This report is presented pursuant to 2003 Senate Resolution No. 160, which directed the Joint State Government Commission to “study the feasibility of establishing an alternative to the existing liability system with regard to medical professional liability actions.” To guide the study, the Commission assembled an advisory committee of representatives of relevant private interests and public agencies. The advisory committee met five times to discuss the policy issues included in this report. Participation on the advisory committee does not necessarily imply endorsement by its members of all the findings and conclusions in this report.

As background, chapters 1, 2, 3, and 4 comprise material prepared by Commission staff on the recurring medical liability crises that have faced Pennsylvania, criticisms of the present system for compensating medical malpractice, the recent measures that the General Assembly and the Pennsylvania Supreme Court have taken to respond to medical malpractice issues, and recent studies and initiatives to address patient safety.

The remainder of the report consists of policy analyses of the reform strategies discussed by the advisory committee.

No-Fault. Many participants in the medical liability debate advocate substitution of the tort system with a “no-fault” or strict liability system similar to workers’ compensation. A key component of this system is the use of an “avoidability” test under which the patient would be compensated for an adverse outcome, whether or not any provider was demonstrably at fault. Different tests for compensability may apply, the most prevalent of which is the “avoidability” test, under which the event is compensable if it would have been avoided if the best medical practice had been followed, even where the treatment was not negligent under prevailing practices. The determination of liability would be made by an administrative body rather than a court, with the right of review by an appellate court. Some proponents of this system envision a move toward “enterprise liability,” so that the costs of the awards would be shifted from individual practitioners toward hospitals and health systems, including health systems jointly managed by hospitals and physicians. Also contemplated is a substantial reliance on scheduled compensation formulas, under which the amount awarded for particular injuries would be determined by a predetermined table for the more common injuries.

The main benefits argued for this system are that it would speed up and broaden eligibility for compensation and lower litigation costs. No-fault is the only alternative designed to systematically provide consistency of compensation and link the compensation system with medical practice, thus potentially improving patient safety. Critics predict the more lenient standard of liability would cause the costs of the program to spiral out of control. They also argue that the standard of liability is unfair to providers because it holds them liable for hazards of medical practice that are beyond their control.

No state presently uses a no-fault system for the broad run of medical patients. Florida and Virginia have instituted a no-fault system for patients with neonatal brain injury. New Zealand and Sweden have long-standing programs in conjunction with broad public health insurance coverage. Studies have indicated that a broad no-fault program could be instituted within a reasonable cost, but compensation would have to be limited in various ways, such as a four- or eight-week disability threshold or a bar to recovery of non-economic damages.

The no-fault medical liability system offers the theoretical prospect of compensating injured patients with a substantial savings of time and money. By giving a broad scope to expert determination of medical avoidability, no-fault may be the alternative that would best foster continuous improvement in medical practice. At the same time, institution of such a system for the broad run of medical patients would represent a radical departure without a track record of success in any other state. Such a system could change nearly every aspect of injury finding and resolution—the standard of care and coverage, the rules of damages, the forum and process of decision making, and the bearer of financial risk.

If the no-fault approach is considered promising, it would be prudent to prepare the way to adoption by careful empirical study. Discussions aimed at formulating a demonstration project have been convened under the auspices of the Hospital & Healthsystem Association of Pennsylvania (HAP), and a complete proposal is expected to be presented this spring. The plan will likely require funding and other support from the Commonwealth. The representatives of the hospitals and the physicians strongly support further exploration of a no-fault compensation system through a demonstration project.

Screening Panels. Under this alternative, medical malpractice suits are reviewed by a nonjudicial panel before they can proceed to trial. This alternative has been implemented at one time or another in Pennsylvania and 30 other states and is currently used in 20 states in a variety of configurations.

In Pennsylvania, a screening system called the Arbitration Panels for Health Care was instituted as part of the Health Care Services Malpractice Act of 1975 (HCSMA), but the Pennsylvania Supreme Court invalidated it in 1980 because it found that the delay in the processing of cases through the arbitration system effectively denied plaintiffs the right to a jury trial. Screening panel legislation can avoid such a challenge by including reasonable time limits, but the program must then be staffed and funded robustly enough to meet those deadlines. Other challenges to the validity of screening panel legislation have been mostly unsuccessful.

The screening panel strategy suffers from a lack of clarity about its underlying aim which has been variously identified as screening claims, improving expertise, and expediting settlement. As these goals somewhat conflict with each other, critics charge that this system has not demonstrably done any of them well. The few academic studies of screening panels do not support their efficacy in significantly improving the handling of malpractice cases or lowering malpractice premiums, except for some success with ob/gyn physicians. The advisory committee did not recommend that the General Assembly place a high priority on consideration of screening panels in preference to other policy options, at least until it is shown that the current certificate of merit procedure has failed to adequately discourage weak claims.

Specialized Tribunals. This alternative would retain the present negligence standards of medical professional liability, but transfer responsibility for deciding the cases to a specialized court or administrative tribunal. Specialized courts could improve the expertise of the decision makers, but it runs the risk of increasing the politicization of the system, especially combined with Pennsylvania’s tradition of an elective judiciary. Because statewide specialized malpractice courts permit fewer venues for trying malpractice cases, this measure is likely to increase travel expenses, which would fall especially hard on plaintiffs. Judicial expertise may also be concentrated by a medical malpractice division within the county trial court, but such a division can be established only in the few counties that see enough medical malpractice cases to make it feasible.

Specialized courts for highly technical classes of litigation have been established at the federal level, and some of these courts have been successful. Their success depends, among other factors, on whether their area of jurisdiction is clearly demarcated, whether there is a broad consensus on the overall goals to be served by the area of law in question, and whether that area seems to be in need of greater cohesion and coherence of decisions. The effect of the specialized court on the litigants, the bar in that specialty, and the ability of such a court to attract judicial talent must also be considered. Implementation of a specialized court must include consideration of the manner of selecting the judges and whether the specialization is to be at the trial level, the appellate level, or both.

The advisory committee considered this alternative worthy of consideration, but did not reach a strong consensus to recommend specialized tribunals over other policy options.

Arbitration and Mediation. Current law provides avenues for disposing of cases through alternative dispute resolution (ADR). The most common of these are arbitration and mediation. Neither has been used much in medical malpractice cases, although mediation is becoming more common.

Arbitration has much in common with the trial system in that it usually renders a final decision based on the application of traditional negligence law. By agreement, the parties submit the dispute to a panel of arbitrators, who may be selected on the basis of expertise in either medicine or malpractice law. The parties can vary the procedural rules in their agreement to a much greater extent than is possible in conventional litigation. Arbitration can be speedier and less expensive than conventional litigation, but the genuineness of the patient’s consent can become an issue, and the loss of judicial control over proceedings can be seen as a disadvantage. Federal and Pennsylvania law provide for arbitration, and the advisory committee had no recommendation on how it can be effectively encouraged.

Mediation is growing in popularity in Pennsylvania, partly because of the initial success of the Drexel University Hospital program and the Rush-Presbyterian Hospital program in Chicago. In mediation, the parties attempt to settle the case with the help of a trained mediator. Because settlement occurs only if the parties agree to it, the parties have greater control than under binding arbitration. Settlement may include terms other than money damages, such as a formal apology or the promise by the provider to change its treatment procedure. In Pennsylvania the Supreme Court has encouraged mediation by promulgating rules requiring its consideration. The Medical Care Availability and Reduction of Error (Mcare) Fund has been supportive of mediation and active in resolving cases through that method. The advisory committee applauds these initiatives, as well as the Drexel University Hospital program. Although some suggestions are discussed in this report, the committee did not arrive at any recommendation for a change in statutory law to encourage mediation. It cautioned that measures mandating participation in mediation are likely to be counterproductive because mediation is useful only if the parties’ participation is genuinely voluntary.