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Medical Malpractice Insurance

An Autopsy on a Medical Decision

Introduction

The United States spends 16% of its GDP on healthcare, and that figure is set to reach 19.6% of GDP by 2016. Already the US is spending 4.3 times as much on healthcare as on national defence. The average premium for health insurance for a family is greater than the minimum wage. The cost of Medicare and Medicaid to the budgets of the US government is set to dramatically increase. Health costs have been rising significantly faster than the overall economy or personal incomes for more than 40 years, a trend that cannot continue forever. One estimate is that it could use up 36% of US GDP by 2050.

US newspaper reports state that by 2030, spending for Medicare, Medicaid, and Social Security alone will be almost 60 percent of the entire US federal budget. That will leave future generations with impossible choices — staggering tax increases, immense deficits, or deep cuts in every category of spending. Long-term solutions to control costs and keep these programs running are urgently required.

Rising medical malpractice costs are a significant component of total health sector costs. A Department of Health and Human Services (HHS) report suggests that healthcare costs could be reduced by 5% to 9% if unreasonable awards for non-economic damages were limited. It estimates this would save $60 billion to $108 billion in healthcare costs each year, thus lowering the cost of health insurance and allowing an additional 2.4 to 4.3 million Americans to obtain insurance.

The growing scale of medical malpractice costs is becoming an economic problem for society. Of more immediate concern however, the scale of these costs are beginning to threaten the availability of some medical services in particular areas, while the rising cost of medical malpractice insurance is inflicting real pain on doctors.

Much of the focus of immediate efforts to reduce the impact of the rising cost of medical malpractice insurance for doctors is focused on capping awards for pain and suffering. In this review the problem is examined from a wider perspective. Following through from a decision making analysis, a number of options for how the medical profession can seek to ameliorate the malpractice situation are identified.


The Problem

The classical decision process is characterised by a rational fact founded process of analysis, synthesis and action. What is important in the process is that each decision is based on facts and information and that the process itself works in a systematic way.

Ideas of classical decision making take it that sufficient time is available to research the problem and identify a wide range of alternative solutions for the problem being addressed. It also takes it that the information available for decision making will reduce if not eliminate areas of uncertainty, thus reducing the input of personal and professional judgement in the decision making process.

The reality of medical decision making is that limitations of time and resources have some impact on the process. In the real world, the time factor is a primary determinant. A decision must be made within a finite time frame while emergency situations require immediate decisions. Also many decisions have to be based, to some degree, on incomplete knowledge either because information is not available or it would cost too much in time and money to get it. To cope with the real life complexity of many problem situations, the exercise of personal and professional judgement is required. The exercise of personal and professional judgement is important and unavoidable part of medical decision making. It is a fact of life of medical decision making.

The routine use of personal professional judgement in decision making can mean a degree of departure from the rational decision process. Cognitive psychology, in its exploration of how irrational decisions are sometimes made, demonstrates that the human factor in decision making can introduce several sources of error and bias. We all like to believe that we make decisions rationally and objectively. But the fact is, we all carry biases, and those biases influence the choices we make.

Typically people develop and then use unconscious routines, systematic rules of thumb or shortcuts to cope with the complexity and uncertainty inherent in difficult decisions. These routines, known as heuristics, serve us well in most situations. Yet, like most heuristics, they are not foolproof. Errors in the exercise of such judgement can occur.

Allegations of errors of judgement in medical diagnosis and treatment decisions form a significant part of medical malpractice situations.

The medical malpractice legal process, like the autopsy process, and like the medical case diagnostic and treatment process share many common decision process characteristics e.g. there are protocols and standard procedures, there may be areas of uncertainty and gaps in the information available, personal judgement may be a significant part of the decision actually taken. There are also significant differences between the processes; the most crucial difference being that in the case of medical malpractice legal process, the focus of the case is the in-depth analysis of an earlier medical case diagnostic and treatment process. It is concerned with past events and what happened and in the case of medical malpractice cases is effectively also concerned with what should have happened. In summary it is a decision process to reach a conclusive understanding of an earlier decision.

With the legal process focusing on an analysis of a past event, there is one particular bias that the legal system must endlessly struggle with - the hindsight bias. Because courts evaluate events after the fact, they are vulnerable to the effects of the hindsight bias. Among the cognitive illusions of judgment that psychologists have studied, the hindsight bias is one of the most well documented and well-understood. The legal system and particularly most judges are well aware of the pitfalls and fallibility of human judgements and they take steps to avoid such errors. However, no known decision-making strategy enables people to make decisions in hindsight that resemble decisions made in foresight. The hindsight bias is a threat to accurate liability determinations as people will generally overestimate the predictability of past events.

Medical practitioners must seek to protect themselves against the consequential damages where of errors of judgement are alleged. This paper also identifies several areas of potential remedy for doctors as they seek to minimise the impact of consequential damages claims.

The traditional solution for the management of personal and corporate risk exposure is insurance. Another strategy is a formal program of risk identification and risk management. A multidisciplinary teamwork approach to decisions, particularly the more important and complex decisions is a key technique of risk exposure management.

The medical profession could consider the pharmacy industry precedent of running television and radio ad campaigns with the twin objectives of educating the public to medical and surgical procedures available, and also educating them to the risks and side effects inherent in medical procedures, particularly in the areas of greatest concern from the need to minimise medical malpractice cases.

The medical profession could also take the precedent established by the medical devices sector and demand a US Federal regulatory approval procedure for the medical and surgical procedures that give rise to the more expensive malpractice liability cases.

The most well developed argument relates to capping the damages for pain and suffering. Other possibilities for legal reform would include the adoption of new procedural, evidentiary, and even substantive rules to strengthen the avoidance of the negative effects of cognitive illusions on legal decision making.

In a more significant area of legal reform, medical practitioners could consider cooperation with the managers of unit trust funds to achieve benefit of the precedent that business managers cannot be sued in tort for errors of judgement in decision making.

A more radical reform option would be change the legal procedure from an adversarial trial proceeding and towards an investigating judicial procedure with a modified application of the rules of evidence, and strong judicial management.


The Classical Decision Process

A simple outline of a decision process for a problem situation can be described as; problem identification and understanding identification of some options for a possible solution selection and implementation of the solution that is judged best in all the circumstances feedback and learning.

This process of decision making is characterised by a rational fact founded process of analysis, synthesis and action. What is important in the process is that each decision is based on facts and information and that the process itself works in a systematic way.

Problem Identification
How the problem at hand is defined is a vital part of the decision process. The recognition of what is the real nature of the problem can sometimes require much questioning and thought as to root causes. It is necessary to peel away the superficial and sometimes misleading symptoms to get to the core of the problem. A particular danger in the decision process is not the wrong definition of the problem but the superficially plausible and incomplete definition.

Develop Options for a Solution and Select One
This stage of the process presupposes a clear definition of the problem. But the facts seldom point to just one solution. At one end of the scale the decision maker can see all data as pointing to one conclusion, while at the other end of the scale the data may suggest many solutions, varying in effectiveness and practicality.

This is the creative phase of problem solving. The important thing is to keep an open mind, let imagination roam free over the facts. Examination of alternative solutions must be comprehensive enough to be reasonably certain of identifying all the best options.

After all the analysis and synthesis, inevitably there comes a time to make a decision. The choice lies with expected results rather than actions to be taken.

Feedback and Learning
The effectiveness of a decision may diminish with time so the decision must be maintained to prevent degeneration. A prompt revision of a decision is necessary as feedback indicates a devitalisation of the original decision.

Every decision is a basis for personal and corporate learning, Every decision implemented represents a potential contribution to the accumulated body of knowledge.

Some Process Characteristics
A formal, systematic process of decision making is part of a scientific approach to making good decisions in a consistent way over time and place. Such a process demonstrates that a thorough and comprehensive analysis was undertaken, the facts properly assessed, documented and communicated. The importance of a formal process grows the larger the organisation and the more important the impact of the decision. Regardless of the actual decision process actually followed, the decision maker needs information inputs that enable him to identify and evaluate the alternative courses of action available when making each decision.

The process approach is based on view that a body of knowledge exists, and which when correctly applied, can bring ensure better decisions. It provides a teachable approach and more importantly it provides a demonstration of method and outcome where decisions are subject to public evaluation, or scrutiny by external parties.


The Medical Decision Process

The classical approach to decision making gives the picture of a relatively simple linear sequence of stages together with a rational and systematic process of thinking followed by the implementation action. In practice, the process is more complex and variable. It is a human process. The cycles of phases are more complex than a simple sequence suggests. Each phase in a particular decision is itself a complex decision making process with the possibility of much recycling back, and wheels within wheels. The classical decision process must adapt itself to the actual situation at hand.

In the real world, decision processes cover structured, semi-structured and unstructured situations. For some medical problems the situation can be repetitive, routine and well understood. Then the problem can be precisely stated and definitive protocols and standard operating procedures for handling the situation are available. To the extent that information is generally available and direct practical experience can be routinely included in a systematic decision process, then decisions can be routinely made. For other medical problems the situation can be more complex. These decisions involve more intangible and judgemental factors and risks. In the final analysis these elements of judgement are essential as they can have a major impact on the success of the decision.

In the real world, the time factor is a primary determinant in decision making. A decision must be made within a finite time frame; most decisions are usually made against a deadline. Emergency situations require immediate decisions based on experience and a general capacity for intelligent adaptive problem orientated action.

Many decisions have to be based, to some degree, on incomplete knowledge either because information is not available or it would cost too much in time and money to get it. It is important never to jump to conclusions before assembling the facts. On the other hand, if a decision maker works for perfection and awaits the completion of an exhaustive data gathering exercise before reaching a decision, then the only analysis is paralysis and the main response is insecurity.

There can be an erroneous assumption that more data will provide better decisions; this is not necessarily the case. Emphasis on facts approach must be seen in context.

In medical decision making, the doctrine of materiality is important. Sometimes there is an emphasis on facts and quantification as a way of demonstrating the perception of a rigorous examination of the problem. However, too much of an emphasis on data gathering can become an obstacle in decision making as it may bring unnecessary complexity.

To cope with the real life complexity of many problem situations, a structural hierarchy in decision making is generally established, whereby classes of decision are related to ascending management levels. To the extent that personal judgement is required, then factors like academic qualification, training, breadth and depth of experience in the subject area, and professional accreditation provide a sound basis for effective decision making. People with the required technical expertise and with effective personal functional competence are allowed to get on with the job.

The routine use of personal professional judgement in decision making can mean a degree of departure from the rational decision process. Typically people develop and then use unconscious routines, systematic rules of thumb or shortcuts to cope with the complexity and uncertainty inherent in difficult decisions. Psychologists have learned that human beings rely on mental shortcuts to make complex decisions. These routines, known as heuristics, serve us well in most situations. Some steps in the decision process may then be performed implicitly, even randomly rather than explicitly and systematically. Yet, like most heuristics, they are not foolproof. Errors in the exercise of such judgement can occur.

Cognitive psychology, in its exploration of how irrational decisions are sometimes made, demonstrates that the human factor in decision making can introduce several sources of error and bias. We all like to believe that we make decisions rationally and objectively. But the fact is, we all carry biases, and those biases influence the choices we make. At every stage of the decision-making process, misperceptions, biases, and other irrational anomalies in thinking can influence the choices made. While these anomalies in thinking can work in isolation from each other they can also work together to amplify each other, giving rise to serious distortion in rational decision making. Highly complex and important decisions are the most prone to distortion because they tend to involve the most assumptions, the most estimates, and the most inputs from the most people.

The way a problem is framed can profoundly influence the choices made. A framing trap occurs when the problem is misstated thus undermining the entire decision-making process.

There are anchoring errors where the first symptoms anchor the thinking process on an incorrect diagnosis of the problem. It gives disproportionate weight to the first information received. Initial impressions, estimates, or data anchor subsequent thoughts and judgments

Another type of judgement error can occur when a recent or dramatic experience is assumed to correspond to a new problem situation; the availability trap. Personal emotions can mean that personal feelings colour the thinking process; affective errors where emotions can trump rationality.

A risk with specialisation in the medical profession and with professional expertise in decision making is a bias to seek out information that supports an existing instinct or point of view while avoiding information that contradicts it. This confirming-evidence trap leads to seeking out information supporting a personal preference and to discount opposing information.

People frequently must determine whether an event is the product of a particular process or is a member of a certain category of events. When the event is similar to the category, people judge the likelihood that the event is a member of that category as high e.g. a defendant's nervous demeanour evinces a guilty conscience, and when the event is not similar to the category, people judge the likelihood that the event is a member of that category as low. Psychologists refer to this decision-making strategy as the representativeness heuristic. It can be a wonderfully accurate rule of thumb, but problems can arise because people tend to rely on the representativeness heuristic to the exclusion of other information relevant to categorical judgments.

Medical treatment decisions generally involve a treatment plan carried out over a period of time. On occasion it may happen that the expected patient progress is not satisfactory and the initial decision may require reassessment. Increasing commitment to a failing course of action may simply be a way to protect an earlier decision; in effect a deep-seated bias to make continuing choices in a way that justifies past choices. Frequently, people are unwilling, consciously or not, to admit to an error of judgement.

Another set of traps that can have significant impact on decision making relates to the decision makers attitude to risk. Medical decision making nearly always involves choice between alternative solutions and always involves risk as it is concerned with estimates of future. The pessimistic personality tends to be overcautious when making decision under uncertainty; the tendency is to be on the safe side what ever happens. Too much prudence can sometimes be as dangerous as too little. At the other end of the scale the overconfidence trap leads to overconfidence in one’s own ability. Over confidence can lead to a rush to judgement without thinking things through. That in turn can lead to bad decisions.

Allegations of errors of judgement in medical diagnosis and treatment decisions form a significant part of medical malpractice situations.


The Medical Malpractice Legal Process

The medical malpractice legal process is a decision process. It is concerned with past events and what happened and in the case of medical malpractice cases is effectively also concerned with what should have happened.

In the US legal system it is an adversarial process with plaintiff and defendant and judge with or without jury as decision maker. The legal decision process has much history and experience behind it, and it is also highly codified in terms of primary legislation and legal precedent. Unlike the medical decision process, the legal process has no time limits, and to those involved as defendants in malpractice cases, it can seem like that the search for information can be endless. Ultimately the presentation of the case by both plaintiff and defendant comes to an end and then it is time to weigh all the evidence and make a decision. A degree of personal judgement is applied to the evidence and a verdict is pronounced.

The legal system and particularly most judges are well award of the pitfalls and fallibility of human judgements and they take steps to avoid such errors. Judges, litigants, and the legal system as a whole take steps to minimize the effects of these cognitive illusions and biases. Judges are generally familiar with psychological traps in judgement and the diverse forms they take and thus are better able to ensure that the decisions they make are sound and reliable.

However with the legal process focusing on an analysis of a past event, there is one particular bias that the legal system must endlessly struggle with - the hindsight bias. Because courts evaluate events after the fact, they are vulnerable to the effects of the hindsight bias. In short, the hindsight bias is a threat to accurate liability determinations.

People will generally overestimate the predictability of past events; a phenomenon known as the hindsight bias. Among the cognitive illusions of judgment that psychologists have studied, the hindsight bias is one of the most well documented and well-understood. It is also quite intuitive, and its effects are relatively easy to identify.

The originator of the work on the hindsight bias, psychologist Baruch Fischhoff, described it as follows:

In hindsight, people consistently exaggerate what could have been anticipated in foresight. They not only tend to view what has happened as having been inevitable but also to view it as having appeared "relatively inevitable" before it happened. People believe that others should have been able to anticipate events much better than was actually the case.

The bias results primarily from the natural (and useful) tendency for people to incorporate known outcomes into existing knowledge, and then to make further inferences from that knowledge. People then rely on these new beliefs to generate estimates of what was predictable, but they ignore the change in their beliefs that learning the outcome inspired. Hindsight vision is 20/20. Even if people can suppress their knowledge of the outcome, they are not even aware that they have made these further inferences, and consequently cannot suppress them. More generally, ignoring a known outcome is unnatural.

Few decisions in ordinary life require an assessment of the predictability of past outcomes, but such assessments are pervasive in legal contexts. Whenever a court must determine what a party "should have known," it is susceptible to the influence of the hindsight bias. As a consequence of the hindsight bias, ex ante estimates of appropriate care to be taken against causing harm are apt to appear unreasonable when judged ex post. No known decision-making strategy enables people to make decisions in hindsight that resemble decisions made in foresight.

Kim Kamin and Professor Rachlinski, for example, compared foresight decisions regarding whether to take a precaution against flooding with comparable hindsight evaluations of whether the failure to take such precautions was negligent. In their study, they instructed participants judging in foresight to recommend the precaution if they believed that the flood was more than 10% likely to occur in any given year (which was based on a cost-benefit comparison of the precaution and the damage that a flood would likely cause). The researchers told the participants judging in hindsight that the precaution had not been taken and that a $1 million flood had occurred.

They instructed these participants to find the defendant liable for the flood if the likelihood of the flood, from the perspective of the defendant before the fact, was greater than 10% in any given year. Although both sets of participants reviewed identical information about the likelihood of a flood, the participants reached different conclusions about appropriate defendant behaviour. Only 24% of foresight participants concluded that the likelihood of a flood justified taking the precaution, while 57% of the hindsight participants concluded that the flood was so likely that the failure to take the precaution was negligent. Because of the hindsight bias, the decision to refrain from taking the precaution seemed reasonable to most participants ex ante, but it seemed unreasonable to most participants ex post.

Courts try to adjust the decision making process in one of two ways: they either suppress evidence that could not have been known beforehand or they attempt to enforce an ex ante standard. In malpractice actions, courts always judge in hindsight, and try to understand the problems associated with doing so. Courts take note of the influence of the hindsight bias in cases that involve jury trials.


Areas of Potential Remedy for Doctors

Insurance
One very traditional solution for the management of personal and corporate risk exposure is insurance. The insurance strategy involves risk identification and sharing. If a problem occurs and liability is assessed then the financial consequence is shared among a society wide pool.

Risk Management
A formal program of risk identification, assessment of the probability of something going wrong, the likely injury and damage consequences, how such situations can be mitigated or avoided. Then develop and implement specific proposals for the management and mitigation of risk for each risk factor.

Organisation Structure
A multidisciplinary teamwork approach to decisions, particularly the more important and complex decisions is a key technique of risk exposure management. The teamwork approach draws into decision making a breath and depth of professional knowledge and experience with the result that individual errors of judgement are less likely to occur.

Pharmacy Industry Example
Follow the pharmacy industry practice by running television and radio ad campaigns with the twin objectives of educating the public to medical and surgical procedures available, and also educating the public to the risks and side effects inherent in medical procedures, particularly in the areas of greatest concern from the need to minimise medical malpractice cases. Prescription medicine advertising raises awareness amongst patients about conditions and diseases that may go undiagnosed and untreated so it can help an informed public get a better diagnosis in a lesser time frame. Such media campaigns also educate people to the fact that prescription medicines may come with very unattractive side effects.

Medical Devices Precedent
Another strategy would be to try limit medical malpractice suits.

In February 2008 the US Supreme Court ruled that makers of medical devices are immune from liability for personal injuries as long as the Food and Drug Administration (FDA) approved the device before it was marketed and it meets the agency’s specifications. Devices subject to the rigorous pre-market approval process, tend to be more technologically advanced, expensive and, in some instances, risky. The FDA evaluates the risks and benefits of the new device and on the balance of advantage for society in general assures that it is safe and effective for its intended use. However the decision does not foreclose lawsuits claiming that a device was made improperly, in violation of FDA specifications. Later this year a case that would pre-empt personal injury suits in respect of drugs approved by the FDA will come before the US Supreme Court.

Perhaps the medical profession can take the precedent established by the medical devices sector and demand a US Federal regulatory approval procedure for the medical and surgical procedures that give rise to the more expensive malpractice liability cases.

Legal Reforms
Award caps on liability lawsuits. A cap on damages for pain and suffering - arguments around this topic are well developed and presented.

Other possibilities for reform of the existing legal system would include the adoption of new procedural, evidentiary, and even substantive rules to strengthen the avoidance of the negative effects of cognitive illusions on legal decision making, including possibly greater reliance on judges.

Courts do not uniformly adapt to the hindsight bias. The law governing investment of a trust's assets involves the hindsight bias. If an investment turns out badly, and the beneficiary sues, the trustee's investment decisions can be judged as imprudent, even negligent, in hindsight. On the other hand, in corporate law, officers and directors are not liable for negligent business decisions. The business judgment rule in corporate law, where the duty of corporate fiduciaries is merely to make well-informed decisions, operates as a blanket protection against liability for negligence. Courts commonly justify this doctrine on the grounds that judging business decisions in hindsight is necessarily biased. Judges recognize that even sound business decisions in foresight can seem foolish in hindsight.

A more radical reform option would be change the legal procedure from an adversarial trial proceeding and towards an investigating judicial procedure with a modified application of the rules of evidence, and strong judicial management. Adversarial litigation promotes combativeness, the cases can take too long and can cost too much to resolve. Proceedings can be weighed down by voluminous evidence, sometimes focusing on irrelevant matters. An investigating legal procedure will more likely result in a faster settlement, it will minimize adversarialism by reducing attack– counterattack processes by parties and their legal representatives. It will better facilitate out-of-court settlements.


References

Medical Malpractice Insurance
Insurance Information Institute
Insurance Issues Series, June 2003 Volume1 / Number 1

Medical Malpractice Insurance,
Multiple Factors have Contributed to Increased Premium Rates
Government Accounting Office GAO-03-702

Inside the Judicial Mind
Chris Guthrie, Jeffrey J. Rachlinski & Andrew J. Wistrich
Cornell Law Review, Vol. 86, No. 4, May 2001

The Hidden Traps in Decision Making
John S. Hammond, Ralph L. Keeney and Howard Raiffa
Harvard Business Review, Sept-Oct 1998

Heuristics and Biases in the Courts: Ignorance or Adaptation?
Jeffrey J. Rachlinski
Oregon Law Review Spring 2000 - Volume 79, Number 1

Judges as Rulemakers
Emily L. Sherwin
Cornell University - School of Law August 2005
Cornell Legal Studies Research Paper No. 05-023

Judgement under Uncertainty: Heuristics and Biases
Amos Tversky, Daniel Hahneman
Science, Volume 185, 1974

Decisions without Blinders
Max H. Bazerman and Dolly Chugh
Harvard Business Review January 2006

Debiasing through Law
Christine Jolls and Cass R. Sunstein
U Chicago Law & Economics, Olin Working Paper No. 225;
Harvard Law and Economics Discussion Paper No. 495
March 2005


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