The unaffordable cost of medical malpractice

Published on
9 min read

Entrenched attitudes, lack of investment and a failure to intervene early are linked to the cost of dealing with malpractice claims. We look at some of the conversations that have or ought to take place to tackle this unaffordable problem.

Earlier this year my colleague Sophie Briggs wrote about the impact of the Personal Injury Discount rate or “PIDR”, on compensation. Since then the discount rate has changed, and also since then, NHS Resolution have published their 2018/19 annual report on (among other things) the cost of malpractice indemnity in the NHS.

The discount rate

The PIDR is a figure used to help calculate lump sum compensation payments for high value personal injury claims (which include medical malpractice claims - referred to by the NHS as “clinical negligence” claims). It reflects the fact that someone getting a lump sum compensation payment to cover future losses (for example care, or lost earnings) will typically invest it, or part of it, and expect to get a return on the sum invested. The lower the discount rate, the higher the compensation awarded, and the greater the cost to compensators, be they discretionary indemnity providers, regulated insurers or the NHS, and those who fund the NHS, namely taxpayers – you and me.

The PIDR was adjusted in 2017 when it was lowered from plus 2.5% to minus 0.75%. This triggered concerns, and in some quarters, outrage, that claimants were being substantially over-compensated, increasing financial pressure on public services that have large personal injury liabilities, such as the NHS, with knock-on effects on the tax-payer.

In the summer of 2019 it was announced that there was to be an increase in the discount rate of 0.5%, increasing it to minus 0.25%. In their press release, the Lord Chancellor’s office explained an example of the impact as follows:

30 year old male with annual financial costs of £50,000. Under the previous minus 0.75% PIDR he would be awarded £2,935,500. Under the new rate (minus 0.25%) he would be awarded £2,565,250, a difference or reduction of £370,250.

The Lord Chancellor’s decision to increase the PIDR came after an extensive review – which formed part of reforms set out in the government’s Civil Liability Bill 2018 – to ensure a more balanced approach that would give victims full and fair compensation. It was informed by a public call for evidence which collected a wide range of views, including from personal injury lawyers, insurers, investment experts and public bodies – with the new rate coming into force on 5 August 2019.

Under the Civil Liability Act 2018 the new PIDR will be reviewed within a five-year period, with future reviews advised by an expert panel and required within five years of the last.

Malpractice costs

Although the rate, having increased, will reduce damages payable, the cost of meeting medical malpractice awards is forever increasing. The Medical Protection Society championed a campaign for reform. In their article of 23 June 2017 they reported that:

NHS clinical negligence costs have increased by 72% over last 5 years (to 2017). Costs could reach £2.6bn a year by 2022. Current yearly costs (as at 2017) equated to the cost of training 6,500 new doctors.

And it campaigned for reforms that it, and many, still consider are required to strike a balance between compensation that is reasonable, but also affordable. Not all the contributions and critiques of that approach were reasonable, and some are certainly not reportable here.  It is an issue that divides people, particularly those “unscrupulous law firms” and others who make a living from the industry that prosecutes and responds to such claims.

Now it may seem somewhat insensitive for me to refer to a group of law firms as “unscrupulous”, but those were the actual words used by the then Secretary of State for Health, Jeremy Hunt:

“Unfortunately, what we often see in lower cost claims is a deeply unfair system where unscrupulous law firms cream off excessive legal costs that dwarf the actual damages recovered. We believe this creates an adversarial culture of litigation, which is inflating insurance premiums and drawing away resource from the NHS at a crucial time.”

That statement heralded the announcement by the Department of Health on the 30 January 2017 that:

“The government intends to impose a new, fixed cap on all clinical negligence cases up to £25,000 to prevent rising litigation costs within the NHS. There are numerous examples of lawyers who profit from the NHS by charging more than 80 times the amount awarded to the victims in minor claims.

“In one case, lawyers claimed £83,000 in legal costs for a case in which the patient was awarded £1,000. These costs contributed to a total bill for the NHS of £1.5 billion in financial year 2015 to 2016.

“Currently, there is no limit on legal costs that can be recouped and the money claimed by lawyers takes vital funds away from NHS trusts. It is expected the new cap will help the NHS save up to £45 million a year.”

But that consultation hit the long grass, and there it has stayed, or as the Law Society Gazette reported in October 2019

“Claimant and defendant sides fail to agree clin neg fixed costs levels”

I detect no real interest in fixed costs. Whilst capping costs would reduce the overall spend on medical malpractice, it does seem a little bit like shutting the door after the horse has bolted. The problem of affordability, whatever it is, remains in the “too difficult” box, with the lid firmly shut…and screwed down.

Why not then try something even more radical, like preventing negligent errors and omissions happening in the first place? Not an original thought.

Claimant’s legal costs

As we have previously reported, even excluding the PIDR changes, in the last ten years the costs of dealing with medical malpractice has soared.  A National Audit Office 2017 Report found that in 61% of cases (involving the NHS) the Claimant’s legal costs of pursuing a claim were greater than the value of the damages the Claimant recovered.  

One reason cited for such high costs is the length of time it typically takes to resolve a dispute – in 2016/2017 the average time 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 (if they win) an enforceable costs order against a Claimant in a claim involving personal injury.  As such, logic would suggest that a Claimant, often on a no win no fee type arrangement, with no skin in the game (some would say) has less incentive, or nothing to gain, in settling the claim early and at a sensible figure, as there is no cost penalty if they don’t.  Whilst the defence can make an offer to settle, bear in mind this will usually be after the injury has been done, the lawyers instructed and all their efforts have gone into ensuring that at the point in time that the claim is actually presented to the hapless defendant (and their indemnifier or insurer) a relatively large sum in legal costs has already been incurred.

It has not helped that for many claims that arise from NHS treatment, there has been little or insufficient incentive or resource aimed at tackling early resolution. An NHS body may know something has gone wrong, undertaken their investigations and come clean, as the Duty of Candour requires, only to sit back and then wait until they are presented with a claim, when the smart thing would have been to offer redress, early.

Logically, this entire approach (sit back and wait for the claim to arrive) must inflate both the sum required to settle a claim, and the Claimant’s legal costs. It also plays to the regular complaint that the NHS do not proactively investigate and deal with medical errors, unless it arises from a potentially hugely expensive obstetric claim.

In his commentary in the most recent NHS Resolution annual report the Chairman reports that:

“At current prices the annual cost of harm was about £7 to £8 billion in recent years. In 2018/19 the cost of harm was approximately £9 billion of which approximately 60% related to maternity claims, the increase being largely attributable to the impact of decreasing discount rates.”

He went on to report that the claims provisions have now increased by “a further” £6 billion to £83 billion. He went on to commend a strategy (which is yet to emerge) to tackle the costs (ie the legal costs) of dealing with such claims, having noted both the custodial sentence meted out to one claimant who exaggerated their claim, and the striking off of a solicitor who supported such a fraud. Am I being asked to accept all claims are exaggerated or fraudulent? Am I alone in thinking these are numbers about which something ought to be done?  

The NHS Resolution CEO also talks about the “robust” approach to challenging claims, whilst acknowledging that the number of claims remains the same, and has done for over a decade. She speaks of the beneficial impact of the early notification scheme in maternity type cases, and so identifies a clear link between early action and better, ie at least less costly outcomes.

It is quite something to know how the problem might be resolved. It is quite something to know that, and not resource the solution effectively.

Many healthcare organisations do not effectively learn from their past mistakes. They do not invest enough in training and risk management, dispute resolution or better patient outcomes. That is the real problem. Whilst that problem remains it is pointless tinkering with the cost of claims, for example with capped costs. All that will look like is a rather mean policy which allows errors to happen, and sometimes happen again, whilst stealing away from responsibility, and pointing the fingers at the very people the hapless patients and clinicians (now claimants and defendants) turn to, as no one else is fighting their corner.

Do not imagine for a moment that I do not see the momentum of the claimant lobby and claims industry (and not just in medical malpractice) that costs so much each year. I also see very effective claimant lawyers, some of whom I will regularly refer people to, who approach me to take on their claims, and which, for conflict reasons usually, I cannot.

So whilst no doubt the Government will at some point change the rules to try and cap costs, because it can, I cannot see that move having any useful purpose in solving the greater problem of stopping the errors happening in the first place. That needs investment.

Reducing claims and costs

A starting point is of course to ensure high clinical standards which reduce the incidents of malpractice arising. Clinicians should also show empathy and ensure patients understand decisions made about their treatment.  This may actually protect clinicians from having a claim made against them.  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 a finding that patients were making appointments with their GP after receiving a letter from a consultant, simply because the patient did not understand what the consultant’s letter meant.   It’s not rocket science.

On top of that, early and active intervention when errors are made. Early proactive intervention and redress will reduce the cost of claims, and learning from those events, if applied properly, will reduce the number of future errors. Only last month in the Journal of Patient Safety and Risk Management, author Albert Wu wrote about the “golden moment after an adverse event”. I know exactly what he means.

It is clear that the medical profession as a whole, and the NHS in particular (and of course the wider interested public) cannot afford the continuation of the current situation. It would be good to see less partisan support for the status quo and the lip service paid to change, or tinkering with peripheral issues that do not address fundamental problems, and see real collaboration on better patient outcomes, especially when someone has been injured due to malpractice.

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