Transcript of Panel Discussion - Medical negligence payout, with John Gatfield, 'Australian Agenda', Sky Television

Well joining me in the studio is Dr Andrew Pesce, a consultant at Sydney's Westmead Hospital, and Secretary of the National Association of Specialist Obstetricians and Gynaecologists. In our Sydney studio, Bill Madden, from the Australian Plaintiff Lawyers' Association's Medical Negligence Special Interest Group, and MCLEOD: from insurer, United Medical Protection. Andrew Pesce to you first of all, just how much insurance are you paying?

PESCE: Well this year, I've had to pay a total of $107,000. That's more than a 12 month subscription but that's how much I've had to pay this year.

GATFIELD: And have you had any cases against you?

PESCE: I've got one notification of a potential claim, but I've so far never had a claim against me, no.

GATFIELD: How much has your insurance premium risen by in recent years?

PESCE: Well when I came back from England, having finished my training and started in practice at Westmead, my first premium was $6,000, in 1991.

GATFIELD: So, in ten years, from $6,000 to over a hundred …

PESCE: Well the annual rate is about $80,000. I paid an 18 month premium.

GATFIELD: Michael McLeod, I would assume then, and this is where you can guide me on this one, that Andrew Pesce is in a special category because he's an Obstetrician and Gynaecologist. Do they pay more?

MCLEOD: Certainly there are two specialist areas that are paying more than most specialists, they are Obstetrics and Neurosurgery. And, particularly in the State of New South Wales where the size of awards that we've had have meant that obstetricians and neurosurgeons are the highest paying specialists in the country.

GATFIELD: So how much would your fund charge, let's start with GPs for example, how much would you charge them?

MCLEOD: A normal standard family GP would pay just a little under $3,000.

GATFIELD: And then it rises according to the risk, as you see it?

MCLEOD: Correct. If you were a general practitioner involved in obstetrics, you'd be paying about $14,000.

GATFIELD: Why are the risks higher, though, for obstetrics? What is the real risk there?

MCLEOD: Well two reasons. Firstly there is the resultant injury that normally happens to a patient and that usually necessitates long-term, very concentrated care and, as you saw with the Calandre Simpson case, that transforms into quite a sizeable settlement. The other aspect is that unfortunately, in terms of obstetrics and this is, probably not being a medico, something that I have come to the conclusion of, that there a lot of systemic processes that are involved in the delivery of a baby. And normally, in most cases, we very rarely find that it is the doctor totally at fault, that he's sometimes part of a process, and so there are a lot more cases, whether they be against the hospital or otherwise, that involve a doctor.

GATFIELD: Well Bill Madden, from a legal perspective, why are we having so many claims being brought now, in the courts, and why are payouts so large?

MADDEN: Well I suppose both of those questions beg an answer to an extent. I don't think that there are a particularly high number of claims being brought in the courts at the moment. In fact, if you look in the Victorian court registries last year, the number of cases started was actually lower than it had been previously. It's very difficult to get reliable statistics for that. So far as the payouts are concerned, it's more a question of the costs being incurred by the victim. So for example, in the Simpson case you've mentioned, more than half, I think, of that verdict was necessary for the cost of the 24 hour care that that girl required.

GATFIELD: And of course legal costs go on top of that.

MADDEN: Legal costs do go on top of that, that's right.

GATFIELD: How many cases are currently underway? Are you aware of that?

MADDEN: No I can't give you a clear number on how many cases are currently underway. I believe that United, one of the major insurers in New South Wales, and Mr McLeod will be able to tell us more about that, resolved somewhere in the order of a thousand cases last year. Whether all of those were successful, I don't know.

GATFIELD: Well Michael mcLeod, I understand that your fund has something in the order of at least half a billion dollars worth of claims against it at the moment, with the possibility of as much again in the next 20 years.

MCLEOD: That's correct. We currently have 55 cases outstanding where there is long-term care, 24-hour care, required. So, in other words, not perhaps of the severity of Calandre Simpson, we have 55 cases involving the organisation where there is a need for 24-hour care. And that will involve multi-million dollar settlements.

GATFIELD: Well Andrew Pesce, if you're paying over $100,000 now in insurance every year, medical liability insurance, what effect does that have on your ability to practice?

PESCE: Personally, I'm able to continue to practice because I'm relatively young, I am in an area which is growing, lots of families, and I have a fairly high number of patients in my practice. What worries me, however, is that in the area that I practice, when I started practising in the area there were 14 obstetricians in private obstetric practice at Westmead Hospital. Now there are seven and potentially, by June of next year, there will be four. And what I'm worried for is that there are going to be, those practitioners who aren't in necessarily large practices which can meet the costs which the medical indemnity insurance premiums pose, who will have to stop practising obstetrics. And that has a roll-on effect in the public system. Not only will they be stopping their private obstetrics, they'll probably stop the public obstetrics as well. And all of a sudden we're in a situation where, I think, there will be less and less doctors who will be making themselves available to practice obstetrics, not only in the private but in the public system as well.

GATFIELD: Simply fewer obstetricians training. Is that what you mean? In other words, medical students saying 'I'm not gonna do O and G, I'd rather do something else.'

PESCE: It starts at the medical student level. I have great difficulty inspiring my students, in the way I used to, that obstetrics is the most wonderful profession to follow, if you can. We even have the current trainees that our College is training to be obstetricians and gynaecologists and, this year, they have had a survey and it's indicated that, of all the trainees in Australia, 47 per cent don't intend to practice private obstetrics when they finish their training. And 45 per cent of them indicated that the costs of medical negligence insurance, and the strains and mental trauma of the thought of going through that process, is discouraging them from doing obstetrics.

GATFIELD: But why is it now like any other cost, where you can simply pass it onto the patient?

PESCE: Well I'm afraid, piecemeal, that's what's done and obstetricians are probably better doctors than they are businessmen. I think they really do care about their patients, certainly in the area where I am in the western suburbs of Sydney, we're acutely aware that any time we increase our costs our patients feel it. Some of them mention it to them, most of them are too polite and kind. But we know that it actually does discourage from seeking private care. And unfortunately, we certainly see a scenario where we will price ourselves out of the market, because there's a free public system that they can go to instead.

GATFIELD: Michael McLeod, clearly this would be a most unfortunate situation for Australia if we were to lose the numbers of obstetricians, for example, that we do have now. Is there nothing that the medical funds can do to lower premiums, or to take out some other form of protection?

MCLEOD: No not really. We're very much governed by the fact that we are a mutual owned by the doctors and, I guess, in simplistic terms, all we do is take in subscriptions from the doctors, manage those funds for the doctors and pay them out to compensate patients who have a claim against the doctor. So it's a fairly simple process and, as the amount of those funds going out goes up, so must the amount of those funds coming in. We protect ourselves with re-insurance where we can, of course. And of course, post the issues in North America on September 11th, the re-insurance global scene is in quite a bit of turmoil. So that will be another on-cost to the doctors, unrelated perhaps to the medical cases that are happening at the moment.

GATFIELD: So in other words, these premiums are going to keep on rising.

MCLEOD: I believe so, yeah.

GATFIELD: And the collapse of HIH, that wouldn't have helped I assume?

MCLEOD: No, certainly we were quite public in what happened to our mutual. We had to take a $30 million hit to our bottom line for HIH which, of course, came from our capital and we will, over time, have to replenish that capital as we move forward.

GATFIELD: Bill Madden is it perhaps time, then, that government stepped in and said we've got to have a legal cap on the amount of money that is paid out in compensation?

MADDEN: The New South Wales Government has, in fact, already done that. On the 5th of July I think it was, this year, some legislation came into effect which provides a cap in some areas, if you can call it that, and also a lower level threshold that people have to overcome. One of the other things that that legislation has foreshadowed, and the regulations probably won't come in until next February, is a limit on premiums for obstetricians and for neurosurgeons, so that those premiums would not be, on the present version of the regulations, more than 20 times higher than the general practitioner rate. Now I think it was said earlier that the general practitioner rate is about $3,000, so that would provide an upper level premium for the obstetricians of about $60,000.

GATFIELD: Michael McLeod would that work and, then, could you afford to ensure obstetricians for $60,000?

MCLEOD: Well the Mutual couldn't, and that is the regulations put in place. In actual fact, what sits behind that is an institutionalised cross-subsidisation by other craft groups. So it actually affects neurosurgeons and obstetrics, whilst they will sit at 20 times a GPs rate, whatever that be, going forward, other specialists are not subject to that same ceiling. So theoretically the Mutual, in fact all mutuals, will have to secure the additional funds from other specialities. So, in a bizarre circumstance, you could see another lesser risk specialty paying more money than the obstetrics or neurosurgery specialists.

GATFIELD: Nobody, of course, disputes that Calandre Simpson, to use that particular case, deserves, I suppose, every cent she gets. And, you know, a 22 year old with decades of care ahead of her, $14 million including the interest payments that've been made. But if we have a cap on these payments, is that going to affect the rights of patients to actually sue doctors? Bill Madden, do you have a view on that?

MADDEN: Well it must necessarily affect the rights of patients to sue doctors and that's what's happened with the law, since July. Since July of this year, a person with less than what's described an injury causing 15 per cent of a most extreme case, which is a bit of a peculiar concept, cannot recover financial compensation for general damages, for pain, suffering, emotional distress. Those things are simply precluded.

GATFIELD: So gradually the law, in a sense, is being tightened.

MADDEN: Certainly in New South Wales, that's happened already.

GATFIELD: And does it need to happen in the other states?

MADDEN: Well it's a question of whether it needs to happen at all, I suppose. You're causing victims of medical negligence, who have already suffered a loss, to then bear the cost themselves rather the cost being borne through an insurance scheme or by the government. Whether it's necessary in other states depends, obviously, on whether the financial pressures are deemed necessary. The problems are sufficient to warrant those changes in other states.

GATFIELD: Andrew Pesce?

PESCE: Look I think that a point that needs to be made here is the fact that we all know that patients will suffer harm, to varying degrees, as a result of medical and nursing care that they receive. One of the problems with the current system, I think, is that it makes people fixate on the human error medical negligence side of adverse outcomes for patients. And studies have shown that only three per cent of all patient injuries which occur are due to human error/medical or nursing negligence. And, unfortunately, there's this huge amount of resources which is being channelled towards what I call a compensation lottery, because there are a lot of people who are there. I have a woman who might deliver and have a brain-damaged baby, not because it's my fault but because the baby developed abnormally. She gets nothing. Whereas, on the other side of the equation, you get a patient who is able to demonstrate that there has been a failure in care and the court decides that this constitutes negligence and awards an extremely large payout. I don't believe it's in the public interest that a tiny proportion of patients who suffer some sort of injury, who may or may not require compensation, are the only ones who can put up their hands. To put it in context, more patients are injured in falls in hospitals than by medical negligence. And their seriousness of injury can also be extreme. And I think the Calandre Simpson case has highlighted the difference between what is available to some and what is not available to the vast majority.

GATFIELD: Are you suggesting that perhaps some patients are thinking already, when something goes wrong they're immediately thinking about how much money can I get out of this? Are they being deliberately litigious?

PESCE: I don't take that view at all. I think the vast majority of patients and their doctors have extremely good relationships, and I think both realise that they're trying to do the best for each other. Look, every now and then, I hear colleagues who give me anecdotes which might suggest that. But I don't think that's the problem. I think the fundamental problem is that we have a system which does not, in any way, address the problems of risk management in our medical system. There are patients who are suffering adverse events every day, not through the fault of anyone, but the fear of litigation sometimes, I think, makes people more secretive. And it makes it harder for institutions, hospitals, governments, to gather data which would allow us to risk manage our institutions and systems in a way which would decrease harm. And I think, the Calandre Simpson case, $14+ million. The Department of Health and Aged Care in this country budgets for $5 million a year, for the whole nation, in risk management. There's a complete mis-allocation of resources there, in terms of improving outcomes for everyone.

GATFIELD: But of course, doctors are always going to make mistakes aren't they? I mean there's probably not a doctor in the country that hasn't made a mistake, whether it be small or large, at some stage in his or her career.

PESCE: Everybody makes mistakes. Sometimes it'll cause harm. Fortunately most of the time it doesn't. But I think that the whole problem is that in the current system, everyone's so paranoid about litigation, about what it's doing to the stress of working that often mistakes where you drop the ostrich approach rather than a constructive approach. And I think that much more emphasis has to be made on constructive risk management rather than shutting the door after the horse has bolted.

GATFIELD: Michael mcLeod, do you have a view on that?

MCLEOD: I think Andrew's quite right. I mean risk management probably is the pro-active tool that we have as an industry to try and mitigate some of these events, and particularly in the hospital system where it's not only the doctor that has necessarily duty of care to the patient, but the staff of the hospital and the environment of the hospital. And so many things can go wrong and we always hope that so many things will go right. I'll just pick up on Andrew's point of the inequitable state of medical negligence and the fact that it is exactly that. I think there are in excess of 200 babies born with cerebral palsy each year and we literally get a handful that go through a settlement at United which means that the vast majority, perhaps 97 per cent of those babies go home and the family struggles to take care of them for the rest of their days.

GATFIELD: Because that's -- nobody's made a mistake in that particular place.

MCLEOD: Because a doctor could not be found and a lawyer was not involved.

GATFIELD: Umm but we cannot just keep on paying out these huge sums, can we? I mean can the country afford to pay this sort of money and can the medical profession afford these premiums in the end?

MCLEOD: Well they can't and I guess the best ratio I can give you is that this year in New South Wales, the obstetricians will pay, as a body of people, approximately $12 million in premium. Calandre Simpson received $14 million plus law costs and we expect to settle another six cerebral palsy claims this year. So it's arguable that as we'll settle many times the premium pull this year and of course the issue faced there is that the premium pull will have to go. Doctor's subscriptions will have to go up.

GATFIELD: Bill Madden, it seems that in New South Wales, more cases are bought and the pay-outs are actually higher too. Would it be better if we had a national approach on this?

MADDEN: The Common Law Compensation Scheme is very similar throughout the country. So to that extent, I suppose there is a national approach. The issue about, for example, obstetricians being required to pay for $12 million worth of claims, falls back to that question as to how you share the risk amongst a group of people. Lawyers, for example, pay an insurance premium as well. All lawyers throughout New South Wales pay the same premium. There's not a different premium dependent upon the type of law they do. And I think one of the unfortunate things that's crept into the medical profession is this differential premium between general practitioners and say for example, neurosurgeons. There are very very few neurosurgeons, but there are a lot of general practitioners.

GATFIELD: So are you suggesting that there should be a sort of an averaging out of that premium payment?

MADDEN: That's right and that's the step that the New South Wales Government's taking with the regulations under that health care liability legislation we spoke about earlier.

GATFIELD: Michael, is that a practical measure and would doctors accept it do you know?

MCLEOD: Well I think that there was a great deal of mutuality when premiums were $75, which was the price in the year that Calandre Simpson was born. Every doctor was happy to pay the $75. But times have changed, and this is a global trend now. We're not the only - Australia's not the only country that has these risk rate of premiums rather, so therefore the GPs would say that well, they believed 2700 or 3000 is probably more equitable, than perhaps the eight or nine or ten thousand dollars they'd have to pay otherwise.

GATFIELD: But inevitably that's going to lead to higher fees for the patients anyway because obviously if a GP is suddenly paying $3000 now in medical liability insurance, and that goes up to, let's say, $10,000 or $20,000, those costs have to be passed on don't they?

MCLEOD: They do and I guess in the case of a mutual where you have a fund pooled by doctors, we actually are, for want of a better word, the insurer of last resort. We have to cover all of our members, but commercial players occasionally come into our marketplace and realise that GPs a much better risk than perhaps obstetricians or neurosurgeons and will undercut to try and write some of the lesser risk specialties, and of course that puts pressure on the mutual.

PESCE: In terms of the costs and being passed on to patients, that's inevitable. I'm afraid however that there's far greater costs that the community's going to have to bear and the main one is loss of services. I received a letter last week from a colleague in a large rural centre. She's the last obstetrician in that centre. She's no longer going to be able to see obstetric patients in the rooms, because she cannot afford the indemnity premium she has to pay because there are only a small number of private patients in that centre.

GATFIELD: So what does she do? She just gives away her practice?

PESCE: She's going to close up seeing the obstetric patients in the rooms. It'll then be up to the Government I suppose to say - well what do we do now? We have to see these patients somewhere. The Government will probably have to open up a public clinic in the hospital to see the patients were previously seen in the rooms. Last year, Mr Knowles, the Health Minister, said that the Government paid $27 million to cover obstetricians public indemnity insurance.

GATFIELD: That's just the New South Wales Government?

PESCE: Just the New South Wales Government. Last year that was $27 million. These costs are going to continue to escalate. There is no way that in the finite budgetary restraints that face our health system, that one part of the expenditure can rise the way it's going to for medical indemnity payouts, without the Government having to cut something else. And I think, there is no exaggeration to say that in the next 12 to 24 months there is going to be a substantial re-allocation of resources which is going to be necessitated by this.

GATFIELD: So we're almost out of time. So summing up, what you're saying is that there'll be fewer services out there for the public and we're going to have to pay more for them anyway.

MADDEN: That's right and the most vulnerable areas will be rural, regional and outer metropolitan areas where there are already lower numbers of doctors who are providing the larger number of the services, and they're the ones who are more vulnerable to having to stop.

GATFIELD: Michael, do you have any thoughts on that one?

MCLEOD: Well I think in terms of the medical profession - I mean really, a solution has to be found very quickly. Things like the New South Wales legislation are certainly a step in the right direction but they're not the total answer. And I guess that we're the best barometer. We all unfortunately keep asking the doctors for those subscriptions whilst we're paying out those funds and it will just grow over time if nothing's done.

GATFIELD: And Bill Madden, I suppose you can just see the number of cases growing all the time can you?

MADDEN: I think it's important though not to lose sight of the fact that the people at the end of this line are the victims of medical negligence. Simpson -- Calandre Simpson was a case where there was an admitted mistake, where there was admitted negligence. She's left with a disability and has to provide for herself for another, I think, 40 or 50 or 60 years. Someone has to pay for that in the sense that someone needs to provide for that person. And I think it's unfortunate if the victim of that sort of an accident becomes a victim then of being deprived of adequate compensation.

GATFIELD: But is it practical to also talk about that compensation coming out of the medical industry? Would it not be better perhaps coming out of a broad, general public fund?

MADDEN: All of these things have a number of different factors and the medical industry itself derives significant income from Government monies through the Medicare scheme. It's an analysis that's quite complex. Broad public funds carry with them their own problems and if we're talking as Mr McLeod said earlier of compensating 200 victims of cerebral palsy in a year, you have to wonder whether the funds made available for those people are going to be adequate to give them a reasonable level of compensation or not.

GATFIELD: All right thank you very much. Bill Madden thank you for taking part. MCLEOD: thank you. Also it looks like we can expect the cost to go up for the public as well as for doctors. Andrew Pesce, thank you for your participation.

Ends