Richard C. Boothman University of Michigan Office of the General Counsel

1. Mistakes and Lost Opportunitiesin Medical Malpractice LitigationMidwest Actuarial ForumSeptember 24, 2003 Richard C. Boothman University of Michigan Office of the General Counsel University of Michigan Health System

2. Disclaimers • Observations are unscientific: derived from 21 years as a trial attorney • Expedient ≠ best • Litigation serves important societal interests • Trials overwhelmingly lead to the right result • Litigation must be improved to be relevant • Risk can be better managed internally • Thoughtful claims management can reduce present costs and future loss

3. Risk • Michigan’s tort reform capped non-economic damages only; presently does not apply in death cases. • Ohio has untested, modest tort reform and is a punitive damages state. • Michigan physician discipline actions following med mal settlements/verdicts increasing. • Planned National Practitioner Data Bank reporting requirements will increase costs and complexity in claims management.

4. Risk of single catastrophic loss is low. Most medical institutions are conservative and risk-averse.

5. Risk of Major Financial Loss Through Less-Than-Optimal Settlements, Unnecessary Expenses and Unrealized Opportunities is High. Opportunity cost is tougher to appreciate, tougher to measure, but cost is insidious, significant and real.

6. The expense can be reduced. • Immediately through improved claims management. • In the near future through improved risk management. • For the future through connections to institutional quality improvement, patient safety, staff education, integrating claims experience in business planning and tort reform.

7. Improve Claims Management Immediately • Principles • Pro-activity • Prophylaxis

8. Principles • What should be a thoughtful decision is often overlooked altogether, left to the idiosyncrasies of claims managers or lawyers outside the institution or company. • Few institutions or insurance companies give thought to the options. • Even fewer institutions or insurance companies integrate those options with their business goals, long range strategies, identities.

9. Honoring and serving institutional principles in claims management. • Economic realities – forced risk aversion? • Recognition that options have consequences on staff and other constituencies, plaintiff’s bar, courts, public perceptions as well as transactional costs and risk. • Choices impact credibility in the litigation arena which in turn, impact future litigation outcomes.

10. University of Michigan Litigation Principles We will defend medically appropriate care aggressively. We will seek to compensate quickly and fairly when inappropriate medical care causes injury.

11. Principled Approach Signals to the plaintiffs’ bar that there is a penalty to bringing medically dishonest claims. Signals to the plaintiffs’ bar that there is a premium to client and lawyer for legitimate claims. Signals to the courts that UM defends only meritorious claims.

12. Principled approach in practice • Tried 7 cases between August, 2001 and September, 2002. • Total exposure (assuming all seven were lost): est. $7.5 – 8.5 million • Won 6 outright. Lost 1, but verdict ($150,000) far below settlement demand ($550,000) and was recently settled. • Cost of settling all seven: est. $2.5 million • Cost to try all seven: est. $320,000 $2 million savings

13. Immediate response from shift to principled approach • Increase in early resolutions • Altered the plaintiff’s attorneys’ approach • Altered mediators’ approaches • We believe (too early to know for sure) that fewer questionable cases are being filed • Sharp, palpable improvement in staff attitude about claims, with greater personal investment and improvement in morale • Altered Courts’ attitude

14. Shift to principled approach required: • Agreement on benchmark • Resolve to hew sensibly to the benchmark • Change in selection of trial counsel • Change in our contractual relationships • Change in culture toward claims • Experience in litigation to assess the risks

15. Pro-ActivityEvaluating potential claims for early resolution without litigation.Selecting cases for aggressive defense.Offers Opportunity to Preempt Catastrophic Loss.

16. Requires experience • Requires confidence • Requires resolve to confront the • problem • Requires the will to engage the • opposition

17. Pro-activity Health systems largely ignore the opportunity. Health systems manage claims on the cheap. Health systems use the wrong people.

18. Pro-activity at UM Health System • Marry trial experience with Risk Management and UM expertise to evaluate claims from both legal and medical perspectives during pre suit period. • Approach confidently and creatively with novel ways of engaging plaintiffs, resolving what needs to be resolved before litigation, increasing chances for success at trial with early trial preparation and dissuading plaintiffs in selected cases.

19. Risks and benefits of pro-activity • Saves defense/transactional costs. • Saves anxiety, distraction, productivity, time. • Avoids licensing complaints. • Controls risk. • Increases staff confidence. • Chance that defenses left unasserted. • Chance that litigation would produce better result. Benefits Risks

20. Prophylaxis If discussed at all in the health care industry, “claims management” is mostly discussed in the context of administrative overhead, not opportunity – not opportunity to save, not opportunity to learn, not in terms of prophylaxis and most definitely, not patient safety.

21. Possible reasons: • Psychological and cultural avoidance; • Accounting partitions; • Resignation that “claims, like the poor, will always be with us;” cost of doing business. • Claims expense is often incurred long after the patient injury occurred; • Sometimes, care adjustments have been made independent of the claim;

22. Consequence: a vicious cycle • Missed opportunities to avoid future patient injuries or teach medical self defense. • Leads to missed opportunities to avoid curse of history repeating itself. • Leads to continued serious med mal expense draining valuable resources from patient care and personnel retention. • Reinforcement of resignation and avoidance.

23. Attacking the problem • Identify the barriers: • Courts/laws need to allow discussions – potential target of tort reform. • Break down the culture of avoidance and resignation. • Develop connections between claims experience and initiatives for improvement of care. • Cost – benefit business analyses need to include claims cost.

24. Prophylaxis - recent progress within UMHealth System • Promoting education and study of losses on the clinical level. • Using claims experience for Grand Rounds. • Risk Management rounds – reviews claims experience for trends and vulnerability. • Created a claims management structure that connects to peer review and patient safety and quality improvement. • Beginning to integrate claims experience in business strategies.

25. Improved staff education in self defense. Focused risk management for every division and department. Maintain systems integral to safety and defensibility. Continue to streamline process for improving clinical services in response to identified need. Consciously attack culture of avoidance, resignation and accounting partitions. Areas of opportunity – UM Health System goals

26. Really only two ways of reducing risk: Improve Patient Care and Teach and Engage in Self Defense

27. No-Fault Tort System Be careful what you wish for . . .

28. No Fault System Defined • In the abstract, concept calls for elimination of administrative expense and legal costs in favor of a predictable, non-adversarial approach to compensation of people injured by the delivery of medical care. • Is not designed to reduce insurance costs. • Is designed to spread reasonable compensation across to more “victims.”

29. Problems with No-Fault • Disincentive to improvements in care. • Expensive. • Cannot work like worker comp because threshold determination will still require litigation of some form. • Demoralizing effect on healthcare staff. • Social safety net at the expense of the healthcare industry.

30. What we can do – reform the present system • Under the present system, caregivers are not judged by a “jury of their peers.” • Junk science and “charlatans.” • Establish some consistency in damage awards. • The value of pre suit notice. • Physician apology protection. • Catastrophic injury assistance.