Counting the cost of litigation

The cost of claims in South Africa is escalating at an accelerating rate. Dr Stephanie Bown, MPS director of policy and communications, outlines the stark reality of a growing problem

Over the past five years, MPS’s claims experience in South Africa has shown an alarming deterioration that has been gathering pace – so much so that over the past two years alone, the value of reported claims has more than doubled: an increase of 132%.

If you are a claimant lawyer, you are no doubt rubbing your hands together in glee at this news. And claimant lawyers appear to be doing just that – a Google search using the terms “doctor” and “litigation” produces in the sponsored adverts section a collection of law firms claiming to specialise in medical negligence cases, suggesting that claimant lawyers – perhaps disgruntled at changes to the Road Accident Fund that capped the fees they can charge – have wised up to the opportunities on offer, and have stepped up their advertising.

Value and frequency

This year, MPS settled our highest claim yet in South Africa, paying out almost R24 million on behalf of a member. The value of settling our five highest claims between 2006 and 2010 was more than twice the value of settling our five highest claims between 2001 and 2005. One of the key factors behind this growth in value is the increased size of awards for catastrophic neurological damage; technological advances and improved life expectancy has meant that the cost of care for affected patients has escalated, in turn increasing the financial awards in negligence cases.

Large claims are just part of the problem. The overall number of claims against members in South Africa has also increased, with the number reported to MPS in 2010 30% higher than the number reported in 2006, just four years previously.

If this trend is to continue unchecked, the grim, blunt reality is that private practice in the highest risk specialties may diminish or even disappear altogether, due to the level of income generated from practice no longer being sufficient to meet the increased cost of indemnity.

The highest membership subscription paid by MPS members in South Africa is typically in the category of obstetricians. The anxiety over affordability of professional indemnity is heightened within this specialty, as the largest element of claims values arises from claims brought on behalf of children catastrophically injured during birth. Bearing in mind that such claims can be brought many years after the birth, when general claims inflation and changes to the amount of future care to be provided come into play, the cost of settling a claim can increase enormously.

Cause and effect

There is no definitive answer to what is causing this sharp rise in claims frequency and value, but there are probably a number of contributory factors. As already mentioned, the reaction of lawyers to the Road Accident Fund Amendment Act, which capped the amount of compensation payable to road accident victims, and lawyers’ more extensive advertising, is likely to have had an effect. In addition, as Dr Graham Howarth, MPS Head of Medical Services (Africa), told SAMJ, a developing country like South Africa was always likely to see patient awareness of their constitutional rights grow, making them more likely to make a medical negligence claim.¹

Something that is definitely on the radar of Health Minister Dr Aaron Motsoaledi is the “no win, no fee” system promulgated by the Contingency Fees Act 1997. The system allows prosecuting lawyers to take a significant cut of any payout – doubling their hourly rate to take up to a maximum of 25% of the payout – when they win their case. Dr Motsoaledi told the Medical Chronicle: “I want a system that will put doctors back in hospitals and lawyers in courts – not the other way around as we are now seeing. Medical litigation and the practice of defensive medicine are the main contributing factors to the outrageous cost of healthcare in the USA because, there, doctors don’t just treat patients – they also have to treat the lawyer behind the patients and we can’t allow this to happen in SA.”²

Another possible factor is the increasingly stressful environment in which healthcare professionals are working. Higher patient expectations and the fear of the consequences of making an error can, paradoxically, lead to more errors occurring. An overly stressed doctor is not at their most effective, and MPS sees no evidence that the profession is intentionally letting its standards slip; the commitment to providing safe care to patients remains as strong as ever.

Stress within the medical profession has arguably never been higher; in 2009, MPS introduced a counselling service for members in South Africa to address anxiety that results from facing a complaint or claim.³ In 2010, Dr Tim Hegan, Director of International Operations at MPS, told SAMJ that many private doctors cited high patient demands and the fear of being reported to the authorities as their main stressors.⁴

In 2006, a study by Thomas and Valli on stress levels in a public sector hospital found higher levels of occupational stress compared to the average working population.⁵ The main sources of pressure included understaffing, lack of resources, lack of control, difficult work schedules, inadequate security, and poor career advancement and salaries.

Finding a solution

It is interesting to look at the experiences of other countries that have experienced similar challenges in the claims environment, even though different socio-economic conditions across the world mean the comparison is flawed by not being like-for- like. However, the example of Australia, and the tort reforms that took place following the Ipp Report in 2002, is a notable one. By 2002, insurance premiums and damages awards for personal injuries through the fault of another were becoming “unaffordable”.⁶

The reforms wiped out small claims, by setting minimum thresholds under which no claim could be made for damages. The threshold in New South Wales, for example, is 15% of the worst case of impairment, such as paraplegia, which is approximately $400,000. So claims cannot be made of less than roughly $60,000. Medical indemnity organisations in Australia say these reforms have been critical – one said that the cost of claims has been reduced by 10-15%.⁷

In New Zealand, there is a completely different system for ensuring victims of clinical negligence are compensated. The “no-fault” system means compensation is paid out to patients from the Accident Compensation Corporation, with no liability attached to the party who is at fault.

A parallel approach – not an alternative, but in addition to the systems described above – is to ensure the medical profession does all it can to ensure learning from adverse events takes place, with a focus on quality improvement as an outcome, rather than castigation.

MPS is already leading on the promotion of this approach. Our Educational Services department offers a series of workshops across South Africa that are free as a benefit of MPS membership. Mastering Adverse Outcomes, in particular, gives practical training in effective management of patient care following an adverse outcome; Mastering your Risk and Mastering Professional Interactions are two other workshops that focus on risk management and strengthening doctor–patient communication respectively. You can read more about these courses here:

Setting subscriptions fairly

The rising cost of claims in South Africa has made increases in subscription rates unavoidable – a consequence that we know is unwelcome. As a not-for-profit, mutual organisation, we always try to ensure that subscription rates are fair. We have no motivation other than to ensure that members’ needs are met.

The cost of clinical negligence claims is the largest element of MPS costs, so we begin by looking at recent claims experience and then try to predict the future trends, with independent specialist actuarial advice. This is no easy task; we have to collect enough money in any year to pay for the consequences of adverse incidents that occur from members’ clinical practice in that year – even though claims arising from those incidents may not be reported for many years. MPS needs to ensure that sufficient funds are available to deal with consequences of all adverse incidents – consequences that may take many years to come to light.

We believe that the escalating cost of claims across both state and private sectors is detrimental to the wider healthcare economy and will have adverse consequences for patients, the public and those delivering care in increasingly challenging circumstances. We will continue to work in collaboration with members and engage with government to try to find a workable solution.

Additional reporting by Gareth Gillespie and Dr Graham Howarth

References

1. Bateman C, Medical negligence pay-outs soar by 132% – subs follow, S Afr Med J 101:216-218 (2011)
2. www.medicalchronicle.co.za/motsoaledi-wages-war-against-lawyers (accessed 29 November 2011)
3. Gillespie G, Putting the stress on anxiety, Casebook 17(2):7 (2009)
4. Bateman C, Stressed doctors thrown an MPS lifeline, S Afr Med J 100:11-13 (2010)
5. Thomas LS and Valli A, Levels of occupational stress in doctors working in a South African public sector hospital, S Afr Med J 96:1162-1168 (2006)
6. www.onlineopinion.com.au/view.asp?article=1900 (accessed 28 October 2011)
7. www.australiandoctor.com.au/news/c8/0c06b9c8.asp (accessed 28 October 2011)