AMCNO Applauds Introduction of SB 59 – Calling for the Mandatory Arbitration of Medical Negligence Claims

The Academy of Medicine of Cleveland & Northern Ohio is pleased to once again offer our strong support for legislation that calls for mandatory arbitration of medical negligence claims. In March, Sen. Kevin Coughlin offered sponsor testimony on SB 59 to the Senator Insurance Commerce and Labor Committee, explaining that the bill establishes a northeast Ohio pilot program which would test the effectiveness of a medical malpractice arbitration process. The senator indicated the process is designed to either legitimize or short-circuit claims before they reach the court process, saving both sides time and money. He said the process could also lead to out-of-court settlements.

Sen. Coughlin noted that the bill - similar to a proposal considered last session - targets several northeast Ohio counties where medical malpractice premium costs are significantly higher than the rest of the state. He said the proposal follows in line with recent legislative efforts to stabilize the rates that have driven some physicians out of practice. He further stated the legislation contains a handful of changes from last session's version, including allowing an arbitration panel to determine if a case is "complex," thereby extending timelines. The new version also generally puts a 21-day timeline on the arbitration hearing, eliminating concerns that the process could be overly long.

Responding to questions, Sen. Coughlin told Sen. Kearney he didn't believe the arbitration process would add additional time and cost for those seeking to pursue claims. The proposed timeline, he said, generally mirrors typical pre-trial proceedings and gives both sides an early chance to determine if the claim has merit. When asked about the rationale for selecting the northeast Ohio counties for the pilot, Sen. Coughlin said most were identified because of the higher malpractice rates their practitioners face.

On March 28th, the AMCNO sent a panel to Columbus to provide proponent testimony to the Senate Insurance Commerce and Labor Committee. The panel consisted of Drs. John Bastulli and John Clough and Mr. Michael Jordan, an attorney versed in dispute resolution practicing in Cleveland at the law firm of Walter and Haverfield. 
Dr. John Bastulli, vice president of legislative affairs of the AMCNO began his testimony to the Senate committee by pointing to the recent Closed Claims Data report prepared by the Ohio Department of Insurance (ODI), which appears to provide a “glimmer of hope” that tort reform works. The report indicates indemnity payment and loss costs are lower since SB 281 became effective. The report also shows that since the inception of SB 281, which included a cap on non-economic damages, overall payments are trending downward – with average payments to claimants down from $270,000 to $170,000 and average allocated loss adjustment expenses down from $25,000 to $9,000 per claim.

Dr. Bastulli informed the Senate committee that the report’s ‘bad news’ came from the statewide comparison which showed more than half the claims (2,561) were filed in Northeast Ohio. In fact, one-half of the costs for both indemnity and expenses are generated from claims in Northeastern Ohio. The report shows physicians in Northeastern Ohio paying the highest average indemnity – about $303,000 per claimant. In addition, physicians in Northeastern Ohio are still paying the highest rates in the state – in some instances as much as two to three times higher than other physicians in the same specialties across Ohio. The reports clearly show that while most medical malpractice claims are closed with no payments to claimants, almost ALL claims generated expenses for investigation and defense. The ODI report also showed that nearly five percent of the claims were adjudicated through some form of alternative dispute resolution (ADR) process. Dr. Bastulli informed the Senate Committee that the AMCNO is a proponent and committed advocate for the use of alternative dispute resolution as an alternative to the court system. Our members support ADR incident to their unease and dissatisfaction with the current court system in which they are judged by lay persons on juries guided mainly by high priced competing medical experts, who may have limited knowledge of their individual practices or the standard of care within our community.

The proposed arbitration process outlined in SB 59 could provide that alternative. The arbitration process allows the parties to gauge how others view the case and assist the parties in reaching a decision based upon the merits of the case. Arbitration has many positive aspects, such as relieving the backlog of cases pending in courts, cost effectiveness, flexibility entering into the process, and decreasing the time it would take to resolve a matter. It has been shown to cost less, result in more predictable awards, and the process is much less intimidating and emotional.

He stated that arbitrators would not decide damages. The three-member panel instead would determine if a defendant deviated from the applicable standard of care in a particular incident, and whether the deviation was the main cause of a claimant's injuries. Parties still could go to trial if they reject a panel's evaluation. Dr. Bastulli noted that similar legislation cleared the Senate last session but not the House. Unlike the previous version, Dr. Bastulli said the current proposal would allow witness testimony and other evidence presented at an arbitration hearing to be admitted in any subsequent court proceeding. However, a panel's opinion would not be admissible, and panel members could not be called as witnesses in a jury trial.

Dr. Bastulli further noted that the current court system does not deter medical negligence and the notion that public disclosure would reduce litigation is largely unproven and somewhat implausible. There is more convincing evidence that tort law influences the behavior of healthcare providers namely by encouraging the practice of defensive medicine which adds cost and risk to the system. The harsh reality is that greater publicity about mistakes, disclosure to patients and access to report information probably would increase litigation, not decrease it. Defending a medical liability claim is expensive and long, taking an average of five years to resolve. The AMCNO believes that the arbitration detailed in SB 59 provides an equitable alternative to the current court system and is fair to society as a whole. It will promote efficiency within the system and provide an opportunity to improve the quality of healthcare services that our patients receive.

Dr. John Clough voiced support for the measure on behalf of the AMCNO and the Cleveland Clinic. He stated that 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 an exaggeration. It does not adequately recognize the fact that the insurance premium crisis can only be abated by actual significant decreases in premiums, and this has not occurred. Dr. Clough further stated that 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. He informed the committee members that physicians and hospitals need something that will work quickly by immediately reducing the loss costs associated with malpractice litigation.

He stated that SB 59 can be an effective way to make this happen and that it can lead to a win-win situation. This is because SB 59 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 in approximately 80% of cases that currently go to court no negligence is found. In the few cases in which the parties don’t agree, they can then go to court and present their evidence in a trial, including the evidence presented to the arbitration panel and the 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.

Attorney Michael Jordan, who represents physicians in dispute resolution, said that by structuring a mandatory arbitration process that focuses on liability, meritorious cases of any size are likely to be pursued and resolved. "By contrast, frivolous claims are less likely to be pursued," Mr. Jordan said. He said the bifurcated nature of the process proposed in the bill allows for a likely resolution of the case "based upon what should be a less expensive arbitration hearing." For those cases that proceed to a jury trial, it will not be necessary for parties to duplicate their effort, as evidence considered by the arbitrators will be admissible in subsequent court proceedings. SB 59 is legislation designed to preserve the rights of litigants while promoting a more hospitable medical malpractice environment in the State of Ohio.

Many of the questions posed by the Committee revolved around the legal proceedings and focused on the statutes outlined in the bill. Mr. Jordan aptly responded to the various questions legal questions while Drs. Clough and Bastulli fielded queries regarding medical liability rates. Overall, the proponent testimony was well received by the committee with several committee members indicating they would be willing to work on the bill with the parties involved.

Editor’s Note: The AMCNO is working with Senator Coughlin’s office on several amendments to the bill – one in particular to allow the Ohio Department of Insurance to choose the counties that will be involved in the pilot project based upon population and medical liability rates as well as an amendment to include employees and agents of health care professionals in the legislation. Additional hearings are planned on SB 59 in the future – for further information on the legislation please contact Elayne R. Biddlestone at the AMCNO offices at 216-520-1000, ext. 100.