Marginal Medical Malpractice Cases Harm Everyone

By Frank Francone, Washington Examiner

Every year, U.S. citizens file an average of 85,000 medical malpractice cases, resulting in damage payments of $42 billion. Of course, news reports focus on a relatively small number of huge jury verdicts or medical claims by the rich and famous, such as the recently settled Linda Evangelista lawsuit. But these huge verdicts and settlements represent less than 0.05% of medical malpractice cases. The vast bulk of filed cases are marginal, are unlikely to result in a recovery for the plaintiff, and impose heavy costs on medical professionals, citizens’ healthcare costs, and the plaintiffs themselves. Tort reform should focus on reducing these marginal lawsuits.

Most laypeople are unable to make a good assessment of whether their claims are legally meritorious or marginal; that is primarily the responsibility of a plaintiff’s attorneys. Not surprisingly, a landmark 2008 study found that early classification of a case by in-house insurance company doctors predicted the ultimate verdict by a jury quite accurately:

“Physicians win 80% to 90% of the jury trials with weak evidence of medical negligence, approximately 70% of the toss-up cases, and 50% of the cases with strong evidence of medical negligence …. The fairness of settlements in medical malpractice has also been investigated. In all but one of the 12 published studies, the likelihood of a settlement payment and the size of any payment have been correlated with the strength of the evidence alleging negligence.”

In other words, early analysis of a case by an impartial medical professional ought to give a plaintiff’s counsel a good idea of the ultimate outcome of the case. Yet before 1992, 62% of filed cases have been rated as marginal, and 57% resulted in no recovery by settlement or at trial (“zero payment cases”). Between 2007 and 2016, that number jumped to 70% zero-payment cases.

Regardless of whether a plaintiff recovers money in a case, it still costs money to defend. For zero-payment cases, the defense cost rose from $25,000 to $36,000 per case between 2007 and 2016 and is likely about $47,000 today. If 70% of filed cases result in no recovery, that means $2 billion-$3 billion is spent annually defending cases that probably should not have been filed. This increases the cost of insurance for medical professionals and the cost of healthcare to everyone.

But the financial cost of zero-cost litigation is small compared to the stress and anxiety of litigation for all parties. These costs also make medical innovation in new and growing fields more risky and costly. For example, cosmetic surgery and laser scar and hair removal can be life-changing procedures for many. But medical malpractice cases against doctors, nurses, and other medical professionals in this field are growing rapidly, and 76% of such cases are “no-recovery” cases.

The likely explanation for what appears to be an excessive number of marginal cases filed is the fee structure for attorneys in such cases combined with the growth in permitted attorney television advertising over the past few decades.

A typical medical malpractice case involves a contingency fee by the attorneys. The client pays no fees or costs until a recovery is had in the case. Then the attorney reimburses themselves for costs incurred and receives, in addition, a percentage of the recovery in the case, typically 33%-40%. By itself, this fee structure would seem to make attorneys careful about filing “no-recovery” lawsuits.

But contingency fees combined with television advertising change all that. In just five years ending in 2009, television advertising by attorneys for medical malpractice cases increased 1400%. The ads often appear to give example of large, successful recoveries and to ignore that many cases will result in no-recovery at all. What this seems to reflect is a business model that values filing many lawsuits, including likely no-recovery cases, instead of a more selective approach. Meanwhile, doctors and insurance companies, and ultimately the public, are paying billions just to get to the point where the plaintiff settles for no-recovery.

The solution would be to restructure the economic incentives for counsel to be more selective in bringing likely no-recovery cases. One possibility is a Pennsylvania law that requires a medical malpractice plaintiff (or the plaintiff’s attorney) to file a signed “certificate of merit” stating that an “appropriate licensed professional” has looked at the plaintiff’s claim and believes there is a “reasonable probability” that the defendant healthcare provider’s conduct “fell outside acceptable professional standards” and caused the plaintiff’s claimed harm. Another possible solution would be changes in the ethics rules for attorney advertising requiring advertisers to disclose that most cases will result in no-recovery.

Ultimately, it is scandalous that about 70% of filed litigation for medical malpractice results in no-recovery and that a nontrivial number of those cases are for actions by medical professionals that can be assessed as likely nonnegligent early in the litigation. The solution is to restructure economic incentives for the plaintiffs’ bar to deter this proliferation of litigation and no-recovery cases that is souring the reputation and credibility of the American legal system.