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Still Seeking a Malpractice Cure

Kentucky’s medical review panel missed the mark on a moving legal target

By Clary Estes

In December 2018, the Kentucky Supreme Court ruled unconstitutional a new state law requiring prospective medical malpractice claims to be screened by expert review panels. The court’s opinion said too many claimants were being denied timely access to court by a process that was too slow and gave defendants too much influence.

The bill had been a priority of the medical community for more than 20 years, with proponents arguing review panels would cut down on “frivolous medical malpractice suits” that were cited as one of the causes of the rising cost of claims and malpractice insurance in the state. In early 2017, the medical review panel law was enacted after Kentucky Republicans gained control of the state House, Senate and governor’s office. Kentucky followed in the footsteps of 17 other states, including Louisiana, Indiana and Texas as well as the Virgin Islands.

Yet, like the rest of the U.S., Kentucky was already seeing changes in malpractice legal liability trends in “the overall rate of claims paid on behalf of physicians. (It) decreased by 55.7% from 1992 to 2014,” according to the National Practitioner Data Bank (NPDB). 

Public Citizen, a nonprofit consumer advocacy organization, wrote a report based on its examination of Kentucky’s malpractice numbers, along with costs and impacts.

“Extrapolating from the Institute of Medicine findings, we estimate that there are at least 632 to 1,407 preventable deaths in Kentucky hospitals each year that are due to preventable medical errors,” Public Citizen reports. “The costs resulting from preventable medical errors to Kentucky’s residents, families and communities is estimated at $244 million to $416 million each year. But the cost of medical malpractice insurance to Kentucky’s health care providers is only $81.8 million a year…

“According to the federal National Practitioner Data Bank, Kentucky malpractice payouts increased 24.2% from 1995 to 2002, or 3.5% annually, while the cost of medical services increased 30.5%, or 4.4%, annually during these seven years. When measured in 1995 dollars, total malpractice payouts to injured patients in Kentucky declined from $38.5 million in 1995 to $36.9 million in 2002.

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NPDB itself directly reports that from 1992 to 2014 “the amount of payment increased by 23.3 percent” nationwide. In Kentucky, when adjusted for inflation, medical malpractice payments have not increased in the last 10 years, staying largely stable and even sometimes decreasing.

In 2009, NPDB reported $50 million in medical malpractice payouts for Kentucky. In 2018 that payout figure was $54.35 million, with the lowest year in the past decade being 2013 at $32.89 million. As of June 30, 2019, Kentucky had seen $19.94 million in payouts.

Total malpractice payouts from 1990 to 2019 (as of June 30) are $1.426 billion, putting the annual average at slightly more than $50 million.

Hard to enlist panel members

The Kentucky Supreme Court found that medical review panels, rather than offering effective reform to a problematic situation, effectively shut the courthouse doors to many Kentucky citizens – with some aspects of the law’s process putting claimants at the “mercy of the other parties involved,” thus exacerbating the problem.

As reported by state newspapers and other sources, Medical Review Panel statistics for the first year indicated that of the “531 complaints filed: 58, or 11%, (being) assigned to panel; 13, or 3%, adjudicated by panel naming 20 defendants; 18 pending with panel; (and) 27 withdrawn, settled or dismissed from panel.” The law directs panels to issue findings within 30 days of receiving a defendant’s submission of evidence, but there was a determination on only about 26% of filings.

A new panel had to be developed for each case.

Attorneys had to choose a panel chairperson, who then was required to provide two lists of physicians to serve as potential reviewers; attorneys were able to suggest medical specialties to serve on the review panel. Furthermore, if panel members were deemed unsuitable by attorneys, they had the opportunity to strike physicians from the list provided by the chairperson. This initial process was intended to end with two panel members agreed upon by all attorneys involved and who would then go on to choose a third panel member to serve and review. 

“The system never got off of the ground because the chairpersons, at least in my area, were not very successful in finding enough physicians to place on the striking list and serve on the review panel,” said Ellen Houston, a DBL Law partner practicing in the areas of medical negligence defense and health care. “Sometimes a physician would agree to serve and then back out.

“This was not necessarily the case in all areas of Kentucky. I believe in Louisville, for example, several attorneys had cases go all the way to decision,” Houston said. “I unfortunately did not have that experience…

“I spent a significant amount of time trying to identify appropriate physicians who would agree to serve on panels. During the year or so the panels were in effect, I didn’t have a single case go to a panel decision due to delays caused by the inability to form a panel of physicians in the right specialties and without a conflict of interest,” she said.

The Courier-Journal newspaper in Louisville reported the following breakdown of adjudicated cases: Nine finding for the defendant, one finding for the claimant, [and] three finding that standard of care was violated without causing an injury.

Time frame considered too tight

The only way the process could be bypassed was if both parties involved, claimant and defendant, “secure the signed consent of all named defendants to either submit to binding arbitration or waive the panel process altogether.” In order to expedite cases within a reasonable timeline, the Kentucky Supreme Court found, claimants were effectively at the mercy of the defendants to agree that the process was unnecessary or overly complex.

Jennifer M. Barbour, attorney and director at Middleton Reutlinger law firm, said, “While the law was still valid, most law firms were frustrated with the medical review panel act. It required the parties to gather evidence and submit their cases to the panel on a very tight timeframe that frankly was not workable with complex medical cases.

“There was also a lot of frustration and confusion about the panel composition, namely, panel members who could comment on standard of care but not causation, such as nurses,” Barbour said. “Some lawyers did not want to include nurses on the panels, even if a nurse’s care was at question, because that meant one less panel member to address causation. In complex cases, such as birth injury cases, three medical professionals were often too few to address all the standard of care and causation issues involved. 

“Now that the law was declared unconstitutional, there was an immediate glut of cases that were filed in circuit court. Law firms were exceptionally busy as a result, but that has passed now,” she said.

The Pew Charitable Trust funded studies of medical review panel use that found they complicated the malpractice case process, thus making it more expensive.

“Medical screening panels, by contrast, seem less useful and more costly” than existing legal processes, according to Pew. “The available data provide little indication that panels are a preferable way to screen out weak cases or to promote dispute resolution. To the extent that a neutral expert opinion is needed at trial, other measures could provide that input more efficiently. Likewise, though specialized medical malpractice courts might develop useful expertise, specialization has potential disadvantages that likely offset its benefits.”

Kentucky’s review panel law was brought down by a lawsuit brought on behalf of Ezra Claycomb, who, the filings asserted, “suffers from severe brain damage and cerebral palsy allegedly caused by medical malpractice.” The Supreme Court ruling striking down the malpractice case review panels cited Section 14 of Kentucky’s Constitution, known as the ‘open-courts’ provision, that guarantees all state citizens have access to the courts “without delay.” 

Review desirable but hard to do

Legal challenges to the medical review panel act occurred almost as soon as the law became effective, Barbour said, and its eventual invalidation created confusion.

“While those challenges made their way up to the Kentucky Supreme Court, several cases made their way through the panel process,” she said. “Once the Kentucky Supreme Court ruled, there was a lot of uncertainty. For the cases that had completed the process, were the panel opinions admissible in court? For those that were still pending before the panel, would the physicians who were working on reviewing the cases be compensated for their time?

“Even the parties who successfully challenged the law were unclear as to when a litigant would need to timely file a lawsuit that was pending before the panel. There’s been a lot of litigation at the trial court level alleging that complaints filed were untimely,” Barbour said. “With regards to future litigation, I think many medical providers are now concerned that no tort reform would ever pass the legislature and survive judicial review.”

The basic idea of screening malpractice claims medically continues to have advocates.

“I understand the legal reasoning behind the court’s opinion, but I believe the medical review panel process was a step in the right direction for Kentuckians,” Barbour said. “Like all laws, once put into practice, ways to improve it became evident, but requiring a basic level of medical support for a case before allowing it to proceed in the court system is a good step towards ensuring injured people can seek redress, our courts are not burdened by baseless lawsuits, and practitioners can practice medicine with reduced fear of baseless lawsuits.”

In response to the ruling, as reported by the Insurance Journal, an insurance industry trade magazine, “The law’s sponsor (Sen. Ralph Alvarado, a Winchester Republican and previously a nursing home physician) … is considering an amendment to the state constitution to establish medical review panels.”

Medical review panels’ invalidation in Kentucky highlights a number of issues in the state when it comes to malpractice litigation (both during the use of medical review panels or otherwise), the historic cost of health care in Kentucky, and the subsequent higher malpractice insurance rates for medical providers.

Risk and cost is concentrated

So what are medical providers and law firms that represent them doing to address the risk of medical malpractice lawsuits? Turns out, the issue of malpractice costs is more complex than what initially meets the eye and varies across the medical, economic or geographic spectrum in Kentucky.

There is substantial variation in the likelihood of malpractice suits and the size of indemnity payments across specialties, according to the New England Journal of Medicine in its “Malpractice Risk According to Physician Specialty.” The risk of facing a malpractice claim is high in all specialties, but most claims do not result in payouts to plaintiffs.

Not all medical malpractice lawsuits are created equal. Certain areas of the medical field typically face higher number of malpractice lawsuits compared to others. The highest number of medical malpractice lawsuits, occupying 85% of all cases, are filed against surgeons and OB-GYNs, according to Mediscape.com. OB-GYNs have the highest payouts in Kentucky at between $40,000 and just over $90,000 per successful suit, which is considerably higher than other medical fields.

Malpractice tort and insurance costs impact how some providers approach their provision of care.

“Some medical providers are more concerned than others, largely because they are in fields that see a higher number of lawsuits, such as obstetricians and anesthesiologists,” Barbour said. “Some practitioners practice defensive medicine, such as ordering tests out of an abundance of caution. Documentation of risks and benefits of treatment options is another area practitioners focus on for risk management. Larger medical providers have in-house risk managers who provide training on documentation and provide evidence-based medical guidelines for practitioners to use in their practice. 

“Some industries, like the nursing home industry, tend to just settle cases, even those with little to no merit, due to the bias many jurors have against the industry,” she said. “With rising premiums, many institutional providers, like hospitals and nursing homes, have either become self-insured, or carry only umbrella/excess policies of insurance in an effort to keep costs down.”

“In 1995, the median malpractice payout in Kentucky was $92,500, according to the NPDB. By 2002, the Kentucky median had declined to $47,500 – a drop of 48.6%. The 2002 median payout for Kentucky was significantly lower than for preceding years, reflecting the unusual record of a single physician who made 76 payouts totaling $947,500. If payouts by this one physician were eliminated from the 2002 totals, Kentucky’s median payout would have been $97,500 – still only a 5.4% increase since 1995 at a time when medical inflation rose 30.5%.”

1.6% of doctors had 26.7% of payouts

The Public Citizen report on Kentucky highlights that the relative percentage of doctors who face medical malpractice claims is overarchingly fixed to a small percentage of doctors with repeat claims (with the highest percentage of payout claims being filed in Eastern Kentucky), rather than being spread across the spectrum of overall providers.

The Gallagher Malpractice brokerage firm concludes similarly:

“In 2014, Kentucky had 17,645 physicians and saw 119 paid medical malpractice claims against the physicians in the state. This amounted to 0.67 paid claims per 100 physicians, which is relatively low compared to the national average (0.97 paid claims per 100 physicians) and the state with the highest claims (Louisiana, with 1.50 paid claims against 100 physicians).”

Payouts over $1 million are now less frequent in Kentucky. In 2012 and 2013, as reported by the Gallagher firm, there was only one medical malpractice payout over $1 million, a considerable decrease from years with six $1 million or more payouts in 1995 and five as late as 2002.

Public Citizen notes that malpractice cases are concentrated among a relatively small number of physicians.

“Overall, these 411 doctors, all of whom have made two or more payouts, have paid $171.9 million in damages since 1990. Even more surprising, just 1.6% of Kentucky doctors (141), each of whom has paid three or more malpractice claims, were responsible for 26.7% of all payouts.”

Because most Kentucky doctors are practicing medicine competently and effectively, the cost burden now borne by all medical provider organizations and insurers could be lightened by a focus on repeat defendants of medical malpractice claims. Public Citizen notes “83.3 percent of (Kentucky) doctors having not made a medical malpractice payout since September 1990,” and the ratio of doctors to Kentucky patients is actually increasing faster relative to neighboring states and putting Kentucky in a more stable medical care situation for patients regionally. 

The recent attempt to create medical review panels was the only real tort reform that the medical malpractice field saw in recent years and there is currently no limit on damages and no arbitration rule in place in Kentucky. The statute of limitations is relatively strict compared to other states, giving patients only one year after the discovery, or reasonable discovery, of injury to file a claim.

Premium spike hit in 2003

Many blame insurance premiums as the origin of the latest ongoing medical malpractice crisis. In 2003, national insurance premiums rose sharply and a number of physicians across the U.S. closed their practices due to malpractice insurance premium costs. In 2004, medical malpractice insurance companies reported premiums would continue to rise by double-digit percentages annually and many small medical providers and organizations could not keep up with the costs.

The rise in medical malpractice insurance premiums ultimately most affects smaller private practices or community hospitals and the most vulnerable of patients. Some physicians opted out of volunteering at “medical clinics for the poor or at the Medical Reserve Corps because they have no malpractice insurance coverage.”

In Kentucky, insurance premium increases hit poorer areas such as Eastern Kentucky harder and drive physicians to work at larger hospitals (a growing trend in Kentucky and nationally), which can afford insurance costs but operate farther away from the most rural areas of the state.

The National Academy for State Health Policy succinctly outlined the wheel of blame with regard to the national crisis, reporting:

“Insurers and doctors blame ‘predatory’ trial attorneys, ‘frivolous’ lawsuits, and ‘out of control’ juries for the spike in insurance premiums. In turn, consumer groups accuse insurance companies of ‘price gouging,’ while plaintiffs’ attorneys point to an exorbitant rate of medical errors and the need to deter malpractice and provide compensation to injured patients.’”

The debate is enough to make one’s head spin and is evidence of just how complicated the U.S. medical system has become. Consensus for effective action still seems out of reach. However, actions and considerations on various fronts are being taken slowly but surely.

Barbour notes, “The legislature should consider laws that would require litigants to file affidavits supporting their medical claims when they file suit in court, both as to standard of care and causation. Also, laws that would address admissibility of certain evidence would be helpful. For instance, limiting the admissibility of survey or inspection results of hospitals and nursing homes would greatly help providers as well. There’s no real consistency in Kentucky’s current law on the admissibility of that evidence, and plaintiffs often use that uncertainty to their advantage to gain leverage over defendants in litigation. Revising the Kentucky Resident’s Rights Act would also be helpful, particularly removing the provisions for awards of punitive damages and attorneys’ fees.”

Houston also recommends a number of steps to mitigate risk as well:

“The legislature recently enacted KRS 411.167, which requires a certificate of merit. This certificate, which must be filed with the complaint, must demonstrate that the claimant has consulted with at least one expert who is qualified to give expert opinions as to the standard of care and that the expert concluded that there is a reasonable basis to commence the action.”

Reducing risk can be as simple as transparency and a good bedside manner, Houston said.

Mediation early in the process can reduce litigation costs by fostering an early settlement, she said, but added that it is not always the right approach.

“An apology statute would also be a good next step,” Houston said. “Ohio has an apology statute, the purpose of which is to provide opportunities for health care providers to apologize and console patients and families without fear that such statements would be used against them in a malpractice lawsuit. This would encourage more transparency and would make certain lawsuits less likely because it would allow for an open dialogue about an unanticipated medical outcome.”

Clary Estes is a correspondent for The Lane Report. She can be reached at [email protected].