Report: Premium rise part of a cycle
It said the Pa. legal system didn't cause the increases in doctors' malpractice costs. A medical group is skeptical.
By Josh Goldstein
INQUIRER STAFF WRITER 1/15/2002
HARRISBURG - The sharp increases in insurance premiums paid by doctors here are the result of the normal insurance industry financial cycle rather than an out-of-control legal system, according to a new study of medical malpractice in Pennsylvania released yesterday.
The study, which was conducted by Stanford Consulting Group, of Redwood City, Calif., was commissioned by the Pennsylvania Trial Lawyers Association, causing the state's leading doctors' groups to criticize its findings as biased.
But it revisits a more comprehensive analysis of Pennsylvania's malpractice system done by the same academic researchers in 1985 under the auspices of state Senate leadership and with the support of the statewide associations representing doctors, hospitals and lawyers.
The study was released in advance of the General Assembly's return to work next week under a mandate from Gov. Schweiker to fix the malpractice system, in part because premiums for doctors - especially surgeons and obstetricians in the Philadelphia area - have increased sharply in the last two years.
In December, doctors said for the second straight year that they were seeing a significant rise in their malpractice-insurance rates, and hospital administrators said they were scrambling to avoid scaling back services at trauma centers and emergency rooms if doctors failed to get the insurance coverage they needed to practice. Those partial shutdowns did not occur. But now hospital executives say the danger will reemerge at the end of February when more doctors' insurance policies come up for renewal.
Doctors say they are caught between the rising cost of malpractice insurance
and stagnant or declining reimbursements for medical care. Doctors and hospital administrators are pushing for tort-reform legislation.
However, the new Stanford Consulting study says the problem with increasing premiums lies in insurance industry practices, not the state's legal system.
"Over the long term, there has not been an increase in premium rates in Pennsylvania that cannot be explained by inflation and increased coverage by the primary" carriers, the study concluded.
"Studies of the Pennsylvania court system have found no evidence of higher-than-average payments in cases involving medical malpractice or . . . a higher incidence of medical-malpractice cases filed in Pennsylvania compared to other states," the report added.
The study found that 2 percent of the state's doctors were responsible for 41.5 percent of payments against doctors made by the Pennsylvania Medical Liability Catastrophe Loss Fund, which provides a second tier of malpractice coverage to doctors and hospitals.
A coauthor of the report, Alfred E. Hofflander, said malpractice insurers underpriced premiums during most of the 1990s to gain market share.
Insurers were able to follow this strategy because investment returns were high and it took a long time for malpractice cases to result in a payout, the report said. But by the late 1990s, the Philadelphia court system had eliminated its large case backlog, and a decline in the financial markets had resulted in poor investment returns.
"Normal long-term trends in the insurance business cycle, as well as changes to the Pennsylvania medical-malpractice delivery system may explain much, if not all, of the premium increases," the report stated.
For doctors who have seen their insurance premiums double or triple in the last two years - particularly high-risk specialists in the Philadelphia region who in many instances are paying well over $100,000 for coverage this year - the reason for the problem does not really matter. They simply want relief.
The Pennsylvania Medical Society expressed skepticism about yesterday's report. "We never agreed with the findings of the  report, and we think what you have now is a report that is being dictated by the trial bar, so it is not surprising that the report finds that the insurance industry, not lawyers and lawsuits, are responsible for the current malpractice crisis," said Charles Moran, a spokesman for the society.
Twenty-one states cap noneconomic damages in malpractice cases. An additional 29 allow or require payment of damages over time. And 21 limit plaintiff lawyers' fees.
"You can put all kinds of caps you want, but that doesn't lower the cost [of malpractice insurance], it just shifts the burden to the taxpayers and the victims," said Hofflander, the report coauthor and a professor emeritus of finance and insurance at the University of California at Los Angeles.
Even as the trial lawyers worked to bolster their position on the malpractice issue, a business group headed by former Republican mayoral candidate Sam Katz came out in support of legal and judicial reforms advocated by doctors and hospitals.
Greater Philadelphia First announced a coalition of businesses, civic and health-care providers yesterday seeking sweeping medical-malpractice tort reform.
The group called on the state legislature to enact a cap on pain-and-suffering damages in malpractice cases, limit the size of plaintiff lawyers' contingency fees, privatize the state catastrophic loss fund, and allow awards for lost wages and future medical expenses to be paid out over time.
"No Band-Aids will do," Katz said. "Real changes in tort laws to treat the unique aspects of Pennsylvania's system must be swiftly enacted if we are to avert a collapse of the medical-service delivery system."
Trial lawyers association president Clifford A. Rieders countered that it would be irresponsible to vault headlong into changing the legal system in ways that might prevent people injured by medical negligence from having access to the courts.
"One of the most important things that this study shows is that a small proportion of doctors are responsible for a large amount of the cost of malpractice," Rieders said. "Real malpractice reform would be to strengthen the state process of disciplining the doctors who are repeatedly" negligent.
Josh Goldstein's e-mail address is firstname.lastname@example.org