Insurance dispute may alter future malpractice pacts.

MALPRACTICE insurance with multiple-year rate guarantees may become a thing of the past after a decision to award Childrens Hospital Los Angeles $3.6 million in a dispute with its insurer.

Non-profit Childrens Hospital was awarded the judgment last month by a panel of three private arbitrators following a lawsuit it filed against Norcal Mutual Insurance Co., claiming breach of contract.

The San Francisco insurer entered into a series of contracts with three-year rate guarantees starting in 1994, but after its last agreement in 2000 it decided not to renew the hospital's professional liability coverage in 2001.

Childrens Hospital argued that the guarantee meant nothing if the insurer were not also bound to continue offering coverage, and the panel agreed, awarding the hospital the additional amount it had to pay to secure new insurance from another provider for the next two years.

"Their position was, we guarantee your rate for three years, but we are not obligated to renew you," said attorney Drew Pomerance, who represented the hospital. "My argument was that that is no guarantee at all."

Norcal released a statement saying it was disappointed with the decision but noting that the panel did not find the insurer acted in bad faith, committed fraud or otherwise engaged in an unlawful business practice. "We are happy to get this matter behind us, and return to the business of serving our policyholders," the statement read.

Pomerance, a partner in Roxborough Pomerance & Nye LLP, said he expected the decision would make insurers be more wary of signing such multiple year contracts.

Double Whammy 

Combined state and federal budget cuts are starting to make California physicians see red.

A few months ago, the Bush administration announced that Medicare reimbursements to doctors would be cut 4.2 percent starting in January. Now physicians are starting to see 5 percent cuts in the Medi-Cal rates as result of the recent state budget compromise.

Doctors who participate in Medi-Cal managed care plans and receive fixed monthly payments are reporting that some HMOs are requiting them to sign new 2004 contracts with the 5 percent cut passed along in them.

The California Medical Association is complaining that the cuts will mean that physicians serving Medi-Cal patients will receive just $23 for a typical office visit.

"We are seeing doctors who don't want to renew. It's a health care access issue for patients," said Heather Campbell, a CMA lobbyist.

Health Net Inc., one of the region's top Medi-Cal managed care insurers, is not passing the rate reduction on to doctors, but Blue Cross of California, a unit of WellPoint Health Networks Inc. and the state's largest Medi-Cal managed care insurer, acknowledged it is.

The CMA was expected to file a lawsuit against the state--not the HMOs--seeking to overturn the cuts, arguing they limit patients' equal access to care. The association's executive committee approved the legal action last month.

Staff reporter Laurence Darmiento can be reached at [phone] ext. 237 or at [e-mail].