Combined Testimony |
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Dr. Bastulli’s prepared testimony:Good afternoon, Mr. Chairman and members of the Senate Insurance, Commerce and Labor Committee. I am Dr. John Bastulli, Vice President of Legislative Affairs of the Academy of Medicine of Cleveland & Northern Ohio (AMCNO). In addition, I am an anesthesiologist practicing at St. Vincent Charity Hospital in Cleveland, Ohio, and currently I am the President of the hospital medical staff. I present today in support of Senate Bill 59 sponsored by Senator Kevin Coughlin (R-Cuyahoga Falls). The AMCNO represents 4,400 physicians in Northeastern Ohio, which constitutes a majority of the physicians in our area. The AMCNO is the predominant physician organization in our region and we speak for the physicians of Northeastern Ohio. Our members in our region still consider the availability of affordable professional liability insurance as one of their primary concerns. I am here today with Dr. John Clough, also an AMCNO member and a practicing physician from the Cleveland Clinic and Mr. Michael Jordan, an attorney from Walter and Haverfield in Cleveland, Ohio. With the committee’s permission we would like to present in a panel format. The citizens residing in Northeastern Ohio have always had access to high quality, state of the art medical care. We have some of the world's best physicians and finest medical institutions. The medical care in our region has been consistently recognized by many national publications, as among the best our nation has to offer. The concentration of medical services in Northeast Ohio makes the practice of medicine the largest employer in the region. In fact, a study commissioned by the regional hospital association in our area shows that the total economic impact of our area hospitals and their related health care facilities is $11.58 billion. This includes a household earning impact of $3.28 billion. These economic activities generate close to $254 million annually in state and local tax revenues. A recent Closed Claims Data report just released by the Ohio Department of Insurance (ODI) appears to provide a glimmer of hope that tort reform works. The report indicates that 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 the average payments to claimants down from $270,000 to $170,000 and the average allocated loss adjustment expense down from $25,000 to $9,000 per claim. The bad news in the report is that based upon a statewide comparison 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. This data is confirmed in the January 10, 2007 medical malpractice comparison report also just released by the ODI. I have attached both ODI reports to my testimony for the committee. The report also clearly showed 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. 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 I believe provides 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. Compared to a traditional trial, arbitration can usually be completed quickly and less formally. The New England Journal of Medicine recently published two studies from the Harvard School of Public Health 1,2 , detailing that the current system is inefficient, lacks sensitivity and specificity and does not promote patient safety. The authors believe that in order to improve the system and advance patient safety there has to be a fundamental change in the current system with an emphasis on alternative dispute resolution. Some of the key points from the two studies are as follows: Only 2% of negligent injuries resulted in claims and only 17% of claims appear to involve negligent injury. Compensation was paid for 28% of the claims where there was no medical error and 16% of the claims where there was no discernable medical injury whatsoever. The average payment for a claim that did not involve a medical error was approximately $313,000. 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 authors believe that data regarding medical errors is underreported and impedes ongoing patient safety. 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. In fact, a very similar arbitration process was at one time utilized in this state for medical negligence cases and I believe that it can and should be used again – with some differences to the process to assure that it will have an impact. First of all, it is important to note that this legislation calls for a pilot program mandating arbitration for claims of medical negligence in seven specific counties – Cuyahoga, Summit, Lorain, Erie, Huron, Lake and Geauga. The pilot program is to be established collaboratively by the Superintendent of the Ohio Department of Insurance and the Ohio Supreme Court and the intent of the pilot program is to determine the benefits of using arbitration in disputes. Furthermore, SB 59 mandates the arbitration would take place prior to a suit being filed. With respect to the three-person arbitration panel, each party must choose a physician with expertise in the same area of specialty that is subject to the claim. The third arbitrator, chosen by the parties arbitrators, serves as a chair of the panel and must have practiced law for at least eight (8) years, and be a member of the American Health Lawyers Association, the American Arbitration Association or similar dispute resolution service. In addition, the legislation calls for a bifurcated process, which has garnered support from the medical liability insurance industry because it does provide for the potential to reduce loss costs. The arbitrators do not decide upon damages. The arbitrators rule on the applicable standard of care, if the defendant deviated from that standard and if that deviation was the proximate cause of the claimant’s injuries. However, if a party rejects all or any of the panel’s evaluation and the claim proceeds to trial, and if the party that brought the claim is again unsuccessful, then that party shall pay the opposing parties actual cost in addition to any damages the court orders the party to pay. This process could provide for a much faster and less costly determination on medical liability cases, but it does not take away the ability to go to trial. In addition, this legislation differs from the previous process due to the fact that it includes a provision that to the extent permitted by the Rules of Evidence, an admission made by a party or a party's representative to the arbitration panel, and witness testimony and documentary evidence given at the arbitration hearing, shall be admissible in any subsequent court proceeding. The legislation also includes a provision that although the panel’s opinion is not admissible in subsequent court proceedings; in a jury action, the court may inform the jury that the claim was arbitrated and an evaluation was rendered and, as to each party to the action, whether the panel's evaluation favored the party. Furthermore, panel members may not be called as witnesses or participate in any manner in a subsequent jury trial. If that evaluation by the panel stated that the arbitration panel determined that a claim or defense was frivolous and the claim proceeds to trial the party who has been determined to have a frivolous claim or defense shall post a cash or surety bond, approved by the court, in the amount of fifty thousand dollars. If judgment is entered against the party who posted the bond, the bond shall be used to pay all reasonable costs incurred by the opposing parties as allowed by the Revised Code and rules of court, including reasonable attorney fees. I would also like to mention other studies conducted by the American Arbitration Association and the American Bar Association, which reviewed pre-dispute arbitration utilized in other types of arbitration cases (such as businesses vs. consumers.) These studies have confirmed the comparative benefits of arbitration (versus lawsuits) for both businesses and consumers. The studies demonstrated that in many instances both trial attorneys and consumers view arbitration favorably in terms of timeliness, cost and access. Additionally, both lawyers and consumers found arbitration to be a fair process and 65% of Americans would choose arbitration over a lawsuit to resolve a dispute. The AMCNO and the Summit County Medical Society strongly support this legislation. Ohioans want healthcare that is safe, cost effective and reasonably accessible. Ohio physicians need the necessary resources to provide high quality healthcare services. The current healthcare system must evolve to achieve three social goals. They are to promote patient safety and quality outcomes, to compensate patients that are truly injured as a result of medical negligence in a fair, timely and equitable fashion and to extract corrective justice for all parties involved in the process. SB 59 would provide a process that could assist in bringing medical negligence cases to a quicker resolution in a more cost effective manner and address the concerns stated above. It is presented as a neutral and informed suggestion for improving the overall quality of how alleged medical negligence cases are resolved. I thank you for allowing me the time to present my comments today. 1 David M. Studdert, LL.B, Sc.D., M.P.H., Michelle M. Mello, J.D., Ph.D., and Troyen A. Brennan, M.D., J.D., M.P.H. Medical Malpractice Health Policy Report, New England Journal of Medicine, January 15, 2004, pgs 283-291 2 David M. Studdert, LL.B., Sc.D., M.P.H., Michelle M. Mello, J.D., Ph.D., M. Phil., Atul A. Gawande, M.D., M.P.H., Tejal K. Gandhi, M.D., M.P.H., Allen Kachalia, M.D., J.D., Catherine Yoon, M.D., Ann Louise Puopolo, B.S.N., R.N., Troyen A. Brennan, M.D., J.D., M.P.H. Claims, Errors, and Compensation Payments in Medical Malpractice Litigation, New England Journal of Medicine, May 11, 2006, pgs 2024-2033 Dr. Clough’s prepared testimony:Good afternoon. My name is John Clough. I am a practicing rheumatologist at the Cleveland Clinic, where I have been employed since 1971, and I am a longstanding member of the Academy of Medicine of Cleveland and Northern Ohio. On behalf of the Cleveland Clinic and the Academy of Medicine and Northern Ohio, I am pleased to add our support to Dr. Bastulli’s comments on Senator Coughlin’s mandatory arbitration bill SB 59, which you have just heard. SB 59 provides an additional brake on 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 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 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 59 can be an effective way to make this happen. We believe it will lead to a win-win situation. As you have heard, 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. 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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