2003 Tort Reforms Still Paying Off
Cover Story – September 2011
Tex Med. 2011;107(9):12-18.
By Crystal Conde
Gerald Ray Callas, MD, began his career as a Beaumont anesthesiologist at an ideal time in the history of medicine. It was 2003, the year the Texas Legislature passed the Medical Malpractice and Tort Reform Act. Just months after the victory of House Bill 4, voters approved Proposition 12, an amendment to the Texas Constitution that authorizes the legislature to cap noneconomic damages in health care liability cases.
Texas' $750,000 total cap includes a $250,000 limit on physician exposure for noneconomic damages such as pain and suffering. The tort reform act doesn't restrict economic damages.
In 2003, Dr. Callas' group had about 15 physicians. Today, it boasts 28 doctors and 11 certified registered nurse anesthetists (CRNAs), due largely, he says, to tort reform.
"Without tort reform, we wouldn't have been able to recruit all the specialists we have, and providing medical liability insurance to CRNAs would have been cost-prohibitive," said Dr. Callas, chair of the TMA Council on Constitution and Bylaws and a graduate of the TMA Leadership College.
He stresses that since Texas enacted comprehensive medical liability reform eight years ago, patients in underserved areas have access to state-of-the art, quality medical care.
"Tort reform is the reason Jefferson County now has 26 different medical specialties available to patients. They don't have to drive to Houston for care," he said.
During the epidemic of lawsuit abuse that preceded the 2003 law, Jefferson County was considered a "lawsuit war zone." The American Tort Reform Association regularly included the county in its list of "judicial hellholes."
Although tort reform has drawn additional physicians to Texas and had other positive effects on the state's health care system, the favorable liability landscape is in danger from forces seeking to overturn the landmark 2003 reforms. Legal challenges are coming in federal and state courts.
The Texas Medical Association, the Texas Alliance for Patient Access (TAPA), and other organizations are coordinating efforts and filing legal briefs to support tort reform's provisions and protections.
David Teuscher, MD, a Beaumont orthopedic surgeon and member of the TMA Board of Trustees, encourages physicians to remain vigilant in their efforts to protect the noneconomic damage cap and other provisions won through tort reform.
"It was a four-decade battle to achieve tort reform. The next generation is going to have to defend this as hard as we had to fight to win it. We can't rest on our laurels. We have to remain engaged in the political process and continue to tell the story of how tort reform is good for our patients," he said.
He adds tort reform contributed to Texas' stable economy and to the robust liability climate that allows professionals to flourish without having to combat excessive, frivolous lawsuits.
Dr. Teuscher warns that if trial lawyers are able to overturn the provisions of tort reform, Texas' professional liability practice landscape would return to the pre-tort reform era. In the years leading up to 2003, skyrocketing liability insurance premiums caused some physicians to restrict their medical practices, hindering patients' access to care.
"We'd see physicians limiting their practices, retiring early, or leaving the state. We'd also have a severe lack of high-risk specialists. None of this would be good for patients' access to care," he said.
Dr. Callas says he'd be hesitant to practice medicine in Texas absent tort reform.
"Without tort reform, many physicians – especially specialists – would be shut out of work and would avoid or flee Texas. The patients are our No. 1 priority, and they'd ultimately suffer from lack of access to care," he said.
Tort Reform's Healthy Benefits
TMA President C. Bruce Malone, MD, says Texas patients' access to care improved in many ways because of tort reform. He says Texas has more high-risk specialists in rural areas and more emergency medicine physicians overall.
According to TAPA, Texas' growth rate for newly licensed physicians in the past three years is 62 percent greater than in the three years preceding tort reform. The number of physicians in El Paso more than tripled post-reform. San Antonio's physician growth rate is 172-percent greater than before reform, and Houston has 124 percent more physicians since 2003.
TAPA indicates Texas' enhanced physician workforce has resulted in the opportunity for 2 million more patient visits per year than likely would have occurred without reform.
Brad Butler, MD, chair of the TMA Committee on Professional Liability and a Longview anesthesiologist, says the influx of physicians to Texas has by far been the most obvious benefit of tort reform in Texas.
"Some rural and underserved areas in Texas have been able to recruit and retain surgeons, emergency medicine physicians, and obstetricians they wouldn't have been able to obtain without reform," he said. "Texas now has more physicians who are able to provide timely, quality care for patients."
Emergency medicine physicians are so thrilled with tort reform they gathered at the state capitol in 2009 to announce a dramatic increase in access to emergency medical care. The Texas Department of State Health Services (DSHS), the Office of Rural Community Affairs, the Texas Medical Board, and TAPA released data at the time showing an increase in board-certified emergency medicine physicians in Texas. Thirty-three rural counties had added at least one emergency medicine physician since 2003. In all, 76 counties – including 39 medically underserved counties – gained emergency medicine physicians.
TAPA says tort reform also helped boost charity care. For instance, charity care at Texas hospitals rose 24 percent in the six years following passage of tort reform.
Tort reform has reduced practice costs for physicians, too, making it possible to improve access to care. (See "Physicians Benefit From Lower Premiums.")
Dr. Malone adds that before tort reform in Texas, money was "misdirected toward defending a large number of frivolous lawsuits. Those dollars are now being allocated toward enhancing technology at hospitals and toward improving patient care."
Tort reform has cut surgical liability lawsuits at The University of Texas Health Science Center at San Antonio by about 80 percent, according to researchers there. They studied surgical operation, risk management, and medical liability data from 1992 to 2010 from two hospital databases and published the results in the April 2011 issue of the Journal of the American College of Surgeons.
"Malpractice Risk and Cost Are Significantly Reduced after Tort Reform" shows Texas had far fewer surgical liability lawsuits after tort reform -- 40 per 100,000 operations before versus 8 per 100,000 operations afterward.
The data used in the study gave the authors a snapshot of medical liability suit prevalence and associated costs from 1992 to 2010, when surgeons performed 98,513 procedures. Patients filed 25 lawsuits during the pre-reform timeframe (1992-2003). Overall litigation cost for these cases was $7.15 million, including $5.56 million in liability payments and $1.6 million in legal fees. The health science center's annual cost of all medical liability claims during the pre-reform period totaled nearly $600,000.
In contrast, after tort reform (2004-2010), patients filed only three surgery-related lawsuits, with legal costs totaling just $500 per year.
Additionally, medical lawsuit filings in Harris and Dallas counties are down since 2003. According to the Dallas County District Clerk's Office, there were 1,108 medical liability lawsuits there in 2003. The same year, Harris County had 1,203 cases. Last year, there were only 85 medical liability lawsuits in Dallas County and 234 in Harris County. Data from the counties show that through May this year, there were 36 lawsuits in Dallas County and 98 in Harris County.
TMA Supports National Tort Reform
An American Medical Association report on physicians' experiences with medical liability claims published last year says that an average of 95 medical liability claims had been filed for every 100 physicians surveyed from 2007 through 2008. The report reveals nearly 61 percent of physicians 55 and older were sued, and there is wide variance in the impact of liability claims among specialties.
For instance, the number of claims per 100 physicians is more than five times greater for general surgeons and obstetricians and gynecologists than for pediatricians and psychiatrists. Before they reach age 40, more than 50 percent of obstetricians and gynecologists have been sued. The report also shows 90 percent of general surgeons 55 and older have been sued.
The AMA report finds the number of medical liability claims does not indicate the frequency of medical error, as the physician prevails 90 percent of the time in cases that go to trial. While 65 percent of claims are dropped or dismissed, they aren't without expense. Average defense costs per claim range from a low of more than $22,000 among claims dropped or dismissed to a high of more than $100,000 for cases that go to trial.
This leads to increased costs for physicians and patients, AMA says.
In an effort to rein in costs, TMA supports expanding Texas-style tort reform nationally.
"Tort reform at the national level would allow hospitals and clinics to direct more money toward patient care and away from defending frivolous lawsuits," Dr. Malone said.
Earlier this year, then-TMA President Susan Rudd Bailey, MD, wrote House Judiciary Committee Chair Lamar Smith (R-Texas) to encourage passage of the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011, filed by Representatives Smith, Phil Gingrey, MD (R-Ga.), and David Scott (D-Ga.). In addition to a $250,000 cap on noneconomic damages, the bill requires medical liability suits to be filed within three years of the injury in most cases.
The HEALTH Act maximizes patients' awards by allowing courts to ensure that an unjust portion of the patient's recovery isn't misdirected to an attorney and allows patients to recover the full cost of economic damages, such as medical bills and lost income.
TMA's letter is in addition to a letter of endorsement that AMA and 100 other physicians and medical organizations sent to the bill's sponsors. At press time, the bill had cleared the House Energy and Commerce Committee and was pending further action.
In addition, TMA backs legislation to improve patients' access to physicians by ending unnecessary lawsuits. U.S. Rep. Michael C. Burgess, MD (R-Texas), filed House Resolution 896, known as the Medical Justice Act, earlier this year. The bill regulates civil actions for an injury or death resulting from health care by, among other provisions, limiting the noneconomic damages that an individual could recover.
Medical litigation and soaring liability insurance premiums contribute significantly to the rising cost of health care, Representative Burgess says. Physicians must practice defensive medicine in fear of being second-guessed by trial lawyers, resulting in millions of dollars in unnecessary tests, procedures, and imaging. Furthermore, seasoned medical professionals are retiring early because staying in practice is no longer financially feasible, further contributing to the nation's doctor shortage, he adds.
The legislation mirrors the tort reforms Texas passed in 2003.
"Texas has led the nation in medical justice reform and is now a model state for what successful tort reform looks like," Representative Burgess said. "Unfortunately, only a few states have followed suit, leaving too many Americans trapped in a system that is harmful to patients and doctors."
HR 896 has been referred to the House Judiciary Subcommittee on the Constitution.
Dr. Butler says Texas physicians can rally around national tort reform legislative efforts by communicating with their representatives and senators.
"Advocacy and grassroots efforts are so important at the national level. We need to tell lawmakers that Texas' tort reforms work; they don't limit people's access to courts, and they do help prevent frivolous lawsuits," he said.
Favorable Supreme Court Rulings
Mike Hull, JD, TAPA general counsel, says the organization continues to monitor how the courts interpret HB 4.
"The trial lawyers consistently and persistently advocate in favor of positions rejected by the legislature, positions that would reduce access to medical care," Mr. Hull said.
TAPA, with support from TMA and other health care groups, has defended the reforms so far.
On July 1, the Texas Supreme Court upheld the "paid or incurred" provision in HB 4 in the case Haygood v. Escabedo, which stemmed from a traffic accident. The law allows patients in a medical liability lawsuit to recover only what they actually owe for a medical service, not the amount billed.
Writing for the majority, Justice Nathan Hecht said that the Texas Civil Practice & Remedies Code "provides that 'recovery of medical or health care expenses incurred is limited to the amount actually paid or incurred by or on behalf of the claimant.' We agree with the court of appeals that this statute limits recovery, and consequently the evidence at trial, to expenses that the provider has a legal right to be paid."
Mr. Hull said the court upheld the law as written.
"Trial lawyers have been trying to get the 'paid or incurred' law either struck down or construed in a way that makes it useless," Mr. Hull said.
Last August, the Texas Supreme Court issued an opinion in Marks v. St. Luke's Episcopal Hospital that disqualified the plaintiff, Irving Marks, from damages because he failed to obtain a timely report on a broken bed. He alleged the bed caused him to fall while recuperating from back surgery at the Houston hospital.
The court held Mr. Marks' claim constituted a health care liability claim, not a simple negligence claim. The court's ruling reversed a 2009 decision that medical liability law didn't cover Mr. Marks' claim. Mr. Marks argued he should be allowed to claim unlimited damages.
Ultimately, the court determined Mr. Marks' case falls under Texas' medical liability law, which caps noneconomic damages at $250,000 and requires a timely expert report. In other words, medical liability and simple negligence cases can't be packaged as a dual claim to dodge the expert report requirement or to sidestep the noneconomic damage cap. TAPA filed a brief that aided in a favorable outcome in the case.
Mr. Hull says the Marks case represents an effort by trial lawyers "to poke holes in what constitutes a health care liability claim."
"The Marks case supports access to care by upholding the broad standard that a medical expert report is required in all medical liability cases," he said. "The trial lawyers want to limit access to care by poking holes in the laws requiring expert reports."
Last March, the Texas Supreme Court ruled that a Texas woman who discovered a sponge was left inside her during a hysterectomy didn't have the right to sue the hospital and doctor because the error wasn't detected for more than 10 years.
TAPA, TMA, and the Texas Hospital Association filed a brief in the case, Methodist Healthcare System of San Antonio v. Rankin. The court held the 10-year statute for health care liability claims is constitutional and doesn't violate the open courts provision of the Texas Constitution.
And at the federal court level, a class action lawsuit filed in February 2008 in Marshall attacks the constitutionality of Texas' $750,000 cap. Attorneys for individuals involved in 11 ongoing legal cases consolidated them into one class action suit, Emma Watson, et al. v. Hortman, et al.
Defendants included health care professionals and trial court judges named as class representatives who enforce the cap under Texas law. The lawsuit alleged the noneconomic damage cap violates the following provisions of the U.S. Constitution: right to trial by jury, right to petition, right to due process, and equal protection.
TAPA, of which TMA is a charter member, coordinated the defense for the lawsuit's challenge of the constitutionality of the noneconomic damage cap.
The plaintiffs assert that HB 4 violates the Fifth Amendment. They allege that the state effectively "commandeers" medical liability plaintiffs' fair and proper compensation for noneconomic injuries that exceed the damages limitations. The plaintiffs contend that capping jury awards disproportionately affects the young, old, poor, and unemployed. They maintain that the costs to litigate a medical liability suit are extraordinary, and that the limitation on noneconomic damages presents a financial barrier to some claimants who attempt to access the courts.
At press time, TAPA was waiting on a ruling by the judge.
"TAPA continues to support access to care against all attacks by the trial lawyers. No medical liability cap has ever been finally held to be unconstitutional under federal law," Mr. Hull said.
Texas' cap on noneconomic damages is immune to constitutional challenges in state court, thanks to Proposition 12.
Tort Reform Survives Session
Before the 2011 legislative session, TAPA and TMA anticipated trial lawyers would attempt to modify or repeal several provisions of Texas' tort reform.
According to Mr. Hull, TAPA monitored almost 900 bills, as well as hundreds of amendments, during the regular and special sessions.
"TAPA was more visible this session, due in part to the work of TAPA staff and lobbyists during the interim. TAPA talked to every member in the interim and alerted them to our interests, listened to their concerns, and tried to educate them about the real effects of House Bill 4," he said. "Arming our elected officials with information and resources made an enormous difference."
Chief among the anticipated attacks this session was a threat to the $250,000 cap on noneconomic damages. TAPA prepared for attempts to raise the cap, attach an exception to the cap, create an exception to the cap for a person without significant economic loss in the form of lost wages, or attach a cost-of-living adjustment to the cap.
TAPA and TMA also worried emergency room protections contained in the 2003 tort reforms could be affected. They anticipated the filing of a bill that would extend emergency care protections only to Good Samaritans, not to all medical professionals who provide medical care in the emergency room and elsewhere.
Fortunately, for the fourth successive legislative session, Texas' medical liability lawsuit reforms emerged intact. The expected attack from the trial lawyers lost steam due in part to a major shift in the Texas House of Representatives as a result of the November general election, Mr. Hull says. Republicans picked up 22 seats, gaining a supermajority in the House.
Dr. Teuscher says support from Gov. Rick Perry, as well as TMA's efforts to educate legislators about tort reform, helped shield tort reform this session.
"We've been successful at educating and electing legislators who understand that we need a stable tort environment in which physicians can concentrate on patients, not lawsuits," he said.
For continued success in the courts and the legislature, Dr. Malone says, physicians need to support TMA in its efforts to protect the noneconomic damage cap and other provisions of tort reform. The association has worked hard to establish tort reform and has been fighting efforts to weaken it in the courts and legislature.
Dr. Malone says physicians also need to be diligent in decreasing defensive medicine. He says physicians need to work with their specialty societies to hold down costs associated with the practice of defensive medicine.
Studies of private sector physicians by The Gallup Organization and Jackson Healthcare last year found 73 percent and 92 percent of private-sector physicians, respectively, admitted to practicing defensive medicine. The groups also found that physicians estimate defensive medicine practices cost the United States from $650 billion to $850 billion annually.
"We don't want to eliminate testing and imaging that's necessary. We want to do away with tests and medical care performed as a means to prevent a lawsuit," Dr. Malone said.
Dr. Butler says that while Texas achieved a stout reform package that has proved resilient, physicians must continue to thwart legal battles waged by the trial lawyers.
"The trial lawyers are well-organized and well-funded," he said. "They're trying to chisel away at tort reform via many avenues of attack. We have to keep up the fight."
Crystal Conde can be reached by telephone at (800) 880-1300, ext. 1385, or (512) 370-1385; by fax at (512) 370-1629; or by email.
Physicians Benefit From Lower Premiums
The Texas Medical Liability Trust (TMLT), the largest physician insurer in Texas with more than 15,000 policyholders, has reduced rates eight times since 2003:
- 12 percent in 2004,
- 5 percent in 2005 and 2006,
- 7.5 percent in 2007,
- 6.5 percent in 2008,
- 4.7 percent in 2009, and,
- 1 percent in 2010 and this year.
Effective Jan. 1, policyholders received a 24-percent dividend.
As of August 2010, renewing policyholders reaped an approximate savings of $634 million due to cumulative rate cuts, premium reductions, and dividends since 2003. TMLT's claims intake is down, too. In 2003, the company received 2,880 claims. In 2010, claims dropped to 1,206.
Physicians also enjoy overhead savings and the ability to recruit more specialists trained in Texas and from out of state, thanks to tort reform. The Texas Medical Board (TMB) received 4,218 physician license applications during fiscal year 2010 and issued 3,522 new licenses. TMB's fiscal year runs Sept. 1 to Aug. 31.
In 2003, TMB received only 2,561 applications and granted 2,513 licenses.
Leigh Hopper, TMB public information officer, says TMB had issued 2,670 licenses from September 2010 to June 2011.
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