I magine that you see a patient with advanced squamous cell carcinoma affecting the head and neck, including nerve involvement. The patient needs significant head and neck surgery. Imagine, too, that you try to find a surgeon to perform the operation. You contact a cancer surgeon, ear, nose and throat specialist, and two or three plastic surgeons. Each one, though, refuses to perform the surgery because the doctor doesn’t want the practice exposed to the insurance risks involved. That tale of woe, from Steven Rosenberg, M.D., of Palm Beach Dermatology, West Palm Beach, FL, illustrates the impact of the malpractice insurance crisis on dermatology. The United States may offer the finest health care in the world, but physicians and patients now both pay the price of the professional liability crisis running rampant through the American healthcare system. The issue has received the attention of the White House, Congress, and the states, all of which have taken up the issue. In this article, we’ll provide a close look at the malpractice insurance crisis, including its causes and potential solutions. We’ll also offer practical steps you can take to keep your premiums as low as possible. But first, let’s take a look at how this crisis currently affects physicians in general. Worsening Crisis Without a doubt, the malpractice predicament is deepening. For instance, in early March the American Medical Association added six states to its count of those it says are in a medical liability crisis. That brings the total number of states to 18. Settlements against physicians are increasing. In 1994, the compensatory award median for all plaintiff verdicts amounted to $362,500, according to Jury Verdict Research. By 1999, that had increased to $700,000. In March, the Department of Health and Human Services (HHS) released an updated report on the crisis. “As we predicted, the crisis has only worsened since we issued those reports,” the paper says. “The scope and intensity of the crisis have increased.” The Squeeze Is On Such problems erode individual practices, says consultant Jeffrey P. Thompson, Manasquan, NJ. As doctors leave their specialties or states or simply can’t stay in practice, health care suffers. The result is “squeezing the necks of these golden geese,” says Mr. Thompson, referring to physicians. Unfortunately, he sees no easing of the crisis, suggesting that doctors will see little if any change in malpractice premiums for the next 5 years. Compared to the “golden age” of medicine, say in the 1960s, when lawsuits were rare, in some areas of the country 25% of all physicians are sued per year, says Clay J. Cockerell, M.D., clinical professor of dermatology and pathology at the University of Texas Southwestern Medical Center at Dallas. Some 58% of all physicians have been sued at one time or another, he notes. “It’s turned into craziness,” he adds. How Dermatologists Fare Dermatologists are by no means exempt from malpractice insurance worries. While traditionally dermatology has been a low-risk field, such is no longer the case, says David J. Goldberg, M.D., J.D., clinical professor of dermatology and director of laser research and Mohs surgery at Mount Sinai School of Medicine and adjunct professor of law at Fordham University School of Law in New York. Still, dermatologists don’t have to contend with the problems of such high-risk specialties as obstetrics/gynecology. Various items impact a dermatologist’s ratings, says Dr. Cockerell. These include: • Geographic location. South Texas, for instance, is a “hotbed” of medical liability problems, he says. • Dermatopathology. This is considered riskier than more traditional dermatology and can increase premiums. The Cost of Cosmetics One major issue involves cosmetic surgery. Cosmetic procedures, such as liposuction, are considered higher-risk procedures, says Dr. Cockerell. Dermatologists perform 50% of the liposuction in the United States, and this procedure is particularly singled out, says Stephen Mandy, M.D., University of Miami, and immediate past president of the American Society for Dermatologic Surgery (ASDS). Many dermatologists, he says, have dropped procedures such as lasers and liposuction because they can’t afford the malpractice coverage. Increasing malpractice premiums, says attorney and physician Dr. Goldberg, are indirectly related to the procedures performed. As malpractice claims and amounts paid increase against a given medical specialty (such as dermatology) because of a particular procedure, malpractice premium fees increase. You’ll usually see a lag between the time a procedure is first performed, malpractice claims are filed, and amounts are paid out by insurance companies, he says. Thus, as dermatologists continue to perform more diverse and complex cosmetic procedures, they can expect an increasing number of malpractice claims to be filed. With this, he notes, premiums will rise. The failure to diagnose a condition, says Dr. Mandy, also plays a role in increasing premiums. Such might occur, for instance, when a patient comes in for a skin check, appears fine, and then 2 years later is diagnosed with melanoma. (Whether the patient had melanoma when seen is, of course, a question.) A failure to diagnose cancer can result in huge awards, especially if the cancer is advanced and beyond reasonable treatment, he notes. Thus, if a dermatologist performs non-cosmetic surgery and only relatively low-end skin cancer surgery, the dermatologist’s malpractice rates might remain low, says Dr. Mandy. But when you get into the cosmetic arena or perform more complex cancer surgery, you can enter the high-liability zone. Even with no claims, Dr. Rosenberg and his large group practice, which includes 10 dermatologists and 2 dermatopathologists, have seen their malpractice premiums almost double this past year. That follows a 25% increase 2 years ago. He pays roughly $12,000/year in malpractice insurance, which includes a 30% discount for such things as being claims-free and taking malpractice risk prevention courses. His group doesn’t perform liposuction. On the other side of the country, Jerome Potozkin, M.D., Walnut Creek, CA, has seen a 25% increase in a 1-year span for his malpractice coverage. A board-certified dermatologist, he pays $22,000 per year, which also includes coverage for liposuction and cosmetic procedures. And this is in California, which caps non-economic awards at $250,000. The Causes of the Problem When it comes to pointing fingers for the malpractice insurance crisis, there’s plenty of blame to go around. Two major suspects include the stupendous toll of litigation and the dynamics of the insurance industry. Pulling no punches, the HHS report states that the liability crisis is caused by an expensive litigation system, “which often finds liability on a random basis and increasingly imposes very large judgments for non-economic damages. “The insurance premiums that health professionals and hospitals must pay are largely determined by the costs that the litigation system imposes on the insurers. The malpractice insurance system and the litigation system are inexorably linked.” In many cases, says Dr. Rosenberg, patients and attorneys go on a “fishing venture” to see if they can get an award. Even dropped cases still requires a legal defense, which can cost tens of thousands of dollars. If an attorney accepts a case on contingency, where he’s paid only if a judgment is collected, the patient bears no risk, says Dr. Mandy. An attorney, says Dr. Mandy, knows that if he brings a lawsuit, he’s likely to have an insurance company offer a settlement up front. “It’s totally free money,” he asserts. However, plaintiffs win only a small percent of malpractice cases, according to Kenneth S. Javerbaum, J.D., partner, Javerbaum, Wurgaft, Hicks & Zarin, Springfield, NJ. In New Jersey, for instance, 1,656 medical malpractice cases were filed in 2002. Only 200 cases were tried to a verdict, and 54 verdicts were in favor of the plaintiff. A certified civil trial attorney, Mr. Javerbaum has tried malpractice cases on both sides. Adding fuel to the fire, a Harvard University study quoted in To Improve Health and Health Care 1997: The Robert Wood Johnson Foundation Anthology (Jossey-Bass, 1997) found that 1% of hospital stays in New York state involved medical negligence, but only one in eight of these patients brought a malpractice lawsuit. Most injured patients, says the HHS report, receive no compensation. Trial attorneys, counters Dr. Rosenberg, talk about the dollars actually awarded each year, but not about the number of cases filed. There needs to be, he feels, a better way of determining which cases are appropriate to proceed through the court system. Influence of Insurance While the litigation system presents a ripe target, it’s not the only one. Critics also take the insurance industry to task for its part in the malpractice mess. In an unlikely alliance, lawyers and physicians may share similar views about the insurance industry. Insurers, says attorney Mr. Javerbaum, should be forced to open their books. Doctors may find that what they believe are unreasonable and unaccountable rates are due not to malpractice awards, but to arbitrary decisions by insurance carriers to raise rates without regard to loss-ratio experience, he maintains. Some point to the insurance industry’s losses in the stock market as a reason for increased malpractice premiums. The current situation represents the third time that Dr. Mandy has seen such a major malpractice crisis in his career, and he says, those crises are almost always associated with a downturn in the economy. Doctors represent “a pot of gold that the insurance companies aren’t afraid to dip into,” he suggests. The inexorable laws of supply and demand also take their toll. With fewer insurance carriers offering malpractice coverage, those that remain feel they can charge what they want, says Dr. Rosenberg. Finally, the 9/11 attacks have sent shock waves into the professional liability arena. Because of 9/11, reinsurers (companies that insure the insurers) abandoned the commercial property insurance market, according to David E. Wood, J.D., who practices insurance policy enforcement at Wood and Bender, LLP, Camarillo, CA. Liability insurers have fled just as fast, he says. But, counters the HHS report, if such insurance factors explained the problem, every state’s insurers would be forced to increase their premiums to the same extent. However, insurers are being forced to increase their premiums more rapidly and steeply in states where no reform in malpractice litigation has occurred, it says. Investments by medical malpractice companies, according to HHS, have been conservative. Most states limit the percent of assets an insurance company can put into stocks. Having worked as an underwriter, consultant Thompson says that underwriters are judged by the level of profit they generate. Thus, without a cap on awards, insurers must charge a certain level of premium. Making Mistakes A final, related factor in malpractice premiums involves medical errors. Arguably, if no dermatologist ever made a medical error, malpractice insurance premiums would have to stay at some reasonable level. Of course, doctors do, despite their best intentions, make mistakes. Well-publicized and dramatic, these sometimes tragic gaffes don’t help the doctors’ cause. In December, a study from the Harvard School of Public Health and the Henry J. Kaiser Family Foundation found that 42% of the public and more than one-third of U.S. doctors say they or their family members experienced medical errors. And 18% of physicians and 24% of the public said an error caused “serious health consequences,” according to a press release. “Certainly, medical errors exist,” says Dr. Mandy. But in fields other than medicine, individuals put up with errors, he holds. Patients may work under an “unrealistic expectation of perfection,” says Dr. Cockerell. The expense of medical malpractice insurance, says Mr. Wood, is partly from a perception by the medical industry and insurers that complications and poor results are an unfortunate but foreseeable byproduct of medical practice, meaning in effect that there’s no such thing as medical malpractice. But, he says, that view is “myopic.” Solving the Problem Unfortunately, unlike a current television commercial, no magic dust or genie will solve the current crisis in malpractice insurance. With vested interests on each side, any proposed solution will run into significant opposition. Much of the effort is aimed at legislation to cap awards. But you can also take practical steps to help deal with the crisis. In January, President Bush proposed a “framework” for dealing with the malpractice crisis. He called for “national adoption of proven standards to make the medical liability system more fair, predictable, and timely,” according to a White House release. President Bush called for the ability of patients to get quick, unlimited compensation for economic losses. He also called for ensuring that recoveries for non-economic damages (pain and suffering) not exceed a reasonable amount of $250,000, similar to current California legislation. Punitive damages would also be limited to reasonable amounts. As of this writing, Congress was considering GOP legislation to limit liability awards. But Democrats are unlikely to agree to legislation they feel compromises patients’ rights. Any federal legislation is likely to face a Constitutional challenge, says Mr. Javerbaum. State-level legislators are also busy. New Jersey and Florida, for example, are considering award limits. Public Support While doctors, not surprisingly, support such legislation, public support for caps is also strong. More than half (58%) of U.S. adults favor new legislation to limit the costs of medical liability and reduce the costs of medical malpractice insurance, according to a recent Wall Street Journal Online/Harris Interactive Health-Care poll. Only 16% of the public would oppose such limits. Some 25% said they didn’t know. What’s more, 66% think that malpractice claims are brought against doctors when there has been no malpractice “very often” (26%) or “somewhat often” (40%). Such support seems a powerful force. Legislators, says Dr. Potozkin, will listen, for instance, to a patient who says that she can’t deliver her baby because her physician can’t get malpractice insurance -— as opposed to a doctor who says that a malpractice premium is impacting the physician’s bottom line. Do Caps Work? Some question, though, whether such caps have the desired effect. In California, says a recent New York Times article, the greatest malpractice premium drops didn’t occur until the state adopted price controls in 1988, years after it had adopted limits on pain and suffering. This throws into question the effects of the caps alone, the article suggests. Caps, agrees Mr. Javerbaum, won’t serve any purpose when there’s no showing in California or other states that they have meaningfully reduced premiums. Yet, argues the HHS, regulation can’t avoid the need for insurers to receive a sufficient premium and make a profit. And it quotes the National Association of Insurance Commissioners (NAIC) as saying almost all states have rating laws for property and casualty insurers, including medical malpractice. California’s regulation can’t explain its ability to avoid rapid premium increases. Dr. Mandy notes that workers’ compensation claims got out of hand in the 1950s. As a result, a system of objective evaluation of workers’ injuries and reasonable compensation was instituted. A similar system might help the malpractice crisis today, he suggests. Personal Tactics While legislative efforts may ultimately address the crisis, for now the malpractice premiums still arrive at your doorstep. “The danger,” says consultant Mr. Thompson, “is waiting to see if it [legislation] occurs.” Some physicians take radical steps: moving to states where costs aren’t as high, retiring, or “going bare” and practicing without malpractice insurance. Besides such desperate measures, you can take more moderate steps. For instance, you can put various items in place to convince an underwriter that he or she wants your business, says Mr. Thompson. He encourages doctors to develop a risk management philosophy and to have specific things in place. These include: • organized management structure • staff policies and procedures • compliance manual • employee policy manual • physician policy manual • self-audit. Besides presenting your best case for obtaining malpractice insurance, having these documents helps you increase efficiency and make your staff more effective. More Strategies You can also have your broker craft a system for separating doctors in your practice who, fairly or unfairly, end up with a loss history that’s greater than average, says Mr. Wood. Have your broker put together a pool for more high-risk dermatologists, he says, and group those physicians together for underwriting. Of course, you may not be able to do this in a small practice. Mr. Wood also cautions doctors that if they’re canceled mid-term, “don’t take that lying down.” In many states, insurers must meet specific guidelines to cancel policies mid-term instead of on the anniversary date. What’s more, the stigma of mid-term cancellation can make it more expensive to replace coverage. It’s better to enforce the policy you have and go to the market to replace your coverage, he suggests. Finally, of course, ensure that your skills are up-to-date. The way to regulate medicine, says Dr. Cockerell, isn’t through the courts. Emphasis should be on quality care and maintaining competence. Review boards and panels are also needed to ensure quality. See the Positives While it’s easy to focus on the negatives during this malpractice crisis, remember why you’re in medicine, stresses Dr. Cockerell. Dr. Mandy uses a single, aggressive question to sum up the liability crisis. Imagine that the world could be free of either lawyers or doctors. “Which world,” he asks, “do you want to live in?”
Malpractice Insurance: Coping with the Crisis
I magine that you see a patient with advanced squamous cell carcinoma affecting the head and neck, including nerve involvement. The patient needs significant head and neck surgery. Imagine, too, that you try to find a surgeon to perform the operation. You contact a cancer surgeon, ear, nose and throat specialist, and two or three plastic surgeons. Each one, though, refuses to perform the surgery because the doctor doesn’t want the practice exposed to the insurance risks involved. That tale of woe, from Steven Rosenberg, M.D., of Palm Beach Dermatology, West Palm Beach, FL, illustrates the impact of the malpractice insurance crisis on dermatology. The United States may offer the finest health care in the world, but physicians and patients now both pay the price of the professional liability crisis running rampant through the American healthcare system. The issue has received the attention of the White House, Congress, and the states, all of which have taken up the issue. In this article, we’ll provide a close look at the malpractice insurance crisis, including its causes and potential solutions. We’ll also offer practical steps you can take to keep your premiums as low as possible. But first, let’s take a look at how this crisis currently affects physicians in general. Worsening Crisis Without a doubt, the malpractice predicament is deepening. For instance, in early March the American Medical Association added six states to its count of those it says are in a medical liability crisis. That brings the total number of states to 18. Settlements against physicians are increasing. In 1994, the compensatory award median for all plaintiff verdicts amounted to $362,500, according to Jury Verdict Research. By 1999, that had increased to $700,000. In March, the Department of Health and Human Services (HHS) released an updated report on the crisis. “As we predicted, the crisis has only worsened since we issued those reports,” the paper says. “The scope and intensity of the crisis have increased.” The Squeeze Is On Such problems erode individual practices, says consultant Jeffrey P. Thompson, Manasquan, NJ. As doctors leave their specialties or states or simply can’t stay in practice, health care suffers. The result is “squeezing the necks of these golden geese,” says Mr. Thompson, referring to physicians. Unfortunately, he sees no easing of the crisis, suggesting that doctors will see little if any change in malpractice premiums for the next 5 years. Compared to the “golden age” of medicine, say in the 1960s, when lawsuits were rare, in some areas of the country 25% of all physicians are sued per year, says Clay J. Cockerell, M.D., clinical professor of dermatology and pathology at the University of Texas Southwestern Medical Center at Dallas. Some 58% of all physicians have been sued at one time or another, he notes. “It’s turned into craziness,” he adds. How Dermatologists Fare Dermatologists are by no means exempt from malpractice insurance worries. While traditionally dermatology has been a low-risk field, such is no longer the case, says David J. Goldberg, M.D., J.D., clinical professor of dermatology and director of laser research and Mohs surgery at Mount Sinai School of Medicine and adjunct professor of law at Fordham University School of Law in New York. Still, dermatologists don’t have to contend with the problems of such high-risk specialties as obstetrics/gynecology. Various items impact a dermatologist’s ratings, says Dr. Cockerell. These include: • Geographic location. South Texas, for instance, is a “hotbed” of medical liability problems, he says. • Dermatopathology. This is considered riskier than more traditional dermatology and can increase premiums. The Cost of Cosmetics One major issue involves cosmetic surgery. Cosmetic procedures, such as liposuction, are considered higher-risk procedures, says Dr. Cockerell. Dermatologists perform 50% of the liposuction in the United States, and this procedure is particularly singled out, says Stephen Mandy, M.D., University of Miami, and immediate past president of the American Society for Dermatologic Surgery (ASDS). Many dermatologists, he says, have dropped procedures such as lasers and liposuction because they can’t afford the malpractice coverage. Increasing malpractice premiums, says attorney and physician Dr. Goldberg, are indirectly related to the procedures performed. As malpractice claims and amounts paid increase against a given medical specialty (such as dermatology) because of a particular procedure, malpractice premium fees increase. You’ll usually see a lag between the time a procedure is first performed, malpractice claims are filed, and amounts are paid out by insurance companies, he says. Thus, as dermatologists continue to perform more diverse and complex cosmetic procedures, they can expect an increasing number of malpractice claims to be filed. With this, he notes, premiums will rise. The failure to diagnose a condition, says Dr. Mandy, also plays a role in increasing premiums. Such might occur, for instance, when a patient comes in for a skin check, appears fine, and then 2 years later is diagnosed with melanoma. (Whether the patient had melanoma when seen is, of course, a question.) A failure to diagnose cancer can result in huge awards, especially if the cancer is advanced and beyond reasonable treatment, he notes. Thus, if a dermatologist performs non-cosmetic surgery and only relatively low-end skin cancer surgery, the dermatologist’s malpractice rates might remain low, says Dr. Mandy. But when you get into the cosmetic arena or perform more complex cancer surgery, you can enter the high-liability zone. Even with no claims, Dr. Rosenberg and his large group practice, which includes 10 dermatologists and 2 dermatopathologists, have seen their malpractice premiums almost double this past year. That follows a 25% increase 2 years ago. He pays roughly $12,000/year in malpractice insurance, which includes a 30% discount for such things as being claims-free and taking malpractice risk prevention courses. His group doesn’t perform liposuction. On the other side of the country, Jerome Potozkin, M.D., Walnut Creek, CA, has seen a 25% increase in a 1-year span for his malpractice coverage. A board-certified dermatologist, he pays $22,000 per year, which also includes coverage for liposuction and cosmetic procedures. And this is in California, which caps non-economic awards at $250,000. The Causes of the Problem When it comes to pointing fingers for the malpractice insurance crisis, there’s plenty of blame to go around. Two major suspects include the stupendous toll of litigation and the dynamics of the insurance industry. Pulling no punches, the HHS report states that the liability crisis is caused by an expensive litigation system, “which often finds liability on a random basis and increasingly imposes very large judgments for non-economic damages. “The insurance premiums that health professionals and hospitals must pay are largely determined by the costs that the litigation system imposes on the insurers. The malpractice insurance system and the litigation system are inexorably linked.” In many cases, says Dr. Rosenberg, patients and attorneys go on a “fishing venture” to see if they can get an award. Even dropped cases still requires a legal defense, which can cost tens of thousands of dollars. If an attorney accepts a case on contingency, where he’s paid only if a judgment is collected, the patient bears no risk, says Dr. Mandy. An attorney, says Dr. Mandy, knows that if he brings a lawsuit, he’s likely to have an insurance company offer a settlement up front. “It’s totally free money,” he asserts. However, plaintiffs win only a small percent of malpractice cases, according to Kenneth S. Javerbaum, J.D., partner, Javerbaum, Wurgaft, Hicks & Zarin, Springfield, NJ. In New Jersey, for instance, 1,656 medical malpractice cases were filed in 2002. Only 200 cases were tried to a verdict, and 54 verdicts were in favor of the plaintiff. A certified civil trial attorney, Mr. Javerbaum has tried malpractice cases on both sides. Adding fuel to the fire, a Harvard University study quoted in To Improve Health and Health Care 1997: The Robert Wood Johnson Foundation Anthology (Jossey-Bass, 1997) found that 1% of hospital stays in New York state involved medical negligence, but only one in eight of these patients brought a malpractice lawsuit. Most injured patients, says the HHS report, receive no compensation. Trial attorneys, counters Dr. Rosenberg, talk about the dollars actually awarded each year, but not about the number of cases filed. There needs to be, he feels, a better way of determining which cases are appropriate to proceed through the court system. Influence of Insurance While the litigation system presents a ripe target, it’s not the only one. Critics also take the insurance industry to task for its part in the malpractice mess. In an unlikely alliance, lawyers and physicians may share similar views about the insurance industry. Insurers, says attorney Mr. Javerbaum, should be forced to open their books. Doctors may find that what they believe are unreasonable and unaccountable rates are due not to malpractice awards, but to arbitrary decisions by insurance carriers to raise rates without regard to loss-ratio experience, he maintains. Some point to the insurance industry’s losses in the stock market as a reason for increased malpractice premiums. The current situation represents the third time that Dr. Mandy has seen such a major malpractice crisis in his career, and he says, those crises are almost always associated with a downturn in the economy. Doctors represent “a pot of gold that the insurance companies aren’t afraid to dip into,” he suggests. The inexorable laws of supply and demand also take their toll. With fewer insurance carriers offering malpractice coverage, those that remain feel they can charge what they want, says Dr. Rosenberg. Finally, the 9/11 attacks have sent shock waves into the professional liability arena. Because of 9/11, reinsurers (companies that insure the insurers) abandoned the commercial property insurance market, according to David E. Wood, J.D., who practices insurance policy enforcement at Wood and Bender, LLP, Camarillo, CA. Liability insurers have fled just as fast, he says. But, counters the HHS report, if such insurance factors explained the problem, every state’s insurers would be forced to increase their premiums to the same extent. However, insurers are being forced to increase their premiums more rapidly and steeply in states where no reform in malpractice litigation has occurred, it says. Investments by medical malpractice companies, according to HHS, have been conservative. Most states limit the percent of assets an insurance company can put into stocks. Having worked as an underwriter, consultant Thompson says that underwriters are judged by the level of profit they generate. Thus, without a cap on awards, insurers must charge a certain level of premium. Making Mistakes A final, related factor in malpractice premiums involves medical errors. Arguably, if no dermatologist ever made a medical error, malpractice insurance premiums would have to stay at some reasonable level. Of course, doctors do, despite their best intentions, make mistakes. Well-publicized and dramatic, these sometimes tragic gaffes don’t help the doctors’ cause. In December, a study from the Harvard School of Public Health and the Henry J. Kaiser Family Foundation found that 42% of the public and more than one-third of U.S. doctors say they or their family members experienced medical errors. And 18% of physicians and 24% of the public said an error caused “serious health consequences,” according to a press release. “Certainly, medical errors exist,” says Dr. Mandy. But in fields other than medicine, individuals put up with errors, he holds. Patients may work under an “unrealistic expectation of perfection,” says Dr. Cockerell. The expense of medical malpractice insurance, says Mr. Wood, is partly from a perception by the medical industry and insurers that complications and poor results are an unfortunate but foreseeable byproduct of medical practice, meaning in effect that there’s no such thing as medical malpractice. But, he says, that view is “myopic.” Solving the Problem Unfortunately, unlike a current television commercial, no magic dust or genie will solve the current crisis in malpractice insurance. With vested interests on each side, any proposed solution will run into significant opposition. Much of the effort is aimed at legislation to cap awards. But you can also take practical steps to help deal with the crisis. In January, President Bush proposed a “framework” for dealing with the malpractice crisis. He called for “national adoption of proven standards to make the medical liability system more fair, predictable, and timely,” according to a White House release. President Bush called for the ability of patients to get quick, unlimited compensation for economic losses. He also called for ensuring that recoveries for non-economic damages (pain and suffering) not exceed a reasonable amount of $250,000, similar to current California legislation. Punitive damages would also be limited to reasonable amounts. As of this writing, Congress was considering GOP legislation to limit liability awards. But Democrats are unlikely to agree to legislation they feel compromises patients’ rights. Any federal legislation is likely to face a Constitutional challenge, says Mr. Javerbaum. State-level legislators are also busy. New Jersey and Florida, for example, are considering award limits. Public Support While doctors, not surprisingly, support such legislation, public support for caps is also strong. More than half (58%) of U.S. adults favor new legislation to limit the costs of medical liability and reduce the costs of medical malpractice insurance, according to a recent Wall Street Journal Online/Harris Interactive Health-Care poll. Only 16% of the public would oppose such limits. Some 25% said they didn’t know. What’s more, 66% think that malpractice claims are brought against doctors when there has been no malpractice “very often” (26%) or “somewhat often” (40%). Such support seems a powerful force. Legislators, says Dr. Potozkin, will listen, for instance, to a patient who says that she can’t deliver her baby because her physician can’t get malpractice insurance -— as opposed to a doctor who says that a malpractice premium is impacting the physician’s bottom line. Do Caps Work? Some question, though, whether such caps have the desired effect. In California, says a recent New York Times article, the greatest malpractice premium drops didn’t occur until the state adopted price controls in 1988, years after it had adopted limits on pain and suffering. This throws into question the effects of the caps alone, the article suggests. Caps, agrees Mr. Javerbaum, won’t serve any purpose when there’s no showing in California or other states that they have meaningfully reduced premiums. Yet, argues the HHS, regulation can’t avoid the need for insurers to receive a sufficient premium and make a profit. And it quotes the National Association of Insurance Commissioners (NAIC) as saying almost all states have rating laws for property and casualty insurers, including medical malpractice. California’s regulation can’t explain its ability to avoid rapid premium increases. Dr. Mandy notes that workers’ compensation claims got out of hand in the 1950s. As a result, a system of objective evaluation of workers’ injuries and reasonable compensation was instituted. A similar system might help the malpractice crisis today, he suggests. Personal Tactics While legislative efforts may ultimately address the crisis, for now the malpractice premiums still arrive at your doorstep. “The danger,” says consultant Mr. Thompson, “is waiting to see if it [legislation] occurs.” Some physicians take radical steps: moving to states where costs aren’t as high, retiring, or “going bare” and practicing without malpractice insurance. Besides such desperate measures, you can take more moderate steps. For instance, you can put various items in place to convince an underwriter that he or she wants your business, says Mr. Thompson. He encourages doctors to develop a risk management philosophy and to have specific things in place. These include: • organized management structure • staff policies and procedures • compliance manual • employee policy manual • physician policy manual • self-audit. Besides presenting your best case for obtaining malpractice insurance, having these documents helps you increase efficiency and make your staff more effective. More Strategies You can also have your broker craft a system for separating doctors in your practice who, fairly or unfairly, end up with a loss history that’s greater than average, says Mr. Wood. Have your broker put together a pool for more high-risk dermatologists, he says, and group those physicians together for underwriting. Of course, you may not be able to do this in a small practice. Mr. Wood also cautions doctors that if they’re canceled mid-term, “don’t take that lying down.” In many states, insurers must meet specific guidelines to cancel policies mid-term instead of on the anniversary date. What’s more, the stigma of mid-term cancellation can make it more expensive to replace coverage. It’s better to enforce the policy you have and go to the market to replace your coverage, he suggests. Finally, of course, ensure that your skills are up-to-date. The way to regulate medicine, says Dr. Cockerell, isn’t through the courts. Emphasis should be on quality care and maintaining competence. Review boards and panels are also needed to ensure quality. See the Positives While it’s easy to focus on the negatives during this malpractice crisis, remember why you’re in medicine, stresses Dr. Cockerell. Dr. Mandy uses a single, aggressive question to sum up the liability crisis. Imagine that the world could be free of either lawyers or doctors. “Which world,” he asks, “do you want to live in?”
I magine that you see a patient with advanced squamous cell carcinoma affecting the head and neck, including nerve involvement. The patient needs significant head and neck surgery. Imagine, too, that you try to find a surgeon to perform the operation. You contact a cancer surgeon, ear, nose and throat specialist, and two or three plastic surgeons. Each one, though, refuses to perform the surgery because the doctor doesn’t want the practice exposed to the insurance risks involved. That tale of woe, from Steven Rosenberg, M.D., of Palm Beach Dermatology, West Palm Beach, FL, illustrates the impact of the malpractice insurance crisis on dermatology. The United States may offer the finest health care in the world, but physicians and patients now both pay the price of the professional liability crisis running rampant through the American healthcare system. The issue has received the attention of the White House, Congress, and the states, all of which have taken up the issue. In this article, we’ll provide a close look at the malpractice insurance crisis, including its causes and potential solutions. We’ll also offer practical steps you can take to keep your premiums as low as possible. But first, let’s take a look at how this crisis currently affects physicians in general. Worsening Crisis Without a doubt, the malpractice predicament is deepening. For instance, in early March the American Medical Association added six states to its count of those it says are in a medical liability crisis. That brings the total number of states to 18. Settlements against physicians are increasing. In 1994, the compensatory award median for all plaintiff verdicts amounted to $362,500, according to Jury Verdict Research. By 1999, that had increased to $700,000. In March, the Department of Health and Human Services (HHS) released an updated report on the crisis. “As we predicted, the crisis has only worsened since we issued those reports,” the paper says. “The scope and intensity of the crisis have increased.” The Squeeze Is On Such problems erode individual practices, says consultant Jeffrey P. Thompson, Manasquan, NJ. As doctors leave their specialties or states or simply can’t stay in practice, health care suffers. The result is “squeezing the necks of these golden geese,” says Mr. Thompson, referring to physicians. Unfortunately, he sees no easing of the crisis, suggesting that doctors will see little if any change in malpractice premiums for the next 5 years. Compared to the “golden age” of medicine, say in the 1960s, when lawsuits were rare, in some areas of the country 25% of all physicians are sued per year, says Clay J. Cockerell, M.D., clinical professor of dermatology and pathology at the University of Texas Southwestern Medical Center at Dallas. Some 58% of all physicians have been sued at one time or another, he notes. “It’s turned into craziness,” he adds. How Dermatologists Fare Dermatologists are by no means exempt from malpractice insurance worries. While traditionally dermatology has been a low-risk field, such is no longer the case, says David J. Goldberg, M.D., J.D., clinical professor of dermatology and director of laser research and Mohs surgery at Mount Sinai School of Medicine and adjunct professor of law at Fordham University School of Law in New York. Still, dermatologists don’t have to contend with the problems of such high-risk specialties as obstetrics/gynecology. Various items impact a dermatologist’s ratings, says Dr. Cockerell. These include: • Geographic location. South Texas, for instance, is a “hotbed” of medical liability problems, he says. • Dermatopathology. This is considered riskier than more traditional dermatology and can increase premiums. The Cost of Cosmetics One major issue involves cosmetic surgery. Cosmetic procedures, such as liposuction, are considered higher-risk procedures, says Dr. Cockerell. Dermatologists perform 50% of the liposuction in the United States, and this procedure is particularly singled out, says Stephen Mandy, M.D., University of Miami, and immediate past president of the American Society for Dermatologic Surgery (ASDS). Many dermatologists, he says, have dropped procedures such as lasers and liposuction because they can’t afford the malpractice coverage. Increasing malpractice premiums, says attorney and physician Dr. Goldberg, are indirectly related to the procedures performed. As malpractice claims and amounts paid increase against a given medical specialty (such as dermatology) because of a particular procedure, malpractice premium fees increase. You’ll usually see a lag between the time a procedure is first performed, malpractice claims are filed, and amounts are paid out by insurance companies, he says. Thus, as dermatologists continue to perform more diverse and complex cosmetic procedures, they can expect an increasing number of malpractice claims to be filed. With this, he notes, premiums will rise. The failure to diagnose a condition, says Dr. Mandy, also plays a role in increasing premiums. Such might occur, for instance, when a patient comes in for a skin check, appears fine, and then 2 years later is diagnosed with melanoma. (Whether the patient had melanoma when seen is, of course, a question.) A failure to diagnose cancer can result in huge awards, especially if the cancer is advanced and beyond reasonable treatment, he notes. Thus, if a dermatologist performs non-cosmetic surgery and only relatively low-end skin cancer surgery, the dermatologist’s malpractice rates might remain low, says Dr. Mandy. But when you get into the cosmetic arena or perform more complex cancer surgery, you can enter the high-liability zone. Even with no claims, Dr. Rosenberg and his large group practice, which includes 10 dermatologists and 2 dermatopathologists, have seen their malpractice premiums almost double this past year. That follows a 25% increase 2 years ago. He pays roughly $12,000/year in malpractice insurance, which includes a 30% discount for such things as being claims-free and taking malpractice risk prevention courses. His group doesn’t perform liposuction. On the other side of the country, Jerome Potozkin, M.D., Walnut Creek, CA, has seen a 25% increase in a 1-year span for his malpractice coverage. A board-certified dermatologist, he pays $22,000 per year, which also includes coverage for liposuction and cosmetic procedures. And this is in California, which caps non-economic awards at $250,000. The Causes of the Problem When it comes to pointing fingers for the malpractice insurance crisis, there’s plenty of blame to go around. Two major suspects include the stupendous toll of litigation and the dynamics of the insurance industry. Pulling no punches, the HHS report states that the liability crisis is caused by an expensive litigation system, “which often finds liability on a random basis and increasingly imposes very large judgments for non-economic damages. “The insurance premiums that health professionals and hospitals must pay are largely determined by the costs that the litigation system imposes on the insurers. The malpractice insurance system and the litigation system are inexorably linked.” In many cases, says Dr. Rosenberg, patients and attorneys go on a “fishing venture” to see if they can get an award. Even dropped cases still requires a legal defense, which can cost tens of thousands of dollars. If an attorney accepts a case on contingency, where he’s paid only if a judgment is collected, the patient bears no risk, says Dr. Mandy. An attorney, says Dr. Mandy, knows that if he brings a lawsuit, he’s likely to have an insurance company offer a settlement up front. “It’s totally free money,” he asserts. However, plaintiffs win only a small percent of malpractice cases, according to Kenneth S. Javerbaum, J.D., partner, Javerbaum, Wurgaft, Hicks & Zarin, Springfield, NJ. In New Jersey, for instance, 1,656 medical malpractice cases were filed in 2002. Only 200 cases were tried to a verdict, and 54 verdicts were in favor of the plaintiff. A certified civil trial attorney, Mr. Javerbaum has tried malpractice cases on both sides. Adding fuel to the fire, a Harvard University study quoted in To Improve Health and Health Care 1997: The Robert Wood Johnson Foundation Anthology (Jossey-Bass, 1997) found that 1% of hospital stays in New York state involved medical negligence, but only one in eight of these patients brought a malpractice lawsuit. Most injured patients, says the HHS report, receive no compensation. Trial attorneys, counters Dr. Rosenberg, talk about the dollars actually awarded each year, but not about the number of cases filed. There needs to be, he feels, a better way of determining which cases are appropriate to proceed through the court system. Influence of Insurance While the litigation system presents a ripe target, it’s not the only one. Critics also take the insurance industry to task for its part in the malpractice mess. In an unlikely alliance, lawyers and physicians may share similar views about the insurance industry. Insurers, says attorney Mr. Javerbaum, should be forced to open their books. Doctors may find that what they believe are unreasonable and unaccountable rates are due not to malpractice awards, but to arbitrary decisions by insurance carriers to raise rates without regard to loss-ratio experience, he maintains. Some point to the insurance industry’s losses in the stock market as a reason for increased malpractice premiums. The current situation represents the third time that Dr. Mandy has seen such a major malpractice crisis in his career, and he says, those crises are almost always associated with a downturn in the economy. Doctors represent “a pot of gold that the insurance companies aren’t afraid to dip into,” he suggests. The inexorable laws of supply and demand also take their toll. With fewer insurance carriers offering malpractice coverage, those that remain feel they can charge what they want, says Dr. Rosenberg. Finally, the 9/11 attacks have sent shock waves into the professional liability arena. Because of 9/11, reinsurers (companies that insure the insurers) abandoned the commercial property insurance market, according to David E. Wood, J.D., who practices insurance policy enforcement at Wood and Bender, LLP, Camarillo, CA. Liability insurers have fled just as fast, he says. But, counters the HHS report, if such insurance factors explained the problem, every state’s insurers would be forced to increase their premiums to the same extent. However, insurers are being forced to increase their premiums more rapidly and steeply in states where no reform in malpractice litigation has occurred, it says. Investments by medical malpractice companies, according to HHS, have been conservative. Most states limit the percent of assets an insurance company can put into stocks. Having worked as an underwriter, consultant Thompson says that underwriters are judged by the level of profit they generate. Thus, without a cap on awards, insurers must charge a certain level of premium. Making Mistakes A final, related factor in malpractice premiums involves medical errors. Arguably, if no dermatologist ever made a medical error, malpractice insurance premiums would have to stay at some reasonable level. Of course, doctors do, despite their best intentions, make mistakes. Well-publicized and dramatic, these sometimes tragic gaffes don’t help the doctors’ cause. In December, a study from the Harvard School of Public Health and the Henry J. Kaiser Family Foundation found that 42% of the public and more than one-third of U.S. doctors say they or their family members experienced medical errors. And 18% of physicians and 24% of the public said an error caused “serious health consequences,” according to a press release. “Certainly, medical errors exist,” says Dr. Mandy. But in fields other than medicine, individuals put up with errors, he holds. Patients may work under an “unrealistic expectation of perfection,” says Dr. Cockerell. The expense of medical malpractice insurance, says Mr. Wood, is partly from a perception by the medical industry and insurers that complications and poor results are an unfortunate but foreseeable byproduct of medical practice, meaning in effect that there’s no such thing as medical malpractice. But, he says, that view is “myopic.” Solving the Problem Unfortunately, unlike a current television commercial, no magic dust or genie will solve the current crisis in malpractice insurance. With vested interests on each side, any proposed solution will run into significant opposition. Much of the effort is aimed at legislation to cap awards. But you can also take practical steps to help deal with the crisis. In January, President Bush proposed a “framework” for dealing with the malpractice crisis. He called for “national adoption of proven standards to make the medical liability system more fair, predictable, and timely,” according to a White House release. President Bush called for the ability of patients to get quick, unlimited compensation for economic losses. He also called for ensuring that recoveries for non-economic damages (pain and suffering) not exceed a reasonable amount of $250,000, similar to current California legislation. Punitive damages would also be limited to reasonable amounts. As of this writing, Congress was considering GOP legislation to limit liability awards. But Democrats are unlikely to agree to legislation they feel compromises patients’ rights. Any federal legislation is likely to face a Constitutional challenge, says Mr. Javerbaum. State-level legislators are also busy. New Jersey and Florida, for example, are considering award limits. Public Support While doctors, not surprisingly, support such legislation, public support for caps is also strong. More than half (58%) of U.S. adults favor new legislation to limit the costs of medical liability and reduce the costs of medical malpractice insurance, according to a recent Wall Street Journal Online/Harris Interactive Health-Care poll. Only 16% of the public would oppose such limits. Some 25% said they didn’t know. What’s more, 66% think that malpractice claims are brought against doctors when there has been no malpractice “very often” (26%) or “somewhat often” (40%). Such support seems a powerful force. Legislators, says Dr. Potozkin, will listen, for instance, to a patient who says that she can’t deliver her baby because her physician can’t get malpractice insurance -— as opposed to a doctor who says that a malpractice premium is impacting the physician’s bottom line. Do Caps Work? Some question, though, whether such caps have the desired effect. In California, says a recent New York Times article, the greatest malpractice premium drops didn’t occur until the state adopted price controls in 1988, years after it had adopted limits on pain and suffering. This throws into question the effects of the caps alone, the article suggests. Caps, agrees Mr. Javerbaum, won’t serve any purpose when there’s no showing in California or other states that they have meaningfully reduced premiums. Yet, argues the HHS, regulation can’t avoid the need for insurers to receive a sufficient premium and make a profit. And it quotes the National Association of Insurance Commissioners (NAIC) as saying almost all states have rating laws for property and casualty insurers, including medical malpractice. California’s regulation can’t explain its ability to avoid rapid premium increases. Dr. Mandy notes that workers’ compensation claims got out of hand in the 1950s. As a result, a system of objective evaluation of workers’ injuries and reasonable compensation was instituted. A similar system might help the malpractice crisis today, he suggests. Personal Tactics While legislative efforts may ultimately address the crisis, for now the malpractice premiums still arrive at your doorstep. “The danger,” says consultant Mr. Thompson, “is waiting to see if it [legislation] occurs.” Some physicians take radical steps: moving to states where costs aren’t as high, retiring, or “going bare” and practicing without malpractice insurance. Besides such desperate measures, you can take more moderate steps. For instance, you can put various items in place to convince an underwriter that he or she wants your business, says Mr. Thompson. He encourages doctors to develop a risk management philosophy and to have specific things in place. These include: • organized management structure • staff policies and procedures • compliance manual • employee policy manual • physician policy manual • self-audit. Besides presenting your best case for obtaining malpractice insurance, having these documents helps you increase efficiency and make your staff more effective. More Strategies You can also have your broker craft a system for separating doctors in your practice who, fairly or unfairly, end up with a loss history that’s greater than average, says Mr. Wood. Have your broker put together a pool for more high-risk dermatologists, he says, and group those physicians together for underwriting. Of course, you may not be able to do this in a small practice. Mr. Wood also cautions doctors that if they’re canceled mid-term, “don’t take that lying down.” In many states, insurers must meet specific guidelines to cancel policies mid-term instead of on the anniversary date. What’s more, the stigma of mid-term cancellation can make it more expensive to replace coverage. It’s better to enforce the policy you have and go to the market to replace your coverage, he suggests. Finally, of course, ensure that your skills are up-to-date. The way to regulate medicine, says Dr. Cockerell, isn’t through the courts. Emphasis should be on quality care and maintaining competence. Review boards and panels are also needed to ensure quality. See the Positives While it’s easy to focus on the negatives during this malpractice crisis, remember why you’re in medicine, stresses Dr. Cockerell. Dr. Mandy uses a single, aggressive question to sum up the liability crisis. Imagine that the world could be free of either lawyers or doctors. “Which world,” he asks, “do you want to live in?”
