Medical liability costs seen as a drain on innovation

But private sector health leaders tell a Senate panel that new care delivery reforms could reduce defensive medicine.

By — Posted June 4, 2012

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Millions of dollars that could be used for innovation in health care delivery often are funneled toward medical liability costs, a panel representing private health systems told a Senate committee on May 23. The witnesses said boosting quality through innovative health system reforms would do a great deal to tamp down the defensive medicine practices that result from the heightened liability climate.

“With the very visible impact and the efforts around the health system on quality and the pursuit of quality, my anticipation is that quality of care will go up and the whole issue around defensive medicine will become much more mitigated,” Richard Migliori, MD, executive vice president for health services for UnitedHealth Group, told the Senate Finance Committee.

The hearing was held to address the progress of private-sector systems to reduce costs and improve quality, but the discussion quickly turned to defensive medicine. Sen. Orrin Hatch (R, Utah), the top Republican on the Finance panel and a former medical liability defense lawyer, asked the witnesses what they were spending to protect against medical liability.

“What is the percentage of cost of doing business that’s caused by many of these suits? And how serious are they in your planning purposes?” asked Hatch, a proponent of using tort reforms to help reduce health care costs.

The costs of defensive medicine practiced by health professionals to avoid medical lawsuits is estimated at $60 billion annually, according to a June 28, 2010, study in Archives of Internal Medicine. The cost of carrying liability insurance is another large expenditure for physicians and others.

“Our organizations covering the hospitals and employed physicians spent $90 million on liability costs” in 2011, said Lee Sacks, MD, chief medical officer of Illinois-based Advocate Health Care and chief executive officer for Advocate Physician Partners, a joint venture between Advocate and about 4,000 physicians.

For 2012, Advocate’s actuaries said it needed to budget $190 million because of an increase in lawsuits, said Dr. Sacks, adding that the Illinois Supreme Court overturned the state’s tort reform statute several years ago. He said despite having fewer patient safety events “and much more transparency and disclosure, that’s an extra $100 million that’s not being reinvested in patient care in our organization.”

Paul Diaz, CEO of Kindred Healthcare, a health system that provides postacute care in more than 40 states, said the money it invests in medical liability protections “does a lot to take away from the [information technology] budget and other innovation budgets that we have.”

Medical errors and other system failures do take place, the witnesses acknowledged. “We have a pretty comprehensive risk-management process,” Diaz said. “But there’s no doubt that those dollars from a societal perspective are better invested in the innovations that we talked about and advancing our health care system.”

Diaz was optimistic that physicians eventually would practice less defensively and in more of a patient-centric manner as they become more involved in health care delivery innovation. “It should have the dual impact of bringing some of this down. But there’s no question that there’s a significant inefficiency when a company like Kindred Healthcare’s net profits are equal to the malpractice reserves that we take in every year.”

Dr. Migliori said he couldn’t provide specific figures on how much United was dedicating to defensive medicine. “What we do understand is that the most effective tools & in improving the health care system and lowering costs really have to do with the adoption of better use of automation tools” and providing useful data to the physicians so they have more awareness of what’s happening to the patient, he said.

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The private sector points to efficiency innovations

Representatives of several health systems offered examples to a Senate panel on how they have improved efficiency despite the drain on resources that they attribute to medical liability costs:

  • Kindred Healthcare has reported reduced rehospitalization rates of more than 8% in its long-term acute care hospitals and skilled nursing and rehabilitation centers since 2008 through its “joint operating committees,” a clinical integration effort with its health care delivery partners.
  • UnitedHealth Group, through its Premium Designation Program, analyzes the performance of physicians against quality and efficiency benchmarks. Cardiologists and orthopedic surgeons who earned a quality designation under the program had fewer procedures that needed repeating and lower complication rates in certain areas than those who did not receive a quality designation.
  • Advocate Physician Partners and BlueCross BlueShield of Illinois are running a shared savings program that has produced a 12.5% decrease in per-capita hospital inpatient days in its second year, compared with a 7.5% reduction outside of the program, while maintaining patient safety, satisfaction and outcomes.
  • Philadelphia-based Renaissance Medical Management Co., a physician-owned network of 230 primary care doctors, deploys nurses to perform patient risk assessments and educate and establish clinical goals for patients, and monitors progress and reports findings to primary care physicians.

Source: “Progress in Health Care Delivery: Innovations from the Field,” testimony from Senate Finance Committee hearing, May 23 (link)

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External links

“Physicians’ Views on Defensive Medicine: A National Survey,” Archives of Internal Medicine, June 28, 2010 (link)

“Progress in Health Care Delivery: Innovations from the Field,” testimony from Senate Finance Committee hearing, May 23 (link)

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