Medical Liability Reform Unlikely to Happen This Legislative Session

Sen. Alan Bates (D-Medford) says he doesn’t want to do anything during the February special session that would stop the evolution of coordinated care organizations

February 2, 2012 -- Despite pressure by Republicans to include tort reform in legislation that will transform Oregon’s healthcare system during the February legislative session under way, that issue will have to wait until 2013, predicted Sen. Alan Bates (D-Medford.

“If we put any tort reform out in February, I’m a little fearful that we’ll do something we shouldn’t,” Bates told an earlier gathering sponsored by FamilyCare. “I want to get the best tort reform we can, that’s carefully thought through, and make doctors and nurses more comfortable and do what’s right for a patient and not try to cover themselves.”

Such a complex issue can’t be vetted during a short four-week legislative session, he added. “And I don’t want tort reform to stop the evolution of coordinated care organizations going forward. In 2013 we have to get something out; it has to happen in 2013. Now we have a governor that if we get something to his desk that most parties agree on and it’s good policy, he’ll sign it. We haven’t had that in the past eight years. It’s been a huge change since Kitzhaber has been governor.”

Legislators are expected to approve an implementation plan this month that will lead to the creation of coordinated care organizations that will integrate physical, mental and dental care and lower costs by reducing hospital admissions and focusing on prevention. Initially these organizations will begin enrolling Oregon Health Plan members in July, and eventually encompass state employees, public school teachers and, potentially, counties, cities and the business community.

Bates, meanwhile, was reacting to a medical liability study report commissioned by the Oregon Health Authority, which estimated the costs of defensive medicine in Oregon and the prevalence and costs associated with overutilization and unnecessary care.

That report showed that approximately $650 million in healthcare spending, representing 2.6 percent of total spending, was attributable to defensive medicine. And, just under half of those dollars -- $310 million – came from public programs – Medicare, CHIP and Medicaid – while the direct impact on Oregon’s budget was $31 million.

If Oregon reformed its medical liability system and placed a limit on non-economic damages, it could not recapture the entire $31 million, according to Katherine Baicker, PhD from Harvard School of Public Health, who conducted the study along with Bill Wright, PhD, from the Center for Outcomes Research & Education at Providence Health & Services.

“The costs of defensive medicine should not be seen as entirely recapturable,” according to the report presented to the Oregon Health Policy Board. “Not all unnecessary care can be attributed to the malpractice environment, and no known malpractice reform scenario would reduce defensive medicine to zero.”

Such reforms could, however, reduce total healthcare costs by $345 million in Oregon, but the majority of those savings would occur under federal or private expenditures and the direct savings to Oregon’s budget would only be $20 million, the researchers estimated.

They also conducted a survey of 2,600 active Oregon physicians, asking them how many procedures they ordered for medically unnecessary care, and found that the overwhelming majority of such costs – 74 percent, representing $552.7 million – were due to unnecessary care in hospitals.

“Hospital care is where the money is,” Baicker told the Policy Board. Specialist referrals accounted for $27.3 million (17.2 percent), laboratory tests $24.5 million (13.9 percent) and imaging $141 million (16.2 percent).

Calling this a very complex issue, Dr. Joe Robertson, president of Oregon Health & Science University, said it goes beyond the dollars that could be saved. “Even if we make small changes we’re looking at transformation which is an amalgamation of small multiple changes. There’s not one place in transformation where we can go to get the money. We shouldn’t do this because it only represents 2 percent. We need all the 2 percent we can.”

Liability reform also impacts the ability to bring new physicians to Oregon, he said. “The feedback we’re getting from the resident directors is that Oregon is a red dot, and residents are not being counseled to practice in Oregon because we have historically low compensation than most states and our malpractice environment isn’t favorable. These facts are being used to discourage residents.”

Felisa Hagins, political director of SEIU Local 49, questioned whether physicians ordered a lot of unnecessary medical tests as a precaution and said she doubted that would change with tort reform.

“Because there are not a lot of claims in Oregon, we cannot really quantify defensive medicine in a way that we can put a nail on the head,” she added.

Reforms Should Consider Malpractice Insurance Itself

“I’ve also heard,” Hagins said, “that malpractice insurance itself is the problem, and we don’t have a proposal to deal with the sideboards of insurance itself such as rate review, how money is transferred, how medical malpractice is sold in the state. I feel like we have to address that in some way,” perhaps, she added, similar to the way insurers are required to undergo rate review by the Insurance Division when filing rate hikes for individual and small businesses.

“If we have reform in medical liability, it might impact how the insurance industry establishes premiums for physicians,” said Carlos Crespo, DrPH, professor and director of the School of Community Health at Portland State University, who believes any savings should be passed along to physicians and consumers. “If someone benefits from the savings it should be our system and that money shouldn’t stay with the insurance industry.”

Hospital Association Reacts to Findings

Responding to the report, Andy Van Pelt, director of communications at the Oregon Association of Hospitals and Health Systems, provided the following statement:

“In the report, of the areas listed, hospital services are the least frequently utilized, at 8 percent, and the associated costs with those services are high. This is due to how business is currently conducted within our healthcare delivery setting.  Hospital admissions/orders occur at the request of a patient’s physician; hospitals provide the facilities, equipment and services that enable physicians and other providers to treat patients. 

“One critical fact absent from the report is that Oregon hospitals are among the most efficient in terms of inpatient length of stay when compared to other states.  Oregon hospital’s length of stay is the third-lowest in the nation.

 “We support new payment and delivery models being implemented under state and federal health care reform, including coordinated care organizations, bundled payment models and value-based purchasing. Adoption of new paradigms such as these are likely to improve efficiency and quality as well as reduce costs.”


To read previous articles on tort reform that have appeared in The Lund Report, click here.

To read the medical liability study presented to the Oregon Health Policy Board, click here.

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I notice that there is no discussion at all about reducing medical errors, which is far and away the largest cost driver in the equation. Reducing the cost of medical malpractice liability will simply make it cheaper to practice poor quality medicine, and shift the real costs that result from these injuries on to tax payers and away from medical liability insurers, and self-insured entities.