The Executive Suite: Behind the rise in large outlier medical malpractice verdicts

Friday, February 21, 2020

Behind the rise in large outlier medical malpractice verdicts

Severity—the average cost of a medical malpractice claim—continues its relentless increase. Though this is a long-term trend (severity has not decreased since we started tracking it in 1976), we are now seeing a sharp increase in outlierverdicts. These are awards well in excess of common policy limits, often setting records for the venue in which they are made. This disturbing trend threatens the viability of smaller medical malpractice insurers, who may not have the resources to cover such large verdicts, and portends medical malpractice rate increases, while adding to burgeoning healthcare costs.

Nationwide, the percentage of medical malpractice claims greater than $500,000 has increased from less than 10 percent in 1999 to almost 20 percent in 2017.1 The number of verdicts in excess of $25 million has increased from four in 2014 to 17 in 2018.2 Nearly all states have seen these awards, with 41 states reporting verdicts greater than $10 million during the last six years.3

Clinicians may well ask why severity is increasing at the same time the medical community has made important strides in patient safety and the frequency of claims has dropped—at The Doctors Company, we’ve seen a drop from a high of 17 per 100 physicians in 2000 to fewer than seven per 100 physicians today.

The consolidation of healthcare is one driver of high verdicts. Large corporate defendants, almost always with very high policy limits, make attractive deep pockets in the eyes of sympathetic juries.

Monetary desensitization is another important factor. Our national debt exceeds $22 trillion, our annual budget is over $4 trillion, companies with no profits have valuations in the billions, and top athletes commonly sign contracts worth hundreds of millions of dollars. Though paid indemnities in average malpractice claims average many hundreds of thousands of dollars, and typically cover 100 percent of economic losses, these numbers may appear less impressive in an era where nine- and 13-digit numbers are commonly used.

Batch claims, lawsuits in which plaintiffs bring multiple claims against one defendant based on the same behavior, are another contributor. An example is the claims brought against compounding pharmacies alleging that breaches in sterile technique affected many individual patients.

Social media is a potent facilitator of batch claims. A patient with an unexpected adverse outcome from a particular operation may post, "Dr. X botched my surgery." Others who believe they have had a similar experience respond, and an attorney gathers them all into a batch claim. Claims of this kind were distinctly unusual in the past but are now an annual occurrence.

States lacking caps on noneconomic damages are particularly vulnerable to these factors. Without caps, awards for “pain and suffering” are unlimited and are almost always present in outlier cases.

The increase in severity adds to the costs of healthcare, which is already 18 percent of our gross national product.4 At The Doctors Company, we have seen a 55 percent increase in severity—the cost of the average claim—from 2000 to 2018. This drives an increase in insurance rates and the added costs are ultimately passed down to patients.

The rise in severity negatively affects us all, but unless jurors’ attitudes change, batch claims decrease, and caps on noneconomic damages are protected, outlier verdicts will continue to become more commonplace.

References:

National Practitioner Data Bank. Washington, DC: U.S. Department of Health and Human Services; 2018. https://www.npdb.hrsa.gov/index.jsp. Accessed September 4, 2019.

Burns B. MedPL market updates. Presented at: PLUS Symposium Series, Healthcare and Medical PL; March 12, 2019; Chicago, IL.

Compiled by Guy Carpenter & Company, LLC.

Centers for Medicare and Medicaid Services. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Tren.... Published December 11, 2018. Accessed September 11, 2019.