Larry L. Smith
The elephant in the strategic management room: Medical malpractice liability
October 16, 2019
By Larry L. Smith
Discussions around hospital or healthcare strategic management often start by focusing on the future: What services must the organization offer to remain competitive, what technologies are needed to fulfill mandates, how best to satisfy a dynamic set of regulatory requirements. And, at some point or another—especially in today’s litigious climate—executive leadership must address the elephant in the room: the high cost of medical malpractice liability.
Although the total number of claims has shrunk by roughly 50% over the last 16 years, the total dollars paid to settle claims over $500,000 has steadily increased. Clearly plaintiffs’ lawyers continue to home in on the claims that are likely to yield the greatest payout.
The result is medical malpractice liability has grown to be one of a typical healthcare organization’s greatest expense lines, after personnel and supplies. That is all money that is not available to invest in revenue-generating projects, capital equipment, better personnel, clinician education, facilities improvements or innovative programs such as care management. With the small margins most hospitals and health systems operate on, failure to account accurately for medical malpractice liability in strategic planning could end up being devastating for the organization.
Far-reaching implications
Beyond financials, medical malpractice settlements can have a catastrophic effect on hospital/health system personnel and the organization’s reputation in the community. Physicians, nurses and others who are at the center of a medical malpractice lawsuit experience frustration and anxiety that can ultimately lead to burnout and withdrawal from practice.
So, as healthcare leaders helping to plot the future of our respective organizations, it is a strategic imperative to work to reduce preventable iatrogenic adverse events. The first step is to realize that as much as science is at the heart of medicine, healthcare delivery is often dependent on the momentary judgment of individuals, and often in pressurized circumstances that are unique—and may never have been encountered by those clinicians before.
Yes, there are a lot of machines gathering a lot of data these days, but the analysis, prioritization and presentation of this data can be uneven at best or even misleading. Human beings must still determine what that data is indicating, as well as the proper course of action. It’s not realistic to expect multiple clinicians—with varied knowledge, experience, backgrounds and biases—to come to the same assessment of the available data at the same time and to then follow a standardized course of treatment or intervention.
Amplified in OB
All of the concerns above apply to every aspect of healthcare. But nowhere are they as amplified as in obstetrics (OB), especially during labor and delivery (L&D). In most hospitals and health systems, OB is either the leading generator of medical malpractice liability issues and resulting premiums, or at least in the top three.
That is certainly the case at my organization, MedStar Health, which is headquartered in Maryland and has hospitals and clinics in Maryland, Virginia and Washington, DC. It makes sense when you think about it.
First, rather than dealing with a single patient, you have the mother-baby dyad, which given their reliance on each other, more than doubles the potential risk. A change in the status of one may have a downstream effect on the other, which can be easily missed in the often chaotic and data-intensive L&D environment.
Then there is the way the liability system is structured. As a strategy to inflate the costs of settlement and jury awards, the plaintiff bar routinely uses exaggerated “life care plans.” Life care plans purport to estimate the future cost of care for patients. These plans often run into tens of millions of dollars. Thanks to the many medical miracles we’ve developed, that care may now take place over many years, ratcheting up settlements and awards. As a result, cases that used to resolve for $2 million to $5 million now carry a penalty of $15 million to $20 million. Just one such case per year can impact the bottom line of any health system.
One other factor comes into play in many of these cases: Sympathy. Childbirth is supposed to be a happy time in a family’s life. But when it goes wrong, and an infant suffers a catastrophic injury that means he/she may not be able to eat, get dressed, or perform other routine daily tasks alone (not to mention get a job, get married or have children), it’s not difficult to understand why those sitting in judgment often side with the plaintiff.
With so much at stake, why offer OB services at all? In some cases, hospitals and health systems have no choice. Babies need to be born somewhere. Local or state government may dictate that a hospital maintain OB services to serve the needs of the community.
But OB is also a good loss leader. Mothers are typically the decision-makers for healthcare in their homes. A positive experience in L&D makes the mother more likely to continue using the hospital and its affiliated physicians, creating tremendous lifetime value across the entire family. The key, however, is doing all you can to ensure that first experience has a positive outcome.
Strategy for reducing medical malpractice liability in OB
MedStar has been successful in reducing its medical malpractice liability in OB—to the point where it is no longer the most expensive department for liability in some of our hospitals—by following a two-part strategy.
The first, and it may seem obvious, is that we work hard to ensure we have the best teams possible at the bedside. We invest a considerable amount in the hiring, credentialing and onboarding process. We also make large ongoing investments in training and education, in monitoring the OB department’s performance, as well as creating a peer review program to ensure our staff are (and remain) the best they can be.
Even with that, however, we also understand if we are going to expect our staff to deliver the best care, we need to provide them with the best tools.
Since 2004, we have continuously invested in technology that supports our clinicians by bringing data, as well as evidence-based best practices and protocols, to them within their workflows. The technology not only provides guidance if things start to go wrong, but also helps minimize the variations in care that can lead to adverse outcomes.
Many of the unfortunate outcomes in childbirth root back to a delayed recognition and treatment of warning signs, so we use technology to help consistently identify those issues in a timely manner, potentially allowing more options for intervention. It doesn’t mean our clinicians are locked into a particular course of action; on the contrary, early warning may provide more flexibility in treatment so clinical judgement is even more critical.
As one of our nurses so eloquently said when asked about the technology: “I feel like I have an angel on my shoulder, whispering in my ear and helping me as I care for my patients.”
We are currently expanding the deployment of an artificial intelligence-driven perinatal early warning system that continuously monitors the data being generated by various devices (including our electronic fetal monitoring, or EFM, system), compares it to known patterns that have produced adverse outcomes, and alerts clinicians when trouble seems to be brewing on the horizon.
The advantage of the technology is its ability to look across the entire L&D encounter at once, automatically considering patterns across hours of data rather than the 14 minutes that typically are monitored on an EFM strip. Clinicians can then focus on using their training and expertise to determine if an alert requires an action on their part, even if it’s an escalation to a nurse manager or physician, helping them prevent issues rather than reacting to them after the fact.
The AI-driven technology offers one additional advantage from a medical malpractice liability standpoint. If something does go wrong during the birthing process, the hospital or health system now has a complete record, backed by evidence-based practices, to support the decisions that were made as well as when they were made.
Plaintiffs’ lawyers are typically looking at their chances for a big payday when considering whether to bring a large lawsuit against a physician or hospital. Having this type of record can demonstrate conclusively that everyone involved did all they could with the information they had, making the prospect of a lawsuit far less attractive. Of course, plaintiffs’ attorneys also are aware that AI exists in other mission critical industries and are already publishing editorials and giving lectures calling for AI analytics to become part of the standard of care in healthcare. It is an argument they will win over time.
Measuring the effectiveness
Any time money is involved, the natural question is, “What has been the ROI for our efforts?” In this case it can be difficult to measure, for two reasons.
One, of course, is that it’s difficult to accurately measure the financial impact of things that didn’t happen. How do you determine how many adverse events were prevented and how much money you saved as a result?
The other is the financial impact of an adverse event isn’t typically felt for two years or more. It can take 18 months for a malpractice claim to be filed after the adverse event occurs. Then comes the discovery and negotiating phase, which can take many more months. As a result, the impact of changes implemented today may not be felt for a few years.
To judge the program’s effectiveness, hospital and health system risk managers and other executives must look across a minimum of three to five years. It is then that the true impact will be seen, which then informs their strategic planning for the future.
Shrinking the elephant
As long as human beings are different from one another, medical malpractice liability will always be a concern for healthcare organizations. But by investing in the right people, processes, and technology, they can at least shrink the elephant in the room, leaving more money to invest in a virtuous cycle of improvement that leads to better care at lower costs.
About the author: Larry L. Smith is vice president of risk management for MedStar Health and president of MedStar Health's captive insurance company, Greenspring Financial Insurance Limited, Inc. of Cayman.
Discussions around hospital or healthcare strategic management often start by focusing on the future: What services must the organization offer to remain competitive, what technologies are needed to fulfill mandates, how best to satisfy a dynamic set of regulatory requirements. And, at some point or another—especially in today’s litigious climate—executive leadership must address the elephant in the room: the high cost of medical malpractice liability.
Although the total number of claims has shrunk by roughly 50% over the last 16 years, the total dollars paid to settle claims over $500,000 has steadily increased. Clearly plaintiffs’ lawyers continue to home in on the claims that are likely to yield the greatest payout.
The result is medical malpractice liability has grown to be one of a typical healthcare organization’s greatest expense lines, after personnel and supplies. That is all money that is not available to invest in revenue-generating projects, capital equipment, better personnel, clinician education, facilities improvements or innovative programs such as care management. With the small margins most hospitals and health systems operate on, failure to account accurately for medical malpractice liability in strategic planning could end up being devastating for the organization.
Far-reaching implications
Beyond financials, medical malpractice settlements can have a catastrophic effect on hospital/health system personnel and the organization’s reputation in the community. Physicians, nurses and others who are at the center of a medical malpractice lawsuit experience frustration and anxiety that can ultimately lead to burnout and withdrawal from practice.
So, as healthcare leaders helping to plot the future of our respective organizations, it is a strategic imperative to work to reduce preventable iatrogenic adverse events. The first step is to realize that as much as science is at the heart of medicine, healthcare delivery is often dependent on the momentary judgment of individuals, and often in pressurized circumstances that are unique—and may never have been encountered by those clinicians before.
Yes, there are a lot of machines gathering a lot of data these days, but the analysis, prioritization and presentation of this data can be uneven at best or even misleading. Human beings must still determine what that data is indicating, as well as the proper course of action. It’s not realistic to expect multiple clinicians—with varied knowledge, experience, backgrounds and biases—to come to the same assessment of the available data at the same time and to then follow a standardized course of treatment or intervention.
Amplified in OB
All of the concerns above apply to every aspect of healthcare. But nowhere are they as amplified as in obstetrics (OB), especially during labor and delivery (L&D). In most hospitals and health systems, OB is either the leading generator of medical malpractice liability issues and resulting premiums, or at least in the top three.
That is certainly the case at my organization, MedStar Health, which is headquartered in Maryland and has hospitals and clinics in Maryland, Virginia and Washington, DC. It makes sense when you think about it.
First, rather than dealing with a single patient, you have the mother-baby dyad, which given their reliance on each other, more than doubles the potential risk. A change in the status of one may have a downstream effect on the other, which can be easily missed in the often chaotic and data-intensive L&D environment.
Then there is the way the liability system is structured. As a strategy to inflate the costs of settlement and jury awards, the plaintiff bar routinely uses exaggerated “life care plans.” Life care plans purport to estimate the future cost of care for patients. These plans often run into tens of millions of dollars. Thanks to the many medical miracles we’ve developed, that care may now take place over many years, ratcheting up settlements and awards. As a result, cases that used to resolve for $2 million to $5 million now carry a penalty of $15 million to $20 million. Just one such case per year can impact the bottom line of any health system.
One other factor comes into play in many of these cases: Sympathy. Childbirth is supposed to be a happy time in a family’s life. But when it goes wrong, and an infant suffers a catastrophic injury that means he/she may not be able to eat, get dressed, or perform other routine daily tasks alone (not to mention get a job, get married or have children), it’s not difficult to understand why those sitting in judgment often side with the plaintiff.
With so much at stake, why offer OB services at all? In some cases, hospitals and health systems have no choice. Babies need to be born somewhere. Local or state government may dictate that a hospital maintain OB services to serve the needs of the community.
But OB is also a good loss leader. Mothers are typically the decision-makers for healthcare in their homes. A positive experience in L&D makes the mother more likely to continue using the hospital and its affiliated physicians, creating tremendous lifetime value across the entire family. The key, however, is doing all you can to ensure that first experience has a positive outcome.
Strategy for reducing medical malpractice liability in OB
MedStar has been successful in reducing its medical malpractice liability in OB—to the point where it is no longer the most expensive department for liability in some of our hospitals—by following a two-part strategy.
The first, and it may seem obvious, is that we work hard to ensure we have the best teams possible at the bedside. We invest a considerable amount in the hiring, credentialing and onboarding process. We also make large ongoing investments in training and education, in monitoring the OB department’s performance, as well as creating a peer review program to ensure our staff are (and remain) the best they can be.
Even with that, however, we also understand if we are going to expect our staff to deliver the best care, we need to provide them with the best tools.
Since 2004, we have continuously invested in technology that supports our clinicians by bringing data, as well as evidence-based best practices and protocols, to them within their workflows. The technology not only provides guidance if things start to go wrong, but also helps minimize the variations in care that can lead to adverse outcomes.
Many of the unfortunate outcomes in childbirth root back to a delayed recognition and treatment of warning signs, so we use technology to help consistently identify those issues in a timely manner, potentially allowing more options for intervention. It doesn’t mean our clinicians are locked into a particular course of action; on the contrary, early warning may provide more flexibility in treatment so clinical judgement is even more critical.
As one of our nurses so eloquently said when asked about the technology: “I feel like I have an angel on my shoulder, whispering in my ear and helping me as I care for my patients.”
We are currently expanding the deployment of an artificial intelligence-driven perinatal early warning system that continuously monitors the data being generated by various devices (including our electronic fetal monitoring, or EFM, system), compares it to known patterns that have produced adverse outcomes, and alerts clinicians when trouble seems to be brewing on the horizon.
The advantage of the technology is its ability to look across the entire L&D encounter at once, automatically considering patterns across hours of data rather than the 14 minutes that typically are monitored on an EFM strip. Clinicians can then focus on using their training and expertise to determine if an alert requires an action on their part, even if it’s an escalation to a nurse manager or physician, helping them prevent issues rather than reacting to them after the fact.
The AI-driven technology offers one additional advantage from a medical malpractice liability standpoint. If something does go wrong during the birthing process, the hospital or health system now has a complete record, backed by evidence-based practices, to support the decisions that were made as well as when they were made.
Plaintiffs’ lawyers are typically looking at their chances for a big payday when considering whether to bring a large lawsuit against a physician or hospital. Having this type of record can demonstrate conclusively that everyone involved did all they could with the information they had, making the prospect of a lawsuit far less attractive. Of course, plaintiffs’ attorneys also are aware that AI exists in other mission critical industries and are already publishing editorials and giving lectures calling for AI analytics to become part of the standard of care in healthcare. It is an argument they will win over time.
Measuring the effectiveness
Any time money is involved, the natural question is, “What has been the ROI for our efforts?” In this case it can be difficult to measure, for two reasons.
One, of course, is that it’s difficult to accurately measure the financial impact of things that didn’t happen. How do you determine how many adverse events were prevented and how much money you saved as a result?
The other is the financial impact of an adverse event isn’t typically felt for two years or more. It can take 18 months for a malpractice claim to be filed after the adverse event occurs. Then comes the discovery and negotiating phase, which can take many more months. As a result, the impact of changes implemented today may not be felt for a few years.
To judge the program’s effectiveness, hospital and health system risk managers and other executives must look across a minimum of three to five years. It is then that the true impact will be seen, which then informs their strategic planning for the future.
Shrinking the elephant
As long as human beings are different from one another, medical malpractice liability will always be a concern for healthcare organizations. But by investing in the right people, processes, and technology, they can at least shrink the elephant in the room, leaving more money to invest in a virtuous cycle of improvement that leads to better care at lower costs.
About the author: Larry L. Smith is vice president of risk management for MedStar Health and president of MedStar Health's captive insurance company, Greenspring Financial Insurance Limited, Inc. of Cayman.