Senate Bill 88 – Arbitration
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| On behalf of the Cleveland Clinic and the Academy of Medicine/Northern Ohio Medical Association, I am pleased to support Senator Coughlin’s modified mandatory arbitration bill, Sub. SB 88. It provides an additional method of helping to control the runaway costs of medical malpractice insurance that have led the American Medical Association to identify Ohio as a medical liability crisis state. Although malpractice insurance premiums are not increasing as rapidly as they did a couple of years ago, characterization of this phenomenon as a “stabilization of the market” and assuming that the problem is solved is grossly inappropriate. It does not adequately recognize the fact that the insurance premium crisis can only be abated by actual significant decreases in premiums, and we have not yet seen this. It is unlikely that liberal damage caps and the other systemic measures passed previously will result in reductions in loss costs sufficient to produce the needed premium reductions, and certainly not until they are tested for constitutionality before the Supreme Court, which has not yet happened. We need something that will work quickly by immediately reducing the loss costs associated with malpractice litigation.
We believe that SB 88 can be an effective way to make this happen. We believe it will lead to a win-win situation. As you have heard, it requires that a balanced panel, selected by both sides of a case, consider the evidence in any malpractice suit and render a decision in a much less expensive setting than open court. If both parties accept the decision, that’s the end of the arbitration process. The majority of cases probably won’t get past this stage, since approximately 80% of cases that currently go to court do not find negligence. The few cases in which they don’t agree can then go to court and present their evidence in a trial, including the arbitration panel’s decision. This protects everybody’s rights. This procedure will take cost out of the system without interfering with anyone’s rights to a trial if they still want one. A key component of Substitute SB 88 is the bifurcation of liability and damages. The bill now provides that the arbitration panel will only consider liability and not damages. The latter would require a court process. After careful consideration of this language, we want to communicate our full support of this change. In order to curb medical malpractice premiums, particularly in Northeastern Ohio, there must be a reduction in loss costs. Loss costs are all those costs associated with a medical malpractice claim, including the associated court and attorney costs. By bifurcating the arbitration, loss costs for claims that are dismissed by the arbitration panel will certainly be less than comparable costs for similar verdicts reached during a civil trial. Not only is alternative dispute resolution typically less expensive than a jury trial but the arbitration process proposed by Sub. SB 88 will only consider half of the lawsuit equation, liability but not damages. If there is no liability, there are no damages. If there is liability, the damages are determined in court. SB 88’s new bifurcation provisions are perhaps the most important change from the bill as introduced. This change has the potential to have a significant positive effect on the medical malpractice process, loss costs, and premium rates. We support this addition to SB 88. Because my organization, the Cleveland Clinic, provides liability coverage for its employed physicians, it may not be obvious that the current crisis affects us along with everyone else. Although our experience with lawsuits has been pretty successful over the years, the general overall experience affects us, even though we are self-insured. Here’s how it works. The Cleveland Clinic has to operate like a liability insurance company in maintaining a capital fund adequate to cover whatever may happen in the liability arena. This money is not available for the more usual and appropriate capital needs of the organization, including the provision of new technology. The amount of money required to be allocated to this escrow-like fund has grown over the years, and the adequacy of the fund is evaluated by our bond-rating agencies. The Clinic’s bond rating determines the amount of interest we have to pay for borrowed money. If our malpractice litigation fund is judged inadequate by the bond-rating agencies, based on the statewide experience, not our experience, our bond rating drops, and our interest rates on borrowed money increase. This adds to the cost of health care, because that is where the revenue that supports this whole system comes from. So we encourage everyone to get behind this legislation. It’s not a total solution to the crisis, but it can be one part of the puzzle. It is an innovative approach that hurts no one while removing cost from the system and helping to keep health costs down.
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