Crisis coast to coast: health-care providers and regulators urge medical liability reform. (Property/Casualty: Medical Malpractice).

Physicians and hospitals across the United States are trying hard to find adequate coverage for medical liability, and many physicians have to make the tough decision whether to remain in practice, move to a more favorable location with lower medical malpractice costs or retire early.

At the end of 2001, the largest writer of medical liability coverage in the United States, St. Paul Cos., withdrew from the market, citing increasing losses and an inability to maintain a profit. Other companies have gone bankrupt or have severely reduced their coverage areas, limiting the availability of the insurance in many states. Some states, including Nevada and West Virginia, have opted to create their own pools in an effort to make med mal insurance available to physicians that practice in their states. Some states are considering tort reform to limit the amount of jury awards on medical-negligence lawsuits, while Congress is working on legislation that would provide insurance assistance to the U.S. medical community.

"In American enterprise, if there is an opportunity in any market, people rush in to make offers according to the market, and you don't see anyone rushing in to medical liability to make offers," said Dr. Donald J. Palmisano, president-elect of the American Medical Association.

The AMA, Palmisano said, believes the country needs a national medical liability reform as soon as possible. There is great concern that many physicians will not be able to stay in practice because they cannot get liability coverage, and that sends a bad message to people, he said.

Across State Lines

Coverage concerns cross state lines, Palmisano said. The location of a $6 million medical center--which had been planned for Mississippi, which has limited tort-reform laws--has been moved across the border to Louisiana, which has better tort-reform laws, he said. The medical liability crisis has driven many neurosurgeons out of Mississippi, he said.

In Pennsylvania, 31 of the smaller, rural hospitals have joined in the Community Hospital Alternative for Risk Transfer program, or CHART, through a Vermont-licensed risk-retention group, said Chuck Moran, spokesman for the Pennsylvania Medical Association.

"The hospitals were unable to get medical liability coverage at an affordable price,' Moran said. "Some hospitals have seen increases in excess of 300% in their liability coverage."

Phico, one of the larger writers of medical liability coverage in Pennsylvania, is now in liquidation. St. Paul Cos. has left the market entirely, and two other companies--Miix Group and Princeton Insurance Co.--have ceased writing new business in the state, according to the medical society.

In Florida, where the total number of med mal writers has dropped from 40 to 20 in the past 10 years, American Physicians Capital Inc. said in June that its subsidiary had stopped writing there, citing an underwriting loss of $18.8 million in the state in 2001. Loss frequency and severity increased faster than anticipated, and the state's stringent bad-faith laws made it difficult for the company to predict ultimate losses, said spokeswoman Sheila Wright.

Scott B. Lakin, director of the Missouri Department of Insurance, said that while that state is not necessarily a bad med mal market, doctors there also are being affected.

"What we're finding in Missouri is that Missouri isn't necessarily a bad market for medical malpractice, but a lot of companies are pulling out of med mal altogether, even though they're based in other states and Missouri is one of the states they do business in," he said.

In Nevada, physicians are leaving practice altogether or moving to California, where there is a more effective law that will permit them to stay in business and get insurance at a reasonable price, said the AMA's Palmisano. Members of the national AMA board spoke in July at a joint session of the Nevada Legislature about the problem, he said.

During the Nevada discussion, an independent actuary was brought in to testify about the new medical liability plan set up by the state. The actuary presented a premium-rate structure that he had calculated independently, based on conditions in Nevada. The actuary's rates were comparable to those offered by the insurance companies in the state, which served to dispute accusations that the insurers had inflated their premium rates, Palmisano said. For example, the actuary calculated the annual premium for an obstetrician to be $90,000--which is the same amount charged by insurance companies in the state, he said.

Medical liability insurance premiums are determined by a number of factors: frequency, severity of the awards, overhead and defense costs, Palmisano said. You put those together and you come up with a number, he said.

Crisis in Texas

South Texas, along the Rio Grande, has become a microcosm of the national medical liability problem.

Neurosurgeons there are paying up to $120,000 a year for liability coverage, and some OB/GYNs are paying up to $100,000 a year, said Dr. Manny Alvarez, a nephrologist in Texas working along the Mexican border. There has been a flight from service by physicians, Alvarez said. El Paso has lost its only pediatric surgeon as well as surgeons, internists, anesthesiologists and a lot of pediatric specialists, he said.

Doctors have reported that they are dipping into personal savings and retirement plans to pay for liability coverage, said Pam Baggett, spokeswoman for the Texas Medical Association. Many physicians are changing practice parameters--some OB/GYNs are no longer offering obstetrician services, and some neurologists are not taking emergency-room calls, she said.

"If there is a 'code blue' [a life-threatening emergency] in the hospital and it's not their patient, they don't respond," Baggett said. "Access to care is the bottom line here."

Doctors Hit Hard

The rising cost of medical malpractice insurance is just one of a list of growing expenses that physicians in the state are facing.

"Many of our physicians treat people who are uninsured, underinsured or indigent or on Medicaid or Medicare, where the reimbursement schedules are fixed," said Dr. Carlos Cardenas, a gastroenterologist in South Texas. "The physicians along the Mexican border have a lower percentage of patients who are privately insured, and to have a line item like medical liability insurance go up 100% to 300% in a year's time is a lot for some practices to swallow."

Trauma surgeons, neurosurgeons and even family practitioners have been hit hard, with unprecedented increases in liability costs, Cardenas said. Physicians are having to make decisions this year as to whether to continue to offer benefits, such as health care, to their employees, and about which patients they will or will not continue to see, he said. The reality is that if you take care of the very young or the very old, you're not a good insurance risk, and you're going to be charged significantly in liability insurance, Cardenas said.

Leaving Las Vegas

"The only trauma center in Las Vegas recently announced it was going to close because its physicians couldn't get liability coverage," Alvarez noted. As a result, local police predicted a rise in the number of homicides in the area--because more assault victims would die before they could obtain proper medical care. "This same sort of thing can happen along the U.S./Mexican border, because of the problem of trauma doctors closing up or pulling out," said Alvarez, referring to the situation in South Texas.

A few years ago, there were 17 companies writing medical liability coverage in Texas; today, there are four, Cardenas said. A couple of other players write niche policies for a small segment of the market. Cardenas said he spoke with one physician whose medical liability coverage jumped to $17,000 from $5,000-- and that doctor's practice has had no claims against it. The physician does not deliver babies, but he does go to nursing homes to see patients, Cardenas said. The insurance company told the physician that his premium rates were so high because his practice is located in the Rio Grande Valley.

'Lawsuit War Zone'

"We're in a lawsuit war zone, and we think it's unfair," Cardenas said." Our liability rates all along the border are, on average, 30% higher than the rest of the state for the same specialties. The situation is untenable, and you can't plan for that kind of a budget--especially in an area where we see a large number of patients on a fixed income, when we see Medicare reimbursements drop and, at the same time, watch our hard costs go up each year.

"We are seeing a litigious culture driving the nails into the coffin of medical care for the next 25 or 30 years, unless we do something about it," Cardenas said. "We've got to find reasonable solutions to these issues. It's not just about lawsuit reform, but also about ways to resolve disputes between parties with ways to take the money out of the discussion. As long as insurance companies are willing to settle cases, lawyers are willing to take cases...The facts of the case don't really matter."

A recent article in the New Jersey Law Journal indicated a significant drop in the number of medical liability cases filed in New Jersey, said Jerry Goldstein, a plaintiffs malpractice attorney for more than 10 years. The drop was due, in part, to a statute that requires a plaintiff to file, within 30 days, an affidavit signed by an expert witness testifying that negligence was present in the case, Goldstein said. If the affidavit is not filed, the defendant has the right to move for dismissal of the case.

Some states require that before cases go to trial, it must be heard by a medical-review panel, the AMA's Palmisano said. The plaintiff picks a doctor, the defendant picks a doctor in the same specialty, and they both pick a third doctor to serve on the panel. The discussion is overseen by an attorney, who doesn't vote. When a panel rules against a doctor who is being challenged, the cases are almost always settled out of court, he said. When a panel rules against the plaintiff, 50% go to trial, and 50% disappear, he said.

The AMA supports the use of an affidavit of merit, which states that there has been some specific damage to the plaintiff, Palmisano said. Some states already require an affidavit or certificate of merit, according to the AMA's Advocacy Resource Center. The states that require such a document before a negligence suit goes to trial are Colorado, Delaware, Florida, Georgia, Maryland, Michigan, Minnesota, Missouri, New Jersey, New York, North Dakota and Texas.

While the number of cases is decreasing, the dollar amount of the awards is on the rise, said New Jersey attorney Goldstein. From 1994 to 2000, the nationwide median value of an award on a malpractice or negligence suit rose to nearly $1 million, from $362,500, according to the AMA.

The cost of expert testimony also is on the rise, Goldstein said. If attorneys know they will have to spend $10,000 or $20,000 on a couple of expert witnesses, they might be less likely to accept and file a case, he said.

'Bad-Doctor' Issues

How much a jury awards in a medical malpractice case depends more on the degree of the injury, rather than the amount of negligence, said Moran of the Pennsylvania Medical Association. But regardless of the dollar amount, when the jury comes in with a decision, it is a "bad-doctor" issue, he said.

"What is the definition of a bad doctor?" Palmisano said. "Is it someone with a high number of suits against them? Is it someone who has been before the state board of medical examiners a number of times and shown to be repeatedly negligent? Or are you talking about an obstetrician who gets a call late at night and is told the emergency room has a woman in labor with complications, who hasn't been to a doctor during her pregnancy and may have other health problems?

"The doctor comes in to help and...saves the woman's life and the baby's life, but as a result there is neurological damage to the child," Palmisano said, describing a hypothetical scenario. "If that's a bad doctor, then a lot of doctors will not go out on emergency calls unless they know the patient, and a lot of people will be permanently injured or die as a result of lack of medical care."

Medical Malpractice Rates

Annual premium ranges as of January 2002 in selected areas of the United
States.


                                         Low      High
Internists

Florida (Miami and Fort Lauderdale
areas)                               $17,611   $50,744
Michigan (Detroit area)               18,375    40,233
Illinois (Chicago area)               16,539    28,153
Texas (Dallas and Houston areas)       7,858    25,070
New York (New York City and
Long Island areas                     16,751    21,648
Ohio (Cleveland and Cincinnati
areas                                  7,766    16,270
Nevada (Las Vegas area)               11,636    15,804
West Virginia                          7,759    15,675
California (Los Angeles)               7,883    12,959
Louisiana                              5,734    11,238
Colorado                               8,040     9,324

Obstetricians/Gynecologists

Florida (Miami and Fort
Lauderdale areas)                   $108,043  $208,949
Texas (Dallas and Houston areas)      39,290   160,746
Pennsylvania                          92,739   150,000
Michigan (Detroit area)               87,444   123,890
New York (New York City and Long
Island areas)                         89,317   115,429
Illinois (Chicago area)               72,530   110,091
Ohio (Cleveland and Cicinnati
areas)                                41,855    95,310
Nevada (Las Vegas area)               71,092    94,820
West Virginia                         63,165    84,551
California (Los Angeles)              46,938    57,740
Louisiana                             27,320    61,813
Colorado                              29,265    38,578
Kansas                                21,839    33,082

Source: Medical Liability Monitor, Pennsylvania Medical Society,
American Association of Neurosurgeons
Medical Malpractice, Top Writers--2001

Increased costs are making it difficult for insurers to make a profit
from medical malpractice.

($ Thousands)

                                          Direct  Adjusted
                                        Premiums      Loss
Companies                         AMB#   Written   Ratio *

Medical Liability Mutual Ins Co  03667  $468,304    134.56
St Paul Fire & Marine Ins Co     02452   405,450    131.47
Medical Protective Co            00591   376,561     52.75
Health Care Indemnity Inc        03701   287,672    110.87
Doctors Co Interins Exchange     03686   236,790     53.34
ISMIE Mutual Ins Co              03757   207,795     72.85
Miix Ins Co                      03737   180,633    118.37
Norcal Mutual Ins Co             03644   175,503     61.96
Physicians Recip Insurers        02888   170,505     66.75
Lexington Ins Co                 02350   170,234     107.9
Medical Assurance Co             03826   165,823     42.13
Truck Insurance Exchange         02174   165,121     79.09
First Professionals Ins Co Inc   03743   162,092     67.43
ProNational Ins Co               02698   148,610     89.35
Princeton Ins Co                 02873   146,259     80.83
Continental Casualty Co          02128   136,604    128.95
Chicago Ins Co                   02266   135,032     36.12
American Physicians Assur Corp   03670   129,349    113.97
Mag Mutual Ins Co                01936   128,623     92.96
State Volunteer Mutual Ins Co    03706   120,236     83.62
Medical Professional Mutual Ins  11673   101,144    149.72
SCPIE Indemnity Co               11800    99,046     53.08
Hanys Ins Co Inc                 00157    92,591     86.53
OHIC Ins Co                      03778    89,815     81.49
American Continental Ins Co      00735    89,115    317.74



Companies                        Group name

Medical Liability Mutual Ins Co  MLMIC Group
St Paul Fire & Marine Ins Co     St Paul Cos
Medical Protective Co            GE Global Ins Group
Health Care Indemnity Inc        Health Care Indemnity Inc
Doctors Co Interins Exchange     Doctors Co Ins Group
ISMIE Mutual Ins Co              ISMIE Mutual Ins Co
Miix Ins Co                      Miix Group
Norcal Mutual Ins Co             Norcal Group
Physicians Recip Insurers        Physicians Recip Insurers
Lexington Ins Co                 American International Group
Medical Assurance Co             ProAssurance Group
Truck Insurance Exchange         Zurich/Farmers Group
First Professionals Ins Co Inc   FPIC Ins Group Inc.
ProNational Ins Co               ProAssurance Group
Princeton Ins Co                 MLMIC Group
Continental Casualty Co          CNA Ins Cos
Chicago Ins Co                   Allianz of America Inc
American Physicians Assur Corp   APCapital Group
Mag Mutual Ins Co                Mag Mutual Ins Co
State Volunteer Mutual Ins Co    State Volunteer Mutual Ins Co
Medical Professional Mutual Ins  ProMutual Group
SCPIE Indemnity Co               SCPIE Cos
Hanys Ins Co Inc                 Hanys Ins Co Inc
OHIC Ins Co                      MLMIC Group
American Continental Ins Co      St Paul Cos

The population of this report is the top U.S.-domiciled affiliated and
unaffiliated single companies ranked by direct premiums written.

For the leading medical malpractice insurance groups, see the August
2002 edition of Bests Review, page 52.

* Adjusted loss ratio is direct losses incurred divided by the
difference between direct premiums earned and dividends paid to
policyholders.

Source: Best's State/Line Products