from The Incidental Economist at http://bit.ly/2t9fCUm on July 11, 2017 at 12:30PM
This is the second post in a series on a proposed CMS rule that would eliminate an Obama-era ban on pre-dispute arbitration for nursing home residents. For the intro, see here.
By penalizing injury-causing negligence, tort law is supposed to deter negligent conduct. That’s one of the reasons (but not the only one) that CMS originally moved to ban nursing homes from insisting on pre-dispute arbitration: by reducing the threat of malpractice, arbitration clauses could compromise patient safety.
Now, mandatory arbitration doesn’t eliminate the malpractice threat. Arbitration is an alternative forum for resolving claims, albeit one that stacks the deck in nursing homes’ favor. Plus, not all arbitration agreements will stand up in court. Sometimes, a judge will find that the resident wasn’t competent to waive her rights to sue.
Without a doubt, however, arbitration clauses reduce nursing homes’ financial exposure and thus any deterrent effect associated with potential litigation. But how big is that reduction? Is it big enough to matter?
To answer that question, we’d ideally look at studies that examine whether a shift to mandatory, pre-dispute arbitration caused a dip in nursing home quality. But no one’s done that research, at least to my knowledge, perhaps because it’s tough to get a handle on how frequently nursing homes insist on arbitration clauses.
That doesn’t mean we’re out of luck, though. There’s a bunch of research on whether malpractice risk is associated with nursing home quality. If that research suggests that the deterrent effect is big, more arbitration might well be bad for patient safety. If the deterrent effect is small, it might not make of a difference.
So what does the research tell us? In 2011, an important study in the New England Journal of Medicine concluded that nursing homes with more quality deficiencies, and more serious deficiencies, were more likely to be sued for negligence. But the difference was small: “Nursing homes with the best deficiency records faced about a 40% annual risk of one or more claims, as compared with 47% among homes with the worst deficiency records.”
From this, it looks like there’s only so much a nursing home can do to mitigate its liability risk. Even it improves, it’ll get sued about as often as it used to. “Such weak discrimination,” the researchers wrote, “may subvert the capacity of litigation to provide incentives to deliver safer care.”
Another 2011 study, this one in the Journal of Health Care Finance, reached a similar conclusion. It found that nursing homes in Florida with more registered nurses per resident paid less in response to malpractice claims, which jibed with earlier studies. But the study still couldn’t pick up a statistically significant connection between deficiencies and malpractice payments. Nor could this study from 2004.
All of these studies, moreover, suffer from a common problem. They tell us which nursing homes are more or less likely to be sued, but they can’t tell us directly whether malpractice risk actually influences a nursing home’s choices about staffing levels and quality. A 2013 study in Health Services Research tried to avoid the problem by exploiting variations in the background rate of malpractice in different geographic areas. In line with earlier research, the study found that “while a deterrence effect exists, it is small, concentrated among a subset of nursing homes, and unlikely to lead to widespread improvements in quality.”
In short, the research suggests that tort law matters, but only on the margins. If that’s right, then mandatory arbitration may not raise substantial safety concerns.
Now, these studies aren’t the final word. Reported deficiencies are only proxies for overall quality; it’s possible that the malpractice threat makes nursing homes attentive to unmeasured but important aspects of quality. Plus, the research pretty consistently shows that having more registered nurses (but not nursing aides) reduces malpractice risk. In the absence of litigation exposure, nursing homes might well hire fewer registered nurses, with unfortunate consequences for quality.
Most importantly, the studies can’t and don’t address the systemic, long-term risks of an industry-wide practice of substituting mandatory arbitration for civil litigation. In particular, the research doesn’t capture whether the secrecy of arbitration may make it easier to sweep the endemic quality problems in the nursing home industry under the rug. I’ll turn to that question in my next post.