Cost Concerns

Malpractice Woes Persist as Congress, States, Deliberate Tort Reform

Last summer, Thomas Jefferson Health System in Philadelphia had to lay off 190 employees and cut 80 vacant positions, citing skyrocketing medical liability insurance costs. Today, the academic medical center still struggles to absorb premiums that doubled in one year. Liability insurance will cost the three hospitals and Jefferson University Physicians roughly $50 million this year, despite recently enacted legislation intended to provide relief.

According to Thomas J. Nasca, M.D., senior vice president of Thomas Jefferson University and dean of Jefferson Medical College, current malpractice costs account for 12.8 percent of all expenses of the health system's practice plan. In February, he testified to that fact - and to his state's medical liability insurance crisis in general - before the House Subcommittee on Oversight and Investigations of the Committee on Energy and Commerce. "The tenuous balance between clinical service, education, and the funding of research at Jefferson is in jeopardy of disruption due to the recent, unprecedented increases in cost for medical liability insurance," he reported.

To compensate for rising costs, academic medical centers are having to take measures that over the long haul threaten their traditional missions. At Jefferson, for example, clinical faculty are providing more clinical services and spending more time seeing patients, even as they watch their compensation dollars shrink.

"This is despite the fact that salaries at Jefferson are, in general, lower than competitive salary scales at our regional competitors, and ... in comparison to other Northeastern university medical schools," Dr. Nasca testified. Meanwhile, time for teaching, conducting clinical research, and for each patient encounter is tightening.

States starting to respond

Last month, West Virginia Gov. Bob Wise (D) acted to pass a comprehensive tort reform bill for that troubled state, where in January surgeons held a work stoppage to protest the crisis. The compromise legislation helps doctors create their own insurance company and caps most pain and suffering awards at $250,000. But some predict the state's Supreme Court, heavily populated with trial lawyers, will strike down the new law within the next few years.

Pennsylvania's physicians too have suffered for years under a constitutional provision that allows unlimited compensation to victims for "pain and suffering" claims. But a year ago the state passed a basic malpractice reform bill allowing damages to be paid over time and requiring more stringent standards in the courtroom. But most parts of the legislation comprised long-term solutions, according to Chuck Moran, spokesperson for the Pennsylvania Medical Society.

"We won't see the benefits of those for some time," Moran says. "There were some reforms related to discounts on the MCARE [Medical Care Availability and Reduction of Error Fund] payment, and they've been realized. But for the most part, the majority of the bills are long-term impacting bills."

Meanwhile, as the crisis grows deeper each month, hospitals are pinning their hopes on federal reform, which could come in a matter of weeks. The strongest bill in Congress is the Help Efficient, Accessible, Low Cost, Timely Healthcare (HEALTH) Act of 2003, introduced last year by Rep. James Greenwood (R-Pa.) and Sen. John Ensign (R-Nev.), And supported by the AAMC. The House passed the bill on March 13, voting 229-196 along party lines.

The measure faces a tougher battle in the Senate, where, although Senate Republicans hold a narrow majority, Democrats may have enough votes to block passage. It is unclear when the Senate will vote on its version, but according to Chris Mitchell, senior legislative analyst in AAMC's Office of Governmental Relations, "There is a lot of optimism that this is our year, and we could be seeing a Senate passage in the coming weeks." President Bush has said he will sign the bill if it is passed.

More reform possible

If Congress can't sign off on this version of the legislation, the president will likely continue to press for reform. He has requested that any bill sent to him include the following minimal standards:

• ensure that injured patients are able to receive unlimited compensation for economic damages, including the loss of ability to provide for their children or elderly parents;
• limit awards for non-economic damages to $250,000;
• establish strict provisions for the awarding of punitive damages. Limit punitive damage awards to two times economic damages or $250,000;
• allow for periodic repayment of future damages;
• establish new statute of limitations that ensures patients have timely access to courts;
• allow collateral source payment information to be admissible during settlement or jury proceedings; and
• o reform joint and several liability to ensure that physicians pay only the amount of damages they were responsible for.

The president has also proposed enacting "sensible" patient safety legislation that is capable of reducing medical errors and adverse events, and that any medical error reporting system must allow physicians and other healthcare providers to submit reports without fear of litigation.

Lawyers' opposition

Congressional Democrats have sided with their traditional trial lawyer allies who dislike any limits on potential damages they can win for clients - and from which they take a percentage in legal fees. Democrats also point out that insurance companies have not promised to lower premiums for coverage if award limits are enacted and argue that limits would deny patients adequate compensation and impede their ability to interest a lawyer in their case.

The climate for reform has also been clouded in recent months by the widely reported case of 17-year-old Jesica Santillan, who died in February after doctors at Duke University replaced her heart and lungs with those of a donor with an incompatible blood type. Legislators opposed to reform have hinted that $250,000 is too small an award for such an extreme blunder.

California is often held up as a model for medical malpractice reform. In 1975, the state put a $250,000 cap on compensation for pain and suffering, with no limits on recovering medical expenses or lost earnings. As a result, insurance premiums for the state's healthcare providers have risen just 175 percent since then, compared with more than 500 percent for the nation as a whole.

But critics point out that the number of medical malpractice lawsuits has not dropped - they continue to rise in line with the state's population. And trial lawyers have become so adept at making a case for uncapped damages, including lost income and medical expenses that verdict amounts are rising at about twice the rate of inflation. Premiums are also on the rise again, after years of stability.

Anti-tort-reformers also point to a study undertaken by USA Today earlier this year finding that although some doctors in particularly vulnerable specialties - obstetrics, neurosurgery, and some high-risk surgical fields - face severe problems, the average doctor invests just 3.2 percent of their revenues in malpractice insurance.

And while premiums are rising, they are not outpacing increases in other healthcare costs. Even for the hardest-hit specialists, the most severe problems are concentrated in a handful of states, the newspaper reported.

HHS highlights concerns

But that's no comfort to academic medical centers in those states. On March 3, the Department of Health and Human Services (HHS) released a report showing that, for hospitals, problems associated with medical litigation have significantly worsened in the past year. HHS originally published a report on the problem last July, but last month's update declares that "the crisis has only worsened, in both scope and intensity," since then. The document also cites a letter from the National Association of Insurance Commissioners (NAIC) confirming that high litigation costs, including mega-awards, are the root causes of the crisis.

According to the HHS study, Addressing the New Health Care Crisis, one-third of U.S. hospitals saw an increase of 100 percent or more in liability insurance premiums in 2002, and more than a quarter of hospitals reported either a curtailment or complete discontinuation of a service as a result of growing liability premium expenses.

As a result of fiscal crises, trauma centers across many states have been threatened with closure, including that of the Orlando Regional Medical Center (ORMC). Spokesperson Joe Brown reports that several neurosurgeons have resigned their privileges because they can no longer afford to practice there.

"We don't want to give up our Level I trauma licensure, but we can't operate without a neurosurgery component in place," he laments. Currently, ORMC neurosurgeons have patched together an on-call schedule for the month of April so the center can remain open. "We'll continue to operate month-to-month," Brown says.

The health system is in discussions with Orange County officials, hoping to secure short-term funding relief for physicians, and is lobbying lawmakers in Tallahassee to pass liability protections specifically for emergency physicians who are particularly vulnerable to malpractice lawsuits.

Adds Brown, "In an emergency and trauma setting, doctors are seeing seriously injured or ill patients for the first time, without benefit of knowing their medical history. There are no Cliff Notes for how to treat the patient, and decisions have to be made in seconds." One ER neurologist Brown encountered recently told him that his insurance company was simply canceling his coverage "because the medicine he practiced was too risky."

Issue troubling faculty, students, residents

Preliminary data from the AAMC's annual surveys of medical students, residents, and program directors indicate that the malpractice issue is weighing heavily on the minds of future physicians. "Students' responses show an increased sensitivity to the situation," says Mitchell. "Far more students consider it a problem than don't, and most believe the problem is worsening.

Their answers suggest that the current malpractice climate might influence their career choices and the states they choose to practice in. Their apprehension level is being dialed up."

For residents, very preliminary data indicate a trend in some geographical areas of residents leaving the state they trained in. "We are seeing this primarily among high-risk specialties," says Mitchell.

The AAMC's Group on Faculty Practice recently released its own data showing the crisis's toll on medical school faculty. "Faculty morale is suffering, and individual faculty members are questioning the utility of spending as much time in direct clinical practice as the physicians in private practice, with less and less time able to be dedicated to research and education," Dr. Nasca declared in his February testimony.

The AAMC has taken these findings to Capitol Hill to support advocacy efforts as one of 50 members of the Health Coalition on Liability and Access (HCLA).

By Martha Frase-Blunt, special to the AAMC Reporter

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