Neurosurgery is in crisis in Pennsylvania. Insurance premiums for many neurosurgeons rose by 50 percent this year and some saw triple digit increases. The profession is reeling. Twenty percent of the neurosurgeons in the southeastern part of the state have either retired or left the area, according to the Pennsylvania Medical Society. The increase in premiums has unleashed a whole series of unfortunate events. Several trauma centers closed their doors temporarily, and a hospital near Philadelphia, unable to secure malpractice liability excess coverage, may permanently shut down its neurosurgery department (as well as its obstetrics and gynecology units). Neurosurgeons are practicing defensive medicine, ordering extra tests and avoiding high-risk cases. Teaching hospitals are having trouble recruiting neurosurgeons.
Doctors in West Virginia also are in the throes of a liability crisis. A rising number of lawsuits has led to doctors paying insurance premiums double what physicians in nearby Kentucky pay. The additional expense has forced doctors from the state. In Wheeling, the area’s last neurosurgeon left because of high premiums, said the president of the West Virginia State Medical Society.
Pennsylvania and West Virginia are the flashpoints for the nation’s medical liability crisis. Doctors in other states have not been hit as hard but still suffer from double digit insurance premiums increases. The situation will get worse before it gets better. Medical malpractice premiums will rise from 20 to 25 percent in some markets and as much as 50 percent in others, according to A.M. Best Company, which assesses insurer financial performance. Underwriters are scrambling to recover costs and physicians will bear the brunt of the recovery. “These estimated price increases only help return to a break-even underwriting operation; additional increases will be needed to meet insurers’ cost of capital,” an A.M. Best analyst recently wrote.
The premium increases reflect soaring jury verdicts as well as years of under pricing from carriers. Contributing to the liability crisis is the lack of state tort reform. Many states that enacted laws capping damages have seen their reforms overturned by state courts. Powerful trial bars stand in the way of reform. The public, angry at managed care and leery of medicine in the wake of the Institute of Medicine report on physicians’ errors, is not exactly primed to rally around calls for liability relief.
High insurance premiums are an old story for neurosurgeons. But this time the rates have reached a staggering level and they come a time when neurosurgeons are increasingly burdened. “What is extraordinary about what’s happening now is the six-digit premiums [for physicians], and neurosurgeons are at the top of the list,” said Lawrence E. Smarr, president of the Physician Insurers Association of America (PIAA), an association of doctor-owned or doctor-directed liability carriers. “This comes at a time when physician income is being restrained. More regulations are placed on them than ever before. They spend more time doing non-productive administrative work, and they have to worry about fraud and abuse. On top of all this they have the larger premiums.”
Astronomical Verdicts
The most obvious reason for the rising premiums is the increase in jury awards. Jury awards for medical malpractice claims rose 76 percent from 1996 to 1999, according to Jury Verdict Research. The median award from medical malpractice rose from $454,565 in 1996 to $800,000 in 1999. The good news is that the increase from 1998 to 1999 was a modest 7 percent-from $750,000 to $800,000.
The study by Jury Verdict also showed a 6 percent increase in the number of million-dollar verdicts in 1998-99 from 1997-98. Some of the awards have been astronomical. In 2000, a Pennsylvania jury awarded $100 million to a plaintiff who sued four doctors and two hospitals over surgeries and other care for an infant born 26 weeks after gestation.
The large verdict amounts have been partly attributed to changes in how society views money in light of the multimillion dollar salaries of athletes and the quick riches of dot.com millionaires. “There’s an overall lottery mentality,” said Richard Anderson, MD, Board Chairman for The Doctors’ Company, the nation’s largest physician-owned medical liability insurer. “Juries have lost track of the value of money. It’s gotten to the point where it’s OK for a lawyer to have a million dollar fee.”
The litigation mentality has spilled over into medicine with the force of a tidal wave. “The public culture needs to be changed. People need to realize that the world isn’t perfect. Just because everything doesn’t turn out right doesn’t mean someone is at fault,” says Raymond Truex Jr., MD, a private practice neurosurgeon in West Reading, Pa.
Anger at managed care and more experienced plaintiffs’ attorneys also account for the larger verdicts, according to insurance carrier administrators. Whatever the reason, the spiraling verdicts drive up settlement costs, too, which eventually lead to higher premiums as well.
Neurosurgeons are apparently particularly vulnerable to high verdict amounts. Jury Verdict analyzed all compensatory awards in 1999 (not just medical malpractice) for six frequently claimed injuries. The median awards were $6,827 for cervical/lumbar strain, $89,000 for herniated disc, $9,000 for headaches, $295,762 for mild/moderate brain damage, $1.45 million for wrongful death and $22,000 for spinal nerve injuries.
A 1999 AANS survey of neurosurgeons by the AANS found that if a respondent had claims experience, the malpractice claim(s) was most often related to spine procedures (77 percent), followed by intracranial procedures (42 percent). The Jury Verdict study also found that the median award for medical negligence in childbirth cases in 1999, $2 million, was the highest of all malpractice cases analyzed. The median awards for other types of malpractice: $636,844 for medication cases, $625,000 for diagnoses cases, $400,000 for nonsurgical treatment cases, $300,000 for surgical negligence cases and $230,000 for doctor/patient relations cases.
The rise in premiums has little to do with frequency of claims. “Liability insurers from Maine to Florida, in the Midwest, in the Southwest, in California and in the Pacific Northwest, said that claims frequency is flat, stable or has declined slightly,” according to the June 20 issue of Medical Liability Monitor. Nor have doctors been losing in the courtroom at a higher rate. The plaintiff recovery rate has hovered around 30 or 33 percent from 1994 to 1999, according to Jury Verdict.
Neurosurgery itself is not in any more difficulty than other specialties. “There is no specific crisis involving neurosurgery,” said Dr. Anderson. “It does not face a specialty specific crisis, as did plastic surgery with breast implants, for example.” A crisis possibly could occur regarding inadvertent transmission of prion-based disease from patient to patient via inadequately sterilized instruments but that issue has yet to be subject to litigation, he said.
Besides rising jury verdicts, the premium increase is due to long-term market forces in the insurance industry. Insurance carriers are always several years behind in knowing the actual cost of claims. Their prices don’t always reflect their true costs. Physicians had benefited from “a protracted soft market,” said Phil Dyer, Vice President of Business Development for The Doctors’ Company. “There was a plethora of carriers. Everyone was in fierce rate competition. Premiums were artificially low.” The bottom dropped out when the stock market tumbled, said Dyer. Carriers overly reliant on investment income became endangered. Several insurance carriers already have closed their doors or are on the block.
The prognosis is not good for the carriers’ customers-physicians. “We’re entering a ‘hard’ market. There are fewer carriers and higher rates. It will be harder to find carriers,” said Dyer.
What happens in a state in crisis like Pennsylvania is that companies begin to fold and the ones left must raise rates so high that fewer physicians can afford them. The entire local malpractice insurance system itself shows signs of teetering. Another factor that can drive up premiums is the general state of the economy. Like crime, litigation statistics correlate with economic indicators. “Litigation cycles tend to parallel economic cycles. If the economy turns down …,” said Dr. Anderson.
The Pennsylvania Story
The crisis in Pennsylvania shares some of the same common roots as the rest of the nation. But a whole set of local factors has exacerbated the problem. First of all, jury verdicts have risen through the roof. The Pennsylvania Medical Society says it no longer counts million dollar awards but adds up the number of $10 million and $100 million awards.
“The plaintiffs’ awards in Philadelphia alone in 2000 exceeded plaintiffs’ awards in California,” says Dr. Truex.
Due to the growth of integrated health systems, attorneys are able to steer cases to Philadelphia, where attorneys are craftier and juries more extravagant with awards.
A second factor is the stress on the state’s Catastrophic Loss Fund, which pays settlements up to 1.2 million. State physicians, who must have malpractice insurance, find their own insurance coverage for the first $500,000 of coverage. As lawsuits mount, the surcharge physicians must pay into the fund have skyrocketed.
The Pennsylvania legislature is populated by former trial attorneys, and the laws distinctly favor the legal community. There are no penalties for frivolous lawsuits and no caps on noneconomic damages. Damages are paid in a lump sum. Plaintiffs can recover their costs more than once from verdicts and other sources such as disability payments. And witnesses need not be from the specialty under question: a pediatrician can be called to testify when a neurosurgeon is a defendant.
“Plaintiffs’ attorneys are out of control. It’s lawsuit abuse,” says Steven Barrer, MD, a private practice neurosurgeon in Abington, near Philadelphia. Dr. Barrer says he has been hit with multiple frivolous lawsuits and consequently had great difficulty this year finding insurance. His premium is a staggering $132,000, a 130 percent increase from last year.
The legislature is considering a bill to relieve the stresses on the Loss Fund, but neurosurgeons are not optimistic full-scale tort reform is coming. “The legislature does not see this as a crisis,” says Dr. Barrer. “Nothing has changed. Babies are still being delivered. Surgeries are still being done, as far as they know. The public does not see the problem. The doctors that are left are working harder.”
Tort Reform Rollback
Physician associations perennially champion tort reform as the answer to the medical liability crisis. States that limit damages, impose a sliding scale for attorneys’ contingency fees and enact other reforms experience stable malpractice premiums, all the while allowing patients to have their day in court, according to physician associations. California is the most frequently cited example. In 1975, in response to a malpractice premium crisis, the state passed the Medical Injury Compensation Reform Act (MICRA). MICRA stipulates:
- A $250,000 cap on noneconomic damages. (Patients are allowed to recoup all medical costs of medical malpractice.)
- Limits on contingency fees. Legal fees are set by a sliding scale.
- Periodic payments on future damages instead of one lump sum.
- Collateral sources of payment. Courts can consider already existing healthcare coverage that pays to correct a medical problem.
- A shorter statute of limitations and a reasonable statute for minors.
What has been the effect of MICRA in California? “Malpractice insurance rates are less than half [of other states],” said Dr. Anderson. “And California is an incredibly litigious state. There is no shortage of lawsuits and lawyers. The frequency of suits is nearly 1.5 times the national average.”
The difference in malpractice insurance rates in states that have and don’t have tort reform is dramatic. “There is a link between open-ended liability and no coverage or unaffordable coverage. What risk writers like least is the lack of predictability,” said Sherman Joyce, President of the American Tort Reform Association.
Neurosurgeons in states with tort reform vouch for the benefits. The situation in Michigan until laws were changed in the early 1990s was “horrible-the same problems you see in Pennsylvania,” says Fernando Diaz, MD, PhD, of Detroit, who chairs the Medical-Legal Committee for the Council of State Neurosurgical Societies. Michigan has curtailed frivolous lawsuits by not allowing a suit unless the plaintiff’s attorney obtains an affidavit from an expert witness in the same field as the accused physician. The affidavit must attest to the merits of the case. Unfortunately, tort reform across the country has seen limited success. A number of states that have passed tort reform laws have seen courts rule them as unconstitutional. Courts in Alabama, Illinois, Kansas, New Hampshire, Oregon, Texas and Washington have struck down caps, according to the Health Care Liability Alliance. On the other hand, courts in Colorado, Florida, Louisiana, Maryland, Missouri and West Virginia have upheld caps.
States that have caps for $250,000 or less for non-economic damages are: California ($250,000), Colorado ($250,000, some court discretion, total cap is $1 million), Indiana ($250,000 cap on total damages per provider, $1.25 million cap on total damages), Montana ($250,000), Nebraska ($200,000, $1.25 million cap on total damages) and Utah ($250,000). States that have caps for more than $250,000 for non-economic damages are: Arkansas ($400,000), Hawaii ($375,000), Idaho ($400,000), Louisiana ($500,000 cap on total damages plus future medical costs), Maryland ($500,000), Massachusetts ($500,000, some exceptions), Michigan ($280,000, $500,000 maximum), Missouri ($500,000), New Mexico ($600,000 cap on total damages, does not apply to past and future medical care), North Dakota ($500,000), Ohio (greater of $250,00 or three times economic damages not to exceed $500,000), South Dakota ($500,000), Virginia ($1 million cap on total damages), West Virginia ($1 million) and Wisconsin ($350,000).
In Florida, plaintiffs are entitled to a maximum of $350,000 in non-economic damages if they do not opt for binding arbitration and $250,000 otherwise. The other states do not have caps.
Premiums for liability insurance vary from state to state not only because of caps but because of urban/rural characteristics, incidence of large awards and local market conditions/performance of carriers. Neurosurgeons in Chicago and New York City are paying as much as $200,000 for a $1 million policy while their counterparts in sparsely populated states may be paying as little as $30,000.
A recent survey by the Pennsylvania Medical Society shows how premiums for neurosurgeons rise the closer the neurosurgeon is to Philadelphia. The premiums are: Philadelphia, $111,296; Buck County (near Philadelphia), $98,273; Lackawanna County (Scranton area), $76,977; Allegheny County (Pittsburgh), $56,484; Tioga County (very rural), $54,572; Lancaster County (very rural and heavily Amish), $54,014.
The survey also compared the highest premiums in Pennsylvania with the highest regions in neighboring states: Philadelphia, $111,296; West Virginia, $107,478; Ohio, $76,715; New York (excluding New York City), $75,232; New York City, $166,302; New Jersey, $74,232; Maryland, $58,279; and Delaware, $51,674.
The disparity in premiums leads to a host of unfortunate consequences for physicians and patients. It’s quite tempting for a doctor in Philadelphia, for example, to move across the river into New Jersey or down the road a few miles into Delaware.
The court decisions overturning tort reform have led medical societies such as the Pennsylvania Medical Society to arouse its members to support judicial candidates favorable toward tort reform. Concentrated efforts also were made in Ohio and Illinois. The backed candidates didn’t win, said Joyce, but positive strides were made. “Public attention was brought to the issue,” he said. “Maybe judges will be a bit less aggressive.”
“Our concern is that the courts have stripped the legislature of authority to make policy,” Joyce added. “Our template is MICRA. What we know is that system works pretty well. That helped relieve a serious crisis in insurance and does provide a level of stability.”
Tort reform is the key, said Smarr of PIAA. “Nothing has really changed over the past 20 to 30 years. There is still an upward trend in malpractice premiums except in states where there is meaningful tort reform,” he said.
The legal landscape surrounding lawsuits and medicine will change if Congress passes a patients’ bill of rights, which guarantees the right to sue managed care groups. Insurance groups such as the PIAA are opposed to the right to sue without tort reform because they believe that doctors would be dragged into the lawsuits.
The AANS is likewise concerned that increased lawsuits against HMOs will inevitably pull neurosurgeons into the fray as well, either as defendants or witnesses. For this reason, organized neurosurgery supports managed care reform that limits the amount of damages patients can collect from their HMOs. Unfortunately, there is not a unified position within medicine. Believing that physicians are not more likely to be sued, the American Medical Association and other some other medical groups support patient protection legislation that permits unlimited damages against HMOs.
A number of states have passed laws making insurers legally accountable for their decisions, and suits against managed care companies have been rare. Georgia, for example, passed a patients’ bill of rights law two years ago that set up an external review board for patients to contest denials of coverage. Not a single person who brought his grievance through the new independent review system and was denied has filed a lawsuit, according to the Atlanta Journal-Constitution. The patients’ rights bills being considered by Congress allow for an external review process.
Strength in Numbers
Patients who visit Dr. Truex in his West Reading office are handed brochures outlining the medical malpractice crisis. But few family physicians are willing to distribute the literature. “The ship is dipping into the water and we’re [neurosurgeons] in the forward cabin,” says Dr. Truex. “The primary docs are on the other side of the ship so they’re not worried.”
Obstetricians and orthopedic surgeons also are in the forward cabin, but neurosurgery is more isolated in its crisis. It’s a small specialty, and its services are not nearly as noticeable to the public as, say, obstetricians.
Neurosurgeons in a few states have banded together with other physicians to press for reforms, and those initiatives have at least gotten the attention of lawmakers. Hundreds of doctors in Pennsylvania closed their office and marched to the legislature in April to demand reform. In West Virginia 1,000 physicians drove to the capitol earlier this year and threatened to shut down their practices permanently and move to states where insurance is cheaper.
As AANS Past President Stewart Dunsker, MD, said at the 2001 Annual Meeting, “We need to take part in the debate not in the halls of hospitals but in the halls of legislatures. It’s easy to sit back and let other physicians do the work. The more we work … the more likely we are to change the future.”
In absence of tort reform, neurosurgeons who wish to avoid the courtroom need to do what every physician presumably intends to do: practice good medicine and maintain good relations with patients. Otherwise, difficult procedures will leave neurosurgeons as well as patients at risk.