Malpractice in crisis

Climbing insurance premiums push more physicians into early retirement
Sunday, November 30, 2003 | 12:00 a.m. CST; updated 8:26 p.m. CDT, Saturday, July 19, 2008

Last summer, Curt Vogel wasn’t quite ready to retire as a physician, but he wanted to reduce his practice to three days a week.

But whether he saw patients five days a week or three, Vogel’s malpractice insurance premiums would have increased from $19,000 a year to about $58,000. After 28 years as a vascular surgeon, he decided that it made more financial sense to retire.

“It is really a crisis,” said Vogel, who performed about 400 operations a year at Columbia Surgical Associates. “You cannot practice medicine in that environment.”

Across the country, experienced physicians like Vogel are calling it quits, driven into early retirement by skyrocketing malpractice premiums. Others – including a half dozen specialists at Boone Hospital Center — have had their coverage canceled by insurance providers who are issuing fewer policies to new physicians.

“It is really a crisis,” said Vogel, who performed about 400 operations a year at Columbia Surgical Associates. “You cannot practice medicine in that environment.”

Meanwhile, women in rural mid-Missouri often must travel to Columbia to deliver their babies. And patients who need high-risk surgical procedures are finding there are fewer specialists to perform them.

A professional survey conducted earlier this year suggested that Missourians who need neurosurgical care might be on the cusp of a crisis. David Jimenez, a pediatric neurosurgeon at University Hospital who conducted the survey, reported that 40 percent of respondents said they are considering early retirement.

Michael Ditmore, a neurosurgeon at Boone Hospital Center, is one of them. Ditmore’s annual malpractice premiums shot up more than 50 percent last year and are expected to double to more than $120,000 next year.

Ditmore echoes the thoughts of physicians across the country who argue that the way to reduce the cost of practicing medicine is to limit the monetary damages awarded to the actual victims of malpractice.

“In states where tort reforms have taken place, they are not having this problem,” said Ditmore, who plans to take the early retirement option in January. “If it were the economy only, then every state would be seeing this problem, but they are not.”

The Missouri State Medical Association has endorsed national tort reform efforts by President Bush, who asked Congress last week to prepare legislation that would cap noneconomic damages at $250,000.

Missouri limits damages for “pain and suffering” to $557,000. Earlier this year, Gov. Bob Holden vetoed a bill by state lawmakers that would have imposed restrictions on malpractice lawsuits, including lowering the cap on damages.

Opponents of limits on so-called “pain and suffering” awards say tort reform would hurt potential victims of malpractice while doing little to reduce the cost of liability insurance. The opposition includes plaintiffs’ attorneys and some consumer advocates.

“Taking away people’s rights to make claims of medical negligence does not reduce insurance premiums,” said Wally Bley, a Columbia attorney who has represented clients suing doctors for medical malpractice.

While this political tug-of-war continues, a group of Missouri doctors have come up with an idea they hope will be a solution to the malpractice insurance crisis.

Missouri Physicians Mutual, a St. Louis-based company, is owned by its policyholders — hundreds of Missouri doctors. Rather than set uniform liability rates, the company would rate physicians based on their individual practice histories, which company officials say would reduce premiums for all policyholders.

Columbia policyholder Laurel Walter, a family practitioner at Whole Health Family and Birth Center, said she felt exploited by her previous insurance provider. Although she had never been sued for malpractice, her annual liability premiums climbed from $2,500 to $48,000 in three years. Since joining Missouri Physicians Mutual, her annual premiums have dropped to $17,000.

While Walter is happy her insurance costs are down, she remains wary. She still believes tort reform is the only long-term solution to the problem.

“Our premiums are going to reflect what the company has to pay out in attorney fees and malpractice awards,” she said. “Tort reform is essential to control runaway jury awards for medical malpractice.”

But Missouri juries are not in the habit of awarding multimillion-dollar damage claims, according to data from the state’s Department of Insurance. While the average damage claim paid by Missouri physicians increased from $164,414 in 1992 to $226,760 last year, awards for “pain and suffering” were not the cause, said Randy McConnell, spokesman for the state insurance department.

In Missouri, 5 percent of the state's doctors account for nearly 40 percent of the malpractice claims, according to the insurance department.

McConnell said wage inflation and the high cost of health care are two explanations for the increase in damages paid, which remain, on average, well below the state’s $557,000 cap. Another reason is that the injuries suffered by patients are more severe and permanent than they were 15 years ago, McConnell said.

“Only the most severe injuries have led to claims,” he said.

Even so, insurance department studies show that million-dollar jury awards are down. In 1996, 15 malpractice claims against Missouri physicians resulted in awards of greater than $1 million. In the first half of 2002, the most recent information available, five jury awards topped $1 million.

Most of the higher-dollar awards “are for lost income and extra medical costs that these people are going to bear because of the injury,” McConnell said. He added that patient claims of medical malpractice have dropped 22 percent in Missouri since 1987. While most physicians fear being sued, relatively few of them are ever found negligent. Insurance department statistics show that, in Boone County, physicians win more than 70 percent of jury cases against plaintiffs.

“Columbia is considered a very bad venue for plaintiffs in medical malpractice,” said trial attorney Greg Copeland, who represents patients. “It is hard to find a jury pool that does not have someone’s friend or family in the medical business.”

In 1991, a Harvard University study concluded that an act of medical negligence was eight to 10 times more likely to occur than a malpractice lawsuit. Less than a decade later, in 1999, the National Institute of Medicine reported that medical errors were the eighth leading cause of death in the United States — ahead of breast cancer and AIDS. The NIM estimated that between 44,000 and 98,000 Americans die each year due to medical error and negligence; about 2,000 die annually in Missouri hospitals.

Statistics show that most errors are committed by a small number of physicians. In Missouri, 5 percent of the state’s doctors account for nearly 40 percent of the malpractice claims, according to the insurance department.

Yet, since 2000, four of the largest medical liability insurers in Missouri have increased the average annual premium for all doctors by 28 percent; some specialists have seen the cost of insurance rise by 200 percent, McConnell said. Other insurers have stopped doing business in Missouri, and more than half the market for new policies has vanished.

Many patient advocates say they think that insurance providers who are driven by shareholders’ needs for profit and penalize all doctors for the acts of a few are to blame for the malpractice insurance crisis. Sara Schuett, executive director of the Missouri Association of Trial Attorneys, said that, in 1978, when California capped “pain and suffering” awards at $250,000, there was no effect on the cost of medical malpractice insurance.

Premiums didn’t go down, Schuett said, until 1988, when California voters approved a referendum that required insurance companies to roll back their rates by 20 percent. The law also mandates public hearings before insurance companies can raise premiums.

“Insurance companies lost a lot of money in the stock and bond market and had to increase doctors’ premiums to make up for their losses,” Schuett says.

Schuett and others say the current crisis began when the booming stock market of the 1990s began to turn. Insurance company investments suffered a financial blow, and the losses accelerated folloing the terrorist attacks on Sept. 11, 2001.

Some Missouri physicians are beginning to question whether they are being treated fairly. Timothy Trout, the physician who is managing director of Missouri Physicians Mutual, said many insurance companies have taken advantage of doctors to remedy problems unrelated to how they practice medicine.

“During the 1990s, insurance companies became fat, dumb and happy and had overstaffed and had assisant to assistant to assistant,” Trout said.

Trout said that’s why, since April, more than 700 doctors have joined Missouri Physicians Mutual. The company is known as a “383” company, referring to the Missouri statute that authorizes the formation of companies by physician-policyholders who assume responsibility for assessing risk, setting premiums and distributing profits.

Missouri Physicians Mutual director Bob Brown said that because the only shareholders are policyholders, the company is not burdened by the usual profit demands and can keep liability premiums low.

“Missouri has a relatively favorable malpractice climate, but some of the companies then take their profits from the state of Missouri and then use them to offset their losses in places like Texas or Florida,” Brown said.

Under the Missouri Physicians Mutual plan, individual premium rates would be based on a physician’s entire history — a practice known as “experience rating.” Physicians who have not been sued or found negligent would not be subjected to the same premium hikes as those who are — and might even receive discounts like good drivers do for car insurance, according to the Missouri Physicians Mutual policy. Brown said experience rating also encourages doctors to better police their peers to reduce the incidence of medical negligence.

It’s too early to say whether Missouri Physicians Mutual can keep insurance costs down, but it’s one of the only proposed solutions aimed at the malpractice crisis that doesn’t call for tort reform.

Recently, state Sen. James Mathewson of Sedalia proposed a combination of insurance and tort reform in an effort to stem the flow of both insurance and health care providers leaving the state. Mathewson’s proposal calls for a temporary freeze on premiums, includes a tax credit to help physicians offset the cost of insurance and gives the state insurance department authority to approve or reject malpractice insurance rates.

Mathewson also is proposing lowering the current “pain and suffering cap” to $350,000, except in cases of wrongful death, permanent incapacitation and serious deformity. The cap would be raised to $700,000 in those cases.

Meanwhile, Brown said, more Missouri doctors are searching for common ground with patients and their advocates by setting up “383” companies like Missouri Physicians Mutual in Jefferson City and Popular Bluff.

“The key,” Brown said, “is to have a Missouri company owned by Missouri physicians.”

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