With a growing handful of states facing crises over the rapidly rising cost of malpractice insurance, medical professionals in Rhode Island are keeping close tabs on the situation here.
The diagnosis: The patient isn’t sick yet, but it has developed a cough.
"Rhode Island is one of those states where the pressure is building," said Steve DeToy, director of public and government affairs for the Rhode Island Medical Society. "We’ve seen steady increases, not the huge jumps that have precipitated crises in other states. But we’ve got to be prepared for that."
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Two- and threefold jumps in medical-malpractice insurance rates in Pennsylvania, New Jersey, Nevada, West Virginia and other states reportedly have prompted some physicians to quit their practices and caused hospitals to close some units and slash jobs. Las Vegas’s only trauma center was forced to close July 3 when most of its surgeons resigned, citing the soaring cost of malpractice insurance.
President Bush, declaring that "excessive litigation" is threatening access to care and leading to higher health-care costs for businesses and consumers, last month announced his support for capping non-economic damages in medical malpractice cases, such as pain and suffering, at $250,000.
In Rhode Island, after more than a decade of stable rates for medical liability insurance, a confluence of factors points to a protracted phase of sharply higher premiums, medical professionals say.
Robert A. Anderson, director of the Rhode Island Medical Society-Insurance Brokerage Corp. – the medical society’s for-profit subsidiary that sells roughly 70 percent of malpractice policies for independent physicians in Rhode Island – said doctors can expect to see base rates increase 20 to 40 percent when they renew policies for next year.
The Rhode Island Joint Underwriting Association – established in 1986 by state statute to serve as the insurer of last resort for medical professionals in Rhode Island – has filed for a rate increase of 20 percent.
The premium increases are more modest than the national average of 37 percent, according to the Physician Insurers Association of America (PIAA). Still, observers say there are telltale signs that things could get worse in Rhode Island before they get better.
For instance, a number of insurance carriers have pulled out of the Rhode Island market over the past year. Other large carriers, such as California-based NORCAL – Rhode Island’s largest malpractice underwriter, with 1,700 physician policyholders – have recently tightened underwriting standards.
Roots of problem abound
In its July 17 testimony to a U.S. House subcommittee on health, the PIAA likened the problem to a "perfect storm" that has gathered to create a crisis in many states.
One reason: Insurance companies have suffered steep losses on their investments during the bear market of the past two years, and some say insurers are seeking to restore their eroded reserves by jacking up premiums.
But physician groups also place heavy blame on increasingly excessive claims by plaintiffs that have led to larger jury awards and settlements, and they complain that state governments – including Rhode Island – have done little to provide relief in the way of tort reform.
In the decade between 1991 and last year, the number of claims costing more than $1 million increased nearly fourfold, the PIAA says.
The same scenario is unfolding in Rhode Island, medical professionals say, with the severity of claims – rather than their frequency – working to increase the cost of liability insurance.
Earlier this year, for example, the Superior Court awarded one of the largest medical malpractice awards in state history, $2.3 million, to a Pawtucket couple for the death of their newborn infant at Women & Infants Hospital in 1997.
Some specialists hit hardest
Physicians generally are unable to pass those cost hikes on to patients. Doctors’ revenue is dependent almost entirely on reimbursement payments from private insurance companies and government payers such as Medicare and Medicaid, and reimbursement rates have been declining, doctors says.
Dr. Kathleen Fitzgerald, a gynecologist who has practiced in Rhode Island for 28 years, said her malpractice-insurance premiums will go up just 10 percent. But malpractice insurance represents a significant chunk of her overall cost structure, on par with the cost of her lease payments or the taxes she pays on her practice.
Many of Fitzgerald’s colleagues, however, likely will be hit harder. Certain specialties, including obstetriciangynecologists (OBGYNs), neurosurgeons, orthopedic surgeons and trauma surgeons, pay the highest rates for liability insurance because those doctors are more likely than others to face expensive malpractice lawsuits.
Fitzgerald said a former colleague, an OBGYN who has since died, refused to take patients older than 30, because they are at greater risk of malignancies or developing complications during pregnancy.
"These are not patients you should be turning away," she said. "But they’re patients who are inherently fraught with potential bad outcomes. How many times do I want to put myself on the firing line to be potentially sued?"
Trial lawyer’s view
But those on the other side of the equation – patient groups and trial lawyers who represent plaintiffs in malpractice cases – argue that litigation claims are not to blame for rising insurance costs.
Max Wistow of Providence law firm Wistow & Barylick Inc., a plaintiffs’ personal injury and medical malpractice firm, said he doesn’t know of any evidence that points to a trend toward higher malpractice claims and jury awards in Rhode Island. He added that the vast majority of cases are settled out of court.
And in cases where settlements and jury awards are much larger than in the past, Wistow said there often is a good reason. He said studies have shown that injuries stemming from cases of physician negligence – as well as the expenses associated with those injuries – have grown more severe over time. The reason: Medical technologies have evolved to enable physicians to attempt more invasive and aggressive procedures, which carry greater risks for severe injury or death.
The Association of Trial Lawyers of America maintains that bad business decisions by insurance companies are mostly to blame for soaring premiums, and the group says taking money out of the pockets of injured patients is not the solution.
Return of risk retention?
The medical society’s concern now is that rising malpractice premiums will spawn one of the biggest plagues that marked the malpractice crisis of the 1980s: the emergence of "risk-retention" groups.
Usually formed by physicians, and typically based offshore or in states with lax regulatory environments, risk-retention groups often are able to duck more-stringent state insurance regulations and undercut premiums offered by insurance companies.
Nine such groups began providing low-cost malpractice insurance in the state during the mid-to-late ’80s, luring physicians who were squeezed by soaring malpractice-insurance rates, according to Newell Warde, executive director of the medical society. But eventually, all nine went bankrupt, he said.
Anderson, of RIMS – Insurance Brokerage Corp., said that as many as 800 Rhode Island physicians were left in the lurch when their risk-retention providers became insolvent. He said many of those doctors still are hounded by groups trying to recoup steep losses.
"This is about the time in the (underwriting) cycle that brokers introduce alternative-risk-transfer mechanisms, and doctors looking to control their costs will look in that direction," Anderson said.
Anderson said virtually all medical professionals in the state, from physicians to dentists and chiropractors, recently have seen liability insurance creep higher. He added that insurance rates are rising much faster for institutional providers, such as hospitals and nursing homes.
Rhode Island doctors say the state legislature has been reluctant to take on tort reform – often siding with the influential trial lawyer bar – and even modest tort-reform measures have failed to gain much support in the General Assembly.
Absent reforms at the state level, Warde said Rhode Island’s medical professionals will be forced to rely on federal action. "I hope we in Rhode Island don’t have to go through the pain these other states have gone through before we find a way to repair the system to compensate patients who are truly injured," Warde said. "But I think it will get worse. There’s more pain coming."
