18 months after law enacted, doctors say it hasn’t worked

By Steve Kanigher

Friday, Feb. 27, 2004 | 6:25 a.m.

WEEKEND EDITION

Feb. 28 - 29, 2004

Eighteen months after Nevada lawmakers passed legislation aimed at stabilizing rapidly increasing medical malpractice insurance rates, doctors say the law has been a colossal failure.

Doctors are so fed up with Assembly Bill 1, which took effect on Oct. 1, 2002, that they are banking on a November ballot measure they hope will lower rates by putting more restrictions on malpractice litigation.

Lawyers say doctors haven't given AB1 a chance to work and that what really needs to occur is better regulation of the insurance industry.

The insurance industry says it will not lower rates until it knows whether AB1 is constitutional, which remains questionable because the law has not yet been challenged.

Once one cuts through the thick rhetoric that surrounds all sides of the medical malpractice issue in Nevada, it is easy to conclude that no one knows for sure the extent to which doctors and health care in general have been impacted by AB1 in Clark County.

Here are some reasons why:

"We simply don't have good primary data yet on the magnitude of this crisis," Dr. John Williamson, a Reno cardiologist and president of the Nevada State Medical Association, said. "We're trying to get a finer handle on this."

But doctors say they have reason to believe -- based on limited surveys and anecdotal information -- that the circumstances that forced the 2002 special legislative session still exist because of four situations:

AB1 was designed to lower insurance rates by placing a $350,000 cap -- with exceptions for gross malpractice or a court finding of "exceptional circumstances" -- on the amount of money plaintiffs could collect from defendants in malpractice lawsuits for pain and suffering, known as non-economic damages. Plaintiffs could still collect unlimited economic damages, which cover medical bills and lost wages.

A group of physicians called Keep Our Doctors in Nevada seeks to modify AB1 through a November general election ballot initiative that would eliminate the exceptions to the cap. The maximum $350,000 pain and suffering award could only be collected once per malpractice occurrence, rather than multiplied by the number of plaintiffs and defendants in a case as allowed now.

The initiative also would hold doctors liable only for their exact percentage of liability. Under existing law, doctors can be held liable for all damages up to their insurance policy limits if other defendants cannot pay, even if that means the doctors are paying a higher percentage of the award than their percentage of liability warrants.

"The high-risk professions are not coming to Nevada," initiative supporter Dr. Rudy Manthei, a Henderson ophthalmologist, said. "There has been a loss of access to health care here and the percentage of uninsured Nevadans is still going up. With AB1, I haven't seen any changes."

But doctors can expect opposition from plaintiff's attorneys, malpractice victims and their families. One opponent is Las Vegas bartender Jason Phillips, who won an out-of-court settlement after his 13-year-old daughter, Brittany, was left permanently brain damaged as the result of medical malpractice 10 years ago. He does not believe there should be any cap on pain and suffering.

"How can you put a monetary value on ruining someone's life forever?" Phillips said. "I was looking forward to her having boyfriends and going on dates and getting married, but she won't have any of that. I wish one person could trade places with me and be inside of me for one day to realize what I go through."

Rate hikes

There is evidence to suggest that obstetrics/gynecology and surgery remain the specialties hardest hit by continued rate hikes. Of those two categories, the OB/GYNs have been the most vocal and have received the most publicity because they are the best organized of the specialties that have been affected.

Dr. John Nowins, president of the Clark County OB/GYN Society, does not have a high opinion of AB1. His premiums increased from $25,885 in 2001 and $36,256 in 2002 to $72,896 this year. The rate would have climbed to $90,782 next October had his insurer, American Physicians Assurance Corp., not announced in January that it was pulling out of Nevada in June.

"Insurance is up, the frequency of lawsuits is up and doctors are leaving," Nowins said. "I have colleagues who are increasing their workload so they can afford their astronomical overhead. I work a little harder and see more patients so I can afford my premium. But if you deliver two or three babies a day, there's a fatigue factor. It can be difficult to give patients adequate care when you are pulled in different directions."

Las Vegas surgeon Ikram Khan, who served as liaison between Gov. Kenny Guinn and doctors during the special legislative session, paid $28,000 for insurance in 2001-02, $48,000 in 2002-03, and $64,000 this year. If he renews with American Physicians Assurance for one more year -- an option the company has given him even though they are pulling out of the state -- he is looking to pay $70,000.

"We need federal regulation of the insurance industry," Khan said. "It's the only industry that is not regulated in any shape or form in this country. If a state tries to regulate them, they leave the state.

"AB1 would do what it was supposed to do if the insurance industry would respond to it and lower the prices. Instead, they have sat back to see if it is a constitutionally viable law.

"It's a Catch-22 situation for the medical community in terms of getting any positive outcome from this law. In order for the people to benefit from the law, the insurance industry has to come to the table and be part of the solution instead of part of the problem."

The doctor-owned Nevada Mutual Insurance Co., which covers nearly 1,000 doctors and is the largest medical malpractice insurer in the state, charges OB/GYNs and surgeons an average of $90,000 a year in premiums, though there are policies as expensive as $180,000 annually.

"Invasive medicine is basically getting hit the hardest," Chip Wallace, Nevada Mutual's marketing director, said. "That's where there is the greatest risk of complications."

When insurance rates are hiked, so is tail coverage, which usually costs at least twice as much premiums and is purchased when doctors retire or switch companies. Most doctors' premiums only cover lawsuits that are filed against them that particular year. Lawsuits filed in subsequent years would be covered by the tail.

"If I left today, I'd have to pay $140,000," Khan said. "Nowhere else in the world do you have to pay money to retire."

The good news for doctors is that the size and frequency of proposed rate hikes are not as bad as they were a year ago, Nevada Insurance Division actuary Janice Moskowitz said. But one insurer, The Doctors' Co., has a pending request for an average 40 percent hike in premiums.

"Except for The Doctors' Co., rate increases are slowing down," Moskowitz said. "Generally, they're more modest."

Nevada's experience with steep insurance rate hikes has not been isolated. The Medical Liability Monitor, a Chicago-based service that tracks the insurance industry, reported in a nationwide survey of 641 medical malpractice rate changes last year that 211 represented increases of at least 25 percent while only 15 involved rate reductions.

Lawyers warned doctors at the special session that insurance rates would not go down until all aspects of medical malpractice were discussed, Las Vegas attorney Dean Hardy, past president of the Nevada Trial Lawyers Association, said. Hardy and other lawyers believe insurers continue to raise rates to make up for disappointing investment returns, something the insurance industry denies.

"It is not the civil justice system making these rate increases," Hardy said. "There has to be an overview of insurance regulation and insurance reform and a discussion of what drives insurance premiums."

Although AB1 has not yet faced a legal challenge, insurance industry lobbyist Jim Wadhams of Las Vegas said there is still a degree of uncertainty as to whether Nevada's law is constitutional, which translates into risk that is built into insurance rates.

"As a practical matter AB1 hasn't done much," Wadhams said. "Until there is certainty in the marketplace, there is risk, and that has premium dollars attached to it.

"Once the Nevada Supreme Court says it's constitutional, it will have an effect. You'd see rate relief of 5 to 10 percent, so if you're paying $90,000 that could mean savings of $9,000."

Insurance exodus

A major problem for doctors is that the number of insurers willing to write malpractice polices in Nevada has been shrinking, and AB1 has done nothing to stop the exodus.

There were 11 medical malpractice insurers in the state in March 2002, but six of those companies pulled out of the market, and a seventh, American Physicians Assurance, is leaving in June, according to the Nevada Insurance Division.

American Physicians Assurance is joining an exit list that already includes St. Paul Medical Liability Insurance Co., Chicago Insurance Co., Continental Casualty Co., Medical Insurance Exchange of California, National Union Fire Insurance Co. and Utah Medical Insurance Association.

The four companies that wrote malpractice policies in Nevada in March 2002 and are still doing so today are Physicians Insurance Co. of Wisconsin, The Doctors Company, Medical Protective Co., which is not covering any more new doctors, and Hudson Insurance Co., which was formerly TIG Insurance Co.

They have been joined by Nevada Mutual Insurance Co. and the Medical Liability Association of Nevada, which was formed by the state in response to rising insurance costs. The market share of these companies was not immediately available.

Except for Hudson, which covers only Northern Nevada physicians, the other companies write policies for doctors throughout the state.

But Larry Matheis, executive director of the Nevada State Medical Association, said there is anecdotal evidence that the companies have tightened their underwriting since AB1, refusing to renew particular physicians or making it more difficult for OB/GYNs and surgeons to get coverage.

"It's difficult because it's not in writing anywhere," Matheis said. "So we rely anecdotally when a doctor says, 'I found out I can't get a bid from anybody.' "

The Doctors Company covers 700 physicians in Nevada but is not writing policies for new OB/GYNs, company spokeswoman Stacy Schultz said. She said her company's position may change if the November ballot measure that would tighten caps on pain and suffering damages is approved.

More insurers won't come to Nevada until they can better predict the risks of entering the state's medical malpractice marketplace, Sam Sorich, vice president of the Property Casualty Insurance Association of America, said.

"Insurers still look at the medical malpractice market in Nevada with a degree of caution," Sorich said. "There is a consensus among companies that more needs to be done to control the costs of medical malpractice lawsuits in order to create an environment where insurers can have greater predictability."

More lawsuits

AB1 has actually promoted more lawsuits than was the case prior to the summer 2002 special legislative session.

The Clark County Medical Society reported that the number of cases filed against doctors in Clark County District Court rose from 177 in 2001 to 455 last year.

The main reason for this has to do with a provision of AB1 that gave plaintiffs' attorneys a grace period to transfer cases to court that were pending before a medical malpractice screening panel. The screening panel, made up of doctors and lawyers who review malpractice complaints to determine whether lawsuits are warranted, is being phased out because of the law.

Over the past three months the number of lawsuits has tailed off to the levels they were in the summer of 2002. Las Vegas malpractice attorney Gerald Gillock, for one, said he believes that number will continue to decline because most lawyers aren't transferring any more cases from the panel to the courthouse.

"It's just too bad the doctors haven't given AB1 a chance to work," Gillock said.

The impact AB1 has had on the severity -- or amount -- of malpractice settlements is still uncertain. The best data is collected by the National Practitioner Data Bank, which keeps track of malpractice payments for the U.S. Department of Health and Human Services.

The latest annual report by the data bank, for 2002, showed that the average malpractice payment in Nevada that year was $317,027, 14th highest in the nation and above the national average of $275,094. But that was less than the average $372,728 award logged in Nevada in 2001, and only slightly higher than the average payment of $317,017 in 2000. Data for 2003 will not be released until later this year.

Doctors leaving

The aspect of the medical malpractice issue that has generated the most debate has to do with the doctors' argument that physicians either quit practicing or left the state in droves because they could no longer afford to pay such high malpractice insurance premiums.

The federal General Accounting Office, prodded by congressmen to look at the impact of medical malpractice rate hikes in Nevada and four other states, reported mixed conclusions last August. The GAO confirmed that health care was tougher to access in Nevada, Florida, Mississippi, Pennsylvania and West Virginia.

But the GAO also concluded that it "could not determine the extent to which differences in premiums and claims payments across states were caused by tort reform laws or other factors that influence such differences.

"In Nevada, 34 OB/GYNs reported leaving, closing practices, or retiring due to malpractice concerns. However, confirmatory surveys conducted by the Nevada State Board of Medical Examiners found nearly one-third of these reports were inaccurate -- eight were still practicing and three stopped practicing due to reasons other than malpractice.

"Random calls we made to 30 OB/GYN practices in Clark County found that 28 were accepting new patients with wait-times for an appointment of three weeks or less. Similarly, of the 11 surgeons reported to have moved or discontinued practicing, the board found four were still practicing."

The GAO report was severely criticized by doctors who said it was misleading in part because it did not take into account the number of doctors who still practiced medicine but limited the types of care they provided in order to lower their insurance risk.

The Clark County Medical Society wasted little time trying to refute the report. After the report was released, the medical society conducted a survey of OB/GYNs last fall and found that 46 local doctors took action because of their high insurance rates. The survey found that 19 dropped obstetrics from their practice, 14 moved out of state, eight retired and five retained their license but closed their practice.

One organization that has been impacted is the nonprofit EOB Community Action Partnership in Las Vegas, which caters to low-income clients and receives funding from United Way and community service block grants. Last fall EOB opened a third women's clinic because of increased demand for prenatal care.

The care is provided by two staff nurses and a team of OB/GYNs who serve as residents at the Nevada School of Medicine.

EOB, which charges clients on a sliding fee schedule based on their ability to pay, was budgeted to see 300 prenatal clients last year but actually handled 482. The organization had to raise its maximum fees from $550 to $600 last year to afford the increased demand for its services.

"For the first time in history we had to make a waiting list for our prenatal moms because we didn't have the staff to handle them all," Cheryl Sonnenberg, EOB's health services administrator, said. "They told us they were having trouble finding prenatal care and that they couldn't afford it. That's indicative that there are fewer doctors taking patients.

"If you have a malpractice insurance rate increase, I'm sure doctors have to raise their rates."

State medical board records show that the number of licensed OB/GYNs in Clark County actually increased from 144 in 2001 to 146 in 2002 and 160 last year. There were 84 licensed general surgeons in the county last year, an increase from 73 in 2001 and 79 in 2002. There were also 78 licensed orthopedic surgeons last year, an increase from 70 in 2001 and 75 in 2002. No one knows for sure how many of these doctors are actually practicing.

But other statistics show a sharp drop-off in the overall number of new doctors coming to Clark County in recent years coupled with the fact that Southern Nevada remains well below the national average in the number of medical specialists it has per capita.

Consider the following:

Doctors say that is an indication that many more of their colleagues have chosen to stay away from Nevada because of its high insurance rates and lack of a more rigid cap on malpractice damages for pain and suffering.

Nationally, there were 14.4 OB/GYNs per 100,000 residents in 2002, but only 9.9 in Clark County that year and 9.0 in 2003.

Nationally, there were 13.2 general surgeons per 100,000 residents in 2002, but only 5.5 in the county that year and 4.6 in 2003.

Sunrise Hospital and Medical Center, the largest privately owned hospital in the state, lost 90 staff physicians who blamed their departure last year on their insurance costs, hospital spokeswoman Cheryl Smith said.

Dr. Larry Allen, a Las Vegas internist and staff member at Valley Hospital, estimated that two physicians are leaving the staff for every new applicant the hospital receives. Many of those physicians have now limited their practices to outpatient work.

"A lot of physicians feel they cannot control outcomes in hospitals so they stay out of them to protect themselves better," Allen said.

The outlook for doctors has been muddied by the fact that insurance companies won't lower rates until AB1 passes a constitutional test -- and no case has arisen yet that has qualified as a test.

While doctors are hoping that the November ballot initiative will solve the problems, the lawyers say it would severely limit justice for injured people.

If the ballot measure passes, lawyers promise they will quickly file a legal challenge to test its constitutionality. And, as in the case of AB1, the insurers say they won't lower rates until they know that the initiative, if passed by the voters, has also passed constitutional muster.

So whether the initiative passes or fails, the likelihood is that it will be years before the issues are resolved in court and physicians can hope to see any meaningful reductions in the cost of their premiums.