Malpractice Debate Heats Up as Hoag Votes for Coverage

Balloting in March by the 600 doctors affiliated with Hoag Memorial Hospital Presbyterian was supposed to decide once and for all the controversial issue of whether the hospital’s staff physicians should carry their own medical malpractice insurance.

Instead, the unexpectedly close vote angered an already divided group of doctors. Although the physicians voted to require that all staff doctors have their own medical malpractice insurance, the vote is being contested and a resolution is not expected for several months.

“The concern is that, as malpractice premiums increase, people who are going ‘bare,’ without malpractice insurance, are having their premiums paid for by those who carry it,” said Dr. William Owsley, chief of staff at the Newport Beach hospital. “It was a very divisive issue.”

Indeed, since a 1983 California appeals court ruling allowed hospitals to have such requirements, experts contend that more and more hospitals in the state are going this route. In the last four months, at least four Orange County hospitals--10% of all local facilities--have voted to require medical liability insurance at their institutions.

In addition to Hoag, insurance requirements have been approved at St. Joseph Hospital in Orange, Mission Community Hospital in Mission Viejo and San Clemente General Hospital, officials said.

The medical staff at St. Joseph Hospital received ballots late last March, and the policy-changing vote was tallied just weeks ago.

“We haven’t even communicated it to the medical staff yet,” said Loretta Cargill, the executive director of St. Joseph’s medical staff services.

“It is to be printed in the next news letter, for June. . . . It’s always a concern because of the cost of malpractice, not only for physicians, but for hospitals. And eventually the cost is picked up and borne by the patients themselves.”

Sources at Mission Community Hospital and San Clemente General Hospital said their facilities changed policies last December and January, respectively. However, hospital administrators could not be reached for comment.

And while some doctors say the ruling will put their colleagues out of business and ultimately affect patient care, most medical associations consider them an important part of practicing medicine in the 1980s. For this is the era of the so-called “Deep Pockets” doctrine, under which wealthy or heavily insured defendants can be made to pay an entire award in a lawsuit if co-defendants are without resources.

“I, as a physician with liability insurance, will not work with a physician without it,” said Dr. Frank L. Amato, president of the Orange County Medical Assn. “If there’s a problem and the patient sues, then I’m the one with the ‘deep pockets.’ ”

According to the California Health and Safety Code, “the rules of a health facility may include provisions that require every member of the medical staff to have professional liability insurance as a condition to being on the medical staff. . . .”

In a June, 1983, ruling, a state appeals court broadened this right to allow hospitals to set the level of their physicians’ medical liability coverage and the qualifications of the carrier.

The court held that Madera Community Hospital had acted legally in refusing to reappoint Dr. Jack R. Wilkinson to the medical staff “because he failed to maintain malpractice insurance with a ‘recognized insurance company.’ ”

Wilkinson’s insurance company was based in Belize, Central America, and was not licensed to run a malpractice insurance business in California.

“In light of the increasing number and amount of personal injury verdicts against doctors and hospitals,” the ruling states, “it is highly germane to consider a hospital’s interest in having its staff doctors insured in an adequate amount and by a reliable carrier.”

Experts contend that this ruling--combined with the rising cost of liability insurance and the growing Deep Pockets problem--caused more hospitals to require that their doctors have their own insurance.

500 Hospitals Surveyed

In the wake of the Wilkinson ruling, the California Hospital Assn. surveyed the state’s 500 hospitals to learn how many required physicians to be insured. Of the 398 institutions that answered, 50% had such requirements, 22% were considering it and the final 28% had no rule and were planning to stay that way, said Ted Fourkas, association spokesman.

At the time, fewer Orange County hospitals had such requirements. In 1983, only 43% required their medical staffs to be insured and 37% said they were considering it. By contrast, 51% of Los Angeles County hospitals had such requirements and 22% were considering them.

“We expect that there has been an increase since then,” Fourkas said. “Then it (the law) became absolutely clear. There has been a trend in that direction for some time.”

Experience Proves Point

Orange County’s experience bears him out. While no in-depth survey has been done since late 1983, officials with the Hospital Assn. of Southern California estimate that at least 80% of Orange County’s 39 hospitals now prohibit non-insured physicians from being affiliated with their medical staffs.

“I think a lot of it (the increase) is stimulated by the interest of the physicians themselves in having peace of mind--especially in a surgical setting,” said Jon Gilwee, director of the association’s Orange County office. “One uninsured person creates a significant deep pocket liability for everyone else.”

Gilwee said he based his findings on discussions with hospital administrators and insurers and on changes in individual hospitals’ bylaws.

Even California Medical Assn. officials, who represent physicians’ interests, are not completely against rules requiring doctors to carry their own insurance.

“Our position is that it is up to the medical staff of each hospital as to whether each physician should carry his own medical liability insurance,” said Tom Kennedy, association spokesman. “We’re kind of in the middle.”

Kennedy estimates that 6% of California’s 60,000 doctors practice without liability insurance.

At Hoag, medical staff bylaws used to require all doctors to have their own insurance. But during the 1975-76 malpractice crisis--when insurance premiums soared and Southern California doctors staged a work “slow down”--the hospital did away with the rule.

The insurance requirement is making its first comeback since then, Owsley said. But not without some strong opposition.

Dr. George N. Haddad, who has a Costa Mesa family practice and is affiliated with Hoag, said that if the ruling is enforced, he may leave the hospital. Haddad, who also works out of Costa Mesa Medical Center, said the center does not require insurance and indicated he would probably affiliate with that hospital alone.

“I had insurance for a while,” said Haddad, who has practiced here for 23 years, “but during the big malpractice crisis a couple of years ago, I attempted to organize physicians not to carry insurance, and I haven’t carried it since.

“I don’t believe that doctors should be required to carry insurance. I don’t think that has anything to do with the quality of practice and care.”

One urologist, who has practiced for 30 years without liability insurance, contends that requiring it could put doctors out of business and eventually hurt patients.

“Those doctors who have never been sued and are not in a situation that demands they have liability insurance will have to pay premiums to balance for the fellows who have been sued three to four times,” the physician, who requested that his name not be used, said.

Besides, he said, “there’s really no way to get liability insurance for anything. If you have a $1-million policy, someone can sue you for $3 million. It costs so much that I have to increase my fees 30%.”

Hoag’s chief of staff refused to divulge the final vote on the issue, nor would he say how many physicians affiliated with the hospital do not carry their own insurance.

“It has been voted on and passed, but it has not been implemented,” Owsley said. “There are still more mechanisms of appeal that have not been utilized.”