this is an article from 2001. before big market crash and insurance companies lost big money in market. do you represent insurance companies or lawyers?
Medical malpractice insurance premiums soar
Sunday, January 21, 2001
By Christopher Snowbeck, Post-Gazette Staff Writer
Doctors in this state have been hit with steep increases in malpractice premiums this month, with some physicians in Eastern Pennsylvania seeing their premiums doubling to more than $100,000.
The situation has prompted at least one physician in the Pittsburgh area to retire early, but the more dramatic access problems have occurred in Philadelphia.
Frankford Hospital's trauma unit in Philadelphia, for example, closed for four days at the beginning of the year because its orthopedic surgeons decided to give up operating rather than renew their malpractice insurance. In the end, the hospital lured the surgeons back by agreeing to pay a portion of the doctors' premiums, which had jumped to six figures.
Premiums aren't nearly so high in Western Pennsylvania.
Still, doctors here are paying out much more this winter than before and those premiums are increasingly subsidizing large jury awards being handed out in Philadelphia and surrounding counties, according to the companies that provide malpractice insurance to doctors. Officials with the Pennsylvania Medical Society are pointing to a recent $100 million award by a Philadelphia jury as evidence that the court system in the east is out of control.
But while doctors and insurers are asking the Legislature to intervene with tort reform, plaintiff's lawyers say the problem with premiums can't simply be pinned on juries. The premium increases also are driven by problems of the insurance companies' own making, they contend, and should not be dealt with by infringing on the rights of individuals and the powers of juries.
How bad are the premiums here?
Physicians in specialties with the highest risk of malpractice claims are seeing increases as high as 45 percent, doctors and hospital officials say.
Dr. Gerald W. Pifer, an orthopedic surgeon at Allegheny General, said doctors in his practice were looking at yearly premiums going from $35,000 in 2000 to more than $50,000 this year. Dr. Robert Thompson, an obstetrician in private practice in Oakland, said doctors in his practice were facing jumps from about $25,000 last year to the upper 30s this year.
Squeezed both ways
The problem is not just that premiums are increasing, said Dr. Charles Huessner, a general surgeon who until this month practiced at UPMC St. Margaret. Rather, the premium increases are coming at a time when doctors' reimbursements from insurance companies are being cut year after year.
"We're getting hit both ways," Huessner said. "Doctors don't want to discount quality of care and yet they continually get discounted in what they get paid."
Huessner, 59, had planned to retire at the end of June so he could devote time to foreign mission work. But when he learned late last year that his malpractice premium would increase by $16,000, he decided to accelerate his retirement by six months.
The insurance companies blame the higher premiums on what they call overly sympathetic juries hearing medical malpractice cases in Philadelphia.
John H. Reed, the executive director of the state Medical Professional Liability Catastrophe Loss Fund, or CAT Fund, said major jury awards in Pennsylvania totaled $425 million last year. More than 80 percent of that money was awarded in Philadelphia County, Reed said, even though Philadelphia represents only 11 percent of the state's population.
Jury Verdict Research, a firm based in Horsham, says the recent $100 million malpractice award in Philadelphia was the largest ever in Pennsylvania and the third-largest in the nation in the past 10 years. Reed points to data from the National Association of Insurance Commissioners that shows that only New York pays out more than Pennsylvania in malpractice awards. Philadelphia alone paid out more in 1998 than all of California.
"The increasing cost of medical malpractice claims in Philadelphia represents a burden than can ultimately cripple the health care profession in the city and injure the public at large," Reed told a medical malpractice seminar in November. "It is no longer clear that Philadelphia juries can be relied upon to make rational, even-handed and dispassionate determinations in the complex matters put before them."
Misplaced blame?
But Jerry Meyers, a plaintiffs attorney in Pittsburgh, said critics don't give juries enough credit.
"When one examines the facts of a case, the rationale of the jury is obvious and not irrational or the product of a system gone wild at all," he said.
Why do Philadelphia juries give bigger awards?
Well, the cost of living is higher in Philadelphia, Meyers suggests, but the major reason is that jurors in different parts of the state simply have different points of view. While malpractice cases are relatively more successful in Philadelphia County, there also are counties in the state where plaintiffs in malpractice cases have never won cases -- and not because there's never been malpractice in those counties, he said.
Meyers said comparing Philadelphia and California is an apples-to-oranges comparison, since California caps jury awards. Besides, he said, the question isn't whether Philadelphia pays more or less than anyone else, but the question is whether the payouts in Philadelphia are fair.
The $100 million award might raise eyebrows, but Meyers says that jury's award has been appealed and the ultimate payout will likely be a fraction of the original amount.
"The medical society and others will pick out a particular verdict. They don't care whether it's ever paid," he said. "They want it to seem as though the system has gone awry because there is a single result that sounds on the face of its facts [to be] unfair."
The premium problem is not driven by juries so much as by insurers, Meyers said.
Doctors in Pennsylvania must purchase $500,000 in primary liability coverage from a commercial insurer. They receive another $700,000 in coverage through the CAT Fund. They purchase this additional coverage through a surcharge. So, when a plaintiff brings a medical malpractice case, more than one insurance company is involved.
More cases might be going to trial these days, Meyers said, because the insurers can't agree on a settlement that would keep them out of court. Meyers also accused the CAT Fund of delaying tactics that add to costs. If the CAT Fund were abolished, he argued, commercial insurers would compete for that portion of the insurance business and keep premiums low.
CAT Fund problems
Hospitals are almost always caught up in these cases and they, too, are expecting big premium increases this year. The only difference is that hospitals won't find out the details of their premium increases until this spring, said James M. Redmon, senior vice president for legislative services at the Hospital and Healthsystem Association of Pennsylvania.
Statewide, 10 percent of the premium increases this year are due to the legislatively mandated attempt to phase out the CAT Fund, Redmon said. In past years, the CAT Fund covered a greater percentage of doctors' liability, but as that percentage has dropped over the past five years, doctors have had to pay more to private insurance carriers.
Hospitals have been calling for the abolition of the CAT Fund, Redmon said, because the fund collects funds in one year for verdicts awarded during the previous year. Right now, the fund is responsible for at least $2.1 billion in future payments, but hasn't set aside nearly enough money to cover the tab. This "unfunded liability" can create jarring spikes in premiums, like the ones being seen this year. Without the fund, commercial insurers would assess premiums that contribute to a reserve that would be a buffer against such wild fluctuations.
"Our suggestion is that the commonwealth goes out and borrows the funds necessary to pay off the claims in the system, and going forward we buy real insurance to cover the risk," Redmon said.
That might sound good, but the costs of financing payment of the unfunded liability would swamp doctors in the short run, said Carol E. Rose, an anesthesiologist at the University of Pittsburgh Medical Center and president of the Pennsylvania Medical Society. Rather than scrapping the CAT Fund, the medical society wants tort reforms that would discourage frivolous suits and spread out award payments over time rather than have settlements issued in one lump sum at the beginning.
Tort reform is one of the medical society's top legislative priorities this year and the society is holding a meeting on Wednesday in Pittsburgh to hear from local physicians on the matter. It is one of several such forums being held around the state.
But Mark Phenicie, legislative coordinator for the Pennsylvania Trial Lawyers, said that rather than blame lawyers and take it out on their clients, doctors should see their premium woes simply as a function of the insurance market. It's been a rough year on the stock market, and the results are being seen in premiums, Phenicie said. What's more, the entire malpractice insurance system in Pennsylvania is still struggling to absorb the costs of the bankruptcies of two insurance companies in the mid-'90s.
That all may be true, but Karen Hartley, vice president for finance at the UPMC Health System, said tort reform was needed and that the CAT Fund must go, as well. And the changes should happen soon because the state's unfunded liability problem will continue to cast a shadow on the health-care system here. UPMC is expecting a 26 percent increase in malpractice insurance premiums overall for the system.
Without changes, the problems of physician retirements and emergency room closures will become more frequent in this part of the state, she said, and Pennsylvania will be unable to recruit and retain talented younger doctors. |
