A Medical Economics Web Exclusive

Flashback in Medical Economics

25 years ago: April 1977

In laying blame for the malpractice crisis, the villains cited most often by doctors were plaintiffs’ lawyers who filed lawsuits under lucrative contingency-fee agreements.

But doctors weren’t alone in denouncing these arrangements–which could bring a plaintiff’s counsel as much as half of a six- to seven-figure award or settlement. Malpractice defense attorney Jack E. Horsley was just as angry–and the Mattoon, IL, lawyer had some solid ideas for reforming the system.

"Despite ethical rules against them," Horsley warned in a Medical Economics cover story, "overblown [contingency fees] are common throughout the country. In my opinion, they’ve been one of the leading causes of the medical malpractice insurance mess."

Horsley didn’t call for total elimination of the contingency-fee system. "Under some conditions, it’s desirable," he acknowledged. "If a person has a legitimate cause for civil action but not enough assets to pursue it, he or she should be allowed to retain a lawyer who’s willing to accept a contingency-fee employment contract."

But lawyers were seeking contingency setups even with malpractice plaintiffs who could easily afford to pay a normal legal fee. These lawyers were gambling that they could hit the jackpot in court–or negotiate a settlement big enough that their share would dwarf their regular fee. And too many times, Horsley complained, they were winning the gamble.

To discourage such whopping payoffs, Horsley noted, some states had capped contingency fees, usually by putting firm limits on the lawyer’s take. That was a good start, Horsley believed, but he had even tighter controls in mind:

• A lawyer could suggest a contingency-fee contract only after the client had been offered representation for a regular fee.

• The client would have to undergo means testing to prove that he or she couldn’t afford the attorney’s customary fee.

• If lawyer and client wanted a contingency agreement, they’d have to submit it, pretrial, for a judge’s approval. Both parties would have to explain to the judge, under oath, why the contract was necessary, and the judge’s decision would be final.

"Under the plan I’ve outlined," Horsley maintained, "I believe half to three-quarters of unjustified medical malpractice claims would never be proposed; they simply wouldn’t be as easy or cheap to make."

But even in the crisis atmosphere of the ’70s, Horsley’s proposed reforms went unheeded. A quarter-century later, contingency fees are still a fixture in the tort system.

50 years ago: April 1952

Items from the news department of Medical Economics:

Doctors 1, Tax Collectors 0. Town councilmen in New Kensington, PA, came up with what they thought was a great way to bring in additional revenue. They imposed a $100 annual "license fee" on every physician in the community. When doctors appealed, a local judge called the fee what it really was: a tax. And because doctors already paid a state licensing fee, he voided the town’s levy on its medical contingent.

Nonallopaths embraced by labor. What America needed, according to a spokesman for organized labor, was a national health system that gave every citizen unlimited choice of doctors, including osteopaths and chiropractors. "Free choice means that the plan must not restrict the availability of medical talent," declared Ed Weston, president of the Washington State Federation of Labor. And in that talent pool must be DOs and DCs, not just MDs. "Reputable osteopaths and chiropractors are entitled to greater consideration and more courteous treatment than they now receive," he said.

Basic rates for surgical assistants. Operating room fees for physician assistants and nurse anesthetists varied widely across the country and were creating some confusion. So the Illinois medical society took matters in hand and adopted a resolution: "Reasonable and legitimate expenses of any physician [in Illinois, that is] have been and should continue to be $25 per hour for physician assistants and nurse anesthetists at operations."

Color the medical profession Red? Perhaps caught up in the McCarthy era furor, a Chicago Tribune correspondent claimed that Communists had infiltrated American medicine. In Los Angeles alone, he reported, nine physicians were active members of the party. One reason the Reds sought physicians as members, the correspondent said, was that a doctor’s office could serve as an underground message center for Communist activity.

The fee wasn’t high, but the doctor was. In New Jersey, a court ordered that an inebriated doctor’s house call charge was valid despite his condition. The patient had refused to pay on grounds that "the doctor was positively drunk. His advice was worthless, and I didn’t follow it. In fact, he’s been our family doctor for years, and he seems to be drunk more often than he’s sober!" And that very fact–that the patient hadn’t sought care elsewhere–was why the fee had to be paid, the judge ruled.

75 years ago: April 1927

Physician William Bierman told readers a new one about the traveling salesman–only this time, it was no joke. This time, it was about salesmen who became seriously ill on the road and didn’t know where to get care.

"It is a problem that has received altogether too little recognition," wrote Bierman, medical director of the National Council of Traveling Salesmen Association. And the problem affected more than salesmen, he emphasized. "Commercial travelers alone, it is estimated, total some 900,000. In addition, there are actors, musicians, stage hands, executives, skilled and unskilled laborers, tourists, and others."

When these travelers become ill, he said, they often face the dilemma of locating a trustworthy physician in an unfamiliar community. "Shall they go to practitioners suggested by casual acquaintances, by strangers, or by hotel and drug store clerks, who may be financially interested in such recommendations?" Or should they do what too many did–delay care, at their peril, until they could get home?

To help ailing travelers, Bierman’s organization collaborated with medical authorities to compile a pocket-size directory of general practitioners in towns across the nation with populations of at least 10,000, as well as specialists in cities of 50,000 or more.

Three criteria governed the listings:

• Each doctor had to be locally recognized as completely reliable.
• Fees had to be in line with those charged local patients.
• Each practitioner’s office had to be located in or close to the community’s business center.

"The effort has resulted in a directory that is far from perfect," Bierman acknowledged. "But it is a beginning, and as time and experience warrant, it can be made a more efficient instrument."

—James D. Hendricks
former Executive Editor

James Hendricks. Flashback in Medical Economics.

Medical Economics

2002;7.