By Christopher Guadagnino, Ph.D.

PMS President Carol E. Rose, M.D.

Published June 2001

• Tuesday in Harrisburg journal

• Malpractice liability impact in western Pa.

• Legal obstacles to tort reform in Pa.

• React to this article in the Discussion Forum.

The physician campaign to redress Pennsylvania’s medical liability crisis has secured a key ally, as the respective boards of the Pennsylvania Medical Society (PMS) and the Hospital & Healthsystem Association of Pennsylvania (HAP) have come to an eagerly-awaited joint agreement on a multiyear agenda to address the problem, which includes an accelerated phase-out the CAT Fund, restoration of Act 135 tort reform provisions suspended by the Pa. Supreme Court in early 1997, lobbying for enactment of new tort reforms, establishing a private sector dispute resolution procedure for would-be plaintiffs, supporting patient safety initiatives, and seeking relief from third-party payors.

Although unified advocacy by PMS and HAP will certainly strengthen the campaign, significant challenges remain. A judicial election in November will replace a retiring Justice on the Pa. Supreme Court, and needs to produce a majority of Justices who are less hostile to the tort reform provisions of Act 135 or to new reforms. A task force appointed by Gov. Ridge to study the medical liability situation has yet to issue its recommendations. A current lack of consensus among legislators in Harrisburg would appear to make passage of additional tort reform difficult this year. The Pennsylvania Trial Lawyers Association (PaTLA) remains a powerful lobbying force opposing tort reform beyond what was contained in Act 135. Finally, divisions among physicians themselves—by geography, specialty and practice status—make it difficult for the physician community to present a unified front.

Lobbying Without a Bill

For months, physician organizations have been attempting to mobilize grassroots lobbying efforts to publicize the negative consequences of the state’s rising malpractice insurance costs and negative impact on access to health care. The PMS and county medical societies have been publishing the names and districts of key state legislators, as well as sample letters and posters for physicians to display in their offices calling on patients to call or write the governor, their legislators and their local newspapers to express concern.

Hospital medical staffs have organized busloads of physicians to lobby their legislators in Harrisburg. Some physicians in Delaware County put a brief message into the greeting on their telephone answering service explaining that the office was closed for the day so that physicians could ask legislators in Harrisburg to enact medical liability reform to assure continued quality health care.

The PMS purchased multiple advertising spots on KYW radio during the morning commute for five business days explaining why doctors were visiting Harrisburg and that Pa.’s liability system was causing doctors in record numbers to retire early, leave the state or give up high-risk cases like delivering babies. The Pennsylvania Orthopedic Society (POS) broadcast a 30-minute radio program in 18 local markets throughout the state which included testimony on the malpractice liability crisis by the POS president, by the ob/gyn chief at Thomas Jefferson University Hospital and by a prominent neurosurgeon. POS also purchased radio ads announcing the program’s archival on Radio PA.

And yet, during all this activity, no concrete legislation had been drafted or introduced, a point raised by several legislators being lobbied and dulling the edge of the lobbying efforts.

PMS and HAP Join Forces

The PMS and HAP had several meetings with the goal of hammering out a joint liability reform agenda, including coming up with a compromise position on what to do about the CAT Fund, an issue which also divided the POS from the PMS.

While HAP and the POS had wanted immediately to retire the CAT Fund and pay for its unfunded liability (exposure to claims not yet settled or tried) with a bond purchase, the PMS felt that approach, although producing stable bond payments, would place an unacceptable financial burden on physicians, says PMS President Carol E. Rose, M.D. Since newly licensed physicians in Pa. would also be assessed to pay off the bond debt, the PMS felt it would "mortgage the future of new physicians," discouraging them from practicing in Pa., adds Rose.

The urgency of physicians’ tort reform interests coincides with that of hospitals. While physicians suffered sticker shock when they saw the premium hikes on their Jan. 1 renewal notices for both primary malpractice insurance coverage and CAT Fund surcharges, most of Pa.’s hospitals, academic medical centers and their affiliated physicians statewide face 35 to 100 percent increases in their July 1 primary carrier renewals and a 26 percent increase in CAT Fund surcharge, says Jim Redmond, HAP’s senior vice president of legislative services. PHICO, a large hospital insurer in the state, has filed for a 40 percent increase in premiums, he notes.

Most hospitals have said that any bottom line they had budgeted for next fiscal year is gone, Redmond notes, while hospitals already in the red are now deeper in the red. As a result, hospitals are going to need to cut back on labor costs and defer any capital improvements or new technology purchases they had planned, he adds.

On May 22, HAP and PMS released a joint statement outlining a set of principles and a four-part action plan for reforming Pa.’s medical professional liability system, involving CAT Fund reform, tort reform, patient safety initiatives and financial relief from third-party payors.

The plan would restructure the CAT Fund, effective January 1, 2002, under a quasi-public governing authority that would have a board with qualifications in banking, finance and insurance and would appoint a committee of physicians, hospital executives and insurance experts to oversee claims administration. The Fund’s surcharge, which was $291 million in 2000, $370 million in 2001, and estimated by HAP to be $440 million in 2002, would be lowered to $150 million and capped at that level in the future. The CAT Fund would be phased out in six years by decreasing its coverage limits by $200,000 every two years starting in 2003. Primary carriers’ coverage limits (currently $500,000 per occurrence) would increase to $700,000 per occurrence on Jan 1, 2003; to $900,000 on Jan 1, 2005; and to the full state mandate of $1.2 million on Jan 1, 2007.

The plan would eliminate CAT Fund assessments for newly licensed practitioners covered by the CAT Fund and would arrange for a state subsidy to offset lost CAT Fund surcharge revenues. The exemption would apply to newly licensed practitioners regardless of whether they are independent or employed, but would not apply to institutional health care providers.

The plan would restore $1 million limits on CAT Fund Section 605 claims, which occur more than four years earlier than reported, and would retain the existing CAT Fund Advisory Board.

According to HAP actuaries, the additional provider cost of purchasing the entire $1.2 million in coverage from a primary carrier would be offset by the reduction in CAT Fund assessment, while a tax-exempt bond purchase would be considered to make up any CAT Fund shortfall stemming from the surcharge freeze, says Redmond.

The PMS-HAP plan’s tort reform agenda has three components, the first of which is to encourage the Pa. Supreme Court to establish rules and procedures to improve the timely and efficient resolution of meritorious medical malpractice claims. The PMS and HAP plan to meet with the Civil Procedural Rules Committee, which makes recommendations to the Court Justices, to ask the Court to consider new rules and revisit key provisions of a major tort bill passed nearly five years ago—Act 135—that the Court suspended as legislative encroachments on the state’s judicial powers.

Among the tort reform provisions the groups hope to see implemented as Supreme Court Civil Rules are:

• Eliminating the imposition of delays in damages; requiring reduction of future awards to present worth; bifurcating punitive damages and compensatory damages phases of a trial; and limiting pre-trial discovery of a defendant’s personal wealth.

• Establishing objective standards that recognize professional qualifications and experience of expert witnesses.

• Applying sanctions for frivolous or dilatory pleadings and motions; and requiring expert reports prior to filing of a complaint.

• Reducing the cost of litigation by mandating timely discovery and exchange of expert reports and by requiring discovery, conciliation and pre-trial conferences.

• Developing venue rules to assure local trials.

The second component of the joint tort reform agenda is to support legislation to reduce the cost of medical liability coverage. Legislative proposals include:

• Creating a collateral source rule to prevent a victim from receiving multiple recoveries for the same loss by permitting juries to know if losses have already been paid by other sources.

• Repealing Pa.’s joint and several liability rule, which currently allows a person who is found to be one percent responsible to a plaintiff to be required to pay 100 percent of the damages claimed. The proposal would limit payment of damages to the portion of fault of any defendant.

• Directing any punitive damages to reduce the CAT Fund’s unfunded liability.

• Requiring (not simply permitting) periodic payment of future damages.

• Developing criteria for venue to restrict the location of a trial to the local area (also part of Civil Rules agenda).

• Applying sanctions on frivolous lawsuits (also a legislative counterpart to a Civil Rules agenda item).

• Applying caps on non-economic damages to limit payment of damages for pain and suffering (an item that will likely require amending the Pa. Constitution).

PMS and HAP plan to discuss the proposals with legislative leaders to determine which elements would be realistic to pursue now and which may need to wait for future introduction, according to PMS Executive Vice President Roger Mecum.

The third component of the joint tort reform agenda would explore use of private contracts between patients and health care providers to provide alternatives to lawsuits to resolve issues of medical negligence. The approach would be a variation of the voluntary, binding arbitration process used in the private sector. Among the issues to be worked out are how to initiate the contract without it being a condition for medical treatment, and whether health insurers will pay upon an arbitration settlement. Legislation may be required if the CAT Fund is to be included as a source of settlement funds, Redmond says. Difficult issues such as caps on non-economic damages could be worked into arbitration agreements, Mecum adds.

Part three of the overall PMS-HAP agenda involves patient safety initiatives to promote improved risk management and quality of care. Initiatives include increasing funding and resources for the Pa. Medical Board to improve the state’s medical licensure system and oversight of health care professionals; promoting voluntary error reporting and private sector investigation, protected from peer review; and revising hospitals’ mandatory adverse hospital events reporting, peer review and investigation by Department of Health.

According to Redmond, increased licensure fees would fund Medical Board enhancements, peer review protection for voluntary reporting would encourage participation by shielding reporting entities from lawsuits, and strengthened mandatory adverse event reporting protocols would better educate health care providers by spelling out a process by which the Health Department is to analyze and report back the data.

HAP and PMS are also engaged in patient safety initiatives of their own. A program to increase the safety of medication delivery at all of southeastern Pa.’s hospitals is being launched by an affiliate of the Delaware Valley Healthcare Council, partnering with the Institute for Safe Medication Practices to assist over 70 southeastern Pa. hospitals to implement 16 safety action steps designed to further improve patient safety.

The PMS is piloting a voluntary medical error reporting system in conjunction with its subsidiary, KePRO. Funded by a HCFA grant through Aug. 2002, the pilot program, if successful, could be expanded statewide and include hospitals, outpatient facilities and physician offices, according to Mecum.

Part four of the PMS-HAP agenda is to seek financial assistance from third party payors by seeking an increase in payments by private health insurers, Medicare and Medicaid to compensate for the increasing cost of professional liability coverage. One approach, says Mecum, may involve a bill in the legislature to address contracting issues between physicians and health plans, and may include proposals such as indexing fee schedules to cost-of-living increases.

Another approach is to address the issue in meetings with private insurers. According to Rose, the PMS has been meeting with Highmark Blue Cross Blue Shield on an ongoing basis to discuss a variety of issues, including increasing malpractice liability costs.

As of early April, Highmark has increased UCR Level II physician reimbursements for a number of evaluation and management codes and for certain surgical and diagnostic procedures for PremiereBlue and all products using the Keystone Health Plan West fee schedule, except for SecurityBlue. The average allowance increase for Highmark’s managed care plans comes to four percent for internal medicine, five percent for family practice and 11 percent for pediatrics, while the capitation rate for the SecurityBlue Medicare HMO was increased by ten percent.

Highmark did have a meeting with HAP and the PMS to discuss the malpractice liability issue, according to Highmark spokesman Michael Weinstein, who adds that the reimbursement increases were not a response to rising medical malpractice insurance costs, but were intended to reflect "fair and equitable rates" which had not been increased for some time, and to produce a more balanced reimbursement schedule for intensive codes.

Weinstein notes that Highmark has not yet seen shortages of physicians for its panels, except for the perennial need for primary care physicians in rural Pa., but is waiting to see proposals by PMS and HAP and will see where things go from there.

PMS also had a meeting with Aetna on the malpractice issue and hopes to have more, but has thus far not been successful in meeting with Independence Blue Cross, says Rose.

Challenges Remain

While unified advocacy by PMS and HAP is an important step toward advancing a medical liability reform agenda in Pa., several hurdles remain.

Implementation of tort reform provisions as Supreme Court Civil Rules would require majority approval among the state’s seven Supreme Court Justices. An election to replace one of those Justices will occur in November, and the Pennsylvania Medical Political Action Committee (PAMPAC) is endorsing Judge Michael Eakin for that election, according to PAMPAC Chair, Mary Hudak, M.D. Learning from the experience of the physician associations in Texas and Michigan, which Hudak says were able to pass tort reform only after their PACs got involved in judicial elections, PAMPAC will donate to, and encourage fundraising for, Eakin’s campaign. Hudak says that Eakin’s record as a Superior Court Judge looks favorable to physicians’ interests.

A strict constructionist, Eakin would be expected to question the constitutionality of legislation only in connection with a case brought before the Court, in contrast to the Court’s suspension of Act 135 provisions on its own without a case being brought before it, says Hudak. Eakin’s election would produce a 4-3 majority of strict constructionists on the Court, says Hudak, who are also opposed in principle to the Court’s engagement in legislative functions and would be less inclined to suspend legislation that is well-crafted, Hudak adds.

A task force appointed by Gov. Ridge in February to study the state’s malpractice liability situation has, at press time, not yet released its recommendations to the Governor, who is expected to review them and determine whether or which agencies would take further actions, according to Rose, who notes that the task force is composed of Physician General Robert S. Muscalus, D.O., Insurance Commissioner M. Diane Koken, and an attorney from the Governor’s office.

It is uncertain how receptive state legislators are to new tort reform bills. The PMS and HAP still need to discuss legislative proposals with legislative leaders to determine which ones may be feasible in the short term. According to Redmond, HAP recognizes that the proposals remain very controversial in the legislature and doesn’t expect quick action on them.

Rep. Anthony DeLuca (D-Allegheny), Minority Chair of the House Insurance Committee, believes that physicians are facing a dire problem, especially in southeastern Pa., yet says that tort reform is not a panacea, but only one facet of the medical liability problem, the others of which he says are low medical reimbursement, medical errors and the high cost of pharmaceuticals driving up health insurance costs.

To illustrate his point, he says that 80 percent of medical practices in California are currently in financial difficulty, primarily because of the reimbursement problem, since extensive tort reforms in that state have greatly reduced the cost of malpractice insurance.

He says that solving the problem requires addressing each of the facets, including having physicians do a better job of policing themselves and beefing up the state Medical Board to more effectively handle disciplinary actions against physicians. He is co-sponsor of a bill introduced by T.J. Rooney (D-Northampton) that would mandate public reporting for consumers, via Internet and telephone hotline, physician information including professional credentials and background, disciplinary actions by the state Medical Board and by the National Practitioner Data Bank; revocation of hospital privileges; malpractice court judgments, malpractice claim settlements involving payments, and arbitration awards involving payments.

Although DeLuca says he would not be against looking at tort reform proposals, "I don’t see the sentiment right now in the Legislature to pass a comprehensive tort reform bill," he notes. "If anything’s going to pass here, it’s going to be a collaborative effort by every party. It won’t work with one stakeholder against another," he adds, referring to PaTLA, the state’s trial lawyer association.

Tort reform legislation stands a greater chance of passage if approached in piecemeal fashion as separate bills than it would as a comprehensive bill, believes Sen. Robert J. Thompson (R-Chester), who has been identified by the PMS as a likely sponsor of future tort reform legislation. Thompson believes that it will be easier to forge consensus on single issues. A larger bill would risk unraveling of support by separate interest groups.

Thompson hopes to introduce a bill, before the Senate adjourns in June, to curtail frivolous lawsuits by making them subject to a separate tort action. The bill would not be restricted to the medical malpractice arena, and Thompson says it is supported by the PMS, HAP and various business groups. Thompson does not anticipate opposition from PaTLA.

Rep. Nicholas Micozzie (R-Delaware), Majority Chair of the House Insurance Committee, says he will not bring any issue up for a vote in committee unless he is confident that it will pass. He personally knows physicians who have left the state because of the liability crisis, but believes that the situation is only beginning to be recognized by the leadership in Harrisburg. He adds that physicians have been doing a good job lobbying and should continue to call and write letters to their legislators.

"When I have a consensus, I will hold public hearings to put more pressure on the leadership and the Governor, and will continue to talk about tort reform," says Micozzie. He anticipates that any tort reform bills will run into problems without PaTLA on board and says that a compromise needs to be worked out between them and the physician and hospital associations.

Despite PaTLA’s thick rhetoric against tort reform efforts by physicians—which has included press releases denouncing the lobbying trips to Harrisburg as office closures amounting to physician strikes designed to intimidate the public for political gain, and indicting doctors as having consistently rejected patient protections for five years—both PMS and HAP say they recognize the importance of sitting down with PaTLA to try to forge a consensus.

PaTLA wrote a letter asking the state Supreme Court not to suspend any provisions of Act 135 because they were agreed to in good faith by the PMS and PaTLA under the auspices of then-Senate Majority Leader Joe Loeper, says PaTLA’s Legislative Counsel Mark Phenicie, who adds that PaTLA would be willing to write a similar letter now, as well as a joint statement with the medical community that "we made a deal on all provisions of Act 135 and intend to keep it."

PaTLA will continue to oppose tort reform items that it views as erosions of patients’ rights, such as caps on noneconomic damages, mandatory periodic payments, agreement to voluntary arbitration as a condition of medical treatment, arbitration by a panel of physicians rather than by a patient’s peers, and "any future attack on collateral source," says Phenicie.

Finally, both the legislators and the PMS recognize that divisions among physicians themselves must be conquered before new tort reform measures stand a chance of success. Sen. Thompson notes that lack of physician consensus ten years ago caused substantial tort reform legislation to fall apart at the last minute, and he emphasizes the importance of physician unity in the current campaign.

Physicians who lack concern or knowledge about the problem are a serious concern of the PMS, says Rose, who estimates that between one-third and one-half of Pa.’s physicians may be difficult to bring on board and educate about the problem, for various reasons. Regional differences are significant and can sometimes be polarizing, she notes, as physicians in southeastern Pa. want physicians in western Pa. to carry more of the CAT Fund burden, while western Pa. physicians want to pay less because they are paying in much more than is paid out on their behalf.

Rep. DeLuca notes that tort reform is rarely brought up during discussions he has had with his western Pa. physician and hospital constituents, but that the burden of low reimbursement is often mentioned.

Physicians in private practice are likely to feel the overhead pressures of rising liability insurance costs more directly than employed physicians whose employers pay for that coverage. Rose, who is an employee of the UPMC Health System, notes that many of the system’s 1,700 physicians are not well-informed about the cost of malpractice insurance and don’t have a feeling for what UPMC is paying for it. It is often difficult to obtain break-outs of individual physician costs, she notes.

Physicians in low-risk specialties and regions, such as a family physician in western Pa., may not care at all about the issue because their malpractice cost is low. "Those are the physicians we are not hearing from," says Rose. "If they’re not hurting, they’re not involved in this issue, unless they are involved in organized medicine or are concerned about public impacts of the problem," she adds.

To encourage physicians to close ranks, the PMS is trying to play down the finger-pointing and frame the issue as an erosion of access to care. If the liability insurance problem impacts that access, says Rose, "It doesn’t matter where you live or where you work because it can’t help but spread all over the state. If it’s impacting the doctors in the east in one way and the doctors in the west in another way, but it’s impacting them both negatively, that’s all that matters."