Problem Addressed

• Many costly errors, leading to injury and death: The Institute of Medicine's seminal 1999 report, To Err is Human: Building a Safer Health System, estimated that between 44,000 and 98,000 individuals die each year in hospitals because of medical errors.¹ The Institute for Healthcare Improvement estimates that 40,000 instances of medical harm occur in the health care system each day.² According to the eighth annual Patient Safety in American Hospitals study, patient safety errors resulted in nearly 709,000 total safety events among U.S. Medicare patients between 2007 and 2009, costing the Medicare program $7.3 billion.³ Medication errors alone injure at least 1.5 million Americans annually, costing the nation more than $3.5 billion a year.⁴
• High cost of liability insurance: The high incidence of medical errors has created significant liability insurance costs for providers. Premiums have skyrocketed, especially in certain states, such as Florida, Nevada, and Pennsylvania,⁵ with the annual cost of malpractice claims nationwide recently being estimated at approximately $6 billion.^5,6 Health systems often accept these costs as part of their overhead without really questioning whether a different approach would be less costly and/or more effective.⁷
• Barriers to—and unrealized potential of—full disclosure: The vast majority of providers employ a strategy of “deny and defend” in the face of an adverse event.⁸ A number of cultural and legal barriers underlie provider resistance to full disclosure, including concerns that frank communications between providers and families may imply guilt even when standards of care are followed, and that apologies will lead to more lawsuits, higher compensation awards and insurance premiums, and/or loss of coverage.^7,8 However, patient–provider communication, including a provider apology for a medical error, has the potential to reduce malpractice costs; many patients filing lawsuits are driven by a need to understand what happened and why, a desire to be heard and to influence the safety of care in the future, and a need to know that providers are being held accountable.⁷

Description of the Innovative Activity

• Three guiding principles: The overall guiding principles of the process are to compensate patients/families quickly and fairly when unreasonable medical care causes harm; to vigorously defend medically reasonable care; and to reduce patient injuries (and therefore claims) by learning from patient experiences.⁷
• Early identification of potential claims: Two elements allow the health system to identify and respond proactively to claims and potential claims:
  • Online system: An online incident reporting system captures adverse events right after they occur, documenting details surrounding the incident. Any clinician or staff member can report via the online system. The risk management department reviews the reports, contacts the clinicians involved, and proactively contacts the patient and/or family to discuss the incident.
  • Outreach to plaintiffs' attorneys: The State of Michigan requires a compulsory presuit notification period for providers being sued for medical malpractice. Rather than setting aside these notices and waiting for a lawsuit to be filed (as many health systems in the state do), the University of Michigan Health Systems begins a thorough investigation when the presuit notification arrives (see bullet below). Consequently, plaintiffs' attorneys in southeast Michigan now call or e-mail the health system's chief risk officer to report potential claims when a legitimate case arises.
• Formal investigation process: The risk management department investigates claims and potential claims to determine if a medical error has occurred or if reasonable care was provided. The investigation begins when the department receives notice of an adverse event via patient complaint, staff notification, the incident reporting system, a presuit notification, or informal contact from a plaintiff’s attorney. The risk management department is available 24 hours a day, 7 days a week to accept calls and e-mails. The actual investigation process varies based on the unique circumstances of the case. In all cases, however, the first priority is to promote the patient’s well-being by understanding his or her medical needs and making sure they are being met. Risk managers also check on the well-being of the caregiver(s) involved in the event. Patients and families are promised full disclosure, are provided known facts without speculation, and are informed that a full understanding of all the relevant information may take some time to ascertain. Risk managers also ensure that evidence is preserved, notify the hospital's chief of staff of the incident, and begin interviewing involved parties as soon as possible. Every event has a different timeline; some are quickly identified as mistakes, while others are not so clear-cut and thus require a longer investigation.
• Multidisciplinary committee to review claims: A 22-member multidisciplinary committee that includes clinicians, administrators, outside experts, and a lawyer from the health system’s legal office reviews each claim. The primary goals of the committee are to arrive at a well-informed determination as to whether the care provided was medically reasonable and/or whether it had an adverse effect on the patient's outcome. (Note: Michigan law protects committee discussions from the legal discovery process.) The committee also considers the need for peer review, and whether the case presents educational or quality improvement opportunities that could prevent similar events from occurring again.
• Communication with patients/families: Every patient/family who makes a claim (and the patient’s lawyer, if one has been hired) is invited to the hospital for nonadversarial discussions with the caregivers involved in the incident; typically, multiple conversations and meetings take place as part of the full disclosure process. Risk management staff also attend, expressing empathy for the patient/family while sharing information related to the circumstances of the event so that everyone understands what happened without misconceptions. Risk managers also listen to and collect information from the patient/family.
• Case resolution: Possible resolutions include the following: the patient may drop the claim; the patient may settle with the health system based on a financial arrangement and/or apology; the patient may proceed with a lawsuit. The health system offers settlements based on the economic implications of injury as assessed by medical economists, life care planners, and financial planners. Because the process outlined above typically lessens animosity, most financial settlements tend to be for reasonable amounts based on the extent of the injury. Settlements also include negotiated compensation for noneconomic recovery (such as pain and suffering), within inflation-adjusted caps set by the State of Michigan ($408,200 for general injuries and $729,000 for central nervous system and reproductive injuries as of January 2009). The settlement agreement usually includes a confidentiality agreement to protect both the health system and the patient/family.
• Data sharing: Based on data collected in the incident reporting system, the risk management department provides daily, weekly, monthly, biannual, and annual reports on a set of patient safety indicators, including falls, medication errors, and others. The lessons learned in every case are shared whenever appropriate within the system—always with the departments involved but sometimes institution-wide and with leadership at all institutional levels.
• Quality improvement: A wide variety of quality improvement initiatives has resulted from the full disclosure approach, including (but not limited to) the formation of patient- or family-activated rapid response teams, the development of hospitalist services, the designation of patient safety coordinators who visit hospital floors with the chief of staff weekly to solicit suggestions for patient safety improvements, the development of an assessment tool to identify patients at risk for pulmonary embolism, the use of portable “vein sensors” to reduce complications related to central line placement, modification of changes in clinical delivery systems, improvement of communication culture between nursing and medical services, and multiple peer review interventions.

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Innovator Disclosures

Results

• More error reporting: The incident reporting system increased reporting of errors, from roughly 3,900 reports in 2002 to an estimated 18,000 in 2009.
• Fewer malpractice claims and cases in litigation: The backlog of open claims declined from 262 in 2001 to 83 pending at the end of August 2009. In 2001, approximately two-thirds of the claims were in some phase of litigation; by September 2009, that figure decreased to approximately 17 percent. Yearly filings also decreased from 121 in 2001 to 61 in 2006, and filings have remained steady at that number through 2009, despite an annual increase in patients of approximately 30 percent over that timeframe.
• Initially faster claims resolution: The decline in the number of total and litigated claims has led to speedier resolution, with the average time to resolve a claim decreasing from 20 to 8 months between 2001 and 2007. Since 2007, the health system is seeing an increase in elapsed time between opening and closing a claim. The health system believes this trend is attributable to two factors. First, the health system is learning about claims earlier, but many claims cannot be resolved before they are ready (e.g., time required to determine whether a nerve injury improves); second, the Federal government is now more aggressively asserting liens for recovery of medical expenses incurred in conjunction with the alleged malpractice.
• Lower costs and reserve requirements, leading to significant savings: Between 2001 and 2007, costs per claim decreased by 50 percent, while the level of insurance reserves required by the malpractice carrier decreased by two-thirds. The reduction of insurance reserves is likely due to several factors. First, the quicker that cases are closed or resolved, the faster the health system can know with certainty the cost that the claim represented. (Reserves are an estimate of potential risk, so, as cases are closed, the risk is concrete and excess reserves can be reduced.) A second factor is that the health system is investigating cases in-house rather than waiting for attorneys and the litigation process; the expense of litigation is not only attorneys' fees and court costs, but also prolonged reserves that cannot earn investment income for the insurance company. Thus, as the health system stays engaged with patients and their lawyers, it avoids placing reserves on cases that turn out not to be compensable; intime reserving is more accurate than estimating a reserve and then waiting 2 years or more for the outcome of the case. The program as a whole has generated a significant amount of savings for the system annually, although the exact amount of savings is difficult to calculate accurately.
• Positive response from physicians: A survey of 419 faculty physicians found that 98 percent perceived a difference in the health system’s approach to malpractice claims after implementation of the new process; 98 percent fully approved of the approach; and 55 percent cited the approach as a “significant factor” in their decision to stay at the University of Michigan.⁸
• Positive response from plaintiffs' lawyers: A survey of 26 lawyers in southeastern Michigan specializing in medical malpractice cases found that 100 percent rated the health system as “the best” or “among the best” health systems for transparency, while 81 percent noted that they had changed their approach to the health system in response. In addition, 71 percent of those settling cases with the system did so for less than anticipated, 86 percent said that greater transparency allowed them to make better decisions about the claims they chose to pursue, and 57 percent reported not pursuing cases that they would have pursued prior to implementation of the program.⁸

Evidence Rating (What is this?)

Context of the Innovation

Planning and Development Process

• Outreach to plaintiffs' lawyers: The chief risk officer visited plaintiffs’ attorneys in southeast Michigan to discuss the new approach, encouraging them to call or e-mail the hospital’s risk management department to report potential claims whenever a legitimate case arises.
• Physician/staff communication: During the first year of implementation, the chief risk officer made many presentations to health system clinicians about the importance of early notification of adverse events. Presentations emphasized that needless litigation was not in the staff's interest, and early notification was a better strategy because it allows the system to focus first and foremost on quality improvements without delays arising from fears of adversely impacting the defense of cases that should be settled. Presentations emphasized that notification allows patients and families to be contacted before their filing a claim, while also allowing the system to track trends and patterns in medical errors that can drive quality improvement. Finally, communication efforts emphasized the drawbacks to using a “deny and defend” strategy, contrasting it with the benefits of an open, honest, process that can spare staff from needless litigation.
• Risk management staff training: The risk management staff received training in claims management and investigation from the chief risk officer and mediation training from the Institute for Continuing Legal Education.

Resources Used and Skills Needed

• Staffing: The program required a significant infusion of new staff. The risk management department has 25 full-time employees, including a director, six risk managers assigned by service (e.g., surgery, emergency department, neurology), an individual dedicated to institutional education (e.g., developing videos, overseeing research projects, improving communication and informed consent processes), nursing liaisons, an engineer who leads biomechanical quality improvement efforts, information technology and data analysis staff, administrative staff, and others. Previously, the department included approximately 10 staff members.
• Costs: The risk management department budget increased from $500,000 in 2001 to $3.25 million in 2009. The budget primarily consists of the salary and benefit costs for staff. The incident reporting system was purchased from an outside vendor (cost information not available). In addition, some costs have been incurred as a result of implementing quality improvement initiatives based on error-reporting data. As noted earlier, however, the program has yielded significant cost savings each year, and thus generates a positive return on investment.

Funding Sources

Tools and Other Resources

Getting Started with This Innovation

• Emphasize support of medical staff: The risk management department should exist to support the medical staff and the institution. When medical staff members call to discuss an adverse outcome, they need to be confident that the department will look out for their best interests and determine the right answer on how to deal with an issue. The University of Michigan Health System believes it supports its staff best by getting to the truth of what happened, resolving cases that deserve settlement, and—most importantly—turning attention to the best ways to avoid the same mistake in the future. Transparency is essential to moving forward with higher quality and safety.
• Protect clinicians financially: The chief risk officer at the University of Michigan Health System assures medical staff members that the system stands behind them financially, and that while certainly accountable for their conduct, they will not face financial ruin as a result of a medical mistake. The health system has a captive insurance company, incorporated in Vermont, for the exclusive benefit of the University and its employees. Thus, the chief risk officer can tell faculty that no matter how accountable they need to be professionally, the health system covers their entire financial liability, and their personal assets are never at risk. Keeping them safe from personal financial risks facilitates honesty and a focus on the quality of care and future safety improvements.
• Encourage medical staff to ask for help in disclosing errors: Medical staff involved in adverse events may be too emotionally involved to be objective. Instead, physicians should be trained to call the risk management department and use experienced risk managers as a resource to help them disclose medical error.
• Assure patients immediately that they will receive full disclosure: People involved in a traumatic event have a primal need to understand what happened. Those who feel they are being stonewalled are much more likely to contact a lawyer. To address this issue, immediately convey to patients/families that they will be provided with all of the facts in a straightforward way after a complete investigation. Furthermore, patients and families involved in an adverse event typically feel a strong desire to ensure that mistakes do not happen to others. Therefore, it is critical to let patients know that the health system is working to correct the problem. That sense of accountability is an important factor in diminishing anger and moving all parties to the same page.

Sustaining This Innovation

• Prove return on investment: Track and report on the financial impact of the program. Avoiding litigation in even one case is highly meaningful from a financial and productivity point of view. Senior leaders will be much more likely to invest in expanding the risk management department if they believe the cost will be more than made up for in reduced malpractice- and litigation-related expenses.

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