The real cost of clinical negligence claims

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The revised discount rate is expected imminently but will this be enough to tackle the rising costs of clinical negligence claims? Possibly not. This article explores the reasons for escalating fees and how the issue can be stemmed.

Over the last decade, there has been a continuous rise in the number of clinical negligence claims made both against the NHS and other indemnity and insurance providers, with the number of claims made against NHS trusts having reportedly doubled between 2006 and 2016.  However, in 2017 the number of claims made against the NHS, the Medical Defence Union and the Medical Protection Society (“MPS”) appeared to reach a plateau, with new claims reported to be either at the same level or slightly decreased from 2016.

Whilst the number of claims appears (for this year at least) to have reached its peak, the costs of claims (both compensation payable and legal costs) continued to rise.  According to the National Audit Office 2017 report, ‘Managing the Costs of Clinical Negligence in Trusts’, (“the NAO 2017 report”), “the costs of clinical negligence claims is rising at a faster rate year-on-year than NHS funding”.  This is worrying.  In the NHS, increased costs for clinical negligence claims diverts funding from front line services and is likely to impact on clinical standards in the future.  Likewise, medical indemnity providers and insurers report increasing claims costs.  As the MPS recognises in their 2017 annual report; “When the cost of clinical negligence increases, the cost of indemnity must also increase to reflect this”.  This puts a higher burden on doctors, which is likely to be passed on to their privately paying patients.

Whilst it is important that people who are injured as a result of clinical negligence are fairly compensated, the level of compensation payable must be sustainable and proportionate.

Why are Clinical negligence costs rising?

Personal Injury Discount Rate (“PIDR”)

On 20 March 2017 the PIDR (used to calculate damages for future loss where the loss is incurred over a number of years) decreased from 2.5% to minus 0.75%.  This dramatically increased damages payable in successful claims.  The 2017 NHS annual report showed that damages payable to claimants excluding PIDR was £1,288m; the PIDR inclusive figure was £1,632m – an increase of 33%.  Whilst the NHS was given additional funds to help meet the shortfall caused by the PIDR, the funds were insufficient in comparison with the increased cost.  No such funds were made available to indemnity providers and insurers. 

The Lord Chancellor recognised that there were issues with how the PIDR was set, and particularly its impact on the NHS.  In response to this, the Civil Liability Act 2018 (which came into force on 20 December 2018) sets out details of how the PIDR should be set and how frequently it should be reviewed.  Pursuant to that Act, a review of the PIDR is required to commence within 90 days (by 20 March 2019), and could take 140 days to complete.  It is expected a new rate will be announced by the end of August 2019. 

Claimant’s legal costs

Even excluding the PIDR, in the last ten years the costs of clinical negligence has soared.  NAO 2017 Report found that in 61% of cases (involving the NHS) the Claimant’s legal costs of pursuing a claim is greater than the value of the damages the Claimant recovers.  

One reason cited for such high costs is the length of time it typically takes to resolve a dispute – in 2016/2017 the average was 426 days, compared with only 300 days in 2010/11.   The reason for these delays is unclear. Some commentators suggest the delay is caused by defence lawyers taking an unreasonably defensive stance even when liability is established.  However, the introduction of qualified one-way costs shifting (“QOCS”) is also cited as a potential cause.   

Following the introduction of QOCS in 2013, it is unlikely (unless the Claimant’s case is struck out or involves fraud) that the Defendant will obtain an enforceable costs order against a Claimant in a claim involving personal injury.  As such the Claimant has less incentive to settle the claim early and at a sensible figure, as there is no cost penalty for failing to do so.  Logically, this must inflate both the sum required to settle a claim, and the Claimant’s legal costs for doings so.

Conclusion:  What can be done to reduce the numbers and costs of clinical negligence claims made?

A starting point is to ensure high clinical standards which may reduce the incidents of clinical negligence arising – although to be clear there is no indication that the rise in the number of claims in any way correlated with a decline in standards. 

Clinicians should show empathy and ensure patients understand decisions made about their treatment.  This may protect clinicians from having a claim made against them.  For example, in September 2018, the Royal College of Medical Professionals published guidance for clinicians to explain how to write to patients in a way patients can understand.  This arose from finding patients were making appointments with their GP following receiving a letter from a consultant, simply because the patient did not understand what the consultant’s letter meant.   

In terms of reducing damages payable, as mentioned above, a review of the PIDR is likely to assist. The current level of damages flowing from the PIDR is unsustainable.

Following a government consultation in 2017, a CJC working group has been considering the proposal of introducing fixed level recoverable costs for claims of up to £25,000.  The recommendations from that review are due to be released imminently.  Claimant solicitors are concerned that fixed costs would result in a lack of access to justice.  Without knowing what the fixed costs proposed are, it is impossible to comment.  However, it is clear that the medical profession as a whole, and the NHS in particular, cannot afford for the current situation to continue.

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