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Corporate Law Concept May Provide Cure To Medicine's Malpractice Woes

March 6, 2002-- The debate over whether patients should be allowed to sue health care providers, including HMOs, once again has emerged as a hot political topic, with strong views on both sides.

The issue, however, often has been framed in all-or-nothing terms that leave little room for meaningful dialogue or a politically feasible compromise. One camp advocates the complete and nearly unrestricted right of patients to sue, with little, if any, consideration for the uncertainty, delay and high costs associated with a normal tort claim. Others advance the position that patients should not be permitted to sue their HMO, with not enough consideration given to the unfairness of leaving patients with little, if any, legal recourse to hold alleged wrongdoers accountable.

In an innovative article, however, Professor Jeffrey O'Connell of the University of Virginia School of Law, one of the nation's foremost tort reformers and coauthor of the principal work that proposed no-fault insurance, and Andrew S. Boutros, an attorney in private practice, suggest a socially responsible and politically acceptable alternative. In the current issue of the Notre Dame Law Review, O'Connell and Boutros discuss their proposal in an article titled "Treating Medical Malpractice Claims Under a Variant of the Business Judgment Rule." Their proposal is called the "early offers" plan.

The plan is based on the business judgment rule, one of the country's most well-established corporate governance doctrines. It provides that courts will not second guess the decisions of a corporation's officers or directors if those decisions are within their authority, have a rational basis, and are made in good faith–even if they turn out to be mistakes in judgment.

As O'Connell and Boutros explain, the "early offers" plan is essentially an improved adaptation of the business judgment rule. It would allow a health care provider, including an HMO, facing a patient lawsuit, to offer the patient within a timeframe set by law (say 120 days after a claim is filed), periodic payments of all net economic losses not covered by other insurance, namely, lost wages, medical expenses, rehabilitation costs and attorney fees. Importantly, nothing would be paid for noneconomic damages such as pain and suffering. An early offer accepted by a patient would end the dispute.

A patient who rejects an early offer, however, would have to establish two things: First, that the defendant acted with gross negligence, and second, such gross negligence would have to be proved by clear and convincing evidence or preferably beyond a reasonable doubt. An early offer results in a much more difficult case for a plaintiff to prove, the theory being that once an early offer has been made, courts should not substitute their judgment for that of a defendant unless there is bad faith in the decision-making process or in the execution of the decision

In an extensive discussion, O'Connell and Boutros show that the policies and rationales behind the business judgment rule apply with equal force in the area of medical malpractice claims. Moreover, they write, the majority of claims against health care providers, including HMOs, would lend themselves to resolution under the early offers plan, which offers benefits to both sides of a lawsuit.

Defendants would welcome the opportunity to settle claims early in the adjudication process, thereby avoiding the uncertainty of runaway verdicts and expensive attorney and expert fees. Plaintiffs would benefit from securing prompt payment of economic losses and attorney fees, while also being spared the uncertainty, delay and huge legal fees (between 30 to 60 percent of their payment) of a tort suit. Significantly, unlike the business judgment rule, the early offers plan does not immunize a defendant from liability; instead, it takes the socially responsible position that defendants must make patients economically whole before any protection is given from full-blown tort liability.

Full article: Jeffrey O'Connell & Andrew S. Boutros, Treating Medical Malpractice Claims Under a Variant of the Business Judgment Rule, 77 Notre Dame L. Rev. 373 (2002).

Contacts: Contacts: Andrew S. Boutros (202) 887-3727 or Jeffrey O'Connell (434) 924-7809 (after March 17, 2002)

FOR ADDITIONAL INFORMATION: Contact the Office of University Relations at (434) 924-7116. Television reporters should contact the TV News Office at (434) 924-7550.

SOURCE: U.Va. News Services


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