Medical liability: Cutting costs from the bench

After years of presiding over thousands of civil claims in one of the busiest courts in the country, New York Judge Douglas E. McKeon was bothered by how medical liability cases were being treated in the system.

The claims were classified the same as every other civil lawsuit, despite medical liability issues being more complex and taking more time to review, said McKeon, an administrative judge in the Supreme Court of Bronx County.

"We had to segregate the medical malpractice cases from the rest of the mix," he said. "They were being lumped into cases where someone fell on the sidewalk."

So in 2002, McKeon began a unique approach to evaluating liability claims in collaboration with New York City Health and Hospitals Corp., the largest municipal health care organization in the U.S. The strategy, called judge-directed negotiation, focuses on early court intervention and facilitating discussion among attorneys about claims and potential settlements.

The program cuts legal costs and resolves cases years earlier than a traditional court route, McKeon said. HHC has saved more than $60 million in medical liability costs as a result of the program and other risk management initiatives.

With the help of a $3 million federal grant, judge-directed negotiation has expanded to courts and hospitals in Brooklyn and Manhattan. With a separate grant, five judges in Buffalo, N.Y., will start a similar program in November.

The goal is to cut medical liability expenses and become a national model for reform in malpractice cases. "There are no laws that need to be changed. All the mechanics are in place," said James Battles, PhD, a senior service fellow for patient safety and medical errors at the Agency for Healthcare Research and Quality, which provided the three-year grant. "Items can still go to trial, but they're trying to get the parties together in a less-heated, less-contested manner."

New York doctors pay among the highest medical liability premiums in the nation. In 2009, the state led the country in claims filed with the National Practitioner Data Bank, according to the state Health Department. A Medical Liability Monitor survey released in October shows that internists in Nassau and Suffolk counties paid $32,611 in premiums in 2011, and general surgeons spent $128,542. Obstetrician-gynecologists in the same counties paid $206,913. Hospitals in the state spend more than $1 billion annually on medical liability expenses.

The concept behind judge-directed negotiation could be adopted nationwide, liability experts say. But funding is a challenge. And whether the program is an effective alternative to traditional tort reform remains in question.

Bartering cases

During a typical negotiation session, judges and attorneys spend about an hour discussing a claim's strengths and weaknesses, McKeon said. Judges can facilitate from eight to 10 negotiations in an afternoon. Doctors and plaintiffs are welcome to join the meeting, and McKeon encourages their involvement.

"Our discussions are more than 'How much do you want, and how much are you wiling to spend?' " he said. "We get into the medicine."

For example, in an obstetric negligence case, the group discusses fetal monitoring strips and questions about the readings. Parties review standard techniques when a baby is stuck in the birth canal and what methods are most acceptable, depending on the situation.

"Not all of these cases are settled on the first go-around. It's a process," McKeon said. "Each case has about three to four meetings. It may get to the point where [the attorneys] leave me" and continue their discussions over the phone.

Judges participating in the program receive medical training based on a curriculum designed for the project and with the help of area medical associations. As part of the AHRQ grant, each court has the aid of a registered nurse, who also is an attorney. The nurse confers with judges on claims and provides any necessary medical background.

Successful compromise depends on the judge who leads the group, said Ronald Landau, a New York plaintiff attorney who had four medical liability cases go through the program. Two cases ended in settlements; the others are ongoing.

"If you can find a judge who can understand the perspective of the plaintiff and understand the constraints and the perspective of the defendant, it's a terrific plan," he said. "I have had multiple mediation experiences over the years, and I would say 85% don't work because the mediator just doesn't have the right temperament."

Another benefit of judge-directed negotiation is finding and excluding early doctors who have no responsibility in a claim. Plaintiff attorneys often include a long list of alleged defendants initially, so as not to lose the chance of adding defendants later. Doctors with no culpability can spend years defending a claim before being dismissed from a case.

In the program, "that person can be taken out sooner rather than later," said Judge Judy Harris Kluger, chief of policy and planning for New York State's Unified Court System, which oversees courts in the state. "Everybody takes a harder look when they have to sit down with the judge. Someone who is not responsible shouldn't have to be named and shouldn't have to fight the case."

Since the program expanded in 2010, it has handled 200 claims. McKeon estimates that since 2002, 95% of cases have ended in settlements. Settlement amounts frequently are lower than jury awards, but the process saves time, program advocates said.

A typical medical liability case takes about three years to resolve, McKeon said. In the negotiation program, a claim runs its course in about nine months.

"We believe fair compensation, [received] sooner, is probably more desirous across the board," he said.

Solving liability problems

The strategy is a positive step toward addressing medical liability problems in the state, said Morris M. Auster, staff counsel for the Medical Society of the State of New York. The medical society sent a letter to the New York State Dept. of Health in support of the program.

"We like the idea of judges having medical training, who understand medical liability allegations cannot simply be resolved the same way you resolve traditional tort allegations," he said. "We're very hopeful that if this is very successful in reducing liability costs, it could be expanded further."

But the initiative should not be seen as the ultimate answer to solving medical liability issues for doctors, he said. The medical society supports traditional tort reform measures, including caps on noneconomic damages and continues to advocate for reforms.

"We think [the court program] is generally a positive development, but it's not the be-all, end-all to address medical malpractice insurance [rates]," he said. "It's one of a series of solutions."

New York physicians will not get significant relief from insurance premiums and claims severity until the state enacts a noneconomic damages cap, said Donald J. Fager, vice president of Medical Liability Mutual Insurance Co., the largest writer of medical liability insurance in New York. MLMIC supports judge-directed negotiation, but Fager said it helps only some doctors.

"A judge can be helpful in settling cases when you want to make a payment but cannot resolve a case when there is no offer," he said in an email. "Further, a judge cannot impose a limit on damages in negotiation. He can only recommend a settlement amount."

The New York Trial Lawyers Assn. said the program is a good opportunity for both sides to come together and potentially resolve cases, as long as plaintiffs' trial rights are not at risk, said Leslie Kelmachter, president of the association. "Of course we are concerned that it doesn't take away from the safeguards in place to protect victims, and that this is not a steppingstone to anti-civil justice measures," she said. "We think the program will work if there's no issue with the victim's right to counsel and that no pressures are being placed on plaintiffs to settle."

Expansion's likelihood

Court systems around the country may see the program's success and undertake similar projects in their state, said Battles, of the AHRQ.

Judge-directed negotiation could be an alternative to health courts, where specialized judges review and rule on medical liability cases, he said. Health courts mean changing law, while judge-directed negotiation works within current court systems. "I would hope a number of state court systems would take a hard look at what's going on in New York," he said.

Expanding the program to other states has challenges, said Michelle M. Mello, a professor of law and public health at Harvard School of Public Health in Boston who is evaluating the experiment.

Other states would need money to train judges and hire a medical assistant, such as the nurse/attorney being used by New York judges, she said. Another challenge would be to find the right team and funding to evaluate their program. "The idea itself is pretty simple, but some of the frosting around the intervention takes money," she said.

Even if judge-directed negotiation doesn't solve medical liability woes for all physicians, program advocates say the strategy only can improve the legal climate.

"If you don't have to do a trial, it saves everybody," said Judge Paula Feroleto, the administrative judge overseeing the Erie County, Buffalo program. "It saves the hospital, it saves attorneys fees for both sides, it saves the court system and the judge's time. It changes the mindset of how these cases are handled. It saves folks the stress of litigation."