Would You be Comfortable in a Health Court?

President Obama has offered a few olive branches to Republicans reluctant to vote for health reform as it has been constructed by congressional Democrats. Not that his proposed changes are likely to attract many GOP votes—he clearly still hopes a law can be passed using the reconciliation process. Still, he's included a few interesting ideas to the mix.

One of the more intriguing ones is the idea of initiating so-called health courts as demonstration projects to determine whether they would help alleviate both the practice of defensive medicine as well as the filing of truly frivolous medical malpractice lawsuits. Such mechanisms are used in other countries, are fair to both sides, and have proven a less expensive alternative to jury trials.

There are a lot of different ways to structure them—from compensating certain types of injuries outside the tort system to creating a voluntary program that links error disclosure with structured arbitration and a predictable process for determining damages. Either of these innovations would be leaps and bounds better than the current "ad-hoc" treatment of medical malpractice cases as they move through the existing court system.

Currently, two cases with the exact same facts might be decided differently by different juries. And under the current system, forget about consistency with damage awards or accumulation of any institutional knowledge about fair judgments for common complaints.

Prospects for this idea actually making it into law, however, seem dim for a couple of reasons. First, Republicans seem unlikely to cross the aisle for healthcare reform now, as the process has become a pollster's nightmare for Democrats. A political cynic might say, 'why let them off the hook when you have them where you want them?' And why would Democrats include such sweeteners if they don't entice Congress members to come to their side? This kind of political ping-pong is one reason why nothing of substance ever seems to come out of Congress anymore. It's more important to "get" the other party than to compromise, but that's another story for another day.

Forward-thinking healthcare organizations have done as much as they can to reduce their potential exposure to malpractice lawsuits that can blow huge holes in their balance sheet. Many—not all—large healthcare institutions are self-insured, so they effectively set their own rates.

As such, they spend a lot of time and effort trying to prevent the kinds of mistakes that lead to big payouts. Smaller institutions who pay for malpractice coverage from outside companies also do this, but all could take lessons from Arizona's Banner Health, which I profiled in a case study for the most recent HealthLeaders Media Breakthroughs report.

Banner has reduced its malpractice reserves significantly over the past few years thanks to investments in quality and patient safety that ensure physicians practice under evidence-based guidelines, or that they justify their departure from those guidelines. As a result, Banner's malpractice expenses have been cut in half, long term, says chief financial officer Dennis Dahlen. Five years ago, Banner started implementing a decision support system for its obstetrics department, which has radically reduced variability and poor practices of OB care in its hospitals.

"Our claims losses are miniscule now in the obstetrics area, whereas they used to be the largest share of our annual claims pool," he says. "We didn't expect it to be as marked a decrease as we've seen, but we're of course very pleased."

Banner's actuary has been watching claims fall more than expected for the past three years, and finally proclaimed the reduced claims rate sustainable, thus allowing the system to reduce its reserves significantly.

"The net result for 2009 is that our malpractice expense will be almost zero," Dahlen says. "I expect it to go up to probably a little less than three-quarters of a percent or 1% of revenue and that'll be our normal run rate."

Given those results, do you think health courts would reduce malpractice rates, frivolous lawsuits, and the practice of defensive medicine? Or is putting a good idea into a demonstration project another way of pushing a nagging problem under the rug?