My Practice's Learning Curve

By Hilton Sparks, M.D.

So in retrospect all indicators were pointing towards our current dilemma. But in the absence of a clear plan, many of us have had to rely on crisis management models to guide us through this predicament.

A ticking clock

Our story dates back to earlier this year, when North Florida Surgeons, our single-specialty general surgery group covering Jacksonville and its surrounding counties, learned through our insurance broker that AHI (American Healthcare Indemnity) would not renew our policy. We subsequently learned the LA-based company was withdrawing from Florida entirely. Initially our nineteen surgeons were not concerned, and fully expected to procure liability insurance but at an increased rate. Little did I understand at that time how difficult the next few weeks would be. One by one the few remaining companies refused to offer policies. Around that same time period, FPIC stopped offering policies to physicians not previously covered. Atlanta-based MAG Mutual Insurance declined to quote us a policy completely. No other insurance company would offer coverage.

With little time left to find a solution, we were in real danger of being suddenly uninsured, and having to close our doors by the end of the week.

Our representatives immediately met with their respective hospital administrations and medical staffs, alerting them to our problem. At that time most of the hospitals where we practice required twice the amount of insurance mandated by state law, and required a policy from a state-approved insurance company. After what seemed like endless meetings with hospital administrators, and in spite of offers of help and support, no solution was forthcoming.
 

In retrospect all the indicators were pointing towards our current dilemma.

The medical staffs were genuinely motivated to help us; many of the services offered by the hospitals might be unavailable without our surgeons on hand to provide support.

Other surgical specialties would not operate without general surgery backup in case of complications. Gastroenterologists were concerned about performing endoscopies without general surgeons available in case of emergencies. Internists and other medical specialists were concerned about admitting patients to a hospital without adequate surgical support. It was educational to find how mutually dependent a medical staff providing high quality care can be.

Our North Florida Surgeons Board of Directors—to their credit—decided to approach our problem publicly, and soon our struggle was chronicled in the Jacksonville Business Journal and the Florida Times-Union. Patients and employees were being kept informed of our progress, or lack thereof, and tensions were high. The hospitals, having been unable to help us find a solution, were trying to contract with other surgeons in town who might be able to substitute, including the Shands faculty and the Navy surgeons.

As we drew closer to the brink of having no coverage at all, we finally explored the option of "non-standard" coverage from Texas-based TIG Specialty Insurance. It was a band-aid, not a fix: a significant reduction in coverage, a 300% increase in cost, and an associated high deductible for each case filed.

(During this process we learned we weren't alone; two other specialty groups facing similar problems had to cobble together last-minute solutions just one month earlier.)

The root of the problem

So the immediate crisis was addressed, the hospitals had their services covered, the patients had access to their doctors...and the only ones affected would be us. But it's still not clear to me that the community or its leadership was (or is now) aware of how close we were to a true catastrophe that could have led to not only loss of services but to loss of life.

Having bought ourselves a little breathing room, we began reaching out to try to address the underlying pathology, and not just the immediate symptoms. We met with local state representatives and senators who were open to our input, but not very hopeful of success—in part because of the fast-approaching November elections, the strong opposition from the trial lawyers, and the lack of public attention.

Because the general public wasn't yet feeling the impact of our crisis (through unavailability or lack of services), we were fighting an uphill battle. As we've seen in other states, it's rare that these issues are addressed without a significant sacrifice from the population as a whole. Nevada and the closing of its trauma center (requiring a special legislative session to provide stopgap help) and similar events in Mississippi are examples. The truth is that our elected officials and leaders are usually only able to reach a solution when significant public pressure is brought to bear.

How have other states tried to solve the problem? Most often through tort reform. California and its MICRA law is the model most commonly sited. Does it work? Premiums for neurosurgery professional liability coverage in California are around $50,000 per year, while similar coverage in Dade County has soared to $200,000.

Doing our homework

During this process it became quite evident that we were woefully ignorant of the issues; we needed to know more if we were going to suggest short-term and long-term solutions.
 

Having bought ourselves a little breathing room, we began reaching out to address the underlying pathology, and not just the immediate symptoms.

In our subsequent educational meetings, which we opened to the entire medical community, we discovered a widespread lack of understanding of the crisis, and of what was going on in the rest of the state.

First we looked to Nevada and their recent solution, bringing in Richard Bray of Nevada Mutual Insurance to discuss that state's current insurance environment, and how companies have changed from physician-controlled mutual companies to publicly traded companies answering to stockholders. Mr. Bray explained the process by which we could begin a mutual company, generating considerable interest.

We also needed to know more about self insurance. Marc Singer of Singer Xenos Wealth Management talked to us about his South Florida experiences with asset protection, and with physicians who self insure. This topic got the attendees' attention; the economic impact of possible lawsuits, in the absence of a large insurance policy for the attorney to go after, underscored the importance of asset protection. At the conclusion of that meeting, all 150 attendees showed unanimous interest in the possibility of becoming self insured.

Direct political involvement is a key element in averting a liability meltdown, and Dr. Jim Dolan of FLAMPAC (the Florida Medical Association's Political Action Committee) discussed the political realities of our struggle, the need for individual participation, and the need to speak with a unified voice.

The response to our program was overwhelmingly positive, and generated a lot of interest in pursuing a course of action. We invited representatives of other groups and specialties to a planning meeting, at which we all agreed we needed to learn even more.

At our second community meeting, with 140 physicians present, Dr. Robert Cline—president of the Florida Medical Association—outlined the FMA's response and its plans for the future. His experience with liability insurance and with physicians who self insure was informative.

Dr. Cline told a sobering story of a South Florida neurosurgeon who was self insured. This surgeon fought a malpractice case all the way through trial, and won...but in the process spent $200,000 out of his pocket, and gave up two months in court away from his practice. That anecdote clearly showed the impact of this crisis on physicians, their families, their practices, and their patients.

Binding arbitration agreements are another option for avoiding catastrophic lawsuits. The FMA and FPIC have collaborated on such a program, described by FPIC's Bob White.

In this plan, patients sign arbitration agreements that could allow issues to be resolved without the quagmire of the court system. Each patient views a video and discusses arbitration prior to signing an agreement (either before elective treatment or after emergency treatment). This program's emphasis on patient education and buy-in requires a significant change in how most of us deal with patients; educational resources are being developed now to help physicians implement the program.

The cast of characters

With a combination of education, creative thinking, and some good counsel, our practice emerged from the fray with minimal liability coverage but maximum motivation to become involved in addressing the problem. Our acute crisis was the push we needed to educate ourselves and our colleagues on the issues, obstacles, and possible solutions.

Yet even after months of focusing on this subject, I have yet to identify a single storybook villain at whom we could point the finger of blame.

And the solutions, I'm afraid, may be just as complex.

The philosophical differences in this fight are real—possibly insurmountable—and point to a tremendous struggle in the months and years to come. In our effort to understand the landscape in which that struggle will take place, let's take a look at the major players.

Liability insurance companies Florida trial lawyers and consumer groups have portrayed the insurance companies as greedy corporations, mismanaging finances in risky stock markets and profiteering from excessive policy rates. (In reality insurance companies maintain most of their investments in bonds, which are relatively safe.)

But industry experts argue that increasingly astronomic jury awards are the root of the premium increases. (The average jury award has risen dramatically over the last few years. The Jury Verdict Research in Horsham, Pennsylvania shows that the median award of $500,000 in 1995 increased to $1 million in 2000.) The Florida Department of Insurance is frequently attacked by the trial bar for having approved rate increases and allowing mismanagement of this huge industry.

I believe that if there was money to be made in the professional liability arena, companies would be entering the marketplace instead of disappearing.

Free market competition, a natural business regulator, is quickly losing ground as companies leave the state. And the difficulty some of us are having in purchasing any coverage at any cost points to a future of runaway risk with certain specialties.

Hospitals First Coast area hospitals have been much more responsive than I initially thought they could be. All area hospitals with the exception of St. Luke's have decreased their requirement for insurance coverage to $250,000 per case and $750,000 in the aggregate per year for the time being—but do require a formal insurance policy. (St. Luke's, dominated by the Mayo health system, is unlikely to adjust its requirements for the non-Mayo physician.) The University system is protected by sovereign immunity. The HCA hospitals in the area have passed resolutions that allow their staff to become self insured but have not yet accepted Florida State coverage standards in their entirety. St. Vincent's and the Baptist Hospital system are said to be researching the possibility of allowing physicians to self insure but at the time of this publication had made no announcement.

It's important for the medical community to understand a recent agreement between the FMA and the Florida Hospital Association.

The FMA's original 2003 legislative package included a provision that would force hospitals and health insurance companies to adopt Florida state law requirements for financial responsibility.

The Florida Hospital Association strongly opposed this provision to statutorily regulate this hospital policy. In a compromise, the FMA agreed to take that provision out of its slate of issues if the Florida Hospital Association would support having its members accept state law requirements for financial obligations.

Unfortunately, it's looking as if some of our area hospitals may not live up to the agreement between our respective organizations, which doesn't bode well for a relationship of trust in our ongoing unified approach to the political process.

If the hospitals are unwilling to accept the requirements as set forth in state law, I believe we may have to influence our representatives with the FMA to reopen the possibility of legislative action in that area. The hospitals argue that without the additional insurance coverage for physicians they become the "deep pocket" in the event of a suit.

I would think that any requirement of the hospital over state law is an unfair requirement; the physician is being forced to subsidize the perceived insurance needs of the hospital.

Organized Medicine The Florida Medical Association's legislative agenda (see For the Record) is worth examination.

The linchpin of the MICRA legislation in California, the legislation most often discussed as a model, is its cap on non-economic damages and a limit on attorney's fees. This will require a constitutional amendment in Florida and is possibly planned for 2004. From my standpoint organized medicine is well behind the other interested parties in its organization and its presentation to the public, but my impression may be tainted by the urgency of our specific situation.

Trial Lawyers The trial lawyers can be expected to fight any changes in the current legal system.

They claim to be the champion of the injured, fighting big business, but their financial interest in filing malpractice claims is huge. It's not a very long stretch to understand the economic incentive to file malpractice claims; well over half of the money in any award goes to the legal system. Claims with awards in the tens of millions of dollars are reported more and more frequently, such as an Orlando case with a $70 million dollar verdict recently reduced on appeal to $16 million. And some studies show less than 45% of an award eventually reaching the injured party.

But let's not forget that there are true cases of malpractice, and we can expect a never-ending stream of unfortunate individuals paraded in front of the public to bolster the trial lawyers' case.

The trial bar is far more organized and experienced in public relations than we are. The solution they offered at the recent meeting of the governor's task force was one of a not-for-profit insurance pool supported by the state—a move that would guarantee the ongoing escalation of the lottery mentality. The Neurological Injury Compensation Association (NICA) state fund, for example, a burden for doctors and a windfall revenue source for the state, has provided no relief in the liability issues it was developed to control.

Unfortunately, the unrealistic jury awards and the current runaway legal system are putting 16 million Florida residents at risk of reduced access to medical care.

Consumer advocacy groups To my surprise, consumer groups have supported the trial attorneys' position on tort reform, perhaps influenced by the public's disbelief that a true access-to-care crisis can develop. Consumer groups buy into the compelling claim that trial lawyers make the system safer by forcing doctors to practice good medicine.

The consumer advocates do highlight a legitimate concern on behalf of retirees, which should be addressed. For these patients, demonstration of economic damages can be difficult, and in these cases a cap on non-economic damages could cause a true malpractice case to be undervalued.

Physicians We as a profession have historically been reluctant to become involved in the political process. But our ability to continue to practice our profession may well depend on how we conduct ourselves through our current crisis.

We know the facts, but have done a poor job of framing them for the public. We know doctors are
available 24/7/365 in emergency rooms; we know that we're compelled by law to care for emergency patients regardless of their ability to pay; and we know that we feel a moral and ethical obligation to do so.

But to get that message out to the policymakers and the public requires money. Money to help elect leaders who understand our side of the issues. Money to help educate the public about the issues at hand.

Our views cannot win out if we fail to make them known.
 

Our ability to continue to practice our profession may well depend on how we conduct ourselves through this current crisis.

We must get involved in the political process or we will have no control over the future of health care; the long-term solution is by necessity a political one. Our society will have to decide if reduced services to the many is justified to provide large settlements to the few.

Short-term options are limited.

We can pursue the option of starting our own insurance company. On the plus side, it wouldn't have to answer to Wall Street.

A drawback, however, is that with the need for capitalization in the first few years, premium costs would increase—and members of our group are already having problems staying in practice with our current rates. Any further increase will be catastrophic.

If possible, we can continue to purchase professional liability insurance at tremendous cost. I expect some of us will be run out of business either due to crushing premiums or because we're simply unable to find insurance at any cost. I expect that many of our number will choose to—or be forced to—go self insured.

This puts both our personal and corporate assets at risk, and is potentially a significant problem for large groups with shared assets.

Are these solutions?

For the immediate symptoms, yes. For the big-picture problem? No. The process in South Florida is well underway, and as we watch them learn hard lessons, we continue down our road in the unknown direction of the future of health care. The real solutions will take hard work, and the political courage to make long-term changes to the system.

Jacksonville Medicine / November-December 2002
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