Physicians Fold Under Malpractice Fee Burden

The cost of medical malpractice insurance is increasing upward of fourfold in some states, forcing doctors from Pennsylvania to Arizona--and now Nevada--to close their practices.

In Las Vegas, more than 10% of the doctors are expected by summer to quit or relocate, plunging the city toward crisis.

Already, specialists are becoming harder to find around the country and trauma centers that treat life-threatening emergencies are closing.

The problem is growing. Doctors in Oregon have been told to brace for “breathtaking” increases in malpractice insurance premiums in coming weeks.

The turmoil began when the St. Paul Cos. of Minnesota, the nation’s second largest malpractice insurer, announced in December it would no longer renew policies for 42,000 doctors nationwide. The insurer said it had lost nearly $1 billion in its malpractice business last year. Other companies are offering coverage, but charging much higher rates to avoid the losses encountered by St. Paul.

The situation is particularly acute in Las Vegas, home to two-thirds of the state population, because 60% of its 1,700 doctors were insured by St. Paul. Replacement policies are costing some doctors four or five times as much--$200,000 or higher annually, more than most doctors’ take-home pay.

In recent weeks, dozens of doctors have closed their offices in Las Vegas, which already has a shortage of physicians.

In January, 30 doctors complained to Nevada Gov. Kenny Guinn, and he instructed the state insurance commissioner to hold hearings today here and in Carson City.

Those facing the largest rate increases are doctors who perform the highest-risk procedures, including obstetricians, specialty surgeons and emergency room physicians. Doctors say they can’t pass the additional costs along to patients because they are reimbursed by government and commercial insurance programs that have negotiated set fees.

Dr. Cheryl Edwards, 41, closed her decade-old obstetrics and gynecology practice in suburban Henderson because her insurance jumped from $37,000 to $150,000 a year. She moved her practice to West Los Angeles, leaving behind 30 pregnant patients.

“I was happy in Las Vegas,” she said, “but I had no choice but to leave.”

In California--where juries hearing malpractice lawsuits are limited to maximum awards of $250,000 for pain and suffering--Edwards’ insurance premium this year is $17,000. Because of 1975 tort reform, doctors in California are largely unaffected by increasing insurance rates. But the situation is dire in states such as Nevada where there is no monetary cap.

“Las Vegas is on the edge of having its health care system implode,” said Larry Matheis, executive director of the Nevada State Medical Assn. “I expect between 200 and 250 physicians will be looking either at bankruptcy, closing their offices and quitting, or leaving Nevada. This is a crisis.”

Nevada state legislators have begun drafting bills to address the problem. One early proposal would limit pain and suffering damages to 10% of actual economic losses from malpractice.

The Legislature, however, isn’t scheduled to meet for a year. Dr. Frank Jordan--a 31-year veteran of vascular surgery, including 13 years in Las Vegas--couldn’t wait. He closed his practice and retired.

‘I Obviously Can’t Afford That’

“I did the math,” the 56-year-old doctor said. “If I were to stay in business for three years, it would cost me $1.2 million for insurance. I obviously can’t afford that. I’d be bankrupt after the first year, and I’d just be working for the insurance company. What’s the point?”

Even before the current crisis, Las Vegas was hard pressed recruiting doctors; many with young families dismissed Sin City. Now even more doctors are steering clear of Las Vegas because of the escalating malpractice premiums and the perception that it is highly litigious, medical group executives complain.

“Instead of a medical system that is growing, we’re seeing one that’s taking steps backward and which may never recover,” Matheis said.

Nevada ranks 47th in the nation for its ratio of 196 doctors per 100,000 population. By comparison, Massachusetts ranks first among the states, with 2 1/2 times as many doctors per capita as Nevada, according to the American Medical Assn.

Nevada Doctors Have Some Protections

Nevada does not limit the amount of jury awards, but trial lawyers here say other protections are in place for doctors. People wanting to sue a doctor must first make their case before a medical legal screening panel, supported by a doctor who agrees with their allegation. If the panel finds there is no malpractice, the plaintiff may still sue in court--but if he loses there, he must then pay the doctor’s defense costs.

Bill Bradley of the Nevada Trial Lawyers Assn. said the highest award from a Nevada jury has been $6 million, and that the number of claims filed against doctors has increased in proportion to the region’s growth.

“There is no evidence of frivolous cases and exorbitant awards in Nevada,” he said.

Last year, St. Paul lost $1.88 in Nevada for every dollar paid by doctors, spokeswoman Andrea Woods said.

If the state, after today’s hearing, finds that malpractice insurance is either unavailable or unaffordable, it has several options.

It can temporarily underwrite the cost of the premiums, or establish its own insurance fund to provide malpractice coverage for the state’s doctors.

That’s what Nevada did in 1975, when another malpractice insurance crisis swept through the country. The state created an insurance pool that was then converted to a physician-owned insurance company. It thrived and became publicly traded but, in 1995 when it had difficulty buying backup insurance to protect itself from catastrophic claims, it was sold by its investors--to St. Paul.

Doctors and others argue that the long-term solution to the malpractice insurance problem is tort reform to limit jury awards, as 24 states have done.

Advocates say California provides the model; its $250,000 cap for pain-and-suffering awards has withstood court challenge, even while similar legislation in other states has been struck down by their state supreme courts.

Multimillion-Dollar Jury Awards Seen

When the Oregon Supreme Court in 1999 rejected as unconstitutional a $500,000 lid on pain-and-suffering awards in malpractice cases, jury awards of $8 million, $10 million and $17 million swiftly followed.

Oregon’s 2,000 doctors should expect sharply increased rates, said the executive director of the Oregon Medical Assn., which is negotiating malpractice insurance premiums on their behalf.

“We’ll know by the 1st of May what those premiums will be, and the reaction will be breathtaking,” Bob Dernedde said. “Doctors may quit. We’ll have some serious problems.”

The fallout is being felt around the country. The Arizona border town of Bisbee has lost its hospital maternity ward because four of the town’s six obstetricians can no longer afford to practice.

In Mississippi, physicians were able to get coverage only after Lloyds of London agreed to an $80,000 monthly policy to keep the only trauma center opened between Memphis, Tenn., and Jackson, Miss.

Trauma Centers Close Over High Costs

Both trauma centers in Wheeling, W.Va., have closed because their neurosurgeons couldn’t pay their new malpractice premiums. The trauma center at Abington Memorial Hospital outside Philadelphia faces closure next month as its doctors scramble to find affordable insurance.

Las Vegas’ only trauma center has announced it will close for 12 hours March 12 because two of its eight trauma surgeons can’t afford insurance premiums. People in southern Nevada needing emergency surgery during that period will be airlifted to hospitals in Southern California, Phoenix, Reno or Salt Lake City.

Even doctors in specialties less prone to lawsuits say they are being pinched by the volatility of the insurance market.

Dr. Rosemary Hyun and her husband, Dr. Kenneth Misch, founded Desert Valley Pediatrics eight years ago and built it into a 14-doctor office. They had to lay off one doctor and another quit because malpractice insurance increased from $1,000 to $4,000 a month per doctor.

“That may not seem like a lot in the grand scheme of things,” Hyun said, “but we get paid in 30s and 60s [dollars], not thousands.”

To pay for the premiums and a $150,000 surcharge for coverage against lawsuits that predate the new policy, Hyun said the group borrowed $300,000.

“We won’t make any money this year,” she said. “It’s going to take us two years to recover from what’s happened.”