Should clinical negligence legal costs be fixed?

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As the NHS report on their pay-out of over one billion pounds in negligence compensation in the year to March 2015, the Department of Health has started a review on where efficiencies could be improved and money saved. This article sets out the background and ideas promulgated.

The NHS paid out over one billion pounds in negligence compensation in the year to March 2015. That is an eye catching, if not eye watering, figure. Even more breath-taking is that the NHS Litigation Authority estimates the money needed to settle all clinical negligence claims is 24 times that sum, though not all of it will be paid at once. The NHSLA estimates known and estimated liabilities are £28.3 billion, up from £13.4 billion in 2009. See the NHSLA annual report for more details.

So expenditure on negligence claims is very much on the mind of the Department of Health, at much the same time as improving patient outcomes is on the mind of the NHS generally.

In July 2015, the Department of Health published its Triennial Review of the NHSLA. The review considered a number of operational aspects, including where efficiencies could be improved and money saved. One such area was to question whether fixing claimant legal costs in clinical negligence claims could offer a costs benefit - as approximately 22 per cent of the clinical negligence expenditure arises solely from claimant legal costs.

As a result, a consultation on fixing costs in clinical negligence claims was due to commence this month and run until December 2015 (although the Government has just announced the full consultation will be postponed until early 2016). Prior to this though, a pre-consultation questionnaire was circulated by the Department of Health and numerous responses have been published in response.

What is the proposal?

Full details of the final consultation proposal are still awaited, but the pre-consultation sought views on whether all claimant recoverable costs should be fixed on a sliding scale for those clinical negligence claims with a value of less than £250,000. Such fees would be introduced to all claims where a Letter of Claim was served on or after 1 October 2016, and apply to costs incurred during the pre-action protocol; after a claim has been issued; and up to a trial. (Pre-action costs would be determined by the claim value, while post-issue costs would be fixed for key stages depending on when settlement occurs.) In addition, all expert evidence report fees would also be capped, and it was proposed that the fixed costs and ancillary rules would be sufficient to control the behaviour of all parties without further sanctions being required.

What are the potential benefits?

Reducing claimant legal costs would undoubtedly benefit all defendants’, and primarily the NHS's, pockets. Such an approach would offer greater certainty and also avoid further disputes about the costs (thereby incurring further costs on costs). The fixed fee schemes operating for specific personal injury claims under £25,000 for employers’ liability, public liability and Road Traffic Accident claims have demonstrated that proposals can work and deliver some savings.

What are the potential risks?

One of the key, and genuine, concerns is that the introduction of such a scheme will restrict access to justice for those injured. If costs are set too low then skilled solicitors will be unable to complete the work, and non-specialists may fill the void and increase costs by pursuing more ill-conceived claims in the future. It is also likely to prompt a rise in litigants in person - already a reality in all litigious areas – which increases defence costs. In addition, it may generate an inequality of arms where defendants will continue to have significant defence resources, while claimants will not.

It is unclear why it is proposed the scheme should apply to claims up to £250,000. This is significantly in excess of the other schemes referred to above. In addition, notwithstanding that clinical negligence claims are often complex due to the medical, legal or value issues which arise, there is no suggestion that liability admissions are required; scheme exceptions could apply; or a streamlined IT system would support the scheme. Concerns have therefore arisen that the scheme is seeking to be too broad-brush. For instance, a divide may appear between claimants themselves, for instance, due to the loss of earnings they claim and whether their job “permits” them to pursue a higher value claim outside of the scheme. Instead further statistics should be collected and analysed to make sure any scheme’s operation is practical and proportionate savings truly are available.

Is it that straightforward?

While the focus here is solely on saving money, the proposals overlook key factual issues. From a purely monetary perspective, April 2013 saw the introduction of the Jackson reforms, including Qualified One Way Costs Shifting (QOCS), cost budgeting, and the recoverability of CFA success fee uplifts and ATE premiums (save in relation to expert liability evidence) ceasing for newly funded claims. There has also been the introduction of a new pre-action protocol, which is not yet 6 months old, and increased court fees. Therefore the impact and costs savings of these changes are yet to be seen - given the time required for the changes to directly filter through and apply to all live claims - neither has it been acknowledged that these changes prompted a peak in “old style” claims. Accordingly the fixed fee discussion is somewhat premature.

In addition, whilst minimising the legal spend is key, improving the medical services offered (in any public or private clinical setting) so as to avoid these negligent errors would have a greater impact. Equally, ensuring hospitals own and manage their risks, and deal effectively with mitigating and lessening the impact of adverse outcomes when they do occur, ought to take more precedence. Therefore, by reducing specific costs via a fixed scheme, the incentive to prevent harm and manage risk better is reduced. To prevent the claims in the first place must surely be better for all?

Further, if expert fees are to be capped, then the medical profession must also “buy into” any scheme. Otherwise claimants may pay for fee shortfalls from their damages and/or defendants will have a wider pool of available candidates, if they can pay more.

Conclusion

The proposals appear to raise more questions at this stage than can reasonably and thoroughly be answered in the very limited consultation windows, if changes are to be implemented regardless by autumn 2016. Whilst costs savings are important and welcomed, prematurely introducing inadequately considered proposals will not only risk serious access to justice problems, but inadvertently undermine a greater need to manage risk and prevent claims arising in the first place.
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