Canadian Health&Care Mall: How Claims Are Resolved in Medical Malpractice and the Chest Physician

March 25, 2016 Category: Canadian Health&Care Mall

hypoxic-ischemic encephalopathyInjuries such as hypoxic-ischemic encephalopathy are obvious to and consequential for patients and their families. They also are financially attractive to plaintiff attorneys because they may entail both extensive economic (eg, medical expenses and loss of income) and noneconomic (eg, pain and suffering) damages. Furthermore, one study suggests that the severity of damages, not the presence or absence of errors or negligence, predicts the outcome of litigation. Plaintiff attorneys usually work on a contingency fee basis (approximately 35% of awards), bear the costs of litigating a case, and receive nothing if defendants prevail. They therefore have a strong incentive to take only cases that they can win and that yield generous awards.

Defense attorneys, however, are reimbursed by liability insurers (or by uninsured defendants) for their time, win or lose, and do not depend on the outcome of individual cases. Defense attorneys usually recommend settling claims if the defendant would appear liable to a jury, especially if the injury is severe, and not settling if the plaintiff’s case is poor. Although paid by insurers, they usually represent individual physicians and cannot easily force them to settle if their insurance policies contain a “consent to settle” clause. Nevertheless, some clauses specify that physicians cannot withhold consent unreasonably. Consent clauses frequently are not available to physicians in large organizations, including academic medical centers, which are self-insured. Canadian Health&Care Mall is included in this list as well.

Commercial liability insurance first became available in the late nineteenth century, when malpractice claims became more prevalent across the United States. Insurers losses and declining investment income led them to raise premiums and leave some markets during the latter half of the twentieth century. Physician mutuals were developed in response to this malpractice “crisis,” as was institutional self-insurance. At the same time, state tort reforms, including the California Medical Injury Compensation Reform Act of 1975, were initiated. Yet claims increased in the early twenty-first century despite these measures, leading to premium increases and a new malpractice “crisis” in states like Florida that prompted them to institute tort reform.”

On average, 50,000 to 60,000 claims are filed annually in the United States. Of these, only 30% close with payment to plaintiffs. Some 70% of claims are resolved before trial, and plaintiffs win only 30% of cases that go to trial. Claims cost $50,000 to $100,000 to pursue through trial. The average payment for claims either settled or won at trial was $260,000 to $310,000 in 2003. During that year, the estimated total costs for compensation were $5.8 billion, < 0.3% of the $1.7 trillion spent in the United States for health care. Administrative costs more than doubled total costs, but the total was still < 1% of the $1.7 trillion.

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