deep
    trouble because of medical malpractice litigation. Reports of the
    number of doctors leaving those counties as reported in the Wall Street
    Journal and other sources ranged as high as 180 doctors. That figure
    would amount to more than 26 percent of the total doctors in those
    counties. I checked those claims by using official American Medical
    Association statistics reported in its annual publications of Physician
    Statistics and Distribution in the U.S.
        I considered only doctors described as ``treating non-Federal
    physicians,'' thus centering only on the doctors whose liability
    insurance rates would be affected by the alleged crisis. Contrary to
    the wild assertions, these statistics showed a steady increase in the
    number of doctors in the combined from 1994 through 2003. In comparison
    to 2000 the number of physicians increased by 4 percent in 2003.
        Similar claims were made for the whole State of Illinois
    particularly with respect to Cook and Du Page counties.\86\ When I
    checked the AMA statistics I again found steady increases in the number
    of doctors, both in absolute numbers and in relation to Illinois'
    population growth. Because obstetrician-gynecologists and neurosurgeons
    are alleged to be two groups most affected in the alleged exodus, I
    found that their numbers, relative to Illinois' population had remained
    relatively steady since 1994.
        Pennsylvania is another State alleged to be experiencing a doctor
    exodus.\87\ A media release by the Pennsylvania Medical Society claimed
    that a survey:

              ``. . . discovered one in four Pennsylvanians lost their
            doctors due to the rising costs of liability insurance.
            According to the poll, 26 percent said they saw their doctors
            move, give up certain procedures, or stop practicing medicine
            as liability insurance costs skyrocketed.''

        Once again I went to the official American Medical Association
    statistics. Similar to Illinois I found that the number of patient care
    physicians increased at an average annual rate of about 1 percent per
    year in proportion to the population. The number of obstetricians
    declined slightly, but so had Pennsylvania's birth rates, strongly
    suggesting that the drop may have been a result of fewer needs for this
    medical specialty. There was a slight decline in the number of
    neurosurgeons but Pennsylvania still had more neurosurgeons per capita
    than the rest of the Nation.
        In short the doctor exodus claims received no support in studies of
    the American Medical Associations' own statistics.

             HEALTH CARE COURTS: BE CAREFUL FOR WHAT YOU WISH FOR!

        Finally, I wish to offer a brief commentary on the proposed Special
    Health Care Courts. Consumer Interest groups, such as the Center for
    Justice and Democracy, have raised serious criticism about such health
    courts.\88\ They argue that the proposed courts deprive citizens of the
    constitutional right to jury trial because they provide no right to
    appeal the court's decision. They also argue that the probable schedule
    of payments to injured persons is likely to ignore the unique
    circumstances of losses of claimants. They further argue that the
    courts, the experts likely to be appointed by the courts and the
    amounts of payments under the schedules are likely to not consider the
    factual circumstances. Additionally, they identify the danger that
    those courts, as proposed, are very likely to be subject to many
    political pressures that could affect the rights of persons injured
    through medical negligence. I agree with those criticisms!
        However, I wish to add an additional problem. The Health Court
    proposal assumes that cases can be handled more efficiently than the
    current tort system. To be sure there are inefficiencies in the tort
    system. However, those inefficiencies have to be weighed against
    inefficiencies that will be endemic to health courts as well. As I have
    pointed out in my discussion of so-called frivolous litigation in my
    testimony today and in my book, Medical Malpractice and the American
    Jury, medical malpractice cases involve complex issues that can only be
    sorted out after considerable investigation and discovery. When
    patients make claims of negligence the process of discovering whether
    negligence occurred requires investigating medical records,
    interviewing the involved parties (through sworn depositions), fording
    experts, sorting out conflicts between the opinions of experts,
    reinvestigating the records and testimony as new insights are uncovered
    and then reaching some kind of consensus, if possible, about what
    actually occurred and whether those facts meet the definition of legal
    negligence. This process takes considerable time as well as money. For
    complex cases the process of finding competent experts and getting them
    to review cases under their busy, over-booked schedules means that
    cases cannot be resolved in weeks, indeed even in months. Sometimes it
    takes years. Any competent defense or plaintiff lawyer who works in
    this area will confirm my assertions. To be fair to both sides, health
    courts will have to do the same thing. Health courts will also have to
    bear these transaction costs.
        As I have pointed out in my testimony today, under the current tort
    system many of these investigative costs are borne now by plaintiff
    lawyers. They screen cases and eliminate many cases before legal claims
    are made. Under a Health Court System, if those claims are to be fairly
    adjudicated, most of the costs will be borne by the health courts and
    the American taxpayers who underwrite the costs of those courts.

                                   CONCLUSION

        I will not reiterate the many points I have made in my testimony.
    The bottom line is that most of the claims made about juries and the
    tort system do not stand up to empirical scrutiny.
        Finally, I want to close with a statement that I am strongly in
    favor of measures that improve the quality of healthcare. I am strongly
    in favor of voluntary measures such as the Medical Error Disclosure
    Program at the University of Michigan. Such programs should be
    voluntary on the part of patients and they should retain the right to
    trial by jury.

                                    Endnotes

        1. David M. Studdert et al., Claims Errors, and Compensation
    Payments in Medical Malpractice Litigation, 354 New England Journal of
    Medicine 2024 (May 11, 2006).
        2. Id. at 2031.
        3. See, e.g. Thomas Baker, The Medical Malpractice Myth (2005) for
    an outstanding review of the literature.
        4. See, e.g., http://cgood.org/healthcare.html; http://
    www.hsph.harvard.edu/press/releases/press001102005A.html.html.
        5. Hillary Clinton and Barack Obama, Making Patient Safety the
    Centerpiece of Medical Liability Reform, 354 New England Journal of
    Medicine 2205 (2006).
        6. Harvard Medical Practice Study, Patients, Doctors, and Lawyers:
    Medical Injury, Malpractice Litigation and Patient Compensation in New
    York (1990). See also Paul C. Weiler et al., A Measure of Malpractice:
    Medical Injury, Malpractice Litigation, and Patient Compensation
    (1993).
        7. Id. at 44, Table 3.2.
        8. Eric J. Thomas et al., Incidence and Types of Adverse Events and
    Negligent Care in Utah and Colorado, 38 Medical Care 261, 261 (2000).
        9. Lori Andrews, Studying Medical Error in SITU: Implications for
    Malpractice Law and Policy, 54 DePaul Law Review 357 (2005).
        10. See Lucian Leape, Institute of Medicine, Medical Error Figures
    Are Not Exaggerated, 284 Journal of the American Medical Association 95
    (2000) [citing R. W. DuBois and R. Brook, Preventable Deaths: Who, How
    Often and Why? 109 Annals Internal Medicine 582 (1988)]; Kathryn B.
    Kirkland et al., The Impact of Surgical-Site Infections in the 1990s:
    Attributable Mortality, Excess Length of Hospitalization, and Extra
    Costs, 20 Infection Control & Hosp. Epidemiology 725 (1999); Thomas M.
    Julian et al., Investigation of Obstetric Malpractice Closed Claims:
    Profile of Event, 2 AM. J. Perinatology 320 (1985).
        11. Institute of Medicine, To Err Is Human: Building a Safer Health
    Care System (Linda Kohn et al., eds. 2000), http://books.nap.edu/
    catalog/9728.html?onpi_news
    doc1 12999; Lucian L. Leape, Institute of Medicine, Medical Error
    Figures Are Not Exaggerated, 284 Journal of the American Medical
    Association 95 (2000).
        12. Reuters, Report Says 195,000 Deaths Due to Hospital Error, WL
    Reuters Eng. News Serv., July 27, 2004, 22:23:11.
        13. HealthGrades, Third Annual Patient Safety in American Hospitals
    Study, April, 2006.
        14. For criticism of the Harvard study or controversy over some of
    the findings, see Rodney A. Hayward and Timothy P. Hofer, Estimating
    Hospital Deaths Due to Medical Errors, 286 Journal of the American
    Medical Association 415 (2001); Clement J. McDonald et al., Deaths Due
    to Medical Error Are Exaggerated, in Institute of Medicine Report, 284
    Journal of the American Medical Association 93 (2000).
        15. Frank A. Sloan and Stephen S. VanWert, Cost of Injuries, in
    Frank A. Sloan et al., Suing for Medical Malpractice 123, 139-40
    (1993).
        16. See generally, Ill. Pattern Jury Instr.-Civ. 30.04.03 (2005
    ed.); Ill. Pattern Jury Instr.-Civ. 34.02 (2005 ed.); West's Smith-Hurd
    Illinois Compiled Statutes Annotated and cases cited in the
    annotations. Chapter 740. Civil Liabilities, Act 180. Wrongful Death
    Act, 180/1. Action for damages.
        17. Neil Vidmar et al., Uncovering the ``Invisible'' Profile of
    Medical Malpractice Litigation: Insights from Florida, 54 DePaul Law
    Review 315 (2005).
        18. Harvard Medical Practice Study, Patients, Doctors, and Lawyers:
    Medical Injury, Malpractice Litigation and Patient Compensation in New
    York (1990).
        19. Michael Saks, Medical Malpractice: Facing Real Problems and
    Finding Real Solutions, 35 William & Mary Law Review 693, 702, 703
    (1994), presents one of the clearest expositions of these findings. In
    further calculations, Saks points out that the probability of a
    healthcare provider being sued for a negligent injury is 0.029 whereas
    the probability of being sued for a nonnegligent injury is 0.0013.
        20. Frank A. Sloan and Chee Ruey Hsieh, Injury, Liability, and the
    Decision to File a Medical Malpractice Claim, 29 Law & Society Review
    413 (1995).
        21. Id. at 430.
        22. Herbert M. Kritzer, Risks, Reputations, and Rewards:
    Contingency Fee Legal Practice in the United States 289 n. 20 (2004).
        23. Carol J. DeFrances et al., Civil Justice Survey of State
    Courts, 1992: Civil Jury Cases and Verdicts in Large Counties Bureau of
    Justice Statistics, No. NCJ-154346, (1995); Carol J. DeFrances and
    Marika F.X. Litras, Civil Justice Survey of State Courts, 1996: Civil
    Trial Cases and Verdicts in Large Counties, 1996 Bureau of Justice
    Statistics, No. NCJ 173426, (1999); Thomas H. Cohen, Civil Justice
    Survey of State Courts, 2001: Tort Trials and Verdicts in Large
    Counties, 2001 Bureau of Justice Statistics, No. NCJ 206240, (2004).
        24. Neil Vidmar, Medical Malpractice and the American Jury (1995).
        25. Valerie P. Hans, Business on Trial: The Civil Jury and
    Corporate Responsibility 127-29 (2001).
        26. For a review of this research, see Hans, Business on Trial;
    Neil Vidmar, Empirical Evidence on the Deep Pockets Hypothesis: Jury
    Awards for Pain and Suffering in Medical Malpractice Cases, 43 Duke
    L.J. 217 (1993).
        27. Mark I. Taragin et al., The Influence of Standard of Care and
    Severity of Injury on the Resolution of Medical Malpractice Claims, 117
    Annals Internal Med. 780 (1992).
        28. David M. Studdert et al., Claims, Errors, and Compensation
    Payments in Medical Malpractice Litigation, 354 New England Journal of
    Medicine 2024 (May 11, 2006) at 2029.
        29. Harry Kalven, Jr. and Hans Zeisel, The American Jury (1966);
    Larry Heuer and Steven Penrod, Trial Complexity: A Field Investigation
    of Its Meaning and Its Effects, 18 Law & Hum. Behavior 29 (1994).
        30. These surveys are reviewed in Brief of Amici Curiae Neil Vidmar
    et al., at Kumho Tire Co. v. Carmichael, 526 U.S. 137 (1999) (No. 97-
    1709), 1998 WL 734434.
        31. See Neil Vidmar, Are Juries Competent to Decide Liability in
    Tort Cases Involving Scientific/Medical Issues? Some Data from Medical
    Malpractice, 43 Emory L.J. 885, 885-91 (1994).
        32. Neil Vidmar and Shari Seidman Diamond, Juries and Expert
    Evidence, 66 Brooklyn Law Review 1123 (2001); Sanja Kutnjak Ivkovic and
    Valerie P. Hans, Jurors' Evaluations of Expert Testimony: Judging the
    Messenger and the Message, 28 Law & Soc. Inquiry 441 (2003).
        33. Randall R. Bovbjerg et al., Valuing Life and Limb in Tort:
    Scheduling ``Pain and Suffering'', 83 Northwestern University Law
    Review 908 (1989).
        34. Neil Vidmar et al., Jury Awards for Medical Malpractice and
    Post-Verdict Adjustments of Those Awards, 48 DePaul L. Rev. 265, 287
    (1998).
        35. Thomas H. Cohen, Civil Justice Survey of State Courts, 2001:
    Tort Trials and Verdicts in Large Counties, 2001 Bureau of Justice
    Statistics, No. NCJ 206240, (2004).
        36. Neil Vidmar et al. Uncovering the ``Invisible'' Profile of
    Medical Malpractice Litigation: Insights from Florida, 54 DePaul Law
    Review 315 (2005).
        37. Charles Black, et al., The Myth of the Medical Malpractice
    Claims Crisis, 2 Journal of Empirical Legal Studies 207 (2005).
        38. See Catherine Sharkey, Unintended Consequences of Medical
    Malpractice Damages Caps, 80 New York University Law Review 391 (2005).
        39. See Neil Vidmar, Medical Malpractice Lawsuits: An Essay on
    Patient Interests, The Contingency Fee System, Juries and Social
    Policy, 38 Loyola of Los Angeles Law Review 1217 (2005). There are four
    processes by which awards are reduced. The judge reduces the award
    verdict through remittitur. An appeals court reduces the award.
    Sometimes the sides agree that there was negligence, but disagree about
    the amount of damages and set a high-low agreement prior to trial or
    during trial: they agree that if the jury verdict is above a certain
    limit, the plaintiff will only get the high limit and if it is below
    the bottom limit or even if the defendant prevails at trial, the
    plaintiff will receive the minimum payment. Most common of all, the
    plaintiff and the defendant negotiate a post-trial settlement that is
    less than the jury verdict, often for the amount of the doctor's
    liability coverage.
        40. Earlier studies involving nonmedical malpractice as well as
    malpractice verdicts include: Ivy E. Broder, Characteristics of Million
    Dollar Awards: Jury Verdicts and Final Disbursements, 11 Justice System
    Journal 349 (1986); Michael G. Shanley and Mark A. Peterson, RAND: The
    Institute for Civil Justice, Post-Trial Adjustments to Jury Awards
    (1987); Brian Ostrom et al., So the Verdict Is In--What Happens Next?:
    The Continuing Story of Tort Awards in the State Courts, 16 Just. Sys.
    J. 97 (1993); Deborah Jones Merritt and Kathryn Ann Barry, Is the Tort
    System in Crisis? New Empirical Evidence, 60 Ohio St. Law Journal. 315,
    353-55 (1999).
        41. Neil Vidmar, Felicia Gross and Mary Rose, Jury Awards for
    Medical Malpractice and Post-Verdict Adjustments of Those Awards, 48
    DePaul Law Review 265 (1998).
        42. Neil Vidmar, Medical Malpractice Litigation in Pennsylvania.
    Report Commissioned and Funded by the Pennsylvania Bar Association, May
    2006.
        43. David Hyman and Charles Silver, Medical Malpractice Litigation
    and Tort Reform: It's the Incentives Stupid, Vanderbilt Law Review (in
    press, 2006).
        44. Neil Vidmar and Kara MacKillop, ``Judicial Hellholes:'' Medical
    Malpractice Claims, Verdicts and the ``Doctor Exodus'' in Illinois,
    Vanderbilt Law Review (in press, 2006).
        45. See Howard Richter, Statement of the Pennsylvania Medical
    Society Liability Insurance Company before the Pennsylvania Senate
    Banking and Insurance Commission Regarding the Medical Malpractice
    Market in Pennsylvania, March 26, 2003; David Wenner, Lawsuits
    Illuminate Debate over Malpractice!, The Patriot News, April 10, 2005.
        46. Nicholas Pace et al., Capping Non-economic Awards in Medical
    Malpractice Trials: California Jury Verdicts Under Micra, RAND
    Institute for Civil Justice (2004).
        47. David Studdert, Tony Yang, and Michelle Mello, Are Damage Caps
    Regressive? A Study of Malpractice Jury Verdicts in California, 21
    Health Affairs 54 (2004).
        48. Id. at 61.
        49. Lucinda Finley, The Hidden Victims of Tort Reform: Women,
    Children and the Elderly, 53 Emory Law Journal 1263 (2004).
        50. Ferdon v. Wisconsin Patient Compensation Fund et al.,, Case
    2003 AP 988 (2005 WI 125).
        51. U.S. General Accounting Office, Medical Malpractice:
    Implications of Rising Premiums on Access to Health Care, GAO-03-836
    (August 2003).
        52. Martin D. Weiss et al., Medical Malpractice Caps: The Impact of
    Noneconomic Damage Caps on Physician Premiums, Claims Payout Levels and
    Availability of Coverage, Weiss Ratings, Inc. (2003), available at
    http://www.weissratings.com/malpractice.asp.
        53. The Kaiser data for individual States can be found at http://
    www.state
    healthfacts.org/r/malpractice.cfm.
        54. Catherine Sharkey, Unintended Consequences of Medical
    Malpractice Damages Caps, 80 New York University Law Review 391 (2005).
        55. Neil Vidmar, Medical Malpractice and the Tort System in
    Illinois, A Report to the Illinois State Bar Association, May 2005
    available at http://www.isba.org/medmal05.html
        56. Ferdon v. Wisconsin Patient Compensation Fund et al.,, Case
    2003 AP 988 (2005 WI 125), at paragraphs 129, 166 and 175.
        57. See http://www.consumerwatchdog.org/insurance/rp/rp004689.pdf.
        58. The Nation, October 26, 2004.
        59. Id.
        60. Bernard Black et al., Stability, Not Crisis: Medical
    Malpractice Claim Outcomes in Texas, 1988-2002 2 Journal of Empirical
    Legal Studies 207 (2005).
        61. Ralph Peeples et al., The Process of Managing Medical
    Malpractice Cases: The Role of Standard of Care, 37 Wake Forest L. Rev.
    877 (2002); R.A. Rosenblatt & A. Hurst, An Analysis of Closed Obstetric
    Malpractice Claims, 74 Obstetrics & Gynecology 710 (1989); See also
    Neil Vidmar, Medical Malpractice and the American Jury (1995), at
    Chapter 8, page 83.
        62. E.g. http://www.theorator.com/bills109/s1337.html.
        63. Lawrence E. Smarr, Testimony before the Illinois General
    Assembly, House Judiciary--Civil Law Committee Hearing, April 7, 2005
    at http://www.ihatoday.org/issues/liability/talk/smarrtest.pdf This
    interpretation of Smarr's data is taken from Exhibit B of his
    testimony. The exhibit shows that paid claims constituted 25.2 percent
    of all claims and that plaintiff verdicts constituted .8 percent of
    this total.
        64. Neil Vidmar et al., Uncovering the ``Invisible'' Profile of
    Medical Malpractice Litigation: Insights from Florida, 54 DePaul Law
    Review 315 (2005).
        65. Trial rates for medical malpractice cases usually range between
    7 and 10 percent of lawsuits. These include cases in which defendants
    prevail, approximately 7 or 8 trials in 10, see Vidmar, supra note 2 at
    39. The data reported here do not include plaintiff verdicts at trial
    but they do include cases that never became lawsuits. In short our data
    are using a different numerator and different denominator than previous
    studies.
        66. The payments were adjusted for inflation so that we could
    compare earlier cases with later cases.
        67. Testimony of Neil Vidmar before the North Carolina House Blue
    Ribbon Task Force on Medical Malpractice, Raleigh, NC, January 7, 2004.
    The same data have been used by the North Carolina Trial Lawyers
    Association and by Medical Mutual of North Carolina, a doctor-owned
    liability insurer.
        68. See Neil Vidmar, Kara MacKillop and Paul Lee, Million Dollar
    Medical Malpractice Cases in Florida: Post-verdict and Pre-suit
    Settlements, Vanderbilt Law Review (in press, 2006).
        69. Peeples et al., The Process of Managing Medical Malpractice
    Cases: The Role of Standard of Care, 37 Wake Forest Law Review 877
    (2002),
        70. Rosenblatt and Hurst, An Analysis of Closed Obstetric
    Malpractice Claims, 74 Obstetrics and Gynecology 710 (1989).
        71. National Center for State Courts, Examining the Work of State
    Courts, 2002: A National Perspective from the Courts Statistics Project
    25 (2002), available at .
        72. See Neil Vidmar, Medical Malpractice Lawsuits: An Essay on
    Patient Interests, The Contingency Fee System, Juries and Social
    Policy, 38 Loyola of Los Angeles Law Review 1217 (2005).
        73. See, e.g. http://www.sickoflawsuits.org.
        74. See Neil Vidmar, Medical Malpractice Lawsuits: An Essay on
    Patient Interests, The Contingency Fee System, Juries and Social
    Policy, 38 Loyola of Los Angeles Law Review 1217 (2005); Neil Vidmar,
    Medical Malpractice and the American Jury (1995).
        75. Id. Frank Sloan et al., Suing for Medical Malpractice (1993) at
    164-185 reports systematic data that are consistent with my
    conclusions.
        76. See Neil Vidmar, Medical Malpractice Lawsuits: An Essay on
    Patient Interests, The Contingency Fee System, Juries and Social
    Policy, 38 Loyola of Los Angeles Law Review 1217 (2005); Neil Vidmar,
    Medical Malpractice and the American Jury (1995).
        77. Id.
        78. Id. at 33-34.
        79. Many doctors want to avoid the publicity, the emotional
    pressures and the time from her practice that a trial would entail.
    However, in other cases the doctor may insist on going to trial to
    clear her reputation, Id.
        80. See Neil Vidmar, Medical Malpractice Lawsuits: An Essay on
    Patient Interests, The Contingency Fee System, Juries and Social
    Policy, 38 Loyola of Los Angeles Law Review 1217 (2005); Neil Vidmar,
    Medical Malpractice and the American Jury (1995).
        81. Neil Vidmar et al., Uncovering the ``Invisible'' Profile of
    Medical Malpractice Litigation: Insights from Florida, 54 DePaul Law
    Review 315 (2005) at 350-352.
        82. Bernard Black et al., Stability, Not Crisis: Medical
    Malpractice Claim Outcomes in Texas, 1998-2002 2 Journal of Empirical
    Studies 207 (2005).
        83. Id. at 252.
        84. See AMA website at http://www.ama-assn.org/ama/pub/category/
    7861.html.
        85. See Neil Vidmar and Kara MacKillop,'' Judicial Hellholes;''
    Medical Malpractice Claims, Verdicts and the ``Doctor Exodus'' in
    Illinois. Vanderbilt Law Review (in press, 2006)
        86. Id.
        87. See Neil Vidmar, Medical Malpractice Litigation in
    Pennsylvania: A Report Commissioned and Funded by the Pennsylvania Bar
    Association, May 2006.
        88. Center for Justice and Democracy, Why Health Courts are
    Unconstitutional, Pace Law Review (in press).

        The Chairman. I am about 20 minutes late for voting. I may
    not get this vote in, but I did want to hear all of the
    testimony. I'll be back to ask some questions. I know that we
    have imposed on your time. Any of you who wish to stay, I think
    perhaps Senator Clinton and Senator Kennedy wanted to ask some
    questions, too. If you need to leave, we'll submit some
    questions in writing, even if you stay, we'll probably do the
    same, because there are some that are fairly technical
    questions that we usually want to have as part of the record.
        So, thank you for your testimony, and I will be back.
        [Recess.]
        The Chairman. Well, I see we didn't lose anybody from the
    panel. I really appreciate your tolerance of the time that it
    takes for us to vote. There were three different votes, and I
    did make it back in time for the first one. They held it open a
    few extra minutes so I could do that, but I appreciated getting
    all the testimony in one block. It's a tremendous amount to
    digest. I appreciate the submitted comments, which I have
    looked over, and that's been very helpful.
        I do have a few questions that I'll ask here and then we'll
    submit others in order to obtain more detailed answers as we
    get into the real heart of the issues. I also had a great
    conversation with Senator Clinton on the floor, who will
    probably be submitting some questions as well. She has a
    statement regarding a bill she's been working on that probably
    could have some incorporation into the base bill that we're
    talking about.
        We are actually looking for solutions. We want to find some
    way that people can be compensated fairly, hopefully
    compensated more quickly, and hopefully, more of the
    compensation will go to the person who has actually been harmed
    or to the family of that person. And for that, Ms. Sheridan, I
    particularly want to thank you for your testimony. You know,
    there's a city in Wyoming that's probably named after your
    family. That's where I graduated from high school.
        But you've been through this process. You've seen it from a
    position that many of us have not. And so, what I would ask, is
    that, as we move through this process, you would help us to
    evaluate and to see from your standpoint whether you think
    we're touching on something that would have helped in your
    situations and others that you know of.
        You've heard the testimony today. I don't know if there's
    any of it that you'd particularly like to comment on at this
    point, but I would ask for your help as a reviewer of what
    we're doing.
        Ms. Sheridan. Well, I think that something--I mean, I like
    all of the ideas, and of course, I don't have the answer. But I
    think something that would help me is when people say that
    certain interventions have been successful. For example, I
    think it was--Richard, did you mention Texas, that they were
    able to bring back physicians into Texas. Was that because of
    the caps or--who mentioned that? Oh, it was the Senator; that's
    right.
        And so, my question is: Is that really a successful
    program? Do we measure success by retaining doctors in States,
    or do we measure success by talking to patients who have really
    been harmed? And so, when people talk about successful
    interventions that have come to the tort system, we need to
    evaluate both sides of the coin and not just by, have we
    reduced the number of lawsuits by saying we're sorry or by the
    numbers paid out. Have we asked the patients are they satisfied
    with this? And this usually gets eliminated and not done when
    we look at some of these interventions. So as we talk about
    successful strategies, that is the one point that I would like
    to clarify is how do we define successful or success when we're
    looking at other interventions?
        You know, whether or not we keep the court system as it is
    but refine it is another question. Do we completely abandon the
    court system as, you know, and do health courts? That's another
    good question. But as I mentioned, I think that other people
    agree, that the way the tort system currently exists, it has
    lost its integrity and honor. And can we bring that back into
    the current system? I don't know, but it will take a lot of
    very bold policymakers to implement changes with regard to gag
    clauses, especially expert witness testimony oversight, and
    other tools that are incredible strategic mechanisms that are
    used in the tort system.
        The Chairman. I thank you for that. You've certainly hit on
    a real key there: What is success? I would mention that the
    bill that I've drafted is a demonstration project which would
    allow a number of different mechanisms to be tried on a limited
    basis to see if they work before imposing them on the whole
    Nation. And, we'll be interested in your evaluation of success
    on that as well. Thank you.
        Mr. Studdert, in your testimony, did your data indicate
    that there were any particular issues; that injuries with
    particular problems--for instance, did juries have lower
    accuracy in dealing with, maybe, obstetrics as opposed to
    dermatology or other fields of medicine? Did you see that more
    complex cases were most often misinterpreted by a jury versus
    the straightforward cases, or did it get into that level of----
        Mr. Studdert. Well, we did to some extent. We have a
    follow-up analysis which will be published probably later in
    the year that tries to look more closely at the claims that
    were resolved we think wrongly; that is, either errors that
    were not paid or claims that didn't involve errors that were
    paid; those two types of discordant outcomes.
        I should stress that only about 10 percent of the cases we
    looked at actually went to trial, so there were wrongly decided
    cases in both settings. But our preliminary findings in this
    area are quite interesting. So, on the question of which types
    of claims involved error but didn't get paid, we look at a
    number of different predictors on that, and interestingly, one
    of the predictors is decision before a jury. And I think it
    comes back--so it was more likely that a claim that involved
    error would be decided against the plaintiff inside a courtroom
    than outside a courtroom.
        And I think it goes back to the earlier point I was making:
    this doesn't suggest that juries are consistently doing a bad
    job, but what it suggests is that it is very difficult for them
    to understand these issues sometimes, and in general, I don't
    believe that juries serve plaintiffs well. I think plaintiffs
    have a really hard time in front of juries. It's a long process
    to get there, and even if plaintiffs are successful in front of
    juries, they then have to pay substantial amounts of money to
    move the case to that point to their attorneys in the event of
    a win.
        On the other side of the ledger, these were cases that did
    not involve error but that were paid, we found the strongest
    predictor of that type of discordance is a case involving an
    infant, and the reasons for that, we think, are that attorneys
    are just not willing to put these cases in front of juries when
    they involve infants and have very sympathetic plaintiffs in
    that way. So merit, to some degree, is irrelevant in those
    settlements. There are cases that need to be paid because
    nobody is really willing to roll the dice with that court
    decision.
        The Chairman. Thank you.
        Mr. Howard, one of my biggest concerns about the current
    malpractice system is that it fails to capture information that
    I think could improve the medical delivery system. How does
    your proposal address that shortcoming of the current system?
        Mr. Howard. Well, a key aspect of our proposal is to have
    the health court attached to an administrative body that would
    capture information not only from trials but also from
    settlements and sort through it to see what the lessons learned
    are and then disseminate the information that's important to
    disseminate to the medical community about things that are
    going wrong and possible fixes, not unlike the FAA, you know,
    when things go wrong; many more instances.
        So there is a vital patient safety component trying to
    collect information and sort through it and then disseminate it
    to learn from our mistakes. And again, part of our proposal
    involves transparency, so, you know, I think it is important
    to--it's a vital part of the proposal.
        Could I also comment, Mr. Chairman, about some other
    things, one thing that was said that I sort of mis-stated but--
    --
        The Chairman. We will give you a chance, give everybody a
    chance at the end to have a little wrap-up comment----
        Mr. Howard. All right.
        The Chairman [continuing]. On any of the things, and all of
    you can put any response to any question in writing for us, and
    we'll make that a part of the record, too, because we don't
    always have the time to collect all those thoughts, but we want
    all those thoughts.
        In your healthcare proposal, you would have the courts hire
    experts to testify on the complex medical issues. Can't courts
    currently bring in independent experts to guide the courts, and
    if not, why isn't it used?
        Mr. Howard. Well, courts can do it today, but they
    infrequently do it, and I think part of the problem is who pays
    for it? And so, part of the funding for this proposal would
    have to include a budget for neutral experts. But I would also
    like to point out that our proposal does not preclude parties
    from having their own experts. But we think having a neutral
    expert will substantially decrease the probability of the kind
    of thing that happened to Susan Sheridan, where someone comes
    in with junk science, you know, in that case on the side of the
    doctor, because you have someone picked off a panel of approved
    experts who will be coming in with the best science.
        The Chairman. For Ms. Niro, we've heard from other
    witnesses on the panel that most people injured by negligence
    don't receive any compensation. Under our current medical
    litigation system, we seem to be missing quite a few of them.
    Probably, they're less substantial cases, or the people are
    confused, or they don't have good representation. Does the ABA
    have a position on whether that's an acceptable aspect of the
    system?
        Ms. Niro. Senator, I'm not aware of any specific statement
    of ABA policy that directly responds to your inquiry. I do know
    that the ABA shares the concern that legal services be
    available to all of our citizens, and it is one of our major
    goals to ensure that that is, in fact, the case. Current
    situations now often prevent needy people from receiving the
    services of attorneys, and there is existing today a difficulty
    in assuring that attorneys are available to those cases that
    are most needy.
        The Chairman. Thank you.
        Kind of the same question for Mr. Vidmar, because in your
    written statement, you said that only 1 out of 7 patients who
    actually suffers a negligent injury files a claim. That seems
    to suggest that the current system is missing something, that
    it's failing in some way. And it seems to me to say that
    something needs to be done.
        Mr. Vidmar. Well, I agree; I agree with that response, and
    it is difficult to say. I don't know what the solution is for
    these kinds of cases. I am offering the view that the one thing
    that the tort system does do is that it sets up a standard
    which causes people to negotiate reasonably because of the
    ultimate threat of the jury trial.
        For those people who are missing, I think it's a very sad
    set of circumstances that we have, and it may be that some of
    those injuries are relatively minor. I don't think anybody's
    really tested this in the sense of, you know, the 1 out of 7
    that actually end up that closely, how seriously they were
    injured or whether, in fact, they had alternative resources.
    And that's not been looked at carefully, so that's just one of
    the pieces that's missing in the puzzle.
        The Chairman. But would you say that a schedule of damages
    might bring more attention to less serious injuries, maybe even
    get the attention of physicians a bit more, even send a more
    consistent message?
        Mr. Vidmar. Absolutely, and I think maybe the Michigan
    standard which we've been talking about here has been
    presented, I'm all in favor of that, because I think that we
    should be providing some compensation. And my feeling is it's
    probably cheaper in the end. I'd like to see statistics on how
    well that works out, because you don't have all the major
    litigation expenses, and I think a lot of people who get this
    say, ``Look, you know, maybe I've got some advice from a
    lawyer, but I don't have to pay for the depositions and the
    travel to different parts of the country and all of those
    expenses.''
        It would be cheaper to do it that way, and yet, you are
    still protecting, if the parties can't agree, you are still
    protecting the right, the ultimate right, to trial by jury.
        Ms. Niro. If I may, the difficulty, I think, is assessing
    accurately what are those kinds of injuries that would be well
    addressed by the schedule. It's very difficult without looking
    at the individuals involved to say what is a minor problem,
    what is a major problem.
        If we just thought about the difference in a person losing
    the operation of their hand, if it's, for example, my 79-year-
    old mother or a world-famous surgeon who has developed new
    operating techniques and taught the world's surgeons a better
    and faster and more efficient way to cure pain and suffering. I
    think that whenever we generalize any kind of injury, what is
    lost is our ability to appreciate that not all people have the
    same needs, and not all people will be compensated fairly when
    we generalize the approach.
        The Chairman. That's why we're suggesting a medical court
    model.
        Yes, Ms. Sheridan.
        Ms. Sheridan. You know, in response to the data that shows
    that most people who experience medical error or harm don't end
    up with any award or don't end up even suing, I think a lot of
    it has to do with the fact in the United States, it's not
    mandatory to disclose medical errors, and a lot of people don't
    know that a medical error has taken place. For example, in
    Pat's situation, after he went in for his second surgery, and
    they took out the tumor, and they said this time, ``it is a
    sarcoma; it's cancer,'' we were led to believe that it was a
    benign tumor that became cancerous.
        But because of a series of doctors asking Pat why he never
    got treated for his first tumor, after the third doctor came in
    and said, ``Wait a second, what was his pathology on the first
    one?'' And they said, ``Well, we don't know?'' I went down to
    medical records. I checked out his file. And I found the
    pathology that got lost that indicated that it was a malignant
    synovial sarcoma.
        Pat was discharged from the hospital with no one ever
    telling him that that error had taken place. I discovered the
    error. So I think that so many errors take place that are never
    honestly disclosed to patients, and therefore, if they don't
    know that an error takes place, and they had some type of
    adverse outcome, they're not going to file a lawsuit. So I
    think that in talking about solutions, you know, when there is
    a known, and sometimes there are gray areas undoubtedly, but
    when there is a known medical error that especially creates
    harm, I think that we need to look at a law that mandates full
    disclosure.
        The Chairman. Which brings me to Mr. Boothman, who is an
    advocate of people admitting when they did something wrong, and
    obviously, testimony to doctors willing to do that and that
    there are some good outcomes to it; I think most doctors in the
    country would be afraid to do that, but Mr. Boothman, what do
    you see as the obstacles to applying the system a little bit
    more broadly, especially in systems that are less uniform, like
    small, independent pediatric practices in New York City or
    rural Wyoming?
        Mr. Boothman. I think the single biggest obstacle is the
    fear of financial ruin and/or losing insurance coverage because
    the physician makes a decision to disclose something, not
    knowing what the ramifications are going to be. I do have a
    luxury that a lot of people in my position don't: I have the
    luxury of being able to say to our physicians, the State of
    Michigan will stand behind you. You don't face financial ruin
    in doing the right thing. And I think that's the single biggest
    obstacle that prevents most physicians from doing what they
    really want to do.
        You know, one of the most interesting experiences we've had
    is once we got past the initial shock and awe of the suggestion
    that the doctor would actually sit down with a lawyer who is
    threatening to sue him and just have a conversation, what we've
    really found is most of our physicians welcome the opportunity.
    They don't shy away from it. But they needed permission, and
    they needed assurance that it wasn't going to somehow ruin
    them.
        I suggested to the State of Ohio, which has been through
    some insurance crises, and I mentioned this in my opening
    remarks; I don't understand why States have not pulled together
    a catastrophic injury protection. I think it can be done. I've
    spoken with insurance people who believe that an umbrella
    policy that can be created with very attractive premium rates,
    and I would, if I were doing it, I would key that, key
    participation in that fund to an agreement to submit charts for
    quality assurance reviews or submit themselves for peer reviews
    should there be any claims.
        I think what you'll find is similar to our experience: that
    the big cases drive the numbers. The catastrophic injury fund
    would have widespread participation but would only be tapped by
    a minority of doctors who needed to do that. And if I were
    designing a system to foster that open and honest disclosure,
    I'd first take care of that. I'd get an umbrella policy that
    would take care of the catastrophic loss. I would make the
    premiums attractive. I think you'd get widespread buy-in. I'd
    connect that up with some peer review and quality assurance
    participation and then require physicians to disclose those
    errors.
        Our experience at the University of Michigan is that it's
    been embraced across the board once they got permission, and
    frankly, permission from a lawyer. Lawyers like me have been
    telling doctors for a very long time not to say anything, and
    it's deeply ingrained. The number of doctors I've spoken with
    who believe they can even lose their insurance coverage just by
    talking to their patient is surprising to me and troubling.
        The Chairman. You also mentioned in your testimony that you
    learned the difference between appropriate and negligent care.
    Can you describe how you developed that knowledge?
        Mr. Boothman. Actually, I haven't developed it. We have
    created a pretty nice infrastructure which allows us to
    understand, come to an understanding on our own. You know, when
    a pediatrician decides that he or she is going to prescribe an
    antibiotic for a patient with a first ear infection, there is
    no way that that doctor knows whether that patient is going to
    be back 2 days with a catastrophic reaction to that, and we've
    had those cases, frankly.
        The practice of medicine is inherently dangerous, and
    that's why I think you can't treat it like you might a worker
    compensation scheme. It's inherently dangerous, and it involves
    a complex set of judgments. What we do is we get reviews when
    we have a patient injury come to our attention, whether it's a
    claim or whether it's just a patient injury. And we interview
    the staff involved; we have internal and external reviews, and
    we have a system by which that case is actually reviewed by a
    medical committee, and that gives me guidance as to what
    direction we should go.
        We always open the issue up for discussion after that, and
    sometimes, I find myself explaining to patients why their
    complication is simply not the result of medical negligence,
    and other times, we sit down, and we say right up front we're
    sorry; this should not have happened, and let's move to a
    discussion of compensation.
        I have seen it both ways. One of the things I've seen is
    that I think that the American public is much more forgiving if
    given a chance, if given a chance to understand the challenges
    doctors have faced in that care. And that's something that's
    been missing, that conversation, that sharing of how difficult
    this surgery was.
        As an example, we have a cardiac surgeon on faculty who
    probably does more heart valve surgeries than anyone, and he
    takes the hopeless cases. And after his third patient
    complaint, he said to me, ``I don't get these people: they
    think that after I do my surgery, they're going to be running
    in the Olympics, when they've really abused themselves for 50
    years, and they've got compromised hearts.'' And I said to him,
    ``Do you realize why? Because you walk in, and you say `hi',
    I've done more of these than anyone else; you can have
    infection, bleeding, or damage, but it's not going to happen to
    you,'' and that's the message that they hear.
        The communication part of this is really important both
    before medical care and then after a catastrophic injury
    occurs. And if we stay in the saddle with people, people are a
    lot more forgiving than we think.
        But one of your earlier questions was how do we handle the
    problem of patients with--the huge number of patients who have
    medical errors and never get compensated. And I had two
    responses to that. One of them was, first, you're assuming that
    everybody believes they should be compensated, but that's not
    our experience. We've had people who have even had loved ones
    die, but when they understand that we are accountable, and they
    understand that their questions got answered, and they
    understand that we've made changes so that it won't happen
    again, they don't all believe they need compensation. They're
    satisfied at that point.
        And second, it depends on how you define medical errors. In
    our institution, for instance, probably the most prevalent
    medical error is medication administration. And yet, the
    incidence of injury from inappropriate medication
    administration is exceedingly low. It depends on how you define
    that. So if a physician says you should get a medication every
    4 hours, and it comes 4 hours and 15 minutes later, we
    characterize that as a mistake, but that 15-minute delay
    probably made no difference in the care.
        So I think you have to be careful when you ask those
    questions and understand how to process that information.
        The Chairman. Thank you.
        Mr. Sage, some people have criticized the health courts and
    other ideas similar to that as inappropriately denying patients
    the right to a jury trial and have said that it would lead to
    inadequate compensation for injured patients. In light of the
    studies that you've seen that show how our current court system
    and jury trials perform and the amount of money that goes to
    the lawyers on both sides, how valid do you find the concern?
    How would you comment on that?
        Mr. Sage. Well, let me start, Mr. Chairman by saying that I
    think everyone who is testifying here as an academic researcher
    does superb work: Dr. Studdert, Professor Vidmar. But there is
    somewhat of a difference in perspective between the way I've
    looked at these issues and the way that Dr. Vidmar, for
    example, presents his work. His book, as he told you, is called
    Medical Malpractice and the American Jury, and my book is
    called Medical Malpractice and the U.S. Health Care System.
        I tend to look at these issues not as issues of whether or
    not to dismantle a jury system or curtail its use but as
    opportunities to build something into the healthcare system
    that has never been in the healthcare system before, which is a
    way of dealing promptly and compassionately and fairly with
    injury as well as preventing injuries that occur.
        I don't have good empirics on this, but I have good
    anecdotes in the sense that most plaintiffs' lawyers that I've
    talked to have suggested that a plaintiff who does not have at
    least $200,000 in recoverable damages won't be a case that that
    attorney will accept. That leaves a lot of room, I think, for
    people to participate in a much, much better system who would
    never benefit at all from the existing system of civil justice.
        The Medicare population, for example, falls squarely into
    that distribution. These are people who file malpractice claims
    far less frequently than younger patients, who recover less
    money if they do file a claim. In Texas, we looked at all of
    the malpractice payments, both trials and settlements, over a
    15-year period, and I could give you the regression analyses,
    but I'll content myself with one piece of information, which is
    that if you list out the 100 largest malpractice payments over
    a 15-year period in Texas, only one involved a person over age
    65. There is a population that is really not seeing benefits
    from the existing system.
        I also think that in bills such as yours that fund Federal
    demonstrations of all of these approaches, you're not stacking
    the deck against claimants. You're saying let's create a system
    that we think is going to work well for everybody, and let's
    test it and see how much it costs and what benefits it
    provides. And under those circumstances, I really don't see
    that any of these proposals is taking anything away from
    anyone.
        The Chairman. Thank you. I have a number of other questions
    here, but I was just handed kind of an emergency note, and I
    had said that I would let you each have a wrap-up comment.
    Could I get you to put those wrap-up comments in writing for
    us? I will look at them, and I'll distribute them to the rest
    of the committee, too, but I am going to have to leave. And I
    apologize profusely.
        This is one of the most valuable panels that I've ever had,
    some of the most diverse opinions that I've ever had assembled,
    and a body of knowledge that I think Senator Kennedy and I can
    use to perhaps put something useful together. It probably won't
    be the original concept, but it might be. It will have some
    variations. But the record will be open for 10 days, so you
    don't have to do that immediately, and the 10 days is also so
    that members of the committee can submit questions, and
    hopefully, you'll answer those, too. My appreciation for your
    time and your answers, and I look forward to more information
    from you.
        So this meeting is adjourned.
        [Additional material follows.]

                              ADDITIONAL MATERIAL

                     Prepared Statement of Senator Clinton

        I'd like to thank Chairman Enzi and Senator Kennedy for
    convening this hearing today to examine alternative proposals
    in the medical liability reform debate.
        Today, I hope that we can begin to move past the
    traditional divisions in this debate to discuss ways that will,
    in the long run, serve patients, physicians, and the healthcare
    system as a whole.
        I hear first hand, from families who've experienced errors
    in their care and from doctors who have experienced escalating
    insurance costs. This is a real problem that deserves both
    serious consideration and realistic solutions.
        We all know the statistic from the landmark 1999 Institute
    of Medicine Report that as many as 98,000 deaths per year
    result from medical errors. But what you hear far less is that
    the vast majority of these errors are not due to the negligence
    of physicians, but to failed systems and procedures.
        We need to reduce medical errors for patients and
    physicians by incentivizing and designing better systems. We
    need to shift our attention from blaming doctors and hospitals
    and focus our efforts on modifying and improving systems to
    reduce medical errors and to enhance patient safety.
        Instead of ending up on the court house steps, we need to
    find a way to prevent and resolve problems proactively, not
    reactively.
        Understanding the root causes of these systemic errors
    requires, first of all, their disclosure and analysis. Herein
    lies the fundamental tension between the medical liability
    system and the goal of providing high quality care and
    improving patient safety.
        Studies have consistently shown that healthcare providers
    are understandably reluctant to engage in patient safety
    activities and be open about errors because they believe they
    are being asked to do so without appropriate assurances of
    legal protection.
        Senator Obama and I co-authored S. 1784, the National
    Medical Error Disclosure and Compensation Act, or MEDiC Act, to
    address this fundamental tension. The bill is designed to
    bridge the gap between medical liability and patient safety
    systems for the benefit of both patients and physicians.
        With better communication, more cooperation and protection
    from liability within the context of the MEDiC program, we
    provide doctors and patients with options to find solutions
    outside of the courtroom, which the vast majority of patients
    say they are looking for.
        The MEDiC Act will improve patient safety and the quality
    of healthcare while protecting patient's rights and providing
    liability protection for healthcare providers who participate
    in the program, to reduce both medical errors and lower
    malpractice costs.
        The MEDiC Act is based on successful programs operating
    around the country in places like a Children's Hospital, a
    private insurance company, a Veteran's Affairs hospital in
    Kentucky, and the one we will hear about from Mr. Rick Boothman
    at the University of Michigan Health System.
        These programs have improved systems to not only prevent
    future medical errors, but also to lower malpractice costs and
    claims.
        Through this model we can meet the four fundamental goals
    that I believe must be a part of any successful medical
    liability reform:

         Reduce the rates of preventable patient injury;
         Ensure that patients have access to fair
    compensation for legitimate medical injuries;
         Reduce liability insurance premiums for
    providers; and
         Encourage open and safe communication between
    providers and patients.

        I look forward to hearing from our expert panel with
    special thanks to Rick Boothman whose program is largely the
    basis for the MEDiC Act. I hope that with his input, we can
    begin considering common-sense alternatives to medical
    liability reform.

                 Questions of Senator Clinton for Mr. Boothman

        Question 1. Mr. Boothman, in your written testimony, you briefly
    mention the importance of distinguishing between reasonable and
    unreasonable care. Based on your experience with the University of
    Michigan's program, why have you found this to be important and why is
    it so difficult to know the difference between reasonable and
    unreasonable care? Can you contrast this concept in the context of your
    program with other alternatives discussed during the hearing?

        Question 2. Mr. Boothman, your written testimony states, ``radical
    proposals like scrapping our tort system must give way to detailed,
    focused efforts designed to reach the real problems.'' Can you
    summarize these problems? Based on your experience, what changes do you
    suggest that would maintain our current system while addressing these
    problems?

        Question 3. Mr. Boothman, why in your opinion does the University
    of Michigan program work? What factors contribute to its success and
    are they reproducible elsewhere? How?

        Question 4. Mr. Boothman, your written testimony asserts that
    alternatives explored during the hearing will not work. Can you
    elaborate? Why do you think these models are not in the best interest
    of the medical community?

        Question 5. Mr. Boothman, how important is it that those involved
    feel that they have gotten justice from whatever system is employed to
    address patient complaints and patient injuries?

        Question 6. Mr. Boothman, how have the changes in the University of
    Michigan Health System's approach been received by your physicians and
    patients?

        [Editor's Note-Responses to Senator Clinton's questions were not
    available at time of print.]

           Responses to Questions of the Committee by David Studdert

        Question 1. I reviewed the recent article in the New England
    Journal of Medicine outlining your research findings with great
    interest. In that article, you and your fellow researchers state:

              ``Our findings point toward two general conclusions. One is
            that portraits of a malpractice system that is stricken with
            frivolous litigation are overblown . . . A second conclusion is
            that the malpractice system performs reasonably well in its
            function of separating claims without merit from those with
            merit and compensating the latter.''

        Your study also determined that:

              . . . nonpayment of claims with merit occurred more
            frequently than did payment of claims that were not associated
            with errors or injuries.''

        You elaborated on this point in your written testimony to the
    committee, stating,

              . . . claims with error and injury that did not receive
            compensation was substantially more common. One in six claims
            was an unpaid error.''

        I think those findings are very significant. They contrast sharply
    with the negative stereotypes we often hear about the jury system. In
    essence, your research shows that most of those injured patients who
    are recovering compensation in the current judicial system, both
    through judgments and settlements, deserve the compensation that they
    receive. The problem that you identify is that other injured patients,
    who also deserve compensation, are not receiving it.
        I agree that is a legitimate concern. Interestingly, it is exactly
    the opposite of what most tort reformers claim the problem is. They
    claim that too many injured patients are being compensated. Assuming
    that your findings are correct, the last thing we should be doing is
    considering alternatives that would take rights away from injured
    patients or that would limit the amount of compensation they receive
    for their injuries. We need to expand the number of injured patients
    who receive compensation, while not reducing the level of compensation
    that the most severely injured patients receive.
        Many of the proposals to replace the jury system with some version
    of an administrative system are not designed to expand compensation to
    more injured patients, but to arbitrarily reduce cost at the expense of
    victims. What safeguards would you propose to protect the rights of
    injured patients to receive the full and fair compensation that they
    deserve?
        Answer 1. The general finding from our recent study was that in
    approximately 75 percent of claims the litigation outcomes were
    concordant with their underlying merits. How far one can take this
    result in inferring that the system's accuracy is adequate is
    disputable. (Discordant outcomes in 25 percent of cases may, for
    example, still cause substantial unpredictability.)
        The first part of the question is a fair summary of one of the more
    specific findings from the study, and from earlier work we have done on
    the issue of ``under-compensation.'' \1\ There is strong evidence from
    epidemiological studies \2\ that many patients--in fact, most
    patients--who experience negligent injury do not obtain compensation.
    This population consists of both unsuccessful claimants (the ``1 in 6''
    figure referred to in the question) and patients who never come forward
    with a claim.
    ---------------------------------------------------------------------------
        \1\ Studdert DM, Mello MM, Gawande AA, et al. Claims, errors, and
    compensation payments in medical malpractice litigation. N Engl J Med
    2006;354:2024-2033.
        \2\ Localio AR, Lawthers AG, Brennan TA, Laird NM, Hebert LE,
    Peterson LM, Newhouse JP, Weiler PC, Hiatt HH. Relation between
    malpractice claims and adverse events due to negligence. Results of the
    Harvard Medical Practice Study III. N Engl J Med. 1991;325:245-51;
    Studdert DM, Thomas EJ, Burstin HR, Thar BI, Orav EJ, Brennan TA.
    Negligent care and malpractice claiming behavior in Utah and Colorado.
    Med Care 2000;38:250-260.
    ---------------------------------------------------------------------------
        I believe the current system's inability to address the needs of
    this deserving yet underserved population is a serious blight on its
    record. We can and should do better for these patients.
        The proposal for an administrative alternative that I am familiar
    with has done better in this regard as one of its central goals. I am
    therefore unsure about the ``many proposals'' to which the question
    refers which are not designed to do this, and which aim to
    ``arbitrarily reduce costs.'' I am not familiar with these proposals
    and so cannot comment on them.
        The health court model that our research group has been developing
    \3\ certainly does not fit this description, and I would oppose any
    proposal that did. Indeed, in previous work, I have criticized some
    tort reform measures for precisely this reason.\4\ The model proposal
    aims to compensate more patients than the current system does in three
    main ways:
    ---------------------------------------------------------------------------
        \3\ A detailed outline of the model appears as an attachment to my
    written testimony.
        \4\ Studdert DM, Yang YT, Mello MM. Are damages caps regressive? A
    study of jury verdicts. Health Affairs 2004;23:54-67.

        (1) By incentivizing providers to be forthright in informing
    patients when a potentially compensable injury occurs (and penalizing
    them if they do not).
        (2) By creating a pathway to claiming that is simpler, more user-
    friendly, and easier to navigate than the current system's.
        (3) By using a more generous standard of compensability, namely
    ``avoidability'' instead of negligence. An avoidability standard would,
    by definition, render every claim that meets the negligence standard
    eligible for compensation, plus some claims that would not be eligible
    under a negligence standard, thereby expanding the pool of injured
    patients who would qualify for compensation.

        Question 2. Thank you for your testimony and for providing us with
    a novel perspective on how we might approach medical injury from the
    perspective of improving patient safety. I could not agree with you
    more that the current system is not accomplishing these most important
    goals for fair compensation and reduction in errors. A lot of informed
    people think that the true number of medical errors and injuries is far
    greater than the current number of malpractice law suits. Have you had
    an opportunity to do cost projections for your proposal. If we provide
    compensation for every injury will this increase or decrease the
    overall amount spent on medical malpractice?
        Answer 2. In a previous study of medical injury in Utah and
    Colorado, our research group estimated the costs of compensating
    avoidable injuries (as opposed to negligent injuries) in an
    administrative compensation model.\5\ The bottom line of these
    projections was that the administrative model, which is similar in many
    ways to the health court model we have proposed, would cost around the
    same or slightly more than the current tort approaches in those States,
    while compensating a much larger number of injuries. How is this
    possible? Savings in administrative costs, as well as some savings in
    the size of some large awards, would free up moneys to be distributed
    to more injured claimants.
    ---------------------------------------------------------------------------
        \5\ Studdert DM, Brennan TA. No-fault compensation for medical
    injuries: the prospect for error prevention. JAMA 2001;286:217-223;
    Studdert DM, Thomas EJ, Zbar BI, Newhouse JP, Weiler PC, Brennan TA.
    Can the United States afford a no-fault system of compensation for
    medical injury? Law Contemp Probs 1997;60:1-34.
    ---------------------------------------------------------------------------
        Our research group is in the process of calculating new cost
    estimates specifically tailored to the health court model we have
    proposed. We hope to have the work completed by Fall, 2006. We
    hypothesize that this work will produce similar results to the research
    in Utah/Colorado--namely, it will not cost less than the current system
    and may well cost a little more. But the issue of value is important:
    how many patients will be compensated under the alternative approach,
    how accurately, how quickly, and how efficiently, compared to the
    current system? And how stable and predictable will the system be? On
    all of these measures, I think there is a good chance the health court
    will come out ahead.
        The last part of the question raises one additional point. It is
    unrealistic to expect that any compensation system will compensate
    every eligible injury. No existing system does that--not even pure no-
    fault models like auto injury compensation schemes. There will always
    be some injured persons who simply don't want compensation, or who
    choose not to come forward, for whatever reason. And sometimes a
    compensation system will ``get it wrong'' and deny compensation when it
    should have awarded it. But again, the question is what proportion of
    eligible persons will find their way to compensation and how often will
    the system ``get it right.'' We believe that an administrative model,
    such as a health court, could surpass the status quo on both counts.
    Indeed, it would be tough to do worse than the current malpractice
    system, where about 3-5 percent of eligible patients obtain
    compensation.

        Question 3. As a follow-up, you also propose an entirely new
    nationwide court system for adjudicating medical injury issues. This
    seems unusually complex and costly. Do you have a fall-back plan to
    achieve your goals without such a specialized change in the structure
    of our court system?
        Answer 3. The proposal to which I have testified--and which I
    understand is on the table--is for a demonstration project, or group of
    demonstration projects, to test the efficacy of alternatives to the
    current tort liability system, not a new nationwide system. To roll out
    an alternative approach nationwide overnight would be premature. There
    needs to be an opportunity to test the potential advantages of an
    alternative against the current system.
        I agree that the health court model we have developed is not
    simple. Compensating medical injury in a fair and consistent way, and
    ensuring that the interests of patients are safeguarded in the process,
    is not a straightforward undertaking. A bare-bones proposal would
    therefore leave important issues unaddressed. The appropriate
    comparison, however, is to the current system, which I believe is much
    more complex than the type of alternatives under consideration.
        I addressed the issue of costs and cost estimates in a previous
    question. We believe that the proposed alternative would cost about the
    same, or slightly (not dramatically) more than the current system. It
    is unlikely to cost much less. But additional costs, if there are any,
    should be assessed in terms of their value. Does the system compensate
    more patients and is it predictable in ways that allows the wider
    healthcare system to operate more efficiently?
        With respect to reforms besides the health court, I mentioned in my
    oral and written testimony that there are a variety of innovative
    alternative dispute resolution (ADR) approaches. I believe a number of
    these warrant serious consideration. The ``Early Offer'' concept, for
    example, has the potential to avoid the passion play and high cost of
    full-blown litigation. In general, these ADR approaches are less
    ambitious than health courts because they merely overlay the existing,
    dysfunctional negligence system, with attempts to streamline the
    adjudication process. Thus, in my opinion, they do not carry the same
    potential for broad system improvement. Nonetheless, reducing the time
    and cost of litigation in this way would likely be a useful step
    forward, and in this regard, they are likely to be productive reforms.

        Question 4. One of my biggest concerns is that doctors are not
    learning from medical malpractice cases. In other words, doctors have
    lost so much faith in the reliability of our system that it no longer
    serves as an effective deterrent to mistakes. In your study did you
    find that the variability of the verdicts made people less willing to
    study and learn from their mistakes?
        Answer 4. Our study did not address the issue of deterrence or the
    quality improvement dimensions of the tort system. I agree that this is
    a serious concern with the tort system. In a previous study, however,
    my colleagues, Michelle Mello and Troy Brennan, conducted what is
    widely-recognized as the seminal review of the evidence relating to
    deterrence in the medical malpractice context.\6\ Their basic
    conclusion is that there is virtually no evidence of a deterrent or
    quality improvement effect. This is unfortunate, given that deterrence
    is one of the system's founding rationale.
    ---------------------------------------------------------------------------
        \6\ Mello MM, Brennan TA. Deterrence of medical errors: theory and
    evidence for malpractice reform. Tex Law Rev. 2002;80:1595-1637.
    ---------------------------------------------------------------------------
        Clearly, any significant reforms in the area of medical injury
    compensation must address patient safety. This is a critical issue. We
    do not know for sure whether an alternative approach to compensation,
    such as health courts, will do better in terms of deterring substandard
    care and promoting high quality care. There is good reason to think it
    might, and in a recent paper we outlined a variety of ways this may
    occur, ranging from collection and analysis of critical data on
    injuries to dissemination of ``best practice'' guidelines derived from
    adjudicated cases.\7\ A health court approach, along the lines we have
    described, offers considerable promise in this area. But once again,
    the proof will be in the pudding. Only the launching of demonstration
    projects, time, and careful evaluation can reveal the extent to which
    the promise is realized.
    ---------------------------------------------------------------------------
        \7\ Mello MM, Studdert DM, Kachalia A, Brennan TA. Health courts
    and accountability for patient safety (in press: Milbank Quarterly,
    2006).
    ---------------------------------------------------------------------------
           Response to Questions of the Committee by William M. Sage
        Question 1. Dr. Sage, your comment on one of the problems with the
    current tort system is that it focuses on the individual physician and
    not on the environment, the team or the process that may lead to a
    medical error. Modern healthcare is clearly a sophisticated and complex
    process that involves multiple inputs from a variety of health
    professionals, institutions and technologies and the cause of errors
    and bad outcomes is not always individually attributable. Given this
    diffusion of blame, who should shoulder the cost of medical malpractice
    and medical error under the systems envisioned by you and other
    panelists today?
        Answer 1. As an empirical matter, rising liability costs during
    malpractice insurance crises tend to be absorbed by patients, private
    health insurers, and government payers such as Medicare, much as those
    parties absorb cost increases in other inputs to medical care. In the
    1980s crisis, Professors Mark Pauly, Patricia Danzon, and Raynard
    Kington studied the economic incidence of rising malpractice premiums,
    and found that physicians quickly passed those costs on to patients and
    payers through fee increases. In a study I co-authored, Professor Pauly
    recently revisited that question with respect to the current crisis,
    and found that physicians today still pass premium increases on to
    patients and payers, but through increasing the volume of services
    because government fee schedules and private managed care prevent them
    from simply raising fees. What we do not know, however, is whether the
    additional services are mainly necessary ones or mainly unnecessary
    ones.
        I believe that the financial burden of medical malpractice is
    largely determined by the demands we place on our healthcare system and
    the value we ascribe to that system's various features. The cost of
    malpractice therefore should mirror the burden of general health
    expenditures. This is a difficult social decision, on which no
    consensus has yet been reached.
        Whatever our beliefs about the role that government should play in
    the healthcare system, we can agree that waste in the malpractice
    system, whether from unnecessarily high rates of medical errors or
    excessive administrative costs, should be reduced just as waste in the
    healthcare system should be reduced. We can also agree, I hope, that it
    is inefficient to ask physicians, who capture at most 15 percent of
    overall healthcare revenues, to finance liability insurance for the
    entire healthcare system, and to burden a few ``high-risk'' physician
    specialties with the lion's share of those costs when all that does is
    increase the volatility of malpractice premiums and the dual threats
    that physician exit and defensive medicine pose to healthcare access
    and quality.
        Because of these issues, I believe that a better malpractice system
    would rely for liability coverage more on the insurance purchasing
    decisions of large, diversified providers of healthcare services, such
    as hospitals, that can also more effectively prevent medical errors. A
    better system also would ask the public, through government, to
    shoulder the burden, after open debate, of caring for severely impaired
    newborns and other patients whose tragic situations are not really
    about medical error. And a better system would take advantage of the
    Federal Government's strength as a reinsurer, making stop-loss coverage
    available at reasonable cost to healthcare providers when commercial
    reinsurance markets tighten.

        Question 2. It often stated that the current litigation climate
    leads to defensive medicine that contributes to the rapidly rising cost
    of healthcare. Do you think that reforms of our approach to medical
    liability will change such practice or has it been incorporated into
    our medical curriculum and into the apprenticeship of internship and
    residency such that it will not reverse or will do so only very slowly?
        Answer 2. I think it is important to distinguish defensive medicine
    that exists as a background constraint in the healthcare system between
    malpractice insurance crises from defensive medicine that spikes along
    with spikes in insurance premiums during malpractice crises. I believe
    that background defensive medicine is a significant factor in the long-
    term cost and structure of healthcare, but that it is so deeply
    entwined in issues of medical culture, healthcare reimbursement, and
    patient preferences that there is no single quick fix.
        By contrast, I believe that the current malpractice insurance
    crisis has resulted in particularly worrisome defensive practices that
    require immediate attention. Physician perceptions of the malpractice
    system during crisis periods affect patients. Research published in
    JAMA, reflecting work I did with Dr. David Studdert and his colleagues
    at Harvard, revealed very high levels of self-reported defensive
    medicine among ``high-risk'' specialists in Pennsylvania. These
    physicians explained in great detail how their fear of losing
    malpractice coverage led them to overtest and overtreat some patients,
    while refusing care to others. One major concern is the effect on
    women's health of having ob-gyns limit access to high-risk obstetrics
    while surgeons and radiologists perform large numbers of mammograms and
    biopsies they consider medically unnecessary. Another major concern is
    that a hostile malpractice environment seems to disadvantage assertive
    patients who are involving themselves in their care exactly as patient
    safety advocates urge them to. In our study, physicians often reported
    refusing to care for assertive patients because they viewed them as
    litigious, or else simply indulged their initial requests for
    expensive, sometimes invasive, tests and procedures rather than working
    in partnership with them.
        These shorter-term trends can be reversed, I believe, if marketing
    and rating practices for malpractice insurance are placed on a more
    secure footing than has been the case since the 1970s, and if
    physicians see that more predictable and compassionate systems than
    conventional malpractice litigation are possible. Physicians'
    skepticism about malpractice liability is deep-seated, however, and any
    commitment to meaningful reform must be credible to them. This is why I
    believe that demonstrations of malpractice reform must include systems
    of early disclosure and fair compensation to which patients commit
    themselves prior to treatment, rather than after injury has occurred.

        Question 3. You mentioned in your testimony that Pennsylvania might
    apply for a demonstration grant if S. 1337 was enacted. Are there any
    other impediments that need to be removed prior to trying an
    alternative in a State like Pennsylvania?
        Answer 3. I think that a Federal ``hold-harmless'' assurance is the
    most important incentive for healthcare providers testing malpractice
    reform at the State level. Malpractice experts agree that any
    successful demonstration must identify more errors and offer
    compensation to more patients than currently occurs in litigation, and
    States and providers reasonably worry that this will increase their
    costs. With a Federal assurance that any excess costs will be covered
    during the test period, States can design fair tests. Without such an
    assurance, I fear that demonstrations will be biased against patients,
    and will seldom gain acceptance for that reason either from patients or
    from the political process.
        Other impediments exist that, while smaller, might endanger a
    successful demonstration program. For example, State law varies in its
    protection of mediation proceedings and voluntary apologies from
    exploitation in subsequent litigation. Both of these procedural
    innovations are central to a successful malpractice demonstration.
    Participating providers might also want assurances that State health
    regulators fully support a demonstration and would not engage in heavy-
    handed enforcement activities in response to greater provider openness
    about errors. And participating States might also want to sort out in
    advance any objection that the State judiciary might have to
    legislatively enact reform of litigation procedures. All of these
    issues have had some relevance to Pennsylvania's reform experience,
    though I do not think that any of them would prevent a successful
    demonstration in Pennsylvania if Federal funding became available.

           Response to Questions of the Committee by Philip K. Howard

        Thank you for the opportunity to respond to questions by members of
    the committee and to provide supplemental testimony.

        Question 1. As a follow-up, you also propose an entirely new
    nationwide court system for adjudicating medical injury issues. This
    seems unusually complex and costly. Do you have a fall-back plan to
    achieve your goals without such a specialized change in the structure
    of our court system?
        Answer 1. Our proposal is for pilot projects only, to test the
    possible benefits of an administrative compensation system. If the
    benefits prove to be great--for example, (1) providing a fairer and
    more efficient compensation system for injured patients (2) improving
    transparency and aligning incentives toward patient safety and (3)
    starting to overcome the culture of defensiveness and waste--Congress
    might conclude that shifting to special health courts is, indeed, worth
    the effort. Again, many important agencies concerned with the quality
    of healthcare--including the Institute of Medicine and Joint Commission
    on Accreditation of Healthcare Organization--have called for pilot
    projects.
        Rather than a nationwide system, we expect that Congress might
    impose requirements for a system that met certain criteria (for
    example, consistent rulings on standards of care instead of ad hoc
    verdicts) and let the States meet these requirements in their own way.

        Question 2. I appreciate the work that you have been doing with Mr.
    Studdert and Dr. Brennan. While much more sophisticated, there are some
    parallels of your proposed health courts with a variety of arbitration
    panels that have been set up and tested for addressing medical injury.
    Yet these arbitration panels and boards have not achieved widespread
    utilization or success. Why have they failed? Are any elements of these
    concerns relevant to the success of your health court proposal?
        Answer 2. The core feature of the health court model is that it
    provides written rulings on standards of care as a matter of law. Only
    when an official body takes this authority can we aspire to the
    consistency needed to restore trust and align incentives. In this
    critical respect the health court model differs from both screening
    panels and arbitration panels.
        Screening panels do not have the authority to adjudicate claims.
    Evidence suggests that screening panels do not reduce, and may
    increase, the number of claims filed.\1\ They also have little or no
    impact on the incentive to file claims for the purpose of obtaining a
    settlement. Screening panels are used by some lawyers as a way to
    evaluate the claim. In tragic situations, such as babies born with
    birth defects, lawyers ignore the opinion of the panel and sue anyway.
    By contrast, health courts would diminish the incentive to file invalid
    claims by establishing and enforcing reliable standards of care.
    ---------------------------------------------------------------------------
        \1\ R. Hanson, B. Ostrom, and D. Rottman, ``What Is the Role of
    State Doctrine in Understanding Tort Litigation'' Michigan Law and
    Policy Review 1, no. 1 (1996): 43-72; S. Shmanske and T. Stevens, ``The
    Performance of Medical Malpractice Review Panels,'' Journal of Health
    Politics, Policy and Law 11, no. 3 (1986): 525-535; P.M. Danzon, ``The
    Frequency and Severity of Medical Malpractice Claims: New Evidence,''
    Law and Contemporary Problems 49, no. 2 (1986): 57-84. (cited in C.T.
    Struve, ``Improving the Medical Malpractice Litigation Process,''
    Health Affairs 23, no. 4, 35).
    ---------------------------------------------------------------------------
        Arbitration can be a productive way of resolving disputes, but
    there is little empirical evidence to support that finding for medical
    malpractice cases.\2\ Arbitration does little or nothing, however, to
    provide guidance to improve healthcare or otherwise align incentives
    toward better quality and avoidance of waste. As with jury verdicts,
    arbitration is an ad hoc system, without written rulings or any
    aspiration for consistency.
    ---------------------------------------------------------------------------
        \2\ E. Rolph, E. Moller, and J.E. Rolph, ``Arbitration Agreements
    in Health Care: Myths and Reality,'' Law and Contemporary Problems, 60
    (Winter & Spring): 153-184, 1997. See also T.B. Metzloff, R.A. Peeples,
    and C.T. Harris, ``Empirical Perspectives on Mediation and
    Malpractice,'' Law and Contemporary Problems, 60 (Winter & Spring):
    107-152, 1997.

        Question 3. One component of your written testimony points to the
    role of health courts in developing legal standards of medical care. Do
    you really think they are the most appropriate group to define such
    standards? Will these standards be regional or national in application?
        Answer 3. In our proposal, health court judges would define the
    standard of care in medical injury cases. They would do so in reliance
    on neutral experts--retained and compensated by the court--who would
    provide unbiased testimony on the standard of care. In general, there
    is a national standard for most medical practices. But in certain
    situations the circumstances can be important as well--for example, a
    general practitioner treating a head trauma victim in rural setting may
    not be held to the same standards as, say, a neurosurgeon in Boston.
    There might be differences among health courts in different States. But
    we expect that these variations will be minor. To help health court
    judges reach consistent decisions from case to case, judges would
    consider past health court decisions as well as clinical practice
    guidelines based on evidence-based practice standards, such as those
    disseminated by the National Guideline Clearinghouse at the U.S. Agency
    for Healthcare Research and Quality.

        Question 4. One of my biggest concerns about the current
    malpractice system is that it fails to capture information that could
    improve the medical delivery system. How does your proposal address
    this shortcoming of the current system?
        Answer 4. The health court proposal is designed to work in tandem
    with patient safety agencies which would capture and disseminate
    information about mistakes and errors, and develop recommendations on
    improving practices. De-identified information from the adjudication
    process would be transferred to patient safety authorities, providing
    the basis for analysis about adverse events and near misses that could
    aid in the development of strategies to prevent errors from occurring
    in the future. Information from the adjudication process would also be
    provided to healthcare providers so that they could conduct root cause
    analyses of what went wrong, and why.
        Changing the culture of defensiveness and concealment is also a
    critical link toward improving patient safety. Creating a court which
    aspires to reliability will significantly reduce the fears that drive
    counterproductive behavior. Liberalizing the standard of recovery
    toward one of avoidability rather than error also lessens the emphasis
    on individual fault and better takes into account the role of system
    failures in leading to injuries.

                             SUPPLEMENTAL TESTIMONY

        The distinguished panel of witnesses at the June 22 hearing
    provided a range of perspectives. Two witnesses offered opinions which
    reflected misunderstandings about the proposal for health court pilot
    projects, which I would like to correct.
        Cheryl Niro from the American Bar Association stated that the
    health court proposal includes ``the creation of a schedule for the
    assessment of damages and would cover both economic and non-economic
    damages.'' Several other times both she and Senator Kennedy made
    statements that implied that patients injured by medical mistakes would
    not get an ``individualized determination of compensation'' or ``fair
    and just compensation.'' Ms. Niro suggested that the surgeon who lost a
    hand would get the same damages as people who did not rely upon their
    hands for their livelihood.
        While there are many ways of structuring damages for pilot
    projects, our recommendation is for the victim to receive 100 percent
    of all monetary losses, including lost wages--thus, a surgeon who lost
    his hand and could no longer operate might receive millions, while a
    politician or a lawyer who could continue to practice would receive far
    less. Because lawyers fees would be dramatically lower in the expedited
    health court proceedings than the standard 33-40 percent (fees would
    probably be calculated as a multiple of actual investment in hours and
    costs), the actual damages that many injured patients take home is
    likely to be greater than under the current system. Health courts are
    also expected to provide compensation to many more injured patients,
    who are today shut out from the system because of the exorbitant cost.
    As Professor Studdert observed, over half of the malpractice dollars
    today goes to lawyers and administrative costs.\3\ This is a shocking
    figure, nowhere addressed in the testimony on behalf of the American
    Bar Association.
    ---------------------------------------------------------------------------
        \3\ D.M. Studdert, Testimony before the Senate Committee on Health,
    Education, Labor, and Pensions, ``Medical Liability: New Ideas for
    Making the System Work Better for Patients,'' June 22, 2006, p. 4; D.M.
    Studdert, et al., ``Claims, Errors, and Compensation Payments in
    Medical Malpractice Litigation,'' New England Journal of Medicine,
    354;19 (May 2006): 2031.
    ---------------------------------------------------------------------------
        For ``pain and suffering'' damages over and above monetary losses,
    we recommend creating a schedule depending on injury, as other
    industrialized nations do. The advantages of the schedule would be to
    create ``horizontal equity'' among patients with similar harms--would
    the surgeon who lost his hand have more pain than the worker on the
    assembly line, or the elderly retiree? Scheduling pain and suffering
    has the advantage of ``turning down the heat'' in disputes--reducing
    the uncertainty of what's at stake and alleviating the fears of
    catastrophic verdicts that skew physician behavior in ways that
    undermine quality and raise costs.
        Professor Vidmar stressed the lack of evidence supporting the
    proposition that limitations on noneconomic damages would make
    malpractice insurance more affordable. But our goal is not to limit
    claims--we believe many more injured patients will receive compensation
    in our health court proposal--but to align incentives for better
    quality and avoidance of wasteful ``defensive medicine.'' Only by doing
    pilot projects can we demonstrate what the actual effects will be.
    That's why we need them.

             Response to Questions of the Committee by Cheryl Niro

        Question 1. Ms. Niro, thank you for your testimony representing the
    American Bar Association. You have suggested that many of the concerns
    brought forward today can be addressed by various voluntary alternative
    strategies such as arbitration panels. Yet despite being around for
    more than 3 decades, such approaches have not become widespread. Why do
    you think that is the case?
        Answer 1. I would not wish to endorse the idea that alternative
    dispute resolution methodologies are not widespread. I believe that
    they are used extensively across the country. Statistics demonstrate
    that an extraordinarily small number of cases filed proceed to a judge
    or jury finding. They are resolved at some point prior to a trial court
    conclusion. And, of course, a percentage of trial courts are reversed
    and/or modified on appeal. Professor Vidmar's specific research in
    Illinois showed that only two cases in the counties he examined
    resulted in jury verdicts over $1 million in 2 years and one of those
    overturned was on appeal. I would refer you to the study he did using
    the records of the Madison/St. Clair County court records. See http://
    www.isba.org/medicalmalpracticestudv.pdf.
        It is also important to remember that negotiation, mediation and
    arbitration are generally private and confidential proceedings by
    agreement of the parties. These options are often sought by the parties
    because they will not result in a public record. Some court systems do
    offer court annexed mediators and arbitrators, but even in those
    programs the parties are usually given the option to find an ADR
    process and ADR professional on their own, rather than using what is
    made available by the court.
        There are a number of competing factors which affect the decision
    to use ADR in medical malpractice cases. After a series of meetings
    with the leaders of the medical community and their insurers, I have
    learned that there is little willingness to resolve these cases via any
    settlement procedure. The medical community is quite reluctant to have
    to report any dollars paid out in malpractice payouts to injured
    patients because of the national database that compiles and publishes
    that information. Competition in the healthcare industry makes any such
    reporting ``bad for business'' understandably, and there is an inherent
    conflict present in the decision to settle or litigate due to this
    factor.
        Lawyers are ethically bound to present all options for resolving
    disputes with their clients and may be prosecuted in a disciplinary
    proceeding for failing to do so. Injured patients would rarely wish to
    prolong any adversarial proceeding, nor would their lawyers. Costs and
    time present difficulties for injured patients.
        Insurers have an entirely different set of issues affecting their
    participation in these cases. They must reserve the moneys that could
    be awarded to an injured patient. But, the longer the moneys are
    preserved in the reserve account, the company continues to benefit from
    the interest accrued. On the other hand, some insurers are quite open
    to quick resolution, and may show reduced payouts over time because the
    injured patient and their lawyers have not had to pay out enormous sums
    in preparing for trial.
        I firmly believe that there are a number of reforms to improve the
    collection and reporting of data, such as the data bank on dollars paid
    by the medical institutions in malpractice claims, which would result
    in positive change.

        Question 2. A great deal of testimony today by some very thoughtful
    people has suggested that the current medical litigation system does
    not begin to deal with true patient safety and instead, often works in
    the opposite direction by preventing open reporting and open
    discussion. How do you counter the vivid evidence and testimony
    presented today?
        Answer 2. Forward thinking medical institutions, such as the model
    in place in Ann Arbor, Michigan dramatically demonstrate that early,
    open discussion and reporting produce significant bottom line savings,
    and undoubtedly, improved relationships among all parties involved in
    this arena. Ombuds programs, bedside mediations and consensus-driven
    decisionmaking involving the medical staff and family of the patient,
    and other models all present tremendous opportunities to reform our
    current system. I am confident that the committee could obtain
    information and testimony from hospital administrators using these
    programs. The healthcare industry would benefit from broader
    experimentation with these models, and should be strongly urged to find
    and implement these programs and give them a chance to prove their
    efficacy.

        Question 3. If a health court system was voluntary or opt-in, as
    you suggested, how could we ensure that a consistent standard of care
    was upheld across the board in the civil and health court system? How
    could an opt-in system address the issue of varying standards of care
    within the medical malpractice system?
        Answer 3. A ``health court'' system, as I understand the proposals
    that are currently pending, would not provide for voluntary
    participation or even provide for a party to opt-in only after a
    dispute has arisen. I would like to clarify my testimony if I was
    understood to have suggested that participation was voluntary in some
    proposals. Mediation is a time-tested, equitable alternative to
    litigation, when it is voluntary and the fully informed choice to
    mediate occurs after the dispute arises. Likewise, arbitration is
    another available alternative to litigation when a fully informed
    injured party decides to use that dispute resolution method on a
    voluntary basis after a dispute have arisen.
        We know, as a nation of laws, that providing justice is a difficult
    thing. Every day, in courts across our Nation, our system is being
    challenged to be more fair and more responsive to the problems of our
    day. The process for the opportunity to do that was built into the
    system in the beginning. It is self correcting, and its rules have had
    over two centuries of refinement. The ``health courts'' proposal does
    not demonstrate a better alternative to our existing court system, and
    it possesses none of the checks against abuse of process that are
    present in our courts.

        Question 4. You have a great deal of experience with mediation and
    other forms of alternative dispute resolution. Based on that
    experience, you emphasize the importance of voluntary participation of
    parties. The consent of the injured patient must be truly informed, he
    or she must understand what rights are being given up and what benefits
    are being received in return. That can only take place after the injury
    has occurred.
        Would you elaborate on this point, and explain why such truly
    voluntary participation is so important to the fairness and
    effectiveness of any alternative dispute resolution system for medical
    malpractice cases?
        Answer 4. Our court system is designed to provide an even, fair
    process for resolving disputes. The most vulnerable may have their
    grievances against the most powerful heard in a forum that treats them
    as equals. The use of any alternative to that system must be considered
    very carefully, because the other alternatives lack the infrastructure
    of the court system and thereby present a greater opportunity for
    inconsistent and perhaps, unjust outcomes. ADR processes of mediation
    and arbitration are desirable when highly trained, highly skilled and
    highly experienced neutrals are in place.
        The underlying principle of alternative dispute resolution is that
    these other methodologies may provide a more desirable process when
    their use can be shown to have a greater likelihood of meeting the
    needs of the disputants. And the array of reasons to opt for an ADR
    process, such as mediation, is extensive and often unique to the
    dispute. There may be urgency in resolving a case (i.e., to replace the
    earnings of an injured patient for a family; the injured patient is not
    going to survive; the practice which led to the injury must be halted).
    The injured patient may present unique needs that may be more
    meaningfully addressed in a cooperative forum, rather than an
    adversarial proceeding. Injured patients need professional advice about
    the pros and cons of each option. Most importantly, they must
    understand what they stand to gain and what they stand to lose with
    every forum.
        The only way for an injured patient to make a meaningful choice of
    forums is to be fully knowledgeable of their needs and of which method
    provides the greatest opportunity to have their needs meaningfully
    addressed. They should have ethical counsel to help them make the
    choice, to represent them in the process, and to work with them to
    achieve the desired outcome. Proponents of ADR are committed to the
    promise of these methods as a component of our legal system only when
    all of the safeguards of knowledge and understanding are in place. For
    us to do any less would be unfair, unjust, and (if I may say so) un-
    American.

        Question 5. Proponents of replacing the right to a jury trial with
    an administrative system or with health courts often point to workers'
    compensation laws as a model. You state in your testimony that an
    administrative compensation system would not work for medical injuries
    because it would not be a true no fault system. Injured patients would
    lose the right to a jury trial, but still need to prove that the doctor
    did something wrong. Please elaborate on the reasons that workers'
    compensation is not an appropriate model for medical injury cases.
        Answer 5. As I stated in my testimony at the hearing, Workers'
    Compensation was designed to provide injured workers a process to
    compensate them for injuries that take place in the workplace. In
    exchange for their access to the court system, workers are guaranteed a
    certain award based on the injuries they suffered on the job.
        ``Health courts'' are unlike the Workers' Compensation system in
    that, under a ``health court'' proposal, injured patients would still
    be required to prove fault on the part of a defendant. A similar burden
    to prove fault is not imposed on an injured worker in a Workers'
    Compensation case. Thus, under the ``health court'' scheme, injured
    patients are forced to give up the right to bring an action in a court
    with no guarantee of an award. Injured patients would be required to
    prove that their injuries are ``the result of a mistake that should
    have been prevented.'' Proponents call this the ``avoidability
    standard,'' which includes injuries ``that would not have happened were
    optimal care given.'' This is not a ``no fault'' standard as in the
    Workers' Compensation field, nor is it a strict liability standard.

        Question 6. Would you describe the type of voluntary mediation
    process that you believe would be appropriate for medical malpractice
    cases? Are you familiar with mediation programs in place today that you
    believe are performing well?
        Answer 6. Medical malpractice mediation is proving to be a viable
    alternative to litigation in appropriate cases. Mediation is generally
    easier to schedule and complete than litigation.
        Mediation is by definition voluntary, and often provides the
    opportunity to custom-design an agreement that meets the unique needs
    of the disputant. The opportunity to reduce adversarial behavior and
    promote cooperation is always present. Mediation is forward looking,
    while litigation and fact finding tend to be less so. Mediated
    agreements are usually easier to enforce, because the parties have
    entered into them voluntarily. There are many more reasons that
    mediation, when used appropriately and practiced ethically, is a very
    desirable component of the legal system for many types of cases,
    including some medical malpractice cases.
        The program at Rush Hospital in Chicago is a wonderful
    demonstration of successful, appropriate and ethical use of mediation.
    Mediations are often facilitated by a team of co-mediators, and these
    co-mediators are selected because they have been lawyers or judges in
    the medical malpractice area. The process is entirely voluntary and
    great care is taken to assure that the sessions take place in a
    cooperative, nonadversarial setting. Appropriate case analysis is
    completed and conferences of the representatives of the parties are
    held. A meaningful assessment of discovery takes place, and ample
    opportunity for counsel and extended sessions are part of the program.
    This model has proven successful in my home city, a city that took a
    step toward mediation thoughtfully and carefully. It has been widely
    respected. It is one of many successful programs across the country.

             Response to Questions of the Committee by Neil Vidmar

        Question 1. Dr. Vidmar, thank you for balancing the discussion
    today with your broad testimony supporting the current medical
    litigation system. You point out on page 6 of your written testimony
    that only 1 of 7 injured patients sues, and therefore receives
    compensation for injury. Isn't this a failure of the current system to
    provide fair compensation and to truly address the needs of patients?
        Answer 1. The issue is complicated and many people want to simplify
    it. The question assumes that patients who are negligently injured from
    negligence are aware of the negligence or, if they are aware, they want
    to sue their doctor, or that they desire or need compensation.
        Many patients may be unaware that their injury is a result of
    negligence. The studies of injuries in the Harvard study and others
    that have followed, including the recent New England Journal of
    Medicine study by Studdert et al., are based on reviews of completed
    hospital records. The researchers have the advantage of hindsight that
    was not necessarily available to the injured patient. The data provide
    no indication that the patients were aware of the negligence.
        Most injuries occur in hospital settings. Patients enter hospitals
    because they are sick or need an operation. Often, it is difficult for
    the patients to determine if the injury or illness they experience
    following negligent medical treatment is the result of the condition
    for which they sought treatment or negligence. In one of the very first
    cases I studied when I began my research on medical malpractice a woman
    with cancer died in the hospital. Her husband assumed it was a natural
    result of her cancer. However, 2 months later when he received
    documents bearing on his wife's death he discovered that the hospital
    pathologist had concluded that her death was the result of negligent
    medical treatment. He was not told of the pathology report by the
    hospital. Thus, what the medical profession calls ``co-morbidity,''
    often prevents the patient from recognizing that negligence may have
    been involved in the treatment.
        As far as I know we do not have data on the frequency and degree to
    which patients are aware that negligence has occurred in their case. I
    do draw attention to research by Professor Lori Andrews, Studying
    Medical Error In Situ: Implications for Malpractice Law and Policy 54
    DePaul Law Review 357 (2005). She documented quite strikingly that many
    medical errors do not even appear in the hospital records. This is
    additional evidence bearing on patient ignorance of negligence. In
    short, if the patient ascribes post-medical condition to the
    ``presenting'' (prior to treatment) illness or injury, there is no
    reason to enter a complaint or seek the advice of a lawyer. The failure
    to claim for this reason would also be true under a health court
    scheme.
        Still another reason that people do not make claims is that even
    when they learn that a negligent error has occurred, they are willing
    to accept that any negligence was not malicious on the part of the
    healthcare provider, e.g., ``We all make mistakes and the doctors were
    trying.'' I think that this factor probably additionally suppresses
    claiming rates. My mother was suffering from dementia due to advanced
    age and was living in a nursing home. She suffered a ruptured bowel and
    was at death's door. A surgeon in St. Francis Hospital in Litchfield,
    Illinois performed surgery and saved her life. My sister and brother
    and I had agreed to a post-surgery ``do not resuscitate order'' on her
    medical chart. (Prior to her dementia she had quietly said several
    times to each of us that this would be her wish). Suppose she had died
    after the surgery and we learned that some form of negligence had
    occurred. I can say with almost 100 percent certainty that I and my
    siblings would not have sued. The doctor and the hospital were doing
    their best.
        Too often patients and American people are characterized as greedy
    and willing to sue on any occasion. Research evidence indicates the
    contrary. Professor David Engle, The Ovenbird's Song: Insiders,
    Outsiders and Personal Injuries in an American Community, 18 Law &
    Society Review 551 (1984) documented this reluctance to make claims in
    what many scholars consider a classic study of disputing behavior. May
    and Stengle, Who Sues Their Doctors? How Patients Handle Medical
    Grievances, 24 Law & Society Review 105 (1990) found similar results in
    a study bearing specifically on medical errors. People have high regard
    for their doctors and are willing to accept many errors and forgive.
    The findings have been supported by other studies. Indeed, I have
    myself published peer-reviewed articles bearing on this reluctance to
    sue. I think Richard Boothman's testimony before this committee
    strongly supports my position on this issue as well. The failure to
    claim for this reason would be true under a health court system as
    well.
        Still another reason for not seeking compensation is that some
    injured patients may have alternative sources of support. These include
    private health insurance or Medicare or Medicaid or income support from
    employers or welfare. There is no need to sue for health costs or lost
    income. The failure to claim for this reason would be true under a
    health court system as well.
        Now, it is true that the present tort system is expensive. Some
    people are possibly kept out of the tort system simply because a lawyer
    cannot afford to litigate the case. Professor Herbert Kritzer's
    research on plaintiff lawyers, Herbert Kritzer, Risks, Reputations and
    Rewards: Contingency Fee Legal Practice in the United States (2004),
    clearly shows how carefully plaintiff lawyers screen cases because they
    cannot afford to take on a case that is going to cost too much to
    litigate or has a poor likelihood of success or that the potential
    returns are too small. Plaintiff lawyers are sometimes castigated for
    this, but you do not need a business degree to understand that taking
    on cases in such circumstances would quickly put a lawyer into
    bankruptcy. On the other hand, some of the problem of the costs lies
    with defendants who obstruct and fight cases rather than acknowledge
    negligence. I think Ms. Sheridan made an important point in her oral
    testimony before this committee. In her son's first trial the ``junk
    science'' was brought by the defense, not the plaintiff. This is
    consistent with my observation of malpractice cases over the past 20
    years. I also note that because the proposed health courts are not no-
    fault courts and require instead that a patient prove negligence the
    problems of transaction costs will deter lawyers taking cases for the
    same reasons, perhaps even more so if the health courts are subject to
    bias in favor of healthcare providers as many of us fear.

        Question 2. As you know, it often takes several years to achieve a
    verdict or a settlement in medical malpractice cases. The personal pain
    and suffering related to such prolonged solutions, let alone the cost
    seems inappropriate and may provide compensation much too late after an
    injury. Isn't this a sign of the failure of the current system to be
    efficient or effective? Have you had a chance to read the two Institute
    of Medicine reports on patient safety and quality? Do you see the
    concerns raised and approaches now being taken to address these issues
    as being less effective than the current litigation approach?
        Answer 2. This question poses a ``compared to which alternatives''
    issue for me.
        My own research indicates an average of 3 to 6 years to resolve
    medical malpractice cases. I have written about the litigation process
    in my book, Medical Malpractice and the American Jury (1995), and in a
    recent essay in 38 Loyola of Los Angeles Law Review 1217 (2005). My
    insights on this issue were especially aided when I had access to a
    sample of three different liability insurers' closed claim files. I
    supplemented the file data with interviews with plaintiff and defense
    lawyers and insurance adjusters.
        Non-lawyers (and some academic lawyers) assume that the process of
    obtaining evidence bearing on negligence when it is contested by the
    defense is something that can be accomplished in a matter of weeks. The
    reality is different. Records have to be obtained, but health providers
    do not receive a letter from a plaintiff 's lawyer and send the records
    out in the next day's mail. Sometimes they resist until a lawsuit is
    filed and they are compelled to produce the records. Even those
    providers who do agree to provide records first consult with their
    lawyers and department head and the personnel and obtain opinions on
    both medical and legal issues, etc. It may be weeks or months before
    the records are sent to the plaintiff 's lawyer. Then the plaintiff 's
    lawyer must conduct an in-house screen of the records before attempting
    to find a medical expert to review the files. This may take some time
    because the lawyer has to do his or her own research on the topic
    before seeking an expert. Then, the plaintiff 's expert must find time
    in her busy schedule to write an evaluation and send it to the
    plaintiff 's lawyer. Then the lawyer must write the pleadings and wait
    for a reply from the defendant--or defendants, each of whom may have
    their own lawyer. Most medical malpractice cases initially have
    multiple defendants because it is not clear at the early stages of
    investigation that might bear responsibility. Then the defendants have
    to seek their own experts to review the records--more weeks or months
    pass. Then lawyers for both sides have to arrange their busy
    schedules--they each have a portfolio of cases and perhaps upcoming
    trials in other cases--and fly to some distant location to depose the
    experts. And so on, and so on.
        If the process of evidence discovery is to be fair health courts
    will encounter the same problems. There is a suggestion that the health
    court will provide the experts. This too will take time. Moreover, the
    proposals seem to indicate that the plaintiff and the defendants can
    have their own independent expert witnesses. It is possible that health
    courts could actually increase transaction time and costs.

        Question 3. In your written statement you state that only 1 out of
    7 patients who actually ``suffered a negligent injury'' files a claim.
    As it stands today, some meritorious claims are kept out of the system
    altogether because of the skyrocketing costs of the current system. In
    your opinion, how might patients with more minimal injuries caused by
    possible physician negligence benefit if their cases were heard in
    health courts?
        Answer 3. First of all, my own research with Florida closed claims
    data submitted by liability insurers, Vidmar et al. 54 DePaul Law
    Review 315 at 352 (2005) indicated that in Florida transaction costs,
    when adjusted for inflation, had not increased over a 14-year period:
    ``The mean transaction cost for paid claims from 1990 to 1993 was
    $40,853, compared to $39,158 for the 2000-2003 period, a difference
    that is not statistically significant.'' Our data were derived from
    public records and I invite anyone to check the figures. While the data
    pertain only to Florida, claims about increasing costs in that State
    are contradicted by the insurer's own data. A study of similar data
    from Texas, Charles Black et al. Stability, Not Crisis: Medical
    Malpractice Claim Outcomes in Texas, 1988-2002 Journal of Empirical
    Legal Studies (2005) yielded similar findings. I suggest that some of
    the claims made about ``skyrocketing costs'' need to be treated with
    some skepticism.
        I am strongly in favor of resolving cases on a voluntary basis
    through negotiation or mediation. The Michigan program discussed by
    Richard Boothman and similar programs are going a long way to fairly
    and efficiently address problems with more minimal injuries. As I have
    suggested in preceding questions, I have doubts about both the fairness
    and presumed greater efficiency of the proposed health courts.

        Question 4. For less severe injuries, especially, might a schedule
    of damages send a more consistent message to physicians regarding the
    accepted and expected standards of care?
        Answer 4. Truly, I do not see how a schedule of damages could--or
    should--have an effect on physician care. I cannot believe--I refuse to
    believe--that physicians are influenced in their caregiving by the
    remote prospect of potential damage awards. I do not see how a
    connection can be made between schedules of payments and medical care.
        I am not a physician, but as an educated layperson I believe that
    the solution to care--and avoidance of medical error--lies in better
    understanding of the sources of error and how to prevent error. I have
    recently read the annual reports of the Pennsylvania Safety Reporting
    Commission established by the Pennsylvania Safety Authority. While in
    its infancy I believe this endeavor begins to show the way to better
    standards of care.

        Question 5. Based on your own substantial research and numerous
    other studies of jury verdicts that you have reviewed, you state in
    your written testimony that most juries decide medical malpractice
    cases based on legal merit, not sympathy for the victim or the
    perception that the defendant is a deep pocket. Jurors are able to sort
    through the competing testimony of dueling experts. You also point out
    that the extensive case reviews have shown that jury determinations on
    liability closely track the conclusions of objective medical experts.
    In other words, juries are good fact finders.
        This is an extremely important finding because it effectively
    rebuts negative stereotypes of the jury system that we often hear.
    Would you elaborate on the basis for your conclusion that most juries
    reach accurate verdicts consistent with the evidence?
        Answer 5. I am delighted to respond to this question. This summer I
    am finishing a book on the subject, American Juries, with my colleague
    Valerie Hans.
        Underlying most of the claims about the tort system for medical
    malpractice cases are claims that juries are the main problem. They are
    characterized as incompetent, anti-doctor, prone to sympathies for
    injured parties rather than legal facts, etc. As just one of many, many
    examples I refer to a statement made by the American Medical
    Association before this very committee on February 11, 2003:

              ``The primary cause of the growing liability crisis is the
            unrestrained escalation in jury awards that are a part of a
            legal system that in many States is simply out of control.''

        I have been conducting empirical research on civil and criminal
    juries since for more than three and a half decades. Many colleagues
    have as well. There are literally hundreds of studies using different
    methodologies and published in peer-
    reviewed scientific journals. Based on this research, here is my
    conclusion that I will state in an intemperate way:

              The many thousands of American citizens who have honorably
            served on civil juries should ask a court to certify them as a
            class and file a class-action lawsuit for defamation of
            character. The American Medical Association and the National
            Chamber of Commerce can be named as the lead defendants, along
            with a host of others.

        I suspect that no Senator or Congressman would dare publicly call
    his or her constituents ``incompetent,'' ``irresponsible,''
    ``rapacious,'' ``gullible'' and all of the other terms and phrases used
    to characterize juries. Yet, these very same constituents are the
    persons who are conscripted as jurors and comprise the juries that are
    so vilified in testimony before legislatures, in testimony before
    legislators, and occasionally by legislators themselves.
        With respect to medical malpractice juries I will summarize what I
    offered in my written testimony. Empirical evidence by many researchers
    indicates that doctors win between 75 and 80 percent of jury trials. At
    minimum this is some pretty good indirect evidence that juries are not
    biased against doctors. Research also shows that when jury verdicts on
    liability are compared with the ratings of medical experts on whether
    negligence occurred there is a very high correspondence. When severity
    of injury and economic losses are taken into account, jury damage
    awards are, on the whole, very reasonable. Trial judges who sit with
    juries on a daily basis and hear the same evidence--and who are thus in
    a better position to judge jury performance than anyone--are
    overwhelmingly supportive of juries.

        Question 6. You also point out that studies of damage awards show
    that ``plaintiffs with the most severe injuries appear to be at the
    highest risk for inadequate compensation.'' Damage caps affect
    primarily the most severely injured patients, such as those with
    paralysis or brain injuries, because they are the only victims who
    would be likely to receive an award above the level of the cap. They
    are the last ones whose compensation should be arbitrarily limited.
    Would you explain what the research shows about the impact of caps?
        Answer 6. I have reviewed this literature in several sources, e.g.,
    38 Loyola of Los Angeles Law Review 1217 (2005). Here are the basic
    findings: Research on the effectiveness of caps in reducing medical
    malpractice premiums lends, at best, equivocal support to the argument
    that they are effective.
        A United States Government Accounting Office (GAO) report in 2003
    showed that States with caps on medical malpractice damages tended to
    have lower premiums for doctors and that rate increases were lower in
    States with caps. However, the report also concluded that it is not
    possible to show a direct link between caps and premiums because there
    are other factors that distinguish States with and without caps.
    Moreover, some States without caps had the lowest premiums of all.
    Importantly, the GAO concluded that there are no data to establish the
    proposition that damage caps have an effect on the number of
    malpractice claims, losses by medical insurers, litigation expenses, or
    the rates charged doctors for insurance.
        In the same year, Weiss Ratings, Inc., a highly respected insurance
    rating company, also concluded that caps do not have an effect on the
    insurance premiums that they charge doctors. Indeed, Weiss found that
    in comparison to States without caps, States with caps had greater
    increases in median annual insurance premiums for practices involving
    internal medicine, general surgery and obstetrics-gynecology.
        An analysis of statistical information for 2003 by the Kaiser
    Family Foundation, another highly respected organization dedicated to
    healthcare, showed that the number of paid claims per 1,000 active
    physicians was unrelated to whether a State had caps on pain and
    suffering.
        Professor Catherine Sharkey analyzed medical malpractice jury
    verdicts from 22 States for the years 1992, 1996 and 2001 that were
    collected by the National Center for State Courts. Sharkey found no
    statistically significant relationship between the presence or absence
    of caps and compensatory damages in jury verdicts and trial court
    judgments.
        Kessler, Sage and Becker studied the impact of malpractice reforms
    on the number of physicians in States with malpractice reforms and
    States without such reforms. The study did not specifically separate
    caps from other reforms. Overall, a combination of tort reforms was
    associated with a slightly greater number of physicians. The study did
    not examine the effects of reforms on malpractice premiums or on the
    frequency of claims or the amounts of awards. The authors of the study
    acknowledged that malpractice climate is one of many determinants of
    the physician workforce and that the reforms they studied had only a
    ``modest impact'' on the number of physicians. Moreover, the authors
    acknowledged that there were possible alternative explanations for
    their findings.
        I analyzed a sample of Illinois jury verdicts that provided
    breakdowns of the verdicts into their specific components or elements,
    including pain and suffering. The analysis showed that a $500,000 cap
    on pain and suffering would functionally affect very few cases.
        The Wisconsin U.S. Supreme Court decision analyzed a substantial
    body or empirical research bearing on caps with specific reference to
    the State of Wisconsin. The Court drew a number of conclusions that
    included:

              ``Based on the available evidence from nearly 10 years of
            experience with caps on non-economic damages in medical
            malpractice cases in Wisconsin and other States, it is not
            reasonable to conclude that the $350,000 cap has its intended
            effect of reducing medical malpractice insurance premiums.''
              ``The available evidence indicates that healthcare providers
            do not decide to practice in a particular State based on the
            State's cap on non-economic damages.''
              ``We agree with those courts that have determined that the
            correlation between caps on non-economic damages and the
            reduction of medical malpractice premiums or overall healthcare
            costs is at best indirect, weak and remote.''

        In 2003, GE Medical Protective Company, the Nation's largest
    medical malpractice insurer, reported to the Texas Department of
    Insurance as follows: ``Non-economic damages are a small percentage of
    total losses paid. Capping non-economic damages will show loss savings
    of 1.0 percent.''
        The company also said that a provision in Texas law allowing for
    periodic payments of awards would provide a savings of only 1.1
    percent. Medical Protective eventually raised the rates on its
    physician policyholders.
        In California in 2003, despite the cap of $250,000, GE Medical
    Mutual sought an increase of 29.2 percent in liability insurance
    premiums. Thus, the cap did not prevent a major increase in liability
    insurance rates.

        Question 7. The proposals to impose what the Enzi bill calls a
    ``defined compensation schedule'' would also deny the fact finder the
    ability to consider the full impact of the injury on the victims' life.
    It would set an arbitrary limit on compensation for a particular type
    of injury. Wouldn't this have an impact similar to damage caps,
    reducing the amount of compensation that the most severely injured
    patients could receive?
        Answer 7. Yes. In addition to serious questions about who is to set
    these standards, there are questions about whether the amount would be
    sufficient in specific cases. My own research on Florida cases that
    were settled without a lawsuit even being filed offered some unique
    insights into the variability of the actual economic losses. Many of
    the losses can only be described as catastrophic. The files contained
    information on ``structured settlements,'' that is, money that was
    invested to ensure the economic well-being of the negligently injured
    patient and often their dependents. I reported some of these data in a
    table in my written testimony on June 22, 2006 but it is useful to
    reproduce that table again. The data show very clearly the great
    variability in the amount that the defendants--who acknowledged
    negligence--paid badly injured patients as well as how much was
    believed to be necessary to keep the patient and any dependents
    economically independent. I think that this single table is the
    equivalent of a picture being worth a thousand words. I suggest readers
    examine this picture carefully. A careful examination will raise
    questions about how any schedule can be designed to provide individual
    justice for patients such as these. Moreover, the most badly harmed
    individuals will be treated most unjustly.

    --------------------------------------------------------------------------------------------------------------------------------------------------------
               Settle Year                     Case                  Sex                  Age                 Injury         Settlement       Structured
    --------------------------------------------------------------------------------------------------------------------------------------------------------
    1991.............................  BMH.................  M..................  0..................  Spastic quad;         $1,887,044  $1 million cash
                                                                                                        cerebral                          plus $887,044
                                                                                                        palsyriplegia.                    annuity yielding
                                                                                                                                          an expected total
                                                                                                                                          payment to child
                                                                                                                                          of $13,855,826.
    1992.............................  WCD.................  M..................  1..................  Severe brain          $1,000,000  $640,000 cash plus
                                                                                                        damage, blind,                    $540,000 annuity
                                                                                                        deaf, immobile.                   yielding $2,557/
                                                                                                                                          month for child
                                                                                                                                          plaintiff.
    1992.............................  UMS.................  F..................  0..................  Severe mental,        $3,000,000  No details except
                                                                                                        emotional                         an estimate that
                                                                                                        impairment.                       the annuity would
                                                                                                                                          yield $5,914,774.
    1993.............................  CRH.................  F..................  2..................  Severe cerebral       $6,000,000  $4,922,115 cash;
                                                                                                        palsy secondary to                plus $1,077,885
                                                                                                        hypoxia.                          present value for
                                                                                                                                          structured trust
                                                                                                                                          expected to yield
                                                                                                                                          $3,179,273 (Note
                                                                                                                                          medical expenses
                                                                                                                                          incurred to date
                                                                                                                                          of the settlement
                                                                                                                                          = $989,164).
    1993.............................  TGP.................  M..................  43.................  Renal cell            $2,000,000  $1,389,542 cash
                                                                                                        carcinoma.                        plus $610,459 for
                                                                                                                                          structured
                                                                                                                                          settlement for 3
                                                                                                                                          surviving minor
                                                                                                                                          children.
    1993.............................  AHP.................  F..................  0..................  Paraplegia.........   $3,750,000  $2,300,000 plus
                                                                                                                                          $1,450,000 present
                                                                                                                                          value for annuity.
    1994.............................  AR..................  M..................  0..................  Profound brain        $1,000,000  $440,178 cash plus
                                                                                                        damage.                           $559,822 annuity
                                                                                                                                          yielding a total
                                                                                                                                          of $2,912,000.
    1994.............................  GBP.................  F..................  39.................  Vegetative state,     $3,000,000  $1,500,000 cash
                                                                                                        non-reversible.                   plus $1,500,000
                                                                                                                                          annuity expected
                                                                                                                                          to yield an
                                                                                                                                          expected payment
                                                                                                                                          to the plaintiff
                                                                                                                                          of $8,783,183 for
                                                                                                                                          plaintiff and four
                                                                                                                                          minor dependants.
    1995.............................  FHH.................  M..................  25.................  Spinal cord injury.   $2,647,617  $1,156,000 cash
                                                                                                                                          plus $1,491,000
                                                                                                                                          for structured
                                                                                                                                          annuity expected
                                                                                                                                          to yield
                                                                                                                                          $5,291,937.
    1995.............................  CHM.................  M..................  0..................  Canavan's Disease     $2,383,900  $1,092,209 cash
                                                                                                        (degenerartive                    plus $1,291,691
                                                                                                        disorder of                       for annuity
                                                                                                        central nervous                   yielding lump sum
                                                                                                        system).                          payments at 5 and
                                                                                                                                          10 years totaling
                                                                                                                                          $2,000,000.
    1995.............................  HBM.................  F..................  32.................  Coma...............   $7,250,000  Cash and annuity
                                                                                                                                          cost unknown but
                                                                                                                                          annuity estimated
                                                                                                                                          to yield
                                                                                                                                          $16,129,528.
    1996.............................  RLC.................  UK.................  UK.................  Death..............   $1,500,000  $1,429,808 cash
                                                                                                                                          plus $70,192 for
                                                                                                                                          annuity yielding a
                                                                                                                                          total payment to
                                                                                                                                          plaintiff 's
                                                                                                                                          family of
                                                                                                                                          $1,422,239.
    1996.............................  CPC.................  M..................  0..................  Required              $2,500,000  $1,187,940 cash
                                                                                                        resuscitation;                    plus $1,312,060
                                                                                                        neurological                      for annuity,
                                                                                                        damage.                           yielding
                                                                                                                                          $3,307,824 for the
                                                                                                                                          child.
    1996.............................  ORH.................  F..................  0..................  Brain damage.......   $7,300,000  $5,100,000 cash
                                                                                                                                          paid on behalf of
                                                                                                                                          four defendants
                                                                                                                                          plus $2,200,000
                                                                                                                                          for an annuity.
                                                                                                                                          Total yield of
                                                                                                                                          annuity unknown.
    1996.............................  GMI.................  F..................  0..................  Severe brain damage   $6,379,322  $5,529,332 cash
                                                                                                                                          plus $850,000
                                                                                                                                          annuity yielding
                                                                                                                                          $8,066/mo for life
                                                                                                                                          of the child.
    1996.............................  DCH.................  M..................  0..................  Cerebral palsy.....   $3,000,000  $2,600,000 cash
                                                                                                                                          plus $800,000
                                                                                                                                          annuity expected
                                                                                                                                          to yield
                                                                                                                                          $13,783,483 over
                                                                                                                                          the child's life.
    1996.............................  CKR.................  F..................  30.................  Brain herniation...   $3,000,000  $1,800,000 cash
                                                                                                                                          plus $1,200,000
                                                                                                                                          from three
                                                                                                                                          insurance carriers
                                                                                                                                          for an annuity
                                                                                                                                          expected to yield
                                                                                                                                          a total of
                                                                                                                                          $7,816,824.
    1996.............................  FHA.................  M..................  0..................  Cerebral vasculitis   $6,500,000  $4,500,359 cash
                                                                                                        and bilateral                     plus $1,999,641
                                                                                                        thalamic infarcts.                for an annuity
                                                                                                                                          yielding $7,855/mo
                                                                                                                                          for life plus
                                                                                                                                          periodic cash
                                                                                                                                          payments
                                                                                                                                          graduating from
                                                                                                                                          $50,000/yr to
                                                                                                                                          balloon at 25
                                                                                                                                          years to $250,000.
    1997.............................  SVC.................  M..................  52.................  Brain damage.......   $1,000,000  $582,935 cash plus
                                                                                                                                          $417,065 for
                                                                                                                                          annuity, yielding
                                                                                                                                          expected total of
                                                                                                                                          $1,572,935.
    1997.............................  HCP.................  M..................  49.................  Death..............   $5,000,000  $4,000,000 cash
                                                                                                                                          plus $1,000,000
                                                                                                                                          annuity yielding
                                                                                                                                          projected
                                                                                                                                          $3,976,503 for
                                                                                                                                          decedent's minor
                                                                                                                                          daughter.
    1997.............................  KCM.................  F..................  37.................  Paraplegia and        $3,520,160  $1,845,160 cash
                                                                                                        cauda equina                      plus $1,675,000 to
                                                                                                        syndrome (spinal                  two annuity
                                                                                                        cord ends).                       companies yielding
                                                                                                                                          an expected total
                                                                                                                                          of $8,157,597.
    1998.............................  GJL.................  F..................  52.................  Paraplegia.........   $1,000,000  $500,000 cash plus
                                                                                                                                          $500,000 annuity
                                                                                                                                          starting at $2,500
                                                                                                                                          per month and then
                                                                                                                                          adjusted for
                                                                                                                                          inflation.
    1998.............................  COR.................  M..................  56.................  Death..............   $1,000,000  Payout of
                                                                                                                                          approximately
                                                                                                                                          $2,000 per month
                                                                                                                                          over 35 years.
    1997.............................  LMG.................  M..................  39.................  Death..............   $1,250,000  $553,359.60 cash
                                                                                                                                          plus annuities
                                                                                                                                          purchased at
                                                                                                                                          $354,4560:
                                                                                                                                          $111,048.20 and
                                                                                                                                          $111,048.20
                                                                                                                                          yielding a total
                                                                                                                                          of $1,129,912.
    1998.............................  UM..................  F..................  56.................  Right ankle, left     $1,625,000  $700,000 cash and
                                                                                                        below knee                        annuity providing
                                                                                                        amputation.                       $4,000 per month
                                                                                                                                          for 5 years and
                                                                                                                                          $1,000 per month
                                                                                                                                          for 7 years.
    1998.............................  GSHI................  M..................  62.................  Quadriparesis,        $1,449,032  $675,000 cash and
                                                                                                        neurogenic bladder.               annuity providing
                                                                                                                                          $9,750 per month
                                                                                                                                          for 5 years or
                                                                                                                                          life.
    1998.............................  UCH.................  M..................  2..................  Profound brain        $5,000,000  $2,500 per month,
                                                                                                        damage.                           increase 3 percent
                                                                                                                                          per year. 20 years
                                                                                                                                          guaranteed, plus
                                                                                                                                          life.
    1997.............................  CKMC................  F..................  37.................  Paraplegia and        $3,520,000  Cash payment of
                                                                                                        cauda equina                      $1,845,160 and two
                                                                                                        syndrome (spinal                  annuities
                                                                                                        cord ends).                       purchased with
                                                                                                                                          present value of
                                                                                                                                          $1,675,000: total
                                                                                                                                          payments estimated
                                                                                                                                          at $8,157,597.
    1999.............................  SPGH................  F..................  0..................  Severe cognitive      $5,500,000  Total annuities
                                                                                                        delays, requires                  yielding
                                                                                                        occupational                      $12,754.31 per
                                                                                                        therapy, physical                 month.
                                                                                                        therapy, speech
                                                                                                        therapy.
    1999.............................  PRMC................  F..................  21.................  Death..............   $2,250,000  Cash of $1,809,709
                                                                                                                                          plus annuity for
                                                                                                                                          surviving child
                                                                                                                                          purchased at
                                                                                                                                          $440,291.
    1999.............................  PRMC................  F..................  1..................  Hemorrhagic           $3,300,000  Cash of $907,829
                                                                                                        periventricular                   plus annuity
                                                                                                        leukomalacia,                     purchased for
                                                                                                        hypoxic ischemic                  $2,392,171 for
                                                                                                        injury resulting                  life care of
                                                                                                        in motor                          child.
                                                                                                        development delay,
                                                                                                        cognitive defects.
    --------------------------------------------------------------------------------------------------------------------------------------------------------

        There is another important matter regarding the proposed schedules.
    I acknowledge that Professor Studdert's Draft Proposal on his proposed
    health court that was appended to his testimony is a work in progress.
    I do not want to be unfair in that regard. Yet, I took a close look at
    that proposal regarding how damage award schedules are currently being
    considered. I contend that the ``current recommendations'' of his
    Design of a ``Health Court `` System on page 3 helps to illustrate the
    problems with schedules.
        First consider economic damages: ``Economic damages will be paid in
    full.'' Ask any practicing plaintiff or defense lawyer how contentious
    economic losses can be. Two experts will offer estimates of the cost of
    future medical care that vary by literally millions of dollars. Similar
    problems attend with income loss, especially if the injured party has a
    business that one expert will estimate enormous growth potential and
    the other expert will estimate stagnation in sales leading to no
    growth. There is no truly right answer on economic losses. That is why
    for more than 200 years we have relied on a group of citizens to apply
    their logic and local community standards to make the decision. Jury
    decisions are not about absolute truth because there is no absolute
    truth. The only criterion is fairness.
        However, I find the most problematic issue to be with regard to so-
    called ``noneconomic'' damages. On page 3 the Studdert proposal states:
    ``Noneconomic damages will be paid according to a schedule tied to
    severity of injury and based on decision science research about utility
    losses and public deliberation about reasonable compensation.'' (Bold
    added for emphasis).
        I am not sure exactly what is meant by ``decision science''
    although I am a trained social scientist. Is the proposal referring to
    those economic theory studies that ask people in the abstract how much
    money they would require to allow someone to amputate one of their arms
    or take away their eyesight? With all due respect to some economic
    scholars, I think the general public would find this criterion very
    unacceptable!
        But what about ``public deliberation about reasonable
    compensation'' that is another criterion set out on page 3? Isn't
    deliberation what juries already do? Or does public deliberation refer
    to town hall meetings with votes about appropriate ranges or possibly
    statewide referenda? If either, how do you get an informed public
    decision when these votes will be made in the abstract?
        In contrast under our present system, juries see the patient, hear
    about the suffering and hear from experts about the future health and
    employment prospects of the specific individual. They make informed
    decisions based on the individual case.
        The Studdert draft also considers basing the schedules on ``past
    jury awards.'' Which past awards? Is not the aim of health court
    proponents to avoid jury awards altogether?
        Schedules deny individual justice. They hurt the persons most
    severely injured. They are inconsistent with American law and American
    tradition. They are unfair.

          Prepared Statement of the American College of Obstetricians
                               and Gynecologists

        On behalf of the American College of Obstetricians and
    Gynecologists (ACOG), representing 49,000 physicians and partners in
    women's healthcare, thank you for holding this important hearing on
    alternatives to the current medical liability system.
        America's broken medical liability system fails both injured
    patients and their physicians. Many patients with legitimate injury
    claims never enter the civil justice system, while as many as half of
    the claims that do enter the system are without merit. The system fails
    to do what it is supposed to do: accurately and efficiently identify
    cases of negligence, fairly compensate injured patients, and promote
    patient safety. The current medical liability system is random,
    unpredictable and ineffective.
        Obstetrician-gynecologists pay the price through the meteoric rise
    in medical liability premiums that is threatening women's access to
    healthcare. Good doctors who have been so important to their patients
    and their communities are dropping obstetrics, ending their surgical
    practice, or closing their medical practices completely. Medical
    students who love the idea of ushering tiny lives into this world are
    turning away from the litigious culture that surrounds ob-gyn. And
    America's women are left asking, ``Who will deliver my baby?''
        ACOG strongly supports comprehensive Federal legislation to reform
    the system, including placing a reasonable cap on non-economic damage
    awards, as has been accomplished in California and Texas. We'll
    continue working toward this goal until it's won.
        At the same time, we believe there is enormous benefit in exploring
    promising alternatives that would more fundamentally fix America's
    broken liability system, including healthcare courts and early offers
    demonstration programs, as S. 1337 would provide. ACOG has supported
    healthcare courts and early offers for many years. These alternatives
    would help guarantee that injured patients are fairly, quickly, and
    fully compensated for their economic and noneconomic damages. These
    alternatives take injury claims out of the adversarial tort system
    where facts are often poorly understood, and put them into the hands of
    experts whose goals are fairness and patient safety.

          OUR PRESENT MEDICAL JUSTICE SYSTEM FAILS ITS OWN OBJECTIVES

    Unable to Define Medical Negligence
        In the United States today, patients harmed by medical care
    generally have one legal option to get compensation for their injuries:
    they can bring a tort claim alleging medical negligence in a State
    civil court system.
        To prove negligence, in general the patient must show that his or
    her physician failed to act reasonably under the circumstances, i.e.,
    to provide a reasonable standard of medical care as ordinarily provided
    in the specialty, resulting in harm to the patient.\1\
        Experts say that all parties to medical litigation--patients,
    doctors, insurers, and attorneys for both sides--can be unclear as to
    what medical negligence really means and what's required as proof.\2\
    When it comes to medical care, civil courts do a poor job of
    distinguishing between negligence and non-negligence, or between poor
    and good care.\3\
        Many injured patients do not have access to civil courts. The
    landmark Harvard Medical Practice study of 1991 estimated that while 5-
    6 percent of patients are harmed by negligence each year, fewer than 2
    percent ever file a claim.\4\ The elderly and the poor are
    disproportionately left out.\5\ And only 1 in 14 people with a serious
    injury resulting in a disability of 6 months or more is ever
    compensated.
        Conversely, the civil justice system also fails to adequately
    screen out patients who don't belong there. Studies from 1991 to 2006
    find that from 37 percent to over 50 percent of claims filed each year
    have no merit, and from 13 percent to 25 percent of cases filed where
    no negligence occurred still receive compensation. Cases with no merit
    also bring other costs to our justice system: a 2006 study of medical
    liability cases found that baseless claims accounted for 21 percent of
    administrative costs and 16 percent of total liability system costs.\6\
        That's the mark of a system that fails to do what it's supposed to
    do: accurately and efficiently identify cases of negligence, fairly
    compensate injured patients, and promote patient safety.
        For patients injured by negligence, the civil justice system fails
    to provide fair and timely compensation. For physicians, it fails to
    provide guideposts for behavior, be a fair and effective deterrent
    against substandard care or accurately distinguish between negligent
    and non-negligent care. For insurers, the unpredictability and
    randomness of the current system creates an unstable medical liability
    insurance market and skyrocketing premiums.\7\
    Doesn't Help Patients
        The current tort system is not easy for patients to navigate.
    Medical liability cases are among the most unpredictable and complex to
    litigate, and proving fault can be difficult.\8\
        The system is lengthy and expensive for patients. The average
    liability claim takes 3 to 5 years to resolve and attorney fees and
    court costs can be high.
        Many attorneys take cases on a contingency fee basis, taking a
    percentage of any fees won, but this arrangement also has its
    limitations. Often the plaintiff has to pay upfront to cover their
    attorney's out of pocket costs. The system eats away at any
    compensation eventually won. About 50 cents of each dollar in the
    liability system goes to attorneys' fees and costs.\6\ \9\ And the
    arrangement makes attorneys more inclined to take particular types of
    cases and exclude others, favoring cases that promise large rewards or
    a plaintiff sympathetic to jurors.\10\ Patients whose cases may be
    meritorious, but small-value, are often left out. Many injured patients
    don't meet the negligence standard at all.
        Patient safety experts believe that most cases of patient injury in
    the U.S. healthcare system are not due to physician negligence, but to
    system errors in healthcare institutions. This can include the
    misreading of prescriptions by hospital staff, lost records, or poor
    communication between departments.\11\ The tort system is a poor fit
    for evaluating, preventing, or compensating the nature of their
    injuries.

    Patient Care is Harmed
        Although physicians prevail in most claims, the litigation process
    can be lengthy, expensive, and psychologically draining. The average
    case against ob-gyns takes 4 years to resolve, with 13 percent of cases
    taking 7 or more years.\12\ In 2006, it cost ob-gyns an average of
    $35,000 to defend a medical liability case, including claims that were
    later dismissed, and claims without physician error accounted for 13-16
    percent of the liability system's total monetary costs.\6\
        An estimated 13 percent to 25 percent of all cases not involving
    negligence still receive compensation.\6\ Negligence is poorly
    understood, and the tort system reaches beyond negligence and awards
    malpractice damages even when there was no malpractice. In some cases,
    jurors may be trying to squeeze what are really systems errors into the
    physician negligence ``box.''
        Some juries find fault even if no mistakes or wrong-doing occurred,
    but instead the cases involved bad, sometimes heart-breaking,
    outcomes.\14\ Cerebral palsy cases (neurologically impaired infants) in
    particular are susceptible to this type of verdict. Research shows that
    less than 10 percent of neurological impairment cases are the result of
    events occurring in labor and, of these, the majority were not
    preventable.\15\ Yet, these cases account for 1 in 3 obstetric-related
    claims and the median award for ``medical negligence in childbirth''
    cases is $2.3 million.\12\ \16\
        The negligence standard--the heart of the medical tort case--has
    become meaningless. For physicians, litigation has been divorced from
    the quality of care they provide and a source of increasing stress and
    frustration.
        This leads to poorer patient-doctor communication, with doctors
    less willing to express anything that might be construed as an
    expression of ``fault.'' It increases defensive medicine practices, as
    doctors perform unnecessary procedures, tests, or referrals to
    specialists, to lessen their chances of being sued.\17\ Some estimates
    of defensive medicine costs run as high as $60-100 billion a year.
    Defensive medicine increases the cost of a healthcare system that now
    accounts for nearly one-sixth (16 percent) of the Nation's gross
    domestic product.\18\ \19\
        Physicians have endured three crises in liability insurance rates
    in the last 25 years, with cyclical skyrocketing premiums. Physicians
    have trouble affording or even finding insurance, which results in a
    reduction in services, and hurts patients' access to care. According to
    a 2003 survey of ob-gyns, over 1 in 4 have reduced their number of
    obstetrics cases and 1 in 7 stopped practicing obstetrics altogether
    due to liability insurance concerns. The scenario is likely to continue
    unless something changes in the medical justice system.\12\

                             THE HEALTH COURT MODEL

        Researchers at the Harvard School of Public Health are studying the
    successful use of health courts in other countries and have pinpointed
    some key reasons why specialized health tribunals may correct serious
    deficiencies inherent in our tort system.\20\

    1. Health courts would be separate, distinct forums from the general
            civil courts, speeding up adjudication and reducing costs.

        Specialized judicial courts exist within the State judicial court
    system, but hear only certain types of cases. Family law, domestic
    violence, probate, or mental health courts are examples of specialized
    State judicial courts. Specialized tax, patent, and admiralty courts
    are also found in Federal law.
        Administrative courts or tribunals hear disputes before an
    administrative judge or officer, with a limited right of review in the
    regular court system. Worker's compensation cases are examples of
    administrative hearings.
        Key benefits of this approach would be:

         faster adjudication of medical claims,
         lower costs of litigation,
         faster compensatory relief to injured patients,
         more accurate determination of negligence and/or fault,
         more expert consideration of science and clinical
    considerations, and
         improved patient safety.

    2. Trained adjudicators would hear cases, setting clearer and more
            consistent standards than under the civil jury system.

        A judge or administrative hearing officer trained to hear medical
    cases would resolve disputes with greater reliability and consistency
    than in cases decided by untrained judges or juries. In contrast to
    juries, trained adjudicators could issue opinions that define standards
    of care or set legal precedent.
        Medical cases--involving scientific and ethical questions about
    disease, biology, and appropriate medical treatment--can be highly
    complex. The United States is nearly alone among developed nations in
    using mostly juries rather than expert judges to decide medical
    liability cases. In England, Canada, France, Germany and Japan, medical
    liability disputes are decided by judges, not civil juries.\22\

    3. Judges would be guided by panels of neutral medical experts, using
            evidence-based standards of care.

        The U.S. tort system needs impartial medical experts to guide
    decisionmakers on complex medical questions and on the issue of what is
    ``reasonable care'' under the circumstances: to establish what
    standards of medical care apply in a given situation, or, as is
    frequently the case in medicine, what factors would guide physician
    behavior when no clear standards exist.
        Instead, plaintiffs and defendants in the United States today hire
    their own medical experts, so juries often hear conflicting testimony
    about the quality of care. All too often, plaintiffs' experts have no
    specific expertise in the medical issues related to the case, or even
    the area of medicine involved. In many European civil law systems,
    judges may examine or select medical experts or choose a panel of
    neutral experts for guidance.\23\

    4. Damage awards would be more predictable, consistent and fair,
            through guidelines for compensating intangible factors.

        The amount of damage awards in U.S. medical negligence cases are
    random and unpredictable.
        Damage awards for economic damages, such as past and future medical
    costs or lost wages, are fairly predictable. These awards depend on the
    plaintiffs individual circumstances and do not depend on a plaintiff
    being a wage-earner: injured infants or housewives, for example, are
    eligible for economic damages based on loss of potential future
    earnings or their economic value to the family.
        Noneconomic damages, awarded for intangible factors including pain
    and suffering, fluctuate wildly for similar injuries and contribute to
    the high cost of medical liability insurance. In approximately half of
    the States in the United States there is no limit on these awards.\7\
        In contrast, under a worker's compensation model, noneconomic
    damages are based on a schedule of award amounts that reflect the
    severity of the injury or extent of incapacitation. Even with upper
    limits on these damages, the system gives adjudicators flexibility to
    adjust damages based on individual circumstances.
        In countries that use a schedule of damages to set awards--such as
    Denmark, Sweden or Great Britain--the even-handedness of the approach
    seems to contribute to a greater public satisfaction with the medical
    justice system, in marked contrast to the situation in the United
    States.\24\ \25\
                health courts could also improve patient safety
        Any new system that corrected the inequities in our current medical
    justice system would be worth pursuing. But what if it could also help
    reduce health system errors and improve patient safety? Some proposals
    for health courts aim to achieve both goals.
        A 2000 Institute of Medicine study estimated that thousands of
    medical errors occur each year in the U.S. healthcare system, most due
    to system errors rather than to physician negligence or malpractice.
    System errors can include miscom-
    munication between hospital departments, loss of charts in hospitals,
    or misreading of prescription information. As our healthcare system
    becomes more complex, opportunities for error increase.\11\
        Currently, the U.S. tort system and the patient safety movement
    ``function in separate worlds.'' \26\ In fact, our litigation system
    often thwarts systematic efforts to improve patient safety.
        Fear of litigation shuts down communication between doctors and
    patients and between personnel within medical institutions. Open
    sharing of information and learning from mistakes reduce the risk of
    errors. The aviation industry, for example, reduced its rate of error
    by switching from a culture of individual blame to a culture of data-
    sharing on the cause of mistakes.\27\
        Many patients want more openness as well. Surveys show that
    patients harmed by medical care are less likely to sue if the physician
    apologizes and shows a willingness to correct such action in the
    future. The ``I'm Sorry'' movement is an effort to allow physicians to
    apologize when things go wrong without the apology exposing the
    physician to increased liability.\28\
        Under our current litigation system, institutions and physicians
    cannot learn from mistakes. Often records are sealed in settlements of
    medical claims, keeping information that might be helpful to preventing
    future harm off-limits, even within the same hospital or institution.

                      HELPING JUSTICE AND REDUCING ERRORS

        Researchers at the Harvard School of Public Health have summarized
    a model that could help join a better patient compensation system to
    improved patient safety efforts.\20\
        An administrative health court process would promote open
    communication and patient safety measures.
        1. A patient files a claim at the facility level. This could
    encourage discussions, I'm Sorry efforts, mediation, or early offers of
    compensation. Facilities could also use claims to help track data on
    system safety.
        2. A Reviewing Panel (a facility, insurer, or administrative panel)
    would determine if the injury is compensable, in which case it would
    make an offer. If non-compensable, the panel would explain why.
        3. Patients dissatisfied with the panel's decision could pursue the
    case before an Administrative Health Court for a hearing.
        4. Using a high standard of review, a judicial Appellate Court
    would hear any appeals from the Health Court decision.
        The second idea, proposed in the Harvard Model and earlier
    Institute of Medicine proposals, is to use a lesser standard of
    evidence for patients to prove harm: the avoidability or preventability
    rule. Under this standard, used in the Scandinavian system, injured
    patients prove only that such an injury should not have happened under
    optimal medical care.\20\
        This standard requires a patient to show more evidence of medical
    wrongdoing than under a strict liability test, but is a more flexible
    standard of evidence than the current negligence standard, which is
    poorly understood and often misapplied. Among its benefits, the
    avoidability or predictability rule is more likely to:

         Compensate patients harmed by mistakes or system errors;
         Correct the abuse and misuse of the negligence rule; and
          Remove the stigma and blame of the negligence label,
    often attached to individual doctors who acted appropriately and were
    not negligent.

        The focus is less on assessing blame, and more on helping harmed
    patients. And the interests of physicians and patients would once again
    be united in a common goal--better patient care.

             QUESTIONS REMAIN, BUT PILOT PROJECTS SHOULD GO FORWARD

        The status quo has become intolerable for both doctors and
    patients. Pilot projects to study health courts would investigate a
    potentially better system and, at a minimum, provide helpful
    information in evaluating medical justice models. There is much to gain
    and little to lose in going forward.
        Research and clinical trials are essential to the development of
    advances in medicine. Advances in our medical justice system are no
    less deserving of investigation. Pilot projects to evaluate the merit
    of health courts can only improve the status quo and should be put in
    place as early as possible. A good start to investigate this and other
    alternatives to the current medical liability system is the ACOG-
    endorsed bill S. 1337, The Fair and Reliable Medical Justice Act, which
    was introduced in June 2005 by Senator Michael Enzi (R-WY) and Sen. Max
    Baucus (D-MT). We applaud Senator Enzi's leadership on this important
    issue and we pledge to work with the Senate and House toward speedy
    passage of this bill.
        The Nation cannot afford to postpone correcting its deeply flawed
    medical justice process. We must begin today.

                                   References

        1. Black's Law Dictionary (West/Thompson, Eighth Edition, 2004),
    pp. 978, 1061-1063.
        2. Udell N. and Kendall D. Health Courts: Fair and Reliable Justice
    for Injured Patients. Progressive Policy Institute, Washington, DC.
    Feb. 2005 Policy Report.
        3. Barringer P. Health Courts: A Better Approach to Malpractice
    Reform. BNA Health Law Reporter. June 23, 2005.
        4. Brennan T. et al. Incidence of Adverse Events and Negligence in
    Hospitalized Patients: Results of the Harvard Medical Practice Study.
    New England Journal of Medicine 1991; 34: 370-376.
        5. Studdert D. et al. What Have We Learned Since the Harvard
    Medical Practice Study? Medical Error: What Do We Know, What Do We Do?
    Jossey-Bass 2002.
        6. Localio A. Russell et al. Relation Between Malpractice Claims
    and Adverse Events Due to Negligence: Results of the Harvard Medical
    Practice Study III. New England Journal of Medicine, July 25, 1991. For
    a history of the Harvard and similar studies, see Udell N. and Kendall
    D., op cit., at p.16, ft. 1. For a separate, May 2006 study, see
    Studdert D. et al. Claims, Errors, and Compensation Payments in Medical
    Malpractice Litigation. New England Journal of Medicine 2006:354: 2024-
    33.
        7. Government Accountability Office. Medical Liability Factors Have
    Contributed to Increased Premium Rates. June 2003 Report to
    Congressional Requestors. Available at: http://www.qao.gov/new.items/
    d03702.pdf.
        8. O'Connell J. Neo-no-fault Remedies for Medical Injuries:
    Coordinated Statutory and Contractual Alternatives. Law and
    Contemporary Problems 1986/ vol. 49, no. 2: pp. 125-141.
        9. Tillinghast-Towers Perrin. U.S. Tort Costs: 2003 Update. Trends
    and Findings on the Cost of U.S. Health System. Washington, DC 2004.
        10. Gawande A. The Malpractice Mess. The New Yorker, Nov. 14, 2005
    at p. 66.
        11. Kohn, Linda T. et al, eds. To Err is Human: Building a Safer
    Health System. Institute of Medicine, National Academy Press, 2000.
        12. American College of Obstetricians and Gynecologists. Survey on
    Professional Liability. Commissioned from Princeton Survey Research
    Associates. 2003. Summary available at: http://www.acog.org/from_home/
    publications/press_releases/nr07-16-04.cfm.
        13. Physician Insurers Association of America. Medical Malpractice
    Claims Expenses. PIAA 2001.
        14. Brennan T., et al. Relation Between Negative Adverse Events and
    the Outcomes of Medical Malpractice Litigation. New England Journal of
    Medicine 1996; vol. 335, no. 26: pp. 1963-1967.
        15. American College of Obstetricians and Gynecologists and the
    American Academy of Pediatrics. Neonatal Encephalopathy and Cerebral
    Palsy: Defining the Pathogenesis and Pathophysiology. ACOG-AAP Task
    Force Report 2003. Summary available at: http://www.acog.org/from_home/
    misc/neonatalencephalopathy.cfm.
        16. Jury Verdict Research. Current Award Trends in Personal Injury:
    43rd Edition. 2004.
        17. Common Good and Harris Interactive. Fear of Litigation Study:
    The Impact on Medicine. Common Good, March 4, 2002.
        18. U.S. Department of Health and Human Services, Centers for
    Medicare and Medicaid Services, National Health Statistics Group.
    National health spending in 2004. Health Affairs 2006; vol. 25, no. 1:
    pp. 186-196.
        19. Progressive Policy Institute. Fact Check: The Impact of
    Malpractice on Health Costs. PPI Health Policy Wire, vol. 2, no. 20,
    Oct. 14, 2004.
        20. Mello M., Studdert D., and Brennan T. Health Courts: System
    Overview and Current Research. Presentation at Common Good Forum of
    Oct. 31, 2005, Washington, DC. Available at: http://cgood.org/assets/
    attachments/HSPH_Presentation revisedt.pdf.
        21. Howard P. Legal Malpractice. The Wall Street Journal, Jan. 27,
    2003.
        22. Schwartz G. Product Liability and Medical Malpractice in
    Comparative Context. The Liability Maze (Huber and Litan, eds.). The
    Brookings Institution 1991, p. 64.
        23. Schwartz G., op cit., at p. 66.
        24. Erichsen M. The Danish Patient Insurance Scheme. Presentation
    at Common Good Forum of Oct. 31, 2005, Washington, DC. Available at:
    http://cgood.org/assets/attachments/Martin_Erichsen USA.pdf Espersson
    C. Swedish Patient Injury Act. Presentation at Common Good Forum of
    Oct. 31, 2005. Available at: http://cgood.org/assets/attachments/Carl
    Espersson_USA.pdf.
        25. Bell, Justice. Guidelines for the Assessment of General Damages
    in Personal Injury Cases. Oxford University Press, 2002.
        26. Berenson R. Malpractice Makes Perfect. The New Republic, Oct.
    10, 2005.
        27. Studdert D. and Brennan T. No-fault Compensation for Medical
    Injuries: The Prospect for Error Prevention. Journal of the American
    Medical Association 2005: vol. 286, no. 2: pp. 217-223.
        28. Kaiser Permanent Institute for Health Policy. Patient Safety,
    Just Compensation and Medical Liability Reform. January 2003. Available
    at: www.kp.org/ihp.

        [Whereupon, at 12:42 p.m., the committee adjourned.]