The network of insurers has fostered loss prevention since the early days of Lloyd's, when underwriters would commission privateers to control attacks on insured shipping. More recently, incentives for policyholders to control losses and improve safety have taken various forms, from formal "loss control" services to retention methods such as large deductible, experience rating and retrospective rating plans.
In medical malpractice insurance, reducing insured losses has the added benefit of reducing adverse medical outcomes, a result benefiting not only health care providers who are policyholders, but also patients, their families and employers. Systems and activities that lead to increased safety in patient treatment have a significant societal benefit.
An April 4, 2005 symposium sponsored by the Insurance Law Center at the University of Connecticut School of Law gathered academics, practitioners and insurer representatives to examine the influences of the med mal insurance system on patient safety and medical care quality.
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Prof. Tom Baker, Director of the Insurance Law Center, introduced two panels of speakers with the observation that the recent "insurance crisis" in med mal is merely the latest in a recurring cycle. As in the past, calls for legislative reform of tort laws may die out as new entrants offer additional insurance capacity and reinsurance prices moderate, relieving the crisis before legislatures can find consensus.
The first panel addressed the role of "evidence based medicine" and the principle of "pay for performance" in improving the quality of medical care and reducing medical injuries (and resulting legal liability). "Pay for Performance," or "P4P" is the approach by which better procedures and clinical outcomes are linked to better pay for health care providers. Panelists discussed challenges and potential payoffs possible in the implementation of "P4P".
Challenges include that of measuring quality in medical care. Validating "evidence based standards" of care requires a substantial data base. Some medical societies and benefit consultants have developed standards, some open and some proprietary. Offering incentives to medical plan members to choose more efficient health care providers may lead to differential payments whereby better performing providers may receive a significantly higher rate of payment, with poorer performing providers getting lower rates.
Differential payments based on differential evaluations requires acceptance of the proposition that not all providers are equal in their quality of medical care delivery. While this proposition seems intuitively sound, it is one that concerns health care providers if it is made part of the payment process. Panelists cited an A.M.A. ethical standard requiring that care provider compensation not be based on outcome, and less formal A.M.A. assertions that all quality-based differentials be "additive and voluntary." In other words, one can pay more for better quality, as long as one does not pay less for lesser quality.
Panelists acknowledged the practical challenges of measuring quality in health care delivery. They also saw the appeal of a hypothesis that if one can build an effective and appropriate system of paying for quality results, the health care industry will transform into structures that deliver the results for which incentives are provided. The fragmentation of the provider community, particularly the physician community, points to process measurements rather than outcome measurements as a practical proxy for "quality," in the views of several panelists.
Prof. William Sage (M.D. & J.D.) of Columbia University asserted that few organizations have thought about the "three legged stool" of the interaction of liability, quality of care and the cost of care, each of the three factors squeezing the others toward some equilibrium. Yet medical malpractice liability issues tend to be debated in legislatures less often by health care experts than by tort lawyers, and may be captured as a proxies for movements for generalized tort reform.
Panelists also looked at the value of focusing less on avoiding or winning lawsuits and more on improving outcomes and patient satisfaction. One program with promising results was that of the Colorado Physicians Insurance Company ("COPIC"), which developed a program for reducing malpractice claims by offering advance payments to patients impacted by unfavorable outcomes, without requiring a release. One audience member compared that approach to one successfully used for years by property insurers. Improved communication and human relationships between providers and patients was recognized by panelists as one of the major factors in reducing the incidence of malpractice claims and litigation, given the same incidence of adverse outcomes.
Leslie Norwalk, J.D., Deputy Administrator of the U.S. Centers for Medicare and Medicaid Services ("CMS "), reminded participants that CMS programs administer some $300 billion in public health care money and cover some 25% of the population of the U.S. One way CMS works to influence medical care quality is by offering comparisons of providers through its publicly available "COMPARE" websites. Based on both process and outcome comparisons, the websites offer differential statistics on a nursing homes, dialysis centers, hospitals and other provider types. What CMS has not yet figured out how best to do is to take such differential measurements and turn them into differential payments. Developing such a process requires public comment and legislative action; in preparation for that, the CMS is officially soliciting input on assembling a payment model that would appropriately assign accountability and recognition.
Prof. Baker moderated a second panel that opened by recognizing a framework based on a theory that insurance can both distribute risk and also effect reduction in loss. In its role of reducing loss, insurance is thus in competition with providers of “unbundled” risk management and with the tort system. As described by Baker, insurers may have advantages over those other forces, including better information, greater objectivity and the incentives that come from playing with their own money.
Another panelist, Prof. Charles Silver, J.D. of the Univ. of Texas, called himself lucky to be at the forefront of the movement toward Pay for Performance in health care. He noted an advantage offered by insurers: while hospitals could improve outcomes by investing in various improvements, they may be unlikely to do so if the beneficiaries of the investments are physicians instead of the hospital. Those same investments are too large to be affordable by individual physician practices, and may require data aggregation only possible for insurers. He suggested that patient safety may be a losing proposition for providers, leading to an endemic lack of incentives for quality and prevention. A med mal insurer may be the only institution rationally motivated to make those investments and thereby reduce the exposures of its insureds. He noted an upcoming paper (with Prof. Hyman) to be published in the Cornell Law Review on these issues.
Panelists discussed the absence of experience rating in the med mal insurance industry, and explained it as a consequence of the shortage of non-claim data on which insurers might benchmark providers. Another challenge noted was the opposition of some medical mutuals that were said to find experience rating to be unfair, on the theory that claim frequency is not correlatable with quality of care. Panelists did not challenge the proposition that experience rating needs good non-claim data and large quantities of it, a commodity in short supply in the med mal field. Prof. Silver suggested that the liability system is working better than some may think, with efforts to improve health care quality driven by incentives from government and liability carriers.
The symposium was jointly sponsored by the University of Connecticut School of Law Insurance Law Center, the Connecticut Insurance Law Journal, the University of Connecticut Health Center and the Connecticut AHEC Program.
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