Liability defense costly, even when doctors win

The cost of successfully defending a physician’s medical liability lawsuit averages $17,130, a significant amount given the outcome of the cases, says the author of a new study.

Lawsuits that result in a payment — either by settlement or jury verdict — cost an average defense bill of $45,070, according to the study in the April 5 New England Journal of Medicine (link). Generally, insurers pay the bulk of defense costs in medical liability suits.

“The administrative costs of fighting these claims, [such as] expert witnesses to testify for doctors, it’s a lot of spending,” said Amitabh Chandra, PhD, co-author of the study and a professor of public policy at Harvard University’s Kennedy School in Cambridge, Mass.

An earlier analysis by the American Medical Association also found high costs to defend against liability suits. The AMA report, released in November 2011, found that the average defense cost in 2010 was $47,158, compared with $28,981 in 2001. The average cost to resolve a medical liability claim, either by settlement, jury award or another disposition, was $331,947, compared with $297,682 in 2001, the report said (link).

The AMA report used data from a broader study on medical liability trends by the Physician Insurers Assn. of America. The PIAA study analyzed about 10,000 claims that closed in 2010 from 22 member companies. The analysis found that the cost of defending doctors who lost their claims at trial was an average of $228,381, while the average defense cost for physicians who won at trial was $124,599. Defense costs for cases that settled were nearly $64,832, while doctors whose claims were dropped or dismissed cost $26,851 in defense bills.

“The takeaway from the body of work on medical malpractice is that the medical malpractice system is broken, both for patients and for physicians,” Chandra said. “That’s why it must be reformed.”

For the NEJM study, Chandra and his colleagues analyzed about 27,000 medical liability claims on 40,916 physicians between 1995 and 2005. The doctors were covered by an unidentified, national liability insurer. The NEJM study did not measure out-of-pocket expenses for physicians or the cost of lost practice time.

Researchers found that the average defense cost of claims, including payment and nonpayment outcomes, was nearly $22,959. Among specialties, defending cardiologists cost $83,056 in cases that ended in payment, the most of any speciality. Ophthalmologists were at the low end, costing $23,760 in defense funds in such cases.

Among lawsuits that did not end in a payment, the cost of defending gynecologists was $25,073, the highest of all specialties. Nephrologists cost an average $7,283 in such cases, the lowest cost among specialties.

The findings, along with other research on medical liability costs, show that the medical liability system remains troubled, Chandra said.

“Presumably, the best malpractice system is one where patients who suffer malpractice would be made whole and those who didn’t would receive no compensation,” he said. “We know neither of those things happen in our current system. & Defense costs are extremely high. It’s not really clear who the current system benefits.”