Florida hospitals are less likely to be sued for malpractice today than 10 years ago. But hospitals that lose or settle are typically paying more on average than before tort reform, a review of state insurance data by MODERN HEALTHCARE shows.
Since the mid-1980s, more than 40 states have passed laws intended to weed out frivolous medical malpractice lawsuits and make insurance more available and affordable.
Few states, however, compile data on claims and payments as Florida does. The data collected from 1985 to 1995 allowed MODERN HEALTHCARE*to review the outcomes of the reforms.
In 1988, Florida approved tort reforms that included a cap on noneconomic damages, an expert witness requirement to precertify lawsuits for merit, an arbitration panel and licensing of hospital risk managers.
At the time, Florida legislators were responding to pleas from hospitals and physicians, who were routinely experiencing annual double-digit premium increases. Some emergency departments and trauma centers were closing because they couldn't find specialists to staff them.
In 1987, for example, only 17 of 57 hospitals in the Miami area were accepting emergency patients because more than 1,000 specialists refused to work. St. Paul (Minn.) Fire and Marine Insurance Co., the nation's largest medical malpractice insurer, which no longer insures physicians in Florida, had raised physician premiums 43% in Dade and Broward counties.
While the number of malpractice claims closed against Florida hospitals declined from 1985 to 1995, total damage payments steadily increased, MODERN HEALTHCARE*found.
Before tort reform in Florida, from 1985 to 1988, the number of claims closed averaged 1,044 a year while payments per claim averaged $46,740. However, claims closed peaked in 1987 at 1,532 and dropped to 1,278 in 1988.
After tort reform, from 1989 to 1995, claims closed averaged 735 per year and payments per claim averaged $145,176. Closed claims decreased 42% to 663 in 1995 from 1,138 in 1989, and payments per claim increased 159% to $208,416 in 1995 from $80,354 in 1989.
However, total payments ranged from $78.9 million to $91.5 million in five of the seven years after reform, indicating payment stability. In 1993, payments totaled $109 million; they jumped to $138 million in 1995.
The Academy of Florida Trial Lawyers attributes the increase in payments to medical inflation and several large malpractice awards of $4 million to $6 million.
"After adjusting for inflation and other factors, payments are flat," said Debra Zappi, the academy's deputy executive director.
Jack Swisher, actuary for the state insurance department and a former hospital risk-management consultant, said inflation is one reason payments have increased. He attributed the reduction in claims to plaintiff attorneys who have become more selective in choosing malpractice cases because of costs.
"Attorneys are weeding out those cases that don't have merit to them," Swisher said.
One reason for the decrease in closed claims is the state's requirement to precertify lawsuits and the 90-day discovery period before claims can be filed, said Bill Bell, general counsel for the Florida Hospital Association.
State data show that claims paid with indemnity payments steadily declined 23% to 333 in 1994 from 433 in 1989. Claims closed with payments indicates suits with merit, experts said. In 1995, claims closed with payments increased to 452.
But claims closed without payment dropped 77% after tort reform, to 55 in 1995 from 243 in 1989. Claims closed without payment generally indicate a case had little merit, which could be viewed as a frivolous lawsuit, Swisher said.
Trial lawyers aren't impressed, however.
"Nobody can show you that tort reform has lowered the costs of healthcare," Zappi said.
The $3,000 to $5,000 estimated cost of hiring an expert witness (a physician) to certify lawsuits has eliminated filing of smaller negligent claims, such as medication errors or hospital-acquired infection cases, that caused temporary discomfort and short-term work loss, Zappi said.
"The precertification caused meritorious cases with (smaller) damages to drop out," she said. "We feel the restriction has left many injured patients without legal recourse."
MODERN HEALTHCARE also found that in recent years a smaller number of hospitals in Florida accounted for a larger percentage of claims paid, suggesting either quality problems, patient mix or geography played a role in why some hospitals are more prone to malpractice lawsuits.
For example, Jackson Memorial Hospital, a 962-bed public hospital in Miami, has paid at least one malpractice claim in each of the past eight years. It's the only hospital in Florida to claim that questionable distinction. However, Jackson Memorial treats some of the poorest and the sickest of any hospital in Florida.
In fact, Jackson Memorial averaged 35 malpractice claims paid per year with an average payment of $179,000. From 1985 to 1988, claims averaged 30 per year and $70,000 per claim.
Zappi said one way to reduce hospital insurance rates is for the state to require physicians to purchase higher malpractice insurance coverage limits.
But Florida's physicians and hospitals lobbied against a bill supported by the state's trial lawyers that would have required doctors to carry insurance coverage of $500,000 per claim.
Under current Florida law, physicians must hold either a $250,000 policy or post a bond to prove financial responsibility. Hospitals generally don't require higher insurance limits than state law for staff physicians.
One insurance executive acknowledged that hospital premiums in Florida and elsewhere would be lower if states required physicians to carry a higher level of malpractice insurance.
"Hospitals won't require higher amounts because doctors will go elsewhere to practice. The hospital (as deep pocket) ends up eating the $5 million case because the physician is covered for only $250,000 (and is primarily responsible for the negligence)," said Wayne Sinclair, senior vice president and general counsel of MMI Cos., a Deerfield, Ill.-based risk-management and malpractice insurer.
"The hospital will let the doctor carry lower limits and will pay higher premiums in exchange," said Sinclair, who's also chairman of the Healthcare Liability Alliance, a coalition of tort reform supporters.
The FHA opposed the bill because it didn't want a fight with the Florida Medical Association, Bell said. "We had other battles," he said.
Over the past five years, hospital medical malpractice insurance premiums have remained stable, according to a review of previously published data by St. Paul. Trial lawyers contend premium stability supports their view that the system is working and that tort reform is meaningless.
For example, in 1994 and 1995, hospitals in Florida insured by St. Paul paid an average of $2,582 per bed for coverage of up to $1 million per claim.
By comparison in 1995, California hospitals paid $3,291 per bed, Texas paid $3,568 per bed and New York paid $1,557 per bed. All three states have damage caps.
Nationally, hospitals paid an average of $1,184 per bed through St. Paul.
Premiums in Minnesota were nearly cut in half after the state Legislature in 1990 repealed a $400,000 noneconomic damage cap on all tort cases. Minnesota hospitals had one of the lowest averages in the nation for medical malpractice insurance-$845 per bed in 1995, St. Paul said.