Medical liability reform efforts make headway in five states

Texas, Oklahoma, Ohio, Pennsylvania and New Jersey are taking steps to address their insurance crises.

Issue: September 2004

Five states currently classified by the American Medical Association as states in insurance “crisis” have recently adopted measures intended to reduce medical liability premiums and costs incurred by the health care system as a result of medical negligence.

Efforts in Texas, Oklahoma, Ohio, Pennsylvania and New Jersey include capping noneconomic damages recovered by the injured party and enacting procedural changes designed to weed out frivolous or nonmeritorious lawsuits. Preliminary data indicate varying success of reform laws, with Texas seeing a reduction in premiums while Pennsylvania has yet to see relief from the mounting costs of insurance coverage.

Texas

The Texas Medical Liability Trust (TMLT), Texas’s largest insurance carrier, cut rates for liability insurance by 12% in 2004. TMLT’s rate reduction stems from voter approval of Proposition 12, a state constitutional amendment that capped noneconomic damages. The Texas cap limits recoverable noneconomic damages to $250,000 for involved physicians, $250,000 for the first health care facility, and $250,000 for a second healthcare facility, for a maximum recovery of $750,000 in noneconomic damages.

Texas’s remaining insurers are considering rate decreases but are hesitant to cut premiums in the face of a growing number of malpractice claims filed. According to Pamela Baggett, spokesperson for the Texas State Medical Association, 87% of the medical liability claims that are filed end without payment to the plaintiff. Baggett told ORTHOPEDICS TODAY that despite relatively few cases resulting in plaintiff awards, costs remain high due to legal expenses. Texas is taking action to combat this problem with a new law designed to discourage nonmeritorious claims under risk of additional legal expenses incurred by the losing party.

“If one party offers the other party a settlement and that settlement is denied and ultimately the lawsuit is found in favor of the person offering the settlement, the person who denied the settlement would be liable for all expenses incurred from that date forward,” Baggett said in an interview.

Texas medical liability tort reform was accompanied by intensified internal review efforts by the medical profession. According to Baggett, Texas imposed a tax to increase the fees paid to the state board of medical examiners. The fees are intended to provide the board with additional funds for physician screening.

Oklahoma

In May 2004, Governor Brad Henry signed Oklahoma’s comprehensive medical liability reform bill into law. The bill maintains Oklahoma’s 2003 law that established a $300,000 cap on non-economic damages for medical negligence related to obstetrical or emergency room care. In addition, the 2004 bill imposes a $300,000 cap on noneconomic damages for all other medical liability actions. The new cap is only applicable if the defendant has made a settlement offer and the jury award is less than 1.5 times the amount of the defendant’s offer.

The cap can be overturned if nine or more jurors determine that the defendant doctor committed negligence or if nine or more jurors deem the defendant’s conduct “willful or wanton.” The cap’s restrictions have left some members of the medical community unsatisfied, according to Cori Loomis, general counsel for the Oklahoma State Medical Association.

“It’s not a good cap because it can be lifted almost any time,” Loomis told Orthopedics Today. “[It’s] referred to as a ‘miracle cap’ because it would be a miracle if it actually applied.”

Oklahoma’s tort reform law includes provisions for expert witness qualifications, including the requirements that the expert be licensed to practice medicine and actively practicing or retired from the area of medicine relevant to the claim. The law also includes an “I’m Sorry” provision that protects doctors from the threat of lawsuit if they express sympathy to patients or family members. Sympathetic statements can no longer be used as evidence of liability.

Ohio

Ohio has enacted measures the state hopes will re-duce the number of nonmeritorious claims filed against physicians. The Ohio State Medical Association estimates that nearly 75% of medical liability lawsuits result in no payment to the claimant.

The state’s new laws require plaintiff expert testimony be given by a physician of the same specialty as the defendant and grants state medical board jurisdiction over out-of-state expert witnesses. In June, Ohio also began work on Senate Bill 80, a law that would limit plaintiff attorney contingency fees.

Tim Maglione, senior director of government relations of the state medical association, told Orthopedics Today that S.B. 80 is part of a dual effort to maximize the net award received by injured patients. “One of the criticisms of putting caps or parameters on damages is that it takes away resources from individuals that may otherwise need them,” Maglione said in an interview.

“So what we thought was, why don’t we try and make sure that the majority of the damages that are awarded go to the injured party as opposed to their lawyer. It seemed to us to go hand in hand with the debate of putting parameters on damages,” he said.

Ohio’s current efforts build on a 2002 reform package that included a $350,000 cap on noneconomic damages.

Pennsylvania

Data released by the Administrative Office of Pennsylvania Courts (AOPC) indicate that Pennsylvania’s efforts to decrease the number of medical malpractice claims filed are proving successful. AOPC data showed a 28.6% decrease in statewide medical malpractice filings in 2003 compared to the previous three years. Philadelphia reported a 50% decrease in filings from its 2002 statistics, and Allegheny County reported a one-third decline in 2003.

In 2003, the Pennsylvania Supreme Court approved a procedural rule that obliges plaintiff attorneys to present a certificate of merit from a medical professional upon filing a lawsuit. The certificate of merit must be endorsed by a physician specializing in the area of medicine pertaining to the case and serves to establish that the care rendered in a particular situation constitutes a deviation from the accepted standard of care within that specialty.

In addition, the court eliminated the practice of “venue shopping” by requiring that medical malpractice claims be filed only in the county where the alleged malpractice occurred. Venue shopping is a popular means of presenting cases in counties renowned for sympathetic and generous juries.

As Art Heinz explained to Orthopedics Today, AOPC believes certification and venue requirements have contributed to the decrease in medical malpractice claims filings across the state. Heinz is AOPC’s coordinator of communications and legislative affairs.

Heinz said that mediation has recently been emphasized as a means of reducing the number of claims filed. “[In March,] the court announced a series of rules changes that were adopted to promote mediation, which is settlement outside of a court and would be reflected in future numbers as well,” he said.

Despite the success of its new filing requirements, Pennsylvania has yet to see the drop in insurance premiums the state hoped would accompany a decline in suits. Shanin Specter, partner in the Philadelphia medical malpractice firm Kline & Specter, blames the persistent high rates on the absence of rate adjustment requirements for insurance companies.

“It would be nice to see some reduction in rates but the health care community has never required the insurance carriers to drop rates as a condition of advocating malpractice reform, which was a mistake on their part,” Specter told Orthopedics Today. “Until they do so, it’s hard to see the carriers voluntarily reducing their profit margins. The number of lawsuits filed has gone down significantly, the law firms that practice in this field have either gone out of business entirely or they’ve redirected their focus, and the number of insurance companies writing coverage in Pennsylvania has gone up substantially,” Specter said. “The doctors and insurance companies are reluctant to declare victory, but they’ve won.”

New Jersey

In June 2004, Governor James McGreevey signed a comprehensive bill designed to prevent New Jersey’s physicians from retiring early or moving their practices to states with more affordable insurance premiums. The law established a subsidy fund for doctors in high-risk specialties, such as obstetrics, neurosurgery and orthopedic surgery, to offset the costs of their disproportionately skyrocketing insurance costs. The bill also created stricter requirements for expert witnesses and grants judges the authority to reduce jury awards they believe to be excessive, a practice Specter said is already commonplace.

“Few huge jury awards are actually paid,” he said. Defense appeals and judge discretion are generally the mechanisms through which large jury awards are reduced.

The funds needed to finance the insurance subsidy program are provided by a $75 annual fee for New Jersey’s physicians, other health care professionals, and attorneys and a $3 fee per employee for hospitals and other health care facilities. Fees will endow the program with $78 million to offset high liability premiums. State regulators have the final word about who gets money and how much they receive.

While New Jersey physicians are encouraged by the recent reforms, they maintain that the new bill’s provisions are insufficient to curb rising insurance premiums, which have increased by 75% in the past two years. John Shaffer, senior manager of public affairs with the New Jersey Medical Society, told Orthopedics Today that a cap on noneconomic damages is still needed.

“[Subsidy funds] are going to do nothing regarding [the current price] of premiums,” Shaffer said. “When you look on the national level, capping of noneconomic damages has the most outstanding record and most proven record in controlling costs.”

Most resistance to capping damages or limiting lawyer contingency fees comes from state trial bar associations, which represent the interests of plaintiff attorneys. Trial attorney advocates claim that caps will discourage an injured patient from seeking compensation because legal expenses will render any recovery virtually nominal, particularly if the patient’s economic losses are insignificant.

“[Capping] penalizes the people who were most badly injured,” said Specter. “The case of a housewife who has an undiagnosed breast cancer because a mammographer failed to report on a lesion won’t be pursued because the case is extremely expensive to litigate.”

Loomis reports similar sentiments from trial attorneys in Oklahoma. “[Trial bar associations] say [capping] denies access to the courts to people who need to hire attorneys on contingency fees,” Loomis said.

“Bankrupting the entire healthcare system isn’t the answer,” said Maglione. “There has to be a balancing of interests to ensure that all people have access to healthcare with the need to compensate people fairly for their injuries.”

For more information:

Contact your state medical association or visit the American Medical Association’s Web site at www.ama-assn.org.