American Journal of Law & Medicine

Adjudicating severe birth injury claims in Florida and Virginia: the experience of a landmark experiment in personal injury compensation.

I. INTRODUCTION

Policy debates over medical malpractice in the United States involve a complex amalgam of legal doctrine, public demands to address the problem of medical errors, and the interests of various stakeholder groups. (1) Most parties can agree, however, that the current system for compensating medical injury performs poorly. It falls short of achieving its two main goals: compensation and deterrence. The current system of tort liability is "neither sensitive nor specific in its distribution of compensation:" (2) the vast majority of patients injured by negligent medical care do not receive compensation, yet the system compensates some cases that do not appear to involve negligence. (3) Sometimes, it awards more in noneconomic damages than seems reasonable to many observers. (4) Ultimately, tort liability appears to do little to improve health care quality and safety, (5) yet it spurs costly defensive medicine. (6) Physicians and health care organizations face burdensome insurance and legal costs, leading some to threaten to curtail their services. (7) These concerns about the burden of medical injury and the malpractice "crisis" (8) have sharpened calls for reform.

Reform proposals for addressing these problems generally fall into two groups: first, partial modifications of the current system, such as caps on damages and collateral-source offsets; (9) and second, wholesale moves away from the traditional tort system to alternative forums of adjudication, such as alternative dispute resolution ("ADR") (10) and administrative compensation. (11) In this paper, we explore the more radical brand of reform. A number of legal and policy scholars have argued that moving to an administrative compensation system for medical injuries would overcome many of the problems with the current, fault-based medical malpractice system. (12) Such a system would use a non-judicial process, specialized adjudicators, and neutral medical experts to award limited compensation to injured patients based on a standard that is broader than negligence. (13) It would jettison negligence as the decisive standard for compensation due to concerns about the inherent uncertainty of the concept (14) as well as worries that negligence judgments stigmatize health care providers in a way that adversely affects the care environment and physician participation in patient safety initiatives. (15)

In the last few years, proponents of administrative compensation have called for demonstration projects to test such a system, (16) and federal legislation has been introduced to support such experiments. (17) In particular, we and others have been involved in developing proposals for "health courts," administrative tribunals that would award compensation on the basis of the avoidability of the injury, neutral medical expert opinion, and ex ante decision guidelines. (18)

The "avoidability" standard is broader than negligence, but narrower than strict liability; it awards compensation to all claimants whose injuries could have been avoided in a well-designed system of care, regardless of whether the injury was a result of treatment that fell below the customary standard of care. (19) The concept of a well-designed system of care acknowledges resource constraints. An optimal system would not, for example, require that every hospital, no matter how small, invest in the most expensive equipment or keep an extensive roster of physician specialists on duty at all times. Nevertheless, the avoidability standard could result in liability in some situations in which hospitals could have improved their systems at reasonable cost, but opted not to--even where such decisions were common among their peer institutions. Proponents of the avoidability standard argue that a move away from negligence would result in more expeditious claims processing, a decrease in the adversarial nature of the process, and avoidance of the stigma of substandard care that chills dialogue and investigation into medical errors. (20) It would also broaden injured patients' access to compensation. Medical injury compensation systems in the Nordic countries utilize an avoidability standard, (21) but invocation of these examples is often met with criticism that the experiences of small, foreign countries with extensive layers of social insurance do not shed much light on the feasibility of a compensation system based on an alternative standard in the U.S. (22)

While the health courts proposal contemplates a wholesale shift of medical injuries from tort to administrative compensation, other proposals have targeted birth injuries, which are a major source of high-cost malpractice claims. Indeed, interest in such "carve out" programs appears to be gaining momentum. In the past year, for example, Colorado's Senate Health and Human Services Committee chair has voiced interest in this model, (23) the Medical Society of the State of New York has proposed the creation of a statewide fund to compensate birth-related neurological injuries, (24) and legislation has been introduced in both houses of the Maryland legislature to establish a Task Force on Administrative Compensation for Birth-Related Neurological Injury. (25) The South Carolina Medical Malpractice and Liability Limits Study Committee recently concluded that the state should consider developing a birth injury program. (26)

The touted benefits of administrative compensation, whether through "health courts" or "carve out" programs, include: more equitable, rapid, and reliable resolution of claims; a significant reduction in claims processing costs: better overall system cost control; an improved climate for open discussion and reporting of medical errors: and greater incentives for physicians and health care organizations to make health care safer. (27) Critics have raised several questions about administrative compensation programs, including whether workable compensation criteria could be crafted once the system is untethered from the negligence standard. (28) Critics also wonder about procedural aspects of claim adjudication--for example, who is an appropriate decision maker, what role would medical experts have, and what procedural rights would claimants have. (29)

To gain insight into how these issues have played out in previous experiments with administrative compensation for medical injury in the U.S., we studied two existing programs: The Florida Neurological Injury Compensation Association ("NICA") and the Virginia Birth-Related Injury Compensation Program ("BIP"). (30) These programs carve out a category of adverse events within a defined clinical area (obstetrics and neonatology) that carry a rebuttable presumption of compensability. Compensation is awarded based on the nature of the outcome and a finding that the outcome is causally linked to the birth process (rather than on the basis of a finding or negligence or avoidability). Unless certain conditions are met, patients who experience these events while under the care of providers who participate in the systems must seek compensation through a non-judicial process.

This approach resembles that of prominent proposals for administrative compensation demonstration projects; although, a key difference is that Florida and Virginia do not apply the avoidability standard. It has been proposed that lists of "accelerated compensation events" ("ACEs") be developed in select clinical areas based on expert deliberation about common adverse events that are always or usually avoidable. (31) Much of the previous literature has focused on the possibilities for development of ACEs in obstetrics and neonatology. These are clinical areas in which a variety of problems with the current tort system have been well-documented, including the burden of awards, problems in the liability insurance market, the catastrophic severity of injuries, and the negative impact on clinical practice (for example, defensive medicine, declining access to care, and professional discontent). (32)

Proponents of ACEs-based compensation systems argue that combining an avoidability standard with an administrative compensation process holds promise not only for expanding the availability of compensation, reducing overhead costs, and making the overall cost of the medical liability system more predictable, but also for reinforcing the system's deterrence function by incentivizing providers to move towards optimal systems of care. (33) The aspirations of the founders of the Florida and Virginia systems were somewhat more limited--in particular, improving deterrence was not a major aim. However, these systems hold promise for achieving many of the same objectives.

We studied the eligibility criteria and claims-determination process in the existing programs in Florida and Virginia in order to extract lessons for the design of compensation criteria and claim adjudication processes in proposed demonstration projects of administrative compensation aimed at a broader range of medical injuries. This article unfolds as follows. Part II summarizes the two programs, by outlining eligibility criteria, modes of operation, and benefits awarded. In Part III, we describe the methodology we used in a key informant interview study of the Florida and Virginia schemes. In Parts IV and V, we present the major findings regarding eligibility criteria in the two programs. Finally, Part VI discusses the implications of these findings for designing a broader medical injury compensation scheme in the U.S.

II. BACKGROUND

A. ORIGIN AND DESIGN OF THE FLORIDA AND VIRGINIA PROGRAMS

Virginia and Florida both established their birth injury compensation programs in the late 1980s, in the wake of malpractice insurance crises that hit the field of obstetrics hard. At that time, obstetrician-gynecologists who delivered babies in these states paid annual liability insurance premiums that were among the highest in the country (the highest, in Florida's case), and they were sued often. (34)

The ultimate aim of the programs was to relocate claims for compensation pertaining to infants with severe neurological impairments from courts of general jurisdiction to standalone administrative compensation programs, thus providing physicians and hospitals immunity from malpractice lawsuits. (35) Birth-related injuries were singled out for this special treatment because their associated litigation was common, expensive, and widely believed to have a destabilizing influence on the malpractice system as a whole. There was also growing concern among policymakers about the future availability of liability insurance (if insurers and underwriters exited the market) and obstetric services (if fed up obstetricians ceased performing deliveries). (36)

Participation in the programs is voluntary for obstetrician-gynecologists. If a family elects to receive treatment from a participating provider after receiving notice of the provider's participation, their choice of venue for pursuing a claim for compensation for birth-related injury is restricted. If the alleged injury falls within the statutory eligibility criteria for the birth injury program, the opportunity for tort litigation is foreclosed. (37)

There are some important differences in the design and effects of the schemes across the two states. First, in Florida, there has been a strong incentive to escape NICA's jurisdiction and pursue remedies in the tort system for claims that families and their attorneys believe have strong chances of success as negligence actions. No cap on malpractice awards existed there until 2003, when a complicated sliding scale for non-economic damages was introduced. (38) Thus, in Florida, considerably larger awards have been potentially available from juries in birth-related injury litigation. How the sliding scale will impact claiming behavior under NICA is unclear at this stage.

This incentive has not arisen in Virginia, or at least not to the same degree, since Virginia adopted a total cap on damages in malpractice litigation in 1992. The cap rises annually, and at the time of writing, is approaching $2 million. (39) Because the total amount available under the cap is similar to what is available through the state's birth injury program, there is little to be gained by seeking to avoid DIP's jurisdiction. On the contrary, since the DIP eligibility standard is in some respects more permissive, establishing eligibility for compensation may prove more difficult in tort.

Second, differences in the financial soundness of the two programs have affected the environment for claims going forward. A 2002 report found major problems with DIP's solvency, which stemmed mainly from future liabilities--compensation streams running into the future on accepted claims which had essentially become unfunded liabilities. (40) NICA, on the other hand, appears to be in a stable fiscal position. (41)

1. The Virginia Birth-Related Neurological Injury Compensation Program ("BIP")

The major features of the enabling statutes for the Florida and Virginia programs are presented in Table 1. DIP is administered by the state's Workers' Compensation Commission ("WCC"), whose main purpose is to administer the Workers' Compensation Act and the Criminal Injuries Compensation Fund. (42) The WCC receives claimants' applications and rules on eligibility through a two-tiered hearing process. (43) The WCC distributes copies of the application to program officials, participating physicians and the hospital involved, the Board of Medicine, the Department of Health, and a panel of medical experts. The panel, which consists of three neutral medical experts, is required to issue a report and nonbinding recommendation in all cases (44) regarding whether the claimant's injury meets the relevant clinical criteria. At a hearing, (45) the Chief Deputy Commissioner considers the panel's recommendation and determines whether claims meet the broader set of prescribed eligibility criteria. Either the claimant or the program may appeal this determination to the full Workers' Compensation Commission (three Commissioners selected by the Virginia General Assembly), and from there to the Court of Appeals, where cases are placed on a docket allowing expedited review.

BIP is financed through annual assessments levied on participating obstetrician-gynecologists, midwives, hospitals, and, when required to maintain the program's actuarial position, liability insurers and nonparticipating physicians. (46) The program provides three categories of benefits to claimants. First, health care costs are compensated, provided they are reasonable and are for medically necessary services. Items typically covered include hospital services, residential and custodial care, medical equipment, and travel to receive care. These expenditures are reimbursed, not awarded in a fixed, pre-determined lump sum. (47) BIP acts as the payer of last resort, (48) covering any losses for which the claimant is not eligible for reimbursement from public or private insurance programs. Second, the program compensates lost earnings of the injured party in installments from the age of eighteen until age sixty-five. (49) Third, the program reimburses reasonable expenses incurred in connection with the filing of a claim, including attorney fees. (50) An exception to these general rules applies to eligible claims in which the infant died within 180 days of birth: in such cases, a single lump-sum payment of up to $100,000 may be awarded. (51)

Eligibility for BIP compensation is contingent on establishing the following: (1) an injury to the brain or spinal cord; (2) occurring to a live infant; (3) caused by the deprivation of oxygen or mechanical injury; (4) occurring in the course of labor, delivery, or resuscitation necessitated by a deprivation of oxygen or mechanical injury that occurred in the course of labor or delivery; (5) occurring in a hospital; (6) which renders the infant permanently developmentally disabled in motor skills (or, for infants sufficiently developed to be cognitively evaluated, cognitively disabled); and (7) the disability causes the infant to be permanently in need of assistance with all activities of daily living (see Table 2). BIP excludes disability or death caused by a genetic or congenital abnormality, degenerative neurological disease, or maternal substance abuse. (52)

As of December 2007, BIP has received 192 claims, of which 134 (70%) were accepted (see Table 3). The program has paid a total of about $74 million dollars to claimants since its inception.

2. The Florida Neurological Injury Compensation Association ("NICA")

NICA's general structure (see Table 1) was heavily influenced by recommendations from an expert panel convened in 1986. (53) The claims process has been described as follows: (54)

 
   All claims for compensation are filed with the Division of 
   Administrative Hearings (DOAH) and are reviewed by NICA for 
   compensability. NICA collects relevant documentation relating to 
   the claimant's petition, conducts a medical records review, and 
   facilitates the examination of the child by medical experts. After 
   medical experts have reviewed the infant's medical records and 
   other documentation, NICA determines whether a claim should be 
   accepted or rejected and sends its determination to DOAH for 
   approval. A DOAH administrative law judge ["Aid"] determines the 
   compensability of disputed claims after an evidentiary hearing. 
   Once a claim is approved as payable by the DOAH administrative law 
   judge, NICA begins paying program benefits. 

NICA is financed through a system of assessments that is very similar to Virginia's BIP. NICA was initially funded with a $20 million appropriation from the state legislature, with an additional $20 million available to be used to maintain the actuarial soundness of the program if required. (55) Currently, the program is funded through a combination of annual assessments from participating and non-participating physicians, participating midwives, and hospitals in amounts similar to those collected in Virginia ($5,000 annually, $250 annually, $2,500 annually, and $50 per live birth annually, respectively). (56) The NICA statute also authorizes assessments on liability insurers of up to 0.25% of prior-year net direct premiums written if these funds are needed to restore the actuarial soundness of the program. (57) No such assessments have been required to date. (58)

The program meets the costs of all necessary and reasonable medical expenses for eligible infants, including training, residential and custodial care, special equipment, and facilities, but not including amounts paid or payable by private insurance or other sources (see Table 1). These expenses are paid over the lifetime of the child. Compensation also includes a one-time award to the infant's parents or legal guardians, not to exceed $100,000, and a $10,000 death benefit. (59) In addition, NICA will pay for some expenses associated with filing a claim, including reasonable attorney's fees, although representation by an attorney is not required to file a claim. (60)

NICA's eligibility criteria are virtually identical to BIP's, with the following exceptions: the live infant's birth weight must be at least 2,500 grams (5.5 pounds); (61) the oxygen deprivation or mechanical injury may occur in the course of labor, delivery, or resuscitation in the immediate post-delivery period; and the infant should be rendered permanently and substantially mentally and physically impaired (see Table 2). (62) Caseload and payment data are presented in Table 3.

B. PREVIOUS EVALUATIONS

A number of previous studies and evaluations of the programs have addressed questions about the origins of the Florida and Virginia programs, various aspects of their operation, and challenges to their legality and viability. (63) These studies have also evaluated the performance of the programs in containing administrative costs, satisfying consumers, and preempting litigation. No studies, however, have examined effects on the quality of care or health outcomes.

Certain weaknesses in the programs are evident, most of which can be traced back to original design features. We address these in detail below. Overall, however, the academic evaluations, together with more recent official investigations, have found that the programs have largely achieved their principal objectives--namely, acting as a stabilizing influence on the obstetrics tort environment, improving efficiency and speed of adjudication of claims, and responding to the needs of injured children and their families. (64) Specifically, the reports found that, relative to the tort system, the programs have shortened the time from claim filing to compensation and lowered overhead costs and attorneys' fees. (65) They have also had high rates of physician participation and have decreased the number of high-cost malpractice claims brought in tort. (66) Finally, they have resulted in lower malpractice insurance premiums for obstetrician-gynecologists, even those who do not participate in the programs. (67)

Evaluations to date have tended toward broad assessments of the programs in relation to those principal objectives. The nub of the programs' innovation, however--non-negligence-based compensation criteria and the process used to apply them--has received relatively little attention. (68) This article focuses on both the programs' criteria and the process through which they are applied. We consider the following questions: Which criteria are used to distinguish compensable from noncompensable injuries? Who decides eligibility? How is eligibility decided? And how well have these standards and processes worked? The experiences of the Florida and Virginia programs matter because these programs stand, nearly twenty years after their introduction, as the country's most radical and enduring experiments with administrative compensation for medical injury. As such, they tend to be referenced as the primary models for current policy proposals for birth injury funds.

III. STUDY METHODOLOGY

We conducted a series of key informant interviews from December 2004 through June 2005 in order to investigate how the statutory compensation criteria for BIP and NICA have been interpreted and applied. The majority of the interviews were conducted during site visits to the headquarters of the programs in Tallahassee and Richmond. A total of seventeen interviews were completed. The interviewees consisted of the director of each program (n=2) and senior staff (n=2); medical experts who work with and advise the programs (n=4); attorneys involved in the programs or litigation related to the programs (n=3); obstetrics-gynecology practitioners and a hospital administrator (n=3); a journalist (n=1); and insurance experts (n=2).

We followed an interview script that contained a core set of questions posed to every interviewee and additional questions targeted to each interviewee's expertise. Core questions elicited information about current interpretations of the compensation criteria and how interpretations have changed over time; particular terms and criteria that have proved difficult to interpret; statutory presumptions; the use of guidelines and other decisionmaking tools; and the perceived performance of the criteria in terms of ease of applicability, comprehensiveness, scientific validity, and fairness. …

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