Tuesday, November 26, 2002

Doctors look for insurance cure

Lawmakers prescribe caps on noneconomic damages

By Spencer Hunt
Enquirer Columbus Bureau

COLUMBUS - Dr. Elizabeth Clark doesn't like to look at her patients through the eyes of an insurance agent, but with the premiums she's paying, it's hard not to.

"Every time you touch somebody, you're exposing yourself to risk," says Dr. Clark, a Cincinnati obstetrician-gynecologist who has watched helplessly as her malpractice insurance rates skyrocketed from $18,000 in 1999 to $58,000 this year.

"I think from a moment-to-moment basis you try not to think like that," she said. "You want to approach everybody as someone you can help."

Thousands of physicians across Ohio are struggling to pay 20 percent, 30 percent - even 60 percent - increases in insurance rates, and they are looking to lawmakers for relief.

Ohio Republicans, triumphant in the November elections, say they have the medicine doctors need in the form of a bill that would limit what juries can award in lawsuits. They blame multimillion-dollar malpractice verdicts for the sticker-shock premiums.

  Here are the biggest Ohio jury awards for medical malpractice cases in 2001, according to Ohio Lawyers Weekly, a publication that tracks such cases annually.
• Shafer v. Feldman: $12.2 million
  A Cuyahoga County jury awarded this amount to 78-year-old Mary Shafer and her family. Ms. Shafer was left paralyzed in 1999 after emergency room doctors didn't recognize signs of internal bleeding that built up pressure on her spinal cord.
• Aivazis v. HM Health Services: $8.5 million
  A jury in Trumbull County awarded this amount to the parents of 6-year-old John Aivazis in a case where a doctor's office didn't recognize symptoms of a worsening infection that led to meningitis and the child's death in 1997.
• Scherf v. St. Charles Mercy Hospital: $4 million
  Two-year-old Bailey Scherf was admitted to a Toledo hospital for a tonsillectomy. She died days later from an inadvertent overdose of prescription nausea medication given by two nurses. A Lucas County jury gave $4 million to her parents.
Critics argue that restricting jury awards won't guarantee lower insurance rates. They say poor business and investment decisions by insurance companies are the causes of doctors' pricey premiums.

"This is not going to help doctors," said Carlton Carl, spokesman for the Association of Trial Lawyers of America. "This is going to subsidize the insurance industry and penalize the victims of medical malpractice."

While no one disputes that doctors' insurance rates are soaring, there is a big disagreement about why it's happening.

Insurance company executives, doctors and their legislative allies point to the juries in Ohio's courtrooms.

Last year, a Cleveland jury awarded $12.2 million to the family of an elderly woman left paralyzed when her internal bleeding went unnoticed. A Trumbull County jury awarded $8.5 million to the parents of a 6-year-old boy who died after doctors didn't recognize a worsening infection that led to meningitis.

In Hamilton County, one of the largest recent malpractice awards was in 1997. A jury awarded $8.1 million to a Sycamore Township family over the treatment of their 16-year-old son at Cincinnati Children's Hospital Medical Center for a heart infection. In return for the hospital not appealing the verdict, the family settled in 1998 for a lesser, undisclosed amount.

A federal jury in 1996 awarded $4.25 million to a 27-year-old Covington man after brain surgery. A Butler County jury gave $1.5 million the same year to a 67-year-old Hamilton man who had a stroke after surgery.

Kentucky does not have limits on what patients can receive in damages. Total medical malpractice insurance losses in Kentucky dropped 31 percent between 2000-2001, after more than doubling the year before.

For insurance companies, the problem boils down to simple math. In Ohio last year, according to the Ohio Department of Insurance, medical malpractice insurers paid out $1.62 in malpractice claims for every $1 they collected in premiums.

In the face of such losses, some companies simply quit writing malpractice insurance. The Minnesota-based St. Paul Companies was the nation's No. 2 malpractice insurer until last year, when it decided to stop carrying doctors altogether.

St. Paul paid out $2.05 in Ohio in 2001 for every $1 it collected in premiums. Nationwide, the company lost $1.43 for every $1. The company lost $1.5 billion over four years, said spokeswoman Andrea Wood.

"A lot of times when you have a bad year or two, you think it's just that: a bad year," Ms. Wood said. "We saw it as a trend. We didn't see any end to this trend."

Other industry observers say insurance settlements and jury verdicts are only part of a bigger problem.

Carol Brierly Golin, editor of Medical Liability Monitor, a Chicago-based publication that tracks the malpractice insurance industry, said many insurance companies were eagerly competing for doctors' business in the mid-1990s. That meant offering lower rates to entice more physicians to sign up.

"A lot of companies were pricing insurance too low," she said.

While companies were discounting rates, awards and settlements were going up.

Data from Jury Verdict Research shows median jury awards in malpractice cases rose from $503,000 in 1997 to $1 million in 2000. The national median for out-of-court settlements rose from $400,000 to $500,000 over the same period.

Ohio Lawyers Weekly, a publication that tracks awards and settlements, has also reported yearly surges in settlements.

"In any given year, I would say there are between 30 to 40 settlements in excess of $1 million," said David Benson a Lawyers Weekly editor. "A good portion of those are medical malpractice settlements."

Ms. Golin said insurance companies were "blindsided" by higher awards even as they were cutting rates.

Cheye Calvo, an insurance analyst with the National Conference of State Legislatures, said the ability of insurers to pay claims also was hampered by the steep declines in their investment portfolios.

"Insurers have to try to predict the future," he said. "They guessed wrong."

Those bad guesses prompted several big insurance companies to collapse under the weight of claims they couldn't pay.

News reports showed the nation's third largest malpractice insurer, Pennsylvania-based PHICO Insurance Co., had a $250 million deficit in 2001 when state regulators began looking through its books. In 1997, the company was offering doctors 25 percent to 35 percent savings on rates.

The 1998 demise of Cleveland-based insurer PIE left many Ohio doctors scrambling to find new insurance companies. Those companies still willing to insure doctors are charging much higher rates.

Data supplied by Medical Liability Monitor shows First Professionals Insurance Co. raised its malpractice rates for Ohio doctors 28.3 percent from 2001 to 2002. Medical Assurance Co. raised its rates between 31 percent and 38 percent. Professionals Advocate Insurance Co. raised its rates a uniform 60 percent.

Obstetricians-gynecologists, always the most expensive doctors to insure because of all that can go wrong in pregnancies, were hardest hit. In Cuyahoga County, obstetrician-gynecologists insured by Professional Advocate saw their rates increase from $95,310 in 2001 to $152,496 this year.

In fact, Cleveland-area doctors appear to pay more for malpractice insurance than doctors in any other region of the state. Ms. Golin said that's because insurers consider Cleveland a "hostile" area.

What makes one region of the state hostile to insurers? "Big jury awards," Ms. Golin said.

Patricia Webb, business manager at For Women Inc., a practice that includes Dr. Clark and six other obstetricians-gynecologists, said they're looking at scaling back their insurance coverage to lower their payments.

"That means greater risk to our doctors," Ms. Web said.

Dr. Warren Metherd, a Cincinnati obstetrician-gynecologist in a two-doctor practice, said he was thinking about quitting medicine. "I'm going to hang in there for now," he said. "How much longer, I don't know."

Republican legislators say limiting lawsuit awards is the best way to help rein in premiums. Their goal is to give fellow Republican Gov. Bob Taft a plan he can sign before the end of the year.

A bill that passed the Senate om Thursday focuses on limiting noneconomic damages that juries award plaintiffs for their "pain and suffering," or costs that can't be directly linked to lost wages or earning potential.

The bill would cap noneconomic damages in many malpractice cases to $500,000. Lawsuits involving permanent injuries would be capped at $750,000, or $35,000 a year for the injured person's lifespan, whichever is greater.

The plan passed easily in the Senate and now goes to the House, where changes are likely.

State Rep. Timothy Grendell is a Geauga County Republican who is advancing a bill in the House. He said lawmakers need to carefully craft a bill that the Ohio Supreme Court will not reject.

A divided court in 1999 tossed out jury award limits in one of its most controversial rulings. The 4-3 majority said Ohio's Republican-controlled legislature was being "openly subversive" in trying to limit awards, because the court had previously found such caps to be unconstitutional. Two candidates backed by medical and insurance industry groups were elected to the court this year.

Nonetheless, Mr. Grendell wants to be sure a bill that most certainly would be challenged by trial lawyers can pass muster.

"I don't know how you put reforms in place by giving (Supreme Court justices) something they've already said is unconstitutional," Mr. Grendell said. "I'm trying to find the constitutional plateau that meets their approval."

Mr. Grendell is convinced capping lawsuits will help insurance companies better predict their future costs. While that wouldn't lower rates in the short term, it could encourage more companies to come back to insure Ohio doctors.

"If you look at the states that have passed reforms, it has helped stabilize insurance premiums," Mr. Grendell said. "It hasn't reduced them, but it's helped stabilize them."

A Medical Liability Monitor survey of the 19 states that cap noneconomic damages in lawsuits shows doctors in most pay below-average rates for their specialties.

Obstetrician-gynecologists in 16 of those states pay between $18,000 and $55,000 a year, all lower than the $56,500 national average.

But there are exceptions. The average rate in Michigan is $89,000. Massachusetts obstetrician-gynecologists pay an average of $85,000 and Maryland's, $64,000.

Opponents of lawsuit limits point to these examples and others to support their argument that such laws hurt only the victims of medical malpractice.

"This takes away the rights of the innocent," said John Lancione a Cleveland lawyer who specializes in medical malpractice cases.

"I don't think the general public understands how bad these injuries can be," he said. "We're talking about babies who are brain damaged, lives that are devastated. You cannot put a price on these horrific injuries."

All the arguing offers little help to physicians like Dr. Clark who are looking at some very tough choices. She must cut other costs to pay the new rates or go to work each day with less insurance coverage.

"We don't have anything that's cut-able. You sit down sometimes and you have to think, `Is the stress of worrying about this stuff really worth it?' Could you make a better living some other way?

"It makes you afraid."

E-mail shunt@enquirer.com

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