The Road To Enterprise Liability
The objective of this paper is to set out the process whereby the Department of Health and Children came to the conclusion that a system of indemnity based on the concept of enterprise liability is an appropriate response to the problem of increased litigation arising from the practice of medicine. Along the way I hope to be able to provide a few insights into the complex and intertwined issues which arise in this area, both from our own experience in Ireland and from our research in other jurisdictions. I hope by the end of this paper to demonstrate that the introduction of enterprise liability will benefit patients, doctors, hospitals as well as providing timely compensation to plaintiffs who have legitimate and verifiable claims to be met.
The Irish Problem
The major problem in attempting to define and measure the medical malpractice problem in Ireland is the absence of publicly available data. There has been no real attempt to gather and analyse data in a comprehensive manner. The main reason for this paucity of data on what is an important and expensive aspect of public policy is that the vast bulk of the data is held by the insurance companies which provide public liability cover to hospitals and by the medical defence organisations which provide indemnity cover to doctors. So, somewhat unusually, the debate on whether there is a medical malpractice crisis in Ireland has been conducted in the absence of almost any publicly available data at all. Occasionally at events such as this a speaker will put up a slide showing either a trend line of claims or a comparison of litigation rates in Ireland in comparison with other countries. There are rarely any numbers on these graphs and if there are, the graph is taken down before you can make any notes. These remarks are not intended as any criticism of the insurers or the defence bodies. These data contain information which is both confidential to their clients and members and, in a competitive business environment, are also commercially sensitive.
A possible source of data is the Courts system where many of the claims against doctors and hospitals end up. However the vast majority of medical malpractice claims are settled out of court and the terms of settlement are the subject of confidential agreements. The cases that do end up in Court are untypical in that they represent those where the two sides are sufficiently confident of achieving success to refuse to agree on a settlement at an earlier stage.
Another possible source of data on the extent of the problem is the Department of Health and Children, which ultimately funds the vast bulk of payments to the insurers and the defence bodies. I have been attempting to track the expenditure for the past ten years. The table below sets out estimates of expenditure in the area for each of the past ten years. It can only be an estimate as the expenditure is incurred at hospital level. These estimates do not include that element of hospitals’ public liability insurance premiums which attaches to clinical staff. Neither do they include doctors in the private sector who pay their own indemnity subscriptions which are not reimbursed by hospitals in the public system.
These figures can only give a very crude indication of the size of this problem in Ireland. They give us no indication of the number of claims, the number of claims which succeed or the average size of the awards or settlements. Nor do they give any idea of the legal and other costs associated with settling claims.
As part of our preparations for the introduction of enterprise liability we have asked the insurers and the two medical defence organisations to co-operate in making data available to us to allow for a calculation of the actual cost of meeting claims in each of the past ten years. I am glad to be able to report that all have agreed to provide these data and as we speak, our insurance advisors, Marsh Ireland and their actuarial colleagues at Mercer are engaged in this enormously complex task. We would hope at the end of this exercise to have, for the first time, a comprehensive and reliable estimate of the real cost of medical malpractice litigation in Ireland.
Is there any other measure of the possible size of the problem? There have been several studies in the U.S. which have attempted, through retrospective examinations of medical records, to estimate the rate of medical error in hospitals. The best known of these is the Harvard Medical Malpractice Study which examined 31,000 hospital records in New York State for the year 1984. The Harvard Study concluded that roughly 1 in 27 hospital patients suffered an adverse event. They concluded that 1 in 4 of these events resulted from negligence. Overall they concluded that 1 negligent adverse event occurred for every 100 patients hospitalised. The Harvard methodology has been replicated in other states in the U.S. and in the U.K. and has produced broadly similar results. If applied to Ireland it would produce the following.
|Inpatients||Inpatients & Day patients|
|Data: Hospital Inpatient Inquiry (1997)
Harvard Medical Practice Study Group (1993)
I don’t think the exercise has any value beyond illustrating the possible extent of injuries to patients in Irish hospitals and the possibility that one in every hundred patients in Irish hospitals to day will suffer a negligent adverse event. I should also point out that the Harvard Study does have its critics. Its definition of an adverse event – prolongation of the hospital stay by at least one day – is extremely broad. Anyone reading the study should also seek out work by its many critics. However there is one very sobering conclusion from the Harvard Study which I have not seen seriously challenged – for every 8 potentially valid claims for damages, only 1 claim was actually filed.
What I would simply conclude from this is that we have no grounds for complacency and probably good grounds for concern.
Initial Engagement by Department of Health
The Department’s, and my own, initial engagement with this problem was in 1991. I was told by my boss that “something had to be done” about medical indemnity. When I pressed him on what this “something” might amount to, I was told that I should produce a paper on the subject. I found that the Department’s total knowledge about this issue was contained in a joint report produced in the U.K. by the King’s Fund and the Centre for Socio-Legal studies at Wolfson College, Oxford. The background to this study was identical to our own experience at the time – rapidly rising cost of insurance associated with an increase in awards and in the size of awards plus the associated legal costs. In Ireland we were also facing into an industrial relations dispute with junior hospital doctors who were threatening to refuse to indemnify themselves because of their unhappiness with the arrangements for reimbursing them for the expense.
The first step was to establish an inter-Departmental Committee with representatives from all of the Governments Departments and Offices which had an interest in litigation and insurance. The Committee was primarily a forum for the exchange of information and views on the various elements of the problem. It looked at experience elsewhere and identified three separate, though not mutually exclusive, approaches to dealing with the problem:
- prevention through risk management
- tort reform as a means of stabilising our exposure to claims
- the financing of the cost of meeting claims
Following receipt of the report of the committee the Department of Health came to the conclusion that the two approaches through which it could most directly influence events were a strategy for prevention and a possible overhaul of the system whereby these liabilities were financed.
As I am often asked why we did not choose to pursue what is generally referred to as “tort reform”, I feel that I should devote some time to it today.
Why not press for Tort Reform?
The first reason why we did not actively pursue the issue of tort reform in the early 1990’s was that it was an issue that we were not directly responsible for ourselves. We felt that, in the short term, we should concentrate on those elements of the problem for which we had direct responsibility. Secondly we were sceptical about the possibility of securing political and administrative support for changes which were bound to generate strong opposition from the legal profession. The list of issues which we looked at included:
- requiring pre-trial assessments of claims
- requiring certificates of merit before claims could be initiated
- changing the burden of proof in cases involving clinical negligence
- examining the role of expert witnesses
- changing the law on consent
- placing caps on general damages
- changing the statute of limitation
Many of these changes would affect all actions for damages arising from personal injuries rather than being confined to claims arising from clinical negligence. We ultimately took the view that if such changes come about, we would benefit from them but we decided to focus primarily on those aspects of the agenda for reform that we could more directly influence. I should mention at this stage that I make a distinction between the need for fundamental changes to the legal process and the need for changes in the way which the Courts operate. A system which is characterised by delays, uncertainty and high cost is not in anyone’s interest. I believe there is a need for reform along the lines undertaken in the U.K. arising from the changes recommended by Lord Woolf.
In all of this I should stress that we are not primarily concerned with making it more difficult for plaintiffs to sue doctors or hospitals where they have valid claims but with bringing more clarity, efficiency and equity to the system. I think defendants in medical malpractice claims have the right to have full details of the claim provided at an early stage with a clear exposition of the nature of the injury and the exact damages being sought.
Roles of Legal and Medical Professions
I think this is the appropriate point to look briefly at the respective roles of lawyers and doctors in the medical malpractice “crisis”. In public debates on this topic doctors tend to blame lawyers for creating the crisis by encouraging plaintiffs to make claims which have little or no merit. The lawyers tend to reply that if doctors and hospitals did their jobs properly, then they would not have any, or as many, clients with claims. For obvious reasons I don’t wish to take sides in this dispute. However I think that a few points are worth making. From the Harvard and other similar studies and from anecdotal evidence it is fairly clear to me that it is still very difficult to successfully sue a doctor. I have no doubt that many patients or relatives who would have good reason to sue doctors and hospitals do not do so for all sorts of reasons. Many people initiate claims but, for a variety of reasons, do not pursue them. Many of these claims are complex and take years to resolve. It is understandable that, except in the most serious cases, many people will put these events behind them and get on with their lives.
However I think there is still good reason to be concerned at the growth of what has been referred to as the “compensation culture” which must have a corrosive effect on business and professional relationships. It is regrettable that many doctors today must inevitably regard the person before them as part patient and part potential litigant. I am still unhappy about the “have a go” nature of much of solicitors’ advertising, although the worst excesses in this area appear to have been successfully curbed. There are still some very worrying advertisements over-spilling from the U.K. on satellite T.V. stations. One recent advertisement has the slogan “If there’s blame, there’s a claim”. As a politics student I spent many hours analysing apparently simple terms so I could probably organise an entire conference on the many meanings of the word “blame” in this context. The vast majority of doctors and other clinical staff are motivated to do their best for every patient they deal with. Their everyday errors arise from the same factors that lead us all to make small mistakes – a momentary lapse of concentration, distraction from another patient and so on. To use the term “blame” in this context and then associate it with a claim for compensation does seem unfair. I am also concerned at the principle of awarding cash compensation for pain and suffering. This element of “profit” to be made in less serious cases is, it seems to me, an incentive to “have a go”. A settlement that includes even relatively modest compensation under this heading can transform many people’s financial situation. Winning the lottery it is not, but who would say “no” to the prospect of collecting £20,000 tax-free and at no risk.
However I think doctors should still be aware of the fact for a claim for medical negligence to succeed a number of conditions must be fulfilled. Firstly, an incident which is arguably negligent must have occurred. Secondly, one or more fellow doctors must be found to offer expert testimony to the effect that the defendant had acted in a negligent manner. Doctors’ greatest potential contribution to tackling the medical negligence crisis is to deny lawyers the opportunity to take claims on behalf of their aggrieved clients.
What Can We Do?
If we cannot afford to wait for tort reform, what can we do to address the growth in claims?
Firstly we must work hard to reduce or eliminate the errors which cause unnecessary injury to patients. Secondly we must improve record keeping and documentation so that claims which have no merit can be successfully defended. Thirdly we must rationalise the existing fragmentary insurance and indemnity arrangements which, apart from not being cost-effective, inhibit our capacity to tackle the first two objectives identified above.
The need to rationalise the insurance/indemnity arrangements was identified in a report from Mercer Limited which the Department commissioned in 1995. At present hospitals, consultants and junior doctors all have separate insurance or indemnity cover. Hospitals and clinical staff other than doctors are covered by hospital public liability insurance. Junior doctors are covered by the Medical Indemnity Scheme (MIS). The MIS is a group insurance scheme for hospital doctors, public health doctors and health board dentists introduced in July 1992. For its first three years it was run by the Medical Protection Society. From 1995 – 1997 it was run by the Medical Defence Union and from 1997 to date it has been run by St Paul Ireland. Consultants in public hospitals take out their own indemnity cover through one of the two mutual medical defence bodies which operate in Ireland – the Medical Defence Union and the Medical Protection Society. The vast bulk of the cost of this cover is borne by the Exchequer.
This system of financing has its origins in an era when most doctors were self-employed professionals who contracted part of their time to the public hospital system to treat public patients. This was also an era when the cost of indemnity was less than £100 a year each for all categories of doctors. These arrangements have persisted, with the exception of the MIS, in an era when virtually all hospital doctors are employees of public hospitals. Hospitals accept vicarious liability for the actions of all other employees so it is strange that this does not extend to doctors.
What are the consequences of these arrangements? Firstly they do not reflect the underlying reality that the Exchequer picks up the bulk of the cost. The economies of scale that might be available if the entire risk were placed with one insurer are lost. Secondly it is not clear that it is in the State’s interest to have these risks insured at all as the State carries its own risk in many other areas of activity. Thirdly, and most importantly in context of the issues which we are discussing today, they make the effective handling of claims extremely difficult. To illustrate the point consider the following case which would not be untypical of many of the cases now working their way through the Civil Courts. A patient went into a hospital for a surgical procedure which had a less then optimal outcome. The patient is unable to get any satisfactory explanation or compensation from the hospital concerned. They consult a solicitor with a view to taking an action against the hospital. To their probable surprise they are told that not only must they sue the hospital but also all of the individual doctors who have been involved in the mishap. As it was a surgical procedure this will include, at a minimum, the surgeon, the anaesthetist, the junior surgical and anaesthetic staff as well as the nurses and the hospital. For the sake of simplicity I am assuming that there were no pathologists or physicians involved. Let us also assume that the surgeon and the anaesthetist were members of two different defence bodies. The plaintiff and their legal team are now facing a veritable Hydra of defendants. Who exactly is to blame for the error and what if more than one is responsible?
Things are no simpler on the defence side. Each of the four defendants have passed on the solicitor’s letter to their insurer or defence body. Each briefs a separate lawyer to defend their interest. The facts of the case may, or may not, be easily established depending on how long ago it occurred, what the state of the medical record is and how many of those involved are still around. There follows the thorny matter of establishing who exactly is liable for the mistake. It is clearly in no defendant’s interest to admit any liability, much less full liability, if someone else can be got to take all, or some, of the blame. Now the focus of the defendants and their legal teams is on each other rather than on the plaintiff. The hospital and its insurers find themselves in correspondence with all of the other parties. Everyone must be supplied with copies of the record, correspondence and so on. The different defendants engage in endless correspondence with each other, commission separate expert reports, threaten each other with costs etc. The plaintiff is left waiting for years while the defendants try to come up with an offer on which they can all agree or, in the absence of an agreement, end up in Court. We are all aware of cases which have run for one or more weeks in the High Court, not because there was an issue of liability between the plaintiff and the defence but because the defence side could not agree on liability or on an apportionment of the liability. The sad irony is that all of the costs of these disputes between publicly-funded defendants is borne by the Exchequer.
In essence we are introducing enterprise liability to end the situation described above. We are probably the only common law country which has not taken this step for its public health system. It was introduced in England in 1991 with Crown Indemnity and the establishment of the Clinical Negligence Scheme for Trusts, now run by the NHS Litigation Authority. There are similar schemes in Scotland and Wales. Most of the States in Australia have established captive insurance companies to offer comprehensive insurance cover to public hospitals. In the U.S. almost all hospitals whether self-insured or placing their insurance in the open commercial market do so on an “enterprise” basis. It is not a revolutionary idea. In essence enterprise liability involves health boards and hospitals assuming vicarious liability for the actions and omissions of their doctors and dentists in the same way that they already accept liability for the actions and omissions of other staff. The intention is to have enterprise liability extend to all doctors and dentists who are employees of health service providers. The details of who exactly is covered and which activities are covered are presently the subject of discussions with employers, the medical organisations and patients’ representatives. However it will almost certainly include the following:
- Consultants employed in Exchequer-funded health agencies
- Non Consultant Hospital Doctors employed in Exchequer-funded health agencies
- Non Consultant Hospital Doctors employed by medical schools and attached to the academic departments of Teaching Hospitals
- Research Registrars appointed by the Health Research Board
- Public Health Doctors employed by health boards
- Dental Surgeons employed by health boards
It will not extend to contractors who provide services on behalf of health agencies who are required to have their own indemnity. It will not, at this stage, cover general practitioners contracted to the General Medical Services scheme.
Enterprise Liability will cover all of the activities of the groups listed here insofar as they are connected with the duties of the posts which they occupy. The only likely exception to this general principle is that it will also extend to Good Samaritan acts undertaken in an emergency. For consultants it will cover the diagnosis and treatment of private patients in public hospitals. It will not cover activities in private consulting rooms or clinics which are separately managed from the hospital in which they work.
It is anticipated that all of the activities which are not covered by the scheme, plus non-indemnity services such as representation in disciplinary proceedings, will continue to be provided by the medical defence bodies. In framing these proposals the Department of Health and Children is aware of, and conscious of, the possible implications of these changes for doctors and hospitals in the private sector. The Minister has stated on several occasions that it is not his intention that the introduction of enterprise liability should have unintended adverse consequences for the private health sector. In Ireland the private sector plays a major and valuable role in the provision of health services and it is the Government’s intention that it should continue to do so. If the introduction of enterprise liability threatens to throw up problems for the private sector, then those problems will have to be addressed and solved.
I believe that these changes have the potential to benefit patients, doctors and hospitals. Nonetheless we are not underestimating the extent of the change for those who will be most directly affected. I understand the degree of comfort which doctors derive from being members of a medical mutual which is run by fellow members of the profession. I also accept that doctors may be fearful of a system which may be predisposed to settle cases on an opportunistic basis which does not have sufficient regard for the effect of a settlement on their professional standing. For those and other reasons we have involved the medical profession in the Enterprise Liability Advisory Group to help design the new scheme.
I referred earlier to my view that the existing fragmentary insurance arrangements hindered the introduction of effective risk management. I now wish to return to that topic as I believe that risk management is at least as important as, if not more important than, the introduction of enterprise liability.
Under the existing insurance and indemnity arrangements each of the parties has separate and different obligations imposed on them by their insurers or defence bodies in relation to incident reporting. I know that all of the insurers and the defence bodies are agreed on the need for incident reporting but it is a fact that on the ground this is difficult under the current arrangements. Incident reporting is important for a number of reasons. Firstly, it allows a hospital to have an accurate picture of where it is being exposed to risk. From incident reports it should be able to identify patterns or trends in its clinical incidents. This is the first necessary step if risk is to be reduced or eliminated. Secondly, timely incident reporting allows an incident to be investigated as soon as possible after the event. Witness statements can be taken while memories are still fresh and witnesses are still available. Any faulty instruments or equipment can be examined and isolated. As well as helping to prevent repeat incidents the information collected in this process may be useful in defending any claim arising from the incident. Finally, if negligence is clearly evident at an early stage it allows the case to be disposed of quickly at least cost. Comprehensive adverse incident reporting, including “near misses” has the capacity to make a major contribution to patient safety in hospitals as well as to contribute to a reduction in the cost of meeting claims.
I hope this account of how we approached the problem has been useful. We are still at a relatively early stage in the process of implementing this change and many challenges remain. However we remain convinced that what is proposed is in the interests of patients, doctors, hospitals and the taxpayer, without whose support none of this is possible.