Capping medical malpractice awards isn't way for hospitals to go

There's a battle slowly boiling in California that could have a wide-reaching effect on the nation's hospitals.

It concerns the Medical Injury Compensation Reform Act--the 1975 state law that capped non-economic damages to $250,000 against a physician who loses a malpractice lawsuit.

That sum seemed agreeable in 1975--it represented more than $1 million in today's dollars. However, there have been no inflationary adjustments factored into the cap. For every year that passes, Californians who may have been negligently injured by their doctors lost a little financial leverage. Over the decades, it's represented a huge loss for patients.

As a result, many have had trouble finding attorneys wishing to represent them, because the potential award they can get from a settlement or judgment has shriveled dramatically. The only other way to boost an award is through economic damages. But in those terms, an executive who earns $500,000 a year is going to be in much better shape pressing their suit than a teacher who earns $60,000.

In response, a consumer group is sponsoring a ballot initiative that would lift the non-economic malpractice cap in California to about $1.1 million. In other words, preserve the intent of the 1975 law.

Hospitals are barred by law in California from directly employing physicians; they instead must work for inpatient providers via a medical group or medical foundation model. As a result, their concerns about malpractice suits are mostly collateral.
Nevertheless, more than 300 hospitals in California have announced their opposition to the ballot initiative. They claim it will drive up healthcare costs and make it more difficult to recruit physicians to practice in California.

These facilities and their lobbies will likely raise tens of millions of dollars to implore voters to not lift the cap. Given the earliest it will appear on the ballot is November of next year, consumers whose financial duress has been blunted by being able to purchase more affordable health insurance starting in January could be reluctant to cast a vote in favor of the initiative.

What transpires in California will be followed closely by other states. If the ballot initiative is defeated, it will embolden what has already been decades worth of legislation that have curtailed the ability of patients to seek redress if they're injured while being treated or undergoing a surgical procedure (trial lawyers are no match against the medical lobbies).
The medical malpractice argument has been a significant part of the debate in reforming healthcare in the U.S., despite the fact it is actually not part of the ACA.

Conservatives and even some moderates like to blame defensive medicine for ever-rising healthcare costs, even though a new report just issued by Public Citizen claims awards from such lawsuits represent little more than a tenth of 1 percent of all healthcare costs in the U.S.

Why is this important for hospitals? Because unlike facilities in California, many are hiring their own physicians directly, often through accountable care organizations or similar delivery models. Some estimates say as many as 75 percent of physicians could eventually work directly for hospitals.

Moreover, hospitals are the settings for most of the countless medical errors that occur every year and claim tens of thousands of lives. The initiatives to curb such errors have been limited and have had uneven results so far.
Should aggressive limitations of medical malpractice damages be pursued in other states if a lifting of California's cap fails, expect hospitals to be the next in line claiming a cap should apply to them.

With such a cap in place, there will be little incentive to improve care other than the readmissions penalties issued by the Centers for Medicare & Medicaid Services and the occasional fines issued to hospitals by state regulators. In the latter instance, most fines are levied only if the hospital self-reports a sentinel event.

There are many ways to improve the bottom line at hospitals, but limiting the ability of patients and their families to become whole again after a mishap that could be avoided is not the way to proceed. - Ron (@FierceHealth)