Healthcare’s Vulture Capitalists

January 30, 2012

Although most malpractice claims are meritless, lawsuits are apparently becoming more common. And, suing doctors is getting easier to finance.

It’s been quiet lately on the tort-reform front. So quiet, in fact, that one could be forgiven for thinking we had this problem licked.

We don’t.

Although most malpractice claims are meritless - 64 percent are dropped or dismissed and only one in 100 end in a jury award for the plaintiff, according to the AMA - lawsuits are apparently becoming more common, not less. Rare settlements and even rarer jury verdicts in favor of plaintiffs can at times be so large that lawyers can’t resist rolling the dice.

Suing doctors is getting easier to finance, too. Possibly the most disgraceful and little-noticed development of the last few years is the emergence of hedge funds that actually invest in large malpractice lawsuits, taking a big chunk of any award out of the patient’s pocket. According to Forbes, such investors injected $1 billion into lawsuits, including med-mal suits, in 2010.

Consequently, by the time they reach the age of 55, 61 percent of all physicians have been sued. In some specialties, virtually all physicians are sued sooner or later. Most OB/GYNs are sued at least once by the time they turn 40. The speculators who fund the lawsuits “don’t care” how it affects healthcare, or even that their chance of getting a payout in any given case is low, says Forbes: “They see it as playing the odds, just as if they were in Las Vegas. They spread their bets across many cases and invest on a big payout, since some cases result in huge jury awards and a big return on their investment.” For physicians, fending off even a frivolous suit is expensive, and there are no financiers lining up to help. In 2010, the average cost of defending a doctor against a malpractice lawsuit was $47,158, an increase of 63 percent since 2001. In some specialties, like neurosurgery, the defense costs are twice that, and twice again for cases that go to trial.

One could argue that the many drawbacks of such a system are mitigated by the virtuous effect of holding physicians accountable for incompetent care. Doctors are human; they make mistakes. I’ve never met a doctor who thinks patients genuinely harmed by such an error, even their own, should go uncompensated. But all this lawsuit abuse means fewer doctors performing more needless tests and procedures for a lot more money. That makes the system’s vultures fatter and reduces everyone’s access to care. But it doesn’t make patients safer. In fact, most instances of actual malpractice are never even pursued by patients.

The tragedy is that all of this is eminently solvable in a way that’s fair to doctors while protecting and compensating truly wronged patients, if only the trial lawyer-lobby didn’t exercise such influence over lawmakers. Reasonable limits on non-economic damages are a start, but even better would be state health courts with specially trained judges and panels of experts who could review the merits of each case and decide whether a case is worthy enough to proceed; new rules on the admissibility of expert testimony; and liability protection for physicians participating in evidence-based medicine programs. Judges, meanwhile, should be able to order plaintiffs’ attorneys to pay for the defense costs of claims deemed meritless.

While we wait (and wait) for policy solutions, you need to know what to do to reduce your liability risk, and how to handle yourself in the event that a claim is made against you. Since such a claim has become all but inevitable, I suggest you check out this month’s cover story now, before it happens, or before it happens again.

Bob Keaveney is the editorial director of Physicians Practice. How would you solve the medical liability crisis? Tell us about it at bob.keaveney@ubm.com. Unless you say otherwise, we'll assume that we're free to publish your comments in upcoming issues of Physicians Practice, in print and online.

This article originally appeared in the February 2012 issue of Physicians Practice.