FOR CHRISTMAS EVE, 1979, Jack and Betty Ross planned to spend a quiet evening at their Gaithersburg home with their two toddlers, B. J., age 2, and Jared, just under 1 year old. After dinner, B. J., short for Brandon Joshua, whimpered to his mother, "Throat hurt, no candy." He couldn't swallow even his Christmas sweets. When she took his temperature, he had a fever of 101.5. By 11 p.m., B. J. still wasn't sleeping. Betty decided to telephone the doctor.

The pediatrician who had cared for B. J. since his birth, Dr. Frank Neuberger, was at a dinner party when he received word of Betty's call: "2- year-old -- 101.5 temp -- side of face red -- throat hurting." By phone, he instructed Betty to give B. J. aspirin or Tylenol, an antihistamine and plenty of liquids. The Rosses tried to follow his instructions, but B. J. had trouble swallowing the medications.

The Rosses said that over the next few hours, B. J.'s condition steadily worsened. He was having difficulty breathing. He was making croaking sounds that his parents thought to be croup, a viral infection of the voice box. B. J. had had it before.

Then, about 4 a.m., Betty phoned the doctor again and asked him to listen to B. J.'s breathing over the phone. Neuberger gave her a new set of instructions and told her to bring B. J. into the office in the morning.

She never got the chance. Forty-five minutes later, B. J. stopped breathing. Attempts to resuscitate the child at home by the Rosses, by a physician who was a neighbor, by a rescue squad, and later, at nearby Shady Grove Adventist Hospital, were unsuccessful. Only a few hours after he had first complained of the sore throat, B. J. Ross was dead.

The exam at the hospital showed the Rosses that their son had been unable to breathe or swallow because of acute epiglottitis, an extremely serious viral throat infection associated with croup. Acute epiglottitis causes swelling of the soft tissues at the back of the throat, which can quickly lead to suffocation. It is a pediatric emergency. Treatment requires hospitalization and insertion of a tube in the child's windpipe to prevent the airway from becoming obstructed. Without rapid medical attention, a child with acute epiglottitis faces a 25 percent chance of dying.

The Rosses were shattered by B. J.'s death. "One of the most significant experiences that parents have when they lose a child is incredible guilt . . . ," says Jack Ross. Another pediatrician, a friend of the Rosses, tried to reassure them they had done all they could.

He read them a description of epiglottitis contained in a standard textbook on pediatrics. "As soon as he stopped reading," Jack remembers, "I looked him in the eye and said, 'So our doctor made a mistake.'ays, Jack and Betty Ross sued Dr. Frank Neuberger for malpractice.

Dr. Neuberger and his insurance company, Medical Mutual Liability Insurance Society, did not believe he committed malpractice. Said Barry Cohen, litigation superintendent for Medical Mutual, "The failure of a doctor to know that a child had epiglottitis over the phone is not his fault; lots of illnesses have similar symptoms." Neuberger declined to be interviewed for this article, but in his testimony in the proceedings that followed, he said much the same thing as Cohen. But for a few details, he did not dispute Betty Ross' account of what had been said in her two telephone conversations with him. The dispute turned largely on whether he should have sent B. J. to a hospital emergency room based on what he learned or should have learned over the telephone.

Pediatricians vary in their assessment of how to treat croup, the viral infection that led to B. J.'s death. Not all children with croup need to be seen by a physician for treatment to be prescribed. But at one of the hospitals where we work -- Cambridge Hospital, a Harvard teaching affiliate -- hospital policy recommends that any child with croup and a fever over 101 be seen; any child who makes a croupy sound when he's quiet or with every breath is to be seen immediately.

A jury in the Rosses' case decided Neuberger had been negligent in his handling of B. J.'s illness. In 1982, nearly three years after their suit was originally filed, the Rosses were awarded a sizable sum in damages for B. J.'s "wrongful death."

MALPRACTICE LAWS are the public's first line of defense against the mistakes of physicians. Doctors, however, complain that lawyers have lost sight of the real aims of malpractice laws and are more concerned about financial compensation for themselves.

Lawyers, in turn, argue that the skyrocketing number of medical malpractice claims is the result of an increasing number of mistakes by doctors. "The sole cause of medical malpractice cases is medical malpractice," says Robert Cartwright, a former president of the American Trial Lawyers Association.

One thing is clear: medical malpractice has become big business. Today, the odds are that nearly every doctor practicing in a major metropolitan area will be sued during his or her career. Nationally, about 900 malpractice suits are filed daily. In the last decade, malpractice claims against American doctors have tripled. Awards have also increased. A 1983 Rand Corp. study showed that awards averaged $102,000 when cases were tried and a verdict reached. Insurance executives say that awards and out-of-court settlements greater than $1 million are not uncommon today, and in some recent cases, malpractice awards have reached $10 million to $15 million.

It's not surprising, then, that as the awards increase, so do the checks doctors write to cover insurance premiums. Physicians in Virginia, for example, saw their premiums increased by one-third last year. Doctors in high-risk specialties like neurosurgery and obstetrics are paying as much as $100,000 a year for malpractice insurance in some parts of the Washington area. Nationally, physicians spent $1.6 billion on malpractice insurance last year.

All these dollars flowing through the pipeline don't necessarily mean that patients and their families are getting a lot of money. A Brookings Institution study last year said only about 28 cents of each dollar paid in malpractice claims is received by victims.

SOME PHYSICIANS say patients are the real losers as malpractice cases multiply, because doctors pass along their rising insurance premiums in higher fees. Dr. David Hilfiker, medical director of Community of Hope Health Services in the District, says, "If you have to pay $60,000 in insurance premiums, your patients pay for it in their fees, you pay it to the insurance company, and the insurance company pays it back to the patients. Doctors aren't on the hook, it's patients who are paying for malpractice."

Consumers may bear other costs of malpractice as well. Because they fear being sued, some doctors practice so- called defensive medicine, obtaining unnecessary laboratory and diagnostic tests, referring patients for unnecessary consultations with specialists and hospitalizing pa- tients when an office visit might do. A 1983 poll by American Medical News found the effort to steer off malpractice claims led 41 percent of the magazine's physician respondents to prescribe additional diagnostic tests. Fear of suits led another 27 percent to provide additional treatment procedures and 45 percent to refer more patients to consultants. Similar findings were reported by researchers at Loyola University and the University of Illinois. These investigators studied a group of 150 physicians who'd already been sued for malpractice in the Chicago area. For more than 60 percent of these doctors, the experience of being sued led to defensive practices such as ordering diagnostic tests for "protection."

MALPRACTICE CASES traditionally have been handled by lawyers on a contingency-fee basis: the lawyer's fee is a percentage of the money that a plaintiff receives in a successful malpractice suit, and if the case loses, the lawyer gets nothing. In the Washington area, many plaintiffs' attorneys collect 35 to 40 percent of the settlement in a major malpractice case. Some lawyers in Maryland take 50 percent.

Malpractice cases can require hundreds, even thousands, of hours from lawyers and their staffs. And lawyers don't always win their cases. Large contingency fees, they therefore argue, are the only way they have to recoup losses in unsuccessful malpractice cases. Nevertheless, some states have attempted to cut down on malpractice litigation by limiting the fees paid to lawyers in successful suits. In California, for example, lawyers were incensed when the legislature passed a law limiting legal fees to 40 percent of the first $50,000 in damages awarded by a jury and decreasing percentages in awards greater than that amount. At its recently adjourned national convention in Baltimore, the American Bar Association opposed any kind of national legislation on malpractice litigation and said there is no justification for limiting awards or lawyer's fees in such proceedings.

Most medical malpractice cases never go to trial. The average suit is settled out of court for a relatively small amount, or dropped without any payment to the claimant. The 1983 Rand Corp. study of malpractice showed that 90 percent of the cases were resolved before being sent to a jury. Fifty percent were dropped with no payment, while 40 percent were settled out of court. In Maryland, researchers for the Johns Hopkins University School of Public Health found that from 1977 to 1982, more than 80 percent of medical malpractice claims were closed without any payment being made.

MALPRACTICE was the furthest thing from the minds of Arlene and Bob Morgan as they drove toward Washington's Providence Hospital from their Hyattsville home early in July of 1980. At 30, Arlene was pregnant with the couple's first child. Her due date was July 23 (although for various reasons her doctors were uncertain about it), and this visit was for a normal clinic checkup. By the end of August, when Arlene had not delivered, the couple was quite worried. On Aug. 28, her doctors decided to admit Arlene to the hospital to induce labor. In "post- term" pregnancies the fetus is considered to be at risk.

"When he put me in the hospital for two days to induce me, and nothing happened, and they said, 'Go home,' I knew something was wrong," Arlene recalls. (Inductions do fail a certain percentage of the time, even when a woman's cervix is ready for delivery. The failure itself does not necessarily indicate a problem with the pregnancy.)

On Sept. 12, Arlene Morgan began having contractions. But the next day, her doctors discharged her again from the hospital. The diagnosis was false labor, not a rare event in obstetrics. Final into real labor and her doctor ruptured her membranes, a routine proedure often performed to speed delivery. In Arlene's case, the membranes were stained with meconium, a sign of possible fetal distress. She had been routinely hooked up to a fetal monitor, and the monitor strip also indicated fetal distress. Six hours later, when Robert Morgan Jr. was delivered by cesarean section, he was severely brain-damaged.

"I don't think I could ever put into words how it feels," says Arlene Morgan, "having a normal pregnancy, and then, having your child be virtually incapacitated." Though post-term pregnancies in general are associated with increased risks of both fetal distress and neonatal brain damage, doctors do not know exactly why.

In their own case, the Morgans were sure that the delivery had been mishandled. "At first," Arlene recalls, "I thought: I know they did something wrong, but what am I going to do, fight the doctor? I thought the doctor knew what he was doing and could prove it to everyone else."

Arlene Morgan is a full- time homemaker and Bob is an engineer. The Morgans did not feel they had much experience with the law so, like the Rosses, they spoke with a friend, a lawyer, "just to ask him what he thought." He thought they had an excellent case. He said they might be able to recover damages to pay for whatever therapy or care young Robert would need in the future. Their attorney eventually reached an out-of-court settlement with the hospital and with two physicians involved, Dr. Serge Rameau and Dr. Gabor Laufer, that totaled close to $2 million.

A spokesman for the hospital said that despite the settlement there was no evidence of poor-quality care in the case. Rameau and Laufer declined to comment for the record, but Rameau's attorney, David Levin, said that opinions differ on the point at which the fetal monitoring strip indicated the advisability of a cesarean section, itself a risky procedure. He also said it as not possible to state with certainty that a delayed delivery was the cause of the brain damage, which can have many causes including genetic problems. One doctor believes that part of the Morgan child's brain damage was genetic in origin and would have occurred regardless of the circumstances of the delivery.

Today, Robert Morgan Jr. is 5 and functions at about a 12-month-old level. Arlene Morgan says of the law suit, "I was very pleased with the settlement because it was all for Robert . . . I know now that if I die tomorrow, he's taken care of for the rest of his life."

Because the Morgans' case never went to trial, it was settled relatively quickly, within slightly more than a year. In contrast, the Rosses' jury award came nearly three years after they originally filed a claim. In Maryland, the average wait for a malpractice suit to reach court is about 15 months. Because of the backlogged courts in the District, cases often don't reach trial stage for four or five years.

Had the Morgans' case gone to court, Edward Horowitz, their lawyer, would have attempted to prove that the care given Arlene Morgan did not match the prevailing "standard" of obstetrical care by other hospitals in the community. To establish that a physician has committed malpractice, a lawyer must prove that the doctor had a duty to care for the patient, that the care provided did not conform to the applicable "standard of care" and that this failure to conform to the standard resulted in harm to the patient.

When the standard of care is at issue, the case hinges on expert testimony. Experts on medical questions are generally physicians, and physicians have traditionally been unwill- ing to testify against one another. This so-called conspiracy of silence presented a much greater obstacle a decade ago than it does today. Physicians now regularly advertise their availability as expert witnesses in the American Bar Association Journal and elsewhere. Fees for these experts are usually $1,400 to $2,000 per day, according to Barry Cohen of Medical Mutual Liability Insurance in Maryland. "Some doctors claim to make a quarter of a million per year from testifying," Cohen says.

Levin, who frequently represents sued doctors, commented tartly, "Give me $2,500 and I'll find you an expert who'll say anything."

The increased willingness of physicians to testify against professional colleagues was one factor in the increase in malpractice cases. During the early 1970s, the frequency of medical malpractice claims rose at a rate of 20 percent to 30 percent. This surge peaked during the "crisis" period of 1974-75, when the staggering weight of claims led many insurance companies to withdraw malpractice coverage altogether. Companies that stayed in the field increased premiums by as much as 750 percent in one year.

Legislators responded to complaints by organized medicine through the enactment of numerous reforms that some lawyers have referred to as a revolution in malpractice laws. Seventeen states capped the award that juries could grant to a malpractice plaintiff -- generally at $500,000. It was at that time that a few states, like California, limited the fraction of an award that could be collected by a lawyer as a contingency fee. Only the District of Columbia and West Virginia made no changes in their malpractice laws. Douglas Torrance of the Medical Society of the District of Columbia says his group, together with the District of Columbia Hospital Society, the Medical-Chirurgical Society and the District physician's self-insurance company, has been working on a "comprehensive package of tort reforms" that they intend to present to the District City Council later this year.

Maryland, which already requires pretrial screening of malpractice cases to eliminate spurious claims, is now contemplating further limitations on lawyers in a dozen bills pending before the legislature.

Though malpractice cases tapered off for a while, in 1985 malpractice cases again reached crisis levels for physicians, and premiums escalated to the level that some physicians chose to forgo insurance altogether.

Others, in high-risk specialties, chose to stop practicing. Meanwhile, the insurance industry and organized medicine began sending their lobbyists back to the legislators' offices asking, yet again, for a revamping of malpractice laws.

ONE MAJOR PLAYER in the malpractice battle that has been largely overlooked until recently is the insurance companies that offer malpractice coverage. In 1983, the nation's leading malpractice insurer, St. Paul Companies of St. Paul, Minn., took in more than $292 million in doctors' premiums, about 19 percent of St. Paul's annual revenues for that year.

The insurance industry argues that its rising premiums are necessary to offset the amounts they are paying out each year in malpractice awards. Some physicians and lawyers are skeptical.

"For every dollar of premiums taken in, the insurers are paying out -- in terms of actual claims paid -- 10 to 20 cents," says David Shrager of the Trial Lawyers Association. Fifty cents of every dollar the insurance companies collect is placed in a reserve fund, Shrager says. The sum placed in reserve is the insurance company's estimate of how much it will have to pay if pending claims are successful. But while cases await trial or settlement, the reserves are invested, and the dividends and interest earned become additional revenues for the insurance companies. Some malpractice critics have argued that poor investments by insurance companies in the 1970s were more responsible for rising malpractice costs than increasing numbers of cases.

"If you want to blame the insurance industry," says Jerry Engeleiter, vice president of the St. Paul Insurance Cos., "you have to blame them not for poor investment policies, but for not realizing where juries were headed . . . for not judging the extent to which society wanted to hand out larger awards." The downfall of so many insurance companies in the mid- 1970s, Engeleiter says, came about because they undercharged physicians for premiums. As juries made larger and larger awards, the companies found they didn't have the assets to pay the awards or the settlements they felt they had to offer to forestall even larger jury awards. They pulled out of the malpractice market to avoid financial failure, leaving some physicians without insurance at all.

Eventually, physician groups and hospitals moved in and started their own medical malpractice companies, like the National Capital Reciprocal Insurance Co., created by District doctors.

THE INSURANCE industry is now focusing on educating physicians about how to avoid being sued by patients. One insurance company distributes a pamphlet to policyholders titled, "The Ten Commandments of Good Patient Public Relations."

Stephen Zuckerman of the Urban Institute has some advice for the doctor looking to avoid lawsuits. In a study published in 1984, Zuckerman found that physicians in certain specialties, primarily obstetrics-gynecology, can reduce their risk of being sued by spending more time with their patients. That same study also showed that female physicians are less apt to be sued than their male colleagues, regardless of specialty. Such a finding may suggest that closer, more trusting relationships develop between patients and female doctors. A growing number of those who've studied the issue fear that the real malpractice crisis may not be public relations but medical incompetence that goes unnoticed. "The big unanswered question," says the Urban Institute's Stephen Zuckerman, "is how much actual malpractice goes on." Zuckerman is particularly concerned about patients who get injured but who never bring suit. "From the data, this really seems to be a very large percentage of patients."

The data Zuckerman refers to are derived from a controversial 1983 California study on medical malpractice. The study, based on a assessment of data in patient medical charts, reported that an astonishing 5 percent of all hospitalized patients experience an injury due to physician errors. If suits were brought by all of these patients, roughly one-sixth of the cases would be found attributable to physician negligence. The study raises a disturbing question: are doctors becoming more incompetent in spite of the fact that they are being sued more often for it?

Jack and Betty Ross feel the medical profession is alarmingly slow to penalize its errant members. After their trial, they were shocked to discover that Dr. Neuberger continued to practice in Maryland. "The medical community never did anything," Betty Ross says.

Physician competence is monitored by state licensing boards that investigate complaints and decide whether disciplinary action is warranted. These boards are composed primarily of physicians and receive most of their complaints from patients.

In 1984, according to the Federation of State Medical Boards, disciplinary actions were taken against 17 of roughly 11,000 licensed physicians in Maryland, and only one of those doctors lost the license to practice. Virginia was tougher: 41 of the state's 10,000 MD's were disciplined, including five who had their licenses revoked. In the Dis- trict of Columbia, with 3,500 licensed doctors, there was only one disciplinary action, and no District doctor lost a license.

A study being circulated by U.S. Department of Health and Human Services says that 20,000 to 45,000 of the nation's 400,000 licensed physicians "are likely candidates for some level of discipline" because they are incompetent or impaired by alcoholism, drug abuse, mental illness or criminal behavior. But in 1984, the state medical boards disciplined only 1,400 physicians, meting punishments ranging from reprimands to license revocations. For most, the actions taken had little or no effect on their right to practice.

Protests about slow processing of complaints made to the District's Commission on Licensure to Practice the Healing Arts led to increased budget and staff for the agency and faster investigations. Last year, four physicians here lost their licenses after commission review, more than in the previous 10 years.

Dr. Sidney Wolfe of the Public Citizen Health Research Group is among those who believe physicians have failed in their attempts to police themselves. Wolfe's consumer group recommends requiring that all doctors pay a $500 licensing fee to raise money for the medical boards and that doctors take written exams periodically to maintain their certifications.

But Hilfiker, of the District's Community of Hope Health Services, doesn't think inadequate doctors are a primary factor in malpractice cases. "The vast majority of doctors who are convicted of malpractice are not incompetent," he says. "The vast majority are physicians who make mistakes."

Wherever the truth lies, the malpractice laws are the foundation of a huge industry, once designed to compensate patients harmed by substandard medical care. As with any social remedy, in time it becomes necessary to ask: Has the cure become worse than the disease.