Risk Management: Extreme Honesty May Be the Best Policy

In the context of hospital operations, the term risk management usually refers to self-protective activities meant to prevent real or potential threats of financial loss due to accident, injury, or medical malpractice. When a malpractice claim is made against an institution in the private sector, risk managers coordinate the defense against patients, their dependents, and their attorneys. The medical institution and the patient often become adversaries, and patients and attorneys frequently seek punitive as well as loss-based damages. One can assume that, as in divorce proceedings, anger at a perceived betrayal of trust is part of patients' motivation. Hickson and colleagues (1) found that of 127 families who sued their health care providers after perinatal injuries, 43% were motivated by the suspicion of a cover-up or by the desire for revenge. In a survey of 149 randomly selected patients in an academic internal medicine practice, Witman and coworkers (2) found that almost all of the respondents wanted their physicians to acknowledge even minor errors; many stated that they would respond to an unacknowledged moderate or severe mistake by filing a lawsuit. Other authors have cited breakdowns in physicianpatient (3) and hospital-patient (4) relationships as motivation for litigation. Medical lawsuits are expensive. Press and DeFrances (5) studied all of the federal tort trials and verdicts (including those involving the Veterans Affairs system) that occurred during 1994 and 1995 (5). They found that 90 of the 283 federal medical malpractice cases that reached verdicts (32%) resulted in awards to the plaintiff. Of the 90 awards made, the median amount was $463 000, 26 exceeded $1 million, and 12 exceeded $10 million. Under the Federal Tort Claims Act (6), the United States is not liable for punitive damages. However, federal judges have wide discretion in determining awards. The upper limit on the size of an award is determined by the plaintiff's claim and by the applicable state law of damages. In cases that involved egregious negligence and resulted in awards of millions of dollars, we inferred that the high assessments were substitutes for punitive awards. Press and DeFrances (5) found that a mean of more than 2 years was spent in litigation in each of the 283 cases studied; this length of time represents additional expense and effort for all participants. For the entire Veterans Affairs medical system, the average cost of liabilities between 1990 and 1997 was $720 000 for court judgments, approximately $205 000 for cases settled at suit or by general counsel, and $35 000 for local settlements. Lower payments are associated with locally negotiated settlements; therefore, it makes financial sense to avoid litigation. A special report from the Bureau of Justice Statistics (7) studied the 75 largest counties in the United States. In these counties, 403 medical malpractice cases were won by plaintiffs; the mean award was $1 484 000, and 24.8% of the awards exceeding $1 million. Although much of this award money was meant to compensate plaintiffs for economic losses, a substantial proportion was undoubtedly intended to punish defendants for perceived gross negligence or outrageous behavior. The self-protective model of risk management is not universal. In 1989, the Board of Directors of the Royal Victoria Hospital in Montreal, Quebec, Canada, approved guidelines for disclosing medical errors to patients and their families (8). The guidelines, which proposed honesty about errors, were produced by the hospital's clinical ethics committee to provide a framework that would enable staff to disclose incidents to patients in a helpful manner. Currently, significant incidents continue to be disclosed to patients or families in accordance with the guidelines. However, no system has been used to track practitioners' adherence to the guidelines or to examine the guidelines' financial consequences (O'Rourke P. Personal communication). Wu and colleagues (9) comprehensively reviewed the benefits of telling patients the truth and reviewed the possible consequences to the physician and the patient under various circumstances. They did not specifically address the responsibility of the medical institution; however, because health care institutions, like physicians, serve the patient, the ethics of their activities should be similar. In 1995, the Department of Veterans Affairs rewrote the section of its policy manual that dealt with risk management policies; this material is now incorporated into a section called Patient Safety (10). Referring to patient injury caused by accidents or negligence, the new wording stated that the medical center will inform the patient and/or the family, as appropriate, of the event, assure them that medical measures have been implemented, and that additional steps are being taken to minimize disability, death, inconvenience, or financial loss to the patient or family. The manual also stated that District Counsel will advise the medical center Director about informing the patient and/or family of their right to file Application for Compensation and Pension or to file an administrative tort claim. In circumstances involving malpractice or accidental injury, the Department of Veterans Affairs requires its facilities to continue their safeguarding relationships with patients and to provide advice about the available remedies, which may include claims against the government. Although this policy is ethically laudable, its financial effects could be counterproductive. However, one Veterans Affairs facility, the Veterans Affairs Medical Center at Lexington, Kentucky, has operated under such a policy since 1987. We examined the use of this policy at the Lexington facility from 1990 through 1996 and found that on the basis of this center's experiences, the economic outcome could be positive. Experiences of One Veterans Affairs Medical Center The Veterans Affairs Medical Center in Lexington is affiliated with the University of Kentucky College of Medicine and provides primary, tertiary, and long-term care to approximately 18 000 veterans. During the study period, services performed included invasive cardiologic procedures, orthopedic procedures, cardiac surgery, and neurosurgery. Ninety residents support the activities of the clinical services, and approximately 400 physicians have staff privileges. The Lexington facility is one of two Veterans Affairs medical centers in Kentucky and is a tertiary care referral center for patients from smaller nearby Veterans Affairs facilities. Available beds (excluding nursing home beds) have decreased from 924 to 407 over the past 10 years. In 1987, after losing two malpractice judgments totaling more than $1.5 million (partly because of inadequately prepared defenses), the management of the Lexington center decided to use a more proactive policy in cases that could result in litigation. This new policy was intended to better prepare the risk management committee to defend malpractice claims by identifying and investigating apparent accidents and incidents of medical negligence. However, when investigation identified an incident of negligence of which the patient or next of kin was apparently unaware, ethical issues arose. The committee members decided that in such cases, the facility had a duty to remain in the role of caregiver and notify the patient of the committee's findings (Appendix). This practice continues to be followed because administration and staff believe that it is the right thing to do and because it has resulted in unanticipated financial benefits to the medical center. Since this policy has been in place, many settlements have been made. Five settlements involved incidents that caused permanent injury or death but would probably never have resulted in a claim without voluntary disclosure to patients or families. Many other settlements involved patients who had expressed dissatisfaction with an outcome; after investigation, the committee agreed with the patient and initiated a settlement. All cases were negotiated on the basis of reasonable calculations of actual loss. Thorough, timely case reviews allowed the committee to defend against nuisance claimsclaims without merit that institutions sometimes settle without contest only to avoid the cost and work of a lawsuit. During the 7-year period that we examined in detail (1990 through 1996), the Lexington facility had 88 malpractice claims and paid out an average of $190 113 per year (a total of $1 330 790 for 7 years). The average payment per claim was $15 622. Seven claims proceeded to federal court and were dismissed before trial. One claim proceeded to trial and was won by the government. The financial consequences of this somewhat radical policy of full disclosure seem moderate. Although satisfied with this outcome, we attempted to determine the facility's position on the liability scale as a result of this risk management policy. It is difficult to compare the risk liability of different health care facilities without comparing workload, inpatient days, size and complexity of the facility, numbers and types of surgical procedures, and regional differences in propensity to sue. Because much of this information was unavailable, robust comparisons were not possible. Instead, we compared the tort claim experience of the Lexington facility with that of all similar Veterans Affairs medical centers located east of the Mississippi River (n=38) during the same 7-year period. Complete information on tort claims was unavailable from 1 of these hospitals, and 1 hospital had opened only recently; therefore, we based our comparison on the remaining 35 facilities. All of these facilities, including the Lexington facility, primarily perform tertiary care and are closely affiliated with medical schools. We obtained tort claim data from the Department of Veterans Affairs Tort Claim Information System (Office of General