That the VA and an academic medical center should take the lead in heading off malpractice claims should come as no surprise. Such institutions employ and insure their medical staffs, which makes it easier for hospital and physician to take a united stand on disclosure and compensation. Community hospitals, on the other hand, often engage in a tug-of-war with doctors in private practice over whose insurer will cover a lawsuit. Moreover, self-insured physicians usually aren’t eager to take responsibility for errors, fearing their rates will skyrocket or their policies will be canceled.

In a closely watched experiment that began in 2000, COPIC Insurance Company, which insures 7,000 private-practice doctors in Colorado and Nebraska, gives physicians the chance to stay in the good graces of patients with an offer of as much as $30,000 to compensate for hardships caused by an adverse outcome. Physicians are encouraged to communicate openly, and if appropriate, apologize. And because patients don’t make a formal written demand for compensation or waive their right to sue later (after they accept the check), doctors avoid having their errors reported to the National Practitioner Data Bank and the state licensing board. Patients who want to receive cash awards are prohibited from being represented by an attorney. “As soon as lawyers get involved, the process becomes adversarial,” says Alan Lembitz, vice president of risk management for COPIC. “We’re trying to foster good communication between patient and doctor.”

The process isn’t a cure-all. Seriously injured patients aren’t likely to be assuaged by an apology and a small payment, and the system works better for surgeons than for internists or family physicians. “Doctors who perform procedures usually know right away that things haven’t gone well, whereas a missed diagnosis may not come to light for months or years,” says Richert Quinn, a physician risk manager at COPIC.

While the insurer’s program has resulted in more patients receiving payments than under the old system, each payout has been relatively small. During the past six years, a quarter of the 3,200 patients with adverse events fitting the program’s criteria received an average $5,400. (The program has a specific set of exclusions, such as a doctor’s obvious negligence or a patient’s death.) Only seven compensated patients went on to sue, and two received payment through the tort system.

What happened to the 75% of patients who may have been harmed and fit the criteria but got no payment? In some cases, say Lembitz, physicians decided their patients had recovered sufficiently and required no economic assistance, while in others, patients turned down the offers, and still others had more serious outcomes than the program was designed to address. Of those who didn’t receive compensation, 16 sued and six received payment via the tort system. “The program hasn’t had a negative effect on our operational costs,” says Quinn, and while it may not be saving money, he thinks it helps preserve relationships between patients and their doctors.