AN ACTION PLAN FOR THE DETERIORATING MEDICAL LIABILITY INSURANCE MARKET IN RHODE ISLAND:

In June, 2002 the Rhode Island Medical Society published a Report and Update on medical professional liability in the state describing how it mirrored the rest of the nation and listing the seven carriers lost to Rhode Island in the previous 12 months (St. Paul; AIG; CAN; HUM; Legion; Phico; Zurich).

At that time, there were only six surviving medical malpractice carriers in Rhode Island insuring a total of 3,300 physicians. These included:
(1)one physician-owned mutual (Norcal with 1,700),
(2)two for-profit stock companies (ProSelect with 300 and General Electric MedPro with 200),
(3)one quasi-public state agency (Rhode Island MM-JUA with 200), and
(4)two hospital-owned, off-shore self-insurance companies (RISE with 700 and Women & Infants Indemnity with 200).

These numbers were rough estimates. Also, because many physicians practice in multiple settings and therefore have multiple insurance policies, the total of 3,300 exceeds the number of physicians who are actually present and practicing in Rhode Island.

The structure of the Rhode Island JUA (Medical Malpractice Joint Underwriting Association of Rhode Island)is such that the JUA could virtually never become insolvent. (This positive assessment of the JUA's strength is supported by the Judge Torres decision of February, 1991).

Hospital-owned off-shore "captives" are not domestically regulated carriers. Information on their capitalization, reserves and loss experience is not publicly available.

See: http://www.rimed.org/news02jun.html

In June 2004, General Electric MedPro announced it will be leaving the Rhode Island market and its remaining 130 covered physicians.

This year in the Rhode Island General Assembly, the Rhode Island Medical Society submitted the 2004 Medical Liability Reform Act to the Judiciary Committees in the House (H7850. Representative Robert E. Flaherty, Chairman) and Senate (S2473. Senator Michael J. McCaffrey, Chairman).

This Medical Society bill was intended to accomplish the following:
(1) Reduce the time injured Rhode Islanders would have to wait for a settlement or award (currently 6.4 years, the longest delay in the nation).
(2) Reduce the 12 percent prejudgement interest rate on successful lawsuit payouts.
(3) Require an expert to certify that a case has merit before it can be filed.
(4) Require a statute of limitations (a suit involving a child must be filed within three years of age 8, not by age 18 as now required).

A bill submitted on behalf of Governor Carcieri this year contained similar provisions, plus a cap on malpractice awards for pain and suffering.

Some of the key reasons professional liability rates are rising so fast in Rhode Island are described in a PDF file on the online May/June 2004 issue of the Newsletter of the RI Medical Society at:

http://www.rimed.org/omeganews5_10.pdf.

In my personal opinion, the H7850 and S2473 bills represent important and long overdue incremental reforms which would benefit both truly injured patients with valid medical negligence claims and the majority of Rhode Island's non-negligent physicians.

However, real medical liability market reform demands not only these common sense measures but also a combination of broader initiatives. Both a clear vision for future reform and substantive, not just incremental, changes are necessary. Policy makers must recognize that patchwork policies will not achieve the fundamental restructuring that is so badly needed. These major "beneficially disruptive" innovations in the system must not be based on the status quo. They must be initiated and catalyzed by an unprecedented, physician-led and insurer-supported effort to shift the focus of reform to increasing patient safety. This will require simultaneously overcoming the tyranny of the minority of physicians with the worst performance records and fundamentally changing the state's existing destructive medical malpractice system.

Even more so than with the two prior medical malpractice insurance crises since 1964, time is rapidly running out for both Rhode Island doctors and their patients.

Before it becomes too late to help, creative structural reforms that truly serve the private and public interests of all of the medical liability stakeholders must be proposed, communicated, enacted and implemented.

Although enactment of the needed legislation and regulations cannot occur until the Rhode Island General Assembly reconvenes in January 2005, it may not prove to be too late if Rhode Island seizes the opportunity to lead the nation in meaningful and durable patient-centered reform by carefully considering, discussing and implementing all three of the following measures.

SUMMARY ACTION PLAN FOR RHODE ISLAND:

I. Medical Discipline:
Increase patient safety immediately and for the long term by creating and implementing fair but firm economic sanctions for the small group of most egregious repeat offenders whose performance records combine excess payouts* with serious disciplinary actions.(mirroring the Texas legislature's SB104 in 2003.)

II. Tort System:
Enact measures equivalent to California's Medical Injury Compensation Reform Act (MICRA) of 1975 and the Texas legislature's HB4 and Proposition 12 in 2003.

III.Insurance System:
Enact measures equivalent to California's Proposition 103 of 1988 and the Texas legislature's SB14 in 2003.



*The Percentage of Physicians with Number of Malpractice Reports in the National Practitioners Data Bank (NPDB)between September, 1990 and December, 2002:
One Report = 63.4%
Two Reports = 20.2%
3-5 Reports = 13.4%
6-10 Reports = 2.5%
>10 Reports = 0.5%

The NPDB Public Use Data File does not include any information that identifies individual practitioners or reporting entities. The file is designed to provide data for statistical analysis only. (http://www.npdb-hipdb.com)

A Toxic Battle Over Medical Malpractice Lawsuits

According to the June 14, 2004 issue of USA Today in a Cover story by Laura Parker entitled "Medical Malpractice Battle Gets Personal", the battle over medical malpractice lawsuits has become toxic. Some doctors are refusing medical treatment to lawyers, their families and their employees except in emergencies. And, some professional medical societies are trying to silence their peers by discouraging doctors from testifying as expert witnesses on behalf of plaintiffs.

" Doctors and lawyers long have been at odds over malpractice litigation. But soaring malpractice-insurance premiums, which hit doctors in high-risk specialties such as neurosurgery and obstetrics particularly hard, have fueled the debate. For doctors who blame the increases in their premiums on unwarranted lawsuits and large jury awards, the solution is clear: Overhaul the nation's civil-litigation system, starting with what juries can award in damages.

Malpractice lawyers, led by the Association of Trial Lawyers of America, counter that rising premiums have more to do with the insurance injury than jury awards. They say tighter regulation of the industry is needed. The lawyers say that stifling malpractice litigation could deny Americans some of their rights to seek redress in court when doctors make mistakes.

The AMA is backing federal legislation that would cap pain-and-suffering awards against obstetricians and emergency-room doctors at $250,000. The bill, resubmitted by President Bush this year, is again stalled in the U.S. Senate where it died in 2003. Meanwhile, the battles continue in state legislatures. All but nine states have restricted medical-malpractice lawsuits in recent years. But the AMA contends that only six states have passed "effective" legislation, meaning laws that cap money awards."

The following link to a map published in the May 15, 2004 issue of Internal Medicine News shows which states had limits on noneconomic damages for medical malpractice in 2003. In New England, only Massachusetts and Maine currently cap noneconomic damages, but only Texas and Colorado have capped both noneconomic (pain and suffering) and total (punitive) damages.

On the AMA home page (http://www.ama-assn.org)in the "Spotlight on Issues" section, clicking on the "Medical Liability Reform is AMAs No. 1 Legislative Priority" link leads to another page containing the link below entitled; "Medical Liability Reform--Now!".

http://www.ama-assn.org/ama/pub/category/7861.html

Published on June 14, 2004, this provides "a compendium of facts supporting medical liability reform and debunking arguments against reform". (It is a 63 page, 610KB PDF file which requires Adobe Acrobat Reader to be downloaded).

Systemic Misunderstanding: Public Citizen versus The Doctor's Company*

In a September 23, 2002 publication, Public Citizen, a "national, non-profit public interest organization", proposed that the real problem is not medical malpractice lawsuits. Instead, Public Citizen believes that improving oversight of physicians and stopping repeat offender doctors are the keys to cutting medical malpractice costs. (http://www.citizen.org/congress/civjus/medmal/articles.cfm?ID=8308).

In its July, 2003 press release, it used 2002 federal National Practitioner Data Bank (NPDB) records to dispute the presence of a malpractice lawsuit "crisis" in Rhode Island (http://www.citizen.org/documents/RI_NPDB.pdf).

On April 14, 2004, Public Citizen released its annual ranking of serious disciplinary actions in 2003 by state medical boards (http://www.citizen.org/publications/release.cfm?ID=7308).

Based on data from the Federation of State Medical Boards (FSMB) on the number of disciplinary actions taken in 2003 against doctors, Public Citizen’s Health Research Group has calculated the rate of serious disciplinary actions, including license revocations, surrenders, suspensions and probation/restrictions per 1,000 doctors, in each state and compiled a national report ranking state boards by the rate of serious disciplinary actions per 1,000 doctors for the year. Physicians are typically disciplined for negligence, incompetence, sexual misconduct, and breaking criminal laws.

There were 2,992 serious disciplinary actions taken by state medical boards in 2003 (3.55 actions per 1,000 physicians), up 4.5% from the 2,864 serious actions taken in 2002 (3.56 actions per 1,000 physicians). State rates ranged from a low of 1.46 serious actions per 1,000 physicians in Rhode Island, which was ranked 51st of all states and the District of Columbia, to 11.58 actions per 1,000 physicians in Kentucky, a 7.9-fold difference between the best and worst states.

* A systemic misunderstanding arises when your framework and the other person’s framework are so fundamentally different that it cannot be corrected by providing more information.” (Thomas Friedman NY Times 1/28/00 Page A28)

DEFENDING THE PRACTICE OF MEDICINE:

According to Richard E. Anderson, MD, Chairman of The Doctor's Company, a leading medical malpractice insurer based in Napa, California: "There is little doubt about the following facts: Physicians across the United States have been confronted with alarming increases in the cost of malpractice insurance, and access to critical medical services imperiled in many states." Mutual or reciprocal insurance companies, like The Doctor's Company, are owned by the physician policyholders themselves, not outside shareholders and dominate the national market, currently insuring more than 60% of America's practicing physicians.

His commentary in an article entitled: "Defending the Practice of Medicine:" reviews the extent of the malpractice insurance dilemma as it exists today, compares it with historical antecedents, analyzes the root causes and suggests practical solutions that are available now. (Archives of Internal Medicine Vol. 164, June 14, 2004 1173-1178: http://www.archinternmed.com). AMA Members and subscribers to the Journal have online access to the article. Others can purchase and print it online for $12.

Main sections in the article include:
(1) The Crisis Today: Loss of Capacity
(2) Earlier Crises
(3) Unique Aspects of Today's Malpractice Arena (Frequency, Severity, The HMPS and IOM Reports)
(4) Allegations of the Plaintiff's Bar (Flat claims losses, Making up for stock market losses)
(5) Solutions
(6) Costs
(7) Conclusions

Dr. Anderson notes the 4 principal provisions of the Medical Injury Compensation Reform Act (MICRA) which was passed by a special session of the California legislature in 1975. These are:
(1) A $250,000 limit on noneconomic damages that limits only payments for pain and suffering, not actual damages.
(2) Periodic payment of awards in excess of $50,000 (damages are paid over the period they are intended to cover rather than as a lump sum).
(3) Collateral source rule (prevents duplicate collection of damages already paid by a third party).
(4) A sliding scale limitation which controls the size of on attorney contingency fees (For example, for a $1 million jury award, an attorney is limited to $221,000 plus expenses)

He concludes that "There are 27 years of evidence that the MICRA statutes can contribute significantly to a solution for the current crisis by facilitating sustainable insurance markets while still providing full indemnification for injured patients."

According to Gerald B. Hickson, MD, director of the Center for Patient and Professional Advocacy at Vanderbilt University in Nashville, Tennessee (http://www.mc.vanderbilt.edu/cppa), the current tort-based system is slow to act, expensive to operate, unpredictable in outcome—and it fails the vast majority of patients injured by poor medical care. (Internal Medicine News March 15, 2004).

“Empirical studies reveal that although adverse events due to medical negligence are common, errors appear to play only a limited role in decisions to sue. Perhaps 1% to 6% of hospitalized patients are injured due to care. Yet only 2% of families with valid claims ever sue. On the other hand, up to seven times as many families with adverse outcomes that are not due to negligence file suit as well. Stated another way, 80% of claims may not be valid.

Studies have also shown that neither patient characteristics nor complexity of care explains suit variation. Not even technical competence discriminates physicians who have never been sued from those in the highest risk group. But the existing court system is neither sensitive nor specific in awarding compensation of which only about 28% is received by the injured individual.

Examination of physician claims experiences reveal that most physicians are never sued or experience only a “random hit.” On the other hand, in any target period, a minority of 2% to 8% of physicians, by discipline, generate a disproportionate share of suits accounting for 70% to 80% of all dollars paid in settlements and awards. Researchers have also found that physicians who are in the ’high risk” group today remain there for years. Physicians who attract a disproportionate share of claims do not seem to relate well to their patients. Poor rapport between physician and patient appears to drive many decisions to sue. Families report that they perceive the doctors they sue as being unresponsive and uncaring. An adverse outcome, the declarations of subsequently treating professionals, and poor relationships—not negligence---appear to drive most decisions to file suit.”

Tyranny of the Minority: Rhode Island 2002 National Practitioner Data Bank Data

There is important Rhode Island-specific information contained in the National Practitioners Data Bank (NPDB) and the Healthcare Integrity and Protection Data bank (HIPDB) that is valuable in trying to create fair-minded and effective legislation and regulations that will actually improve the deteriorating statewide market for medical liability insurance.

This online data has been collected by the federal government since September 1, 1990 and is continuously updated as a public service at: http://www.npdb-hipdb.com. It is accessible to the public without cost, but does not currently allow the public access to the names of any physicians in the database.

The following link: http://www.publiccitizen.org/documents/RI_NPDB.pdf is a press release based on aggregate NPDB data that was published by the consumer advocacy group, Public Citizen on July 8, 2003. It provides a summary of key 2002 NPDB data for Rhode Island. To view it requires using the free Adobe Acrobat® Reader that can be downloaded from: http://www.adobe.com/products/acrobat.

As is typical in other states reported in the NPDB, between 1990 and 2002, a small minority of Rhode Island doctors (4.9%) was responsible for half (49.9%) of all malpractice payouts. This is also the case in Kentucky (4.7% for 50%), N.J. (6.1% for 54.8%), FL (6.2% for 52%), S.C. (3.9% for 61%) W.V. (10.2% for 60%) and Montana (8.7% for 53.3%).

Over that twelve-year interval, an even smaller physician minority in Rhode Island (1.5%) had made three or more malpractice payouts, amounting to 23.5% of all malpractice payouts in the state. Of the 52 doctors who made three or more malpractice payouts, only 12 (23.1%), have been disciplined by any disciplinary entity in the state.

The group of 84 doctors with 3, 4, 5, 10 or more payouts represents only about 2.4% of the 1997 RI doctor population of 3,481, and in this group, only 22 (26.5%) have had one or more reportable licensure actions.

As you can see from the tables in this July, 2003 news release, the numbers most directly related to our currently escalating premium increases and carriers leaving Rhode Island are the average amounts that have been paid out per case and per doctor. In Rhode Island, between 1990 and 2002, the average payout per case was $263,352 ($193,563,650/735) and the average payout per doctor was $367,992 ($193,563,650/526).

Public Citizen and trial attorneys may not acknowledge a real-time malpractice insurance cost and availability crisis in Rhode Island, but it's very real to me since I've seen my own General Electric Medical Protective premiums soar from $4,000 in 2000 to $20,000 in 2003 ($16,000 with my 20% discount based on zero claims since GE Medical Protective's coverage began in 1989). Even worse news for me, and about 129 of my Rhode Island colleagues using the same insurer, is the recent announcement that because GE Medical Protective is leaving the state as of July 1, 2004, my current policy will terminate on April 5, 2005.

Most of America’s more than 800,000 practicing physicians generally view the current professional liability cost and availability crisis from the perspective of the conservative/libertarian Association of American Physicians and Surgeons (AAPS.This viewpoint is expressed in its most recent newsletter entitled:"Doctors Fight Back on “Med Mal” (AAPS News Volume 60, No. 6 June 2004 at:http://www.aapsonline.org. Under “Departments” in the left frame click on: “AAPS News”.):

“What lawyers call “med mal” really refers to anything bad that happens to a patient for which a court might award money. It is a medical maloccurrence that might or might not involve malpractice—culpable neglect and negligence*---but certainly imposes liability on doctors, at least for insurance and defense costs.

The explosion in liability costs, like that in medical costs, is to a large extent sustained by an enormous pool of third-party “free money.” Everyone with the right ticket has access to the pool, which manifests the tragedy of the commons. When the pool is in danger of running dry, the third parties just extract higher premiums. But there is a limit, which is being reached with both professional liability and medical insurance. More and more states are nearing or reaching the tipping point**.”

On the other hand, the reality is that malpractice plaintiffs' trial lawyers and consumer and labor advocacy groups, like Public Citizen and Ocean State Action, will always believe that:

"The right approach to reducing lawsuits and insurance premiums is to reduce medical errors, improve oversight of physicians, stopping repeat offenders and encouraging other patient safety efforts".

In fact, Max Wistow, a prominent Rhode Island plaintiff's lawyer quoted in a Providence Journal article on May 21, 2004 parroted the Public Citizen and trial attorney mantra stating:

"The other part of the problem (in addition to malpractice insurance company fiscal irresponsibility) is that doctors have chosen to protect each other in ways that are scandalous. In Rhode Island, 4.8% of doctors were responsible for 52.7% of payouts. No one goes after those doctors".

Malpractice plaintiffs' trial lawyers and consumer and labor advocacy groups continue to scoff at the medical community’s argument that medical liability litigation constitutes a giant "lottery," in which lawsuits are purely random events bearing no relationship to the care given by a physician.

From their perspective, because a small percentage of doctors are responsible for the bulk of malpractice in the United States, better oversight by state medical boards could drastically reduce the damage they cause.
· Public Citizen’s analysis of the National Practitioner Data Bank, which covers malpractice judgments and settlements since September 1990, found that about five percent of the doctors in the United States are responsible for half the malpractice. Specifically, through September 2002, 4.8 percent of doctors (40,118) had paid two or more malpractice awards to patients. At that time, these doctors were responsible for 51 percent of all the reports made to the Data Bank, and had paid out nearly $21 billion in damages, more than 53 percent of the total damages paid.
· At the same time, 14,293 doctors, representing 1.7 percent of the doctors in the U.S., had made three or more payments, totaling $11 billion. These doctors were responsible for 27.5 percent of all malpractice awards reported up to that date.

To malpractice plaintiffs' trial lawyers, Public Citizen and other consumer and labor advocacy groups, rather than suggesting a random, lottery-like pattern, this distribution very much resembles the pattern of drunk driving recidivism. They point out that motor vehicle licensing bureaus have procedures in place to prevent or deter predisposed individuals from driving under the influence, such as mandatory counseling and license suspensions or revocations. Unfortunately, they believe, medical licensing boards do not use their statutory authority with nearly as much vigor.

This is why I personally believe that incremental malpractice liability market reforms(like those currently proposed to the Rhode Island General assembly), even if enacted into law, in the long term will not solve the underlying structural problems and thus will fail to improve the "old conditions".

What we need is a truly new order of things. If the silent majority of doctors, our hospitals and defense lawyers could ever initiate a coordinated, large scale attempt, using reasonable measures, to economically quarantine the most dangerous members of the Rhode Island doctor minority, I believe the escalating cost and availability crises could be improved significantly in both the short and long term.

Some of these types of measures are described in the September 23, 2002 Public Citizen News Release entitled: "Stopping Repeat Offenders: The Key to Cutting Medical Malpractice Costs."

(See: http://www.publiccitizen.org/congress/civjus/medmal/articles.cfm?ID=8308 ).

With adequate publicity and media coverage, I believe that, such an unprecedented good faith effort would provide the necessary leverage to at least start public and private discussions about combining:

(1) the patient safety effort with the other two components of the triad,

(2) California-style non-economic damages caps (i.e. the 4 principal provisions of MICRA (the California Medical Injury Compensation Reform Act of 1975). Similar damage caps are already in place in 24 states where they have been the only malpractice reform effort that has affected physicians' premiums, reducing them 17.1 %, and

(3) comprehensive liability market reform (between 1988 and 2001,the addition of California's 1988 " Proposition 103" to the MICRA provisions helped limit that state's cumulative medical malpractice premium increases to only 2%).

One thing is certain, Rhode Island’s one million citizens have no knowledge of these key statistics or the real scope of the crisis and its disastrous impact. And even worse, based on periodic news stories of medical negligence awards and settlements in PowerBall lottery amounts, many assume that medical negligence involves the majority of doctors both locally and nationally.

If Rhode Island's proposed new health insurance commissioner, consumers, the local media, the Governor, and our legislators and judges can appreciate the value of this integrated triad approach with its non-incremental, patient safety-centered features, meaningful reform legislation could be enacted and withstand any legal challenges.

Niccolo Machiavelli would have appreciated both the extreme barriers to innovative reform and the importance of introducing a coordinated approach that attacks all three root causes of the "med mal" problem. All we need now is the right medical, political and media leadership that can clearly explain this "new order of things" to all Rhode Island stakeholders and convince them that beneficial market reform will improve the status quo while serving the legitimate long term interests of all affected parties.


*In law: “failure to exercise the degree of care considered reasonable under the circumstances, resulting in unintended injury to another party.”

**an epidemiologic concept that small changes will have little or no effect on a system until a critical mass is reached. Then a further small change “tips” the system and a large effect is observed.

Scope of the Problem in Rhode Island

NPDB and HIPDB Data for RHODE ISLAND PHYSICIANS (September, 1990-April, 2004):

National Practitioner Data Bank(NPDB)Summary Report:

The following is a summary of reports of adverse malpractice,licensure and clinical privileges and professional society membership actions against Rhode Island physicians submitted and accepted into the NPDB. This data covers the period from September 1, 1990 through April 24, 2004.

Since September 1, 1990, there were 783 malpractice reports for Physicians (MD) and 46 for Osteopathic Physicians (DO), for a total of 832(about 5 per month).

Over the same period, there were 210 licensure, clinical privileges and professional society membership reports for Physicians and 11 for Osteopathic Physicians, for a total of 221 (about 1.4 per month).

In addition, there were 32 Medicare or Medicaid exclusion reports for Physicians and 3 for Osteopathic Physicians, for a total of 35 (about 0.2 per month).

Healthcare Integrity and Protection Data Bank (HIPDB)Reports Submitted by State Agencies and Health Plans:

This report summarizes the number of Adverse Action Reports (including licensure actions, any other negative actions or findings, and other adjudicated actions) and Civil Judgment or Criminal Conviction Reports submitted for Rhode Island physicians. This data also covers the period from September 1, 1990 through April 24, 2004.

Since September 1, 1990, there were 78 adverse action reports for Physicians (MD) and 2 for Osteopathic Physicians (DO), for a total of 80 (about 0.5 per month).

Over the same period, there were no civil judgement or conviction reports for Physicians (MD) or for Osteopathic Physicians (DO), for a total of zero per month.

HIPDB Reports Submitted by Federal Agencies:

This report summarizes the number of Adverse Action Reports (including licensure actions, any other negative actions or findings, and other adjudicated actions) and Civil Judgment or Criminal Conviction Reports submitted by Federal Agencies for Rhode Island physicians. This data also covers the period from September 1, 1990 through April 24, 2004.

Since September 1, 1990, the HHS Ofice of Inspector General made 7 adverse action reports for Physicians (MD) and 2 for Osteopathic Physicians (DO), for a total of 9 (about 0.06 per month).

Over the same period, the same agency made no civil judgement or conviction reports for Physicians (MD)or for Osteopathic Physicians (DO), for a total of zero per month.


Source: http://www.npdb-hipdb.com (Statistical Information: “Data by Profession and State”).


June 15, 2004:

SHIFTING THE FOCUS TO PATIENT SAFETY

SHIFTING THE FOCUS TO PATIENT SAFETY IS THE KEY TO MEDICAL LIABILITY MARKET REFORM:

According to Stephen C. Schoenbaum, MD, of the Commonwealth Fund, in New York, and Randall R. Bovbjerg, JD, of the Urban Institute, in Washington, DC, “physicians hold the key to malpractice reform in the United States.” (1)

They note that large numbers of Americans are the victims of preventable medical injury, which in some specialties and locations have doubled within the past 1or 2 years.

Nationwide, in 2002, malpractice premiums increased on average by 23.2%. “Caps” on jury awards and settlements do exist in 24 states and are the only malpractice reform effort that has affected physicians’ premiums, reducing them 17.1 % in these states. (2) According to the Schoenbaum and Bovbjerg, however, such caps ignore the fundamental problem by neglecting to address patient safety as an issue that needs reform.

The authors believe that reducing medical errors and improving patient safety must be an important part of any medical liability reform and that more active work to reduce harm and improve care is clearly in the best interest of the public. Ultimately, they believe, it is also in the best interest of American physicians.

They added, “Simply capping awards applies a Band-Aid to the increases in premiums bleeding many physicians, while leaving patient wounds unattended.”

A COLLECTIVE PHYSICIAN EFFORT IN RHODE ISLAND TO REDUCE PATIENT HARM:

What has never been tried in any state with or without caps on awards is to combine Rhode Island malpractice market reform with a physician-led, consumer, malpractice insurer and regulator-supported effort to “quarantine” or eliminate from practice the small minority of physicians with the worst records of repeated incidents of unequivocal patient harm.

This is entirely feasible because only a small minority of American physicians are responsible for the majority of the patient injuries and malpractice payment dollars paid.

Since the National Practitioner Data Bank inception in 1990, the one percent of physicians with the largest total payments in the NPDB were responsible for about 12 percent of all the money paid for physicians in reported malpractice judgments or settlements. The five percent of physicians with the largest total payments in the NPDB were responsible for just under a third of the total dollars paid for physicians over the 13-year period. Eleven percent of U.S. physicians were responsible for half of all malpractice dollars awarded by jury verdicts or settlements from September 1, 1990 through March 31, 2003.
(See: http://www.npdb-hipdb.com ).

Legislation producing meaningful long-term reform of the medical liability market in Rhode Island is impossible this year since the 2004 legislative activities of the Rhode Island General Assembly will most likely be completed before the July 4th holiday.

However, this is clearly an important and costly bi-partisan issue that must be confronted and solved as soon as possible. This will be possible only by creating a consensus among all its stakeholders on specific easy-to-understand reform measures and by adequately educating members of the medical and legal professions, legislators, the public and the media.

The proposed solution is straightforward and should be easily understood by all:

In exchange for an unprecedented effort by the majority of Rhode Island physicians to help enhance health care consumer safety and cut overall medical malpractice costs by stopping repeat offenders, the Democratic Rhode Island General Assembly and Republican Governor Carcieri would work together in the 2005 legislature to create a legislative pro-consumer, pro-business solution to the serious medical malpractice insurance cost and availability crisis in this state.

Subsequent postings on this topic using publicly-accessible information contained in the National Practitioner and Healthcare Integrity and Protection Databanks will provide a complete description of the scope of the medical malpractice and physician discipline problems in Rhode Island since September, 1990.

Viewing and understanding this historical data is crucial to implementing the critical first component of the triad that is necessary for meaningful long-term reform (as outlined in my first posting on June 13th).


(1)Annals of Internal Medicine (2004; 140: 51-53).
(2) Physicians Financial News March 15, 2004 (page 26) See: http://www.healthaffairs.org/press/janfe0403.htm .

June 15, 2004:

Many Physician Businesses are Falling Behind

Despite the common public perception of doctors as an economic class of the “super-rich”, for the average physician the reality is quite different.

Despite an overall national trend of rising income and general economic prosperity in the late 1990s, and first three years of the new century, physician net income from the practice of medicine declined markedly and their private office overhead as a percentage of revenue surged to an estimated 54%, a substantial rise from 36% in 1997, and more than twice the 1980 median of 25%. (1)

Between 1995 and 1999, with CPI inflation averaging 2.5%, the average United States’ Professional Technical worker income rose 3.5%. In comparison, the percent change in average income decreased by 5.0% for all physicians, 6.4% for Primary Care physicians and 4.0% for Specialists physicians.

In addition, there is an increasing and demoralizing disparity between provider workload and compensation. The American College of Physicians (ACP noted that between 1999 and 2000, physician income declined by 13.9%, while total hours worked underwent a 6.7% increase. (http://www.acponline.org/hpp/e-consult.pdf).

In 2002, U.S. healthcare spending reached $1.6 trillion ($5,440 per person) with hospital and drug spending driving most of the increase. Hospital spending and prescription drug costs fueled the 9.3% increase over 2001. Total spending is expected to exceed $2 trillion by 2004.

In 2003, as a share of US gross domestic product, healthcare costs jumped to 15% up from only 5% in 1980. They are now projected to rise to almost one quarter of GDP by 2030. Last year, drug spending alone in the United States and Canada rose 9.1% to $230 billion, accounting for 46% of the estimated worldwide sales of $500 million. Many experts now believe that health costs are rising at a rate that, in the long term, employers and the federal and state governments will not continue to bear.

Health care spending (i.e medical costs) which climbed faster than the rest of the U.S. economy in 2002 at a 9.6% rate, slowed to a 7.4% rise in 2003. Hospital spending, which makes up the lion's share of health care costs, accounted for 53% of the total increase in spending in 2003, a year in which inpatient and outpatient hospital care costs rose by 8%, the biggest one-year increase since the government began tracking these figures. Spending on prescription drugs, meanwhile, grew by 9.1% in 2003 compared to 13.2% in 2002 and the peak of 18.4% drug cost growth set in 1999.

Compared to hospital and drug spending, aggregate physician spending is not growing as fast as in recent years. (2) Spending on physician care rose by only 5.1% in 2003 compared to a 6.5% increase in 2002. This is a significant decrease from the 8.6% growth in 2001, with physician spending reaching $339.5 billion representing 21% of total healthcare spending last year. Since 1960, as a percentage of U.S. personal health expenditures, physician spending has stayed about the same, while the hospital share grew and then declined and the spending on home health and nursing homes has grown substantially.( Distribution of Personal Health Care Expenditures by Type of service, 1960-2000: Table 1.5 See: http://www.cms.hhs.gov/charts/healthcaresystem/chapter1.pdf).
According to a recent study by the Center for Studying Health System Change, a public policy research organization in Washington, DC, between 1994 and 2003, the average annual growth in healthcare spending, by type of service showed the following percentages:
Physician = 4.29%
Hospital Outpatient = 9.98%
Hospital Inpatient = 1.39%
All hospital services = 5.67%
Prescription drugs = 12.14%

Prescription drugs alone now account for 11 percent of all U.S. healthcare spending, twice the level of just ten years ago.

In the face of aggregate declining inflation adjusted revenues and because of inexorable increases in key fixed costs to a national median of about 55%, many physicians in Rhode Island and other insurer-dominated, highly regulated markets continue to struggle to make ends meet. According to the 2003 American Medical Group Association’s (AMGA’s) Medical Group Financial Operations Survey, many doctor’s groups are experiencing losses in the midst of an increasingly regulatory and competitive environment. (3) An important part of declining profitability is the more than doubling of median practice overhead for U.S. physicians over the last 30 years, from 25% in 1976 to 36% in 1996 and 54% in 2002.

Based on financial performance on a per physician basis (by region), the average group lost $3,977 per physician. The biggest average losses were in the Northern ($11,943) and Southern ($12,954) regions. In 2002, the average annual compensation for a group practice internist decreased by 1.8% compared to increases of 2.2% for a family physician and 0.9% for an OB/GYN physician.

Doctors continued to fall behind othe economic sectors last year as well. According to the US Commerce department ans Sullivan, Cotter & associates, in 2003,the average compensation increase of 1.3% for U.S. primary care physicians again lagged behind the 1.9% increase in the annual inflation rate. A recent survey by Akel & Associates found that 67% of physicians expect their practice revenue to "decline or remain the same" in the next three years.

In Rhode Island, however, the situation is substantially worse because more than 75% of office-based physicians are practicing, not in medium or large group practices, but as individuals or in small groups with 5 or less members.

Even more ominous from the consumer perspective, with private and public reimbursement in the lowest 10th percentile compared to all other states and fixed by the payers for over three decades, most of the independent solo practitioners in Rhode Island are in even deeper financial trouble than in other states. Issues contributing to their escalating financial challenges include rising liability premiums, cutbacks in retroactively dated Medicare reimbursement and unfunded legislative and regulatory mandates including HIPAA.

Looking forward 3-5 years, physician accessibility and quality is further threatened by an average educational debt of a U.S. medical school graduate of $109,457 (4) and surveys indicating that 52% of America’s active physicians’ if given a second chance, say they wouldn’t go into medicine again. (5) And in fact, the most recent Meritt, Hawkins & Associates national survey predicts an impending physician shortage in the United States. In their 2004 nationwide survey of 436 physicians, in the next 1 to 3 years, more than 50% of physicians between the ages of 50 and 60 are currently planning to retire, seek nonclinical jobs, or significantly reduce the number of patients they see.

Doctors just entering practice and those still in training also have financial problems.

According to the 2004 report from the Association of American Medical Colleges (AAMC), there has been a 238% increase of tuition and fees in the 126 medical schools in the United States since 1984, an annual average increase of almost 12 %.

In 2003, the median education debt of a US medical school graduate increased to $117,000. Graduates of private medical schools incurred a median debt of $135,000, while the median debt for public medical school graduates was $100,000. By contrast, in 1984, median debt for private and public medical school graduates was $27,000 and $22,000 respectively. Overall, medical education debt was 4.5 times as high in 2003 as it was in 1984, while average tuition and fees was 2.7 times as high in private medical schools and 3.8 times as high in public medical schools.

For first-year students in 2003-2004, average tuition and fees in private medical schools was $32,488 for state residents and $34,067 for nonresidents. The average for public medical schools for residents was $16,172 and $33,653 for nonresidents. (6) According to US News & World Report, for example, in 2004 one year's tuition at the private Harvard Medical School cost $34,766. An additional $19,234 in fees, supplies and living expenses increased the total annual cost to $53,900.

The danger is that medical education may soon not be within reach for many qualified students. And at the same time, student debt may become unmanageable if practice expenses, including malpractice premiums, continue to rise and physicians' income remains flat or continues to decrease.

The AAMC survey also found the average annual income for a US physician was $187,500 in 2003. In the face of soaring educational debt, practice operating expenses exceeding 60%, declining profitability and crises in medical liability insurance cost and availability, it remains to be seen whether this potential income level will continue to attract the "best and brightest" into the medical marketplace for physician services.

This increasingly hostile market for physicians is also increasingly threatening for patients, employers and government who must pay for health care products and services and especially for the more than 41 million Americans without private or public health insurance coverage.

According to Paul B. Ginsburg and Bradley C. Strunk of the Center for Studying Health System Change(http://www.hschange.org), "Costs--and therefore private health insurance premiums--will likely continue to outstrip growth in the overall US economy by a significant margin for the foreseeable future. Although some argue that ever-higher spending for medical care is a good thing, the continuing rapid growth in health spending will make insurance unaffordable to more and more people. Ultimately, policy makers are likely to confront a stark trade-off between health care costs and access, perhaps leading to a willingness to discuss taboo subjects, such as rationing of health care."

(1) Medical Economics Annual Surveys, for 1997 (October 26, 1998) and for 2002 (November 7, 2003).
(2) Health Affairs, 23 (1): 147-159, 2004.
(3) See: http://www.amga.com or call: 703-838-0033.
(4) Association of Medical Colleges, 2004.
(5) Merritt, Hawkins & Associates, 2003.
(6) Physicians Financial News, June 15, 2004 (page 3)The complete report, entitled "Medical School Tuition and Young Physician Indebtedness", can be found on AAMC's Website at (http://www.aamc.org/publications) .

June 14, 2004:

Physicians and Patients are Running out of Time

TRENDS IN UNITED STATES MEDICAL MALPRACTICE PREMIUMS:

Between 1998 and 2002, changes in malpractice premiums were -2.9% versus 20% for Internal Medicine, 1.0% versus 21.9% for General Surgeons and 0.3% versus 14.2% for OB/GYN.

2003 FACTS(1):
· The average medical malpractice jury verdict award increased to $1,000,000.
· The average out-of-court settlement for a medical malpractice claim = $299,000.
· Percentage of all medical malpractice jury verdicts decided in the doctor's favor = 61%.

Nationwide, premium changes for internists, general surgeons and OB/GYN physicians ranged from a 144% increase to a 16% decrease. The vast majority, almost 66%, saw premium increases of 10% or more, about 6% being hit with rates that were higher by 50% or more. Although 20.3% saw no changes in their premiums in 2003, only 2.3% saw lower rates.

Their is a wide range of professional liability insurance annual premium costs across the United States. The highest current premium costs for Internal Medicine ($65,697), General Surgeons ($226,542)and OB/GYNS ($249,196) are in Dade County, FL. The lowest premiums are in Nebraska for Internal Medicine ($2,786),in Minnesota for General Surgeons ($8,717) and in South Dakota for OB/GYN ($14,662).

Four factors have been identified as the principal drivers of escalating United States malpractice premiums and accelerating disruption of the insurance market:
(1) increased frequency of lawsuits
(2) growing jury awards and settlements
(3) declines in insurers investment income
(4) the bankruptcy of some malpractice carriers and the decisions of others to stop writing new policies in some states or withdraw from the business altogether.

For example, between 1995 and 2002, operating expenses, settlements and jury awards for every dollar of premium received have increased from $0.95 to $1.29. Investment earnings as a percentage of premium income has decreased from 49 percent to 18 percent. Overall, in 2002, the U.S. malpractice insurance industry suffered an aggregate industry-wide loss of 11 percent.


(1) Jury Research Verdict and Physician Association of America, 2003; Medical Liability Monitor 2003 rate survey; Health Affairs, Medical Liability Monitor (as of 10/8/02)(http://www.medicalliabilitymonitor.com).


June 14, 2004:

Some Ominous Statistics

UNITED STATES MALPRACTICE CLAIMS COSTS: Average payouts for malpractice claims are rising, as are the expenses of defending against them.

Between 1988 and 2002, average legal expenses paid by physician-owned liability insurance companies for cases that doctors settled or lost increased from $2K to $48K and average payments to plaintiffs made by physician-owned liability insurers for settled or lost claims almost tripled from $110K to $300K.

Source: Physicians Insurers Association of America (PIAA)

According to Jury Verdict Research, (http://www.juryverdictresearch.com 800-341-7874):

$4.9 billion = medical malpractice claims paid by insurance companies in 2003.

$1,010,858 = median compensatory jury award for medical malpractice cases. This steadily climbed by more than 100% between 1996 and 2000, but leveled off between 1999 and 2002. ($0.713 million in 1999, $1 million in both 2000 and 2001 and $1,010,858 in 2002)

52% = percentage of $1 million or more medical malpractice verdicts between 1999 and 2002.

42% = the overall medical malpractice plaintiff recovery rate (i.e. the ratio of plaintiff verdicts to total verdicts) in 2002.

Between 1998 and 2002, the following increases in plaintiffs recovery rates occurred:

Medical Malpractice Overall: 33% to 42%
Diagnosis Negligence: 33% to 43%
Surgical Negligence: 30% to 41%
Childbirth Negligence: 43% to 60%

COMMON CLAIMS:
According to Jury Verdict Research, from 1996 to 2002, the following median awards were made for the five most common injury claims in medical malpractice cases.

Brain damage = $5.3 million
Cancer = $1.3 million
Death = $1 million
Leg injuries = $670,000
Genital injuries = $300,000

According to the Physician Insurers Association of America, (PIAA; http://www.thepiaa.org), a trade association of more than 60 malpractice insurers:

65% = percentage of malpractice suits filed in 2002 that were dropped or dismissed.

$16,000 = the average expense to a malpractice insurer for dropped or dismissed suits

24% = percentage of malpractice suits filed in 2002 that were settled out of court.*

1% = percentage of malpractice suits filed in 2002 that were tried and decided in favor of the plaintiffs.

60% = percentage of any settlement or jury award consumed by lawyer and witness fees and court costs.

WHERE TORT COSTS GO:
Awards for noneconomic loss = 24%
Awards for economic loss = 22%
Administration = 21%
Claimant's attorney fees = 19%
Defense costs = 14%

A "tort", which from Law French, literally means "a wrong" is a civil wrong for which the law provides a remedy. In 2002, total costs for all tort case types in the United States were $233 billion. This represented 2.23% of the Gross Domestic Product or $809 per capita and increased from $205 billion or $721 per capita in 2001. Medical malpractice tort costs have steadily been growing at a faster pace than all other tort costs since 1975. In 2002, according to Tillinghast-Towers Perrin (TTP), a New York-based insurance industry consulting firm, they were $24.5 billion, or 10.5 percent of total tort costs.

Aggregate medical malpractice premiums have more than doubled in less than 10 years. Direct written premiums reached $4.2 billion in 2003, up from $1.9 billion in 1995, with the biggest spike occurring in 2002 when premiums jumped to $4 billion, up from $3.1 billion the previous year.

During the same period, insurers' net income plummeted from 23 percent in 1995 to -2 percent in 2003. Profits hit a low in 2002 at -11 percent.

A key indicator from A.M. Best, which rates insurers, reflects easing financial pressure on the industry. The so-called "combined ratio," a measurement of the amount insurers spend on claims for every premium dollar they take in, dropped to an estimated 1.35 in 2003, from 1.53 in 2002, the Rockville, Md.-based PIAA reports. That means carriers' losses declined last year to 35 cents for every premium dollar collected, from 53 cents the previous year.

The rating agency predicts a further drop in the 2004 ratio, to 1.28, says Lawrence Smarr, president of PIAA. The break-even point is 1.14, he adds, so while the business climate is improving, insurers are "not out of the woods yet."

Source: Data compiled for the Physician Insurers Association of America (PIAA)from Tillinghast-Towers Perrin (Physicians Financial News: July 15 and Aug 15, 2004).





*Many doctors believe they are pressured to settle a malpractice claim even when they are in the right, thus saving the insurance company the legal costs of contesting the suit. Because of this, plaintiff’s lawyers often file “shotgun” suits aimed at any doctor whose name shows up on a patient’s chart, even if the doctor had absolutely no effect on the medical outcome.


June 13, 2004:

A PATIENT-FOCUSED TRIAD FOR MEDICAL MALPRACTICE LIABILITY REFORM IN RHODE ISLAND:

TRIAD FOR MEANINGFUL REFORM OF THE MEDICAL LIABILITY MARKET IN RHODE ISLAND:

American consumers and voters want specifics and solutions on healthcare system reform, not just empty rhetoric. Here are three tangible and achievable specific measures to solve the growing crises in malpractice insurance cost and availability in Rhode Island. No known U.S. state has tried to implement all three concurrently or sequentially.

(I). Utilize public information in the National Practitioners Databank (NPD), the Health Integrity and Protection Databank (HIPDB) and the Rhode Island Board of Medical Licensure and Discipline (RI BMLD) to promote necessary legislation and regulation that “quarantines” the most dangerous licensed physicians in Rhode Island based on repetitive malpractice reports, criminal convictions and civil judgements. (1)

(II). Reform the medical liability market by enacting measures equivalent to California's Medical injury Compensation Reform Act(MICRA)of 1975(2)

(III). Reform medical malpractice and all other major insurance lines by enacting measures equivalent to California's “Proposition 103” of 1988(3)






(1)See: http://www.npdb-hipdb.com and http://www.docboard.org/ri/discipact.htm

(2) According to a recent analysis published in the journal Health Affairs (January 21, 2004), award caps exist in 24 states and are the only malpractice reform that has reduced physicians’ premiums, reducing them 17 percent. (http://www.healthaffairs.org/press/janfeb0403.htm).

(3) In California, damage caps instituted by themselves in 1975 (MICRA) did not prevent total medical malpractice premiums paid by California providers from increasing 190 percent between 1976 and 1988 (almost 16% per year). When Proposition 103, a major insurance market reform which included all major insurance lines was passed by voters in 1988, malpractice premiums subsequently declined by 2 percent between 1988 and 2001. (http://www.pifc.org/Media/pdfiles/refprop103.pdf).


Bob Coli, MD

June 13, 2004: