1 Patricia M. Danzon, Medical Malpractice: Theory, Evidence, and Public Policy 2 (1985) [hereinafter Medical Malpractice]. Even as far back as the Babylonian Code of Hammurabi, circa 1780 B.C., medical error is mentioned and remedies to deter it are sought: “If a physician make a large incision with an operating knife and cure it … he shall receive ten shekels in money … If a physician make a large incision with the operating knife, and kill him … his hands shall be cut off.” Ancient History Source Book, Code of Hammurabi, c. 1780 B.C.E. (L.W. King trans.), http://www.fordham.edu/halsall/ancient/hamcode.html#text (last visited Oct. 26, 2009). The Code is the oldest written legislation pertaining to the practice of medicine and “set out for the refirst time the concept of civil and criminal liability for improper and negligent medical care. Penalties ranged from monetary compensation to cutting off the surgeon's hand.” Wecht, Cyril H., The History of Legal Medicine, 33 J. Am. Acad. Psychiatry & L. 245, 245 (2005)Google ScholarPubMed. In England, physicians have been liable for medical malpractice since the fourteenth century; in the United States, since the late eighteenth century. Medical Malpractice, supra at 59.

2 In the early 1970’s, increasing claims and inadequate malpractice insurance rates caused some insurers to leave the market, causing a crisis of availability and price for physicians and hospitals. In the 1980’s, a second crisis of affordability occurred as premiums rose quickly in response to increased claim frequency and severity, leading many physicians in high risks specialties, such as obstetrics and gynecology, to reduce risks by limiting care. Finally, in the 2000's continued affordability and liability concerns led to closure of practices and decisions by trainee physicians not to enter high-risk fields. See Am. Med. Ass’n, Medical Liability Reform – NOW! 2 (2008), available at http://www.ama-assn.org/go/mlrnow.

3 E.g., Bernstein, Joseph et al., Topics in Medical Economics: Medical Malpractice, 90 J. Bone & Joint Surgery 1777 (2008)CrossRefGoogle Scholar; Robinson, Glen O., The Medical Malpractice Crisis of the 1970’s: A Retrospective, 49 Law & Contemp. Probs. 5 (1986)CrossRefGoogle ScholarPubMed; Paul C. Weiler, Medical Malpractice On Trial (1991). For a good overview of approaches to tort reform in general, see Feinman, Jay M., Unmaking and Remaking Tort Law, 5 J. High Tech. L. 61 (2005)Google Scholar (critical of recent tort reform proposals) and Sugarman, Stephen D., Tort Reform Through Damages Law Reform: An American Perspective, 27 Sydney L. Rev. 507 (2005)Google Scholar (describing American tort system). See also Frank A. Sloan et al., Insuring Medical Malpractice 4-7 (1991) (discussing medical malpractice debate).

4 E.g., Bernstein et al., supra note 3, at 1777; Note, Fixing Medical Malpractice Through Health Insurer Enterprise Liability, 121 Harv. L. Rev. 1192, 1192 (2008)Google Scholar. See also Medical Malpractice, supra note 1, at 85-87 (discussing issues in medical malpractice insurance).

5 See, e.g., U.S. Gen. Accounting Office, Medical Malpractice: A Framework for Action 23 (1987) [hereinafter Framework for Action] (noting that most plaintiffs’ attorneys refuse a case that promises a recovery under $50,000). See also Stephen Dietz, et al., The Medical Malpractice Legal System, in Report of the Secretary's Commission on Medical Malpractice, Appendix 97-106 (1973) (noting that out of every eight potential malpractice suits offered to patients’ attorneys, only one is accepted, and that a substantial portion of recoveries goes to lawyers).

6 Office of Technology Assessment, Impact of Legal Reforms on Medical Malpractice Costs 14 (1993) [hereinafter Impact of Legal Reforms].

7 See, e.g., Bernstein et al., supra note 3, at 1777-78.

8 See Bernstein et al., supra note 3, at 1779. See also Brennan, Troyen A. et al., Relation Between Negligent Adverse Events and the Outcomes of Medical Malpractice Litigation, 335 New Eng. J. Med. 1963, 1963 (1996)CrossRefGoogle Scholar (noting the severity of physical disability but not the presence of medical negligence as dispositive factor predicting payment to the patient.)

9 See Brennan, supra note 8, at 1963. See also Epstein, Richard A., Contractual Principle Versus Legislative Fixes: Coming to Closure on the Unending Travails of Medical Malpractice, 54 DePaul L. Rev. 503, 512 (2005)Google Scholar [hereinafter Contractual Principle] (arguing that much compensation may be occurring without negligence); Walter K. Olson, The Litigation Explosion: What Happened when America Unleashed the Lawsuit 267-68 (1991) (arguing that malpractice case results not wholly explained by merits of claims).

10 Metzloff, Thomas B., Alternative Dispute Resolution Strategies in Medical Malpractice, 9 Alaska L. Rev. 429, 431 (1992)Google Scholar (citing Cheney, Frederick W. et al., Standard of Care and Anesthesia Liability, 261 JAMA 1599 (1989)CrossRefGoogle ScholarPubMed (finding 46% of more than 1,000 cases of medical malpractice claims were non-meritorious)).

11 While estimates vary, the plaintiff receives at best only about fifty cents out of every dollar spent by insurers on handling a malpractice claim; at worst, about a fifth. See, e.g., Impact of Legal Reforms, supra note 6, at 38; Paul C. Weiler et al., A Measure of Malpractice 77, 109 (1993); Sage et al., Defense Costs and Insurer Reserves in Medical Malpractice and Other Personal Injury Cases: Evidence from Texas, 1988-2004 41 (Univ. Ill., Law & Econ. Research Paper No. LE07-012, 2007; Univ. Tex. Law Sch., Law & Econ. Research Paper No. 99, 2008), available at http://lawweb.usc.edu/academics/assets/docs/black.pdf (“[T]he per-case efficiency of the system is a bit under 50%. Stated differently, it costs about a bit over a dollar in legal fees and expenses for the plaintiff to end up with $1 in his pocket.”); F. Calvin Bigler, Medical Professional Liability in the United States, in Medical Malpractice Solutions: Systems and Proposals for Injury Compensation 33, 41 (M. Martin Halley et al. eds., 1990) [hereinafter Medical Malpractice Solutions].

This loss is frictional and directly related to the costs of litigation. See generally Sage, supra (examining increasing rate of defense costs). And it should be remembered that even claims that are settled with no payment to the plaintiff consume significant amounts of resources. See Bigler, supra.

12 Such as time away from practice spent defending suits, lost opportunity costs, choice of career, etc. See, e.g., Am. Med. Ass’n, supra note 2, at 2-4 (detailing various stresses malpractice litigation imposes on physicians). It has been reported that the average time from injury to filing of an action is 16.4 months, with another 25 months until resolution of the claim. See Bigler, supra note 11, at 41.

13 See Weiler, supra note 3, at 52.

14 See, e.g., Impact of Legal Reforms, supra note 6, at 38. See also Medical Malpractice supra note 1, at 24-25 (reporting that less than 10% of injuries resulted in claims filed, and only 40% of those resulted in eventual payment, for an average of one payment for every twenty five injuries); Localio, A. Russell et al., Relationship Between Malpractice Claims and Adverse Events Due to Negligence: Results from the Harvard Medical Practice Study III, 325 New Engl. J. Med. 245, 245-51 (1991)CrossRefGoogle Scholar (reporting that although nearly 4% of patients in the Harvard Medical Malpractice Study suffered iatrogenic injury, only one claim was filed for every 7.5 of those negligent medical injuries).

15 One of the principal justifications for tort is that the threat of financial sanctions induces physicians to take optimal precautions to avoid injuries by investing in training, equipment, time, care, and continuing education, as well as self-monitoring for best and safe practices. Arlen, Jennifer, Private Contractual Alternatives to Malpractice Liability 6 (New York Univ., Law & Econ. Research Paper No. 05-07, 2005)Google Scholar [hereinafter Private Contractual Alternatives], available at http://ssrn.com/abstract=726503. Professor Patricia Danzon argues that since the other central goal of tort law, compensation, can be achieved more efficiently through existing first-party insurance systems, such as life and disability, the only convincing economic rationale is that of deterrence. Medical Malpractice, supra note 1, at 3. In effect the theory of deterrence presumes that physicians cannot be trusted fully to act optimally to reduce error based on ethical or professional considerations alone, in that physician selfinterest will interfere with the goal of error reduction. Jennifer Arlen, Contracting Over Malpractice Liability 9-12 (Am. Law & Econ. Ass’n., Annual Meetings Paper 42, 2008) [hereinafter Contracting Over Liability], available at http://law.bepress.com/cgi/viewcontent.cgi?article=2627&context=alea. In response to this assumption, by imposing the threat of financial sanction, the tort system “transforms physician's motivations to protect their own welfare into a desire to protect others by holding them liable for the harms they cause to others.” See Private Contractual Alternatives, supra at 6. In effect, tort liability functions not only as a system of compensation and hence corrective justice but also as one of “quality control.” Medical Malpractice, supra note 1, at 10.

16 See, e.g., Medical Malpractice, supra note 1, at 9-15.

17 See infra text accompanying notes 233-67; Abraham, Kenneth S. & Weiler, Paul C., Enterprise Medical Liability and the Evolution of the American Health Care System, 108 Harv. L. Rev. 406, 407 (1994)CrossRefGoogle Scholar (discussing use of tort litigation to control error as a “somewhat speculative venture”).

18 See generally Bernstein et al., supra note 3 (reviewing different tort reform proposals); see also Framework for Action, supra note 5, 19-30 (discussing proposals for reform); Robinson, supra note 3, 23-26.

19 Impact of Legal Reforms, supra note 6, at 23-55.

20 See, e.g., Abraham & Weiler, supra note 17 (promoting enterprise liability for hospitals); Sage, William M., Enterprise Liability and the Emerging Managed Health Care System, 60 Law & Contemp. Prob. 159 (1997)CrossRefGoogle Scholar [hereinafter Enterprise Liability] (advocating for liability for managed care organizations (MCOs)); Weiler, Paul C., Reforming Medical Malpractice in a Radically Moderate—and Ethical--Fashion, 54 DePaul L. Rev. 205, 225-26Google Scholar (advocating enterprise liability to be allowed by state regulation).

21 See, e.g., Mello, Michelle M. & Brennan, Troyen, Deterrence of Medical Errors: Theory and Evidence for Malpractice Reform, 80 Tex. L. Rev. 1595 (2002)Google Scholar (advocating hospital liability combined with no-fault regime); Weiler, Paul C., The Case for No-Fault Medical Liability, 52 Md. L. Rev. 908 (1993)Google Scholar (Making the case for no-fault as an ethical proposition).

22 E.g., Contractual Principle, supra note 9 (allowing patients and physicians complete freedom to contract); Danzon, Patricia M., Tort Liability: A Minefield for Managed Care?, 26 J. Legal Stud. 491 (1997)CrossRefGoogle Scholar (discussing imposition of MCO limited liability by contract); Epstein, Richard, Medical Malpractice: The Case for Contract, 1 Am. B. Found. Res. J. 119 (1976)Google Scholar (discussing contractual liability for physicians).

23 Contractual Principle, supra note 9, at 504 (citing RAND Institute For Civil Justice, Research Brief: Changing the Medical Malpractice Dispute Process: What Have We Learned from California's MICRA? (2004) [hereinafter RAND Study], available at http://www.rand.org/pubs/research_briefs/RB9071/RB9071.pdf) (discussing the experience of California's Medical Injury Compensation Reform Act (MICRA), which capped noneconomic damages). In California, the RAND Study sample demonstrated that a reduction in defendants’ liabilities by 30 percent and attorneys fees by 60 percent, both due to MICRA. RAND Study, supra.

24 While the reasons for such failures are numerous and generally beyond the scope of this article, they include: effective and principled opposition by trial lawyers, the cumbersome nature of the complicated administrative proposals combined with the significant frictional costs associated with various plans for reform, and the complex legislative measures needed to address errors while simultaneously protecting physicians from increased rates of malpractice claims.

25 See Weiler, Paul C. et al., Proposal for Medical Liability Reform, 267 JAMA 2355, 2355-59 (1999)CrossRefGoogle Scholar.

26 See Impact of Legal Reforms, supra note 6, at 43-45.

27 James S. Todd et al., The Model Medical Liability and Patient Protection Act: A Fault-Based Administrative System for Resolving Medical Liability Claims, in Medical Malpractice Solutions: Systems and Proposals for Injury Compensation 129, 129-39 (M. Martin Halley et al. eds., 1990).

28 See Impact of Legal Reforms, supra note 6, at 41-42.

29 Id. at 43-45. We also recognize that in the absence of universal coverage, the expense of a complete, unfettered no-fault regime would be prohibitively expensive to implement. One study of such costs examined proposed no-fault regimens in Utah and Colorado and found costs substantially exceeding the amount spent on malpractice premiums in the two states; however, costs were lower and affordable for a “preferred” model of no-fault that limited compensation based on “avoidability criteria” and mandated a disability period of several weeks, and which covered health care costs, pain and suffering, and partial to full wage replacement. Robert Wood Johnson Foundation, Researchers Evaluate the Feasibility of a No Fault System for Medically Injured Patients in Utah and Colorado, Grant Results (Sept. 2006), http://www.rwjf.org/reports/grr/032865.htm#RESULTS.

30 Impact of Legal RefoRMS, supra note 6, at 100-03.

31 Robert Pear, Clinton May Seek Lid on Doctor Fees and Liability Suits, N. Y. Times, Mar. 9, 1993, at A1.

32 See id.

33 See infra text accompanying notes 298-328; Rosemary Gibson & Janardan Prasad Singh, Wall of Silence: The Untold Story of the Medical Mistakes that Kill and Injure Millions of Americans 11, 16, 39, 135-49, 155-68 (2003) (examining concealment of medical error by healthcare professionals).

34 Id. at 137, 148, 166-67.

35 Id. at 135-68 (detailing a “culture of coverup” by physicians hiding medical error).

36 See Bernstein et al., supra note 3, at 1778. Nor is this concern unfounded. At time of this writing, the Massachusetts Supreme Court is scheduled to hear oral arguments that the state licensing board may have access to peer review documents without any administrative proceeding having commenced against a physician. See Brief of Appellant Board of Registration, Medicine, Bd. of Registration in Med. v. Hallmark Health Corp., 910 N.E.2d 898 (Mass. 2009), available at http://www.ma-appellatecourts.org/display_docket.php?dno=SJC-10297.

37 We use the term “malpractice nihilism” to mean an environment in which moral actions to prevent injury are deemed by the relevant actors (e.g., physicians) not to matter due to a perception of a “lottery-like” aspect to medical malpractice. See infra text accompanying notes 329-38.

38 See Abraham & Weiler, supra note 17, at 408 (“The individualistic quality of malpractice litigation … is more of an obstacle to, than a vehicle for, effective injury prevention.”).

39 Andrew Feenberg, Can Technology Incorporate Values? Marcuse's Answer to the Question of the Age, (Conference on The Legacy of Herbert Marcuse at the Univ. of Cal., Berkeley, 1998), available at http://www-rohan.sdsu.edu/faculty/feenberg/marcuse.htm.

40 See Condlin, Robert J., “What's Love Got To Do With It?” – “It's Not Like They’re Your Friends for Christ's Sake”: The Complicated Relationship Between Lawyer and Client, 82 Neb. L. Rev. 211 passim (2003)Google Scholar (examining history of and arguing against the “lawyer-as-friend” view).

41 See infra text accompanying notes 182-223.

42 See, e.g., Medical Malpractice, supra note 1, at 9-17.

43 See Epstein, supra note 9, at 512.

44 See infra text accompanying notes 269-97. See also Contracting Over Liability, supra note 15 (arguing against such contracting).

45 See Gibson & Singh, supra note 33, at 171-81 (discussing different error reduction strategies in American hospitals).

46 In 2005 the American tort system was estimated to have cost $260.8 billion for all claims (roughly $880 per person) and $29.4 billion due to medical malpractice, costs being defined as all of the various outcomes of a claim. This total cost represented an increase of 0.5% compared to 2004, when totals costs increased 5.7%, and was the lowest increase since 1997. Tillinghast-Towers Perrin, 2006 Update on U.S. Tort Cost Trends, 3, 15 (2006), available at http://www.towersperrin.com/tp/getwebcachedoc?webc=TILL/USA/2006/200611/Tort_2006_FINAL.pdf.

47 See Inst. of Med., To Err is Human: Building a Safer Health System 29-33 (Linda T. Kohn et al. eds., 2000) [hereinafter IOM Report].

48 See Medical Malpractice, supra note 1, at 20 (discussing problem of undercounting error). See also Gibson & Singh, supra note 33, at 42 (noting the IOM figures represent undercounting of error rates).

49 See Contracting Over Liability, supra note 15, at 8 (discussing error rates in medicine). See also Rosner, Fred et al., Disclosure and Prevention of Medical Errors, 160 Archives Internal Med. 2089, 2089 (2000)CrossRefGoogle ScholarPubMed. The Institute of Medicine has concluded that between 44,000 and 98,000 deaths occur yearly due to medical mistakes, making medical error the eighth leading cause of death. See IOM Report, supra note 47, at 1. See also GIBSON & SINGH, supra note 33, at 42 (discussing IOM report and impact of error).

50 See Andrews, Lori, Studying Medical Error in Situ: Implications for Malpractice Law and Policy, 54 DePaul L. Rev. 357, 370 (2005)Google Scholar (observational study over 15 years reporting 45.8% of patients experience medical error during treatment); Brennan, Troyen A. et al., Incidence of Adverse Events and Negligence in Hospitalized Patients -- Results of the Harvard Medical Practice Study I, 324 New Eng. J. Med. 370, 370 (1991)CrossRefGoogle Scholar [hereinafter Incidence of Adverse Events] (discussing results of the Harvard Medical Practice Study demonstrating nearly a 4% rate of injury in New York State in 1984); Brennan, Troyen A., The Institute of Medicine Report on Medical Errors - Could It Do Harm? 342 New Eng. J. Med. 1123, 1123 (2000)CrossRefGoogle ScholarPubMed [hereinafter Could It Do Harm?] (discussing 1992 study of Utah and Colorado hospitals revealing a 2.9% rate); Dubois, Robert W. & Brook, Robert H., Preventable Deaths: Who, How Often, and Why? 109 Annals Internal Med. 582, 585 (1988)CrossRefGoogle Scholar (retrospective study of 377 patients admitted to hospitals for heart attack, strokes, or pneumonia revealed that errors in diagnosis or management probably caused the deaths of 14%); Schwartz, Gary T., Reality in the Economic Analysis of Tort Law: Does Tort Law Really Deter?, 42 UCLA L. Rev. 377, 397 (1994)Google Scholar (citing Lori B. Andrews, Medical Error and Patient Claiming in a Hospital Setting (Am.B.F., Working Paper No. 9316, 1993) (revealing that in a study of more than one thousand patients at one hospital, medical errors occurred during the care of approximately 44% of those patients and serious injury to approximately 14%)).

51 See Medical Malpractice, supra note 1, at 20 (citing Cal. Med. Ass’n., Medical Insurance Feasibility Study (1977)).

52 However, given that this study only counted those mistakes apparent from the record as negligent (not accounting for mistakes not reported in the record), and did not include errors occurring outside the hospital, or in nursing homes or long-term rehabilitation facilities, it certainly underestimates the problem. Medical Malpractice, supra note 1, at 20.

53 Sage, supra note 20, at 161 n.5 and accompanying text (citing Harvard Medical Practice Study, Patients, Doctors and Lawyers: Studies of Medical Injury, Malpractice Litigation and Patient Compensation in New York (1990)).

54 See Medical Malpractice, supra note 1, at 20 (explaining that the CMA study “implies an average injury rate of 4.65 injuries per 100 hospital admissions, or roughly 1 in 20” and that the study “understates the total universe of iatrogenic injuries.”).

55 Id.

56 The National Academy of Sciences has recently estimated that medication errors alone throughout the United States injure approximately 1.5 million people. National Academy of Science, Medication Errors Injure 1.5 Million People and Cost Billions of Dollars Annually; Report Offers Comprehensive Strategies for Reducing Drug-Related Mistakes, NEWS FROM THE NATIONAL ACADEMIES, July 20, 2006, http://www8.nationalacademies.org/onpinews/newsitem.aspx?RecordID=11623. Rates of mortality are equally alarming. A 2008 HealthGrades Corporation study restricted to Medicare patients indicated that between 2004 and 2006, 238,337 preventable deaths occurred in that cohort alone as the result of 1.1 million medical errors. HealthGrades, The Fifth Annual HealthGrades Patient Safety in American Hospitals Study 2-3 (2008) [hereinafter HealthGrades Study], http://www.healthgrades.com/media/DMS/pdf/PatientSafetyInAmericanHospitalsStudy2008.pdf. Even if preventable deaths due to medical error are held to an estimate of 100,000 patients annually—a figure roughly equal to other recent research on this topic, see Weiler, supra note 20, at 214-215 (estimating 115,000 deaths)—this is approximately twice the annual death rate on American highways. See Gibson & Singh, supra note 33, at 42. Similarly, the Institute of Medicine (IOM) Report on Medical Error states that in American hospitals medical errors cause between 44,000 and 98,000 deaths each year. IOM Report, supra note 47, at 1. Moreover, the IOM statistics reflect medical error in hospitals only. Errors occurring in ambulatory settings, other institutional settings such as nursing homes and pharmacies around the country—that is, errors in diagnosis, treatment, and execution of physician orders—most probably represent the majority of cases of medical error, dwarfing those occurring in hospitals. See Gibson & Singh, supra note 33, at 42.

57 See Sage, supra note 20, at 161.

58 Such as increased morbidity, the psychological effects of illness, stresses on the family, etc.

59 See Sage, supra note 20, at 203 n.218 (citation omitted) (discussing how in low tolerance, high reliability industries such as air transport, mail transportation, and banking, even a 0.01% error rate “would mean that 84 unsafe airplane landings occurred each day in the United States, that 16,000 letters were lost each hour by mail carriers, and that banks made 32,000 check processing errors each hour”).

60 See IOM Report, supra note 47, at 40-41 (estimating the “national costs of adverse events to be $37.6 billion and of preventable adverse events to be $17 billion”). See also HealthGrades Study, supra note 56, at 2 (finding that “safety incidents” in Medicarerelated hospitalizations from 2004 through 2006 resulted in $8.8 billion in preventable costs, or an average of 4.4 billion dollars annually); Johnson, William G. et al., The Economic Consequences of Medical Injuries, 267 JAMA 2487, 2487-92 (1992)CrossRefGoogle ScholarPubMed (discussing a study of costs in New York); National Academy of Science, supra note 56 (finding that “extra medical costs of treating drug-related injuries occurring in hospitals alone conservatively amount to $3.5 billion a year”).

61 Although we discuss the compensatory justification for tort, we follow Professor Danzon's premise that the primary economic rationale for tort liability is deterrence. See Medical Malpractice, supra note 1, at 9 and accompanying text.

62 See Medical Malpractice, supra note 1, at 9.

63 See Pear, supra note 31, at A1; Sage, supra note 20, at 165.

64 See Abraham & Weiler, supra note 17, at 383; Sage, supra note 20, at 159.

65 See Abraham & Weiler, supra note 17, at 400.

66 See id. at 384-85 (discussing hospital-based enterprise liability); Sage, supra note 20, at 162 (discussing enterprise liability based on managed care organizations).

67 See Sage, supra note 20, at 164.

68 See id. at 170-71.

69 See 38 C.F.R. § 14.514 (2005) (permitting the Department of Veterans Affairs to indemnify an employee named as defendant in any civil suit).

70 42 U.S.C. § 233(a) (2003).

71 See 28 U.S.C. § 2672 (1988 & Supp. IV 1992) (Federal Tort Claims Act allowing heads of federal agencies to settle claims against employees).

72 See 32 C.F.R § 61 (2005) (permitting malpractice claims against armed forces personnel).

73 Sage, William M. & Jorling, James M., A World that Won't Stand Still: Enterprise Liability by Private Contract, 43 DePaul L. Rev. 1007, 1026-27 (1994)Google Scholar.

74 See Sage, supra note 20, at 173-74.

75 See Cohen, Jonathan R., Apology and Organizations: Exploring an Example from Medical Practice, 27 Fordham Urb. L.J. 1447, 1465 (2000)Google Scholar (describing the proactive approach to address error disclosure and systemic error used by VA hospital in Lexington, Kentucky).

76 See Robert Cook, Manchester Veterans Want Their Hospital Back, Foster's Daily Democrat, Mar. 13, 2007.

77 California's Kaiser also has a form of modified, voluntary enterprise liability, in which negligent actions by staff physicians are defended by the Kaiser Foundation Health Plan; in practice this arrangement means that plaintiffs’ attorneys usually but not invariably agree to remove the physician as a defendant. See Sage & Jorling, supra note 73, at 1032.

78 See James C. Robinson & Lawrence P. Casalino, Vertical Integration and Organizational Networks in Healthcare, Health Affairs, Spring 1996, at 7. While many health care systems are becoming more integrated, one major problem is their stability, as systems frequently acquire and shed practices, clinics, and other hospitals at a fast rate, leading one to observe that the only thing stable about the managed care system in America is its instability. See Sage, supra note 20 (discussing organization of MCOs).

79 Cf. Cohen, supra note 75, at 1452-53 (detailing the organizational framework unique to a particular VA that allowed it to impose a regime of institutional apology).

80 Implied in most discussions of medical error, and explicit in many, is the necessity for empowered, relevant decision makers to be able to effect systemic change. See, e.g., Gibson & Singh, supra note 33, at 172-73 (discussing situation of Boston's Brigham and Women's Hospital, which, when management decided to change medication ordering to an electronic system, saw a significant decrease in medication error rates).

81 See Abraham & Weiler, supra note 17, at 384.

82 See, e.g., Arlen, Jennifer & MacLeod, W. Bentley, Malpractice Liability for Physicians and Managed Care Organizations, 78 N.Y.U. L. Rev. 1929, 1933 (2003)Google Scholar (advocating liability for MCOs).

83 Sage & Jorling, supra note 73, at 1028. In contrast, more tightly controlled HMOs, such as staff model HMOs, would be able to exercise more control over their physicians but may also transfer liability for highly specialized care for which the HMO contracts with outside entities, such as academic hospitals. Id.

84 See, e.g., Sunenshine, Rebecca H. and McDonald, L. Clifford, Clostridium difficileassociated disease: New challenges from an established pathogen, 73 Cleveland Clinic J. Med. 187 (2006)CrossRefGoogle Scholar (describing a case where the more expensive approach is clearly superior).

85 Malpractice litigation against employer-sponsored HMO health plans often runs into thorny issues of pre-emption under the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). ERISA pre-emption of state law malpractice claims, a topic beyond the scope of this article, hinges on courts differentiating between the determination of covered benefits and the provision of medical care, pre-empting lawsuits dealing the former but not the latter. However, this distinction is conceptually difficult and increasingly hard to make, since the denial of benefits—a coverage determination—often means that care is not provided—a provision of care determination. See Sage, supra note 20, at 182-83. Also, MCOs which provide utilization review for insurance purposes will also be very reluctant to assume liability, due to the difficulties of directing care second-hand.

86 See Sage, supra note 20, at 174-75. We recognize as well that physicians directly employed by HMO's may also experience similar conflicts but in those instances it is more likely the enterprise itself will be liable. See id. at 174.

87 See Abraham & Weiler, supra note 17, at 385 (arguing that the developments in the law over the last fifty years has left hospitals uniquely well-positioned to adopt enterprise liability).

88 See id. at 385-97.

89 Gibson & Singh, supra note 33, at 172.

90 See Charles l. Bosk, Forgive and Remember: Managing Medical Failure (2003) (noting lack of meaningful and extensive social control over physician behavior, even in cases of serious errors leading to significant morbidity and/or mortality).

91 An error related to a faulty plan motivating a wrong course of action is a form of an error of omission: what's missing is the correct plan. Yet because error reduction analysis focuses most easily on erroneous actions, errors of omission are especially difficult to assess. In the case of a faulty plan motivating wrong steps, the problem is compounded by the cognitive bias that makes it difficult to even recognize that the plan was faulty. Moreover, the bad plan may have been chosen at a point in time greatly removed from the injurious event. As an example, take the case of a patient with a history of gout who presents to an emergency room complaining of an inflamed knee, yet the history of gout is forgotten by or not known to his emergency room treaters. An aspiration of his knees shows 121,000 white cells and the presumptive diagnosis is an infection, the wrong presumptive diagnosis if gout were recalled. The patient is taken to the operating room for irrigation of the knee. In the operating room the patient has reaction to the anesthesia and goes into cardiac arrest. This plan would be an error, for if it's gout, you don't operate but medicate. The key error here was a wrong diagnosis, yet that error would not be the focus of any post hoc analysis, as the focus of a morbidity and mortality conference would be the reaction to the anesthesia. It is certainly easy to further imagine scenarios where the error is even more remote, for instance, where the diagnosis of gout is not made previously, though it should have been. See, e.g., GIBSON & SINGH, supra note 33, 3-14 (exploring multiple case histories of medical error due to such practices).

92 See BOSK, supra note 90. See also supra note 50, and accompanying text (detailing high rates of error).

93 Abraham & Weiler, supra note 17, at 407.

94 Id. at 414.

95 Id. at 415.

96 Cf. id. at 421-22 (hospital assuming liability for physicians who admit principally to that institution despite where malpractice occurred).

97 Id. at 421.

98 Id. at 422.

99 Id.

100 Kaiser contracts with its physicians as a group, the Permanente group, but effectively controls them as this group has no other affiliation and exists solely to service the Kaiser plan. See Sage, supra note 20, at 175 (describing the relationship between Kaiser and the Permanente group). In addition, hospitals now employ “hospitalists” to manage many inpatients, in lieu of having the patient's own internist follow the patient during hospitalization. See Kelley, Mark A., The Hospitalist: A New Medical Specialty?, 130 Annals Internal Med. 373, 375 (1999)CrossRefGoogle ScholarPubMed (discussing increasing role of hospitalists).

101 See Burns, Lawton R. & Wholey, Douglas R., Factors Affecting Physician Loyalty and Exit: A Longitudinal Analysis of Physician-Hospital Relationships, 27 Health Services Res. 1, 14 (1992)Google ScholarPubMed (describing study in which more than half of surveyed physicians admitted patients to more than one hospital).

102 See Abraham & Weiler, supra note 96 and accompanying text; Medical Malpractice, supra note 1, at 217-19 (noting probability of increased litigation should “designated compensable events” be adopted as part of limited no-fault tort reform package).

103 See infra text accompanying notes 172-81.

104 See Sage supra note 20, at 189. See also Havighurst, Clark C., Private Reform of Tortlaw Dogma: Market Opportunities and Legal Obstacles, 49 LAW & CONTEMP. PROBS. 143, 167 (1986)CrossRefGoogle ScholarPubMed (noting that arbitration clauses affect substantive outcomes); Tunkl v. Regents of the Univ. of Cal., 383 P.2d 442, 443 (Cal. 1993).

105 Courts “now generally uphold agreements to undergo binding arbitrations as long they comply with state statutory requirements.” Sage, supra note 20, at 190 (citing Morris v. Metriyakool, 344 N.W. 2d 736, 753 (Mich. 1984)). See also Madden v. Kaiser Found. Hosps., 552 P.2d 1178, 1179 (1976) (upholding contractually-imposed mandatory and binding arbitration of medical malpractice claim).

106 Metzloff, supra note 10, at 435.

107 See Margaret C. Jasper, The Law of Alternative Dispute Resolution 1 (2000) (discussing differences in discovery between ADR and traditional litigation).

108 See id. (citing “more expedient resolution of a conflict” as benefit to ADR).

109 Rolph, Elizabeth et al., Arbitration Agreements in Health Care: Myths and Reality, 60 Law & Contemp. Probs. 153, 155 (1997)CrossRefGoogle Scholar.

110 Id. See also Jasper, supra note 107, at 4-5, 17 (detailing American Arbitration Association roster of 17,000 impartial experts, “recognized for the standing and expertise in their fields” and requirements for educational degrees and licenses appropriate to field of expertise); Oakley, Ellwood F., The Next Generation of Medical Malpractice Dispute Resolution: Alternatives to Litigation, 21 Ga. St. U. L. Rev. 993, 1006 (2005)Google Scholar (stating how medical expertise can be beneficial in assisting ADR and noting that “it is unrealistic to expect most judges to have the background and training to evaluate claims involving statistical nuance and the scientific methods”).

111 There is certainly a debate over whether judges and or juries “in medical malpractice and other tort cases are rational when assessing science and/or awarding damages.” Kinney, Eleanor D., Administrative Law Approaches to Medical Malpractice Reform, 49 St. Louis U. L.J. 45, 51 (2005)Google Scholar. Use of medical experts, it is argued, can lessen the problems of irrational decision making. See Oakley, supra note 110, at 1006.

112 ADR seems to more efficiently distribute compensation to patients. One study reported that claims of patients who were permanently disabled tended to be upheld more frequently under arbitration than litigation. But malpractice claims in which fatal injury or no physical, minor or temporary injury had occurred were upheld less frequently. Also the damages for injury awarded by arbitrators were higher for permanent disabilities but lower for temporary injuries. See Ladimer, Irving et al., Experience in Medical Malpractice Arbitration, 2 J. Legal Med. 433, 464 (1981)CrossRefGoogle ScholarPubMed. See also Medical Malpractice, supra note 1, at 202, 203 (reviewing study results suggesting that formal arbitration may increase the frequency of successful malpractice claims while decreasing significantly the amount of payment to patients per claim).

113 Metzloff, supra note 10, at 439.

114 One group who demonstrably seems to do worse are those patients with more minor, temporary injuries who under a traditional tort litigation system might be the beneficiaries of huge “windfall” awards. See Ladimer, supra note 112, at 464. Thus the use of arbitration promises to eliminate this “lottery-like” aspect of malpractice litigation.

115 See Metzloff, supra note 10, at 435.

116 Id. at 435-36. See also Fresno County Superior Court, Alternative Dispute Resolution (ADR) Information Packet 3 (2009), http://www.fresnosuperiorcourt.org/_pdfs/adr_Information%20Pack.pdf (describing benefits to ADR in terms of lessened psychological stress).

117 Rolph et al., supra note 109, at 155.

118 Id.

119 Metzloff, supra note 10, at 436.

120 Rolph et al., supra note 109, at 155. The question can legitimately be raised whether or not such a private forum would be a good idea, as it arguably would lessen the public impact of disclosure and hence deterrence. However, the public disclosure of error in the SQM proposal should mitigate this concern as, by its very definition, the SQM is dedicated to open discussion of error. See infra text accompanying notes 298-338. Moreover, the confidentiality of ADR is an advantage to plaintiffs who may not want publicity about private medical conditions or concerns. See Jasper, supra note 107, at 2 (detailing advantage of confidentiality in general). It may be, however, that SQMs, after reporting error to the patient, would also regularly, e.g., quarterly, issue “error reports” detailing errors while preserving patient confidentiality.

121 See Rolph et al., supra note 109, at 155 (discussing continuity of care, i.e., the continuation of the doctor-patient relationship).

122 See Medical Malpractice, supra note 1, at 202-03 (discussing how lack of finality may impede resolution and how binding arbitration may increase economic efficiency).

123 See Jasper, supra note 107, at 9 (discussing roles of individual parties in electing arbitration).

124 See id.

125 See id. at 10 (discussing in general some disadvantages of arbitration).

126 Id. at 10-11 (discussing the curtailed use of extensive discovery in ADR).

127 See id. at 1 (detailing dramatic growth of arbitration services with 140,000 filed in 1999). Nevertheless, the number of cases settled by arbitration is small compared to cases litigated.

128 See, e.g., Abraham & Weiler, supra note 17, at 384; Harris, Lee, Tort Reform as Carrot-and- Stick, 46 Harv. J. on Legis. 163, 164-68 (2009)Google Scholar; Sugarman, supra note 3, at 514 (arguing damages caps tends to harm young more than old as permanent pain and suffering conventionally determined by taking into account the life expectancy of the victim).

129 See Kozak, Christopher S., Note, A Review of Federal Medical Malpractice Tort Reform Alternatives, 19 Seton Hall Legis. J. 599, 601 (1995)Google Scholar (reviewing high procedural costs of malpractice claims and noting that the “potential cost of claims not supported by evidence serves as a barrier to injured, indigent claimants because many attorneys will opt to forego the opportunity to represent that person”).

130 According to one line of reasoning, pain and suffering cannot be assuaged with money—anguish simply lies in another realm. For example, if an infant wrongfully dies because of botched medical care and the parents collect $10 million, no amount of money can repair the loss. Any payment for such a loss, therefore, is an arbitrary token. That is not to say that pain and suffering should go without compensation altogether. It is simply to assert that it would be fairer to avoid potential jury caprice by imposing limits on awards for noneconomic damages. See Medical Malpractice, supra note 1, at 153 (arguing that “[f]ull compensation for pain and suffering is unlikely to be optimal because insurance can only transfer money from the healthy to the disabled state, but money cannot replace the nonpecuniary losses of physical injury”).

131 Limiting a few random large awards, even if it were not to affect the average award very much, could drive down insurance prices by tamping down volatility. See Richard E. Anderson, Medical Malpractice: A Physician's Sourcebook 223 (2004) (discussing studies showing that, between 2000 and 2001, states with caps of $250,000 or $350,000 on noneconomic damages had average premium increases only one third of increases in noncapped states).

132 One argument for the imposition of caps is that such a limitation reflects implicit popular preference. The preference for caps is revealed by the behavior of consumers in states such as California that have already imposed these caps. In the states with caps, there has not been a proliferation of secondary insurance sold to patients to make up the difference between what a jury might award and what the caps allow. By contrast, uninsured motorist policies (which also offer “gap coverage”) are very popular. We can infer, consequently, that people do not value limitless awards for pain and suffering—at least not at the price the market says such coverage truly costs. See Priest, George L., The Current Insurance Crisis and Modern Tort Law, 96 Yale L.J. 1521, 1547 (1987)CrossRefGoogle Scholar.

133 Nor would we argue the political interests, which are the manifestation of those practical interests. In describing the situation in this way, however, we make no value judgment as to the validity of those interests. Instead, it is the nature of a tort system built on recovery and contingency fees—necessary to fund lawsuits on behalf of the politically and economically disenfranchised—that has structured the behaviors we describe.

134 See Epstein, supra note 9, at 504 (discussing MICRA).

135 CAL. CIV. CODE § 3333.2 (2009). MICRA places a $250,000 cap on noneconomic damages, provides for periodic payments (damage awards to be paid over the period of time they cover), places restrictions on contingency fees, and prevents duplicate collections of money for the same damages (i.e., modifies the collateral source rule). Id.; Anderson, supra note 131, at 214 (“These reforms have reduced California malpractice premiums by 40% in constant dollars since 1975, or less than 3% per year uncorrected for inflation.”).

136 See RAND Study, supra note 23, at 1-3. See also Epstein, supra note 9, at 504 (discussing the California experience and how MICRA and caps in general may increase access ex ante to medical care while reducing costs ex post).

137 See Abraham and Weiler, supra note 17, at 383 (noting retrogressive nature of caps); Bernstein, supra note 3, at 1778; Harris, supra note 128, at 179 (citing Finley, Lucinda, The Hidden Victims of Tort Reform: Women, Children, and the Elderly, 53 EMORY L.J. 1263 (2004)Google Scholar) (detailing the argument that caps have been criticized as penalizing marginalized groups more severely than dominant groups).

138 Harris, supra note 128, at 173-76 (detailing how, at present, twenty-eight states have approved statutory caps on non-pecuniary damages: Alaska, Arkansas, California, Colorado, Florida, Hawaii, Idaho, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, New Mexico, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Texas, Utah, Vermont, West Virginia, and Wisconsin).

139 See, e.g., Wright v. Cent. Du Page Hosp. Ass’n, 347 N.E.2d 736, 743 (Ill. 1976) (overturning caps on noneconomic damages as violating Illinois Constitution). However, Illinois preserves caps on punitive damages. 735 Ill. Comp. Stat. 5/2-1706.5 (2009). See also Anderson, supra note 131, at 215 (noting that Oregon, Alabama, Georgia, Illinois, New Hampshire, North Dakota and Washington state have had tort reforms nullified by state supreme courts). When nullification occurs, malpractice indemnities often rise. See, e.g., id. (noting that after Oregon nullified $500,000 cap on noneconomic damages in 1998, malpractice indemnities increased by 400% in two years).

140 See Medical Malpractice, supra note 1, at 158-63 (discussing advantages versus disadvantages of various capitation systems including how common capitation systems applicable to all claims penalize some plaintiffs disproportionally (e.g., severely injured young claimants)).

141 See Harris, supra note 128, at 173-76 (detailing success of caps in sense of passing in majority of states).

142 See infra text accompanying notes 172-81. In addition, we note and are impressed with Professor Lee A. Harris's attempt to legislatively grant noneconomic damages caps to hospitals which perform “best recommended care and avoid error.” Harris, supra note 128, at 166. However, we are not satisfied that this would be the best course to follow. Many of the most advanced hospitals in this country, i.e., the major tertiary centers such as Boston's Harvard- affiliated Massachusetts General and Brigham and Women's Hospitals, treat the world's sickest patients with some of the most highly developed surgical and medical therapy, leaving more room for adverse outcomes and more difficulty in determining when “error” actually occurs. A good example of this is the surgical practice of the extrapleural pneumonectomy for mesothelioma at the Brigham and Women's Hospital, a procedure performed at very few hospitals in the world, and which can have numerous complications and a tortuous recovery, even when successful. In such cases, determining the “best hospitals” would have the patina of a ranking system based on misleading data. See infra note 290.

143 Sugarman, supra note 3, at 509-10.

144 Id.

145 Id.

146 See Feinman, supra note 3, at 68.

147 See Sugarman, supra note 3, at 510.

148 Id.

149 Id. at 511.

150 Id.

151 Id. Professor Sugarman argues that treating private life insurance as different from other benefits is justified because it is culturally understood to belong to the patient beyond any tort recovery that is received. Id. at 512. He also points out that ignoring private life insurance is consistent with how life insurance was viewed by the compensation program for victims of the September, 11, 2001 terrorist attacks, in which benefits paid to survivors were offset by life insurance payments. In this case, because life insurance varied greatly between survivors, the plan would end up paying those without life insurance more than those with, and “valuing” the lives apparently differently. Id.

152 Id.

153 Id.

154 See Bernstein et al., supra note 3, at 1780.

155 Id.

156 Id. See also O’Connell, Jeffrey, et al., An Economic Model Costing “Early Offers” Medical Malpractice Reform: Trading Noneconomic Damages for Prompt Payment of Economic Damages, 35 N.M. L. Rev. 259, 263 (2005)Google Scholar (defining “net expected present value” as four “adjustments of nominal future jury awards. These four adjustments account for: (1) probability in outcome; (2) timing of outcome, and specifically a positive rate of time preference by individual actors; (3) the claimant's lawyer's contingent fee; and (4) other litigation-induced costs. Together, these adjustments return a figure for the value claimants should attach to their claims.”).

157 See Emily Brandon, Retirement Often Happens Unexpectedly, U.S. News and World Report, Mar. 31, 2009, available at http://www.usnews.com/money/blogs/planningto-retire/2009/03/31/retirement-often-happens-unexpectedly-.html; Sandra Block & Stephanie Armour, Many Americans Retire Years Before They Want To, USA Today, July 9, 2006, http://www.usatoday.com/money/perfi/retirement/2006-07-09-retire-early_x.htm.

158 Indeed, many patients may find that chronic but previously managed disease can become severe enough to cause mortality well before the retirement years. See Department of Health and Human Services, Center for Disease Control and Prevention, Diabetes and Women's Health Across the Life Stages: A Public Health Perspective 6 (2001), available at http://www.cdc.gov/diabetes/pubs/pdf/womenshort.pdf (stating that diabetes “is a leading cause of death among middle-aged American women; rates in 1996 follow: fifth among white women, fourth among black and American Indian women, and third among Hispanic women aged 45-64 years”).

159 While we believe that a cogent justification for keeping such awards not discounted— i.e., one reason that plaintiffs’ attorneys take malpractice cases (and provide the injured an ability to recover in tort) is the prospect of an award that is not discounted—we contend that the SQM proposal will redistribute both the amount and number of awards more equitably and not destroy such motivation. See infra text accompanying notes 182-213.

160 See Bernstein et al., supra note 3, at 1778-79.

161 Id. See also Medical Malpractice, supra note 1, at 213-19 (discussing general and limited no-fault regimens).

162 Id.

163 Id.

164 Id.

165 See Abraham & Weiler, supra note 17, at 434-36 (discussing how adopting enterprise medical liability would facilitate eventual adoption of no-fault liability).

166 See Epstein, supra note 9, at 506-11.

167 For example, despite state of the art care, many spine surgeries fail to resolve back pain. See Jerome Groopman, A Knife in the Back, The New Yorker, Apr. 8, 2002, at 66-73.

168 Medical Malpractice, supra note 1, at 214-17.

169 Also, and not insignificantly, is that under no-fault all examples of missed diagnosis would be eligible for compensation, despite lack of negligence, leading to millions of irrebuttable claims.

170 See Landes, Elizabeth, Insurance, Liability and Accidents: A Theoretical and Empirical Investigation of the Effect of No-Fault Accidents, 25 J.L. & Econ. 49, 50 (1982)CrossRefGoogle Scholar (showing auto accident fatalities increased in no fault regimes). See also Sugarman, Stephen, Doing Away with Tort Law, 73 Calif. L. Rev. 558, 589-90 (1985)CrossRefGoogle Scholar (arguing Landis’ results may only indicate more people encouraged to drive, i.e., engage in behavior that entails some risk).

171 Although such criticisms of no fault are applied to a broad regimen, a much more narrowly tailored, limited no-fault regimen might be attractive in order to comprehensively and quickly deal with malpractice that is obvious, grotesque, and that would be settled well before trial in a traditional tort system. See Medical Malpractice, supra note 1, at 217-18 (arguing that the “most appealing” approach to no-fault liability may be through elective option in contract). Therefore we note that an extremely limited no-fault regimen may be feasible in the SQM proposal, employing a list of previously designated types of injury or events, or what has been termed “Designated Compensable Events” or DCEs. See id. As such, gross mistakes would undoubtedly be settled in a traditional tort system rather quickly. See id. Employing DCEs might not reduce frictional costs substantially, but it would still provide some peace of mind for patients who would know that they would not be subject to the psychological and still not inconsiderable costs of pursuing a suit even to the point of settlement well before trial. In addition, the other quality improvement measures of the SQM, see infra notes 179, 325-49 and accompanying text, would serve to correct the disincentives to control the error mentioned earlier as a problem of traditional no fault liability.

172 At first glance, determination of competency could employ board certification in all specialties and subspecialties as a reasonable proxy. It would not be enough, for example, to be a board certified general psychiatrist but one would need to be subspecialty board certified in psychosomatic medicine if one were to offer consults to hospitalized patients.

173 See Gibson & Singh, supra note 33, at 171-181 (detailing efforts to improve patient safety).

174 While all physicians by virtue of their training should be committed to high quality care, the SQM proposal envisions membership by physicians who agree to relinquish traditional autonomy for imposed quality directives aimed at process and substance, e.g., apology, error notification and correction, and improvement in medical practice.

175 See infra notes 240, 270-73 and accompanying text (discussing the idea of signaling quality).

176 See Orentlicher, David, The Influence of a Professional Organization on Physician Behavior, 57 Alb. L. Rev. 583, 602-03 (1994)Google ScholarPubMed.

177 At this point it is anticipated that SQM will have specially-trained mediators, such as retired judiciary, who will help facilitate an agreement and allow all parties voices to be heard. In addition, we envision that the role of the patient's attorney, should one be present, will be to protect the patient's interests such as determining that any error or event falls within the contractual terms, that the proper procedures are being followed, and that the compensation offered is fair, to list a few examples.

178 We note parenthetically that use of mediators could also take place if the parties are unable to agree, as a step occurring before arbitration, and occurring within a defined period of time agreed by the parties. Such use has been described in the literature as achieving multiple goals of conflict resolution. See Dauer, Edward A. & Marcus, Leonard J., Adapting Mediation to Link Resolution of Medical Malpractice Disputes with Health Care Quality Improvement, 60 Law & Contemp. Probs. 185, 185-218 (1997)CrossRefGoogle Scholar (noting mediation as more conducive to apology and rectification of error); Galton, Eric, Mediation of Medical Negligence Claims, 28 Cap. U. L. Rev. 321, 321 (2000)Google Scholar (mediation as more therapeutic process than litigation, conducive to medicine's goals of communication and healing).

179 For example, it can be established that the SQM will hire a “quality systems initiator,” a medical doctor with substantial expertise in systemic reduction of error who will have complete responsibility for, and plenary power over, the institution of strict systems-based quality control measures to be followed by society members. Physicians will be required to adhere to any error-reduction programs or procedures implemented by the quality systems initiator. Failure to adhere to these requirements may result in disciplinary measures, including mandatory retraining, education in error reduction, and even in egregious cases of continued negligence or willful misbehavior expulsion from the Society.

180 See, e.g., infra note 230 (discussing Act 13 in Pennsylvania, which makes error reporting mandatory).

181 We note that a split system in which doctors are outside the legal system and health systems are in it is not tenable: doctors who discuss error (but are immune from suits) will be “spies” against the hospitals who would want to hide error (because they are not immune). This would tend to make SQM doctors unwelcome on hospital staffs—a bad thing. So hospitals must be within the umbrella of the system.

182 Lest they veto the arrangement. We note formally that if the utility of most but not all stakeholders is improved, a veto can be averted by side payments, but ideally the system would inherently improve the lot of all concerned.

183 See supra notes 128-64 and accompanying text.

184 As noted, the system is vexed by imprecision; litigants who were not injured by medical negligence—or maybe not even injured at all—may sue and win. Conversely, those injured may never be able to bring suit for various factors. See supra notes 5-30, 33-41, 43-62 and accompanying text.

185 See supra notes 53-7 and accompanying text.

186 Id.

187 Limited disclosure of error means that at times litigation must be initiated simply to find out if an error took place.

188 See generally supra notes 5-7.

189 These patients are those who were “victims” of their disease, but either do not realize it or chose to ignore that fact.

190 See Medical Malpractice, supra note 1, at 49-51 (summarizing conclusions that damage awards are influenced by economic loss and the more severe the injury, the more likely verdict in plaintiff's favor).

191 See Cheney, Frederick W. et al., Standard of Care and Anesthesia Liability, 261 JAMA 1599, 1601 (1989)CrossRefGoogle ScholarPubMed (finding 46% of more than 1,000 cases of medical malpractice claims were non-meritorious).

192 This is a fundamental assumption for which there is some empiric support. See Christopher Guadagnino, Impacts of error reduction initiatives, Physician's News Digest, Feb. 2000, http://www.physiciansnews.com/cover/200.html (“Perhaps the greatest success story in medical error reduction is evident in anesthesiology, a specialty which has seen its patient death rate decline from about one in 10,000 in the early 1980s to about one in 200,000 today, according to Ellison C. Pierce, Jr., M.D., executive director of the Anesthesia Patient Safety Foundation. Whereas anesthesiologists paid about $30,000 for malpractice insurance 15 to 20 years ago, they now pay between $5000 and $10,000, indicating that the specialty has become much safer, says Pierce.“). This drop is directly due to the imposition of numerous, systemic safety measures designed to make the field safer: one example commonly cited is the Harvard anesthesiology department's efforts in spearheading safety reform, leading to a sharp drop in anesthesia-related incidents and a reduction by half in malpractice premiums, reforms which that spread throughout the country. See Abraham & Weiler, supra note 17, at 411-12.

193 See supra notes 53-57 and text accompanying note 185.

194 See, e.g., supra notes 53-57 and accompanying text. A lower rate of error could be expected from quality measures, but the more immediate (if not more significant) factor would be self-selection. Practitioners who simply deem medical error as a cost of doing business, externalized by insurance, are far less likely to join the SQM.

195 A general reluctance to file a claim no doubt will be felt by some, so this 100% rate is almost certainly not to be seen.

196 See supra text accompanying notes 193-94. Owing to greater disclosure, the rate of claims filed will increase. As an upper bound, this increase will be as high as five fold.

197 Following the dictum ‘justice delayed is justice denied’ we note that given the speed with which error is disclosed and claims resolved, injured patients are apt to get paid much sooner. We estimate that this could be up to two year sooner. And although this delay was accounted for in the old, i.e., current, system by the payment of delay damages, the new approach leads to greater justice, as of course delay damages can be collected only by triumphant litigants: if you don't sue and win, you can't get this payment.

198 The false negative rate under the current system, 96%, is obliterated; that is, whereas at present only 4% of those deserving compensation get it, with the SQM, every deserving patient is compensated.

199 These figures are based on assumption. The net dollars to deserving—i.e., those truly injured by medical negligence—claimants can go up even with a decrease in the average award due to both the increased sensitivity for detecting them and the increased specificity for excluding the non-injured.

200 As shown in the table in the appendix, the rate of total claims inevitably rises (due to increased disclosure).

201 With awards held constant and sensitivity for detecting the injured increased, spending goes up unless specificity is also increased by an offsetting amount. That scenario cannot be reasonably expected; accordingly, to make sure that spending does not go up, the average award must be decreased.

202 There is no empirical data regarding caps below $250,000, though we note that the shape of the distribution is skewed to the left, i.e., there are more awards lower than 250,000 than there are above that threshold, such that a 20% reduction in the cap produces more than 20% additional savings. By the same token, there is also no evidence of support for lower caps. So we leave the analysis with the parameter set at $250,000, noting that it could of necessity be moved with significant savings accrued.

203 Part of this calibration should include not only discounting the award to net present value, but also considering actuarial risk. That is, for instance, an anticipated twenty-year wage loss should be discounted for the chance that the claimant dies before retirement.

204 See Epstein, supra note 9, at 504 (citing RAND Study, supra note 23).

205 Browne, Mark J. & Puelz, Robert, The Effect of Legal Rules on the Value of Economic and Non-Economic Damages and the Decision to File, 18 J. Risk & Uncertainty 189, 207 (1999)CrossRefGoogle Scholar.

206 A perhaps even greater savings could be attained, as some of the collateral source payment may be directed at future health costs; but of course the health systems supporting the SQM could provide that care—at “wholesale prices.”

207 As we calculated elsewhere, “a plaintiff may assert that he will lose $50,000 a year of wages for 20 years, for a total of $1 million. Were he to be given that full $1 million all at once, he would be overpaid: at 5% interest, that $1 million would generate $50,000 a year in perpetuity—not only for 20 years. In fact, less than $655,000 invested at 5% can generate $50,000 per year for 20 years. Actuarial adjustment considers the possibility that the plaintiff would not have worked for the full 20 years claimed (an obvious reason: dying of other causes). As such, a fair compensation for the claimed wage loss of $50,000 over 20 years is not $1 million; it is not even $1 million discounted to present value; it is the price of an annuity that pays $50,000 a year as long as the person remains alive.” Bernstein et al., supra note 3, at 1780.

208 The terms are not purely additive: the 30% reduction from caps and the 15% from eliminating collateral recovery decrease the average award to 55% of the original; it is this value, then, that is further discounted 35% yielding an overall award that is 36% the size of the original (.55 x .65 = .36). We acknowledge of course that 36% is not 34% but is certainly a fair approximation.

209 This is correct only if we assume pure rationality. Although the utility of the stakeholders increases, it is not a foregone conclusion that they will go along with the deal— this is a negotiation, and parties are free to hold out for whatever terms they think are in their best interest. Nevertheless, it is reasonable to assume that if every stakeholder is made better off they will be deprived of the political power to scuttle a deal. After all, the trial lawyers, per se, don't formally sign anything here; we speak of their willingness to not try to obstruct politically an arrangement made by the SQM and potential consumers.

210 We anticipate that the SQM will hire a quality systems administrator who will monitor physicians and have power to discipline them should they not fulfill their reporting duties. See supra note 179.

211 See Peters, Philip, Doctors and Juries, 105 Mich. L. Rev. 1453, 1459-1460 (2007)Google Scholar (finding juries tended to side with defendant doctors almost 75% of the time, as 27 percent to 30 percent of filed medical malpractice suits end in a verdict for the plaintiff, reportedly the lowest success rate of any type of tort litigation). See also Anderson, supra note 131, at 223 (“70 to 80% of all malpractice claims today are found to be without merit (i.e., they close with no payment to plaintiff).”).

212 We are fully aware that this proposal does short change the defense bar—the frictional costs saved are in no small part monies that would have gone to defense firms. It is our contention that this group lacks the political power and organization to veto reform efforts, unlike the plaintiff's bar, which is not only highly organized but can allude to their clients sympathetic stories for political points.

213 The significant exception is the rare practitioner whose successful practice depends only on winning cases with catastrophic non-pecuniary damages caused by true negligence – who is a clear loser under this arrangement.

214 See supra text accompany note 199.

215 As discussed elsewhere, see infra text accompanying notes 269, 279-97, Professor Jennifer Arlen believes that high volume consumers of health care (i.e., sick people) would be harmed by liability by contract. Her argument addresses the lower price for health insurance overall that would be given to patients willing to sign away their right to sue (as this would be a signal that the patient perceives himself/herself to be a low volume consumer). We note here that the effect on quality brought about by the SQM disproportionately benefits high volume consumers. (We ignore for the moment the question of whether high volume patients would want to free-ride on the benefits created by others).

216 Recall that error, and even bad outcomes, is rare: the benefits to a “deserving claimant” are benefits that the average patient will never experience.

217 If your marginal utility for money is increasing, i.e. a large payoff is disproportionately valuable, a system with caps is likewise disproportionately unappealing as the chances of winning big is lower.

218 As a matter of public policy, it should be made clear that the chronically nonemployed (and hence not likely to collect future wage losses) are apt to suffer disproportionately under a system of caps on non-pecuniary losses, as most, if not all, of this group's losses will be in that category.

219 See Survey Finds Tort Reform Enjoys Broad Bipartisan Support, American Tort Reform Association, Feb. 27, 2003, http://www.atra.org/show/7525 (detailing industrysponsored survey showing 83% of the public believes that there are too many lawsuits). Cf. Feinman, supra note 3, at 61-63 (criticizing conservative vision tort reform as promoting business interests to extent of public values).

220 See RAND Study, supra note 23 at 1-3 (showing that about 45% of awards reached statutorily-imposed limit and were affected by California's damages cap).

221 Even those individuals who experience medical error find out about it and are lucky enough to bring a winning claim would still sign up for SQM plan because they could not a priori, know of the outcome of their surgery. Seeking to limit risk, they would operate behind Rawls’ “veil of ignorance” to choose the SQM contract. See JOHN Rawls, A Theory of Justice 136-142 (1971) (discussing the veil of ignorance theory).

222 And that is knowable, as people with no income are less likely to suffer economic damages.

223 See RAND Study, supra note 23 (indicating that less than 1 in 4 awards for nonpecuniary damages were above $250,000).

224 That it is proposed here by physician authors, both of whom still maintain clinical practices in addition to their academic careers, may invoke a bit of the “Nixon Goes to China” psychology; that is, it may pass muster with physician groups precisely because it came from within.

225 Some studies suggest that high premiums are not a problem for doctors in the long run; eventually the costs are integrated into their business model and passed on to patients. The problem is sharp increases in fees, which are a shock to the system. See Pauly, Mark et al., Who Pays? The Incidence of High Malpractice Premiums, 9 F. Health Econ. & Pol’y 8, 9 (2006)Google Scholar, available at http://www.bepress.com/fhep/9/1/2.

226 We note as an aside that, as of 2003, nearly half of the graduating medical class opted for careers in pediatrics, primary care and psychiatry. See Newton, Dale A. et al., Trends in Career Choice by U.S. Medical School Graduates, 290 JAMA 1179, 1179-82 (2003)CrossRefGoogle ScholarPubMed. All these specialties offer a maximal anticipated salary one-third or less than what more lucrative fields in medicine produce on average. See Bodenheimer, Thomas et al., The Primary Care–Specialty Income Gap: Why It Matters, 146 Annals Internal Med. 301, 301-306 (2007)CrossRefGoogle ScholarPubMed. Thus, it is safe to say that the utility curves of many graduating medical students are not dominated by financial concerns.

227 See Wei, Marlynn, Doctors, Apologies, and the Law: An Analysis and Critique of Apology Laws, 34-54 (Yale Law Sch. Student Scholarship Series, Paper 30, 2006)Google Scholar, available at http://lsr.nellco.org/yale/student/papers/30 (detailing various stresses upon physicians prompting them to resist disclosure of error).

228 It is well known in chemistry that not all energetically favorable reactions take place because in addition to considering the net thermodynamic effects—whether energy is taken in or given off—one must also consider the activation energy needed to start the process. See generally Activation Energy, http://chemed.chem.purdue.edu/genchem/topicreview/bp/ch22/activate.html. Just as a boulder won't roll down hill if a sufficiently large pebble blocks its way, energetically favorable [exothermic] reactions may, like the boulder itself, require a kick to get them started in motion. As such, the formation of an SQM requires not only financial stability (and acquiescence of the stakeholders) but resources and motivation to initiate the process.

229 At the minimum, a legal challenge can be expected. Thus, any organization without the resources for litigation and the willingness to commit them will shy away from this.

230 Act 13 in Pennsylvania makes this method of error reporting mandatory. Under Act 13, all Pennsylvania-licensed hospitals, ambulatory surgical facilities, birthing centers, and certain abortion facilities must submit reports of those events to the Authority. In turn, the Authority will analyze the collected data to identify trends and recommend changes in healthcare practices and procedures that may be instituted to reduce the number and severity of future serious events and incidents. Medical Care Availability and Reduction of Error (MCARE) Act, P.L. 154, No. 1340, §746 (2002).

231 See generally id. (detailing requirements that health systems in Pennsylvania must follow). We hypothesize that for such health systems, the added costs would be more marginal than for those not currently operating under such statutory standards.

232 Although we acknowledge the potential for litigation to occur around contract terms when patients elect the SQM. See infra text accompanying notes 241-55.

233 That is, enrollment in a program all of whose providers are members of the Society and whose explicit rules for joining require signing on to this approach.

234 See Daniel P. Kessler & Mark McClellan, Do Doctors Practice Defensive Medicine? 33 (Nat’l Bureau of Econ. Research, Working Paper No. 5466, 1996).

235 See Sharkey, Catherine M., Unintended Consequences of Medical Malpractice Damage Caps, 80 N.Y.U. L. Rev. 391, 411-12 (2005)Google Scholar (citations omitted) (discussing varying calculations of costs of defensive medicine, and citing one controversial study showing eliminating defensive medicine resulting in a five to nine percent cost reduction).

236 A case in point: antibiotics for a sore throat, which is probably virally induced. If everybody were to get antibiotics, society is worse off—not only because antibiotics are not free, but because they induce the formation of resistant bacteria. Drake, Douglas E., National Antibiotic Timing Measures for Pneumonia and Antibiotic Overuse, 16 Quality Mgmt. Healthcare. 113, 113-22 (2007)CrossRefGoogle ScholarPubMed (discussing overuse of antibiotics in promoting resistance). Therefore, there are now extensive guidelines—best practices—to help physicians only prescribe antibiotics appropriately. Unfortunately, for a given doctor in front of a given patient with a sore throat, the calculus –“it could not hurt, it may help”—tips toward using antibiotics, often inappropriately, due to pressure on the physician from the patient “to do something.” So they are used by many practitioners when not necessarily indicated. See id. Yet if the SQM were to issue a Best Practice guideline, and if adherence to that guideline were a requirement of membership in the SQM, as it is, inappropriate antibiotic use may decrease.

237 Between $100,000,000,000 and $200,000,000, approximately, in 2009 expenditures.

238 Of course, it might not make sense at first glance how a 5% to 9% savings—we’ll call it 7%—allows TPPs to pay a 20% premium to the doctors yet it is the case. The paradox, such as it is, resolves with the awareness that physicians’ fees represent only 1/5th of the entire health care bill. Consider: if a third party payer (TPP) ordinarily spends $100, a 7% savings puts $7 back in their till. Meanwhile, out of that $100, only $20 is earmarked for physicians’ fees. With a 20% bonus, the total payment is $24. This still leaves the TPP $3 ahead. In some specialties, moreover, the physician fee fraction is not 1/5th but perhaps 1/10th or less. (The surgeon's fee for a total knee replacement is only about 1/20th of the total cost.) For those specialties where the physician fee is small fraction of the total costs—typically surgical fields, themselves very concerned about malpractice—the TPP would be especially induced to offer a “Quality option.”

239 It might be asked, “What if there is only one pile into which all physicians are sorted?” That is, what if all physicians elected to join? Although there would be a 4% increase in total costs, society has purchased for that sum a stark improvement in the standards of practice. The more pressing problem from the legal perspective is whether the contract would be considered coercive if there were no physician remaining in the standard (non-Quality) pool. We suggest an analogy that perhaps begs the question: “Are contracts with union carpenters valid in areas where there are no non-union carpenters?” Sure they are. The better question is how to handle the free rider problem of a patient who wants the current liability rules but reaps the benefits of the new (proposed) quality standards.

240 Of course it can be argued that this is only a label, but maintaining the SQM standards imposes real demands and joining requires more than lip service. Just as one cannot pretend to be brave—one's actions are either brave or not brave, regardless of intent—one cannot pretend to be a Quality physician: either one lives up to the standard or one does not. This raises the issue of signaling first articulated by Michael Spence and developed by Professor Arlen in the medical malpractice context: How does a product or service signal it is of higher quality reliably without other lower quality products/services mimicking that signaling? See Contracting Over Liability, supra note 15, at 44 n.128 (citing Priest, George, A Theory of Consumer Product Warranty, 90 Yale L. J. 1297 (1981)CrossRefGoogle Scholar and Spence, Michael, Consumer Misperceptions, Product Failure and Producer Liability, 44 Rev. Econ. Stud. 561 (1977)CrossRefGoogle Scholar (discussing problems with signaling)).

241 See Contracting Over Liability, supra note 15, at 21-46 and accompanying text (discussing deforming aspects of contract).

242 In California, for example, the parties must be provided with the option of revoking a medical malpractice arbitration provision by written notice within thirty days of signing the contract. See Cal. Civ. Proc. Code § 1295(c) (2009). In Ohio, the patient has thirty days to withdraw. See Ohio Rev. Code Ann. § 2711.23(B) (2009).

243 As a practical matter, this may mean for administrative purposes that the election of an SQM plan will require notification to the employer slightly earlier in the open benefits period, in order to allow for rescission and election of a competing, traditional plan before the open enrollment period ends. To do otherwise would invite litigation around adhesion and duress.

244 In the California medical malpractice arbitration statute, for example, the contract is required to contain not only a detailed explanation of the consequences of the contract in the first article, but also the following paragraph immediately above the signature line in “at least ten-point, bold red type: ‘NOTICE: BY SIGNING THIS CONTRACT YOU ARE AGREEING TO HAVE ANY ISSUE OF MEDICAL MALPRACTICE DECIDED BY NEUTRAL ARBITRATION AND YOU ARE GIVING UP YOUR RIGHT TO A JURY OR COURT TRIAL. SEE ARTICLE I OF THIS CONTRACT.’” Cal. Civ. Proc. Code § 1295(b) (2009).

245 Clark H. Havighurst, Malpractice Reform: Getting There by Private Vehicle, in Medical Malpractice Solutions: Systems and Proposals for Injury Compensation 115. 116 (M. Martin Halley et al. eds., 1990).

246 See infra text accompanying note 251.

247 See Havighurst, supra note 245, at 119; Private Contractual Alternatives, supra note 15, at 12.

248 Havighurst, supra note 245, at 119.

249 Although we also note that mediation may also fit in well to this model, as a preliminary step before arbitration. See supra text accompanying note 177.

250 See Private Contractual Alternatives, supra note 15, at 10-12.

251 See id. An oft-cited case for this proposition is Tunkl v. Regents, which held as invalid a clause that released hospital from liability for future negligence due to hospital's superior bargaining position as well as lack of option for patient to pay higher fee for imposition of liability. Tunkl v. Regents of the Univ. of Cal., 383 P.2d 442, 443 (Cal. 1993).

252 See supra text accompanying notes 172-81. We also contemplate that the SQM proposal will not apply to emergency care, for similar reasons of duress, lack of time to investigate alternatives, etc. In these emergency situations courts routinely have rejected contracts limiting malpractice liability. See infra notes 245-55 and accompanying text.

253 See Havighurst, supra note 245, at 123.

254 The SQM appeals to the risk averse, not the risk takers who are counting on the lottery aspect of their care. See Medical Malpractice, supra note 1, at 13, 119-24 (discussing aversion to risk).

255 However, this is not to elide the still formidable structural problems that are posed for any medical malpractice arbitration scheme. Certainly state legislatures need to examine state statutes that may impede the implementation of arbitration, taking care to eliminate the disincentives inherent to the statutes. Revoking such statutory roadblocks should go a long way towards eliminating the current situation where “few physicians … even attempt to enter into arbitration contracts with their patients.” Metzloff, supra note 10, at 450.

256 See Contracting Over Liability, supra note 15, at 2-5; Private Contractual Alternatives, supra note 15, at 10-23 (reviewing and responding to arguments for contracting over tort).

257 See Contracting Over Liability, supra note 15, at 2-5; Private Contractual Alternatives, supra note 15, at 10-23.

258 See Contracting Over Liability, supra note 15, at 2-5; Private Contractual Alternatives, supra note 15, at 10-23 (reviewing and responding to arguments for contracting over tort).

259 Richard A. Epstein, Medical Malpractice: Its Cause and Cure, in The Economics of Medical MalpracTICE 245, 255 (Simon Rottenberg ed., 1978).

260 The use of the term “defensive medicine” is the authors’ own for this type of practice. See Bernstein et al., supra, note 3, at 1777.

261 See Epstein, supra note 9, at 509.

262 See Epstein, supra note 259, at 254.

263 See, e.g., Contracting Over Liability, supra note 15, at 4, 53-62 (discussing problems with liability for MCOs).

264 See id. at 2-3 (reviewing scholarship on MCO liability).

265 See Abraham & Weiler, supra note 17, at 382-85.

266 See, e.g., Contracting Over Liability, supra note 15. See also Weiler, supra note 3, at 96 (discussing arguments for contract but arguing against various permutations of individual contracting out of malpractice liability).

267 See Contracting Over Liability, supra note 15; Private Contractual Alternatives, supra note 15.

268 See Contracting Over Liability, supra note 15; Private Contractual Alternatives, supra note 15.

269 See Contracting Over Liability, supra note 15; Private Contractual Alternatives, supra note 15.

270 See Contracting Over Liability, supra note 15.

271 See Id. at 62.

272 Id. at 6-7.

273 Id. at 6.

274 Id. at 6, 48, 52

275 Id. at 48, 52.

276 Id. at 48 (discussing problems of signaling).

277 To be clear: although the magnitude of the average individual award under SQM is lower than the current mean award, the expected value of compensation ex ante for all errors is higher, for under SQM more errors receive compensation. In the current system, the expected compensation for a medical error would be higher than under SQM, but only if three criteria are met: a) you know of your tort; b), you elect to sue; and c), you win. Yet in common practice (without SQM) these criteria themselves are far from assured. Accordingly, expected value calculations must subject these criteria to probabilistic winnowing, discounting for the injured being ignorant of their injury, those who know of their injury failing to file a claim, and the valid filers who nonetheless lose at trial. With SQM, the probability of knowing of your tort, making a claim, and prevailing are all higher, hence this system has higher expected value for all patients at the outset.

278 We further note that one can no more pretend to be a high quality physician (as defined here) than a coward can pretend to be brave. We don't care about your mindset: if the actions taken reflex quality (or bravery) then the label is apt, independent of your state of mind. That is, if you wish to mimic the SQM physician by emulating his or her standards, you are not a simulator but indeed the genuine article.

279 See Contracting Over Liability, supra note 15, at 57-64.

280 Id.

281 The relatively greater knowledge about one's heath (compared to what the payer knows) is the prime moral hazard in health insurance. Getting patients to disclose that would be very profitable indeed.

282 See Contracting Over Liability, supra note 15, at 60-62.

283 Id.

284 Id.

285 Id. at 7.

286 Id. at 60-62.

287 Id.

288 Id.

289 Id.

290 Id.

291 See id. at 7.

292 However, there are situations of medical hazard, see infra note 293, where high-risk care is undertaken in which the risks of injury due to adverse outcome and not negligence are high.

293 One class of patients who would arguably be better off under the current system are those who know they are facing an inherently hazardous operation with a high prospect of substantial disability, pain, and disfigurement; for example, extrapleural pneumonectomy. (Extrapleural pneumonectomy is a treatment for advanced mesothelioma that involves removal of one lung, part of the lining of the chest, the diaphragm, and the lining of the sac around the heart. This operation contains substantial risks of disability, pain, and a tortuous recovery. See Online Cancer Guide, Mesothelioma Cancer Treatment Guide, http://www.onlinecancerguide.com/mesothelioma-cancer-treatment.html (last visited Nov. 3, 2009). See also supra note 142 (discussing extrapleural pneumonectomy)). Those facing extrapleural pneumonectomy, for example, might be thought to favor the current system because a poor outcome—independent of negligence—is more likely, and a poor outcome is the best indicator of collecting under the current system. See supra note 9 and accompanying text. Still, the class of patients facing this procedure is small; membership in the class is typically unknown at the time insurance is bought; and members of this class are more likely to concentrate on the disease at hand as compared to the problems of recovery in tort. And this previous analysis says nothing about the overall likelihood of recovery, only the relative rate. The overall recovery may still be too low to affect behavior.

294 Again, we note it is not only an absence of economic damages that needs to be assumed, but also that non-economic damages would be above the cap.

295 Tort awards basically comprise wage loss, future medical care, and pain and suffering. If one wished to designate a priori those individuals whose potential tort awards would be weighted toward pain and suffering, it would be a simple matter of identifying those individuals who are less likely to claim wage loss and future medical care losses. And that can be inferred from zip codes (which can inform about average wage), gender (women earn less) and date of birth (as older patients have fewer years to live). That is, all things equal, the malpractice finding favoring a 26 year woman living in a poor neighborhood is apt to contain a greater share of pain and suffering compensation, as compared to an award given to, say, a 59 year old man living in a high-rent district. That is, some information about the relative contribution of pain and suffering in potential awards is inferable already.

296 A similar law, set up to encourage genetic testing, bars discrimination based on those test results, even though the findings have a much more direct effect on health consumption costs than what Arlen contemplates here. See Genetic Information Nondiscrimination Act, Pub. L. 110-233, 122 Stat. 881 (2008).

297 However, given the recent lengthy battles over mental health parity, we have no illusion that such a legislative route would be easy. See Matt Brady, Insurers, Employers Lose Mental Parity Battle, National Underwriter, July 18, 2007, available at http://www.lifeandhealthinsurancenews.com/News/2007/7/Pages/Insurers--Employers-Lose-Mental-Parity-Battle.aspx?utm_source=15368&utm_medium=redirect&cmpid=redirect (noting opposing views of the Paul Wellstone Mental Health and Addiction Equity Act); Bazelon Center for Mental Health Law, 110th Congress Brings Victories for People with Mental Disabilities, Bazelon Center Mental Health Pol’y Rep., Oct. 16, 2008, available at http://www.bazelon.org/newsroom/reporter/2008/10-16-08reporter.htm#1 (discussing Act from viewpoint of disability advocates).

298 Leape, Lucian L., Error in Medicine, 272 JAMA 1851, 1851-57 (1994)CrossRefGoogle ScholarPubMed. Similarly, the IOM's report on error laconically notes, “Providers also perceive the medical liability system as a serious impediment to systematic efforts to uncover and learn from errors.” IOM Report, supra note 47, at 3.

299 Could It Do Harm?, supra note 50, at 1125.

300 See id.

301 See Gibson & Singh, supra note 33, at 135-68 (detailing what the authors call a “culture of coverup” by physicians and hospitals hiding medical mistakes).

302 See Kapp, Marshall B., Our Hands Are Tied: Legal Tensions and Medical Ethics 21 (1998)Google Scholar; Leape, supra note 298, at 1851.

303 See, e.g., Hilfiker, David, Facing Our Mistakes, 310 NEW ENG. J. MED. 118, 121 (1984)CrossRefGoogle ScholarPubMed (explaining attitudes from the perspective of a physician).

304 Leape, supra note 298, at 1852.

305 See Walter S. Davis, Lecture given at University of Virginia Medical School: The Ethics of Being a Medical Student (Spring 2008) (lecture notes available at http://www.meded.virginia.edu/courses/pom1/2007-2008/LectureNotes/Spring/TheEthicsofBeingaMedicalStudent2007.pdf).

306 Hilfiker, supra note 303, at 121.

307 Blumenthal, David, Making Medical Errors Into ‘Medical Treasures’, 272 JAMA 1867, 1867 (1994)CrossRefGoogle Scholar.

308 Leape, supra note 298, at 1852.

309 Hilfiker, supra note 303, at 121.

310 Id.

311 Leape, supra note 298, at 1852.

312 See Witman, Amy B. et al., How Do Patients Want Physicians to Handle Mistakes?, 156 Archives Internal Med. 2565, 2565-66 (1996)CrossRefGoogle ScholarPubMed (showing 98% of respondents desired physicians’ active acknowledgment of medical error).

313 Id. at 2565.

314 Beckman, Howard B. et al., The Doctor-Patient Relationship and Malpractice, 54 Archives Internal Med. 1365, 1365-70 (1994)CrossRefGoogle Scholar. See also Aaron Lazare, On Apology (2004), for a discussion of the motivation of injured or aggrieved parties who desire apology and what type of apology may be desired. Professor Lazare makes the interesting distinction between errors that call for immediate apology and those for which such an apology might not serve goals of reparation and healing. Id. at 170-79.

315 See Blumenthal, supra note 307, at 1868.

316 Id. See also Gibson & Singh, supra note 33, at 71-73 (examining systemic attempts at error reduction in various medical and nonmedical contexts).

317 See Gibson & Singh, supra note 33, at 135-58 (detailing reluctance of individual physicians and hospital systems to admit error).

318 Brennan, Troyen A., Hospital Peer Review and Clinical Privileges Actions: To Report or Not Report, 282 JAMA 381, 381 (1999)CrossRefGoogle ScholarPubMed.

319 Wu, Albert W. et al., Do House Officers Learn from Their Mistakes?, 265 JAMA 2089, 2092 (1991)CrossRefGoogle ScholarPubMed.

320 See Brennan, supra note 318, at 382.

321 See Cohen, supra note 75, at 1465.

322 Id.

323 See Cohen, Jonathan R., Advising Clients to Apologize, 72 S. Cal. L. Rev. 1009, 1029-69 (1999)Google Scholar.

324 See, e.g., Mass. Gen. Laws ch. 233, § 23D (2000). More than twelve states have passed laws protecting apology, typically allowing defendants to prevent plaintiffs from introducing sympathetic statements made regretting outcome of medical treatment. See Wei, supra note 227, at 4-6 (citing Cal. Evid. Code § 1160 (2004); Fla. Stat. Ann. § 90.4026 (2004); Tex. Civ. Prac. & Rem. Code Ann. § 18061 (2005)) (discussing apology statutes).

325 See, e.g., Brennan, supra note 318; IOM Report, supra note 47, at 10.

326 See id. (explaining that the NPDB was created by the Health Care Quality Improvement Act of 1986 and required hospitals to report physicians who had had their credentials restricted or terminated, and also required hospitals to query the NPDB when credentialing or recredentialing doctors). See also Gibson & Singh, supra note 33, at 88-91, 236-38 (comparing medicine with aviation safety systems designed to detect and examine error).

327 Am. Med. Ass’n, Code of Medical Ethics 125 (1997).

328 Am. Coll. of Physicians, Ethics Manual, 4th ed., 128 Annals Internal Med. 576, 579 (1998).

329 See, e.g., Gibson and Singh, supra note 33, at 3-14 (examining growing consensus of need to ameliorate error and to continue practicing high quality medicine).

330 See Priest, supra note 132, at 1553.

331 See Sage, supra note 20, at 161 n.8.

332 See Baker, Tom, Medical Malpractice and the Insurance Underwriting Cycle, 54 DePaul L. Rev. 393, 412 (2005)Google Scholar (explaining classic moral hazard theory).

333 Professor Weiler believes that physicians as a group may be deterred by such concerns about liability, but, as mentioned above, the actual occurrence of malpractice is not an accurate predictor of eventual payment to a malpractice plaintiff. Weiler, supra note 3, at 81.

334 Kapp, supra note 302, at 7.

335 Id. Moreover, as Professor Epstein points out, it becomes “no longer possible to argue that the system produces underdeterrence. Rather, the dominant feature is the unreliability of the entire system as a check on medical misconduct. After all, why should anyone take care in medical practice if the likelihood of losing a case depends on the seriousness of the patient's condition and not on the quality of care provided?” Contractual Principle, supra note 9, at 512.

336 See Gibson and Singh, supra note 33, at 77-98, 135-68 (detailing reluctance of individual physicians and hospital systems administrators to admit error).

337 Kapp, supra note 302, at 31.

338 Studies indicate that the malpractice litigation system changes physicians’ behavior by indirectly promoting the use of defensive medicine such as ordering more tests and procedures, spending more time in visits, and increasing the number of follow-up visits by patients. See Weiler et al., supra note 11, at 79-82 (suggesting that rating liability affects standards of care more than peer review). Moreover, there are two types of defensive medicine, positive defensive medicine—such as ordering more tests—and negative defensive medicine, such as closing down practices, moving out of state, retraining in other fields. It also may be that the practice of negative defensive medicine—particularly as it has led to shortages of vital, highrisk specialists such as neurosurgeons and obstetricians—is an equally pernicious and perhaps more damaging aspect. Bernstein et al., supra note 3, at 1777. See also Contractual Principle, supra note 9, at 503-04 (noting the loss of neurosurgical services in Carbondale, Illinois due to high malpractice insurance rates motivating physician relocation); Anderson, supra note 131, at 220-21 (noting that, due to malpractice pressures, more than 12% of obstetricians/ gynecologists nationally have stopped practicing delivering babies and that an area of West Virginia lost all neurosurgeons for approximately two years). 339 See, e.g., Black, Lee, Virtual Mentor: Effects of Malpractice Law on the Practice of Medicine, 9 American Medical Association Journal of Ethics 437-40 (2007)Google Scholar, available at http://virtualmentor.ama-assn.org/2007/06/pdf/hlaw1-0706.pdf.

340 See, e.g., id.

341 Gibson & Singh, supra note 33, at 135-54; see also Leape, supra note 298, at 1851-52 (discussing generally reactions to mistakes in the medical community).

342 KAPP, supra note 302, at 15-23.

343 Kenneth Kizer, Large System Change and a Culture of Safety, in Proceedings of Enhancing Patient Safety and Reducing Errors in Health Care 31, 31 (1999).

344 Id.

345 Id.

346 Id.

347 Id.

348 Id.

349 Id.

350 Id.

351 The latter option may be preferred to avoid judicial invalidation. See supra text accompanying notes 241-48.

352 Compare, e.g., Epstein, Richard & Sykes, Alan, The Assault on Managed Care: Vicarious Liability, ERISA Preemption, and Class Actions, 30 J. Legal Stud. 625 (2001)CrossRefGoogle Scholar (advocating contracts) with Private Contractual Alternatives, supra note 15 (advocating maintenance of the medical malpractice tort system without a private contractual alternative).

353 These undesirable outcomes would occur because the patients would not understand the benefits of tort liability or would experience unacceptably high costs of searching for quality physicians, both problems we feel are mitigated in an SQM system. See Contracting Over Liability, supra note 15, at 24-25 (discussing problems of information and search costs in the private contracting of malpractice liability). See also supra note 139 and accompanying text (discussing state supreme court nullification of tort reforms).

354 Legislature support may be required for caps on damages, limitation of collateral source recovery, and contracting out of tort. See supra notes 128-42, 143-53, 241-55 and accompanying text.

355 We posit that the rate of injury will be lower in the SQM owing to higher standards and self-selection of better doctors, see supra note 194 and accompanying text.

356 This rate would not change, since it reflects the unintended consequences of treatment that is not based on error.

357 This is obviously an upper bound and unlikely to be seen. Some patients may simply refuse to file a claim. However it is aspirational, in the sense the SQM system strives to identify and compensate all those injured by error.

358 The rate will decrease in SQM owing to greater trust in the disclosure process; people will not need to sue simply to “find out what happened.”

359 We posit greater but still imperfect accuracy in judgments. This non-zero rate provides an upper bound on the cost of the system.

360 There are many more successful claims in SQM, but likewise many more of the successful claims will be meritorious.