“The Only Thing We Have To Fear Is Fear Itself”: How Physicians’ Exaggerated Conception Of Medical Malpractice Liability Has Become The Real Problem

Myungho Paik, Bernard Black, & David A. Hyman, The Receding Tide of Medical Malpractice Litigation:  Part 1—National Trends, 10 J. Emp. Legal Stud. 612 (2013) available at SSRN.

Physicians continue to talk about the “Medical Liability Crisis” and physician-funded advocacy groups continue to push for additional and further-reaching liability-limiting reforms.  Yet although the prize advocates seek (tort reform!) has remained the same for decades, the justification for why tort reform is needed has undergone a subtle metamorphosis.  For a while, reformers argued that liability limits were needed because the problem of medical injury was grossly exaggerated—medical injury was a problem mostly ginned up by plaintiffs.  But then, the Institute of Medicine’s (IOM’s) groundbreaking 1999 study, To Err is Human, came along.  Estimating that between 44,000 and 98,000 Americans die in hospitals each year as a result of preventable medical errors, the IOM’s study took the wind out of that argument’s sails.  Undaunted, reformers changed their tune.  Tort reform was needed, reformers insisted, because, even if medical injury is all too real, medical liability is random, as decisions are untethered to the underlying merits of claims.  In 2006, however, that argument encountered a major setback.  David Studdert and co-authors published a groundbreaking study of 1,452 medical malpractice claims which convincingly debunked the litigation lottery story.  Some claims that don’t involve errors are indeed filed, they found.  But such claims do not typically result in payment.  Undeterred, another reason to resist medical liability has taken center stage:  the problem of defensive medicine.

Defensive medicine refers to instances when physicians, concerned about liability, test or treat despite the lack of medical necessity, as well as times physicians decline to provide particular services or accept certain individuals as patients for fear of liability.  A prototypical example might be a doctor who orders a CT scan, not because he believes it’s medically warranted but because he believes it’s prudent in light of the liability risk.  This behavior, some now say, imposes medical liability’s biggest cost.  Though numbers are hard to pin down (as it’s hard to discern whether that CT scan was really ordered to protect the physician from liability, as opposed to helping the patient or, perhaps, even padding the physician’s paycheck), defensive medicine appears to be widespread.  One recent survey found that 93% of physicians in high-risk specialties reported providing care that they thought was unnecessary.  And, respected academics suggest its price tag is high—roughly $45.6 billion per year.  Pointing to these statistics, some reason:  (1) defensive medicine is a huge problem, and (2) in order to rein in defensive medicine, we need to dramatically reduce medical malpractice liability—or, perhaps, dismantle the present system of compensation for medical injury.  That argument, in fact, appears to be gaining ground.

What’s puzzling, though, is that defensive medicine is caused mostly by fear—by physician’s fear of medical liability.  And, there are at least two ways to respond to another person’s fear of something.  One approach is to remove the menacing thing.  Another is to convince the person their fear is unfounded.  So, for example, when my son was four, he was terrified of lightning.  Confronted with his terror, I could choose to remove the lightning (perhaps by relocating to a sunnier clime) or I could convince him that lightning, while not without some danger, isn’t actually so threatening; his fear was totally overblown.  Not keen to move, I adopted the latter approach.  So, too, with medical malpractice liability.  Confronted with physician’s fear of medical malpractice (which via defensive medicine is causing demonstrable harm), we can, as some suggest, dismantle the liability system.  Alternatively, we can empirically assess and then convey to physicians the legitimate liability risk.

Of course, the latter tack will only prove fruitful if doctors’ current estimate of the risk is (like my son’s view of lightning) grossly exaggerated.  Evidence suggests it is.  Doctors substantially overestimate their risk of being sued.  Various studies suggest that, of patients who are negligently harmed, a very small minority—on the order of 2% to 3%—ever attempt to claim compensation for their medical injuries.  Yet, in 1989, researchers surveyed 739 New York physicians who estimated that 60% of negligent injuries led to lawsuits, while 45% of all iatrogenic injuries led to lawsuits, regardless of whether or not the injury was negligently inflicted.  Doctors, in other words, estimated the threat of liability to be some 20 times what it actually is.  Doctors’ views concerning the system’s accuracy are similarly out of whack.  The Studdert study (and a number of other studies, too) show that the medical liability system does quite a good job of sorting between meritorious and non-meritorious claims, and that, when errors are made, they tend to be made in favor of physicians (i.e., payment of claims not involving errors occurs less frequently than the converse form of inaccuracy).  Yet, in a 2002 poll, a full 83% of surveyed physicians indicated that, if sued, the current system of justice could not be trusted to “achieve a reasonable result.”  Given physicians’ apparent sense that lawsuits lurk everywhere and their concomitant distrust of the system once sued, it’s no wonder defensive medicine has come to the fore.  Indeed, a recent study puts the pieces together, suggesting that physicians who are most worried about malpractice liability are precisely the ones most apt to engage in costly “defensive” practices.  The same study looked to physicians’ actual liability risk (as measured by objective, state-level determinants, such as claims costs and tort reforms) and found these indicators counted for little:  “[I]t is perceived rather than actual risk, the authors found, “that determines how physicians behave.”

This all suggests that, if we want to curtail defensive medicine, there’s much to be gained by targeting perceptions—by assessing and conveying to physicians their legitimate liability risk.  This insight brings us to Myungho Paik, Bernard Black, and David Hyman’s recent, and important, work.  Relying on data from the National Practitioner Data Bank (NPDB), Paik and co-authors provide the first academic assessment of national trends in medical malpractice liability.  They show that, despite persistent and often panicked claims that the medical malpractice system is in “crisis,” in actuality, paid claims per physician dropped by 57% nationally from 1992 through 2012, while lawsuit filings (whether or not paid) are also in sharp decline.  Using data from Florida, Illinois, and Texas, they consider, and mostly refute, the possibility that the observed decline is explained by hospitals stepping in to pay settlements in order to shield practitioners from having to report payments to the NPDB.  By breaking states down into whether they have noneconomic damage caps, they show that, though tort reform is surely part of the story, it’s not the whole story, as there’s been a decline in per-capita physician payments even in non-cap states.  Finally, they consider, and cast doubt on, the possibility that “improvements in health-care quality” explain the observed drop—though, of course, they can’t wholly dismiss that possibility.  Nor, for that matter, can they disprove that an uptick in defensive medicine itself helps to explain identified trends.

Still, while the reasons for the precipitous decline aren’t entirely clear, the decline’s very existence adds an important coda to the true medical malpractice liability story.  We now know that few negligently-injured patients seek compensation, and when patients do seek compensation, payments generally track the quality of care.  Now, thanks to Paik, Black, and Hyman, we also know that, rather than facing a litigation “explosion,” physicians’ liability risk has (for whatever reason) dropped considerably over the past two decades.  Some contend that defensive medicine is the number one cause of “unaffordable health care in America.”  Stoked by fear, defensive medicine might be curtailed, at least in part, by ensuring doctors have a greater understanding of the real—rather than the imagined or grossly exaggerated—tort liability system.  The important work of empirical legal scholars over the past two decades ought to be deployed toward that end.