[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


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          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 [[email protected], 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

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