Bringing patients to court may not be efficient
Friday, June 19, 2009 Mohamad Mova Al'Afghani
Unlike buying clothes in a department store, the quality of a particular health, legal and financial service is hard to ascertain. Even if consumers have experienced the service, the long-term effect of the service remains unknown. Is there any guarantee you will not be sued for following your lawyer's advice, or that you will not experience any side effects for taking medication? No.
Health, legal and financial services exploit the high degree of information asymmetry between seller and buyer. Put simply, the service is there because laypersons don't know what to do. Clients don't know the law and patients don't know their disease.
As such, consumers rely heavily on their service provider. Demands are created by the service provider and not by the consumer alone. So clients follow their lawyers on which transaction structure they should enter into and patients follow their doctors on which pills they should buy and swallow.
Hence, at the tip of the business is trust and reputation. Reputation may be worth more than the actual quality itself. As reputation is earned through sustainable efforts in performing high-quality, honest services and a good relationship with consumers, it is the Achilles' heel of this business.
Do courts resolve tarnished reputations through their verdicts? The news that a former patient has been victimized by a health service provider is more likely to be good news for the media than news that a hospital wins a lawsuit over its former patient.
People are naturally more interested in stories where they can be projected into the situation. Hospitals are impersonal institutions owned by corporations, therefore it is not in the interest of the layperson to hear a story of them winning a lawsuit.
Is criminal libel a good recourse to repair a damaged reputation? One thing about going to criminal proceedings is that external factors come into play in the process - namely the police and the prosecutors.
Once a case has been lodged with the police and transferred to the prosecutors, it is no longer in the full control of the "victim" or their lawyers. Unlike lawyers, the police and the prosecutors worked on behalf of the state in the pursuit of (bureaucratic) justice, not in the interests of both parties.
It is not within their consideration if the hospital is interested in maintaining reputation and the former patient just wants to go home. As such, criminal justice institutions may decide to proceed with imprisonment although it may not be in the best interests of any party.
Conventional wisdom suggests going to court in libel cases to get an injunction - that is, to get a court order for the defendant to stop defaming the client.
However, this is effective only in the age of the printing press, not in the Internet age. Court injunctions are meaningless, as the cost of distributing and multiplying information for every user is very low. Once an email is sent, there is no way to stop it from spreading.
Rather than go to court, I would argue for a market-based solution. From the plaintiff's point of view, going to court means they have to pay litigation costs and legal fees. If they win in civil court, they may not be able to recover the costs as the defendant may not have enough money to pay. If it is the insurance company they are suing, the insurance company may decide to appeal, which means more costs and more publicity for the plaintiffs. If at all they finally win the case, it will not bring the damaged reputation back, so they will still need to pay a public relations company to repair the damage.
From the defendant's point of view, the judicial process is lethargic, cold, cumbersome, costly and often does not reflect their sense of justice. From the taxpayers' point of view, legal proceedings mean a burden for their tax money. Taxpayers pay every penny for electricity, water and other utilities spent by the police, the prosecutors and judges. Yet, like laypersons, judicial professionals do not know about medicine.
That is why judges need doctors to stand as expert witness. If there are two expert witnesses with conflicting views, one from the plaintiff and one from the defendant, judges will just have to choose the most convincing one and take the opinion into their decision. The end result could be far from we call "the truth".
In a market-based solution, the parties stay out of court. If the health service provider does something wrong, they pay the patient and the patient can agree not to sue at a price. If providers don't do anything wrong, they ask the patient to issue a public apology and a sum of money to the extent that they can pay. The cost expended in this mechanism is much lower compared to going to court.
This mechanism requires the government to reduce information asymmetry in the market as parties can only negotiate when the evidence is available.
In practice, this means medical records should be made available to the patient. Criminal, administrative and civil sanctions should be introduced for those who tamper with medical records or retain them from patients.
This setting will provide incentives for honest behavior. It will make information discovery cheaper for patients and insurance companies, and also prevent burdening taxpayers through complicated judicial proceedings.
The writer is the founder of the Center for Law Information.