How malpractice suits might be a (small) quality-improvement tool

The following is a guest post by Nicholas Bagley, University of Michigan Assistant Professor of Law.

Aaron’s post on the scariest medical story of 2013—an article about a Texas neurosurgeon with a penchant for maiming and killing patients—got me thinking. The author of the story, Saul Elbein, asks why no one had stopped this surgeon much, much earlier. Part of the problem, he thinks, is a suite of Texas medical malpractice reforms that capped pain-and-suffering losses and sharply limited hospital liability.

Until recently, this sort of claim would have made me wince. In principle, of course, medical malpractice claims are supposed to encourage physicians to practice high-quality medicine. In practice, however, there are lots of reasons to think they don’t. First, only a tiny fraction (maybe about 2%) of those injured by medical negligence ever sue. Plus, many of the lawsuits that are actually filed (maybe around one-third of them) don’t appear to involve any negligence at all. The mismatch between negligence and claims attenuates the incentives that physicians have to adjust their practice patterns to avoid lawsuits.

Second, the tort system’s primary leverage is financial: it penalizes those whose conduct we’d like to change. But almost all physicians have malpractice insurance, and a physician found liable for malpractice typically won’t see his or her insurance rates go up as a result. The financial signal just doesn’t get through.

Third, physicians can’t always anticipate what the law expects of them. A physician is supposed to act like a reasonably competent physician would have acted under the circumstances. Often, however, there’s no consensus about how best to treat a given patient. What’s a physician supposed to do?

For these and many other reasons, I had basically written off malpractice as a tool for promoting high-quality care. Two recent studies, however, have pushed me to reconsider. The first is from Joanna Schwartz at UCLA, who interviewed dozens of hospital risk managers and received survey responses from hundreds more. The paper is worth a full read, but what caught my attention was the following:

[T]he vast majority of my interviewees and survey participants report that litigation data has proven useful to hospital patient safety efforts. Lawsuits reveal allegations of medical negligence and other patient safety issues that fall through the cracks of hospitals’ other reporting systems; depositions and discovery materials surface previously unknown details of adverse events; analyses of claim trends reveal problem procedures and departments; and closed claims files serve as rich teaching tools.

In other words, malpractice claims generate information that hospitals can then—at least in principle—use to improve patient care. That’s so even though malpractice claims are weak and often-misleading signals about quality problems: they still provide some information about what’s actually happening on the hospital floor. And when you’re trying to improve patient care, information is key. Schwartz’s study has limitations, not the least of which is that it relies on interviews with risk managers who may overestimate the usefulness of malpractice claims to their efforts. But especially as hospitals acquire more and more physician practices, it seems worth exploring further the link between malpractice and hospital quality-improvement efforts.

A second study, this one by Michael Frakes at Cornell, is even more surprising. Historically, the law has set the standard of care for physicians with reference to what a reasonable local physician would have done under the circumstances (known as the “locality rule”). In some states, however, the locality rule has over the past half-century given way to a national standard that measures a physician’s conduct against what a reasonable physician in the United States would have done.

Frakes exploited this shift to run a nifty experiment: when states moved from the locality rule to the national standard, did physicians in those states begin to practice more like physicians in other states? Turns out they did. As Frakes writes:

Focusing on obstetric and cardiac practices, I find evidence of regional convergence in the utilization rates of the targeted treatments and diagnostic procedures upon the abandonment of a locality rule. For instance, in the case of cesarean deliveries, I find evidence consistent with a convergence effect in which 40% of the gap between state and national utilization rates is closed in connection with the adoption of a national-standard rule.

This floored me. I would have bet a substantial sum of money that the change to a national standard—a change that most physicians are completely unaware of—would have had at most a trivial effect on physician practice. I was wrong.

Contrary to what some have argued, what the Frakes study suggests is not that the national standard or the locality standard is the right approach. To make that judgment, you’d have to know more about which treatments work best for which conditions. (For what it’s worth, Frakes doesn’t find an effect on outcomes in his study.) What the study does suggest, however, is that tinkering with malpractice law has the potential to aid in improving quality of care. Imagine, for example, that physicians were given safe harbors from malpractice liability if they adhered to evidence-based practice protocols. Such safe harbors might powerfully encourage adherence to the protocols.

Neither the Schwartz nor the Frakes study, of course, remotely suggests that the benefits of the malpractice system outweigh its substantial costs. I’m still skeptical about that. Nor is malpractice reform likely to do much to curb runaway spending on health care; I’m with Aaron in thinking that economic incentives, not liability concerns, are the big problem there. But they do suggest a modest silver lining to an otherwise grim story. The tort system can’t fix all the quality problems that plague medicine. But maybe—just maybe—it can help.

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