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Texas tort reform:One year later, some physicians say they're reaping big benefits

From the January-February ACP Observer, copyright 2005 by the American College of Physicians.

By Bonnie Darves

Sixteen months after Texans approved a constitutional amendment to cap noneconomic damages in medical liability suits, the health care community has little doubt that the measure—Proposition 12—is making a difference where it counts: in lowering malpractice premium rates and reducing the number of lawsuits being filed.

In response to the ballot's passage, for instance, the state's largest professional liability carrier, Texas Medical Liability Trust, reduced its rates by 12%, then dropped them another 5%. A member survey by the Texas Hospital Association (THA) found that members' malpractice liability premiums dropped 8% in 2004 and could fall another 17% this year.

And last August, the Texas Hospital Association reported a 70% reduction in the number of lawsuits being filed against the state's hospitals. Analysts also point to the reform's more subtle effects, saying that the exodus of both physicians and insurance carriers from the state has stopped and may even be reversing.

However, not all liability carriers in Texas have dropped premium rates and some physicians here still report having problems finding coverage. And it remains to be seen how soon the passage of Proposition 12—which capped noneconomic damages in liability awards and settlements at $250,000 per physician, with a total noneconomic cap for all parties of $750,000—will affect how doctors here practice medicine.

'A great sigh of relief'

Texas is among 21 states that have instituted caps on noneconomic damages or passed related medical tort reforms. (Last November, tort reform ballot initiatives passed in Nevada and Florida, but failed to move forward in Oregon and Wyoming.) While physicians are still eyeing federal-level reform to address liability-system ills in a wholesale fashion, many analysts say passing states' measures is still physicians' best bet for meaningful reforms. (See "Internists' liability premiums: 2004 highs and lows.")

In the wake of Proposition 12, which ensured the constitutionality of caps approved earlier by the Texas legislature, some Texas physicians already report real premium savings. Neal Sklaver, FACP, a general internist with Medical Specialists Associated in Dallas, for instance, is very pleased that his premiums have dropped roughly $5,000 since the measure passed in September 2003. Even though he has had no judgments against him, his premiums had skyrocketed in 2003 to nearly $18,000 a year.

A former College Regent, Isabel V. Hoverman, FACP, a general internist in Austin, likewise said she and her partners were able to reverse the trend toward double-digit yearly rate hikes. Dr. Hoverman said her malpractice premiums climbed at a rate of between 40% and 45% every year between 2000 and 2003, even though she'd had no malpractice claims filed against her.

Now, however, "We've seen a 48% drop in our rates since the passage of Proposition 12," she said, adding that she and her three partners reduced their policy liability limits since the measure passed—another source of savings.

"Physicians in Texas are breathing a great sigh of relief," said F. David Winter Jr., FACP, the College's Governor for the Northern Texas Chapter. His group, HealthTexas Provider Network, has dropped premiums for its affiliated physicians by 14%. Dr. Winter is vice chair of this 380-physician system, which is affiliated with Dallas' Baylor Health Care System.

According to Dr. Winter, internists are feeling more upbeat about the liability environment than they have in several years.

"Everyone is feeling less pressured," he said. "There are fewer depositions, fewer subpoenas for records, fewer lawsuit initiation requests. It's a huge relief and it's real."

One major reform benefit is the fact that, as reported by the Sept. 25, 2004, Dallas Morning News, the number of medical liability suits filed since September 2003 has dropped in many Texas counties by as much as 80%. "It's stopping a lot of nuisance suits, and I think that difference will become more pronounced," said Paul Anderson, MD, a Dallas gastroenterologist.

As for other positive changes, Dr. Anderson said he's actually received mailers from several carriers indicating that they want to "bid on" his liability business. A recent survey from the Texas Medical Association (TMA) found a dramatic increase in physicians' willingness to resume certain procedures they had stopped performing, including obstetric, neurosurgical and radiation oncological procedures. (Survey results are online.)

And Michael Darrouzet, executive vice president of the Dallas County Medical Society, pointed out that some of the state's crippling recruitment problems have started to ease. One Dallas-area hospital recently hired three neurosurgeons to fill long-vacant spots, he said, while another retained two emergency physicians who had announced plans to leave the state.

"Those are some of the subtle things happening all over Texas," Mr. Darrouzet said. "It's as if physicians can go back to focusing on their practice rather than on the [malpractice] situation."

The end of defensive medicine?

But those positive developments don't mean that all physicians have seen savings. To date, most of those who've enjoyed rate reductions are insured by the giant physician-owned firm TMLT, which insures half the state's physicians. But other carriers—only a handful remained prior to the proposition's passage—haven't followed suit.

"We wish more liability carriers would lower their rates, and that hasn't happened yet," Mr. Darrouzet said. "Some physicians are still finding it difficult to even get insurance."

Analysts say that one reason why rates haven't dropped for many physicians is because so few carriers exist. Texas had more than 50 carriers in the late 1990s—but by 2003 only four were still operating. Last September, according to the Sept. 21, 2004, Dallas Morning News, the state's insurance commissioner told a state Senate committee that 13 carriers had—since Proposition 12 passed—returned to the Texas market or expressed plans to do so. As more carriers enter the market, Mr. Darrouzet said, competitive pressures may push premiums down.

Another reason why other carriers haven't rushed to reduce rates can be chalked up to the rash of lawsuits filed in the weeks before the caps went into effect. Between May 1 and September 1, 2003, said TMA president Bohn Allen, MD, the number of filed claims rose 400% compared to the same period as the previous year. Those suits still have to be addressed, he said.

And even though TMA statistics show that more than 80% of those suits will either be dropped or deemed meritless, there's a premium price tag attached to riding the lawsuits out, Dr. Allen explained.

"As soon as we get those cases out of the system, some actuaries think we could see premiums reduced as much as 30%." said Dr. Allen, a general and vascular surgeon in Arlington. Until all carriers drop their rates, he cautioned, Proposition 12's benefits may continue to elude certain physicians, especially those in subspecialties where rates have been historically high.

Perhaps more disturbing, even physicians whose premiums have dropped said that too many years working in a bruising malpractice environment mean that the habit of practicing defensive medicine will remain.

"The answer is 'no,'" said Dallas' Dr. Sklaver, when asked if tort reform now meant that internists would order fewer tests. "Even though the amount you're liable for has gone down, you're still at risk. I just don't want to be sued, so this won't affect the tests I order."

And Dr. Anderson, the gastroenterologist, said he doesn't think the reduced number of lawsuit filings will change subspecialists' practice patterns in the near future.

"I've been in practice 23 years and have seen defensive medicine increase over that period," he said. "If we can just level it off, that's a positive, but there's no doubt right now that defensive medicine is practiced in every specialty. You're guarding against the chance of a zebra being in a large herd of horses."

More time needed

Oncologist Richard E. Anderson, FACP, chair and chief executive officer of The Doctors Company in Napa, Calif., one of the country's largest malpractice insurers, thinks the move toward less defensive medicine will come, but not anytime soon. (The Doctors Company offers premium discounts to College members. For more information, call 1-800-352-0320.)

"It will take a long period of establishing the fact that physicians will not be sued on a regular basis for exercising appropriate medical judgment," Dr. Anderson said. "Until that behavior changes, physician response to it cannot be expected to change." He cited California's 25+-year-old Medical Injury Compensation Reform Act (MICRA) as an example.

While that reform has created a "more reasonable litigation environment," California physicians still frequently get sued, he noted. He also predicted that in Texas, it may take longer to see medical practice become less defensive because the state "got more out of balance than other states," as far as the number of lawsuits.

"There were some counties in Texas where there were three or four claims per year per doctor," Dr. Anderson said. "So it's going to take awhile for those doctors to believe the world has really changed."

And there is another reason why old practice patterns die hard: Physicians in Texas, as in other states where tort reform measures have passed, say they are waiting for the judicial challenge to the constitutional amendment that they are sure the state's trial attorneys are going to mount.

Even if reform has somewhat subdued the lottery mentality, cautioned Warren Lichliter, MD, a colorectal surgeon who is president of the Dallas County Medical Society, physicians shouldn't rest easy yet, despite their clear gains.

"We've made progress, and on one hand everyone is excited that at least we have made some inroads in tort reform, he said. On the other hand, Proposition 12 did not establish a vetting mechanism to judge a suit's merit before it proceeds through the system. As a result, he added, many physicians still feel under siege by the threat of nuisance suits.

"The caps help, but you can still get sued for anything," he said. "My day-to-day practice isn't any different now."

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