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Liability William M. Sage I view the liability portion of the proposal as a major breakthrough. The major breakthrough, however, is not the detail of the proposal. The details actually all build on well-established concepts in the academic and policy literature or programs that have been tested in particular organiza- tions or in other countries. The breakthrough is that liability is included here as part of an integrated set of health system improvements. In my view, there is an unfortunate tendency to divorce liability considerations from the rest of the health care system. We tend to treat them as a special case that really does not relate to all the things that, in fact, we know they do, including the other ways people access health care, the providers who must make that health care available, and how it must be paid for. I think one thing that has contributed to this unfortunate tendency toward what I like to call liability exceptionalism is that in the political world, we continue to debate proposals that are malpractice liabilities first considered and adopted in some jurisdictions back in 1975. Because liabil- ity insurance crises happen periodically, we have a tendency to think that a proposal from 1975 would be appropriate for the health care system of 2003. My view is that this is absurd, and I think the great breakthrough here is that we are talking about a liability proposal that is integrated with health system reform and health system improvement. There are several goals associated with a liability proposal. I believe we are in the midst of a true, liability insurance crisis and that concerns the committee greatly. Therefore, aspects of this proposal are intended to bring much greater certainty and, therefore, financial predictability to ei- ther the coverage costs or doctors and for hospitals. 18

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LIABILITY 19 One of the great breakthroughs, since 1975, is that we understand patient safety much better. This is a set of proposals designed to induce health care providers to do a better job with patient safety and to do it in ways that are more sheltered from the types of liability risks currently discouraging health care providers from engaging in cooperative patient safety improvement activities. An important thing that patients deserve, if they are injured, is a prompt payer and certain level of compensation, something the tort sys- tem has not typically provided and these proposals are designed to incor- porate that. Another issue is that these proposals are designed to involve patients in their own care, in patient safety improvements generally, and to give patients good communication when and if errors do occur. Those are the conceptual landmarks for the proposal. We have outlined two options. One we call a provider-based early payment and the other we call statewide administrative resolution. The difference is that option one takes the approach that there is a better mousetrap here. There is a way of organizing health care services that is better in terms of patient safety and patient involvement that can offer compensation to injured patients in a way that is financially predictable for them. But the committee wanted to recognize the better mousetrap in a vol- untary rather than a mandatory fashion. So, the notion of option one is to provide incentives for these organizations to step forward, change the way they compensate injury, connect the things they can do to improve patient safety to public systems of accountability, and in return get tort immunity and significant changes to the current system of resolving pa- tient injury disputes. Option two is a statewide administrative scheme, which looks to the entire provider community within a state to engage in both the prompt compensation of avoidable injuries and the patient safety improvement activity and to do that on an all-inclusive, mandatory basis. Both of these proposals have certain features in common. There is a public infrastructure involved in terms of creating definitions of avoid- able events, assigning values for compensation in addition to economic harm, and compensation for noneconomic harm and values, prospectively according to some deliberative process. In my view, one of the really important things here is that this offers an opportunity for the types of social conversations that we have been struggling to have in the United States for decades over what people really expect to get out of the health care system and what monetary amounts they place on those benefits. In option one, the provider-based early payment system, we are usu-

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20 FOSTERING RAPID ADVANCES IN HEALTH CARE ally talking about a hospital organization. We have provided incentives for the hospital to bring physicians who are associated with that hospital within the ambit of reliability protection and we would expect them to build on proposals currently available that offer early offers of settlement. We would also expect that the hospitals would identify avoidable inju- ries, communicate those facts to patients, take steps to keep them from happening again, and to promptly pay the patients the amounts required according to the predetermined schedules. In exchange for that, the orga- nizations would enjoy freedom from a lawsuit. As a financial inducement, we focused on the federal government con- tributing to the excess coverage that these institutional health care pro- viders currently face. One of the facts of the current liability crisis is that the excess layer of coverage is extremely expensive for a variety of rea- sons, many of which are related to the reinsurance markets. But the no- tion here is that organizations that can do things right and really want to do things right would come forward and take advantage on an organiza- tion-by-organization basis of this proposal. Option two, the statewide administrative resolution system, is an ad- ministrative adjudication system similar to a worker's compensation or other no-fault system on a statewide basis. This option uses definitions of avoidable injury and compensation amounts that have been developed through public processes with the federal government contributing to the start-up costs for that system.