Published 4/1/2010
Theodore J. Clarke, MD

HHS initiates liability demonstration projects

In September 2009, President Barack Obama issued a memorandum to Kathleen Sebelius, the Secretary of the Department of Health and Human Services that read, in part, as follows:

“We should explore medical liability reform as one way to improve the quality of care and patient-safety practices and to reduce defensive medicine….to begin funding projects that can test a variety of medical liability models and determine which reforms work….We must put patient safety first and work to reduce preventable injuries. We must foster better communication between doctors and their patients. We must ensure that patients are compensated in a fair and timely manner for medical injuries, while also reducing the incidence of frivolous lawsuits. And we must work to reduce liability premiums….”

It will be up to historians to decide whether practical politics or philosophic belief lead to this decree in the midst of the debate on healthcare reform. But the memorandum was followed by a directive to the Agency for Health, Research, and Quality (AHRQ) to oversee $25 million in grants for demonstration projects centering on patient safety and liability reform.

The program appears to be on a fast track for implementation. Grant proposals were due by Jan. 27, 2010, and the grants will be awarded in early 2010.

To put the grants in perspective, the current healthcare system is a $2.5 trillion industry. The estimates for covering the uninsured and underinsured in several of the bills considered by Congress ranged from $600 billion to $900 billion.

Last summer, the Congressional Budget Office issued a statement that enacting tort reform measures such as those in place in California and Texas would result in $54 billion in savings over 10 years. The $54 billion in savings is based on the direct cost to physicians and the indirect cost to patients in the form of defensive medicine. Other estimates put the impact of defensive medicine significantly higher; independent actuaries at Price Waterhouse Coopers estimated that as much as 10 percent of all healthcare costs are attributable to defensive medicine.

Still, the demonstration projects are an acknowledgement that the problem of defensive medicine exists and is a driver in healthcare costs.

Planning vs pilots
Two types of demonstration grants are available. Planning grants ($4 million total; maximum individual grant of $300,000) are designed to help states and health systems implement and evaluate evidence-based demonstrations. Funding is also available for pilot projects for states or systems ($21 million total; $3 million over 3 years is the maximum available per project). Discussions at the subcommittee level, however, suggested variable amounts for these awards.

According to Carolyn Clancy, MD, director of the AHRQ, the grants have the following four goals:

  • Patient safety
  • Improved doctor-patient communication
  • Fair and expedient compensation for patients
  • Lower liability premiums for doctors

Each project does not necessarily need to incorporate all these goals. For example, patient safety initiatives may look at the incidence of selected patient safety events, reduction of precipitating factors, corrective actions taken and the effectiveness of such actions, and the transparency used in patient safety events. Medical liability initiatives may look at strategies to expedite the claims process such as early disclosure and mediation programs, patient and physician satisfaction with such programs, or the savings and costs of such programs relative to the existing system. Projects focusing on doctor–patient communication must seemingly measure both sides of this dialog and the effectiveness in improving the delivery of care.

Keep an eye on the results
Many physicians are disappointed that the proposed health reform bills—despite their considerable size—paid scant attention to the need for liability reform. In fact, one version included a section called Medical Liability Alternatives (Sec.2531) buried among the amendments to the House Bill, that specifically stated that any alternative in liability law “does not limit attorneys fees or impose caps on damages.”

It is important to note that the AHRQ demonstration projects are outside of the proposals for healthcare reform. Although $25 million is a small amount in the context of the healthcare delivery system, these grants acknowledge the need to look at different approaches to resolving medical errors that seemingly are not addressed in the current tort environment. It is an opportunity to advocate for patients, physicians, and a better way. It will be worth following the progress and the results of these awards.

Theodore J. Clarke, MD, is chairman and chief executive officer of the COPIC Companies and a member of the AAOS Medical Liability Committee. He can be reached at tclarke@copic.com

Editor’s Note: Articles labeled Orthopaedic Risk Manager are presented by the Medical Liability Committee under the direction of contributing editor S. Jay Jayasankar, MD.

Articles are provided for general information and are not legal advice; for legal advice, consult a qualified professional.

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