Text of Dr Bastulli's Testimony at the Ohio Statehouse

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). On behalf of the 4400 physician members of the Academy of Medicine of Cleveland and Northern Ohio, I would like to thank you for allowing me to once again present before this committee. The AMCNO is the pre-eminent physician organization in our region and we speak on behalf of the physicians of Northeastern Ohio. Today, I am here to advocate for the passage of SB 59. This piece of legislation, sponsored by Senator Kevin Coughlin of Cuyahoga Falls and submitted on behalf of the AMCNO, would establish a pilot program that requires all cases of alleged medical negligence be submitted to non-binding arbitration. We are confident that SB 59 will reduce healthcare expenditures, stabilize the professional liability insurance market and help the current system to evolve to achieve three social goals: (1) to promote patient safety and quality outcomes; (2) to compensate patients that are truly injured as a result of medical negligence in a fair, timely and equitable fashion; and (3) to extract corrective justice for all parties involved. 

Members of the Academy of Medicine of Cleveland and Northern Ohio (AMCNO) have made it clear that medical liability, the cost and availability of professional liability insurance and the fear of litigation remain their most pressing concerns and represents a significant threat to their ability to practice medicine and provide their patients with continued access to safe, cost effective healthcare services. In addition, medical students that receive their education and training in Ohio are choosing not to train and/or practice here incident to our medical liability climate – which could result in a physician shortage in Ohio. There is no doubt that the primary reason for the continuing medical liability crisis is the cost of investigating, defending and settling claims brought against physicians and hospitals. 

Medical costs are also influenced by the medical liability climate. The cost of defending lawsuits, the overall cost of medical liability insurance and the impact of practicing defensive medicine have all increased the cost of health care – along with having an impact on patient access to care. One of our more pressing concerns at the AMCNO is the plight of the one million Ohioans who lack health insurance. It is estimated that 1.3 million Ohioans or approximately 12.3 percent live below the federal poverty level and in Cuyahoga County, that there are over 132,000 people without healthcare insurance. Last year, 3.6 billion dollars was spent to provide healthcare for Ohio’s uninsured and doctors, hospitals and other healthcare professionals provided 550 million of uncompensated care. 

While the bulk of health care expenditures pays for medical services, total expenditures include the cost of medical liability and defensive medicine. Significant reform of the current system to increase access for the uninsured must be accompanied by continued efforts to reform our medical legal system and how cases of alleged medical negligence are dealt with in Ohio. The current system increases the cost of healthcare through the practice of defensive medicine and adversely effects physician supply as well as the scope of services that doctors and hospitals are able to provide. It is estimated that the cost of defensive medicine is approximately 124 billion dollars a year, which amounts to ten percent of the total increase in annual healthcare expenditures, which are presently 8.8 percent. 

Higher malpractice awards and premiums are associated with higher Medicare spending. In fact, the 60 percent increase in malpractice premiums between 2000 and 2003 was associated with an increase in total Medicare spending of more than 15 billion dollars. In addition to the increased cost of defensive medicine, the current tort system in the United States is having a significant detrimental impact on our economy. Current healthcare expenditures represent 17 percent of the gross domestic product (GDP), with 2.5% of the GDP dedicated to tort costs. The U.S. tort costs for the year 2005 were 260 billion dollars with 30 billion dollars spent on medical malpractice. No other industrialized country spends such a large percentage of the GDP on tort cases. England’s rate is .7 GDP. If the United States had the same ratio then we would have spent 150 billion dollars less in 2005. This money placed back into the economy would provide jobs with substantial benefits including health insurance. Significant reform of the current system to increase access for the uninsured must be accompanied by continued efforts to reform our medical legal system and how cases of alleged medical negligence are dealt with in Ohio. It is our belief that SB 59 provides an avenue for reform to the system that could reduce costs to the healthcare system.]

Since the inception of SB 281, which included a cap on non-economic damages, data from the Ohio Supreme Court and the Ohio Department of Insurance reveals that the number of medical malpractice cases has trended downward. Unfortunately, Northeastern Ohio continues to see a disproportionate number of filings, the highest jury awards and the most expensive medical malpractice premiums of anywhere in the state. Of the total number of claims filed in Ohio, more than half -- 2,561 were filed in the Northeastern Ohio region. In addition, more than one-half of the costs for both indemnity and expenses are generated from claims in Northeastern Ohio. Additionally, physicians in our region of the state are paying the highest average indemnity at $303,000 per claim and the highest premium rates in the entire state sometimes as much as two to three times higher than other physicians in the same specialties. While most medical malpractice claims are closed with no payments to claimants, almost all claims generated expenses for investigation and defense. 

The New England Journal of Medicine recently published two studies from the Harvard School of Public Health, 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:

1. 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.

2. The average payment for a claim that did not involve a medical error was approximately $313,000.

3. For every dollar spent on compensation, 54 cents went to administrative expenses (including lawyers, experts and courts).

4. The current court system does not deter medical negligence and the notion that public disclosure would reduce litigation is largely unproven and somewhat implausible. 

5. Defending a medical liability claim is expensive and long, taking an average of five years.

The authors found that incident to concerns over medical liability data regarding medical errors is under reported and therefore impedes ongoing patient safety initiatives. Healthcare professionals must believe decisions will be based on facts rather than emotion. SB 59 is meant to address this issue since alternative dispute resolution has the ability to effect substantial change in the system. The arbitration process proposed in SB 59 allows the parties to gauge how others view the case and assist them in arriving at a settlement agreement more quickly. 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.

SB 59 directs the head of the Ohio Department of Insurance (ODI) in collaboration with the Ohio Supreme Court, to establish a pilot program mandating arbitration for medical negligence claims in specific areas of the state. The intent of the pilot program is to determine the benefits of using arbitration in disputes.

The arbitration process is to be pre-dispute with a panel consisting of three members. A medical expert chosen by the plaintiff, one by the defendant and a chair person chosen by the two experts who must have expertise as an arbitrator.

The panel shall rule only on liability and not consider the issue of damages. This bifurcated process is fairly common in our court system. If either party rejects the arbitration panel’s decision, they may proceed to a jury trial and be responsible for any reasonable attorney fees and court costs if they do not prevail in court. 

In addition, this legislation includes a provision that to the extent permitted by the Rules of Evidence, admissions made to the panel and the final evaluation made by the panel shall be admissible in any subsequent court proceeding.

Other states such as Florida, North Carolina and Pennsylvania are starting to take notice of the arbitration legislation under review in Ohio and have developed their own pieces of alternative dispute resolution legislation for consideration.

By structuring a required arbitration process that focuses on liability only – as outlined in SB 59, meritorious cases of any size are likely to be resolved and frivolous claims are less likely to be pursued. SB 59 is legislation designed to preserve the rights of litigants, promote a more hospitable medical malpractice environment, foster patient safety initiatives and reduce healthcare expenditures.

Even lawyers favor arbitration. Studies conducted by the American Arbitration Association and the American Bar Association 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.

Support for SB 59 growing - in addition to strong support from the AMCNO, SB 59 has garnered additional support from the Ohio Hospital Association, the Ohio Podiatric Medical Association, the Ohio Chapter of the American College of Obstetricians and Gynecologists, the Ohio Osteopathic Association and the Ohio Orthopaedic Society. These organizations, the physicians of Northeastern Ohio, the citizens of Ohio and the civil justice system need relief, and this legislation would provide a process that could assist in bringing medical negligence cases to a quicker resolution in a more cost-effective manner. 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 to present my comments today and I would be happy to respond to any questions.