About four of every 10 hospitals in Georgia are now facing liability insurance premiums that have increased by more than 50%-and one of every four of those facilities has been hammered with increases that exceed 200%, a new report from the state's hospital association found.
The numbers highlight the growing dilemma facing both hospitals and physicians as a medical-malpractice insurance crisis, fueled by everything from increased jury awards to the industrywide impact of the Sept. 11 terrorist attacks, spreads across the nation.
Georgia's situation, though not unique, is among the most acute, according to officials with the state's hospital association, who warn that the fiscal woes could quickly affect access to essential services.
The association's report, released last week, found that many of the state's 178 hospitals already are struggling financially from staffing shortages and reimbursement pressures. And the sharp increases in liability insurance during a 16-month period ending in January represent just one more struggle for the healthcare industry, officials said.
"We've got 128 hospitals losing money from providing patient services," said Georgia Hospital Association President Joseph Parker. "With so many other pressures, this extra expense can cause them to go bare, to cut out services. Hospitals in this state may have to look at closing."
Aside from the impact of the terrorist attacks, Parker said, big jury awards also are partly to blame for the rise in costs. Less than two weeks ago, Jury Verdict Research, a Horsham, Pa.-based company that maintains a national database of almost 200,000 verdicts in personal-injury claims, reported that median awards in medical-malpractice cases jumped 43% in just a year-to about $1 million in 2000 from $700,000 in 1999.
What's more, one of the biggest medical-malpractice insurers in America, St. Paul Cos. in Minneapolis, shut down its liability insurance division for doctors last December, leaving 42,000 physicians scrambling for alternatives (Dec. 17, 2001, p. 8).
Last August, state insurance regulators in Pennsylvania seized control and later liquidated failing PHICO Insurance Co., leaving another 9,400 doctors in jeopardy (See related story, below). And just a month ago, MIIX Group, Lawrenceville, N.J., a provider-founded mutual company that went public in July 1999, reported a net operating loss for the fourth quarter of $162.8 million. The company insures 8,000 doctors in New Jersey and 6,000 nationwide.
Several rural hospitals in Georgia were in trouble before this predicament developed, Parker said. Two hospitals that nearly shuttered as a result of insurance increases have managed to survive, but just barely, he said.
"What happens next year, if we don't see any change in this, may be a different story," Parker warned. "The insurance crisis couldn't have come at a worse time for Georgia hospitals."
One facility, 80-bed Bacon County Hospital in Alma, Ga., was forced to take out a bank loan to cover a medical-malpractice insurance premium that more than tripled to $396,000 last year from $118,000. Another, Memorial Hospital and Manor, an 88-bed hospital in Bainbridge that includes a 107-bed nursing home, was faced with a staggering 600% increase on its existing policy. Chief Executive Officer Jim Peak said the hospital's current policy, which included a $50,000 deductible and cost $140,000 a year, was jumping to $970,000.
Despite its nearly spotless claims history, the hospital kept its payments almost the same by choosing a $1 million deductible, which is almost like being self-insured.
"To us, this is ridiculous," said Peak, who added that the facility has paid just $380,000 in total claims in the past seven years. "With managed care, the recession, 9-11, and all the cuts on the federal and state level, there's no fluff here. To pay that kind of insurance, I'd have to cut services."
The struggles in Georgia typify a national challenge for both hospitals and physicians. Physicians, affected by many of the same factors as hospitals, are threatening to relocate or retire in the wake of dramatic increases in malpractice premiums.
Earlier this month, state officials in Nevada were forced to step in with $250,000 in emergency funds to create the Medical Liability Association of Nevada, a company that will sell malpractice insurance to doctors left in the lurch in the wake of St. Paul's exit. The newly created insurance plan is meant to be a temporary answer to a deepening crisis in Nevada, where many doctors have threatened to relocate or quit their practices in the wake of rate increases reported to be as high as 300%.
A similar, state-run malpractice insurance plan was created late last year in West Virginia. In Pennsylvania, a medical-malpractice reform bill passed in March will provide doctors with $40 million in state funds to help offset insurance premiums and spread out the payment of big-money awards. In Georgia, the hospital association plans to provide its own insurance under a plan that would be owned and managed by the hospitals themselves.
Georgia's hospital association, like others across the nation, is preparing a full-scale lobbying blitz in an attempt to promote tort reform-a battle already being waged on a national level by groups such as the American Medical Association and the Physicians Insurance Association of America, a Rockville, Md.-based trade group that represents about 60 physician-owned companies that cover about 60% of physicians with malpractice policies.
"I don't see any end in sight to these increases in malpractice premiums," said Lawrence Smarr, president of the PIAA. "As claim costs keep going up over time, so must prices. The only solution in sight is federal tort reform, with caps on noneconomic damages. Keeping costs reasonable will help keep prices reasonable."