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Harming Patient Access to Care: The Impact of Excessive Litigation
Subcommittee on Health
Mr. Stuart H. Fine
Mr. Chairman, I am Stuart H.
Fine, Chief Executive Officer (CEO) of
Grand View Hospital in Sellersville,
Pennsylvania. I am here today on
behalf of the American Hospital Association's (AHA) nearly 5,000 hospital,
health system, network, and other health care provider members.
We are pleased to have this opportunity to testify before you concerning
the harmful impact that
excessive litigation is having on patient
access to care. This issue is of
critical importance for hospitals, physicians, and the patients and communities
they serve across our nation. Formed in 1913 as Bucks County's first
hospital, Grand View Hospital is in most ways a typical community,
not-for-profit hospital. Grand View
provides a broad array of patient services, from obstetrics to orthopedics, and
from hospice/home care to oncology. Our
mission, in brief, calls for us to "provide and coordinate the appropriate
utilization of quality, cost-effective health care and related services" for
the people of our community. We
are our region's largest employer, providing jobs to more than 1,550 people
and having an annual payroll in excess of $55 million.
And these figures do not include the more than 250 physicians who
comprise our medical staff, or the hundreds of individuals who are employed by
those private practitioners. Solucient
recently designated Grand View as operating one of the nation's "Top 100"
Intensive Care Units as measured by patient care outcomes and
cost-effectiveness. Also of note is
that Grand View has never had a court judgment against it for a
professional liability claim in our 89 years of operation.
On
a related note, I also serve as the chairman of Cassatt Insurance Co., Ltd., a
Bermuda-based "captive," through which 12 suburban Philadelphia hospitals
and health care organizations endeavor to improve patient safety and the quality
of patient care services being provided; manage and share risk; and insure, on a
group basis, their professional and general liability exposures.
It is with this combination
of experience and perspectives that I come before you today to discuss the
problems associated with medical liability insurance, its impact on hospital and
physician services, and, ultimately, how these factors affect access to
important health care services. A recent AHA TrendWatch report, researched by the Lewin Group on behalf of the AHA, documented that health care providers across the nation are becoming increasingly concerned about their ability to find affordable medical liability insurance and how patients' access to care has been undermined. The report confirmed that since 2001, many physicians have, and are continuing to experience, premium increases in the high double digits. Premiums for hospitals have more than doubled! The report suggests that the current crisis is likely to be more complicated than medical liability insurance problems that occurred in the 1970s and 1980s. It stated that the factors influencing the wide geographic differences in premiums include the following:
The TrendWatch report also
stated, "The exit of a large insurer, like St. Paul [one of the nation's
largest insurers that covered an estimated 750 hospitals and 42,000 physicians
throughout the United States], from a market can push premium rates up and make
coverage harder to find. In
response, physicians may leave for another market and hospitals may need to
alter the services they provide." The
experience of Grand View Hospital and the Cassatt group of insured health care
organizations is telling. As a
group, we've self-insured certain professional liability exposures for more
than 10 years. Until two years ago,
however, we were readily able to group-purchase insurance at affordable rates
for "excess" or "catastrophic" layers of coverage above our primary
limits, and do so on a "first dollar" basis above the primary layer of
coverage. We were able to obtain
this coverage due to competition among a large number of commercial carriers who
were very interested in securing our business.
Last
year, Grand View's cost for insurance coverage increased by approximately
one-third. But that doesn't tell
the whole story. In addition to
experiencing that huge increase in cost, we were forced to accept, on a group
basis, a $5 million dollar deductible or retention on an "each and every"
claim basis. This
year, our insurance cost increased yet again - this time by almost 50 percent.
Our deductible level is going from $5 million to $7.5 million.
On top of that, we are being forced to accept a 50 percent "co-pay"
for each $5 million above the $7.5 million for which we secured coverage.
Consequently, Grand View Hospital will spend in excess of $7,500 each and
every day for our insurance coverage in the current fiscal year -- about the
same amount that we spend for medications/pharmaceuticals.
Accordingly, the Cassatt group of hospitals will spend in excess of $60
million to insure itself in fiscal year 2003! Securing the coverage that I've described
was not easily accomplished. In
January, I joined four colleagues from other Cassatt hospitals and traveled to
London for two days of meetings with seven different carriers and re-insurers
from Switzerland, Germany, and the Lloyd's of London insurance syndicates.
While essentially marketing our group to these carriers and re-insurers,
we were surprised to be told on three different occasions during our visit that,
along with Australia and Czechoslovakia, the Philadelphia region is viewed by
the international insurance markets as being among the least attractive within
which to do insurance business. The
rationale supporting that view was that, up until that time, there had been a
lack of meaningful tort reform activity on the part of our state legislators. THE
EFFECT ON CARE
In addition to experiencing
serious increases in the cost of health care liability insurance, hospitals are
facing a growing workforce shortage; reductions in private, Medicare, and
Medicaid payments; and redoubled disaster preparedness efforts.
These additional burdens are threatening hospitals' ability to
appropriately staff emergency departments, recruit new physicians to high-risk
specialties, and deliver babies in the manner that most Americans have become
accustomed. While
I am pleased to report that Grand View Hospital continues to deliver babies, three
other hospitals in our immediate area have discontinued OB services.
Warminster Hospital in Bucks County has discontinued the service
altogether, as have both Methodist and Misericordia Hospitals in Philadelphia.
More recently, Methodist and Doylestown Hospitals announced that they would no longer be providing
prenatal care for low-income women. The
primary reason given for these
unfortunate reductions in service was the rising cost of medical liability
insurance. Our
county has seen numerous OB/GYN physicians either retire from practice or
eliminate the OB component of their practices.
This has occurred at Doylestown Hospital, St. Mary Medical Center, and
Lower Bucks Hospital. Already
mentioned was Warminster Hospital's closure of its OB service.
In the community of Quakertown, two of the three existing OB/GYN offices
were closed as the physicians in those practices withdrew from our region based
on the high cost of professional liability insurance. One of Doylestown
Hospital's two orthopedic surgery groups has been unable to secure malpractice
coverage and has discontinued its surgical practice and Emergency Room back-up
coverage. At Grand View Hospital,
we've lost physicians specializing in family practice, general surgery,
plastic surgery, and interventional radiology.
And, we have no neurosurgery coverage.
Our efforts at recruiting replacement/successor physicians to those who
have left our area, or are planning to retire, have proved fruitless.
We currently need physicians in the areas of cardiology, family medicine,
diagnostic and interventional radiology, neurosurgery, plastic surgery, and
obstetrics. If our hospital had not been able to secure insurance
coverage for our largest OB group at a cost of approximately $1,000 per
delivery, an increase of approximately 50 percent over the prior year, Grand
View would have lost five of our nine practicing obstetricians from practice.
That would probably have resulted in the closure of our OB service.
In the book "Ghost Soldiers," by Hampton
Sides, a veteran of the Battle of Bataan describes how "the defense of Bataan
devolved into a brutal war of attrition - a war . of consumption without
replenishment." It is just such a
circumstance that confronts our nation's hospitals and physicians. Without intervention by Congress, we will soon be unable to
address the basic health care needs of our communities.
Congress must help hospitals and physicians find a solution to
skyrocketing medical liability premiums so that we can continue to provide the
right care, at the right time, in the right place; 24 hours a day, seven days a
week. THE
CURRENT SYSTEM NEEDS REPAIR
The
current medical liability system is a costly and ineffective way of resolving
health care liability claims and compensating injured patients.
This has led to the growing crisis I've described.
In many states, especially Delaware, Florida, Mississippi, Nevada, New
Jersey, New York, North Carolina, Ohio, Oregon, South Carolina, Texas,
Washington, West Virginia, and my own, inherent problems in the health care
liability system are causing skyrocketing premiums. For
example, there are many reasons why Pennsylvania is currently struggling with
medical liability problems. Insurers
faced heavy losses when declining returns on investment exposed insurers to
expenses that were significantly above premiums collected.
In addition, large jury awards, which often set the standard for
settlement awards, began to put upward pressure on premiums.
Finally, the three largest insurers, PHICO, PIC, and PIE became insolvent
and no longer offered medical liability insurance.
In short, insurance capacity
evaporated. In
an effort to address these issues, the Governor of Pennsylvania signed into law
a medical liability reform bill in March of 2002.
Pennsylvania's effort represents the latest in a series of legislative
actions taken by the state to alleviate pressure on health care providers.
While the law signed in March does not include a cap on damages, it does
allow hospitals and physicians to appeal if paying those damages would force a
doctor out of business or force a hospital to cut services, thereby affecting
access to care in the community. In
addition, it allows judgments for future medical costs to be spread out over
time. More recently, a law
reforming the rules regarding "joint and several" liability was passed in
June. This is especially important
to hospitals because we are often singled out as the "deep pockets" in many
litigation situations. Because
the effects of tort reform take time to be fully realized, in part due to the
long trail of claims, the effects of the Pennsylvania legislation remain to be
seen. At
our hospital, due to our inability to obtain adequate medical liability
coverage at a reasonable rate, many physicians have retired or relocated to
areas with lower premiums. And it
has become increasingly difficult to recruit new doctors and secure physician
coverage. If this continues, we
will be forced to reduce important patient services, leaving our community with
little or no access to appropriate health care.
Further, it is well
documented that the United States has the world's most expensive tort system,
with tort costs over the past 50 years outpacing growth in the United States'
economy by a factor of four. Such
growth has not translated into efficiency.
According to the General Accounting Office (GAO), 43 percent of insurance
defense costs are spent on claims that have no merit.
Other studies show that many claims with merit are never filed. LEGISLATIVE
SOLUTION NEEDED
The
AHA believes that a federal legislative solution to America's medical liability
crisis is warranted under the current circumstances. That is why the AHA strongly supports H.R. 4600, the
bipartisan Help Efficient, Accessible, Low Cost, Timely Health Care (HEALTH) Act
of 2002, sponsored by my congressman, Representative Jim Greenwood (R-PA). The AHA believes that the
California-style reforms enacted under the Medical Injury Compensation Reform
Act (MICRA) of 1975 and reflected in H.R. 4600 should be adopted at the federal
level. For more than 25 years,
MICRA has demonstrated that patients' rights can be protected at the same time
that medical liability costs are reduced. H.R.
4600 includes the following MICRA-type reforms: A limit on non-economic damages - By placing a ceiling of $250,000
on non-economic damages (pain and suffering), stability is restored to the
insurance market. All economic
losses and/or costs are paid in full. Such
a cap provides affordable coverage, and ensures that health care providers can
buy coverage. It does not affect a
plaintiff's ability to be fully compensated for economic damages such as
medical expenses or lost wages. Periodic payments
- Periodic payments would allow compensation to be made in intervals rather
than a lump sum, permitting settlements to be geared to a plaintiff's needs
over the course of his or her life. In
addition, because periodic payments can be funded through an annuity, future
needs can be fully met at a considerably lower cost to the health care system. Regulation of attorneys' fees
- Under the current health care liability system, patients awarded
compensation are often shortchanged. Money
that should go toward their long-term care goes instead to their attorneys.
This is because, traditionally, attorneys in liability cases are paid
through contingency fees, which provide the attorney a percentage of the
plaintiff's award. Percentage
limitations should be applied to attorneys' fees. The
California experience under the MICRA law has proven to be more equitable to the
medically injured. While the number
of health care liability claims brought by medically injured plaintiffs in
California, on a per capita basis, is the same as before MICRA, the compensation
actually paid to those medically injured in California was higher after MICRA
than before. The AHA also supports a uniform
statute of limitations in health care liability cases and the continued
development of successful conflict resolution programs.
Bringing liability claims to court is often inefficient and costly and
renders unpredictable results. Nontraditional
approaches such as alternative dispute resolution systems can play an important
role in reforming the health care liability system. A
NATIONAL PROBLEM REQUIRES A FEDERAL SOLUTION
While I appreciate the
opportunity to discuss some of the challenges we face in Pennsylvania due to the
medical liability crisis, this issue affects hospitals and physicians throughout
the United States. I've already mentioned that Methodist
Hospital in Philadelphia announced that it would no longer be able to provide
prenatal care for low-income women, and just two weeks ago, the University
Medical Center's (UMC) Level-I Trauma Center in Las Vegas, Nevada closed its
doors due to the liability risk at the facility.
As a result of the increased insurance premiums, 11 of UMC's 13 general
trauma surgeons and 57 or 58 orthopedic surgeons resigned from trauma-care
responsibilities. Within the past
few days, the UMC Trauma Center has retained the temporary services of trauma
and orthopedic surgeons who have agreed to be covered by the county's liability
insurance for 45 days. This
temporary reprieve allows the governor to call a special legislative session to
address this issue. While the
trauma center has been able to keep its doors open for a few more days, a large
question mark remains regarding access to care in the community.
Without the UMC Trauma Center, patients will instead be routed to the
closest emergency room, where most doctors aren't trained to do surgeries and
where specialists might not be readily available. The UMC Trauma Center serves a 10,000-square mile area in
four states - Nevada, California, Arizona, and Utah. Hospitals and physicians need
Congress to enact H.R. 4600 to prevent even more hospitals from being forced to
close their doors. We want to
provide the type of health care that saves patients' lives and improves their
quality of life, but we can't continue to do that without your help. I appreciate the opportunity to
testify before your committee today. The
hospital and physician communities look forward to working with members of this
committee, as well as the entire Congress, to ensure that this critical
legislation is enacted into law.
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