Medical Malpractice Litigation in a Transparent Pay-For ...



Medical Malpractice Litigation in a Transparent Pay-For-Performance World

David A. Hyman[1]

Over the past half-decade, the U.S. health care marketplace has taken moderate steps in the direction of a payment-for-performance (“P4P”) system of compensation. This development has been associated with a parallel move toward greater transparency with regard to cost and quality. Considerable ink has been spilled on the likely impact of these initiatives on the traditional triad of health policy issues: cost, quality, and access. Little attention has been given to the implications of these developments for medical malpractice litigation. This essay offers some preliminary predictions on the way these distinct institutional arrangements are likely to interact. A future draft will explore how medical malpractice litigation is likely to influence these transparency/P4P initiatives, and sketch out a strategy for harmonizing the incentives created by these disparate systems.

At the outset it is important to apply a high discount rate to my predictions. As I noted some years ago, if law professors had any particular expertise in forecasting the future, their time would be monopolized by hedge fund managers and bookies, instead of law students.[2] Health policy is also prone to institutional fads and moral panics – which can result in regulatory U-turns, and the abandonment of policies that are far more entrenched than the relatively nascent movement toward P4P and transparency. Finally, 2008 is an election year, and one’s predictions about the future should be affected by the identity of the Democratic nominee, and the outcome of the Presidential election – both of which still remain to be determined

Part I briefly sketches out the backdrop against which these developments have played out. Part II describes the move toward transparency and P4P. Part III predicts how these developments will interact with the medical malpractice system, and more broadly, how the patient safety movement and the liability system will interact. Part IV concludes.

I. How We Got Where We Are

The past thirty years have seen the emergence of a quality movement in health care. The greatest changes in visibility and public attention to the issue have come in the past decade – resulting from the reframing of the quality movement into the patient safety movement.[3] Historically, the issue of quality was the exclusive province of physicians and professional organizations. These entities employed a range of strategies to ensure quality and avoid error, including education, lofty ethical standards, demanding norms of patient service, licensure, reputation, the desire for referrals, an emphasis on character and altruism, and a highly punitive “shame and blame” culture. The regulatory framework was licensure-based, dominated by professionals, and built around a “bad apple” model of health care quality. Instead of focusing on system-level failures, individual physicians were the focus of regulatory intervention.

Non-professionals played little or no role in assessing whether the quality of care that was delivered was of high quality, or even minimally adequate. The signal exception was the medical malpractice system, which subjected the decisions of physicians to lay judgment, and was heartily disliked by physicians for that reason.

Purchasers played a very limited role in ensuring quality. Both public and private payors were more focused on the cost of health care services than their quality. Even if Medicare’s administrators had wanted to exercise their purchasing power to improve quality of care, there were significant institutional and statutory constraints on their ability to do so. Indeed, the first two sentences of the Medicare statute explicitly state that the program would not interfere with the practice of medicine in any way, shape, or form.

The lack of any effective oversight was compounded by a lack of transparency regarding the quality and cost of medical services. As the former Deputy Secretary of HHS observed, “our health care system is both ‘price blind’ and ‘quality silent.’”[4] The President’s Council of Economic Advisors summarized the situation as follows:

In most market settings, consumers’ purchase decisions are based on good information on the value of the products they buy. But in healthcare the lack of good information on the success of different treatments – in terms of the best outcomes per dollar – means that individuals and families have difficulty making informed decisions, and insurance companies are not rewarded for altering their coverage to encourage high-value care.”[5]

Stated more concretely, ordinary consumers have access to better information about the quality of household appliances and automobiles than about the quality of care rendered in their local hospitals; “few Americans could tell you which of the five hospitals nearest to them has the best outcomes for cancer care, or obstetrics, or orthopedic surgery. Significantly, they would have trouble even getting this information if their health or their life depended on it!”[6]

The lack of transparency is compounded by the dysfunctional incentive arrangements under which health care is delivered. In health care, most compensation arrangements pay health care providers for what they do, not for what they accomplish.[7] The failure to tie compensation to variables that correlate closely with patients’ needs and desires means that providers rarely have an economic incentive to invest in quality or prevent error. More concretely, when physicians are paid using a fee-for-service system of compensation for every patient encounter they have, there is no necessary nexus between payment and quality of care. Indeed, under some circumstances, providers receive higher payment for providing worse quality care. In the language of strategic planning, these incentives mean that there is often no “business case for quality” in health care.[8]

As a former dean of clinical affairs at George Washington Hospital, turned long-time president of the principal accrediting entity in health care (JCAHO) summarized matters, “when I came out of school I thought that someone would be measuring my performance, and that I would be paid accordingly. That seemed logical to me. . . But it turned out that I could do as well or as poorly as I wanted and get paid anyway.”[9]

In combination, these dysfunctional institutional arrangements contributed to serious quality deficiencies. As I noted in an earlier article, the empirical literature on health care quality is “replete with statements that look like tabloid headlines.”[10] These headlines would include, among others, that “one-fourth of hospital deaths may be preventable;”[11] “180,000 people may die” every year “partly as a result of iatrogenic injury;”[12] “one-third of some hospital procedures may expose patients to risk without improving their health,”[13] and “[t]he United States loses more American lives to patient safety incidents every six months than it did in the entire Vietnam War.”[14] The quality problems that give rise to these headlines include every conceivable example of overuse, underuse, misuse, and out-and-out error, in every conceivable setting in which care is delivered.[15] In an influential 1999 report, the Institute of Medicine estimated that medical errors are the eighth leading cause of death in the United States, ranking ahead of AIDS, motor vehicle accidents, and breast cancer.[16] In 2007, the National Center for Quality Assurance reported that the failure of health plans to provide optimal care resulted in between 35,000 and 75,000 deaths avoidable deaths, 45 million sick days and $7.4 billion in lost productivity.[17] Avoidable adverse drug events and preventable nosocomial infections are quite common.[18] Treatment variations are enormous as well, with patients in some areas receiving far higher and far more expensive levels of care than others of similar age and physical condition who live elsewhere—with no obvious effect on outcomes.[19]

The last half-decade has seen the emergence of two complementary strategies (transparency and P4P) for addressing these and other problems. Part II addresses each of these initiatives in turn.

II. The Rise of Transparency and P4P

A. Transparency Initiatives

The last few years have seen an explosion in the availability of information from public and private sources about quality of care. Between state and federal report cards, and private sector sources of similar information, consumers have access to far more information than they once did about providers’ expertise, malpractice and disciplinary records, and success rates.

On the public sector side, the Department of Health & Human Services has a major transparency initiative,[20] pursuant to an executive order by President Bush encouraging such efforts.[21] The HHS Hospital Compare website allows consumers to obtain information on how often particular hospitals provide recommended care.[22] Similar websites exist for dialysis providers, home health agencies and long term care providers.[23] Information has also been posted on charges and Medicare payments to hospitals, ambulatory surgery centers, and physicians.[24] Numerous states have created report cards for managed care organizations and some provide volume information for specific conditions or quality ratings based on clinical quality measures.[25] Finally, AHRQ periodically issues a national report on the state of the quality of care in the United States.[26]

On the private sector side, the most well-known initiative is run by NCQA. NCQA developed the Health Plan Employer Data and Information Set (“HEDIS”) to help assess health plans. HEDIS uses more than 50 measures of provider and plan performance in areas, such as patient satisfaction, childhood immunization, and mammography screening rates, known to affect employee plan choice. Other private initiatives similarly seek to make quality-related information available to employers, health plans, and the general public.

Transparency has also been politically popular; as Professor Bill Sage has noted, “because disclosure laws influence private transactions without substituting direct government regulation, they illuminate all parts of the political spectrum, appealing equally to conservatives, who applaud ‘market facilitation’ and ‘bootstrapping,’ and to liberals, who favor ‘empowerment,’ and the ‘right to know.’”[27] However, there has been a provider-led backlash against transparency initiatives, based on arguments that the information that is being disclosed is flawed, incomplete, and has the potential to mislead patients and actually result in lower quality care.[28] Physicians have already brought lawsuits on similar grounds in Connecticut (against Cigna) and Washington (against Regence Blue Shield).[29] Although previous cases have involved the attempts by insurers to create tiered networks, such complaints have resonated with New York Attorney General’s Office, which recently sued numerous health insurers and attempted to enjoin them from introducing provider-level report cards.[30] The case ultimately settled with an agreement that identified certain quality measures to be employed by all insurers, and prohibited the use of other measures unless authorized by an independent monitor with expertise in health care quality.[31]

B. P4P Initiatives

P4P represents a modest effort to use economic incentives to encourage health care providers to consistently deliver high-quality care.[32] By forcing providers to internalize the costs of low quality care and enabling them capture the benefits of high quality care, P4P attempts to harness the self-interest of providers to improve quality of care. P4P also has an important information-forcing potential. To the extent health care organizations have internal cultures that discourage health care workers from reporting and dealing with mistakes, P4P can make this dysfunctional culture more expensive – and encourage these organizations to transform themselves.

P4P arrangements have become extremely common in recent years. Medicare recently announced it will no longer pay for certain events that should never occur (“never events”).[33] Medicare also recently completed a demonstration project that paid modest financial incentives for hospitals that did well (and modest financial disincentives for hospitals that did poorly) on specified measures of quality for five conditions.[34] Medicare has a number of similar bonus programs for managed care plans and physicians.[35]

Employers and private plans have enthusiastically adopted P4P.[36] The Pacific Business Group on Health has been using incentive-based performance targets for many years in its contracts with HMOs. HMOs that fail to meet targets for patient satisfaction and various clinical benchmarks (including prenatal care, mammography, pap smears, childhood immunizations, and cesarean section) forfeit two percent of their fees.[37] The Leapfrog Group, a coalition of 145 private and public organizations, is using its purchasing power to encourage hospitals to adopt computerized physician order entry (“CPOE”), referrals to high volume hospitals for certain procedures, and staffing intensive care units (“ICUs”) with intensivists.[38] Finally, multiple insurers have decided they will no longer pay for medical treatments that should not have been provided, nor will they pay the medical bills associated with the consequences of such errors.[39]

III. Interaction of Transparency/P4P and Medical Malpractice

A. Medical Malpractice 101

Predictions about the interaction between the medical malpractice system and transparency/P4P initiatives requires an understanding of what we know about the current performance of the medical malpractice system. An extensive body of research makes it clear that the liability system does a thoroughly unimpressive job in dealing with the problem of negligent diagnosis and treatment – let alone low quality care that does not rise to the level of negligence.[40]

The most comprehensive studies have involved structured reviews of the medical records of hospitalized patients in California, New York, Colorado and Utah. A consistent finding across these studies is that approximately 1% of hospitalized patients will be negligently injured, with consequences ranging from complete recovery in less than a month (46% of those negligently injured) to death (25% of those negligently injured). If these figures are extrapolated to the nation as a whole, adverse events accounted for more than 150,000 deaths every year, with medical negligence accounting for more than half of that total – without even counting deaths in outpatient settings.

Relatively few adverse events resulted in the filing of a malpractice claim against a health care provider. Approximately 2% of those who were negligently injured filed a claim, although a substantially greater percentage of claims were filed in cases where the injury was more severe. Of the claims that are filed, a substantial majority involve cases where there was no negligence. However, the second problem is dwarfed by the first; “for every doctor or hospital against whom an invalid claim is filed, there are seven valid claims that go un-filed.”[41] Once cases are filed, the tort system does a fair job of sorting the wheat from the chaff, but in an appreciable percentage of cases, it reaches the “wrong” decision – i.e. awarding damages when there was no negligence/adverse event, and not awarding damages when there was negligence.[42]

This unimpressive performance is expensive: for every dollar which reaches the injured patient, estimates indicate that at least one additional dollar is spent getting it there. Most of this expense is ultimately borne by patients in the form of higher medical fees, but there is a substantial public subsidy as well.[43] To summarize, the tort system does a miserable job of compensating victims of medical malpractice and deterring medical injury – largely because most of the victims never file a lawsuit – but also because it has extremely high loading costs, and a significant error rate.

Of course, compensation is not the only purpose of the tort system. Deterrence is also an important element. In theory, the tort system imposes economic costs on negligent providers (and only on negligent providers), who respond by modifying their behavior to conform to professional standards. In practice, matters are considerably more complicated, since the tort system’s deterrent “signal” contains an enormous amount of noise. As noted previously, relatively few of those who are negligently injured ever file a claim – meaning that negligent defendants will be under-deterred. Because patients who are not victims of negligence do sue and frequently obtain compensation, careful providers are also over-deterred. Negligent providers also win many cases, adding to the confusion. Whatever signal emerges from this mix of non-adjudications, good adjudications, and bad adjudications is then further muddied by malpractice insurance, which is priced by state and practice specialty and not on claims experience. Thus, the tort system imposes roughly similar amounts of pain on both high-quality and low-quality providers.

B. Medical Malpractice and P4P/Transparency

If transparency/P4P initiatives work as intended, they have the potential to dramatically decrease the number of negligent medical injuries. In theory, fewer injuries would mean fewer lawsuits and lower medical malpractice premiums. This sequence of events has already occurred in anesthesia; as quality of care improved, the number of malpractice cases declined precipitously, followed by lower (and quite stable) malpractice premiums.[44]

Yet, there are good reasons to question the likelihood of this happy scenario, at least in the reasonably short run. First, increased transparency could actually increase the probability of a claim, as individuals who did not know they were negligently injured now learn of that fact.[45] Second, transparency/P4P could conceivably raise expectations about the quality of care patients should expect, which would likely increase the chance of suit in the event of a bad outcome.[46] The American Medical Association was quite concerned about this issue; it’s Code of Medical Code of Medical Ethics flatly prohibits doctors from conditioning the right to payment on the success of a treatment or procedure, on the grounds that do so implies “that successful outcomes from treatment are guaranteed, thus creating unrealistic expectations of medicine and false promises to consumers.”[47] Although there are good reasons to doubt this assertion from an ec, onomic perspective, it is less clear how consumers will actually process such information.[48]

Third, even if transparency/P4P does not materially increase the claiming rate, the number of “false negatives” in the current system (i.e., negligently injured patients who do not presently sue) is so high that even a tiny increase in claiming could swamp any benefit from improved quality of care. This “boiling pot” of negligently injured plaintiffs that do not currently bring suit represents a major business opportunity for plaintiffs’ lawyers who have already shown their creativity in marketing their services.[49]

Finally, there are good reasons for doubting the ability of transparency/P4P initiatives to materially affect the number of negligent injuries, at least in the short run. The available research indicates that information disclosure strategies have had relatively modest effects, with most of the “bang for the buck” coming on the supply side, as providers discover to their dismay that they are ranked below average or worse, and take steps to improve their performance – at least as long as they anticipate that the results will be made public. Although the empirical research on P4P is promising, the results are mixed – and even when performance improves, it is still far from six-sigma levels of quality.

More fundamentally, P4P takes the existing (dysfunctional) system of compensation as given, and creates incremental incentives to deliver high performance. The core incentives of our current payment system are not altered merely because a modest P4P incentive has been plopped on top of them.[50] Until P4P displaces the core incentives created by our current system of compensation – which was described by the Institute of Medicine as “broken” because “it provides few disincentives for overuse, under use or misuse of care and does not reward efficiency,” one should not expect P4P to work miracles.[51]

One should not be unduly negative regarding the potential of transparency/P4P initiatives to improve quality of care. In the long run, I expect transparency/P4P initiatives to materially lower the rate of negligent injury, but the long run can be long indeed.

A second possible consequence of transparency/P4P points in the opposite direction, and suggests such arrangements might actually increase liability risk. If the transparency/P4P measures are deemed by insurers and jurors to represent mandatory national treatment guidelines, they will (unintentionally) result in strict liability for failure to meet these standards. When Medicare and every insurer in the United States has determined that certain things should “never” happen, it is more likely that patients who suffer such adverse outcomes will become plaintiffs -- and less likely that juries will give health care providers the benefit of the doubt. The same dynamic will apply to a lesser degree with measures that, although not styled as “never events,” still require the provider to hit xx% of a statistical measure to receive additional payment. As noted previously, such arrangements can create an expectation that bad outcomes can be avoided through diligent effort – which, at a population level, is the whole point of a P4P arrangement. If transparency/P4P initiatives heighten expectations enough, they can result in increased malpractice litigation, even though the actual rate of negligent treatment is declining. (Of course, it does not follow that any of these cases will be “winners,” since one needs more than heightened expectations to prevail.)

Such arrangements may also have more subtle effects that will also tend to increase liability exposure. Under current law, Plaintiffs must prove that the treatment they received breached professional standards of care – and establishing that point generally required expert testimony as to professional custom. The locality rule and tort reforms adopted by numerous states imposed substantial restrictions on who could qualify as an expert – meaning that the cost of obtaining such testimony was high, when it could be obtained at all. High transaction costs discouraged litigation – particularly in cases with modest damages. Absent provable damages of at least $100k, most plaintiffs lawyers are reluctant to take on a case.[52] If transparency/P4P initiatives create an objective national standard of care, the transaction costs of litigating such cases will go down. At the margins, such developments will broaden the pool of cases plaintiffs lawyers are willing to pursue – and enhance the likelihood they will take on such cases. When cases come to trial, transparency/P4P initiatives could even be used as the basis for resolving cases through res ipsa loquitar.[53]

Finally, there is a third possible consequence of transparency/P4P initiatives. If these initiatives are successful, patient safety advocates would have a stronger hand in their attempts to replace traditional malpractice liability with an alternative system of dispute resolution. Patient safety advocates already have the support of physicians, who argue that high error rates are the fault of the legal system. Their basic claim is that fear of liability discourages error reporting and reduction.[54] Patient safety advocates similarly assert, in the words of the IOM’s 1999 report, that “patient safety is hindered through the liability system and the threat of malpractice which discourage the disclosure of errors. The discoverability of data under legal proceedings encourages silence about errors committed or observed.”[55] The IOM’s 2001 report repeated and extended the claim, asserting that “alternative approaches to liability, such as enterprise liability or no-fault compensation, could produce a legal environment more conducive to uncovering and resolving quality problems.”[56]

The claim that liability risk discourages error reporting and quality improvements has become the conventional wisdom among providers and patient safety advocates – and has found a ready reception among those who prefer a world without malpractice liability. Physicians and patient safety advocates agree that we should replace medical malpractice litigation with an alternative institutional arrangement. Although there is disagreement on what exactly that arrangement should be, health courts and no-fault liability appear to be the leading contenders for the crown. To date, opponents of the tort system have made little headway in this regard, apart from no-fault systems for bad baby cases in Virginia and Florida. However, if (and it is a big if) the transparency/P4P initiatives are perceived as dramatically improving the performance of the health care system, patient safety advocates will have much more credibility in their efforts to vanquish medical malpractice litigation.

Finally, one should not ignore the possibility of providers and patients using the litigation system to attack transparency/P4P initiatives. Although a full frontal assault on P4P seems unlikely to succeed, patients could bring a negligent design challenge on various grounds – particularly if the arrangement uses a process-based variable that turns out to be a poor proxy for quality of care. Similarly, providers who are unhappy with these initiatives can use litigation to delay or cripple such initiatives, just as they attacked the attempts of insurers to create tiered networks. If that happens, all bets are off, at least until these cases are resolved.

IV. Conclusion

As I noted in earlier article, “no rational system of compensation rewards an agent for making a principal worse off.”[57] A world in which health care providers profit from their mistakes is a world in which providers will find reasons for allowing high error rates to persist. The initiatives described in this article represent a preliminary attempt to address this problem, by creating incentives that make the agent (provider) better off only when the principal (patient) is better off. It is far from clear whether these initiatives will have that effect, or the form such initiatives will take in the future. It is even less clear how these initiatives will interact with the medical malpractice system.

Design details matter as well. How the transparency/P4P initiatives are designed and implemented – including how many services they affect, and how they change over time will affect the nature of the interactions between these initiatives and the medical malpractice system – and will change the likelihood of any of these predictions coming to pass. For example, it will probably matter whether P4P is explicitly tied to the outcome in a particular case v. aggregate levels of performance across all cases. Similarly, it will matter if transparency/P4P initiatives focus on areas that currently give rise to substantial malpractice liability or not. Finally, the degree to which tort reform and physician adoption of effective apology protocols affect claiming rates remains to be seen.[58]

Predicting the net effect of all of these trends, when each individual component is contingent on a host of unforeseen circumstances, is not a task for the faint of heart. That said, if I was forced to make a prediction, it would be that in the short-run, transparency/P4P initiatives will result in a modest increase in malpractice claiming. If this does not kill off these initiatives, I predict the long-run improvements in quality will lower the claiming rate back where it was before these initiatives began. Finally, I don’t expect the wholesale replacement of the tort system, although I expect increased use of ADR as a result of private contract.

To be sure, crystal-ball gazing tells you as much about the soothsayer as the future – particularly if the soothsayer does not attach concrete probabilities to their predictions. To summarize, one should assess my predictions with a healthy appreciation for the implications of Yogi Berra’s insight “It is difficult to make predictions, especially about the future.” That goes double when my compensation is not tied to the accuracy of my predictions. P4P anyone?

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[1] Richard & Marie Corman Professor of Law and Professor of Medicine, University of Illinois.

[2] David A. Hyman, Medicine in the New Millenium: A Self-Help Guide For the Perplexed, 26 Am. J. L. & Med. 143, 144 (2000).

[3] See Lucian L. Leape & Donald M. Berwick, Five Years After To Err is Human: What Have We Learned? 293 JAMA 2384 (2005); Thomas Bodenheimer, The Movement For Improved Quality in Health Care, 340 New Eng. J. Med. 488, 488-92 (1999). See also In Conversation with Lucian Leape, M.D., at (2006).

[4] Alex M. Azar, Transparency in Health Care: What Consumers Need to Know (2006), at .

[5] Council on Economic Advisors, Economic Report of the President, Promoting Health Care Quality and Access (2002), as cited in FTC/DOJ Report.

[6] Newt Gingrich, Testimony before House Subcommittee on Health (2006)

[7] David A. Kindig, Purchasing Population Health (1998) (quoting former Assistant Secretary of Health and Human Services Dr. Philip Lee) (providers “get paid for what we do, not what we accomplish.”). See also David A. Kindig, Purchasing Population Health: Aligning Financial Incentives to Improve Health Outcomes, 33 Health Services Research 223, 223 (1988) (same).

[8] Sheila Leatherman et al., The Business Case for Quality, Case Studies and An Analysis, 22 Health Affs. 17 (2003).

[9] Bonnie Darves, Physician Pay For Performance Programs Taking Hold, New Engl. J. Med. At

[10] David A. Hyman & Charles Silver, The Poor State of Health Care Quality in the U.S.: Is Malpractice Liability Part of the Problem or Part of the Solution?, 95 Cornell L. Rev. 893 (2005).

[11]Robert H. Brook et al., Health System Reform and Quality, 276 JAMA 476 (1996).

[12] R.W. Dubois & Robert H. Brook, Preventable Deaths: Who, How Often, and Why? 109 Annals Internal Med. 582 (1988).

[13] Stephen M. Shortell, Charles L. Bennett, and Gayle R. Byck, Assessing the Impact of Continuous Quality Improvement on Clinical Practice: What It Will Take to Accelerate Progress, 76 Milbank Quarterly 593, 593 (1998).

[14] Healthgrades Quality Study, Second Annual Patient Safety in American Hospitals Report (2005), at

[15] See Elizabeth A. McGlynn, et al., The Quality of Health Care Delivered to Adults in the United States, 348 N. Engl. J. Med. 2635 (2003); Elizabeth M. Lapetina and Elizabeth M. Armstrong, Preventing Errors In The Outpatient Setting: A Tale of Three States, 21 Health Aff. 26, 26 (2002).

[16] Institute of Medicine, To err is human: Building a safer health system (Washington, DC: National Academy Press Kohn, L. T., J. M. Corrigan, and M. S. Donaldson, eds. 1999.)

[17] National Committee for Quality Assurance, The State of Health Care Quality: 2007, at .

[18] David P. Phillips et al, Increase in U.S. Medication-Error Deaths between 1983 and 1993, 351 Lancet 255 (1999); David C. Classen et al., Adverse Drug Events in Hospitalized Patients: Excess Length of Stay, Extra Costs and Attributable Mortality, 277 JAMA 301 (1997); David W. Bates et al., Incidence of Adverse Drug Events and Potential Adverse Drug Events: Implications for Prevention, 274 JAMA 29 (1995).

[19] See e.g., Elliott Fisher et al, The implications of regional variations in Medicare spending: the content, quality, and accessibility of care, 138 Ann Intern Med 273 (2003); Elliott Fisher et al, The implications of regional variations in Medicare spending: health outcomes and satisfaction with care, 138 Ann Intern Med 288 (2003); Elliott Fisher, Medical Care -- Is More Always Better? 349 N Engl J Med 1665 (2003). See also The Dartmouth Atlas of Health Care, at

[20]

[21]

[22]

[23] Centers for Medicare and Medicaid Services, End Stage Renal Disease (ESRD) Program,

[24] Centers for Medicare and Medicaid Services, Health Care Consumer Initiatives, at

[25] See, e.g., (California report cards on HMOs and physician groups); (collecting several state report cards on cancer and cardiac surgery).

[26] Agency for Healthcare Research and Quality, 2007 National Healthcare Quality Report,

[27] William M. Sage, Regulating Through Information: Disclosure Laws and American Health Care, 99 Columbia L. Rev. 1701 (1999).

[28] See Darves, supra note 9.

[29] See, e.g., Theo Francis, Insurers’ Lists on Doctors Under Fire: Physicians, Critics Claim Rankings Focus More on Costs, Wall St. J. Aug. 21, 2007, at ; AP, Doctors angered by insurers' rating systems: Physicians are filing lawsuits, saying agencies' evaluations amount to libel, at (2007). For a review of the merits of such claims, see Sara Rosenbaum et al, An Assessment of Legal Issues Raised in “High Performing” Health Plan Quality and Efficiency Tiering Arrangements: Can the Patient Be Saved?, at (2007).

[30] Press Release, Cuomo warns major health insurers about promoting potentially deceptive physician ranking program; Calls for More Transparency in Practices of Aetna, Cigna Healthcare, and UnitedHealthcare

[31] See, e.g., Press Release, Attorney General Cuomo announces agreement with Cigna crating a new natonal model for doctor ranking programs,

[32] In two prior articles, I called for increased used of result-based compensation arrangements (RBCA’s) that would tie providers’ compensation to measurable improvements in patients’ health or other objective targets. David A. Hyman & Charles Silver, You Get What You Pay For: Result-Based Compensation for Health Care, 58 Washington & Lee L. Rev. 1427 (2001) (hereinafter You Get What You Pay For); David A. Hyman & Charles Silver, Just What the Patient Ordered: The Case For Result-Based Compensation in Health Care, 29 J. L. Med. & Ethics 170 (2001). Although we appear to have won the war over the propriety and desirability of these arrangements, we lost the battle over acronyms. P4P has swept RBCA from the field.

[33] Centers for Medicare and Medicaid Services, Eliminating Serious, Preventible, and Costly Medical Errors – Never Events, May 18, 2006), at

[34] See Centers for Medicare & Medicaid Services, Premier Hospital Quality Incentive Demonstration, at ; Reed Abelson, Bonus Pay By Medicare Lifts Quality, N.Y. Times, Jan. 25, 2007, at

[35] Centers for Medicare & Medicaid Services, Medicare “Pay For Performance (P4P)” Initiatives, Jan. 31, 2005, at

[36] See, e.g., The National Pay For Performance Summit,

[37] Helen Halpin Schauffler et al., Raising the Bar: The Use of Performance Guarantees by the Pacific Business Group on Health, 18 Health Aff. 134 (1999) (outlining use of performance contracts by Pacific Business Group on Health).

[38] Kelly J. Devers & Gigi Liu, Leapfrog Patient-Safety Standards Are a Stretch for Most Hospitals, Center for Studying Health System Change, Feb. 2004, at 4.

[39] Kevin O’Reilly, No-pay for Never Event Errors Becoming Standard, Am. Med. News, Jan. 7, 2008, at ; Chen May Yee, Health Partners to Withhold Payment for Errors, Star Tribune, Oct. 6, 2004, at 1A.

[40] David A. Hyman & Charles Silver, Medical Malpractice Litigation and Tort Reform: It’s the Incentives, Stupid, 59 Vand. L. Rev. 1085-1136 (2006); David A. Hyman, Medical Malpractice: What Do We Know, And What, If Anything Should We Do About It?, 80 Texas L. Rev. 1395 (2002).

[41] Michael Saks, Medical Malpractice: Facing Real Problems, 35 William & Mary L. Rev. 693, 703 (1994).

[42] Hyman, supra note 40; David M. Studdert et al., Claims, Errors and Compensation Payments in Medical Malpractice Litigation, 354 New Eng. J. Med 2024 (2006). Significantly, the second problem (denying compensation to negligently injured plaintiffs) occurs far more often than the first problem (paying non-negligently injured plaintiffs), even when one limits the analysis to those who file suit. Id. If one includes those who do not file suit, the second problem dwarfs the first.

[43] Although the costs of medical malpractice litigation are initially borne by the treating physician’s insurer, there is considerable evidence indicating that insurers simply pass these costs back to physicians as a group in the form of non-risk-adjusted malpractice premiums, and physicians in turn pass these costs (and more) back to patients in the form of higher fees. See Patricia M. Danzon, Mark V. Pauly & R. S. Kington, The Effects of Malpractice Litigation on Physicians’ Fees and Incomes, 80 Am. Econ. Rev. 122, 125 (1990). Of course, since most Americans pay for a substantial proportion of their health care expenses with insurance, these costs are borne by everyone who is insured. The public subsidy comes in two forms: the amounts spent on public programs that purchase medical care and the amounts spent on keeping the courts open.

[44] Jeffrey M. Cooper, Getting into Patient Safety: A Personal Story, at .

[45] David M. Studdert et al., Disclosure Of Medical Injury To Patients: An Improbable Risk Management Strategy, 26 Health Aff. 215 (2006).

[46] William M. Sage, Understanding the First Malpractice Crisis of the 21st Century, Health Law Handbook (2003) (“improvements in the clinical capabilities of medicine increase expectations of success, redefine success upwards, and foster the belief that failure is the result of negligence rather than misfortune.”)

[47] American Medical Association, Code of Medical Ethics, Opinion 6.01 (2006-2007).

[48] Hyman & Silver, You Get What You Pay For, supra note 32 (“Principals and agents use RBCAs when both understand that success is not guaranteed but depends instead on the quality and quantity of an agent’s work. . . The point of paying on the basis of results is to motivate optimal performance when the possibility of failure is real. In contrast to the AMA’s assertion, RBCAs actually make the risk of failure explicit.”)

[49] For example, numerous plaintiffs attorneys are using the IOM’s 1999 report to help market their services. See, e.g., ; ; and . However, they do not seem to have solved the “under-claiming problem,” so factors other than lack of information are obviously important.

[50] Robert A. Berenson, Testimony before the Subcommittee on Health, House Ways and Means Committee, Sep. 29, 2005, at

[51] Institute of Medicine, Rewarding Provider Performance: Aligning Incentives in Medicare (2006). The Institute of Medicine made a similar observation in a 2001 report. Institute of Medicine, Crossing the Quality Chasm: A New Health System for the 21st Century (2001) (“Current payment methods do not adequately encourage or support the provision of quality health care, and in some instances, they may actually impede local innovations and efforts to improve quality.”). That the same observation was made five years after the initial report indicates how little progress had been made in the interim.

[52] Hyman & Silver, supra note 40.

[53] An analogy may be drawn to the process whereby certain standardized scenarios used to be handled as rule of reason antitrust cases, but are now treated as per se cases.

[54] Hyman & Silver, supra note 10.

[55] IOM, supra note 16

[56] See IOM, Crossing the Quality Chasm 219 (2001)

[57] Hyman & Silver, You Get What You Pay For, supra note 32.

[58] Hyman & Silver, supra note 40.

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