No Fault Regime Better Than a No Fault Rule – Medical Negligence

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Is a no fault regime better than a negligence rule as a way of dealing with the causes and consequences of medical error? ’ When assessing whether a no fault regime is better than a negligence rule in dealing with the causes and consequences of medical error, it would seem prudent to first understand the meaning of the term “medical error”. Liang defines medical error as ‘a mistake, inadvertent occurrence, or unintended event in health-care delivery which may, or may not, result in patient injury’ (2000, p. 42). The consequence of these errors (or adverse events) that lead to patient injury, and the method by which we determine and administer compensation for such injuries, has been the source of heated debate amongst scholars in recent times. Fenn et al suggest that public policy has two key objectives to address in this area: ‘providing compensation to those who have suffered injuries and providing incentives to practitioners to supply an appropriate standard of care’ (2004, p. 72). Fenn et al (2004) also relay the dissatisfaction with the current scheme in England, which uses the tort of negligence to award damages; describing it as costly and time consuming due to the need to prove fault, meaning too few patients receive compensation for their injuries. To be awarded damages under the tort of negligence, a claimant ‘must prove that the defendant is at fault for the injuries cited’ (Fenn et al, 2003, p. 272), with fault being the operative word here.

There are four key areas to consider under a negligence rule, these are: ‘(1) establishment of a duty of care, (2) evidence that the physician’s services did not conform to the appropriate standard of care, (3) a determination that the failure to act in accordance with the duty of care was the cause of the harm, and (4) existence of a physically objective and ascertainable injury’ (Horwitz & Brennan, 1995, p. 167). The effect of this is an injurer is only liable for the cost of accidents if they have taken care in an amount less than the established legal standard, as represented below.

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Fig. 1 Not liable for damages Liable for damages x’=x* X P(x)D X+P(x)D Care (x) ? This graph represents the private cost function for a potential injurer (the bold line) under a negligence rule. In this case, the privately optimal amount of care taken is equal to the social optimum amount of care. This is because if a potential injurer takes care below the legal standard, and is therefore at fault, they bear the cost of both their own cost of care (x) and the expected cost of damages (P(x)D).

However if they take care up to or above the legal standard of care, they are no longer liable to pay the cost of damages under a negligence rule, and so to minimise their total costs, as we assume a rational, self interested person would; a doctor liable under a negligence rule would take care at the legal standard. In the case of medical negligence, the difficulty comes in how a court adjudges the legal duty of care, as they are reliant upon expert advice in order to set a reasonable level.

In instances of medical negligence, the Bolam test is applied to determine if a doctor has behaved negligently; and can be taken to mean ‘that a doctor or nurse will not be negligent so long as he/she acts in accordance with the professional practice or opinion’ (Hartwell, 2005, p. 294). By this, a court decides the level of care a doctor should have taken based on the opinion of a professional body on the reasonable amount of care expected from an ordinarily skilled doctor practicing in the same field.

Hartwell (2005) has suggested that the Bolam test is not without its problems; in that it inhibits courts exercising a restraining influence and argues that judges must not be deterred from interference when justified, solely because actions taken have been approved by a body of medical opinion. Strong financial incentives under a negligence rule provide deterrence from substandard care by individual doctors. In the UK however, policy changed in the 1990s to move liability from the individual, with the NHS taking on ‘full responsibility for all new and existing claims of negligence against mployees’ (Towse & Danzon, 1999, pp. 94). The NHS Litigation Authority is now responsible for claims of clinical negligence, with trusts in England belonging to the Clinical Negligence Scheme for Trusts (CNST) run by the NHSLA; with the current structure providing indemnity for all those employed by the NHS; whereby ‘NHS employers are ordinarily responsible for the negligent acts of their employees where these occur in the course of the NHS employment’ (NHSLA, 2011).

It could be argued that because doctors are no longer individually liable for their actions, this could invoke a reduced standard of care. In spite of this, Towse & Danzon (1999) suggest that with the assumption that an employer is at a better position to mitigate risk than its employees; this move to ‘enterprise liability’ should further improve deterrence. Tappan (2005) adds that adopting enterprise liability helps deterrence by giving hospitals incentives to gather data and eliminate errors; and due to the heightened financial risk, to identify and deal with doctors providing inefficient treatment.

This is supported by NHS policy, which states that if it is deemed appropriate to do so, a Trust may ‘take disciplinary action against the individual responsible for the negligence which caused the harm’ (NHS, 2005). Since the NHSLA also provides incentives, such as discounts ‘to hospitals that achieve certain assessed risk management standards’ (Fenn, 2002, p. 234), it can be concluded that a shift to enterprise liability has not affected the strong deterrence incentives under a negligence rule; and that shifting liability from individuals to hospitals helps mitigate risk through incentives aimed at managers.

Negligence nevertheless, is not without its flaws. In theory, ‘doctors balance expectations about the social benefits of medical care, the costs of precaution, and the costs of negligence’ (Kessler et al, 2006, p. 240). However it has been argued that fear of litigation leads doctors to practice defensive medicine, which Kessler et al suggest can take two forms: ‘Positive defensive medicine includes the supply of care that is unproductive for patients; negative defensive medicine takes place when providers decline to supply care that is productive for patients’ (2006, p. 41). This implies that doctors can ‘over-care’ for their patients, by ordering unnecessary tests, prescribing unnecessary medicine or keeping patients longer than required; or even avoid certain procedures over concerns regarding risk; which can prove costly and inefficient, and affect the level of care patients receive. Summerton notes ‘defensive medicine has consequences for the public health not only in terms of the quality of individual care but also in relation to the utilisation of limited health resources’ (1995, p. 7). Furthermore, based on research into the level of defensive medicine amongst general practitioners, Summerton found that ‘Some 98% of general practitioners claim to be making practice changes in response to the possibility of a patient complaining’ (1995, p. 29). Although only based upon a small sample of 300, this figure is extremely high, and gives rise to the potential harm the fear of litigation can have; not only on patient care, but the effective use of health resources also.

Studdert & Brennan highlight that ‘malpractice litigation induces silence and bitterness’ and go on to argue that ‘the need to collect error data in an environment where medical injury compensation calls for scrutiny of provider fault constitutes a troubling deadlock for the patient safety movement’ (2001, p. 218). In short, doctors who are under scrutiny to perform at a certain level of care, are unlikely to be willing to openly share information when they have made mistakes, for both fear of formal action against them and loss of reputation; relinquishing the possible opportunity to learn from lawsuits that arise.

Kachalia et al reinforce this idea, suggesting ‘Clinicians found the error standard punitive and stigmatizing, and consequently tended to be reluctant provide information about injuries’ (2008, p. 392). One of the most predominant arguments against using a negligence based system for compensation is put forward by Towse et al who infer that under such a system ‘only a small proportion of patients harmed by the NHS receive compensation’ (2003, p. 1), with estimates suggesting around 90,000 adverse events occur in the NHS in England per year, of which only 7,000 claims are received, and only 2,000 payments made (Towse & Danzon, 1999).

This small percentage of injured parties receiving compensation reflects a problem with the negligence system; as those who have suffered adverse effects during treatment are evidently not coming forward and making claims to damages they may be entitled to. Also, it is important to again point out that those who have been harmed at the hands of doctors, are only entitled to compensation on the basis of proving fault, which have left some to refer to a negligence system as a ‘litigation lottery’ (Capstick, 2004, p. 59), implying that the rewards when ‘winning’ compensation are high, but the odds of winning are slim and you gain nothing if you lose. A consequence of medical error therefore, under a negligence rule, is that the patient bears the losses regardless of whether they are compensated. The large costs associated with negligence claims, coupled with the lengthy time it takes to actually reach a settlement, give light to why there have been calls for reforms to the current policy.

A report from the national audit office in 2001 states: ‘We estimate that for claims closed in 1999-2000 the average time taken from claim against the Trust or health authority to payment of damages was five and a half years, and the average total time from incident to payment of damages was just over seven years’ (National Audit Office, 2001, p. 16). This lengthy delay in payments means those injured can be without proper financial support up to seven years after the incident occurred.

Fenn et al (1994) estimated the cost of compensating patients to the NHS in England to be ? 52. 3m in the year 1990-1; and following this, Towse & Danzon report that ‘negligence was estimated to cost the NHS in England ? 235m in 1996:1997’ (1999, p. 93). In addition, Ferriman has suggested ‘The NHS is facing a bill for medical negligence of ? 2. 6bn’ (2001, p. 1081). Although the figures are somewhat ambiguous, it is clear that the cost of negligence is an issue that needs to be addressed.

The negative aspects relating to negligence have led to some referring to it as ‘complex, inequitable, and expensive in terms of time and legal fee’ (Capstick, 2004, p. 457). In 2003 in the UK, the NHS investigated reform of its negligence based policy, which led to a ‘Redress Scheme’ being proposed; ‘containing a fast procedure for resolving ‘small claims’ (those with value below ? 30,000) – ultimately involving a relaxed standard of care – and a no-fault procedure for compensating birth-related neurological injuries’ (Fenn et al, 2004, p. 273).

The idea behind this was to move small claims towards an administrative basis, in the hope that compensation could be delivered quicker, and more cost-effective to claimants; in light of potential benefits observed in overseas no-fault schemes. In Florida, a no-fault regime for birth-related neurological injuries has been in place since 1988. The scheme; which is operated by the NICA, a public entity; is funded by participating physicians and hospitals, and operates as an advisory commission to compensation claims made on hospitals (Bovbjerg et al, 1997).

Strict guidelines are set over who will qualify for compensation under the regime, with Bovbjerg et al commenting that ‘this approach has the potential to make it easier for claimants to realize that they have a potentially valid claim, thus simplifying the filing of claims. It should also simplify the resolution of claims once brought’ (1997, p. 81). As yet however, the proposed Redress Scheme has yet to take shape in England, with Lakhani reporting ‘Ministers have been condemned for failing to implement a law designed to help victims of NHS negligence and improve patient safety’ (2009).

A no-fault approach has been adopted by a number of countries overseas, including New Zealand and Sweden, along with a few US states, such as Florida mentioned above; providing a strong basis for analysis. The main difference between how a no-fault regime and the tort of negligence deal with the consequences of medical error; is that under no-fault there is no need to prove fault to obtain compensation, only causation (Gaine, 2003). In this sense, a no-fault scheme is similar to the tort of strict liability; whereby the defendant is always liable to pay damages on top of their own cost of care (as represented by the cost curve X+P(x)D in fig. above). However it differs in that the decision of whether compensation is paid is determined by an administrative board or designated public company, which set their own standards of eligibility and amount of damages awarded, rather than legal standards and levels of damages settled in court. It has been argued that foregoing the need to prove fault has lead to ‘more-timely compensation to a greater number of injured patients and more-effective processes for complaint resolution and provider accountability’ (Bismark & Paterson, 2006, p. 278).

The main arguments against no-fault regimes are that ‘eliminating liability will dilute incentives to deliver high-quality care’ (Studdert & Brennan, 2001, p. 217), and that ‘broadening of the base of compensational injuries will lead to much higher compensation costs’ (Kessler et al, 2006, p. 244). It would therefore seem that no-fault is more efficient at dealing with the consequences of medical error, yet provides little incentives for doctors in addressing the causes of such error. A look at evidence from overseas no-fault regimes could help form opinion on the matter.

In New Zealand, compensation is delivered by an administrative system based on assessed need; which is funded through taxation and compulsory payroll levy (Davis et al, 2003). This system is operated by the Accident Compensation Corporation (ACC), which provides those injured with a simple process for submitting claims, which are then ‘decided in the ACC’s national claims unit, based on information provided by patients and their providers, and advice from independent clinical advisers’ (Bismark & Paterson, 2006, p. 280).

The focus in New Zealand doesn’t solely concern creating a more efficient and effective claims process, as Paterson notes; the ‘complaints system is directed not only at resolving individual complaints but also at improving the quality of care delivered throughout the health care system’ (2002, p. 75). The aim of this is to promote a culture that does not represent a ‘blame environment and hinder quality improvement by driving mistakes underground’ (Paterson, 2002, p. 78), unlike the behaviour exhibited by some doctors under a negligence rule.

This can help drive improvements in patient safety by reducing the number of adverse events and the causes of medical error, by enhancing knowledge of previous practices that have led to undesired outcomes and designing methods to negate this in the future. Conversely, research carried out by Bismark & Paterson counteracts this argument; as they have found that after thirty years under the ACC, ‘New Zealand hospitals appear no safer (or more dangerous) than those in other Western countries’ (2006, p. 282).

In Sweden compensation was provided by ‘Patient Compensation Insurance (PCI), a voluntary, contractual administrative mechanism that provides compensation without proof of provider fault’ (Danzon, 1994, p. 453) until reform in 1997. Under this mechanism, Danzon notes that ‘providers suffer no moral blame, financial loss, or reputation loss as a result of successful claims’ (1994, p. 455). This is due to the decoupling of compensation and deterrence to encourage physicians to aid patients through the claims process, without the fear of reprimand or financial loss.

In order for a patient to pursue some sanction for their attending physician, they must file a separate claim through the Medical Responsibility Board (MRB) who review cases; which can then lead to disciplinary action (Danzon, 1994). From 1997, Sweden introduced the Patient Insurance Act, which ‘requires that a causal relationship must be established between injury and medical care and that it can be demonstrated that injury could have been avoided’ (Johansson, 2010, p. 88); amidst ‘significant cost increases’ (Fenn et al, 2004, p. 82). Compensation is now determined by whether injuries are avoidable; using the experienced specialist rule for 85 per cent of all paid claims (Kachalia et al, 2008); which asks ‘whether the injury would have occurred at the hands of the experienced or ‘‘best’’ specialist in the relevant specialty’ (Kachalia et al, 2008, p. 392). Parallels can be drawn here with the tort of negligence and assessing the duty of care; whereas using the experienced specialist rule, standards for receiving compensation are much higher.

Kachalia et al (2008) remark that it is simpler to regard what would have been done in the best hands, rather than whether a provider’s actions fell below the accepted standard of care; resulting in faster decision making over claims. Studdert et al report the average claim takes 6 months from initiation to final determination (1997, p. 6). However, the cost of implementing a Swedish style no-fault regime in the UK has been estimated at ‘over six times the estimated current cost of fault-based compensation to the NHS in England’ (Fenn et al, 2004, pp. 288).

It is clear to see that both a negligence rule and no-fault regime have their various merits. In dealing with the causes of medical error, it is difficult to find great difference between the two methods of compensation. As found from analysing the no-fault regime in New Zealand, patient safety levels under both schemes are similar. The arguably greater deterrence experienced under a negligence rule can be offset by both the fact that this encourages defensive medicine; and that no-fault encourages greater communication and reporting of error, which can lead to reduction of error in the first place.

Also, under enterprise liability such as in the UK, premiums paid could be experience rated. ‘For instance, a hospital would pay more in a given year if there was a rash of avoidable injuries and less if quality improvement initiatives curtailed the incidence of such events’ (Studdert & Brennan, 2001, p. 221); and since under enterprise liability the employer assumes all liability, deterrence levels for negligence and no-fault would be comparable. In my opinion, where no fault surpasses negligence is in dealing with the consequence of medical error.

No fault provides more efficient, widespread and accessible compensation to those injured. Although seemingly far greater in monetary cost, Towse & Danzon argue ‘the main concern, however, is total societal cost’ (1999, p. 93); thus implying that focus should be on which policy is the best for society as a whole. Evidence suggests that no-fault can provide this; with Scotland developing plans to implement a no-fault based scheme in the near future (NFCG, 2011), a move away from the ‘disenchantment with the negligence standard’ (Kachalia et al, 2008, p. 401). Word Count: 3,149 `

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No Fault Regime Better Than a No Fault Rule – Medical Negligence. (2016, Sep 16). Retrieved from

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