Last year's tort reform rally in Harrisburg.

By Christopher Guadagnino, Ph.D.

Published June 1997

DISCUSSION FORUM

• A call for unity

• Getting beyond the current turmoil

• CAT Fund is only a band-aid

• React to this article in the Discussion Forum.

Justice has not prevailed regarding the CAT Fund’s new surcharge assessment method, according to many physicians in the Delaware Valley. The 75 percent Joint Underwriting Association (JUA) formula was meant to spread the Fund’s financial burden equitably across the state and across medical specialties. Instead, a sizable proportion of physicians in this region, particularly in certain surgical and medical specialties, wound up paying more into the Fund than they did before the Pennsylvania Medical Society (PMS) brokered a solution with state legislators. PMS proclamations of tort reform and CAT Fund victory for Pennsylvania physicians have been met instead with disillusionment toward the settlement and toward the ability of organized medicine to represent physicians.

The CAT Fund debate is viewed by some as a watershed event for physicians in Pennsylvania. Never before had Pennsylvania physicians been so effectively mobilized and unified, with bus loads of physicians protesting at the state capitol, prepared to withhold payment of the CAT Fund surcharge if necessary.

Disenchantment with the settlement has led many to seriously question the status quo. That challenge has become manifest in a number of ways: county medical society leaders have declared their desire to dissociate from the state medical society and alternative physician organization structures have emerged as a direct result of the CAT Fund affair.

Bucks County Medical Society President Marvin Hunter, M.D., describes what he calls "disgruntled disaffection" felt by Bucks County physicians after the CAT Fund surcharge numbers came out of Act 135. "The PMS reported the agreement as miraculous. It was PR." Hunter, a plastic surgeon, saw his surcharge increase to $52,000 a year, and knows some plastic and orthopedic surgeons who now must pay $100,000 a year. "I’m 55 years old, and going to get out [of medical practice] ten years earlier than I would have," Hunter laments.

Bucks County physicians were hit particularly hard when the surcharge assessment mechanism was converted to a statewide JUA rate instead of a percentage of basic primary coverage. Under the old system, Bucks and Chester County primary coverage rates were based on a territory separate from that of Philadelphia, Montgomery and Delaware County rates, explains Hunter. The new system lumps their rates back in with rest of the Delaware Valley physicians, making their surge in surcharge premiums especially high. "Especially when the PMS continues to tout winning the CAT Fund fight, we feel cheated," says Hunter.

Hunter plans to introduce a resolution at an upcoming Bucks County Medical Society board meeting to eliminate the dual membership requirement for county and state medical societies. Because Bucks County society membership is declining and because members perceive the state society as having "sold out too early" on the CAT Fund, says Hunter, the move to explore decoupling the dual-membership requirement is an attempt to increase county society membership, which he notes is declining in Bucks County.

Hunter questions the extent to which organized medicine is able to address the needs of every practicing physician. He points out that some 42 percent of doctors in the region are employed and concedes that a medical society must cover those doctors as well. Instead, he believes that physicians will turn to specialty societies; for him that would be the American Society of Plastic Surgery.

"The legal community was allowed to rape us," says Robin Scheiner, M.D., immediate past president of the Delaware County Medical Society. "Many physicians canceled office hours to go to the rally in Harrisburg, only to get a disappointing result and no effect on malpractice premiums—and an increase for some," says Scheiner. After writing several letters to the PMS which went unanswered, "I became so frustrated with the state society, I resigned from the board of the Delaware County Medical Society," Scheiner says. "It’s a bureaucratic dinosaur unable to disseminate information or to change direction fast enough. It’s run by retired physicians cocooned in a world that they think exists, but it doesn’t."

Scheiner believes that the immediate CAT Fund outcome will drive some physicians to sell their practices to avoid the burden of the liability payments. "My OB was recently bought out by Great Valley," she notes. "Doctors already practicing are having trouble attracting associates. I know an orthopedic surgeon in that situation," Scheiner adds.

PMS President Victor Greco, M.D., is aware that Delaware Valley’s physicians have been hit the hardest by the new surcharge system, but points to results of a statewide physician survey of PMS members and nonmembers that indicates 84 percent saying they were happy with what the PMS had accomplished on the CAT Fund and tort reform. Southeastern Pennsylvania was an "anomaly," says Greco, in that 50 percent of the payouts by the CAT Fund came from Philadelphia, Bucks, Montgomery and Delaware Counties, which combined paid in only 35 percent of the subsidies. "When the playing field was leveled, obviously these people were hit. They had entitlements taken away."

Greco adds that he knew some physicians might have to leave their practice as a result of the new surcharges: "That’s the choice they have to make—it’s a free country. Pennsylvania is a lousy place to practice medicine, I can’t change that. We must wait to straighten out the situation."

Greco adamantly acknowledges the need for further reform of the CAT Fund scenario. Among the goals of the PMS, Greco asserts, are to abolish the CAT Fund, to turn insurance over to the free market, to establish a $1 million private malpractice insurance standard and to spread the Fund’s unfunded liability over all groups interfacing with health care, including insurers and consumers. The PMS is currently lobbying for those goals, and has met with the advisory committee to the CAT Fund created by Act 135.

A four-year moratorium agreed to during last-hour negotiations between the PMS and the trial lawyers, says Greco, precludes the PMS from seeking further medical liability tort reform in Pennsylvania and from rallying in Harrisburg. The moratorium also stipulates that the PMS will not contribute over $100,000 to a coalition of which it is a founding member to pursue broad-based tort reform—the Pennsylvania Civil Justice Coalition.

That coalition is composed of the Chamber of Business and Industry, the Hospital Association of Pennsylvania, the Pennsylvania Business Roundtable, the Osteopathic Medical Association, the League of Cities and Municipalities, the School Boards Association, the Federation of Independent Business, the Association of Township Supervisors and the Insurance Federation of Pennsylvania, according to Greco. The coalition plans to focus on the collateral source rule and stronger periodic payments language which, if adopted for general tort reform, would apply to medical tort reform as well, Greco points out.

In the meantime, the PMS is working to correct "obvious inequities in way the CAT Fund is assessed," says Greco, by studying whether statewide data supports separate underwriting data for some specialties, such as psychiatry, colorectal surgery and general surgery, the last two of which are currently grouped with cardiac surgery at the high end of the JUA categories. Other interim adjustments to CAT Fund assessments Greco says the PMS is studying are discounts for young and part-time physicians, and provisions to take into account claims experience. Data to support these changes need to be collected and the changes would have to presented to the CAT Fund administration, says Greco. However, data collection could be hampered by insurance company reluctance to release proprietary data, and CAT Fund Director John Reed may not have the authority to approve the changes, which would then necessitate state Insurance Department approval, admits Greco. Although Greco could not give a specific timetable for this agenda, it would be intended to take effect before the CAT Fund is fully phased out—scheduled for the year 2001 by Act 135.

Localized physician efforts have emerged to take action without the help of organized medicine. A Committee to Abolish the CAT Fund was formed in early April as a grassroots effort in response to a lack of confidence in the PMS and to channel the frustration expressed by physicians over Act 135, according to Ellen Mahony, M.D., a plastic surgeon in Bala Cynwyd and one of the committee’s organizers. The group mailed a newsletter to 35,000 health care providers in the state, charging the CAT Fund with corruption, highlighting its financial burden on physicians and soliciting support for a bill being written by State Representative Samuel Rohrer (R-Berks) that would eliminate the CAT Fund by January 1, 1998.

Since the letter was mailed, says Mahony, some 1500 MDs, DOs and podiatrists have responded, the majority of whom are physicians in the Delaware Valley. "I get 20-30 responses and donations per week after a mailing made six weeks ago from those who feel misrepresented by the PMS," Mahony indicates. "Just about all the physicians who responded are PMS members," she adds.

The purpose of the committee, Mahony explains, is to lobby legislators on behalf of physicians and health professionals and to keep a database of ideas and suggestions of "mainstream physicians," as Mahony puts it. "We can’t wait four to five years. We’re pushing for abolition by the end of this year," Mahony asserts.

According to Rohrer, some 100 physicians have spoken with him personally on the issue. "The committee has been very effective as a catalyst and a communicator, which the profession has not had," observes Rohrer. Although language of his bill was not finalized at press time, Rohrer indicates that it will give the option to medical providers of purchasing their malpractice coverage from the private insurance market, lower payout awards for medical malpractice claims and reduce required coverage, and stretch out payment for outstanding liability over time.

When the next legislative session convenes in June, Rohrer plans to introduce the bill either on its own or as an amendment to one of three bills by Rep. Nicholas Micozzie (R-Delaware), Chairman of the House Insurance Committee. Micozzie’s bills are under advisory committee review.

Mahony enumerates a number of other goals the committee has pooled from physician suggestions:

• Establish an independent accounting of unfunded liability for this year.

• Phase out unfunded liability with a flat percentage assessment of physicians’ gross income.

• Spare new physicians that assessment for the first year of medical practice.

• Establish a new statewide coverage requirement for private medical liability coverage with a low minimum rate and a proof of purchase mechanism for the state Insurance Department.

• Establish a monthly payment schedule for malpractice premiums, rather than a lump sum.

• Eliminate self-insurance programs in the state.

• Change the penalty for noncompliance with mandatory coverage from license suspension to a fine.

• Create a mechanism to deal with individual physicians who claim financial hardship from the mandatory coverage.

These suggestions demonstrate that "physicians recognize the incongruity between what the PMS has been doing and what physicians want," says Mahony. Rather than concede that some physicians had to be hurt by a CAT Fund settlement, Mahony asks rhetorically, "Wouldn’t it be great if Dr. Greco could say that all physicians are paying less?" As yet, the PMS has not met with either the committee or with Rep. Rohrer, although Greco says he would be happy to do so.

While Mahony’s group has taken a legislative route to change, a second initiative takes a judicial course. The Physicians’ Cincinnatus Society was formed in 1986 out of objections to the CAT Fund. It’s current President Louis Meier, M.D., dropped off the board of the Montgomery County Medical Society in 1986 over objections to the CAT Fund. Meier is now part of a federal lawsuit brought by 18 physicians before Federal Court in Philadelphia alleging that the CAT Fund violates the 14th amendment right of due process. The way the state statute is written, says Meier, a physician who does not pay the mandatory CAT Fund premiums is automatically regarded as noncompliant and subject to license suspension, bypassing the right to a hearing. Such a mechanism, Meier charges, gives the licensing board no discretion over license revocation.

In response to Meier’s case, the PMS notes that a noncompliant physician is entitled to a hearing at the CAT Fund before his or her name is sent to the Medical Board. Meier does not regard that as due process, since the physician would already have been certified as noncompliant for not paying the CAT Fund surcharge.

Meier also objects to the 75 percent CAT Fund surcharge assessment for physicians because he believes the rates were arbitrarily based on PMSLIC’s limited experience with claims setting, especially for colorectal surgeons (a claims base of one individual). Meier is also bitter over the unfunded liability burden place on physicians’ shoulders when it was created primarily from a shortfall resulting from discounts given in the recent past by the Fund to hospital systems.

Greco responds that high-risk specialists were also given discounted rates on their basic premiums, and are naturally upset that those discounts have ended. He also explains that PMSLIC was always conservative in setting their rates, which are based on tier, individual rating and territory. To compensate for its lack of claims experience with colorectal surgeons, PMSLIC consulted national data which came out the same anyway, according to Greco.

A third avenue for physician equity being explored is unionization. Raymond Lodise, M.D., president of the Philadelphia County Medical Society (PCMS), chaired a meeting at the society in early February on the subject of unionization. The event drew the largest attendance the society had ever seen on any topic, says Lodise, adding that no physician said it was a bad idea. "Outside of organized medicine, the only other organization that has legislative impact is a union," Lodise declares.

Lodise concedes that the term "union" may have misled independently practicing physicians to think that they were not eligible to join, and may have left a bitter taste for others who feared strikes and deprofessionalizing the practice of medicine. Lodise now advocates the term "guild" or "association" to reflect more accurately the legislative advocacy potential of such an organization without the conceptual baggage of the term "union." Strikes or collective bargaining over salary was not part of the concept to begin with, according to Lodise.

Such a guild or association would affiliate with the OPEIU and draw lobbying strength from the larger constituency base available. As to the two primary physician objections to "unions," Lodise points out that there are no strike clauses in OPEIU contracts with physicians and that all established unions would rather affiliate with medical organizations rather than with individuals, distinguishing the medical profession as a block group interest.

Nathan Zuckerman, M.D., president of the St. Mary Hospital medical staff in Bucks County, believes that a large number of his physicians would be interested in exploring a union. He is awaiting a response from the OPEIU to a request for applications. Bucks County President Hunter confirms that several hundred physicians have expressed an interest in a union.

Lodise warns that waiting could be costly, noting that California’s Kaiser Permanente HMO recently affiliated with a union, which will promote Kaiser. "If Keystone or U.S. Healthcare were to affiliate with a union here, physicians would be worse off than they are now," Lodise points out. "Physicians have a window of opportunity to take that away."

Should county medical societies feel threatened by a union, physicians could consider joining through a specialty society, says Lodise. If unions can’t convince county medical societies to join, they must define other organizations to open up the avenue for physician membership, Lodise believes. Another avenue through which unionization is possible, Lodise advocates, is a regional society such as a Delaware Valley Medical Association. Such an option is better than forming numerous smaller organization such as the Committee to Abolish the CAT Fund that arise from specific dissatisfactions, he says.

"Organized medicine is not helping physicians in one of their major concerns, economically," notes Lodise, pointing out that this year, the PCMS saw a ten percent decrease in overall income from membership dues, a figure that he believes may double in 1997. "Unless organized medicine does something that tickles members and nonmembers, we’ll end up as specialty societies. Organized medicine will be less relevant," he laments.

Physicians looking to form organizations outside of medical societies make sense to Lodise, as medical society leadership does not generally reflect what the grassroots physician wants, he charges. "Most of my board at the PCMS have had conflicts of interest, vested interest or disinterest in exploring issues that our physicians have an interest in," charges Lodise. Physicians need an alternative vehicle that speaks exclusively to legislation and methods to change the status quo, Lodise maintains.