Texas doctors hit hard by increases, which insurers say are needed

01/20/2002

By PATRICIA V. RIVERA / The Dallas Morning News

Dr. William F. Tucker, an orthopedic surgeon, figured he'd try to curb the cost of his malpractice insurance premium by abandoning spinal surgeries and reducing his emergency rooms calls.

Both decisions cut down on his income but provided him with a greater sense of security as malpractice lawsuits against doctors become more common in Texas and the nation. Then came the shocking news that his premium would rise by 63 percent to $38,000.

"Almost without exception, any physician that I know is at least entertaining the option of doing something else because the costs keep going up, liability keeps rising and reimbursement is going down," said the 38-year-old Dallas physician. "We're all trying to figure out what to do."

Doctors, insurers and lawmakers have been trying to control high medical malpractice premiums for almost three decades, and – even after several rounds of malpractice reform – little seems to be working.

Many of the 36,000 physicians across Texas are again reckoning with skyrocketing malpractice premiums, which for 2002 are due this month. Increases range from 30 percent to 200 percent, according to the Texas Medical Association. A recent report released by the American Medical News showed that only seven other states – Arkansas, Connecticut, Illinois, Nevada, North Carolina, Ohio, and Pennsylvania – experienced increases of 30 percent or more by at least two carriers.

Experts say the situation could approach the crisis of the mid-1970s, when rising costs forced malpractice insurers to desert the market, leaving physicians few options for coverage. For now, physicians are starting to experience the back-to-back double-digit premium increases visible in the late 1980s. Doctors complain that the high premiums of 2002 come as they struggle with operating costs that outpace revenue because of medical inflation and lower managed care reimbursements.

Malpractice premiums can take up between 10 percent and 25 percent of a physician's revenue, which range from about $100,000 for a family physician to $500,000 for a neurosurgeon, the Texas Medical Association said.

Other states are grappling with the issue that affects nursing homes and hospitals as much as physicians. The doctors' cries, however, are heard loudest because they pay their own premiums, while those of other agencies are covered by operating budgets.

Players in the arena are arguing about the causes and the solutions – already expecting to hit more dead-ends.

"What this means is that the tort system is not working. It's basically an open bank account for lawyers," said Uwe Reinhardt, a Princeton University health care economist. "Ultimately the solution must be a nonlitigation arbitration, which won't happen here."

Defensive measures

In the 1970s, rural doctors started dropping high-risk services, such as delivering babies. They've ceased certain high-risk procedures such as Dr. Tucker's spinal surgeries, cut back on staff, ordered additional and sometimes unnecessary medical tests, and pulled out of medicine altogether. Some are avoiding emergency room calls, which expose them to unknown patients.

The problem is particularly acute in Texas, where 51.7 percent of all physicians in 2000 had claims filed against them, according to the Texas Medical Examiners Board. Although no concrete numbers are available as a comparison, several industry experts say the frequency is twice the national average.

The Texas Legislature will tackle the issue again next year. The Texas Medical Association and insurers are putting pressure on lawmakers to amend reform measures. The 1995 Legislature passed a sweeping package of seven tort reform bills that made it harder for people to file certain lawsuits – including medical malpractice suits – and to collect huge damage awards.

Texas Medical Liability Trust president W. Thomas Cotten said future legislation should include limiting frivolous claims. The liability trust, one of Texas' largest medical malpractice insurers, covers about 10,000 physicians statewide.

In Texas, about 85 percent of cases are closed without payment to plaintiff, yet they still cost money to resolve. Jury awards should also be limited, he said.

"One of the biggest problems we have now is that juries have gotten away from looking at medical negligence and are now just looking at damages," he said.

Paul Romano, senior vice president of health care at The Chubb Group of Insurance Cos. in Warren, N.J., said people who have been injured by health care providers deserve compensation. But in recent years, the public has become desensitized to the value of a million dollars, leading to larger awards.

"We just can't continue with the way the system is working right now," he said. The Chubb Group insures physicians and hospitals throughout Texas and in 46 other states.

Kim Ross, vice president of public policy at the Texas Medical Association, said immediate solutions are difficult. A variety of committees are preparing possible remedies for the 2003 Legislature to consider. The TMA and other agencies will study issues such as the efficiency of tort law, underwriting practices, and the prevention of medical errors.

"You have to tackle this on all three fronts. Anything less won't work," he said.

Who's to blame?

John Polewski, a malpractice attorney in DeSoto, takes exception to blame placed on lawyers.

"We're not puppet masters. We can't hypnotize the 12 jurors sitting on a box nor the judge who decides on the award," he said.

Consumer advocacy groups continue to follow the issue closely as lawmakers study tort reform.

"Before we start bailing out insurance companies and eliminating consumer rights in Texas, we need to get the bad doctors out of the system. Right now, the good doctors are paying for mistakes of the rest," said Dan Lambe, executive director of Texas Watch, a statewide consumer advocacy organization.

Insurance carriers in Texas paid more than $381 million in claims in 2000 alone, according to the Texas Department of Insurance – costs passed on to policyholders. That's an 87 percent increase since 1995.Nationally, the median malpractice award more than doubled from 1994 to 1999, to $800,000, according to the latest figures from Jury Verdict Research in Horsham, Pa. The firm doesn't break the awards down by state.

Mr. Cotten, of the Texas liability trust, said any company that writes medical malpractice has had severe losses in recent years. Several insurers have pulled out of the business.

St. Paul Cos., for instance, announced in December that it no longer would write medical liability policies. It covers physicians in 45 states.

Insurers that stayed increased their premiums, with the Texas Medical Liability Trust raising rates by 100 percent in the last 21/2 years, Mr. Cotten said.

Executives admit that insurers are partially responsible for complicating the situation. Competition in the last 10 to 15 years has become fierce, and some groups, particularly the physician-formed nonprofits, have forced prices to drop artificially, said Donald Zuk, chief executive Los Angeles-based SCPIE Holdings Inc. The company stopped writing medical malpractice contracts in Texas, after experiencing a 200 percent paid loss ratio in 2000, he said.

"Prices were too low, and then we started to see awards that were ridiculous," he said. "Texas is a real mess in that sense. The only thing you can do is pull out."

Indeed, claims against physicians have increased over the last decade, though they fluctuate widely from year to year. Patients filed 4,501 claims in 2000, up 51 percent from 1990, according to the Texas Medical Examiners Board.

More troublesome is the rise in expenses involved in resolving a case. Each claim cost an average of $68,681 to litigate in 2000, compared with $46,079 in 1995. The figure does not include the amount of settlement or award.

"That means it's taking longer to get the claims resolved, and there are glitches in the system with regard to the efficient disposition of [invalid] claims," said Mr. Ross, chief lobbyist for the Texas Medical Association.

Ultimately, the underwriting costs are greater for certain kinds of physicians such as obstetricians/gynecologists, making it difficult to recruit doctors in those specialties, he added.

"The rate increase came first, and that has been very difficult for the physicians, but what is happening now is that there are physicians in particular pockets of the state that can't find coverage," Mr. Cotten said.

At least 25 companies continue to sell malpractice liability insurance in Texas. Doctors who can't get coverage can look to the Joint Underwriting Association, supported by all professional liability insurance carriers in the state. Any doctor who has been refused by at least two carriers can get coverage from the association, which, by law, must charge the highest rates in the state.

Crisis in Valley

Seven in 10 Valley doctors have had medical liability claims filed against them. A February 2001 survey by the Texas Medical Association found that 1 in 3 Valley doctors say their insurance providers have stopped writing liability insurance.

Frustration is high everywhere. But in the Valley, half of the physicians admitted to being inclined to leave the area or to retire, according to a survey conducted in February 2001 by the Texas Medical Association.

Many doctors in the Valley said they profile patients and refuse to treat some, because they fear the patients are prone to sue. They said they deny care for people who pay with cash, because the patients are most likely poor and may look at a lawsuit like a lottery opportunity.

Some physicians are even hesitant to respond to a "code blue," which indicates a medical crisis, in a hospital. Dr. Carlos Cardinez, a gastroenterologist in McAllen, said he doesn't want to respond anymore because of the legal uncertainty.

"After I do [treat the patient], I'm constantly looking over my shoulder for a certified letter," Dr. Cardinez said.

Physicians say the region has become a magnet for personal injury lawyers. Jack McGehee, president of the Texas Trial Lawyers Association and a Houston-based malpractice attorney, questions such a premise.

"The Rio Grande Valley problem is an aberration. The current system is working in weeding out frivolous cases," he said. Texas is one of the few states that provides physician defendants greater privileges than other defendants, such as expert witnesses and caps on damages, he added.

Because of the stringent requirements for malpractice cases, his firm accepts only one in every 300 studied, he said.

Still, physicians throughout Texas feel the pinch from the rise in premiums.

Dr. James E. Race, an internist in Oak Cliff, learned last month that he would have to pay $23,000 in malpractice premiums – a 200 percent increase over last year. Internists and family doctors are considered one of the least-risky groups.

Dr. Race said he is till trying to figure out how to pay for the increase amid other rising overhead costs. Like so many doctors, his profits have fallen over the last three to five years.

Increases in medical practice costs have outstripped revenue increases over the last 10 years, according to the Medical Group Management Association's 2000 cost survey. Operating costs for multispecialty groups went up an average of 35 percent over the past 10 years, while revenue increased 21 percent over that same period.

"Everyone else in business can make up costs by raising their [revenue]. I don't have the luxury of charging my patients more money," said Dr. Race, who must adhere to federal and private health insurance contracts.

Dr. Tucker, the orthopedic surgeon, feels a similar frustration. He's trying to make up for the premium rise by recruiting his wife to work the front desk, because he can no longer count on the extra income of spinal surgeries and emergency room shifts. Page Tucker often comes in to work with their 7-month-old daughter. For Dr. Tucker, the $38,000 annual premium represents 11 percent of his operating costs for one year.

"We've resorted to turning this into a mom-and-pop operation just to stay open," he said.

Staff writer J.C. Conklin contributed to this report.