Medical Malpractice: Crisis or just another controversy?

Malpractice expenses represent less than 10 percent of medical practice costs. Evidence for a nation-wide malpractice crisis is not apparent.

A recent investigation utilizes data collected by the American Medical Association on physician incomes, practice expenses, and practice characteristics. The data were collected from 1970 to 2000 by the AMA Center for Health Services Research and its successor, the Center for Health Policy Research. Analysis was focused on medical specialties considered to have the highest malpractice costs – general surgery, obstetrics/gynecology, and anesthesiology.

National trends revealed an overall increase in medical malpractice premiums of $416 annually over the entire 30-year period. Although there has been a more rapid rise in malpractice costs recently (averaging $731 annually between 1996 – 2000), malpractice premiums for all physicians were lower in 2000 ($18,400) than at their peak in 1986 ($20,106, in constant 2000 dollars). The contribution of malpractice costs to all practice expenses rose dramatically from 6% in 1970 to 11% in 1986.Lately, the fraction of malpractice costs from total practice costs has declined (6% in 1996 and 7% in 2000).

The increasing costs of operating a medical practice have outpaced the growth of malpractice premiums. Such non-premium costs include office rent, medical equipment and supplies, and non-physician personnel services. Coupled with declining physician revenues in recent years (for all physicians except OB/GYNs), many physicians have seen real declines in their personal income. Such declines in revenue since 1996 are nearly 4 times greater than the increased malpractice costs over the same period.

Commentary:

It appears that the claims of the American Medical Association and other physician groups may be overblown. While malpractice crises on a local or state-level scale cannot be ruled out, a regional or national crisis has not been observed. The authors conclude that, “It was revenue decline and increases in nonpremium expenses, not premium increases, that account for the overwhelming share of falling [physician] income.” Perhaps physicians should first look to reduce their practice expenditures and then exert greater effort on leveraging third-party payers for improved reimbursement. It appears unlikely that malpractice reform will substantially affect physicians’ bottom lines.

Health Affairs. 2006. 25(3): 750–758.

by

Cedric K. Dark, MD, MPH