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It all begins with a political movement for national health in the 1970s. There are no “health systems,” just doctors and hospitals. Fee-for-service is determined by conventional principles of cost accounting, in which payment for services compensates for overhead and leaves enough profit to remain in practice and enjoy the American dream.
There are health insurance companies. The purpose of health insurance is to protect patients against medical expenses, not to manage care.
Doctors are reimbursed the UCR (usual, customary, and reasonable), which is determined by competition in the free marketplace.
Indeed, there is medical malpractice, and there are medical malpractice insurance companies, but, relative to today, the risk of a lawsuit is low, and so is the premium.
People have more realistic expectations about results, which are sometimes unpreventable. Patients trust doctors, and doctors trust patients. In addition, there is law and order, fewer lawyers, due process, and a well-functioning and respected tort system.
Most importantly, there is no medical liability litigation industrial complex (MLLIC). However, it is in its infancy.
As medical technologies develop, expectations about outcomes increase. Greater expectations lead to less tolerance for adverse outcomes. Trust takes a tumble. There is simply more incentive to sue a doctor over a complication, which was formerly understood as nothing more than a random, unpreventable error of nature.
As always, preponderance of evidence is the validating legal standard used by lawyers and by the medical experts they hire when they represent a malpractice case. Preponderance of evidence is 50 percent probability plus some ill-defined scintilla. This corresponds to mantras of “more likely than not” and “to a reasonable degree of medical probability.”
Preponderance of evidence is not a medical standard. Nevertheless, over time, medical experts treat it as if it is and use it as the foundation for their opinions, despite being physicians.
Jury decisions are predicated on preponderance of evidence. These mantras are the only things jurors hear in court. They become conditioned.
Jurors are instructed by the judge that scintilla could be anything, even 1 percent. They never make the connection that, under this circumstance, their decision has a 51 percent chance of being right and a 49 percent chance of being wrong. A judge has enormous influence over jurors, and now their ability to be objective and to differentiate a medical error caused by a departure from a standard of care from an error of nature caused by a random occurrence is impaired, and the impairment is sanctioned by a judge.
Formerly, jurors trusted that doctors used a medical standard, with a higher bar, when it came to making decisions about the safest and most effective treatment for any patient.
In fact, they are right. It is the scientific method. It has a level of confidence of 95 percent, meaning there is a 95 percent chance of getting it right and a 5 percent chance of getting it wrong. Nothing prohibits a juror from thinking likewise. Doing so requires a scintilla of 45 percent, which corresponds to 95 percent confidence and aligns preponderance of evidence with the scientific method.
Unfortunately, jurors never make this connection. Jury verdicts become more sensational, and media coverage more notorious. The cost of claims increases. So do liability insurance premiums. To survive in a free marketplace, doctors increase fees. UCRs increase. So does the cost of health care.
This threatens the health insurance industry. In response, it experiments with “managed competition” in the belief that this will control costs. Managed competition is adopted as health policy, at first by health insurers and then by everyone else. It alters the landscape of the health care system to this very day.
Insurance companies no longer exist. They are “health plans,” perhaps under the same name. Standards of care no longer exist. They are “resource-based practice guidelines.” Guidelines, not standards of care, determine “quality.” Fee-for-service no longer exists. It is “the allowable charge.” The UCR no longer exists. It is the “assignment,” which is typically lower than the “allowable charge.” The invoice no longer exists. It is the “explanation of benefits,” and any difference between the allowable charge and the assignment is an “adjustment” made by the doctor. “Balanced billing” no longer exists. Patients are responsible for a copay and a deductible.
There are out-of-network and in-network providers (preferred or non-preferred). A preferred provider is reimbursed the “allowable charge” and makes no adjustment. Hence, the advantage of a preferred provider. If an overhead, such as a malpractice premium, increases, the in-network provider cannot pass it on.
Naturally, the cost of health care decreases; however, only because of all the above. It is as though there are no other cost drivers. The doctor is the only cost driver.
To make matters worse, economies of scale favor the formation of integrated health systems called accountable care organizations (ACOs), which are partnerships of medical practices, hospitals, other health care facilities, and academic institutions. ACOs recruit doctors with the promise of a guaranteed income and protection from overhead, including liability. In return, doctors agree to practice in accordance with the resource-based practice guidelines.
Resource-based practice guidelines are themselves departures from applicable standards of care. A departure from the standard of care is the legal criterion for medical malpractice. Lawsuits increase. Premiums increase. Unaffiliated doctors are forced into ACOs and adhere to practice guidelines.
A vicious cycle is in motion. This is the “perfect storm,” the confluence of dysfunctions in the tort system, the health care marketplace, the medical profession, and politics. Politics brings tort reforms—more than 100. Tort reforms lend to the false impression that the problem receives attention. This is the new normal.
This is the medical liability litigation industrial complex of which I speak. It is the root cause of great expectations by patients, low expectations by providers, and it earns at least $39 billion per year.
Now, do I have your attention? If I have not, November 5th should have. There is a new world coming with new opportunities. Are you prepared?
Howard Smith is an obstetrics-gynecology physician.
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