Defensive Medicine - "A Costly Defense"

A recent independent national physician Gallup survey found that physicians attribute 26 percent of overall healthcare costs to the practice of defensive medicine. Of the physicians surveyed, 73 percent agreed that they had practiced some form of defensive medicine in the past 12 months.  According to a just-published e-book summary, "$1 in every $4 spent on healthcare each year is spent on unnecessary tests and treatments ordered by physicians solely to protect themselves against lawsuits."   

This article continues the interview with Rick Jackson, CEO of Jackson Healthcare and sponsor of the Gallup survey.

HTN: How did you get engaged with the topic of defensive medicine?

Rick Jackson: We did a survey of 1,900 doctors to understand the voice of the doctors. 90% of the doctors said that the number one priority was tort reform or some kind of malpractice reform. I was actually surprised by that. I was going to be speaking with senators and congressmen - - I was on a panel and they wanted me to talk about defensive medicine. And to be honest at that point in time it wasn’t one of my best subjects. So we followed up to find out how much defensive medicine is costing. We couldn’t find any quantification of defensive medicine – how prevalent it was.

We did a study of 3,000 doctors in late November – our survey came back with 34% percent of total healthcare costs tied to defensive medicine. We knew we had something. A little bit of the story is that we decided nobody’s going to know who Jackson Healthcare is outside of healthcare - - we have some reputation within healthcare but not outside - - especially among politicians. We hired Gallup to quantify and ask the same question. Gallup did the interviews and came out with a lesser percentage than we came up with but still a significant number.

When we went to Washington, most of the people that would talk with us were Republicans because tort reform is something that they’re talking about. Well the good news is that this is a lot larger number than anybody thought. Malpractice expense is the tip of the iceberg. Defensive medicine is the real cost. So the good news is that this is a big amount of money and a big opportunity for us to reduce cost which is the problem of healthcare, not the symptoms that I think Washington has been addressing.

But the bad news is that tort reform doesn’t work. They (the politicians) all said “what?” Well it works a little bit on reducing malpractice cost. But as far as doctors practicing defensive medicine, it doesn’t.

HTN: Why won’t tort reform work?

Rick Jackson: I should say traditional tort reform. What I find in medicine is that what’s most important is to identify the problem. So what’s the problem we’re trying to solve? This is a “financial Armageddon” among physicians. The United States is the only major country in the world where the physician is personally financially liable for medical errors. Meaning that they can make one mistake then be unable to make a living and someone can take everything that they have. That’s different than anywhere else. Canada doesn’t have that. England doesn't have that. Australia and New Zealand - - they don’t have the kind of system that we have.

So physicians have everything to gain by protecting themselves. In fact, I was actually surprised - - we basically copied Wikipedia's definition of defensive medicine and it is medically unnecessary treatment. That’s it. We’re ordering medically unnecessary treatment for the purpose of protecting ourselves from a lawsuit. In the states that have tort reform, doctors practice just as much defensive medicine as the people that didn’t have it. Like in Texas especially, we drilled down even further. There might have been a percentage point difference, but it’s materially the same. Tort reform hasn’t modified their behavior because at the end of the day the physicians are worried about “financial Armageddon”.

HTN: What are the implications from a policy perspective?

Rick Jackson: What it requires is a different solution. If you look at Gallup’s survey, there’s $650 billion per year in defensive medicine. Our survey was $850 billion per year in defensive medicine. So somewhere between those two numbers there’s that potential amount. And even if that’s half right, it’s trillions of dollars in the next several years if we could solve it.

My solution was to come up with a system like workers comp - - the physician is accountable professionally, but financially they’re not liable. Anybody could file a claim with a medical review board of physicians that are independent -- they would decide whether or not there was a medical error. If there was, then the compensation board, just like in workers compensation, would decide what that amount is.

Florida actually did that with ED (Emergency Department) doctors just recently. You can’t sue a doctor - - the state is going to be responsible for lawsuits. I don’t know if that will be constitutional in Florida or not, but that’s what’s got to happen. The smart thing about that is that the ED is the number one profession that is practicing defensive medicine. Somebody comes in the ED and they’re going to run every test in the world on them because if anything was ever wrong with that patient that they didn’t pick up, they can get sued. So the one out of a thousand patients that they might have missed, they’re going to charge the other 999 for medical tests just to make sure they don’t get sued.

HTN: There was a 2004 CBO study that said that tort reform wouldn’t get rid of the practice of defensive medicine because there’s too much money at stake. (“Some so-called defensive medicine may be motivated less by liability concerns than by the income it generates for physicians or by the positive (albeit small) benefits to patients.”)

Rick Jackson: I’m surprised the CBO would say that since they don’t know anything about the way healthcare is practiced.

First of all, tort reform – the way it’s being done in Texas and the way it’s being promoted– the CBO is right for a different reason. Our studies are proving that tort reform with caps and penalties– it doesn’t eliminate or certainly doesn’t even discourage defensive medicine. So from that standpoint I think they’re right.

What they’re wrong about though is that the healthcare costs are in prescriptions, in-patient admissions, MRI’s, diagnostic tests and all of those. Doctors don’t get money for that. That’s an illogical comment because there’s a perception that doctors get all of the money in healthcare. It’s just a bad perception – it’s wrong. So doctors don’t make money off of that. Are there some doctors that get some money off of MRI if they have one in their building? Maybe. But a doctor that admits a patient into the hospital doesn’t make money off of the hospital. They don’t get any kickback from drugs. It’s illegal to get kickbacks from lab. It’s illegal to get kickbacks to refer to another speciality. So I think that’s wrongheaded. They don’t make money off of defensive medicine. How many ER doctors that are practicing defensive medicine get money off of anything they order? Zero.

HTN: The ED case is an interesting example.

Rick Jackson: That’s the best example. They don’t get anything out of it. They might get a percentage of billings for their professional services, but they don’t make any money off of anything else. So they have nothing to gain by doing that.

HTN: Are there any studies or examples where there have been changes in the rules that have resulted in changes in outcomes that would be along the lines that Gallup is predicting?

Rick Jackson: There haven’t been and the trial lawyers in our lifetime may not permit it. Constitutionally, people think it’s a violation if you can’t sue somebody for some kind of tort. Here’s what we’re doing: we’re paying $650 to $850 billion per year to get $4 billion of malpractice claims to patients. Two thirds of the malpractice claims that are paid every year go to insurance companies and attorneys, the other third goes to patients.

Is it worth us paying that much more money for them to get that money? Versus under my system, there would be twice as many people that get money because doctors would come forward then and be able to admit when they make mistakes. And more people would be able to file a claim with or without an attorney and get more money.

It’s one thing where I come and hurt you. It’s quite another thing when the doctor is doing the best they can and they make a mistake and they clip the wrong vein for example. All lawsuits start with malicious intent to harm. That’s crazy. Doctors just don’t do that. It’s an education issue.

We talked with Mitch McConnell’s office, John Boehner’s office, Tom Colburn who’s the doctor out in Oklahoma, Tom Price who’s a congressman and doctor in Georgia. They were surprised to hear that tort reform doesn’t “solve” defensive medicine. They were surprised by that, or their staff was. They were scratching their heads. So the issue is “how do we solve that problem”?

One of the reasons that I think defensive medicine is more prevalent now than several years ago is that in our later survey, 87% of the doctors said that a mentor or a physician told them horror stories. So most doctors are being taught it now. That’s the problem. The younger doctors are practicing defensive medicine more than the older doctors, which seems strange since I would guess that the older doctors have more to lose.

HTN: Regardless of what the right prescription is to fix it, the numbers are just staggering.

Rick Jackson: You hit on the main message. No matter which way we do it, this is a big number that we’re paying for the “privilege” of having doctors that have personal financial liability. This is a big number. The question is are we willing to keep doing it?

I had a couple of people ask me if doctors would just lie about this (on the survey). You’ve been in healthcare – you know – why would doctors lie about this? What do they have to gain? Again, they don’t make money off of it. If the CBO was accurate, they’d probably say “no – we don’t practice defensive medicine because we make money off of it”. So there’s really no reason for them to lie about it.

Most people don’t know that all of healthcare is ordered by physicians. It’s illegal to go into a hospital and get a diagnostic test or get a prescription without the permission of a physician. So if the doctors don’t know who’s practicing defensive medicine, then who does? We felt like it was the right source - - if they don’t know, nobody does.

HTN: There are some experiments in the health reform legislation around defensive medicine. There’s some move to see what can be done there. What are your thoughts about the bill?

Rick Jackson: $50 million to do some kind of a test. That’s not even a serious bill. The problem is that we have to come up with a good solution. There are some solutions that will significantly help. My solution is the best, because I’ve tried to eliminate the problem of personal financial liability – that’s the problem.

But one of the complaints that doctors have is that they’re never reviewed by a jury of their peers. Because a jury of their peers would be other physicians or people that know what they’re doing.

One of the things that Newt Gingrich’s firm has done is to come up with a different solution - - healthcare courts. It would be judges and experts that only do healthcare. And therefore they would know what’s really going on, eliminating some of the frivolous lawsuits. That would probably help with defensive medicine. I don’t think it would necessarily do away with it, at least until physicians are not personally financially liable.

If you ask people who pays for doctors mistakes, they’ll say the hospital or the insurance company. They don’t know that the physician is personally financially liable. People have watched “General Hospital” forever, or they see “House”, and it’s always the hospital saying “we’re going to have to pay this malpractice claim” - - of course that’s television.

If everybody already thinks that doctors aren’t personally financially liable, why not go ahead and make that accurate? Because that would solve the problem.

HTN: There is a just published study on physicians’ views of defensive medicine in the Archives of Internal Medicine. The study suggests savings in the $60B range – an order of magnitude less than the Gallup survey.

Rick Jackson: It’s our understanding that the $60 billion figure comes from Amitabh Chandra, Professor of Public Policy with Harvard Kennedy School of Government. According to a New York Times article, Chandra’s figure is cited by both the American Medical Association and trial lawyers. Honestly, we don’t know what data he used to arrive at his number, and we don’t know how old this data is. We sent Mr. Chandra our survey information on June 30th.

In our study, we asked physicians to estimate what percent of overall healthcare spending do they believe is defensive in nature. In our study with Gallup, physicians estimated 26 percent to be defensive in nature. In our independent, online study, physicians estimated defensive spending to be 34 percent. As you know, a recent report from The Centers for Medicare and Medicaid Services recently estimated overall U.S. healthcare spending in 2009 to be $2.5 trillion. Applying these physician estimates to overall spending brings us to between $650 billion and $850 billion being spent each year on medically unnecessary services. We believe ONLY physicians know what influences their practice of medicine.

We have to make sure that, in our quest to put a price on defensive medicine, we don’t lose sight of the big opportunity that exists here: billions of dollars in annual savings can be realized if we focus on addressing the root problem driving defensive medicine practices. If Chandra’s numbers are close, our savings could be tens of billions of dollars each year. If our numbers are closer to reality, our saving could be hundreds of billions. No matter what the real number is, we can’t ignore the significance of this opportunity. It requires action.