- Email: [email protected]
Review of the professional medical liability insurance crisis: lessons from Missouri merit prize
American Journal of Obstetrics and Gynecology (2004) 190, 1534e40
www.elsevier.com/locate/ajog
Review of the professional medical liability insurance crisis: Lessons from Missouri Merit Prize Erol Amon, MD, JD,* Hung N. Winn, MD, JD Division of Maternal-Fetal Medicine, Department of Obstetrics, Gynecology, and Women’s Health, St. Louis University, St. Louis, Mo
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– KEY WORDS Professional liability insurance crisis Medical malpractice Medical liability Medical errors Tort reform
Objective: This study was undertaken to document and generalize the professional liability insurance (PLI) crisis. Study design: Data analysis from physician surveys, Missouri Department of Insurance, and court records. Results: In 2001-2002, many insurers stopped writing new and existing PLI. A survey found 1 in 7 physicians had their PLI terminated and/or application for new insurance denied. Average premiums increased 22% in 2001 and 60% in 2002. Accordingly, 50% of surveyed obstetricians took salary cuts, 18% secured loans, 9% liquidated assets, and 55% significantly limited their clinical services. An adverse court ruling caused insurers to double reserves. Incomplete data led the Missouri Department of Insurance to erroneously conclude a decrease in claim frequency and severity. In contrast, courthouse records and missing data sources revealed increased malpractice filings. PLI premiums continue to rise. Conclusion: Many life-saving specialists are being forced out of business. Specialists are less willing to care for emergency and indigent patients for fear of liability exposure. Legislative enactments leading to meaningful tort reform, public support, and judicial restraint must occur to save health care. Ó 2004 Elsevier Inc. All rights reserved.
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– The professional liability insurance (PLI) system is the primary funding mechanism for defending medical malpractice claims and indemnifying successful negligence lawsuits. This dynamic pits patient against physician, and plaintiff attorney against liability insurer. In late 2001 and throughout 2002, many liability insurers quit writing new and existing PLI policies in MisPresented at the 70th Annual Meeting of the Central Association of Obstetricians and Gynecologists, October 1-4, 2003, LaJolla, Calif. * Reprint requests: Erol Amon, MD, JD, 6420 Clayton Rd, St. Louis, MO 63132. E-mail: [email protected] 0002-9378/$ - see front matter Ó 2004 Elsevier Inc. All rights reserved. doi:10.1016/j.ajog.2004.03.057
souri, whereas others became insolvent (eg, PHICO). Accordingly, many physicians sought other PLI carriers to insure against professional negligence claims. As Missouri lost 57% of its PLI capacity combined with stricter underwriting criteria, availability became an issue and rapidly rising premiums exacerbated affordability.1 For similar reasons, the American College of Obstetricians and Gynecologists (ACOG) has placed 19 states, including Missouri, on red alert status.2 Causes of the PLI crisis of availability and affordability are debatable, but its potential downstream effects are clearly alarming.3,4 Trauma and maternity units are closing. Timely access to life-saving specialists is being
1535
Amon and Winn Table I
Table II
Closed claim count for independent physicians
Year
Total claims
Claim count reported as opened claims* Independent physicians
Hospitals
Year
Total claims
Closed with payment
CWP
1998 1999 2000 2001
1679 1696 1765 1226
736 819 907 569
374 292 273 262
1998 1999 2000 2001
766 757 752 630
154 209 190 190
612 548 562 440
* Total claims are for all health care providers including dentists, chiropracters, nurses, nursing homes. Independent physicians account for less than half the total claims
compromised.5 The PLI crisis also challenges our ethical imperatives to care for all patients. The inability to pass on increases in PLI to payers of health care insurance because of their price controls resulted in an insurance squeeze, and together with a poor economy caused a perfect storm. Our purpose is to chronicle the current PLI crisis in Missouri, organized efforts to mitigate this crisis, and generalize lessons learned.
Methods The first author is past president of the St. Louis Metropolitan Medical Society (SLMMS) for 2002 and knowledgeable on Missouri’s PLI crisis. At SLMMS’s request, the Missouri State Medical Association (MSMA) conducted a statewide survey of physicians’ experience with their PLI during summer 2002 (on file with MSMA). ACOG’s Department of Professional Liability and Risk Management conducted a national PLI survey from July 12 to August 12, 2002, for changes made within the previous 18 months. Data relevant to Missouri were extracted with permission for use in state tort reform efforts (on file with ACOG and SLMMS). A 1986 Missouri statute enacted a maximum recovery per defendant (cap) for noneconomic damages. The key judicial decision affecting this cap, Scott v SSM Healthcare,6 will be analyzed. In its 2001 Medical Malpractice Report, the Missouri Department of Insurance (MDI) found that the frequency and severity of PLI claims were markedly down in 2001.7 They prematurely concluded in October 2002 that the PLI crisis was caused by the insurance industry and not the tort system. Tables I, II, and III are extracted from their report. The report is critically analyzed. Because the most complete source of data on medical malpractice lawsuits is the courthouse, SLLMS analyzed the number of ‘‘personal injurydmalpractice’’ cases filed in the 21st and 22nd Judicial Circuits. These 2 Circuits account for the majority of such filings in Missouri. These data excluded cases filed under the Wrongful Death Act (on file with SLMMS). MSMA initiated legislation, modeled in part on the renowned Medical Injury Compensation Reform Act
CWP, Closed without payment.
of 1975 from a state not in crisis, California.8 Tort reforms included reinstating the single cap, limiting venue shopping and attorney contingency fees, repealing mandatory PLI and joint and several liability rules, capping trauma and punitive damages, strengthening the affidavit of merit, allowing evidence of collateral sources, immunizing benevolent gestures, and shortening the statute of limitations. Important definitions are economic damages: arising from monetary harm including medical bills, lost wages, and lost earning capacity, both future and past (unlimited in amount). Noneconomic damages: arising from nonmonetary (nonquantifiable) harm, including pain and suffering, mental anguish, physical impairment, disfigurement, and loss of consortium. Economic and noneconomic damages are called indemnity payouts. PLI does not insure punitive damages. Loss adjustment expenses (LAE) are known as defense costs: These include expenses paid to defense counsel, court costs, depositions, experts.
Results MSMA and ACOG surveys Five hundred eighty-two MSMA physicians responded to the PLI survey, a response rate of 20%. The average premium for $1million/$3 million coverage increased 22% in 2001, with a further 61% increase in 2002. Accordingly, 31% of the physicians considered leaving practice, and more than 25% limited their clinical practice. Sixteen percent had their PLI terminated and/or application for new insurance denied. Of these, 80% were unable to find primary coverage. Hardest hit were obstetricians, neurosurgeons, and general/trauma surgeons. ACOG surveyed 528 Missouri obstetricians. In response to increases in PLI premiums, 72% of 190 respondents reported significant financial changes. Fifty percent took a 10% or greater salary reduction, 18% secured a loan, and 9% liquidated assets to stay in business, 7% reduced liability coverage, and 16% made other financial changes. Changes in clinical practice were reported by 55%. Nineteen percent decreased high-risk obstetric care, 12% stopped delivering infants, and 8% decreased/stopped performing major gynecologic surgery.
1536 Table III
Amon and Winn Summary by amount of indemnity paid for each defendant physician claims closed in 2001
Indemnity range
Number Cumulative Average of closed % of Indemnity months claims claims paid
None 1-999 1,000-1,999 2,000-2,999 3,000-3,999 5,000-5,999 10,000-19,999 20,000-29,999 30,000-39,999 40,000-49,999 50,000-59,999 60,000-69,999 70,000-79,999 80,000-89,999 100,000-199,999 200,000-299,999 300,000-399,999 400,000-499,999 500,000-999,999 1,000,000-1,999,999 2,000,000-2,999,999 Total Total paid
49 19 8 42 56 21 47 55 69 62 71 64 53 24 55 53 55 46 55 52 37 51 54
440 2 2 1 1 2 15 12 6 10 10 4 9 1 42 30 19 6 13 4 1 630 190
69.8% 70.2% 70.5% 70.6% 70.8% 71.1% 73.5% 75.4% 76.3% 77.9% 79.5% 80.2% 81.6% 81.7% 88.4% 93.2% 96.2% 97.1% 99.2% 99.8% 100%
Cumulative % of Average indemnity economic paid damages
0 0.0% 742 0.0% 2,451 0.0% 2,750 0.0% 3,500 0.0% 10,000 0.0% 203,179 0.6% 284,750 1.3% 198,000 1.8% 438,700 3.0% 503,000 4.3% 249,239 4.9% 667,936 6.7% 80,000 6.9% 5578879 21.4% 7,230,670 40.2% 6,517,500 57.1% 2,612,499 63.9% 7,665,000 83.9% 4,199,134 94.8% 2,000,000 100% 38,447,929 38,447,929
Adverse case law On January 29, 2002, the Missouri Court of Appeals for the Eastern District of Missouri in its Scott v SSM Healthcare decision expanded the number of allowable caps for noneconomic damages. Since 1986, Missouri Revised Statutes Section 538.210.1 provided: ‘‘In any action against a health care provider for damages for personal injury or death arising out of or failure to render health care services, no plaintiff shall recover more than $350,000 per occurrence for non-economic damages from any one defendant as defendant is defined in subsection 2 of this section.’’ (The cap is adjusted upward annually to account for inflation.) The Court interpreted ‘‘per occurrence’’ to mean ‘‘acts of neglect complained of’’ and ‘‘not receipt of injury by the plaintiff.’’ Although technically permitting a cap to remain, the Court allowed the cap to be multiplied by the number of negligent acts. Accordingly, plaintiffs may now receive multiple caps for multiple alleged acts of negligence resulting in a single injury. This interpretation essentially eviscerated the single cap on noneconomic damages.
The MDI malpractice report In Table I the number of opened claims for independently insured physicians, peaked at 907 in 2000, followed by
0 321 1,226 0 0 1,050 8,113 12,328 21,290 31,865 26,414 32,061 25,802 6,300 62,211 144,430 153,116 152,083 360,385 924,784 2,000,000 35,720 118,441
Average indemnity Average Average LAE per noneconomic per defendant defendant damages 0 50 0 2,750 3,500 3,950 5,433 11,401 11,711 12,005 23,887 30,249 48,413 73,700 70,619 96,592 189,911 283,333 229,231 125,000 0 25,308 83,917
0 11,528 371 2,419 1,226 0 2,750 17,353 3,500 4,304 5,000 1,167 13,545 14,527 23,729 31,193 33,000 23,349 43,870 34,290 50,300 22,898 62,310 33,167 74,215 34,848 80,000 1,081 132,830 43,326 241,022 44,774 343,026 34,648 435,417 21,531 589,615 62,228 1,049,784 146,695 2,000,000 0 61,028 19,363 202,358 37,508
a 37% decrease in 2001. Their average indemnity payout rose from $164,000 in 1999 to $222,000 in 2000, and decreased to $202,000 in 2001. Total indemnity payments for all health care providers and for independent physicians showed the same pattern, peaking in the year 2000. Respective payouts were $71,328,000 and $34,206,000 in 1999; $89,104,000 and $42,274,000 in 2000; and $74,129,000 and $38,448,000 in 2001. Table II shows a 16% decrease in total closed claims from 2000 to 2001. Yet, the number closed with payment in both years, 190, were identical. Of these, 76% involved permanent injury or death. The average interval between opening and closing a claim paid was 54 months (Table III). The highest 12%, or 24 of 190, successful claims were for amounts exceeding $400,000. This corresponds to 43% ($16,476,633) of total indemnity paid. The remaining 166 of 190 physician defendants paid out 57% of the total or $21,971,296 (Table III). Defense expenses are distinct from indemnity losses. The LAE can be classified on whether payment occurred (Table III). LAE defending 440 closed claims without payment totaled $5,072,320. Of 190 claims paid, defense costs totaled $7,126,520. Of 190 claims paid, 181 (95%) were contractually settled without a judicial determination of malpractice. Nine were pursuant to a plaintiff’s verdict. Of 440 claims
Amon and Winn closed without payment, 331 (75%) were dismissed by plaintiff before any court disposition.
Incomplete nature of the MDI report The MDI states ‘‘The report is based upon data provided by insurers.however, the accuracy of this report still depends largely upon the accuracy of the data filed by the insurers and self-insured hospitals.’’7 We found 2 noteworthy absences in the MDI report: (1) missing data from some self-insured hospitals (eg, Tenet Healthcare had not submitted any claims at all. This is significant because Tenet owns several large self-insured hospitals), and (2) missing Missouri Insurance Guaranty Association (MIGA) data, which handles all claims of insurers gone insolvent. Data on file with the MSMA obtained from MIGA reveals that PIE Mutual, previously insolvent, alone had 484 claims opened against physicians in 2001. Simple addition to the open claim count of 569 in Table I indicates a rise in frequency of claims compared with 2000, a finding at considerable odds with MDI report. Furthermore, claims from PHICO, a major insolvent insurer, disappeared altogether from the MDI data in 2001, indicating another sizable number may be missing. Moreover, in 2001, MIGA paid out claims totaling $23,278,646, none of which are recorded in the MDI data, revealing almost a third of the 2001 total indemnity as missing. Courthouse data from the 21st Judicial Circuit found an increased number of new filings for ‘‘personal injuryd malpractice’’ suits from 141 to 159 to 240 cases for years 2000, 2001, and 2002, respectively. Lawsuits in the 22nd Judicial Circuit, St. Louis City increased from 214 to 231 between 2001 and 2002. In St. Louis City alone, the number of ‘‘named’’ malpractice defendants for these 2 years were 1090 and 1207, respectively.
Legislative efforts at tort reform At the start of the 2003 legislative session, approximately 750 physicians in white coats rallied at the State Capitol requesting their state senators and representatives to support tort reform. Three critical reforms survived the final vote: reinstating the single cap for noneconomic damages, eliminating venue shopping, and strengthening the affidavit of merit. Governor Holden, however, vetoed the legislation. Unfortunately, the legislature failed by 2 votes to override the Governor.
Comment The current national PLI crisis resembles the insurance availability crisis of the mid 1970s and the affordability crisis of the mid 1980s. Yet, it differs in that today there
1537 is both an availability and affordability crisis.5 In Missouri, physician practice surveys conducted by the MSMA and ACOG found many physicians experiencing both an availability and affordability PLI crisis, causing significant financial and clinical practice adjustments. However, no firm conclusions can be drawn, from the group of nonresponders. Nonetheless, most other red alert states surveyed by ACOG found even higher rates of physicians experiencing PLI crisis-induced practice adjustments. Legislative enactments can be reversed by courts. In Missouri, an adverse judicial decision, Scott v SSM,6 added fuel to the firestorm of escalating PLI premiums. Although the Court found Missouri’s noneconomic cap on medical damages valid, it expanded the number of allowable caps. Thus, any defendant may now pay multiple caps for multiple episodes of negligence resulting in an injury. In response, insurers doubled their reserves and further increased premiums.7 In other states, such as Illinois and Texas, supreme courts have held their legislatively enacted caps to be ‘‘unconstitutional.’’ These observations add credence to the view that appellate courts may invade the province of the legislature and write new law. The lesson here is that physician organizations must remain vigilant to any judicial attempt to undo statutory tort reforms. By working with the defense bar, we can identify, monitor, and submit briefs on important cases arising through appellate courts. Contrary to the MDI report indicating a decrease in frequency and severity of claims, we demonstrated the opposite. Missing data from MIGA, self-insured hospitals, and the courthouse showed an increase in frequency and severity. Furthermore, MIGA claim payouts are capped for economic damages only and at $300,000 per defendant, indicating probable larger payouts if insurers were solvent. Beause the courthouse analysis excluded cases of wrongful death, the number of malpractice suits may even be higher. These findings imply that all physician organizations evaluating the PLI crisis should critically review PLI data obtained from state agencies. We all may need to counter incomplete databases and obtain our own data to properly inform the media, legislators, and public opinion. Our findings indicate that indemnity payouts are not normally distributed. The top 3.8% of all 630 closed claims in 2001 accounted for 43% of indemnity payouts that were due to very large payouts. Similar data are frequently misrepresented by opposing parties, indicating that less than 5% of physicians are responsible for about 50% of malpractice. The amount paid out is clearly different than the amount of malpractice. In fact, 75% of obstetricians have been sued.9 We found a large number of claims closing without payment and before court dispositions, indicating their meritless nature. Thus, we need to strengthen the
1538 affidavit of merit statutes in all states so that only meritorious claims will be brought. In 95% of cases, money is transfered pursuant to a settlement agreement and not because of a jury verdict. Many settled cases may represent nonpreventable maloccurence and not malpractice. Yet, many are not vigorously defended all the way to jury verdict. Why? For economic, strategic, or political reasons, rather than medical reasons, either the insurer, defense attorney, defendant physician, or some combination thereof recommended or demanded settlement. Unfortunately, some obstetricians/gynecologists, who did nothing wrong, yet agreed to settle for large dollar amounts are redlined, and ironically can no longer purchase affordable insurance. They may have been better off vigorously defending their case to jury verdict. With national publicity surrounding the Institute of Medicine Report on medical errors,10 and the error at Duke,11 the public is sensitized to the need for patient safety. Yet, serial studies cited by Institute of Medicine show decreasing rates of injury: 4.6% in California in 1976, 3.7% in New York in 1984, and 2.9% in Colorado and Utah in 1992.12 Moreover, the reliability of medical record review by trained physicians in identifying adverse events depends on the degree of consensus.13 Requiring 3 physicians to agree versus only 1, dropped the rate 5-fold. Thus, the national number of deaths caused by medical care could revise downward from the estimate of 98,000 to only 20,000. Thus, physicians may be less at fault then previously thought. The current tort system is a poor way to prevent and redress injury from medical malpractice. Most legal claims do not relate to negligence.14 We also found that 70% of claims were closed without payment. Most payouts are related to injury severity rather than proof of negligence.15 We likewise found that 75% of claims with payment involved permanent injury or death. Finally, tort compensation is highly inefficient because after 4 to 5 years of expensive litigation, the injured party is left with only 40% to 50% of the settlement or award.16 Forging ahead with public support, similar tort reforms, and tempered judicial restraint, each state can stabilize and ensure affordable PLI premiums, provide just compensation for medically injured patients, and genuine legal protection to good innocent physicians. Inequities and inefficiencies in legal tort processes and volatile PLI markets make a compelling case for meaningful reform.
Acknowledgments We thank St Louis Metropolitan Medical Society, Missouri State Medical Association, American College of Obstetricians and Gynecologists, and American Medical Association for their assistance.
Amon and Winn
References 1. Lakin S. Medical Malpractice Insurance in Missouri: the current difficulties in perspective. Missouri Department of Insurance. February 2003. 2. ACOG names latest ‘‘Red Alert’’ states facing liability insurance crisis [news release]. Washington, DC: The College; April 28, 2003. 3. Zinberg S, Hale RW. Professional liability 2002: Res Ipsa Loquitor. Obstet Gynecol Surv 2002;57:261-3. 4. Mello MM, Studdert DM, Brennan TA. The new medical malpractice crisis. N Engl J Med 2003;348:2281-4. 5. AMA survey shows patients losing access to care [press release]. Chicago: AMA; April 3, 2003. 6. Scott v SSM Healthcare St. Louis, 70 SW 3d 560 (1986). 7. Medical Malpractice Report for 2001. Jefferson City (MO): Missouri Department of Insurance; October 2002. 8. Amon E. MICRAda primer on how it works. St Louis Metro Med 2003;24:4-5. 9. Griffin LP, Heland KV, Esser L, Jones S. Overview of the 1996 Professional Liability Survey. Obstet Gynecol Surv 1999;54:77-80. 10. Kohn LT, Corrigan JM, Donaldson MS, editors. To err is human: building a safer health system. Washington, DC: National Academy Press; 2000. 11. Campion EW. A death at Duke. N Engl J Med 2003;348:1083-4. 12. Brennan TA. The Institute of Medicine Report on medical errorsdcould it do harm?. N Engl J Med 2000;342:1123-5. 13. Thomas EJ, Studdert DM, Brennan TA. The reliability of medical record review for estimating adverse event rates. Ann Intern Med 2002;136:812-6. 14. Localio AR, Lawthers AG, Brennan TA, Laird NM, Hebert LE, Peterson LM, et al. Relation between malpractice claims and adverse events due to negligence: results of the Harvard Medical Practice Study III. N Engl J Med 1991;32:245-51. 15. Brennan TA, Sox CM, Burstin HR. Relation between negligent adverse events and the outcomes of medical-malpractice litigation. N Engl J Med 1996;335:1963-7. 16. Sloan FA, Bovberg RR, Githens PB. Insuring medical malpractice. New York: Oxford University Press; 1991.
Discussion Dr Brent W. Bost, Beaumont, Texas. This article chronicles the events leading to the crisis in the availability and affordability of medical professional liability insurance in the state of Missouri: a scenario replicated in many other states across the country. It further explores the adverse impact of the crisis on patient care and offers some suggestions to improve the medical professional liability system. The article exposes some key features of the medical malpractice insurance crisis: 1. Insurance costs are rising. Premium rates in Missouri increased by 22% in 2001 and an additional 61% in 2002. Nationwide, obstetricians and gynecologists faced an overall rate hike of 20% in 2002, double the prior year’s 9% increase.1 2. Availability of insurance is shrinking. In Missouri, 3 major carriers left the state altogether, representing 30%+ of the physician insurance market. In Jefferson County, Texas, there
www.elsevier.com/locate/ajog
Review of the professional medical liability insurance crisis: Lessons from Missouri Merit Prize Erol Amon, MD, JD,* Hung N. Winn, MD, JD Division of Maternal-Fetal Medicine, Department of Obstetrics, Gynecology, and Women’s Health, St. Louis University, St. Louis, Mo
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– KEY WORDS Professional liability insurance crisis Medical malpractice Medical liability Medical errors Tort reform
Objective: This study was undertaken to document and generalize the professional liability insurance (PLI) crisis. Study design: Data analysis from physician surveys, Missouri Department of Insurance, and court records. Results: In 2001-2002, many insurers stopped writing new and existing PLI. A survey found 1 in 7 physicians had their PLI terminated and/or application for new insurance denied. Average premiums increased 22% in 2001 and 60% in 2002. Accordingly, 50% of surveyed obstetricians took salary cuts, 18% secured loans, 9% liquidated assets, and 55% significantly limited their clinical services. An adverse court ruling caused insurers to double reserves. Incomplete data led the Missouri Department of Insurance to erroneously conclude a decrease in claim frequency and severity. In contrast, courthouse records and missing data sources revealed increased malpractice filings. PLI premiums continue to rise. Conclusion: Many life-saving specialists are being forced out of business. Specialists are less willing to care for emergency and indigent patients for fear of liability exposure. Legislative enactments leading to meaningful tort reform, public support, and judicial restraint must occur to save health care. Ó 2004 Elsevier Inc. All rights reserved.
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– The professional liability insurance (PLI) system is the primary funding mechanism for defending medical malpractice claims and indemnifying successful negligence lawsuits. This dynamic pits patient against physician, and plaintiff attorney against liability insurer. In late 2001 and throughout 2002, many liability insurers quit writing new and existing PLI policies in MisPresented at the 70th Annual Meeting of the Central Association of Obstetricians and Gynecologists, October 1-4, 2003, LaJolla, Calif. * Reprint requests: Erol Amon, MD, JD, 6420 Clayton Rd, St. Louis, MO 63132. E-mail: [email protected] 0002-9378/$ - see front matter Ó 2004 Elsevier Inc. All rights reserved. doi:10.1016/j.ajog.2004.03.057
souri, whereas others became insolvent (eg, PHICO). Accordingly, many physicians sought other PLI carriers to insure against professional negligence claims. As Missouri lost 57% of its PLI capacity combined with stricter underwriting criteria, availability became an issue and rapidly rising premiums exacerbated affordability.1 For similar reasons, the American College of Obstetricians and Gynecologists (ACOG) has placed 19 states, including Missouri, on red alert status.2 Causes of the PLI crisis of availability and affordability are debatable, but its potential downstream effects are clearly alarming.3,4 Trauma and maternity units are closing. Timely access to life-saving specialists is being
1535
Amon and Winn Table I
Table II
Closed claim count for independent physicians
Year
Total claims
Claim count reported as opened claims* Independent physicians
Hospitals
Year
Total claims
Closed with payment
CWP
1998 1999 2000 2001
1679 1696 1765 1226
736 819 907 569
374 292 273 262
1998 1999 2000 2001
766 757 752 630
154 209 190 190
612 548 562 440
* Total claims are for all health care providers including dentists, chiropracters, nurses, nursing homes. Independent physicians account for less than half the total claims
compromised.5 The PLI crisis also challenges our ethical imperatives to care for all patients. The inability to pass on increases in PLI to payers of health care insurance because of their price controls resulted in an insurance squeeze, and together with a poor economy caused a perfect storm. Our purpose is to chronicle the current PLI crisis in Missouri, organized efforts to mitigate this crisis, and generalize lessons learned.
Methods The first author is past president of the St. Louis Metropolitan Medical Society (SLMMS) for 2002 and knowledgeable on Missouri’s PLI crisis. At SLMMS’s request, the Missouri State Medical Association (MSMA) conducted a statewide survey of physicians’ experience with their PLI during summer 2002 (on file with MSMA). ACOG’s Department of Professional Liability and Risk Management conducted a national PLI survey from July 12 to August 12, 2002, for changes made within the previous 18 months. Data relevant to Missouri were extracted with permission for use in state tort reform efforts (on file with ACOG and SLMMS). A 1986 Missouri statute enacted a maximum recovery per defendant (cap) for noneconomic damages. The key judicial decision affecting this cap, Scott v SSM Healthcare,6 will be analyzed. In its 2001 Medical Malpractice Report, the Missouri Department of Insurance (MDI) found that the frequency and severity of PLI claims were markedly down in 2001.7 They prematurely concluded in October 2002 that the PLI crisis was caused by the insurance industry and not the tort system. Tables I, II, and III are extracted from their report. The report is critically analyzed. Because the most complete source of data on medical malpractice lawsuits is the courthouse, SLLMS analyzed the number of ‘‘personal injurydmalpractice’’ cases filed in the 21st and 22nd Judicial Circuits. These 2 Circuits account for the majority of such filings in Missouri. These data excluded cases filed under the Wrongful Death Act (on file with SLMMS). MSMA initiated legislation, modeled in part on the renowned Medical Injury Compensation Reform Act
CWP, Closed without payment.
of 1975 from a state not in crisis, California.8 Tort reforms included reinstating the single cap, limiting venue shopping and attorney contingency fees, repealing mandatory PLI and joint and several liability rules, capping trauma and punitive damages, strengthening the affidavit of merit, allowing evidence of collateral sources, immunizing benevolent gestures, and shortening the statute of limitations. Important definitions are economic damages: arising from monetary harm including medical bills, lost wages, and lost earning capacity, both future and past (unlimited in amount). Noneconomic damages: arising from nonmonetary (nonquantifiable) harm, including pain and suffering, mental anguish, physical impairment, disfigurement, and loss of consortium. Economic and noneconomic damages are called indemnity payouts. PLI does not insure punitive damages. Loss adjustment expenses (LAE) are known as defense costs: These include expenses paid to defense counsel, court costs, depositions, experts.
Results MSMA and ACOG surveys Five hundred eighty-two MSMA physicians responded to the PLI survey, a response rate of 20%. The average premium for $1million/$3 million coverage increased 22% in 2001, with a further 61% increase in 2002. Accordingly, 31% of the physicians considered leaving practice, and more than 25% limited their clinical practice. Sixteen percent had their PLI terminated and/or application for new insurance denied. Of these, 80% were unable to find primary coverage. Hardest hit were obstetricians, neurosurgeons, and general/trauma surgeons. ACOG surveyed 528 Missouri obstetricians. In response to increases in PLI premiums, 72% of 190 respondents reported significant financial changes. Fifty percent took a 10% or greater salary reduction, 18% secured a loan, and 9% liquidated assets to stay in business, 7% reduced liability coverage, and 16% made other financial changes. Changes in clinical practice were reported by 55%. Nineteen percent decreased high-risk obstetric care, 12% stopped delivering infants, and 8% decreased/stopped performing major gynecologic surgery.
1536 Table III
Amon and Winn Summary by amount of indemnity paid for each defendant physician claims closed in 2001
Indemnity range
Number Cumulative Average of closed % of Indemnity months claims claims paid
None 1-999 1,000-1,999 2,000-2,999 3,000-3,999 5,000-5,999 10,000-19,999 20,000-29,999 30,000-39,999 40,000-49,999 50,000-59,999 60,000-69,999 70,000-79,999 80,000-89,999 100,000-199,999 200,000-299,999 300,000-399,999 400,000-499,999 500,000-999,999 1,000,000-1,999,999 2,000,000-2,999,999 Total Total paid
49 19 8 42 56 21 47 55 69 62 71 64 53 24 55 53 55 46 55 52 37 51 54
440 2 2 1 1 2 15 12 6 10 10 4 9 1 42 30 19 6 13 4 1 630 190
69.8% 70.2% 70.5% 70.6% 70.8% 71.1% 73.5% 75.4% 76.3% 77.9% 79.5% 80.2% 81.6% 81.7% 88.4% 93.2% 96.2% 97.1% 99.2% 99.8% 100%
Cumulative % of Average indemnity economic paid damages
0 0.0% 742 0.0% 2,451 0.0% 2,750 0.0% 3,500 0.0% 10,000 0.0% 203,179 0.6% 284,750 1.3% 198,000 1.8% 438,700 3.0% 503,000 4.3% 249,239 4.9% 667,936 6.7% 80,000 6.9% 5578879 21.4% 7,230,670 40.2% 6,517,500 57.1% 2,612,499 63.9% 7,665,000 83.9% 4,199,134 94.8% 2,000,000 100% 38,447,929 38,447,929
Adverse case law On January 29, 2002, the Missouri Court of Appeals for the Eastern District of Missouri in its Scott v SSM Healthcare decision expanded the number of allowable caps for noneconomic damages. Since 1986, Missouri Revised Statutes Section 538.210.1 provided: ‘‘In any action against a health care provider for damages for personal injury or death arising out of or failure to render health care services, no plaintiff shall recover more than $350,000 per occurrence for non-economic damages from any one defendant as defendant is defined in subsection 2 of this section.’’ (The cap is adjusted upward annually to account for inflation.) The Court interpreted ‘‘per occurrence’’ to mean ‘‘acts of neglect complained of’’ and ‘‘not receipt of injury by the plaintiff.’’ Although technically permitting a cap to remain, the Court allowed the cap to be multiplied by the number of negligent acts. Accordingly, plaintiffs may now receive multiple caps for multiple alleged acts of negligence resulting in a single injury. This interpretation essentially eviscerated the single cap on noneconomic damages.
The MDI malpractice report In Table I the number of opened claims for independently insured physicians, peaked at 907 in 2000, followed by
0 321 1,226 0 0 1,050 8,113 12,328 21,290 31,865 26,414 32,061 25,802 6,300 62,211 144,430 153,116 152,083 360,385 924,784 2,000,000 35,720 118,441
Average indemnity Average Average LAE per noneconomic per defendant defendant damages 0 50 0 2,750 3,500 3,950 5,433 11,401 11,711 12,005 23,887 30,249 48,413 73,700 70,619 96,592 189,911 283,333 229,231 125,000 0 25,308 83,917
0 11,528 371 2,419 1,226 0 2,750 17,353 3,500 4,304 5,000 1,167 13,545 14,527 23,729 31,193 33,000 23,349 43,870 34,290 50,300 22,898 62,310 33,167 74,215 34,848 80,000 1,081 132,830 43,326 241,022 44,774 343,026 34,648 435,417 21,531 589,615 62,228 1,049,784 146,695 2,000,000 0 61,028 19,363 202,358 37,508
a 37% decrease in 2001. Their average indemnity payout rose from $164,000 in 1999 to $222,000 in 2000, and decreased to $202,000 in 2001. Total indemnity payments for all health care providers and for independent physicians showed the same pattern, peaking in the year 2000. Respective payouts were $71,328,000 and $34,206,000 in 1999; $89,104,000 and $42,274,000 in 2000; and $74,129,000 and $38,448,000 in 2001. Table II shows a 16% decrease in total closed claims from 2000 to 2001. Yet, the number closed with payment in both years, 190, were identical. Of these, 76% involved permanent injury or death. The average interval between opening and closing a claim paid was 54 months (Table III). The highest 12%, or 24 of 190, successful claims were for amounts exceeding $400,000. This corresponds to 43% ($16,476,633) of total indemnity paid. The remaining 166 of 190 physician defendants paid out 57% of the total or $21,971,296 (Table III). Defense expenses are distinct from indemnity losses. The LAE can be classified on whether payment occurred (Table III). LAE defending 440 closed claims without payment totaled $5,072,320. Of 190 claims paid, defense costs totaled $7,126,520. Of 190 claims paid, 181 (95%) were contractually settled without a judicial determination of malpractice. Nine were pursuant to a plaintiff’s verdict. Of 440 claims
Amon and Winn closed without payment, 331 (75%) were dismissed by plaintiff before any court disposition.
Incomplete nature of the MDI report The MDI states ‘‘The report is based upon data provided by insurers.however, the accuracy of this report still depends largely upon the accuracy of the data filed by the insurers and self-insured hospitals.’’7 We found 2 noteworthy absences in the MDI report: (1) missing data from some self-insured hospitals (eg, Tenet Healthcare had not submitted any claims at all. This is significant because Tenet owns several large self-insured hospitals), and (2) missing Missouri Insurance Guaranty Association (MIGA) data, which handles all claims of insurers gone insolvent. Data on file with the MSMA obtained from MIGA reveals that PIE Mutual, previously insolvent, alone had 484 claims opened against physicians in 2001. Simple addition to the open claim count of 569 in Table I indicates a rise in frequency of claims compared with 2000, a finding at considerable odds with MDI report. Furthermore, claims from PHICO, a major insolvent insurer, disappeared altogether from the MDI data in 2001, indicating another sizable number may be missing. Moreover, in 2001, MIGA paid out claims totaling $23,278,646, none of which are recorded in the MDI data, revealing almost a third of the 2001 total indemnity as missing. Courthouse data from the 21st Judicial Circuit found an increased number of new filings for ‘‘personal injuryd malpractice’’ suits from 141 to 159 to 240 cases for years 2000, 2001, and 2002, respectively. Lawsuits in the 22nd Judicial Circuit, St. Louis City increased from 214 to 231 between 2001 and 2002. In St. Louis City alone, the number of ‘‘named’’ malpractice defendants for these 2 years were 1090 and 1207, respectively.
Legislative efforts at tort reform At the start of the 2003 legislative session, approximately 750 physicians in white coats rallied at the State Capitol requesting their state senators and representatives to support tort reform. Three critical reforms survived the final vote: reinstating the single cap for noneconomic damages, eliminating venue shopping, and strengthening the affidavit of merit. Governor Holden, however, vetoed the legislation. Unfortunately, the legislature failed by 2 votes to override the Governor.
Comment The current national PLI crisis resembles the insurance availability crisis of the mid 1970s and the affordability crisis of the mid 1980s. Yet, it differs in that today there
1537 is both an availability and affordability crisis.5 In Missouri, physician practice surveys conducted by the MSMA and ACOG found many physicians experiencing both an availability and affordability PLI crisis, causing significant financial and clinical practice adjustments. However, no firm conclusions can be drawn, from the group of nonresponders. Nonetheless, most other red alert states surveyed by ACOG found even higher rates of physicians experiencing PLI crisis-induced practice adjustments. Legislative enactments can be reversed by courts. In Missouri, an adverse judicial decision, Scott v SSM,6 added fuel to the firestorm of escalating PLI premiums. Although the Court found Missouri’s noneconomic cap on medical damages valid, it expanded the number of allowable caps. Thus, any defendant may now pay multiple caps for multiple episodes of negligence resulting in an injury. In response, insurers doubled their reserves and further increased premiums.7 In other states, such as Illinois and Texas, supreme courts have held their legislatively enacted caps to be ‘‘unconstitutional.’’ These observations add credence to the view that appellate courts may invade the province of the legislature and write new law. The lesson here is that physician organizations must remain vigilant to any judicial attempt to undo statutory tort reforms. By working with the defense bar, we can identify, monitor, and submit briefs on important cases arising through appellate courts. Contrary to the MDI report indicating a decrease in frequency and severity of claims, we demonstrated the opposite. Missing data from MIGA, self-insured hospitals, and the courthouse showed an increase in frequency and severity. Furthermore, MIGA claim payouts are capped for economic damages only and at $300,000 per defendant, indicating probable larger payouts if insurers were solvent. Beause the courthouse analysis excluded cases of wrongful death, the number of malpractice suits may even be higher. These findings imply that all physician organizations evaluating the PLI crisis should critically review PLI data obtained from state agencies. We all may need to counter incomplete databases and obtain our own data to properly inform the media, legislators, and public opinion. Our findings indicate that indemnity payouts are not normally distributed. The top 3.8% of all 630 closed claims in 2001 accounted for 43% of indemnity payouts that were due to very large payouts. Similar data are frequently misrepresented by opposing parties, indicating that less than 5% of physicians are responsible for about 50% of malpractice. The amount paid out is clearly different than the amount of malpractice. In fact, 75% of obstetricians have been sued.9 We found a large number of claims closing without payment and before court dispositions, indicating their meritless nature. Thus, we need to strengthen the
1538 affidavit of merit statutes in all states so that only meritorious claims will be brought. In 95% of cases, money is transfered pursuant to a settlement agreement and not because of a jury verdict. Many settled cases may represent nonpreventable maloccurence and not malpractice. Yet, many are not vigorously defended all the way to jury verdict. Why? For economic, strategic, or political reasons, rather than medical reasons, either the insurer, defense attorney, defendant physician, or some combination thereof recommended or demanded settlement. Unfortunately, some obstetricians/gynecologists, who did nothing wrong, yet agreed to settle for large dollar amounts are redlined, and ironically can no longer purchase affordable insurance. They may have been better off vigorously defending their case to jury verdict. With national publicity surrounding the Institute of Medicine Report on medical errors,10 and the error at Duke,11 the public is sensitized to the need for patient safety. Yet, serial studies cited by Institute of Medicine show decreasing rates of injury: 4.6% in California in 1976, 3.7% in New York in 1984, and 2.9% in Colorado and Utah in 1992.12 Moreover, the reliability of medical record review by trained physicians in identifying adverse events depends on the degree of consensus.13 Requiring 3 physicians to agree versus only 1, dropped the rate 5-fold. Thus, the national number of deaths caused by medical care could revise downward from the estimate of 98,000 to only 20,000. Thus, physicians may be less at fault then previously thought. The current tort system is a poor way to prevent and redress injury from medical malpractice. Most legal claims do not relate to negligence.14 We also found that 70% of claims were closed without payment. Most payouts are related to injury severity rather than proof of negligence.15 We likewise found that 75% of claims with payment involved permanent injury or death. Finally, tort compensation is highly inefficient because after 4 to 5 years of expensive litigation, the injured party is left with only 40% to 50% of the settlement or award.16 Forging ahead with public support, similar tort reforms, and tempered judicial restraint, each state can stabilize and ensure affordable PLI premiums, provide just compensation for medically injured patients, and genuine legal protection to good innocent physicians. Inequities and inefficiencies in legal tort processes and volatile PLI markets make a compelling case for meaningful reform.
Acknowledgments We thank St Louis Metropolitan Medical Society, Missouri State Medical Association, American College of Obstetricians and Gynecologists, and American Medical Association for their assistance.
Amon and Winn
References 1. Lakin S. Medical Malpractice Insurance in Missouri: the current difficulties in perspective. Missouri Department of Insurance. February 2003. 2. ACOG names latest ‘‘Red Alert’’ states facing liability insurance crisis [news release]. Washington, DC: The College; April 28, 2003. 3. Zinberg S, Hale RW. Professional liability 2002: Res Ipsa Loquitor. Obstet Gynecol Surv 2002;57:261-3. 4. Mello MM, Studdert DM, Brennan TA. The new medical malpractice crisis. N Engl J Med 2003;348:2281-4. 5. AMA survey shows patients losing access to care [press release]. Chicago: AMA; April 3, 2003. 6. Scott v SSM Healthcare St. Louis, 70 SW 3d 560 (1986). 7. Medical Malpractice Report for 2001. Jefferson City (MO): Missouri Department of Insurance; October 2002. 8. Amon E. MICRAda primer on how it works. St Louis Metro Med 2003;24:4-5. 9. Griffin LP, Heland KV, Esser L, Jones S. Overview of the 1996 Professional Liability Survey. Obstet Gynecol Surv 1999;54:77-80. 10. Kohn LT, Corrigan JM, Donaldson MS, editors. To err is human: building a safer health system. Washington, DC: National Academy Press; 2000. 11. Campion EW. A death at Duke. N Engl J Med 2003;348:1083-4. 12. Brennan TA. The Institute of Medicine Report on medical errorsdcould it do harm?. N Engl J Med 2000;342:1123-5. 13. Thomas EJ, Studdert DM, Brennan TA. The reliability of medical record review for estimating adverse event rates. Ann Intern Med 2002;136:812-6. 14. Localio AR, Lawthers AG, Brennan TA, Laird NM, Hebert LE, Peterson LM, et al. Relation between malpractice claims and adverse events due to negligence: results of the Harvard Medical Practice Study III. N Engl J Med 1991;32:245-51. 15. Brennan TA, Sox CM, Burstin HR. Relation between negligent adverse events and the outcomes of medical-malpractice litigation. N Engl J Med 1996;335:1963-7. 16. Sloan FA, Bovberg RR, Githens PB. Insuring medical malpractice. New York: Oxford University Press; 1991.
Discussion Dr Brent W. Bost, Beaumont, Texas. This article chronicles the events leading to the crisis in the availability and affordability of medical professional liability insurance in the state of Missouri: a scenario replicated in many other states across the country. It further explores the adverse impact of the crisis on patient care and offers some suggestions to improve the medical professional liability system. The article exposes some key features of the medical malpractice insurance crisis: 1. Insurance costs are rising. Premium rates in Missouri increased by 22% in 2001 and an additional 61% in 2002. Nationwide, obstetricians and gynecologists faced an overall rate hike of 20% in 2002, double the prior year’s 9% increase.1 2. Availability of insurance is shrinking. In Missouri, 3 major carriers left the state altogether, representing 30%+ of the physician insurance market. In Jefferson County, Texas, there