Download a PDF of the Current Issue 2015 Volume 12 Number 3 July- September

Mandatory Pre‐Suit Mediation: Local Malpractice Reform Benefiting  Patients and Healthcare Providers

By Randall C. Jenkins, JD,
Director Self‐Insurance Programs Lindsay A. Warren, JD,
and Nikolaus Gravenstein, MD
9-3-1 INTRODUCTION This article outlines the systematic process and early success of the Florida Patient Safety and Pre-Suit Mediation Program (FLPSMP) as a pro-patient and pro-provider solution to the high costs, lengthy delays, and uncertainty plaguing the existing medical malpractice litigation process.   Problem: Costs, delay, and uncertainty with medical malpractice litigation The cost of healthcare has been consistently increasing for decades. The average payment per malpractice claim rose from about $95,000 in 1986 to $323,306 in 2007. (1) Although the cost per claim resulting in payment to the patient has increased, the rate of claims has remained relatively constant. Each year, about 15 malpractice claims are filed for every 100 physicians. Furthermore, since 1986, legal defense costs have grown by about 8% annually.  Claims that did not lead to payments incurred average defense costs of $22,000 in 2002, compared with $39,000 for claims that resulted in payments.(2) Thus the total cost to defend a claim (defense expense plus payment to patient) went from approximately $103,036 in 1986 to approximately $350,500 in 2002.   A 2009 University of Michigan report called overhead costs associated with malpractice litigation “exorbitant” and demonstrated that “for every dollar spent on compensation, 54 cents went to administrative expenses (including those involving lawyers, experts, and courts).”(3) In other words, patients retain only about 46% of payouts when their claim is successful. Complicating the issue is the length of time it takes for a patient to be compensated after injury. In Florida, Missouri, and Texas, medical malpractice claims were filed with insurance companies an average of 15 to 18 months after an injury. (4)  It took on average another 26 to 29 months to close a claim. On average, it took close to 3.5 years after an injury for patients to receive compensation.   Solution: University of Florida Health Science Center Pre-Suit Mediation and Patient Safety Program To provide more compensation directly to deserving patients and address the rising healthcare liability legal expenses, the University of Florida Health Science Center instituted the FLPSMP on January 1, 2008 and has data to support how the consistent use of the FLPSMP meets its objectives of: • Compensation of patients in a fair and timely manner • Encouragement of better communication between doctors and patients • Reduction of frivolous lawsuits   The systematic process that has been implemented provides a template to be followed that ensures patients and their counsel are fully informed, that mediations are scheduled in a timely way, and, when mediations are successful, that patients receive their compensation quickly.   Because the cost of malpractice insurance premiums for physicians is related to the number of claims filed, an expected future benefit is the long-term reduction in liability premiums.   Process: As part of the consent process and prior to receiving medical care, patients sign a form that includes an explicit agreement to mediate unless they are unable to sign due to an emergent condition.   FLPSMP provides a trained, neutral medical malpractice mediator to facilitate candid, confidential communication in a structured setting between the patient and the healthcare provider during a pre-suit mediation. If the claim does not resolve at pre-suit mediation, the patient preserves the right to file a formal lawsuit.   Through a systematic approach too early and confidential communication and apology, the FLPSMP minimizes legal expenses to patients, providers, and healthcare facilities; maximizes the amount of compensation patients with successfully mediated claims receive; and preserves patients’ full legal rights to file a lawsuit should they choose to do so.   FLPSMP results: Timely resolution of claims. From 2000 to 2007, claims using the traditional litigation process took on average 33.8 months from filing a notice of intent to resolution, and claims using the FLPSMP were, on average, resolved in 6.2 months.   FLPSMP resolved claims in less than one-fifth the time it took to resolve claims using the traditional litigation process. An obvious benefit to the patient is earlier closure and expedited compensation. When claims are resolved quickly, patient safety and quality improvement techniques learned from each claim and possible medical error can be implemented more swiftly.   Reduction of medical liability costs for patients and providers Formal litigation processes do not provide the injured patient with the full awarded amount, as claimants are required to pay for legal expenses associated with litigating the claim. Of particular interest to this discussion, 37% of the claims examined in the 1999 IOM study not involve medical errors. Claims not involving errors accounted for between 13% and 16% of the system’s total monetary costs, a meaningful percentage. (5)   Fair compensation for meritorious claims FLPSMP data for the first two years of pre-suit mediation indicate that patients using the program receive at least as much compensation as they would have received had they used the traditional legal system. Claims resolved using the FLPSMP mediation system provided patients with statistically greater net recovery because a large majority of the legal fees and costs incurred by the traditional litigation system were avoided.   Furthermore, the FLPSMP data confirmed that the 2008–2009 average payment to the patient per claim was slightly higher than the average patient payment per claim, using the traditional legal system (not adjusted for inflation), from 2000 to 2007. Also, the 2009 Benchmark Analysis conducted by Aon Analytics for the American Society for Healthcare Risk Management reported a national average compensation to patients of $179,833 per claim from 2003 to 2008. (6) The FLPSMP not only provides compensation on par with the contemporary national average for litigated claims, but patients keep a higher percentage of the compensation, as they do not pay for years of legal expenses.   Claims resolved through formal litigation consume at least 54 cents of every dollar compensating patients to pay attorneys’ fees and legal expenses. (7) The FLPSMP claimant retains much more of the net pay out when not burdened with a 54% to 78% reduction of the settlement awarded that is required to finance the higher legal fees and expenses during traditional litigation. Generally if a claim is settled prior to the filing of a lawsuit, a plaintiff’s attorney compensated on a contingency basis receives 25% to 30% of the patient’s compensation. Once formal litigation begins with the filing of a complaint, the plaintiff’s attorney receives about 35% to 40% of the patient’s total compensation. This percentage is in addition to any legal expenses incurred in the pursuit of a formal lawsuit.   As healthcare facilities and providers become more informed about the benefits of implementing a consistent and systematic pre-suit mediation program for all claims prior to entering litigation, it will become easier to make the paradigm shift that conducting an early mediation does not have to signal to the plaintiffs that the defendants have concerns about the care provided to the claimant.   Smaller claims An additional benefit of FLPSMP is that this program encourages patients and related other plaintiffs to bring smaller dollar-value claims—claims that would not be accommodated in the traditional legal system because of the costs of litigation. Plaintiff’s attorneys can benefit from the early mediation process. Although a smaller percentage of the compensation is paid to the plaintiff attorney (typically 25% to 30% as compared to 35% to 40%), the attorney will receive deserved compensation for the patient and himself or herself without years of trial preparation and discovery.  Healthcare providers and systems also gain from FLPSMP by saving thousands of dollars in legal defense costs and learning of opportunities to improve patient safety within the first six months of an incident because of much earlier discovery and resolution. This enables healthcare providers the rare opportunity to make quality improvement changes based on small claims that would not have otherwise been brought to their attention.   CONCLUSION The program has improved patient safety, provided more net compensation per claim to patients with meritorious claims than the traditional litigation process, and reduced legal liability expenditures by an average of $46,008 per claim, saving significant dollars per year.   FLPSMP is a successful, systematic alternative dispute resolution remedy for medical malpractice claims. The success of FLPSMP stems from a mediation environment that promotes open and honest communication, full and frank disclosure, and early apologies. Patients using FLPSMP resolve claims on average 5.4 times faster than those proceeding with traditional litigation, FLPSMP claimants receive equal or more compensation as compared to litigated claims, and allocated legal expenses for both patients and healthcare providers and facilities are reduced by many thousands of dollars.   As more healthcare systems and providers embrace mandatory pre-suit mediation programs similar to FLPSMP, patient care improvements can occur years earlier, and patients and providers will enjoy a significant reduction in legal expenses, which should naturally lead to reductions in liability insurance premiums and reduced medical costs for patients.   REFERENCES   1. Henry J. Kaiser Family Foundation. Payments on Medical Malpractice Claims, 2007. http://www.statehealthfacts.org. Accessed June 30, 2010. 2. Congressional Budget Office. Limiting Tort Liability for Medical Malpractice. Washington, DC:   Congressional Budget Office; January 8, 2004. 3. Boothman RC, Blackwell AC, Campbell DA, Jr., Commiskey E, Anderson S. A better approach to medical malpractice claims? The University of Michigan experience. J Health Life Sci Law. 2009;2:127–159. 4. Cohen, TH, Hughes, AK. Medical Malpractice Insurance Claims in Seven States, 2000–2004. Washington, DC: U.S. Department of Justice, Office of Justice Programs; March 2007. 5. Aon Analytics. Hospital Professional Liability and Physician Liability, 2009 Benchmark Analysis. Chicago: American Society for Healthcare Risk Management; October 2009. 6. Kohn LT, Corrigan JM, Donaldson MS, eds. To Err Is Human: Building a Safer Health System. Washington, DC: National Academy Press; 2000. 7. Boothman RC, Blackwell AC, Campbell DA, Jr., Commiskey E., Anderson S. A better approach to medical malpractice claims? The University of Michigan experience. J Health Life Sci Law.2009;2:127-159