Malpractice insurance rates reach boiling point: Physicians burned by lawyers, lawsuits and jury awards. (Doctors, Lawyears and Lawsuits).

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TAKE A DEVASTATING terrorist attack that kills more than 3,000 people and shakes the confidence of a nation.

Take corporate investment portfolios that seep value in a sodden stock market. Take an economy in the throes of retrenchment, normal business further unsettled by domestic jitters and international hostilities.

Add a steady increase in the fortunes juries award to plaintiffs who claim injury by a doctor, along with smoldering public resentment of managed care and a spotlight trained on medical error.

This melange of costly ingredients has professional liability insurance rates at a boiling point for physicians and all of health care.

At least one major underwriter decided it could no longer afford to serve the doctors. The St. Paul Companies, the nation's second-largest physician insurer, announced last December it had written its last medical malpractice policy.

That leaves some 40,000 doctors in 45 states casting about for alternatives as their St. Paul coverage expires over the next 18 to 24 months.

The company pegs the closure of its medical malpractice division to huge losses, notwithstanding regular hikes in premiums that averaged 24 percent in 2001. (In some states, St. Paul customers had to pay as much as 65 percent more.)

Lawyers and lawsuits

Lawrence Smarr, president of the Physician Insurers Association of America, whose 40-odd doctor-owned member companies write policies for about 60 percent of the U.S. medical community, points his finger at trial lawyers and juries when accounting for industry-wide rate increases over the past three years.

Indeed, Jury Verdict Research, of Horsham, Pa., reports that nearly half of all awards in medical malpractice cases topped $1 million in 1999, the most recent period for which data are complete. Simply settling a claim cost an insurer $650,000, up 30 percent in a single year.

* St. Paul said it paid out catastrophic sums -- more than $1 million -- twice as often in 2000 as in 1999: 54 cases versus 27.

* In 2000, a Philadelphia jury socked four physicians and two hospital defendants for $100 million for bad outcomes suffered by a baby born at 26 weeks of gestation.

* A Texas jury returned an $11 million malpractice verdict and a West Virginia jury tried to award $2 million to a plaintiff despite a state cap of $1 million.

Not surprisingly, these areas of the country have seen some of the most staggering rises in physician liability insurance premiums. PHICO bumped the price to Texas doctors 83 percent last year. West Virginia obstetricians paid an average of $75,155 in 2001, while their colleagues next door in Kentucky were charged only $41,661.

Faced with rates 20 percent higher in 2002 than last year -- already up as much as 60 percent over 2000 premiums -- "doctors are retiring early, relocating their offices to neighboring states or discontinuing their practices," complains Pennsylvania Attorney General Mike Fisher. "Hospitals are faced with the possibilities of closing trauma units."

Obstetricians, neurosurgeons, emergency physicians and other high-risk specialists have absorbed the brunt of the blow. It can cost an ob-gyn in South Florida $209,000 a year to insure for delivery of babies.

But even internists in some locales saw premiums soar last year by as much as 69 percent, and general surgeons by as much as 86 percent, according to a survey by the Medical Liability Monitor.

(In a few states -- New York, Michigan, Louisiana and Colorado, for example -- selected doctors actually enjoyed modest decreases.)

Government help

Government bodies in many affected states are deliberating responses. Fisher has asked the Pennsylvania Supreme Court to rule quickly on disputed portions of state malpractice law that he says led to premium inflation.

The West Virginia legislature passed a reform bill in January, and Florida, Mississippi and Texas are likely to address the issue. (The latter's House of Representatives doesn't convene again until next year, however.)

Two national medical malpractice bills are also queued in the U.S. Congress -- pushed to the back burner by the same set of ingredients that led to the rapid premium increases.

RELATED ARTICLE: High Insurance Rates Force Surgeon To Quit

When his annual malpractice insurance premium pulled neck-and-neck with his yearly income, David Crowder, MD, decided he'd had enough.

A general surgeon in Gillette, Wyo., Crowder was one of only 40 practitioners of his specialty statewide. With no managed care penetration to speak of and nearly a third of the population uninsured, Wyoming patients often "look at health care as grabbing the silver ring," Crowder says.

"You get nickeled and dimed by claims," he says. "They never go to trial, but the only two companies that insure physicians here -- the Doctors Company and Ohio Casualty -- say as far as they're concerned, we're getting as bad as Las Vegas."

Physicians covered by two of the three largest professional liability insurers in that Nevada city of gamblers and litigants saw their premiums zoom 52 percent and 70 percent respectively in 2001.

Last summer, Crowder received his malpractice insurance renewal notice -- and a payment coupon for $150,000.

"We don't make the same kind of money in Wyoming as surgeons do in a lot of areas," he sighs. "I just decided I wasn't going to pay that much. And it's gotten so hostile to practice clinical medicine. You're always looking over your shoulder. It makes you feel like a terrible doctor!

"My time and complication rates were lower than the people they have now, but as you get older, things get to you more. Every night, or every third night, I'd wake up wondering whether that patient I'd operated on was going to have a complication and sue me. So I decided to quit practice."

Crowder's decision is not unusual in states where malpractice insurance rates have skyrocketed.

More than a quarter of West Virginia's doctors surveyed last year by the state medical association said they were thinking about early retirement.

Another 28 percent said they were considering changing their practice to one with lower risk.

44 percent were contemplating relocation to another state where liability insurance is less costly (Simply moving across the Ohio River could shave $5,600 off a West Virginia internist's premium and $26,000 off an obstetrician's.)

The Wheeling Hospital has had to curtail services due to loss of doctors and other problems related to the high cost of medical malpractice insurance, says CEO Donald Hofreuter, MD.

"After three years and $100,000 in recruitment fees, we're still without a neurosurgeon," he says. "We used to have three, but the last one left thirteen months ago. The affordability and availability of malpractice insurance in this state is a real issue in recruiting."

He says patients who come the hospital with head trauma have to be transferred to another facility. "And we no longer have invasive coverage in our heart unit on weekends. A patient who needs angioplasty would have to be airlifted out [to Pittsburgh, 50 miles away, or to Morgantown, 80 miles away]."

In Wyoming, Crowder traded in his scalpel for a desk-job, working for the Powder River Coal Company and several other mines to try to stem an 18 percent annual rise in the cost of health care benefits.

Not only has Crowder escaped the burden of professional liability insurance, he's also no longer routed from sleep by a jangling telephone.

"I was on call every other night for most of my life and to me the phone is an evil device that sits in the corner and hates people," he laughs. "But now I feel almost guilty. Sometimes I just stay up late so I'll feel tired the next day."

David Weber

David O. Weber is principal of The Kila Springs Group, an editorial organization specializing in science and health care based in Mendocino, Calif. He can be reached by phone at 707/937-2158 or by e-mail at [e-mail].