Medical Liability
“Available & Affordability and the Medical Malpractice Act”

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• Physician Facts – Medical Liability Insurance – USA
• Tort Environment, Medical Malpractice Act of 1976
• Patients Compensation Fund
• Competition; Insurers, TDC (APCapital)
• Profitability
• Claim Frequency & Severity & Comparisons
• New Mexico Problems
• A Cure for Medical Malpractice
• Conclusions
• Insurance Department
• Questions & Answers

Statistics –  Medical Liability, USA

• 100,000 lives are impacted each day due to medical mistakes
• Each day, 100 medical errors take place
• Three times per day, wrong side surgery happens (mostly breast surgery mistakes)
• Each year, 15,000 instruments are left in patients
• Three most common & expensive claims:
  • Birth trauma, brain injury, mis-diagnosis
• “Hospital are no place for sick people”
  • Infections cause more deaths than malpractice
• The American Medical Association reports that an average of 95 medical liability claims are filed for every 100 physicians, almost one per doc.
• Nearly 61% of all physicians over 55 have been sued at least once.
• Before the age of 40, more than 50% of obstetricians/gynecologists have already been sued.
• Ninety percent of general surgeons age 55 and over have been sued.
• In the US, it is not a matter of “IF” an independent  healthcare provider will be sued, it is a matter of “WHEN”!!!
• The AMA reports that the severity of claims is on the rise (… as are the number of trial attorney’s  AND the funding of trial bar associations).
• While the vast majority of claims are dropped or decided in favor of physicians as “meritless,” the cost of defending docs is costly to the national health care costs and patient care.
• The average defense cost for a dropped claim is $22,000, and over $100,000 for cases that go to trial. Defense costs are as high as 48% of the incurred losses, compared to an average 16% for casualty insurance claims.
• Some feel these costs are “validation” for the need for national and state healthcare intervention/reform ????
• Today, some constituencies claim physicians practice “self defense medicine” which may (?) increase healthcare costs as much as by 30% (?) or more.  This may (?) also reduce lawsuits?  Who knows with absolute certainty ????????????
• Shortage of physicians:
  • By 2025, the US will be short by 159,300 docs
  • New Mexico is currently short 2000 docs, 400 primary care
• Incomes of independent physicians has been reduced significantly in last 20 years.
  • Current average income is $146,000
• More deaths occur by healthcare provider and hospitals errors than by gun owners.
• Exit of Travelers Insurance from Medical (Malpractice ) Professional Liability (MPL) insurance in 1975 created.
• Travelers inability to obtain rate adequacy lost nearly $1.50 for every $1.00 earned, creating an insurance crisis, but also opportunities for state and regional insurers to expand.
• Led to the formation of New Mexico Physicians Mutual Liability Company (purchased by APCapital in 1999).
• Nationally, MPL Liability premium accounts for approximately 4% of all insurance company premiums in all property/casualty lines… over $10 billion.
• Rates have increased 300% in the last dozen years, despite most states having passed “reform” laws that benefited insurers and healthcare providers.

 Tort Environment in New Mexico

• In New Mexico, the Medical Malpractice Act of 1976 is the legal/regulatory template for healthcare providers and insurers.
• A pure form of “comparative negligence.”  Thus, a claimant’s negligence will never bar recovery but, instead will only reduce the claimant’s recovery in proportion to his fault.
• In any lawsuit to which comparative negligence applies, a tortfeasor is only liable for that portion of the judgment equal to his share of the fault.
• In New Mexico, hospitals are not generally liable for the acts of independent contractors who are members of medical staff, only for their “employees.”
• Any medical malpractice action for injury or wrongful death must be brought within three years from the date when the alleged incident occurred.
• According to Swiss Reinsurance Company, New Mexico is a good state to do business in for insurers due to the low liability limits, pay-out caps and overall low jury awards.
• The New Mexico Medical Society (NMMS) and Greater Albuquerque Medical Association (GAMA) have effectively held the New Mexico Trial Bar “at bay” in their attempts legislate a raise current liability caps.
• Legislators were told an increase in the cap would increase medical liability premiums significantly… as much as 25%.
• Under the Medical Malpractice Act, independent healthcare providers must obtain liability coverage from an insurer on an occurrence based form, or maintain a cash deposit with the Superintendent of Insurance.
• New Mexico generally requires the use of expert testimony to prove a claim, unless the alleged negligence is so apparent as to be within a layman’s comprehension.

Patients Compensation Fund (PCF)

• The Patients Compensation Fund is the primary component of the 1976 Medical Malpractice Act (copied from Indiana).
• The PCF provides an excess layer of professional liability coverage for its member healthcare providers.  Awards are capped at $600,000, except for medical care costs and punitive damages, which are not capped.
• All medical liability claims against healthcare providers in the PCF must be reviewed by the New Mexico Medical Review Commission before they can be filed in court.
• There is a three-year statute of limitations… except for minors under the age of six have until their ninth birthday to file a claim.
• The PCF is administered by the Superintendent of Insurance.
• The PCF is funded solely through surcharges (ie. Premiums) levied against its healthcare providers.
• The latest actuarial study (summer 2011) evaluated the PCF to be solvent.
• Definition includes – “…doctors of medicine, hospital, outpatient healthcare facility, osteopathy, chiropractor, podiatrist, nurse anesthetist, or physician assistant”.  Not business entity.
• We currently have approximately 1800 insured members in the PCF.
• To be eligible, a primary layer of annual occurrence form coverage of $200,000 (per occurrence) must be obtained from an authorized/approved insurance company.
• Unfortunately, not many insurance carriers are actively writing in New Mexico… nor many insurance agents are well-versed in this specialty line of insurance.

Insurers – Medical Liability

• The top ten insurers in New Mexico write approximately $50 million of Direct Written Premium.
• With the assistance of several prominent physicians, legislators and the NMMS, New Mexico (like in most states), formed a mutual insurance entity known as New Mexico Physicians Mutual Liability Insurance Company (NMPMLIC) after Travelers Insurance Company decided to stop writing medical malpractice insurance in the 1970’s.
• This company was managed by New Mexico physicians and several hired insurance professionals.
• After financial struggles and pressure from audits from the New Mexico Insurance Department, NMPMLIC was acquired by APCapital (MICOA) domiciled in Lansing, Michigan.
• New management and financial surplus brought stability to the organization.  The NMMS partnered with APCapital and endorsed their portfolio and presence.