Private regulation.

• Author: Avraham, Ronen
• Position: Healthcare reform's main goals

INTRODUCTION I. THE VARIOUS COSTS OF THE HEALTHCARE SYSTEM A. Costs Associated with Underuse B. Costs Associated with Misuse C. Costs Associated with Overuse 1. Defensive Medicine 2. Offensive Medicine 3. Cost-apathetic Medicine 4. Compassionate Medicine D. Summary II. IS CURRENT MEDICAL MALPRACTICE LAW THE ANSWER? A. Can Tort Law Tackle the Healthcare System's Costs? B. Can Current CPGs Tackle the Costs of the Healthcare System? 1. When the Government Writes Guidelines a. Theory b. Evidence from States' Experience with Guidelines c. Evidence from Federal Experience with Guidelines d. Summary 2. Guidelines Written by Hospitals and Hospital Organizations 3. Guidelines Written by HMOs, Health Insurers, or Liability Insurers 4. Guidelines Written by Professional Associations C. The Treatment of CPGs in Practice 1. The Treatment of Guidelines Within the Medical Profession 2. Courts' Treatment of Guidelines D. Summary III. THE DESIGN OF PRIVATE REGULATION REGIME A. The Legal Infrastructure 1. Liability from the Ex Ante Perspective 2. Contractually Standardized Care and Reimbursement Levels 3. Private Regulatory-Compliance Defense 4. Intellectual Property Protection for Guidelines 5. Not Recognizing the State of the Art Defense 6. Guaranteeing Private Regulators' Solvency 7. The Value of Constrained Pluralism B. Implementation IV. EVALUATION IN LIGHT OF OBJECTIONS A. The PRR Compared to Alternative Regimes 1. What is the Difference Between PRR and Liability for Gatekeepers? 2. What is the Difference Between PRR and Self-Regulation? 3. Why Not Strict Liability or No-Fault Regimes? 4. Why Do We Need Legislation? Why Do We Not See It in the Market Already? a. MCOs as Cost Internalizers b. Liability Insurers as Cost Internalizers c. Government as Cost Internalizer d. Private Firms as Cost Internalizers B. Practical Medical Concerns 1. Medical Ethics 2. Good Medicine Requires Discretion 3. Not Enough Reliable Scientific Information Exists To Make the Endeavor Worthwhile 4. How Effective Will PRR Be in Reducing Costs? a. Misuse (Medical Errors) b. Underuse c. Overuse C. Legal and Political Concerns 1. Are We Losing the Information Updating Benefit that Tort Law Provides? 2. Would Private Regulation Lead to Pulling the Plug on Grandma? 3. Could a Profit-Driven Regulatory Regime Ever Win Political Support? V. BEYOND MEDICAL MALPRACTICE CONCLUSION "The more I have studied it, the more I believe that less discretion for doctors would improve patient safety."

Don Berwick (1)

INTRODUCTION

Addressing the American Medical Association (AMA), President Obama described the healthcare system as a "ticking time-bomb for the federal budget." (2) He stressed the need "to improve the quality of medical information making its way to doctors and patients." He further noted that "it can take up to 17 years for this information to find its way to an exam room or operating table." (3)

Improving the quality of information channeled to doctors can further what legislators agree are healthcare reform's three main goals: increasing access for the uninsured, controlling rising costs, and improving patient safety by improving the quality of care. The main focus of the Patient Protection and Affordable Care Act (ACA), (4) a historic health care reform bill signed by President Obama on March 23, 2010, was the first of these goals--increasing access by providing insurance to thirty-two million uninsured Americans. This is important, but if quality does not improve and costs do not decrease, the United States will soon face another increase in the number of uninsured. ACA (as well as the American Recovery and Reinvestment Act of 2009) contains provisions that allocate grants to improve the quality of care. (5) Specifically, these relatively small grants fund projects that increase patient-doctor communication, prevent mistakes, and deal with the aftermath of the mistakes that do happen. (6) For access to healthcare to be sustainable in the long run, however, costs-estimated at $940 billion over ten years for the ACA program (7)--must come down and the quality of care must improve sustainably and much more dramatically.

This Article proposes a novel reform which directly addresses the twin goals of improving care quality and lowering costs--and thus of making access to care for the uninsured sustainable--by improving the quality of the information available to physicians to facilitate implementation of cutting-edge procedures. I propose a private, market solution to a burning social problem. Specifically, I argue that the healthcare system is a suitable place for private regulation of medical procedures rather than the government or self-regulations that are prevalent today.

As explained, cost and quality are intimately intertwined. Too little care (underuse), incorrect care (misuse), and too much care (overuse) raise concerns about both the quality and the cost of care. Substantial research has established that all three problems are ubiquitous in the American healthcare system. Underuse is exemplified by the statistics that show half of Americans do not receive recommended preventive care, 30% do not receive recommended acute care, and 40% do not receive recommended chronic care.s Likewise, misuse is exemplified by the estimated 300,000 annual injuries that result from of preventable medical errors. (9) Lastly, overuse is exemplified by the 30% of Americans who receive acute care and 20% who receive chronic care for clinically inappropriate reasons, regardless of their insurance plan. (10)

Underuse is insufficient care, which happens because of financial barriers such as lack of insurance, lack of coverage for preventive care, high deductibles and copayments, and so on. Underuse also occurs because some segments of the population distrust physicians and the health care system in general. These segments may decline to follow recommendations or may avoid the system altogether. (11) Underuse has been shown to lead to poorer health outcomes. (12)

Misuse, often referred to as medical errors, is caused by fatigue, poor judgment, over confidence, lack of facility resources, lack of adequate training, or lack of communication between medical team members. Medical errors can result in negative outcomes that range from unnecessary hospitalization and loss of income, to suffering and sometimes even death. The Institute of Medicine, a not-for-profit, nongovernmental organization under the U.S. National Academies, estimated that up to 98,000 deaths every year are associated with medical error--about twice as many as from car accidentsl. (13)

Overuse, or overutilization, happens for four interrelated reasons. First, overuse can occur as a result of defensive medicine--that is, excessive care which a doctor provides to avoid liability. Second, overuse can arise from offensive medicine-that is, excessive care which doctors pursue to magnify their reimbursements. Third, overuse can result when doctors are unaware that a treatment's costs exceed its benefits, either because they have no relevant information or because they are not accustomed to considering care in those terms. I call this "cost-apathetic medicine" because providers are unaware of, or do not care about, costs when they deliver care. Fourth, overuse can occur because of compassionate medicine--that is, excessive care provided because doctors compassionately opt to do the most they possibly can for a patient--especially when the patient is dying.

Republicans focus on reducing the overuse associated with defensive medicine. They push for a medical liability reform that would decrease doctors' liability and reduce doctors' incentives to overtreat for fear of lawsuits. On the other hand, Democrats focus on reducing overuse associated with offensive medicine and misuse resulting in medical errors. They seek to change the way medical care and drugs are reimbursed, and they object to reforming medical liability. Both Republicans and Democrats, however, discuss reducing underuse through increased preventative medicine and improved access to insurance.

A better way than this political, piecemeal approach, however, would be to simultaneously address underuse, misuse, and all four types of overuse. How? As articulated in several reform proposals, doctors should be immune from medical malpractice lawsuits if they comply with evidence-based medical guidelines. These reform proposals are reasonable because a central objective of medical malpractice liability is to encourage doctors to provide scientifically defined "optimal care." (14) Accordingly, immunity for those providers who act optimally by complying with evidence-based guidelines would further the same aims without imposing excessive costs on doctors. This proposal would thus address both misuse and overuse-especially the compassionate and cost-apathetic types and, to some extent, offensive medicine. Further, granting doctors immunity would address overuse of the defensive medicine type.

Unfortunately, this proposal ignores a critical issue: the actual development process and framework of existing clinical practice guidelines (CPGs). Currently, CPGs are produced by various entities, including professional medical organizations, hospitals, healthcare maintenance organizations (HMOs), liability insurers, and government agencies. These organizations should strive to provide guidelines focused towards a goal of optimizing patient care while minimizing unnecessary costs. Yet, these organizations often struggle to achieve this goal because they have neither the resources nor the financial incentives to invest constantly in updating the guidelines to reflect quickly evolving scientific research. (15) Thus, they produce guidelines that lack adequate support from scientific evidence. Indeed, recent studies show that only a small percentage of CPGs are based on scientific evidence. (16)

The difficulties with CPGs are further compounded by two factors...