With malpractice costs skyrocketing, some physicians are talking ‘crisis’
Fallout includes recruiting problems and defensive medicine
From the April 2001 ACP-ASIM Observer, copyright © 2001 by the American College of Physicians-American Society of Internal Medicine.
By Phyllis Maguire
- Awards and settlements steadily increasing
- New for members: discounted professional liability insurance
- The gold standard: tort reform in California
- Why are malpractice awards on the rise?
According to West Virginia nephrologist Derrick L. Latos, FACP, an epidemic of defensive medicine has broken out in his state.
As proof, Dr. Latos recalled one of his dialysis patients who suffers from gouty arthritis and recently had an attack in one knee. The patient's regular orthopedist was unavailable, so Dr. Latos—who was on call and knew that past aspirations had repeatedly shown gout crystals—asked the orthopedist's partner to aspirate the knee and inject steroids.
"He said, 'Are you out of your mind?'" Dr. Latos recalled. "'I have never seen this patient before, and if this is the one case in a million where it's something else, I'll get creamed.'" As a result, the patient's knee went untreated for several days, until a culture confirmed the diagnosis: gouty arthritis.
The "creaming" the physician feared was a lawsuit, a familiar anxiety these days for West Virginia physicians, some of whom have seen their malpractice premiums almost double. And they are not alone: Across the country, medical societies report that the stable liability climate that physicians enjoyed for much of the past decade may be over.
Physicians like Dr. Latos say that too many of their colleagues are turning to defensive medicine to keep out of trouble.
Insurance premiums are rising sharply in many states. At the same time, dollar amounts for malpractice awards and settlements continue to soar. And analysts see no end in sight. Tort reform is still a tough sell in many state legislatures, while courts across the country are striking down reforms that have already been passed. Some state organizations, however, are fighting back by mounting new campaigns to elect more reform-friendly judges to state courts. And they hope to bolster reform efforts by addressing the public's new awareness of safety issues amid reports about medical errors.
Problems in the mid-Atlantic
While physicians everywhere complain that the malpractice environment is getting tougher, physicians in West Virginia say they have reached a crisis. They complain that they have always paid disproportionately high premiums. According to the West Virginia State Medical Association, internists in the state paid more than $12,500 on average in 2000 for malpractice insurance, while their colleagues next door in Kentucky paid less than $6,400.
This year, however, the situation got worse. Average premiums rose 35% for all physicians and 50% for internists, according to state medical association president John Holloway, FACP. He said the figures reflect increases in the number of failure-to-diagnose suits and in award amounts.
The medical association also contends that the number of malpractice suits and frivolous claims in the state is spiraling upward—claims disputed in a series of articles published by one of the state's newspapers.
R. Brooks Gainer, FACP, an infectious disease specialist in Morgantown, W.Va., said that his 13-physician multispecialty internal medicine group saw its malpractice premiums jump from just over $167,000 in 2000 to $288,000 this year-despite the fact that the group switched insurers to get lower rates. (The group's original carrier gave his practice a quote for 2001 of more than $422,000.) Dr. Gainer said that the more-than-70% increase the group is paying this year will have to come out of physician income.
Dr. Latos, a former College Governor for the West Virginia Chapter, said that premiums for his three-physician nephrology group jumped on Jan. 1 from $47,000 to $75,000. As a result, he said, the practice has put off hiring new staff, even though it recently opened a new office. Other groups in the state are deferring equipment purchases.
Perhaps worst of all, physicians like Dr. Latos say that too many of their colleagues are turning to defensive medicine to keep out of trouble. Wheeling, W.Va., urologist David J. Lindert, MD, for instance, claimed he now gets many more referrals for routine prostate exams and urinary tract infections, while he himself does far fewer surgeries, sending patients instead to medical centers in Pittsburgh or Ohio.
For three years, he has tried to recruit another urologist with no success, even though he's contacted every urology fellowship program in the country and paid outside recruiters. One potential candidate claimed he was interested until an attorney mentioned the state's tough liability climate. He decided he'll probably head to Maryland instead.
Physicians say rising insurance costs only further damage the practice environment. "There will be no mass exodus of physicians from the state," the 58-year-old Dr. Lindert predicted, "but you'll see doctors like me retire early and not be replaced."
"You can't talk about tort reform without addressing the growing public unhappiness with health care in general."—Roger F. Mecum, Pa. Medical Society
Physicians in southeastern Pennsylvania are also having a tough time. High-risk surgical specialties have been particularly hard-hit with runaway premium hikes, and rates for all physicians are sharply on the rise. Sandra L. Skyles, second vice president of Doctors Insurance Reciprocal, a malpractice carrier, said the company increased physician premiums across the board by 25% on Feb. 1 to keep up with escalating claims and malpractice payments.
A major factor behind rising rates in southeastern Pennsylvania has to do with the growth of integrated health systems. Philadelphia-based health care systems have built massive physician networks in surrounding counties and suburbs over the past several years. Lawsuits that would normally be heard in the suburbs and outlying areas are now being tried in Philadelphia, where juries typically give much higher awards.
According to Medical Inter-Insurance Exchange, an insurance underwriter in the state, the number of Philadelphia malpractice verdicts over $1 million rose 75% between 1998 and 1999. That put Pennsylvania in second place for the highest median malpractice payments in the country in 1999, just behind New York.
Rising awards are also leading to higher out-of-court malpractice settlements. According to John H. Reed, director of the state's catastrophic insurance fund, malpractice settlement amounts in Pennsylvania rose 23% in 2000 alone and another 25% in the first quarter of this fiscal year, which began in July.
And while physicians in both West Virginia and Pennsylvania have been blindsided by rising rates, mid-Atlantic doctors are hardly alone. This year, premium increases nationwide are averaging more than 14%, according to Medical Liability Monitor, an industry newsletter.
In 2001, physicians in Washington state saw rate increases of 15% to 20%, the steepest since the mid-1980s. Texas physicians started seeing premium spikes last year: According to the Texas Medical Association, physicians there now pay 50% more on average for malpractice insurance than they did in 1999.
"In the short term, it's only going to get worse," said Lori A. Bartholomew, director of research for Physician Insurers Association of America, a trade association of physician-owned insurance companies. "Big trials now get more media coverage, and malpractice has become much more of an issue."
An old solution: tort reform
Advocates propose the same decades-old solution to rising premiums and payments: meaningful tort reform. Obstacles to effective reform, however, are also familiar: powerful trial bars, and the perception held by legislators, judges and the public that reforms would keep injured patients from getting their day in court.
Those hurdles are even more frustrating, analysts say, because states that have enacted reforms have compelling evidence that tort reform protects both physicians and patients. They point to what is considered the gold standard of malpractice reforms: California's Medical Injury Compensation Reform Act (MICRA), passed in 1975.
MICRA contains several elements—like caps on noneconomic damages and legal fees—that advocates say are needed nationwide. (See "The gold standard: tort reform in California,") Casco Consulting, for example, an actuarial consulting firm, reports that while internists in Pennsylvania's most expensive coverage areas will pay more than $18,000 this year in malpractice premiums, their California colleagues will pay less than $9,600. The difference, analysts say, is MICRA—particularly its $250,000 cap on noneconomic damages.
Physicians in only a handful of states—including Utah, Colorado and Montana—enjoy that kind of comprehensive protection. And while more than half of all states have some reforms in place, many statutes are repeatedly challenged in state courts and even struck down.
Modest reform measures passed in 1996 by the Pennsylvania legislature, for instance, were largely gutted just weeks later by that state's Supreme Court. The Illinois Supreme Court in 1997 struck down reform laws passed in 1995, while in 1999, the Ohio Supreme Court completely overturned that state's enacted reforms.
Even as the fight to pass—and uphold—reforms continues, other factors are complicating the liability climate. According to Richard E. Anderson, MD, chairman of The Doctors' Company, a national insurer, managed care has made failure-to-diagnose claims both more common and easier for plaintiffs to win. As physicians navigate a maze of authorizations, he pointed out, clinical details can become buried in paperwork and critical time lost in ordering tests. (The Doctors' Company recently began offering liability insurance with discounted premiums to College members. For more information, see "New for members: discounted professional liability insurance.")
But if you think that managed care is a good excuse for a poor outcome, you are in for a rude awakening should you get to court. "When physicians blame the system, however appropriate that finger-pointing may be, they are informing the jury that indeed there is guilt," Dr. Anderson said. "With guilt already admitted, the jury simply has to put a dollar figure on it."
The growing patient safety debate also affects tort reform. Some analysts, for instance, claim that public scrutiny of medical errors in the wake of the 1999 report from the Institute of Medicine (IOM) will eventually make physicians' liability environment less harsh. They argue that the IOM report might help convince the public that system changes will improve patient safety, not lead to tougher punishment of individual providers.
But Dr. Anderson disagrees, arguing that the new spotlight on errors makes the liability slope even steeper. "The public is now convinced that there is a medical crisis, not a litigation one," he said. "The crowning irony is that if errors are not discussed openly enough, it's because the litigious environment has made physicians appropriately reluctant to discuss them."
New strategies for reform
In an effort to push harder for legislative reforms, organized medicine is forming more coalitions with like-minded organizations. The Illinois State Medical Society, for instance, has formed an alliance with the Illinois Civil Justice League, a nonprofit group that includes large and small businesses and lobbies for tort reform. Reform advocates have also become increasingly aware that legislative victories may be futile without a more favorable judicial environment. That's why the Pennsylvania Medical Society this year is launching a judicial awareness campaign to endorse candidates for judgeships, particularly at the state Supreme Court level. The idea is to get physician members as well as the public more involved in electing pro-reform judges.
Physicians in Ohio, West Virginia and Illinois have launched similar campaigns with mixed results. The Illinois Civil Justice League's "Justice 2000" campaign helped put 24 of its 30 endorsed judicial candidates into office last year. On the down side, one of its candidates for a crucial Supreme Court seat was defeated. Medical groups are also starting to link legislative and judicial efforts with activities to improve patient safety. "To get public support for tort reform measures, you have to broaden your agenda to discuss reducing medical errors and weeding out bad doctors," said Roger F. Mecum, executive director of the Pennsylvania Medical Society. "You can't talk about tort reform without addressing the growing public unhappiness with health care in general."
The Pennsylvania Medical Society is exploring ways to establish a statewide peer-review system that would evaluate the quality of hospital care in the state. It is also urging the state medical board to beef up disciplinary actions against negligent physicians.
But legislative, judicial and quality reforms take time, and they can't provide immediate relief to physicians struggling with new liability premiums and concerns. For physicians in West Virginia, meanwhile, there was one positive recent development. In December, the state Supreme Court voted 3-2 to uphold the state's one tort reform measure: a $1 million cap on noneconomic damages.
Since that ruling, however, one of the judges who voted to maintain the cap was replaced by a new justice in the November election. The new court has announced that next month it will reconsider its December decision and rule again on whether capping noneconomic malpractice awards is unconstitutional.
Malpractice case jury awards and settlements have been on the rise. Median awards and settlements have gone up by 60% or more since 1993, and the probability range (middle 50%) of payouts has also risen.
|1993||$500,000||$150,000 - $500,000|
|1994||$375,000||$122,858 - $1,000,000|
|1995||$500,000||$160,350 - $1,351,005|
|1996||$454,565||$125,000 - $1,500,000|
|1997||$500,725||$175,000 - $2,000,000|
|1998||$750,000||$262,500 - $2,000,850|
|1999||$800,000||$250,000 - $2,250,000|
|1993||$400,000||$150,000 - $875,000|
|1994||$287,000||$125,000 - $700,335|
|1995||$340,000||$120,000 - $725,001|
|1996||$355,000||$125,000 - $928,688|
|1997||$400,000||$150,000 - $1,000,000|
|1998||$500,000||$217,597 - $1,175,000|
|1999||$650,000||$215,000 - $1,360,000|
Source: Jury Verdict Research, "Current Award Trends in Personal Injury," 2000 edition.
ACP-ASIM has signed a contract with The Doctors' Company to give College members a 10% discount on professional liability insurance.
With more than $1 billion in assets, the Napa, Calif.-based company is one of America's largest doctor-owned liability insurance carriers. It has received 16 consecutive "A" ratings from A.M. Best Company, an independent industry analyst.
The College decided to help members secure discounted insurance in response to a toughening liability climate and spent 18 months soliciting bids from liability carriers. Joseph Silva Jr., FACP, dean of the school of medicine at University of California, Davis, and Chair of the College's Member Insurance and Financial Services Subcommittee, said that The Doctors' Company won hands-down.
He explained that the College was particularly impressed by the company's track record and its refusal to settle claims without physician consent. (The company follows that policy unless state law prohibits it or the insured is required to maintain a deductible because he or she represents a substandard risk.)
"Many other malpractice carriers will settle even if the doctor doesn't want to," Dr. Silva said. "The doctor's name could be impugned and go into the National Practitioner Data Bank."
The Doctors' Company offers coverage that is portable between states. The discounted coverage will be available to members in all states except Florida and New York, which already have chapter-sponsored insurance programs. College officials predict that the discount will save members in some states enough to more than cover the cost of College membership.
In addition to the 10% discount, College members will be able to take advantage of a comprehensive risk management program and an exclusive dividend plan.
While several states have shown that tort reform protects injured patients and gives physicians relief, legislation passed by California in 1975 continues to be viewed as the standard setter. Here's a look at the features that make the Medical Injury Compensation Reform Act (MICRA) so effective:
Limited noneconomic damages. While MICRA allows patients to recoup all economic costs of medical malpractice, the law limits pain-and-suffering awards to $250,000.
Periodic payments. Instead of receiving one lump sum, California plaintiffs receive malpractice payments over time.
Collateral sources of care. Under MICRA, courts can consider already existing health care coverage that pays to correct a medical problem. As a result, malpractice settlements don't have to pay for the same care twice.
Limited contingency fees. Legal fees are set by a sliding scale. Contingency fees for a $1 million claim, for instance, would be $221,500.
The good news is that 70% of all malpractice claims are resolved without payment. Most of the remaining 30% of claims are settled out of court, while only a small percentage of claims-perhaps as low as 5%-ever make their way to court.
The bad news is that both jury awards and settlements for malpractice are on the rise. (See "Awards and settlements steadily increasing.") In Pennsylvania, for instance, payments increased more than 23% in 2000. Nationwide, average payments increased 11% between 1998 and 1999, according to Physician Insurers Association of America, a national trade association of physician-owned liability carriers.
Analysts say that increases are due in part to dramatic changes in the perceived value of money. "Here in the Seattle area, we call it the 'Microsoft phenomenon,'" said Thomas A. Fine, senior vice president of the Physicians Insurance Mutual Company in Washington. "When you keep hearing about people paying cash for expensive homes, a million dollars just doesn't seem like that much money anymore."
Experts think that juries are also mirroring the public's frustration with health care in general. According to jury exit polls and mock trials that insurers are increasingly holding, that frustration is eroding juries' traditional esteem for physicians.
"More people are having negative personal experiences with health care systems," said Thomas J. Curry, chief executive officer of the Washington State Medical Association. "We think juries are trying to send a strong message."
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