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The hidden cost of malpractice: Why doctors are losing control

Howard Smith, MD
Physician
May 18, 2025
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In ancient times, there were oracles and soothsayers. Risk management was not a science until the 1950s. However, a medical malpractice lawsuit is still a problem in need of a skilled risk manager, not an oracle or a soothsayer.

Today, there are 1 million physicians practicing in the U.S. A doctor’s chance of being sued for medical malpractice is 8.5 percent per year, and the chance that this lawsuit has no merit is 66.6 percent.

One would think that because of its evolution over the years into a science, risk management would have impacted medical malpractice. It does not take an oracle or soothsayer to know that any complication needs to be regarded as a potential medical malpractice lawsuit. Neither does it take an oracle or soothsayer to predict that this increases the cost of health care.

Complications are inevitable. Medical errors occur during medical interventions. So do errors of nature. Whether from an error of nature, which is random, or a medical error, which bestows merit, a malpractice attorney is sure to follow. As long as there is a settlement value, a plaintiff attorney could not care less if a claim has merit. Neither could a defense attorney, who always gets paid. However, when disproportionate numbers of all lawsuits have no merit, there is a problem.

It is conventional wisdom among practitioners to take no action because they are protected by medical malpractice insurance. For practitioners, as long as premiums are paid, they can live with this false sense of security.

For carriers, because premiums are always paid, practitioners are “the gift that keeps on giving.” As long as there is a steady cash flow, malpractice carriers could not care less whether or not a claim has merit. The only thing that matters is the claims-to-premium ratio.

To afford premiums and/or to maintain malpractice coverage, practitioners join all sorts of networks. The networks are horizontally integrated with hospitals and medical institutions. These networks are often self-insured, and each, including practitioners, are covered under the same medical malpractice plan. This is how the health care system evolved. When a malpractice lawsuit is filed, not only is the network a codefendant, but it may also be the insurance carrier for all defendants. Therefore, conflicts of interest are unavoidable.

The prime objective of the network is cost-effective health care. These networks often require adherence to “resource-based practice guidelines.” A practice guideline is not a standard of care. As long as best practices lower cost, networks could not care less about whether they increase risks.

For practitioners, instead of the sanctuary they seek from malpractice by joining networks, the networks they join make them even more vulnerable because, as a condition of agency, they comply with practice guidelines.

The natural instinct for a doctor should be advocacy for the standard of care. While this is risk management, the trend among medical professionals is to defer self-advocacy to the consensus of adhering to “best practices.” It matters not if a best practice conflicts with a standard of care, as long as they do not jeopardize their position in a network.

To assure protection, JAMA recently redefined “practice guidelines.” According to the AMA, the evidence upon which a practice guideline is based is competence, not cost. In truth, however, standards of care are based on competence; practice guidelines are called “resource-based” because they are based on cost.

Under what possible circumstance would even an oracle or soothsayer in ancient times advise, “A conflict is coming; let’s disarm”? Yet, this is exactly what the AMA does. It matters not if standards of care are jeopardized by networks, as long as their members in networks are not jeopardized by standards of care.

It is not that the inability to differentiate a medical error from a random error of nature goes unrecognized. On the contrary, an entire industry develops to exploit the problem—the medical liability litigation industry. It includes plaintiff attorneys, defense attorneys, medical experts, malpractice insurance companies, networks, and hosts of risk managers.

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The problem with risk management in medical malpractice today is that risks of medical liability are no better managed by risk managers than if risk were managed by oracles and soothsayers. As there was no shortage of oracles and soothsayers in ancient times, there is no shortage of risk managers today.

Risk managers had their chance, and the best they can do are 100 tort reforms, settlement values, cost-to-premium ratios, practice guidelines, and 50 percent probability plus a scintilla. It is no accident that the number of frivolous medical malpractice claims, among 85,000 lawsuits filed per year, is disproportionately high.

Indeed, discarding the “American Rule” in favor of “loser pays” also serves as a solution; however, this requires legislation with all the intervening disruption.

I developed the only risk management tool that measures and manages the causes of medical liability, namely, medical errors and errors of nature. It proves with 95 percent confidence that an inevitable complication is from a random error of nature, not from a medical error.

It matters not if the medical liability litigation industry embraces my tool. It was not developed by or for them; it was developed because of them. It is the game changer. It emphasizes standards of care over “best practices.” Unlike before, the practitioner becomes integral to medical liability case review. The practitioner is a self-advocate and establishes the rules for risk management from the GITGO. Before, the medical expert is integral and lawyers establish the rules. The practitioner is just one of several defendants. The heuristic of my tool may serve the interest of practitioners, but it also serves the interest of justice. Convention only serves the interests of lawyers, best illustrated in their own words: “If you have a phone, you have a lawyer,” “If we don’t win, you don’t pay,” and “If you need an advocate, we are the firm for you.” Afterwards, these words are just hollow syllogisms.

Howard Smith is an obstetrics-gynecology physician.

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