Smelling the Peanuts

By Dr. William Harvey, M.D.
America’s Right

There’s an old joke that goes “How do you know when there’s an elephant in the room?” Answer: “You can smell the peanuts on his breath.” A significant part of the Obama Healthcare Reform plan is the elimination of fraud, waste, duplication and mismanagement. Being against the elimination of waste and duplication is as un-American as being against God, Motherhood and Apple Pie although based on our Courts and Congress only Apple Pie is still safe (at least for now). However, if we’re not careful about what is labeled “waste and duplication” we may find ourselves in even more of a mess. Many Congressmen don’t understand that the reason for some duplication is the practice of defensive medicine. Removing this duplication as healthcare reform without simultaneous malpractice litigation reform is a surefire formula for failure.

To be fair, President Obama in his address to the American Medical Association did mention medical tort reform (Jeff, when you come back from holiday, you can explain the distinctions of torts as a type of suit to us!!) and indicated it was “on the table”, but it’s clear that tort reform has none of the intensity or priority for Obama that other parts of the healthcare reform proposal have. In all likelihood any final healthcare bill will have minimal malpractice reform in its pages.

Let’s look at how defensive medicine came to be and why it makes litigation reform a key part of healthcare reform. Ssay Mr. Smith is involved in a car accident and fractures his leg. He’s taken to surgery, where his fracture is treated. His care follows the standards of care determined by the hospital, and those standards follow the guidelines of the national surgical society. After a few weeks, he develops pain, redness, and swelling. An X-ray shows a pattern suggesting infection, and Mr. Smith is taken back to the operating room for additional surgery. In addition, his hospitalization is prolonged for intense, expensive antibiotic treatment. His infection is successfully treated.

Mr. Smith feels that he should not have had an infection and prolonged hospitalization; this must have been the fault of the surgeon and the hospital. He sues and eventually the case comes before a judge and jury. Mr. Smith’s attorney argues that if the hospital had checked Mr. Smith’s wound more frequently, provided additional and earlier antibiotic treatment, and gotten X-rays more frequently and earlier the infection either would not have happened or would have been treated much more easily.

The defense provides testimony of recommended standards of care and shows that what the hospital and the surgeon did followed the recommendations of local and national surgical societies. The judge charges the jury, indicating what they can and can’t consider and what the general philosophy of the law is, and the case goes to the jury for determination of guilt/innocence and for a determination of compensation if the defendant is found guilty.

So far this is familiar to all of us. We’ve seen it, or a similar situation, on “ER”, “House”, or “Law and Order” many times, but let’s look at this in a different light. What the judge and jury decide will become legal precedent — a guide to how future cases and case law will be determined. Insurance companies will take note of the jury decision and the factors used in that decision, and hospitals and doctors will take away a simple message: “if you want to avoid or thwart a lawsuit, you need to [fill in the blank]” where the blank can be filled with additional tests, additional consultations, more expensive and sophisticated procedures, ruling out rare and unusual conditions, etc. Note the key factor: the decision on what constitutes “appropriate” care (i.e., likely to prevent or diminish a lawsuit) is being made on the basis of a single case with a single patient by a group without medical training, knowledge, or experience. There are no clinical trials here, no “evidence based medicine”, and no comparative effectiveness studies. An emotional appeal to the jury can result in a decision favoring Mr. Smith and a large financial award and establish a more expensive, non-scientific standard of medical care.

Now imagine the cycle: in future cases, the argument is made for even earlier tests, even more expensive procedures, to handle even rarer situations and circumstances. Insurance companies demand that their physician clients practice medicine to avoid the likelihood of lawsuits, and since under the current system, physicians are paid based on procedures performed and tests ordered, there is no incentive to do less. In short, what is built (and has been built for the last 60 years) is the layer-on-layer onion of defensive medicine.

No physician writes “defensive medicine test” on the requisition for additional lab or imaging work so we don’t have a precise measure of how much work in the healthcare system is “defensive” in nature. The CBO estimated that in 2008 about $30 billion was spent to defend against and pay medical malpractice claims (link is a .pdf, see page 178). About half of this amount goes to administrative costs, including the cost of malpractice insurance and the payment of legal fees. The CBO describes this as “substantial”, but it represents about 1.5% of total healthcare expenditures and about 5% of the total amount paid to doctors and hospitals. Just to put this number in perspective, the total cost of “hospital uncompensated care” (i.e., the “free care” hospitals provided) in 2008 was $35 bn (link is a .pdf). Whether substantial or not, the key issue is that this increases the cost of delivering healthcare without resulting in improved healthcare delivery for anyone. Instead it fosters an environment of mistrust and reduced communication and a constantly increasing insurance cost.

Hospital systems and payors, both private and governmental, have already started to reduce costs and litigation in this area by defining “never events” – events that clearly represent identifiable, preventable and serious medical errors that never should happen. As Medicare indicates in this press release, a 1999 study concluded that such events resulted in $9.8 bn in excess costs (this is in addition to the $30 bn in defensive medicine costs) and 32,600 deaths. CMS (the government agency that administers Medicare payments) is using newly granted authority, beginning in FY 2008, to eliminate payments for one never event (hospital acquired infections) and work with hospitals and other payors to reduce the frequency of such events.

Let’s take an even simpler example of how malpractice reform and healthcare reform are linked. Certain specialties in medicine are considered “risky”, i.e., having a high potential for lawsuits. As the cost of malpractice insurance skyrockets, healthcare providers stop accepting patients, and the system has to make major adjustments to prevent healthcare disaster. Let’s take the example of obstetricians, where there have been two documented cycles in the last 30 years. The most recent is documented in articles in USA Today and elsewhere. USA Today documents a Nevada obstetrician who has been in practice for 12 years. His payment for a delivery has stayed fixed at $1200 for 20 years; he’s never been sued in that year period, but in the last year, his malpractice insurance premium (his annual cost) has gone from $56,000 to $108,000. Insurance rates in Nevada are determined uniformly across all obstetricians as a group. He’s stopped taking new patients and new mothers-to-be are finding it hard to get pre-natal and delivery care in the state of Nevada – whether they have medical insurance or not. Obstetricians simply can’t afford to practice their specialty… and have stopped.

Eliminating the costs of “defensive medicine” without reforming the malpractice system will leave healthcare providers holding an unacceptable level of risk personally and with skyrocketing insurance costs that will bankrupt practices and hospitals. In the end Americans may have health insurance but no doctors to provide the actual health care.

Do you smell the peanuts?

William Harvey is a physician with extensive experience in drug research and development. He began as an academic researcher but has been a pharmaceutical executive in the global development arena for almost two decades. His current position involves the strategic use of comparative effectiveness research to speed drug development and to educate healthcare stakeholders: government, payors, prescribers, and patients. He lives in the greater Philadelphia area.



  1. Anonymous says:

    Th Washington Times says it plain as day, "his father was born in Kenya". How come that's okay?

  2. Anonymous says:

    The Obstetricians can thank John Edwards for their premiums.

  3. Anonymous says:

    Greater scrutiny of Obama's plan will doom it to failure, hopefully. This is why he has set a deadline. How do you think the Cap and Trade bill passed? No one had read it. The new house bill forbids joining a private plan once passed. Yes, you can keep your present plan, but if you change jobs, your only option is the public plan. Look at MA and see what is happening with mandated health care. A major medical center in Boston has sued the state for not reimbursing as planned which has resulted in a multimillion dollar loss. At present, Medicare and Medicaid payments to hospitals must be supplimented by private insurance funds to cover to cost of care for these patients. I agree with Susan Collins R-ME who has stated that there should be no deadline to push through this legislation given the social and economic impact it will have to future of our country.

  4. goddessdivine says:

    Very informative; thanks for the synopsis. This admin can't see the forest through the trees. Their solution to everything is just to throw money–that they don't have–at problems. Well, that and the idea of more control. That's what we get for having a community organizer at the helm, instead of someone who actually 'gets' it.

  5. FEBREZE says:

    Peanuts???? smell the dung!

  6. Rix says:

    > Removing this duplication as healthcare reform without
    > simultaneous malpractice litigation reform is a surefire
    > formula for failure.

    Dead wrong – it is a surefire formula for success. Not for everyone, of course, but for a selected few called "litigation lawyers". Yet another group of Obama supporters is being thrown a large juicy snack at taxpayer's expense.

  7. Gail B says:

    Dr. William Harvey for Surgeon General!

    Dr. Harvey, I'm glad I'm not your patient because you would charge me double for an office visit! There's nothing wrong with my health; I'd be discussing politics just to listen to your thoughts!

    Thanks–that was excellent. [I see our watchdog, Rix, was paying attention, too!] :-) )

  8. Gail B says:

    Well, as we're discussing healthcare, here's the link that Claudia was looking for:

  9. Gail B says:
  10. Anonymous says:

    Hey, Gail

    I hope you see my post under "The Coup That Wasn't"!

  12. TARZAN says:

    And it's a KENYAN elephant at that!


    I heard even Dr Seuss is getting out!

  14. MUJERLATINA says:

    I'm a Board Certified Family Physician who is fellowship trained and have barely paid myself in 7 months. Solo practice is an uphill battle, and I spend the bulk of my time on non-clinical aspects of running my practice: referrals; re-submission of claims for adjudication; etc. Can you imagine that one of our HMOs penalize us if we diagnose "tonsilitis" without doing a rapid strep test? Doing the rapid test costs me money, but not doing it provokes an audit by the company and threats of financial penalty. Whatever happened to commen sense? Forced paradigms in the diagnosis and treatment of my patients is driving my practice broke — and has taken the joy out of caring for my patients. Medicare drives the private HMO reimbursement rates, litigious culture fuels the testing and re-testing of patients, and Obama-health will force the dwindling number of U.S. trained physicians right out of practice. It's sad, disgraceful and shameful. :(

  15. NOW WHO DO I LOOK UP TO? says:

    Glenn Beck just lumped those of us with concerns on Obamas heritage with those who doubt the lunar landing. Sigh, Glenn Beck….. now on the Fox dole.


    Glenn Beck, now a gazillionaire.

  17. cal says:

    We are never going to have any meaningful tort reform with lawyers crawling all over Washington. It is a shame because lawsuits are one of the major causes for the explosion of healthcare costs.

  18. Winginit says:

    You can't sue the government without the government giving permission to you to sue it. As I understand it, under the healthcare reform act that everybody will eventually be on, you lose the wrong arm by a negligent doctor; too bad, so sad. You have the wrong breast removed in a masectomy, whoops! Thanks America! Thank you so much for your brilliance! Thank you for fking up our future and giving us socialism… YOU HAVE NO RIGHT TO COMPLAIN – WE TOLD YOU SO AND YOU REFUSED TO LISTEN!!!
    I wonder: Will congress be required to be "serviced" by governmental facilities and be required to wait as long as the PUBLIC THAT VOTED THESE FOOLS INTO OFFICE??? Good luck America – YOU have turned this once liberated, free, country into a LIVING CANCER!!!

    And I can't even move to Canada, because it's just as bad there!

    Politics – Evidence a public education in our Country's "finest" universities is bad for your brain!


  19. Still a Patriot says:

    Hello Dr. Harvey -

    Thank you for this enlightening article. I wish everyone in Congress would read it. Our healthcare system is like the Titanic – it's doomed!


  20. BECK v DOBBS says:

    I guess Glenn Beck is just SOOOO much more enlightened than Lou Dobbs.

  21. John Feeny says:

    Dr. Harvey -
    In addtion to this being an excellent article, you touch upon something that I've been trying to explain to many people nowadays, in that leftist philosophy over the course of the past 40 years has resulted in those who identify themselves as "conservatives" living their lives on the 'defensive'. In my book, I spend a significant portion of one particular chapter discussing what has come to be known as 'defensive teaching' in education.

    The long and short of it is that if we don't stop being afraid of lawsuits – how that can be done, I have no idea – we'll never be able to begin making common-sense, proper life decisions once again.

  22. Amy says:

    I work in healthcare and was wondering about those "never events" like hospital acquired infections. If you are already ill and your immune system is compromised, aren't you more likely to get an infection even when precautions are taken?

    Also, apparently, now there is a new rule about catheter use since people get infections from catheters sometimes. If you don't allow catheter use when needed, how many people who are still drugged up or frail will have a fall because they need to get to the restroom? Many people refuse to use bedpans and with staff shortages, you can't always get someone to help you with a bedpan when you need it.

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