'Sorry Works' -- or Does It?

'Love means never having to say you're sorry,' according to Eric Segal's protagonist in the 1970s hit book and movie, Love Story. That may work in love but, increasingly, it may not apply to the more adversarial realm of medical malpractice and adverse patient outcomes.

Thirty years ago I began my claim-handling career by attending a five-week adjuster 'boot camp' in Atlanta run by a national third-party claim administrator. Wizened instructors drummed into the newly minted adjusters certain precepts as part of that indoctrination program. Conventional wisdom in handling medical malpractice claims ' as in handling any kind of liability claim ' was never to admit to fault or blame, even when there was fault or blame. A corollary was to make no premature offers of financial settlement, but to undertake painstaking investigation of a claim to assure oneself that it was meritorious and worthy of a settlement offer. Another tenet of claim handling was that you should never make any payment without getting a signed 'Release of All Claims' in exchange. In other words, you never give anything away; no signature on the release means no settlement payment.

A New Movement Afoot

Sacred cows make great steaks, as one wit quipped. The usual way of doing things is being stood on its head and, in the realm of medical malpractice claims at least, is being replaced in many cases by fresh approaches and claim resolution templates. Specifically, historical norms of adversarial claim approaches are being supplanted by 'apology programs,' which receive increasing interest and publicity.

For example, a recent Newsweek magazine article (spotlighting health care errors and apology programs) described how 14 hospitals affiliated with the Harvard Medical School have instituted a program that embraces four steps in the event of physician or hospital mishaps. Leape, L., 'Disclose, Apologize, Explain,' p. 50, Newsweek 10/16/06. Those four steps are:

• Disclose. Tell the patient and to the family what happened;
• Take responsibility;
• Apologize at once, on the theory that compassion diffuses anger and restores trust; and
• Explain to the family or patient what will be done differently in the future

In many cases, a fifth step appears: early offers of financial compensation.

This template strays from the classic legal and risk management advice that doctors and nurses should keep their mouths shut, making no admissions or statements of responsibility. Instead, the rationale is that disclosure, apology and early offers of financial compensation will drastically reduce the number of medical malpractice suits.

This has empirically been the experience at Veterans Hospitals in the 1990s and, more recently, in medical malpractice coverage programs run at the University of Michigan and by Colorado's COPIC, a private insurer specializing in medical malpractice coverage for doctors. All operate some variant of an 'apology program' aimed at fostering non-adversarial resolution of medical malpractice claims and adverse patient outcomes.

Patients facing adverse medical outcomes often want explanations and a sense of contrition in the face of medical error. They may decide to hire lawyers and file medical malpractice lawsuits simply to get 'the real story' on what happened, because they feel ignored, and that no one sat down to explain and apologize. Many hospital systems now embrace apology programs to address patient concerns over adverse outcomes and to avoid fractious claims and lawsuits. Over 15 states have passed so-called apology laws, which protect doctors' expression of remorse from being used against them in trial. Some credit apology programs with reducing claim payouts and improving loss ratios.

What Should You Believe?

While apology programs are garnering increasing publicity and interest, they pose challenges from an insurance coverage standpoint. No doctor wants to jeopardize his or her medical malpractice insurance coverage. Without such coverage, a physician might face possible bankruptcy from even spurious liability claims, because even groundless claims can cost tens of thousands of dollars to defend and defeat. Apology programs have implications for insurance coverage; doctors must be aware of these before jumping on any apology-program bandwagon.

Let us examine some prime insurance coverage issues that can arise from medical malpractice apology programs.

Usurping the insurer's claim-handling role. Most insurance companies discourage policyholders from playing the role of claims adjuster. Part of the adjuster's role is to determine legal liability. Insurers resist the notion of policyholders substituting their judgment for the judgment of the carrier's own claim staff. This is more than a philosophical preference. The 'Conditions' section of most insurance policies spells out a policyholder's duties in the event of a claim. Breaching a 'Condition' may negate an insurance policy's financial protection. For example, many liability policies contain a Condition that bars insureds from making any commitment to pay without the insurer's consent. Common in insurance policies is language along the following lines: 'No insured shall, without our consent, make any offer or payment, except for first aid.'

A physician's offer to settle or make a payment ' however well-meaning ' may be disproportionate to the damages that can be proven, or to the liability picture. Insurers believe that if they are going to be called on to pay a claim, they should have the definitive say as to the worth of a claim. This is an equitable stance.

The training of claims personnel gives them a frame of reference (not infallible) as to what certain injuries may be worth. When a well-meaning physician or representative makes such an offer to a patient, it may be much more (or perhaps even less) than what an insurer deems reasonable to pay. Insurers do not want to be 'locked into' paying sums before they have a chance to thoroughly analyze both legal liability and proven damages. Apology programs, with their emphasis on early financial offers, can easily contravene this insurer instinct.

An insurance company worry is that its rights to defend a medical malpractice claim not be prejudiced. If a physician apologizes to a patient and, in effect, concedes liability, the company may argue that this hampers its ability to fully defend a claim. This relates to the next reason for insurer concerns.

Potential prejudice to the insurer's claim resolution efforts. Even if state laws bar such apologies from being admitted as evidence of liability, the insurance company can argue that such an apology creates an expectation of recovery in the patient's mind; an expectation that may be tough to dislodge once the insurer drills down deeper into the investigation and defense of a case. Offering money ' even a nominal amount ' to a patient is a bell that cannot be unrung. Some patients may misconstrue an offer as a sign of fear or weakness.

Early gestures to 'monetize' an adverse patient outcome may even prompt a patient or family to up the ante and raise their demands for compensation. 'If I knew it was going to be this easy, perhaps I should ask for more,' one can imagine patients and families thinking. 'What about my future lost wages or loss of earning capacity? What about my pain and suffering? I read of a case where an injured patient got millions for that. Now that we're talking money, I think I really need and deserve more ”

Early offers of financial payment may fully address the needs, wants and expectations of some patients. In others, it may stoke the fires of greed. These concerns inhibit many insurance companies from sharing the current enthusiasm over medical malpractice apology programs.

Other pragmatic questions abound when harmonizing apology programs with medical malpractice insurance coverage:

• Who determines whether an adverse outcome is in fact a case of liability or not on the part of the policyholder physician?
• What happens in 'gray area' cases where negligence may exist on the health care provider's part but there is also a component of contributory negligence on the part of a noncompliant patient or an intervening cause due to a malfunctioning medical device? Liability questions in medical malpractice cases and adverse events are rarely open-and-shut, black and white. Nuances and shades of gray abound. What to do in these cases? Make a monetary offer? Offer an apology even though liability is not clear-cut? Reserve expressions of remorse only for the most clear-cut cases of deviation from the standard of care?
• If a physician makes a nominal monetary offer to a patient or a patient's family, who funds this ' the physician or the insurance company?
• If the patient or family accepts the offer, does the physician insist on an executed 'Release' of all claims? Without a release, the family or patient may still be free to pursue a broader claim to recover additional damages. Pressing for a release has its own perils, though. The risk is that the gesture may prompt the family or the patient to seek legal counsel to review the document. This, in turn, may cause the doctor to lose control of the claim, triggering the conventional litigation process that apology programs aim to sidestep.
• If a physician expresses remorse and coordinates this gesture with his or her malpractice insurance company, will this be used by the insurance company as an underwriting factor? Would this gesture possibly come back to haunt the physician at renewal ' in the form of either higher premiums for coverage or loss of coverage?

Desire for Quick Resolution vs. Need for Methodical Investigation

Timing factors loom as an added challenge. Part of the problem in adverse outcomes is that a physician may want to move rapidly to address patient concerns. A sense of urgency exists. Patients also desire speedy resolution of issues regarding adverse outcomes. Doctors may want to put the matter behind them as quickly as possible. Perceived delays may prompt the patient or family to seek legal counsel, at which point the process often becomes adversarial.

By contrast, the insurance company will want to undertake an investigation. This may entail a thorough review of medical records, determining the relevant standard of care for a procedure and interviewing various parties who provided care to the patient in question. An investigation like this takes time ' time that perhaps neither the patient nor the physician wants to take in the desire to bring closure to an event and foreclose an adversarial claim process.

Reconciling Apology Programs with Insurance Policy Compliance

Ideally, physicians would like to 'have their cake and eat it too,' participating in apology programs but doing so without alienating their insurance company or jeopardizing their liability protection. Is it possible for doctors to reconcile these two aims? Here are five tips:

• Educate your insurance agent or broker on the fact that you have adopted or participate in an 'apology program.' Make this part of the specifications when going to get quotes for medical malpractice cover.
• Educate prospective medical malpractice insurers about this program. Prepare to make a cogent case to the insurer as to how and why wise decisions will be made. Allay concerns that doctors will routinely 'promise the world' to a patient or family due to every adverse outcome.
• Align yourself with insurers that support and encourage apology programs as a rational way to address adverse outcomes.
• Get buy-in from your insurance company before expressing any apology to a patient or before making any monetary offer.
• If your insurance company balks at giving its approval for either an apology or a monetary offer, decide whether you want to handle the claim outside of your insurance coverage and policy contract.

Conclusion

'Sorry works,' but so do financial protections in the form of medical malpractice insurance. The point here is not to persuade doctors to bypass apology programs due to insurance coverage issues. Rather, as part of their own personal and professional risk management efforts, practitioners must be aware of insurance coverage perils that can lurk in so-called apology programs and use these tips to sidestep the financial landmine of lost liability protection.

Kevin Quinley, CPCU, a member of this newsletter's Board of Editors, is Senior Vice President, Medmarc Insurance Group, Chantilly, VA. He is the author of Bulletproofing Your Medical Practice: Risk Management Strategies that Work (www.seak.com).

'Love means never having to say you're sorry,' according to Eric Segal's protagonist in the 1970s hit book and movie, Love Story. That may work in love but, increasingly, it may not apply to the more adversarial realm of medical malpractice and adverse patient outcomes.

Thirty years ago I began my claim-handling career by attending a five-week adjuster 'boot camp' in Atlanta run by a national third-party claim administrator. Wizened instructors drummed into the newly minted adjusters certain precepts as part of that indoctrination program. Conventional wisdom in handling medical malpractice claims ' as in handling any kind of liability claim ' was never to admit to fault or blame, even when there was fault or blame. A corollary was to make no premature offers of financial settlement, but to undertake painstaking investigation of a claim to assure oneself that it was meritorious and worthy of a settlement offer. Another tenet of claim handling was that you should never make any payment without getting a signed 'Release of All Claims' in exchange. In other words, you never give anything away; no signature on the release means no settlement payment.

A New Movement Afoot

Sacred cows make great steaks, as one wit quipped. The usual way of doing things is being stood on its head and, in the realm of medical malpractice claims at least, is being replaced in many cases by fresh approaches and claim resolution templates. Specifically, historical norms of adversarial claim approaches are being supplanted by 'apology programs,' which receive increasing interest and publicity.

For example, a recent Newsweek magazine article (spotlighting health care errors and apology programs) described how 14 hospitals affiliated with the Harvard Medical School have instituted a program that embraces four steps in the event of physician or hospital mishaps. Leape, L., 'Disclose, Apologize, Explain,' p. 50, Newsweek 10/16/06. Those four steps are:

• Disclose. Tell the patient and to the family what happened;
• Take responsibility;
• Apologize at once, on the theory that compassion diffuses anger and restores trust; and
• Explain to the family or patient what will be done differently in the future

In many cases, a fifth step appears: early offers of financial compensation.

This template strays from the classic legal and risk management advice that doctors and nurses should keep their mouths shut, making no admissions or statements of responsibility. Instead, the rationale is that disclosure, apology and early offers of financial compensation will drastically reduce the number of medical malpractice suits.

This has empirically been the experience at Veterans Hospitals in the 1990s and, more recently, in medical malpractice coverage programs run at the University of Michigan and by Colorado's COPIC, a private insurer specializing in medical malpractice coverage for doctors. All operate some variant of an 'apology program' aimed at fostering non-adversarial resolution of medical malpractice claims and adverse patient outcomes.

Patients facing adverse medical outcomes often want explanations and a sense of contrition in the face of medical error. They may decide to hire lawyers and file medical malpractice lawsuits simply to get 'the real story' on what happened, because they feel ignored, and that no one sat down to explain and apologize. Many hospital systems now embrace apology programs to address patient concerns over adverse outcomes and to avoid fractious claims and lawsuits. Over 15 states have passed so-called apology laws, which protect doctors' expression of remorse from being used against them in trial. Some credit apology programs with reducing claim payouts and improving loss ratios.

What Should You Believe?

While apology programs are garnering increasing publicity and interest, they pose challenges from an insurance coverage standpoint. No doctor wants to jeopardize his or her medical malpractice insurance coverage. Without such coverage, a physician might face possible bankruptcy from even spurious liability claims, because even groundless claims can cost tens of thousands of dollars to defend and defeat. Apology programs have implications for insurance coverage; doctors must be aware of these before jumping on any apology-program bandwagon.

Let us examine some prime insurance coverage issues that can arise from medical malpractice apology programs.

Usurping the insurer's claim-handling role. Most insurance companies discourage policyholders from playing the role of claims adjuster. Part of the adjuster's role is to determine legal liability. Insurers resist the notion of policyholders substituting their judgment for the judgment of the carrier's own claim staff. This is more than a philosophical preference. The 'Conditions' section of most insurance policies spells out a policyholder's duties in the event of a claim. Breaching a 'Condition' may negate an insurance policy's financial protection. For example, many liability policies contain a Condition that bars insureds from making any commitment to pay without the insurer's consent. Common in insurance policies is language along the following lines: 'No insured shall, without our consent, make any offer or payment, except for first aid.'

A physician's offer to settle or make a payment ' however well-meaning ' may be disproportionate to the damages that can be proven, or to the liability picture. Insurers believe that if they are going to be called on to pay a claim, they should have the definitive say as to the worth of a claim. This is an equitable stance.

The training of claims personnel gives them a frame of reference (not infallible) as to what certain injuries may be worth. When a well-meaning physician or representative makes such an offer to a patient, it may be much more (or perhaps even less) than what an insurer deems reasonable to pay. Insurers do not want to be 'locked into' paying sums before they have a chance to thoroughly analyze both legal liability and proven damages. Apology programs, with their emphasis on early financial offers, can easily contravene this insurer instinct.

An insurance company worry is that its rights to defend a medical malpractice claim not be prejudiced. If a physician apologizes to a patient and, in effect, concedes liability, the company may argue that this hampers its ability to fully defend a claim. This relates to the next reason for insurer concerns.

Potential prejudice to the insurer's claim resolution efforts. Even if state laws bar such apologies from being admitted as evidence of liability, the insurance company can argue that such an apology creates an expectation of recovery in the patient's mind; an expectation that may be tough to dislodge once the insurer drills down deeper into the investigation and defense of a case. Offering money ' even a nominal amount ' to a patient is a bell that cannot be unrung. Some patients may misconstrue an offer as a sign of fear or weakness.

Early gestures to 'monetize' an adverse patient outcome may even prompt a patient or family to up the ante and raise their demands for compensation. 'If I knew it was going to be this easy, perhaps I should ask for more,' one can imagine patients and families thinking. 'What about my future lost wages or loss of earning capacity? What about my pain and suffering? I read of a case where an injured patient got millions for that. Now that we're talking money, I think I really need and deserve more ”

Early offers of financial payment may fully address the needs, wants and expectations of some patients. In others, it may stoke the fires of greed. These concerns inhibit many insurance companies from sharing the current enthusiasm over medical malpractice apology programs.

Other pragmatic questions abound when harmonizing apology programs with medical malpractice insurance coverage:

• Who determines whether an adverse outcome is in fact a case of liability or not on the part of the policyholder physician?
• What happens in 'gray area' cases where negligence may exist on the health care provider's part but there is also a component of contributory negligence on the part of a noncompliant patient or an intervening cause due to a malfunctioning medical device? Liability questions in medical malpractice cases and adverse events are rarely open-and-shut, black and white. Nuances and shades of gray abound. What to do in these cases? Make a monetary offer? Offer an apology even though liability is not clear-cut? Reserve expressions of remorse only for the most clear-cut cases of deviation from the standard of care?
• If a physician makes a nominal monetary offer to a patient or a patient's family, who funds this ' the physician or the insurance company?
• If the patient or family accepts the offer, does the physician insist on an executed 'Release' of all claims? Without a release, the family or patient may still be free to pursue a broader claim to recover additional damages. Pressing for a release has its own perils, though. The risk is that the gesture may prompt the family or the patient to seek legal counsel to review the document. This, in turn, may cause the doctor to lose control of the claim, triggering the conventional litigation process that apology programs aim to sidestep.
• If a physician expresses remorse and coordinates this gesture with his or her malpractice insurance company, will this be used by the insurance company as an underwriting factor? Would this gesture possibly come back to haunt the physician at renewal ' in the form of either higher premiums for coverage or loss of coverage?

Desire for Quick Resolution vs. Need for Methodical Investigation

Timing factors loom as an added challenge. Part of the problem in adverse outcomes is that a physician may want to move rapidly to address patient concerns. A sense of urgency exists. Patients also desire speedy resolution of issues regarding adverse outcomes. Doctors may want to put the matter behind them as quickly as possible. Perceived delays may prompt the patient or family to seek legal counsel, at which point the process often becomes adversarial.

By contrast, the insurance company will want to undertake an investigation. This may entail a thorough review of medical records, determining the relevant standard of care for a procedure and interviewing various parties who provided care to the patient in question. An investigation like this takes time ' time that perhaps neither the patient nor the physician wants to take in the desire to bring closure to an event and foreclose an adversarial claim process.

Reconciling Apology Programs with Insurance Policy Compliance

Ideally, physicians would like to 'have their cake and eat it too,' participating in apology programs but doing so without alienating their insurance company or jeopardizing their liability protection. Is it possible for doctors to reconcile these two aims? Here are five tips:

• Educate your insurance agent or broker on the fact that you have adopted or participate in an 'apology program.' Make this part of the specifications when going to get quotes for medical malpractice cover.
• Educate prospective medical malpractice insurers about this program. Prepare to make a cogent case to the insurer as to how and why wise decisions will be made. Allay concerns that doctors will routinely 'promise the world' to a patient or family due to every adverse outcome.
• Align yourself with insurers that support and encourage apology programs as a rational way to address adverse outcomes.
• Get buy-in from your insurance company before expressing any apology to a patient or before making any monetary offer.
• If your insurance company balks at giving its approval for either an apology or a monetary offer, decide whether you want to handle the claim outside of your insurance coverage and policy contract.

Conclusion

'Sorry works,' but so do financial protections in the form of medical malpractice insurance. The point here is not to persuade doctors to bypass apology programs due to insurance coverage issues. Rather, as part of their own personal and professional risk management efforts, practitioners must be aware of insurance coverage perils that can lurk in so-called apology programs and use these tips to sidestep the financial landmine of lost liability protection.

Kevin Quinley, CPCU, a member of this newsletter's Board of Editors, is Senior Vice President, Medmarc Insurance Group, Chantilly, VA. He is the author of Bulletproofing Your Medical Practice: Risk Management Strategies that Work (www.seak.com).