Mmore than 60 Texas hospitals have applied to prune their malpractice liability by using a little-known provision in the state's new tort reform law that grants lower caps for noneconomic damage awards to hospitals that provide significant charity care.
For those hospitals that qualify, the provision limits noneconomic damage awards to $100,000 rather than the $250,000 limit established under the 2003 law, which gave Texas one of the most provider-friendly malpractice laws in the nation.
The law has drawn criticism from consumer rights groups that have said it would lessen incentives for hospitals to provide quality care.
The lower damage award for major charity-care providers could be unique, according to interest groups that track tort reform. Florida passed limits on noneconomic damages, with a lower cap for emergency room cases, in 2003.
"I think it is unusual," said Paul Turner, a lawyer at McCullough, Campbell & Lane, a Chicago-based law firm, which represents medical professional liability-excess insurers and was unaware of the provision until contacted by Modern Healthcare.
To qualify for the lower cap, private not-for-profit hospitals must show that they spend at least 8% of their net patient revenue on delivering charity care. In addition, they must provide at least 40% of all charity care in their county.
The law was designed to put hospitals that are major charity-care providers in their communities on par with the state's public hospitals, which enjoy a $100,000 cap on total damages, including noneconomic and economic damages, said Charles Bailey, general counsel of the Texas Hospital Association.
"We've had some very high judgments for noneconomic damages. So the insurers were having to actuarially reserve for some very large noneconomic damage awards. Whether it's $250,000 or $100,000, this will provide some certainty to the hospital's actuaries and derive savings," Bailey said. "To the extent a nonprofit hospital saves money based on this cap, its ability to provide charity care is enhanced."
Among the major not-for-profit systems applying for the lower cap are Memorial Hermann Healthcare System in Houston; East Texas Medical Center Regional Healthcare System in Tyler; Scott and White Memorial Hospital in Temple; Seton Healthcare Network in Austin; and Christus Spohn Health System in Corpus Christi.
Sixty applications were received, but some involve more than one hospital. Fewer than 10 of those that applied by the May 31 deadline are expected to qualify for the lower limit, according to the Texas Department of Health, which has delayed certifying any hospitals because of a lack of reliable hospital charity-care data.
Department officials said they believe many won't meet the 40% requirement, but no determination can be made until the department receives charity-care data from investor-owned hospitals in those counties.
Investor-owned hospitals are not required under state or federal law to provide data on their charity-care volumes. In some counties, that makes it impossible to calculate the portion of total charity care that a particular hospital provides. Certification is expected to be completed early this month and must be renewed annually.
Consumer groups are unhappy with the provision. "What we're losing here is a disincentive to commit malpractice. You could get a hospital that is more careless because it is not liable in the same way it used to be," said Lisa McGiffert, a senior health policy analyst at the Consumers Union.
Michael Regier, general counsel for Seton Healthcare, said, "I don't think that any hospital or hospital system uses litigation as its only quality-control mechanism. First, that would simply be irresponsible. And second, the cases would arise too long after (an incident) for something to be done."
Seton Healthcare has applied to implement lower damage caps for all seven of its hospitals, but Regier expects that only two-Brackenridge and Children's hospitals, which Seton operates under a long-term lease with the city of Austin-will qualify.