How New Exchange of Healthcare Data Might Reduce Tort Costs

By Stephen Ambrose | July 19, 2010

Tort reform, which has been a longstanding and slow-moving political juggernaut, needs to sprout a necessary and useful set of wings. A “perfect storm” between today’s data technology, an existing healthcare crisis, current tort laws and common filing procedures may lend a kick start to reducing frivolous personal injury and medical malpractice torts through making attorneys more accountable for their activities.

It is estimated that each year, countless billions of dollars are unnecessarily transferred out of our battered healthcare system to the accounts of legal firms and injured parties. This happens through the filing and subsequent settlement of claims and lawsuits, involving personal injury, medical malpractice, product and pharmaceutical tort.

Annual estimates of the cost of tort, relating to known awards, range from $252 billion (by the Tillinghast-Towers Watson actuarial firm) to $865 billion by the Pacific Research Institute.

Not all torts are wasteful or frivolous; tort law is necessary to a free market system. Simply stated, a tort is a civil wrong that causes injury to another. When tort involves physical or psychological injury, it necessarily includes treatment notes and billings from treating providers. Proof of treatment and billing records are commonly obtained and utilized by injured parties and attorneys, in part to substantiate and develop valuation of their claim or lawsuit. This is where the tort system is inexorably bound to and dependent upon the U.S. healthcare industry.

On the other side of the free market are health plans, having rights to identify, preempt payment and recover mispaid claims of monies related to a plan participant’s involvement in and financial settlement from an injury. This is necessary to keep monies back into a sector, which itself is closely aligned financially with health providers, medical device manufacturers, pharmaceuticals and home health.

In order to find monies which would be normally lost to the healthcare industry, plans must be able to better identify their participants involved in tort filings. While previously inefficient, this can be attained with small amounts of HIPAA-based, transactional data, focusing not on voluminous treatment notes or billings, but on the simplicity of the exchange itself, and identifying requesting parties involved.

Such data would be submitted from the record departments of all types of hospitals and health providers, subsequent to their receiving a record request made by a patient or attorney. These requests number approximately 10 million annually in the U.S. Upon receipt of the provider-submitted record exchange data, the patient’s health plan would be able to know, rather than guess on attorney and patient tort intent, involvement and applicable settlement.

Would attorneys, knowing of their new, transparent accountability when requesting records, start to figure this into the amounts of claim monies requested? Not likely.

Most claims insurance adjusters use computer software to appraise any insurance claim that is made. In fact, Computer Science Corp. licenses a product known as Colossus, which is bodily injury claims-handling software used by an increasing number of property and casualty insurance companies. Colossus itself is used by more than 50 percent of the nation’s claim adjusters and by more than 300 insurance companies. Asking for larger settlements is not going to thwart the necessity for transparency to health plans.

Tort reform should not be about reducing lawsuits or injury claims that are necessary, but rather filtering out those which aren’t. Free market forces and better levels of “tort intent” knowledge improve necessary detente, when attorneys know that stakeholders have increased awareness. Frivolous lawsuits have a better chance of settling or not even being filed.

Our country’s healthcare system needs to retrieve monies rightfully due back. This can be coupled with deterring unnecessary tort through the same free market forces in our country that allow tort to exist in the first place. Perhaps Congress and our President should look more inside the economics of our tort system, in an attempt to reform it, instead of wielding a thick axe through policy and politics.

About Stephen Ambrose

Ambrose is the executive director for ClaimCatcher and the president of Provider Compensatory Invoicing. He is located in Richmond, Va.

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Insurance Journal West July 19, 2010
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