When Honesty is the Best Health Policy

When Jennifer Wagner, 34, found a lump in her breast six years ago, she headed straight for her doctor.

"I asked him, I said, should I go for a mammogram and he sort of poo-pooed that idea, really just said it would be nonsense to go unless you're 40," Wagner said.

Ten months later, a second doctor also told her there was nothing to worry about, reports CBS News correspondent Priya David. But a year after that, a second lump appeared. The doctors, both affiliated with the sprawling University of Michigan Health System, had made a terrible misdiagnosis.

"The ultra sound technician said, 'This is breast cancer,' and I was just 'Wow,'" Wagner said. After 21 months of it growing, it went from what could have been stage 0 or 1 to stage 3."

Furious, Wagner called malpractice attorney Tom Blaske and they prepared to sue.

"We would have started the war," Blaske said.

But instead of going to court, the University of Michigan Health System did something astounding. It quickly examined the case, admitted it was wrong, offered Wagner a $400,000 settlement and apologized.

"That validation meant more than a million dollars," Wagner said.

"With the other hospitals, you don't get any of that, you just get deny deny, deny, defer, defer, defer," Blaske said.

The policy of honesty and apology started in 2002, and it's proven to be a shrewd business practice for the 40-member hospital system. Since then, claims against the system have dropped from 262 in 2001 to 83 in 2007. Fewer claims have allowed the system to drop its malpractice insurance cash reserves from 73 million to 13 million.

The policy was initiated at the University of Michigan by Rick Boothman, who spent 30 years defending hospitals in malpractice cases.

"It's important to understand that litigation is not a search for the truth," Boothman said. "It is a game. I could have found experts to diminish the importance of that two-year delay in diagnosis, I could have found oncologist to say she's had cancer for 5 or 6 years and that delay made no difference in her staging, but that wouldn't have been true."

And telling the truth has another positive outcome - decreased fear of lawsuits has boosted reporting of negative incidents six times higher.

"There's a general culture that's come about here of being forthright, taking responsibility and meeting it head on," said Dr. John E. McGillicuddy, a neurosurgeon.

A win for the health system and a win for Wagner. Money for the settlement is in a college trust fund for her boys. Now in remission, she is able to enjoy her healthy body today and has peace of mind for her children's future.