Sherman Joyce, President of the American Tort Reform Association, told the Liability Week publication, “We wouldn’t tell you or anyone that the reason to pass tort reform would be to reduce insurance rates.”  

                   Victor Schwartz, the Association’s General Counsel, told Business Insurance, “...many tort reform advocates do not contend that restricting litigation will lower insurance rates, and I’ve never said that in 30 years.”  

                   The American Insurance Association even released a statement (March 13, 2002) acknowledging, “[T]he insurance industry never promised that tort reform would achieve specific premium savings...”  

                   Mark S. Yerby, M.D., M.P.H., Chairman of the American Association of Neurologists, (AAN), Legislative Affairs Committee , was quoted in Neurology Today, January 2003 that “it seems clear to me that the medical liability crisis has less to do with malpractice litigation and more to do with insurance company economic losses in other areas.  Increasing our rates is a good way to offset these costs.”  Dr. Yerby is quoted as saying that these rates are going up without a corresponding increase in malpractice claims.  

            The anti-consumer coalition has attempted to shift the focus from the real causes of rising malpractice premiums, and is setting up a straw man of frivolous lawsuits as the cause.  If frivolous lawsuits are the alleged problem (it’s not), how do caps solve anything?  Caps penalize the victims that are most deserving.  It attacks any perceived problem from the wrong end because the victims that are affected by caps are the most seriously injured victims.  Caps will not affect the so-called frivolous cases or the cases in which the injuries to victims are not permanent.  

            While damage caps are unfair and discriminatory public policy, because it only limits the damages of those most seriously injured victims, the people that have suffered the greatest injury and need the most help – many insurance executives have acknowledged that tort reforms and/or caps will not guarantee lower insurance rates. (See “Dose of Reality for Doctors”, January 29, 2003 Palm Beach Post)  

            Pennsylvania Governor Rendell has publicly stated that caps are not a “silver bullet” and do not guarantee lower malpractice premiums or the availability of coverage.  Professor William Sage, of the PEW Foundation, has stated that damage caps do not address the appropriate issues.  

            Many of the physicians who advocate restriction of patient rights because of the poor financial condition of hospitals have personally opened surgical centers and labs that directly compete with hospitals for these resources.  The question shall be raised as to where they refer their patients for surgical, imaging and laboratory services, the hospitals or their own facilities.  Think about it.  

            A competent attorney, David Fallk, in the Scranton Times on May 24, 2003 in “Hospitals Prescribe Wrong Cure for Many Ills”, made many solvent points on this issue.  

“First, the hospital administrators need to admit what the Pennsylvania Health Care Cost Containment Council stated in February, namely that hospitals statewide endured a “precipitous decline in income driven largely by losses in investments and in the value of securities held by hospitals.”
 

Second, the recent economic downturn has created a 12.9 percent increase in bad debt and charity care for the hospitals, according to the Council.
 

Third, the hospitals need to acknowledge a shift of revenues away from their institutions by doctors, medical groups and corporations that set up their own outpatient and shortterm treatment cents.
 

Some hospitals in our area have also been criticized for spending too much money on expansion and purchase of doctors’ practices.  

***

As for the “malpractice insurance crisis,” no one can dispute that insurance companies have subjected doctors and hospitals to outrageous demands.  However, the fault lies primarily with the Insurance Industry itself, not with the victims of malpractice.
 

Study after study shows the same cause.  When the economy was good, insurance companies lowered rates to gain market share.  Then they invested the premiums in the booming stock, bond and real estate markets.  When the economy tanked, profits fell, reserves to pay claims proved insufficient and rates had to be raised sharply.  

***

Recently Florida’s new chief financial officer, Tom Gallagher, stated that his state’s malpractice insurers’ failure to raise rates during the 1990s left a “very large hole” that led to the state’s crisis.  

***

St. Paul Insurance lost $108 million alone due to Enron and stopped writing several lines of insurance, not just malpractice policies, even in states with damage caps.
 

In addition to investment losses, our local hospital administrators neglected to mention the questionable conduct of some of the Pennsylvania’s largest insurers, Larry Rogers, president and CEO of PIE Insurance, went to jail for defrauding his company into bankruptcy. 
 

The Pennsylvania Insurance Department has accused Reliance Insurance and its president and board members of mismanaging the company into insolvency.
 

An even more glaring omission by the local hospital administrators is their failure to note their reasons for the demise of PHICO (Pennsylvania Hospital Insurance Company).  The Pennsylvania Insurance Commissioner has sued PHICO for “fundamentally unsound” practices and has accused several board members of self-dealing in handing out dividends in the face of falling reserves.
 

The insurance industry is also culpable for the way it handles malpractice premiums.  Unlike auto insurance, where rates go up for drivers with multiple accidents or a bad-driving record, the few incompetent or negligent doctors pay the same rate as the vast majority of good doctors who never face a malpractice suit.”  

            Lackawanna County has several physician-owned medical surgical centers, and diagnostic imaging centers which directly compete with hospitals.  These physician owned facilities continue to grow and seem to be thriving despite physician complaints about their poverty and federal and state laws prohibiting self-referral practices, i.e. where a physician refers a patient for a diagnostic study to a facility that he/she has a substantial financial interest.  

            The Scranton Times Editorial Board observed that the United States Congress and Pennsylvania State Legislature “have ignored the insurance industry, which is collecting exorbitant premiums and reducing coverage with scant scrutiny from state and federal regulators.  Especially in Pennsylvania, where well-documented fraud and mismanagement of several major malpractice insurers has contributed to the crisis, insurance reform must be a major component of a workable solution.”  

Little Has Been Done To Address the Stunningly High Rates of Medical Errors Documented Since 1984.  

            One year after the Pennsylvania Legislature enacted dramatic changes in medical malpractice laws, the purported patient safety provisions have been so ineffectual that the Patient Safety Authority has not yet set up a web site, or even established the criteria for a final bid proposal for the private contractor, that will administer the Patient Safety Board.   Philadelphia Daily News “Losing Patience With Patient’s Board”, March 11, 2003.  The Patient Safety Board has a $5 Million Dollar annual budget and is charged with hiring a contractor to develop an on-line, medical error reporting system to help spot patterns of errors or near misses in a hospital’s reports.  The Patient Safety Authority membership is dominated by organized and institutional medicine.  

            State Senate Democratic Leader Robert Mellow has written: “The Patient Safety Authority created a year ago by Act 13 (with a $5 Million budget) has yet to launch its website, has no office, and hasn’t taken a single incident report from doctors and hospitals ... The first priority must be a concerted effort to cut the rate of catastrophic medical mistakes.  It’s alarming to hear the President of the Pennsylvania Medical Society state that doctors won’t report errors if they think a lawsuit will result.  If this is true, it’s a sad statement about a state of medical ethics and personal morality that no legislation will fix.”  (“Fixation on Caps Impedes Solving Other Issues.” Scranton Times, April 27, 2003, C2)  

            Estimates found in "To Err is Human: Building a Safer Health System," (National Academy Press, 1999)  a 1999 report published by the Institute of Medicine [hereinafter “IOM”], between 44,000 and 98,000 Americans die each year due to preventable medical errors.  Under these figures, more Americans die in a given year as a result of medical errors than from motor vehicle accidents (43,458), breast cancer (42,297) or AIDS (16,516).  Total national costs (lost income, lost household production, disability and health care costs) of medical errors that result in injury are estimated to be between $17 billion and $29 billion, of which health care costs represent over one-half.  The increased hospital costs of preventable medication-related errors to patients alone are estimated to be about $2 billion for the nation as a whole.  

            As William C. Richardson, chairman of the panel that conducted the IOM study, aptly comments in citing the Hippocratic Oath, “These stunningly high rates of medical errors–resulting in deaths, permanent disability and unnecessary suffering–are simply unacceptable in a medical system that promises first to ‘do no harm.  In face of  “these stunningly high rates of medical errors,” why does it make sense to take away a forceful incentive for physicians to adhere to appropriate standards of medical care.  Look at Wall Street.  

            Indeed, some 7,000 hospital patients died in 1993 due to medication-related errors alone, more than the number of Americans who die from workplace injuries in an average year.   

            The IOM concedes that liability in tort “serves a legitimate role in holding people responsible for their actions.”  

            It should be noted that the IOM’s report only reflects empirical data concerning medical error affecting hospital patients.  Therefore, with more than half of all surgeries today occurring on an outpatient basis, the report’s scope can be seen as limited in that the rates of error are too low.  

            The data gleaned from the 1984 Harvard study in New York indicate that as many as 98,000 patients may perish each year in American hospitals as a result of preventable adverse events.  This estimate renders medical error the fifth leading cause of death in the U.S., above such other scourges as pneumonia, diabetes and kidney disease.  Even by the more conservative estimate of 44,000 deaths per year, the amount generalized from the Colorado/Utah study, medical error would still rank as the eighth single leading cause of death in this country.  

            Indeed, at the ACHE Symposium at the University of Scranton on April 2, 2003, former Pennsylvania Medical Society (PMS) President Roger Mecum cited the failure of local peer review committees as a basis for creation of a PMS backed creation of statewide peer review committees in order to enhance patient safety.  

            The high rates of medical errors and lax government oversight of the medical profession is not a newly recognized phenomena.  In 1827, for example, Nathan Smith, M.D., at Yale University had complained to his medical students that the state of Connecticut was far too lax in bringing malpractice indictments.  “Even the most egregious Quacks escape punishment as things now stand,” he grumbled, and he hoped for more action on this front.  (Smith N., Medical jurisprudence.  Lecture notes taken by Skelton AJ New Haven, Conn: Yale University Medical School; 1827.  Located at National Library of Medicine, Bethesda, MD.)  In 1834, the equally prominent R.E. Griffith, M.D., at the University of Pennsylvania Medical School made the same kind of complaint about the unwillingness of U.S. government authorities to safeguard the public against what he regarded as rampant irresponsibility in medicine.  (Griffith RE, reviewer. Am J. Med Sci, 1834-1835.)  

            While organized medicine pays lip service to the claim that it supports patients’ rights to “full economic compensation,” (as opposed to making victims whole for all harm caused by malpractice such as responsibility for blindness, injury for loss of limbs, mastectomy, reproductive capacity resulting from negligent  gynecological care or other non-economic, but life-altering injury caused by preventable medical negligence,) organized medicine has resisted efforts for mandatory reporting of medical errors for  this very reason that people will seek compensation.   

            Contingent fee agreements historically have been allowed to provide access to the courthouse for many people who could not otherwise afford to have a lawyer.  The “contingent fee system makes possible the enforcement of legitimate claims which otherwise would be abandoned because of the poverty of the claimants.”  Koenig and Rustad, In Defense of Tort Law, (N.Y.Y. Press 2001, p. 42) Doctors have attacked the contingent fee system since at least the 1850's in order to deny legal access to these very injured victims.  

            In “Medical Malpractice A Comprehensive Analysis”, Bhat (2001), Dr. Bhat construed that Pennsylvania had one of the highest reporting rates in the national databank for many of the most common procedures performed.  Dr. Bhat attributed this to the poor policing of doctors in Pennsylvania.  

            The Institute of Medicine has concluded the costs of medical adverse events are recorded as being higher than the direct and indirect costs of caring for people with HIV and AIDS.  

            The Institute of Medicine has concluded preventable medication-related adverse errors are dramatically rising: among medication-related outpatient deaths, there was nearly 8.5% increase in frequency between 1983 and 1993; amongst medication-related deaths occurring in hospitals, the rate increased 2.57% over the same time period.  

            The Institute of Medicine has concluded that seventy (70%) percent of the adverse events that occur in American hospitals are preventable!  

            The most common types of these preventable errors include technical errors (44%), improper diagnosis (17%), and mistakes in the use of a drug (10%).   

            However, in rebutting those who charge that the report “exaggerated” the medical errors problem, panel member Dr. Lucian Leape, of the Harvard School of Public Health,  points to the fact that the original Harvard research took into account only hospital patients.  Dr. Leape also argues that with more than half of all surgeries now occurring on an outpatient basis, the IOM report, if anything, underestimates the total number of medical errors.   Indeed, countless other cases of medical errors are committed in contexts other than hospitals, such as nursing homes.  For instance, according to a study by the University of Massachusetts Medical School, an estimated 350,000 medication errors occur in U. S. nursing homes each year, more than half of them preventable. (JAMA: “Institute of Medicine Medical Error Figures Are Not Exaggerated”, Vol. 284 No. 1 - July 5, 2000)  

            The IOM, however, faults the current overall medical care system itself as the primary cause of preventable adverse events in the U. S.  Indeed, although the data cited in the report has been readily available to institutional medicine since 1984, little has been accomplished.  

            This past summer, the Journal of the American Medical Association reported on the high number of medication errors in hospitals.  On September 29, 2002, the Scranton Times Editorial Board commented that:  

“The Archives at Internal Medicine reported recently that a study of 36 hospitals in Georgia and Colorado discovered mistakes in the administration of 19 percent of all doses of medication, many of the errors were harmless.  But of the total errors, 7 percent were deemed to be potentially harmful to patients.”  

            Rather than supporting payment of compensation to victims of malpractice, the policy of organized medicine has opposed payment of compensation.  Due to pressure by many medical groups, in particular the American Medical Association, Congress has refrained from opening the National Practitioner Data Bank  to the public. (See AMA Denounces Databank Effort, Wash. Post, September 8, 2000)  The National Practitioner Data Bank is seen by many as an abject failure, citing, for example, the case of Dr. Michael Swango:  In September, 2000, Swango confessed to killing four patients, attempting to kill four more, and committing five felonies during the span of his career as a practicing physician in Ohio, Illinois, Virginia, South Dakota and New York.   Although he was investigated for murder at the Ohio State University Hospital in 1984, and convicted of poisoning fellow hospital employees at a hospital in Illinois in 1985, events that took place some weight years before he committed his murders in New York, Swango’s name never appeared in the data bank.  (See “Data on Bad Doc’s Off Limits To Public” CBS Evening News)  

            Organized Medicine opposes mandatory reporting initiatives arguing that a loss of confidentiality and an increase in litigation would follow and therefore seeks to deny information to those injured by medical malpractice.  This effort by organized medicine to oppose mandatory reporting directly undermines patients rights to access to information about injuries they suffer, including serious and preventable injuries.  This also undermines consumer choice in selecting competent  physicians as well as conceals opportunities to seek compensation for injuries.  How does this AMA policy ensure prompt, equitable compensation for the victims of medical malpractice.  It doesn’t and the AMA knows it.  

            Commentators have pointed out that little has been accomplished by organized medicine to address the alarming rates of medical errors since 1999 when the IOM issued its report.  Lucian Leape, M.D. has stated “Before the IOM reports nobody was doing diddly squat.”  Washington Post.com: “No End To Errors,” December 3, 2002,Page HE01.  For instance, how have great insurance systems and HMO’s used their databanks to reduce and minimize the risk of preventable medical errors in their systems, or rather, have their reimbursement structures undermined patient safety by creating disincentives to provide services.   

            The Washington Post has reported:  “Leape underscores the reality of the nascent movement to reduce medical mistakes.  There is a lot of talk, but not significant progress.  The reasons, observers say, include fierce resistance by doctors and hospitals to mandatory reporting and other IOM recommendations, a lack of oversight by the federal government and the absence of an effective consumer lobby.”  Washington Post.com “No End To Errors”  

            On January 16, 2003, the same day President Bush came to Scranton to talk about “lousy juries” – the “lousy” people who have their lives interrupted to perform public service and actually hear the evidence on both sides of cases and render verdicts - the New England Journal of Medicine published a study conducted by researchers at Brigham and Women’s Hospital and Harvard School for Public Health, that concluded surgical teams unnecessarily leave tools in approximately 1,500 people a year.  (See “The Palm Beach Post, January 16, 2003, pg. 6A.”)  

            Only recently, a group of the nation’s largest companies, including General Electric, General Motors, AT & T, and IBM have also taken action in response to the IOM’s report by agreeing to use their mammoth health-care buying power to press for stringent new safety standards at U. S. Hospitals.  (See generally Barbara Martinez, Business Consortium to Launch Effort Seeking Higher Standards at Hospitals, WALL ST. J., Nov. 15, 2000, at A3.)  

            The Kaiser Family Foundation and the Harvard School of Public Health reported survey results that one-third of practicing physicians and 40 percent of the public have experienced a medical error in care that they or a family member received.  (USA Today “Doctors Cite Instances of Medical Error” December 12, 2002)  

            In New York state alone, there were some twenty-eight cases of wrong-site injury in the year 2000.  Id.  Included in these cases were the following nightmarish episodes: two doctors were accused of operating on the wrong side of a patient’s brain; one was found guilty of performing surgery on the wrong section of a person’s spinal cord; another lost his license for (among other things) removing the left  kidney of a seventy-nine-year-old man who had a cancerous mass in his right kidney; and another performed surgery on a healthy knee, rather than the injured one.  Id.  

            Medical institutions have found ways to avoid reporting measures designed to protect the public.  In Pennsylvania, which requires reports for “gross” (i. e., severe) events such as deaths due to injuries, suicides or malnutrition, the Department of Health received only one report for the one-year period that ended in 1999. (See Philadelphia’s Largest Hospitals Failed to Report Medical Errors, Philadelphia Inquirer, Jan. 22, 2000 at A1)  

            Philadelphia’s hospitals alone probably encountered thousands of reportable errors.  The story in Pennsylvania is not unique.  North Carolina’s mandatory reporting system received only fifteen reports in its first year and Colorado received only seventeen reports on two years.  Id. (Citing Charles Billings, Incident Reporting Systems in Medicine and Experience with the Aviation Safety Reporting System, in  A TALE OF TWO STORIES: CONTRASTING VIEWS OF PATIENT SAFETY, app. B, at 55 (1998)).  See also id.  

            Only recently, The Joint Commission on Accreditation of Healthcare Organizations issued a new standard that requires hospital management and risk managers to investigate not only a sentinel event – “any unexpected occurrence involving death or serious physical or psychological injury, or the risk thereof,” but also the root causes of all actual and potential injuries, with an eye toward total candor in rooting out causes of past and future iatrogenic injury.  Id. At 2.  The AMA objected to federal legislation requiring mandatory reporting in 2000.  It will be interesting to follow compliance with this standard.  

The AMA Has Moved The Goalposts On The Issue Of Medical Ethics and Strikes  

            On December 27, 2002, the Associated Press in Philadelphia reported that, “AMA ethics guidelines enacted in 1998 discourage doctors from refusing to work saying, ‘Strikes reduce access to care, eliminate or delay necessary care and interfere with continuity of care.’  Each of these consequences is contrary to the physician’s ethic.”  This position was taken by the AMA when it sought to obtain collective bargaining status for physicians to negotiate fees with HMO’s and insurance companies.   

            The position that “strikes...are contrary to the physician’s ethics,” was taken by the AMA and organized medicine when it served its purpose to attempt to assuage the federal government’s fear that the right of collective bargaining  would be abused by strikes by organized medicine, reducing essential services to the community.  Consider the AMA’s position in the present context where physicians are striking to try to force damage caps

despite the unfairness of caps to the elderly, homemakers, women, children and the working poor.  This is akin to locking out miners from work and closing the company store.   Two commentaries have stated that “there is no evidence to suspect the claim that collective bargaining by physicians will improve the quality of care.”  

            What was President Bush’s position on striking when blue collar dock workers in California struck last year?  How would President Bush react if the nation’s firemen and police officers went on strike, or air traffic controllers.  Suppose our armed forces went on strike to get higher pay.  Why is this administration encouraging strikes and risking public safety for a pocketbook issue.  

            In the November, 2002 issue of Lycoming Medical, entitled “PMS (Pennsylvania Medical Society) Puts Chips on the Table,” Timothy Heilman, M.D. a Lycoming County representative to

the PMS House of Delegates discussed PMS Board of Trustees Report 25 which included a plan for the Pennsylvania Medical Society to go on strike.  Heilman explained:  

“As responsible physicians, we cannot - must not – go on strike.  No matter how we want to wordsmith it, no matter how we want to shift the responsibility for the outcome, if we purposefully take an action that will result in our being unable to care for our patients, that is what we would be doing.  

***

When we finished medical school, most of us recited the Oath of Hippocrates at our graduation ceremonies.  If you wade through all the verbiage (either in the original or “modern” version), what it all boils down to is that we promised to do our best to take care of our patients.  While I enthusiastically support the first ten actions outlined in PMS Board of Trustees Report 25, the final action would be in violation of this promise.  I, for one, cannot abide that.”  

            In Secret Email from N. J. Dockers Shows Real Intent of Staged Malpractice Crisis?  Cause “Confusion and Inconvenience” for Patients, not Insurers, the leaders of the New Jersey strike announced their intention to “cause confusion and inconvenience,” pressure reluctant colleagues “both professionally and economically just as any other ‘scab’,” divert blame from malpractice insurers, and not reschedule canceled patient appointments in order to “significantly inconvenience them.”  See http://www.consumerwatchdoq.org/healthcare/rp/.  “E-Mail In Doctor’s Walkout Suggested Discomforting Patients”, Andrew Jacobs, New York Times, March 10, 2003, B-11.  

            Physician strikes in which they agree not to perform any, but emergency medical procedures in order to pressure legislators to take legislative action is a form of collective activity that is a classic form of “group boycott” that may violate the antitrust laws and Section 5 of the Federal Trade Commission Act, 15 U.S.C. §45, which outlaws unfair methods of competition.  

            In a letter from Public Citizen to Timothy J. Muris, Chairman of The Federal Trade Commission on February 4, 2003, Public Citizen wrote:  

“This is precisely the same conduct that the United States Supreme Court held to be a violation of those laws in 1990, when the Federal Trade Commission brought a similar case against lawyers for refusing to serve indigent defendants in the District of Columbia, as a means to protest the District’s failure to raise the statutory rates of pay applicable to those cases.

* * *  

In all likelihood the Medical Society will reply that it is not guilty of a group boycott because it is exercising its rights under the First Amendment to petition the government for redress of grievances and to speak out (and assemble to protest) against what it considers to be injustices in the laws.  But the answer to that claim is that it was unequivocally rejected by the Supreme Court in Federal Trade Commission v. Superior Court Trial Lawyers Ass’n, 493 U.S. 411 (1990).  The Court made clear that its decision did nothing to preclude any person or organization from expressing their views on matters on which they seek legislative action, but the antitrust laws do not countenance individuals or organizations from collective legislative action, but the antitrust laws do not countenance individuals or organizations from collectively refusing to serve their clients (here, their patients) in order to gain leverage with the legislature.  As we have outlined above, the MSNJ has plainly engaged in collective activities the express purpose of which is to cause doctors throughout New Jersey to deny medical services to their patients as a means of pressuring the New Jersey legislature to enact laws that will increase the economic well-being of doctors.  It is the unlawful nature of the means, not the legislative ends, that gives rise to the violation of law.

If the Federal Trade Commission under President Reagan was willing to bring a case against criminal defense lawyers who withheld their services, and to take it all the way to the Supreme Court, this Commission should be at least as willing to start an investigation here.  Indeed, the equities here are even less in favor of the striking doctors than they were of the trial lawyers.  In the trial lawyers case, there were no alternative “buyers” of their services since they worked exclusively on cases funded by the District of Columbia Government, whereas here it is at least theoretically possible for doctors to shop elsewhere for malpractice insurance.  In addition, the lawyers were protesting their pay of $30 an hour for in-court time and $20 an hour for preparation, which had not been increased in 13 years during a time of rampant inflation.  The average gross intake for the protesting lawyers was about $45,000 a year, out of which they had to pay all of their expenses.  By contrast, the average earnings of a physician in New Jersey are in excess of $155,000 a year.  Moreover, in contrast to members of labor unions, who are permitted by the labor laws to withhold their services from their employers in order to pressure their employers to improve their terms and conditions of employment, the doctors are either self-employed or organized as individual professional corporations and in that capacity as refusing to do business with their patients in order to put pressure on the government to change its rules.

So far, the New Jersey job action has lasted for only two days, but there is no way of knowing whether it will continue or whether it will resume if the Medical Society does not achieve its demands.  Moreover, similar plans are underway in other states, and therefore it is important that the Commission take decisive action now to head off further illegal conduct.  Nor should the fact that patients, hospitals and others injured by this illegal conduct may have lawsuits, in which they may recover treble damages, deter the Commission from acting to assure that the law is not violated.
 

There are two steps that the Commission should take that are urgently needed.  First, the Commission should immediately open an investigation of the conduct of the Medical Society of New Jersey in leading the job action and announce that fact.  Second, it should make a public announcement that the law as enunciated in FTC v. Superior Court Trial Lawyers Ass’n is still the law and that the Commission will closely examine similar job actions in other states when doctors attempt to achieve their legislative ends by means that violate the antitrust law.
 

We are sending a similar letter to the Attorney General of New Jersey asking him to review the Medical Society’s conduct under New Jersey antitrust laws and to take appropriate action under them.

Sincerely,
Alan B. Morrison
Director
Public Citizen’s Litigation Group

            In New Jersey, doctors have walked off the job in January and February of 2003, despite New Jersey government reports that pay-outs in medical malpractice damages rose only $4 million, not adjusted for inflation between 1992 and 2001.  The Philadelphia Inquirer reported that, “The total amount of malpractice pay-outs made by New Jersey insurers in 2001 was $235 million, compared with $231 million in 1992, according to data from the National Association of Insurance Commissioners.  Further, the Philadelphia Inquirer reported that patients filed 1,656 lawsuits in 2001, a 16% decrease from 1997 where 1,971 were tried according to figures from the Administrative Offices of the Courts.”  (See The Philadelphia Inquirer, “Untangling The Knots of Medical Malpractice,” February, 2003.)  There is, most likely, an increase in the number of physicians practicing in New Jersey between 1992 and 2001.   

            In New Jersey, if there has been a decrease in the medical malpractice insurance payments between 1992 and 2001, how can 50% increases in insurance premium payments be justified by the insurance industry (which is allied with organized medicine in the efforts to take away people’s right to full compensation for life-altering, non-economic injuries.), where there has been a decrease in the amount paid for claims, when adjusted for inflation.  It’s the economy, not the legal system.  

            Public Citizen has reported that: “As a group New York malpractice insurance premiums have remained flat for a decade, betraying claims of a liability “crisis”.  The total amount New York doctors paid in malpractice insurance premiums in 2001 was $873 Million Compared to $821 Million in 1992.  Discounted for inflation, this likely represents a decrease.”  (See “Doctors Should Focus on Patient Safety Crisis, Not Non-Existent Liability Crisis”, Pressroom, March 10, 2003)  

            One reason insurers are increasing premiums dramatically, at a time when there has not been a dramatic rise in liability payments, is because since 2000, the casualty insurance industry has lost substantial sums of investment capital from their reserve funds.  (See The Wall Street Journal “Some Bets May Come Back to Haunt Insurers”, October 30, 2002, C1)  

            Public Citizens has reported that 4.7 percent of doctors are responsible for 51.4 percent of all malpractice payments.  (See Reuters, “Small Fraction of US Physicians Account for Most Malpractice Cases”, September 26, 2002)  

            In 1997, PMSLIC paid out $5 million to cover the claims of other insurance companies that have folded which carriers were allowed to underprice their medical malpractice insurance premiums in Pennsylvania throughout the 1990s.  At the April 2, 2003 “ACHE Symposium” at the University of Scranton, Roger Mecum, Executive Vice President of the Pennsylvania Medical Society reported that the remaining Pennsylvania insurers, had been assessed over $21 million in 2002 because of the insolvent insurance carriers in Pennsylvania.  It is now well known that Pennsylvania has suffered from rampant insurance company fraud and mismanagement resulting in several insolvencies, including medical malpractice insurers PIC, PIE and PHICO.  (See e.g. PIC, RICO, Suit Defendants, The Legal Intelligencer, February 16, 2000; Wall Street Journal “Assigning Liability, Insurers Missteps Helped Provoke Malpractice Crisis”, June 24, 2002; Scranton Times “Medical Damage Limits NO Cure All”, October 20, 2002; National Underwriter, Pa. Reliance Suit Hits Actuary, Accountants, October 18, 2002.)  Reliance represents another Pennsylvania bankruptcy.  

            Rebutting arguments of runaway juries, the Scranton Times reported that “Jury awards are not skyrocketing” and in Lackawanna County, “only one jury awarded a medical malpractice plaintiff more than $1 million in the past five years.”  (Scranton Times, December 15, 2002)  The Erie Times in “Jury Awards Modest in Erie”, May 12, 2003, reported that in the past five years in Erie County, there was one jury verdict in excess of $1 Million, a $4.3 Million verdict that was later reduced to $1.2 Million.  Even Manhattan Institute-backed conservative Phillip Howard has conceded that “[e]xorbitant verdicts are the exception, however, and don’t directly touch the lives of most Americans.”  

            Pennsylvania CAT Fund data demonstrated that the number of doctors in Pennsylvania increased from 30,451 in 1990 to 34,484 in 2000.  Therefore, in 2000, there were 34 fewer people per doctor in Pennsylvania since 1990. (The Philadelphia Inquirer ,  “Recent Census of Doctors Shows No Flight From Pa.”  October 2, 2001)  

            In Lackawanna County, the number of licensed physicians increased from 516 in 1996 to 656 in 2001.  (Scranton Times,  Jan. 20, 2002)  Since Lackawanna County has been steadily losing residents over the past few decades, it only seems logical that with more doctors, there will be more competition and incomes will drop.  On April 17, 2003, The Tribune of Scranton A1, reported in “Pike County Still Leads Rest of State in Growth”, The Tribune reported that in 2002 alone, Lackawanna County population estimates dropped 0.5% in one year from 2001 for an estimated total of 210,711.  The article states that Lackawanna County has a “high percentage of elderly residents”, which corresponding results in a higher percentage of patients whose medical reimbursement payments are tied to Medicare.  This coupled with low “rural” medicare reimbursement, a poor economy and bad weather provides a fairly good reason that it may be difficult to recruit younger doctors.  See Wilkes-Barre Times-Leader “Presidents’ Prescription Weak Medicare At Best”, January 21, 2003.  Lawyers are simply a convenient target to shift attention from the primary issues of reimbursement rates, ineffective insurance regulation and the recession.  The Wilkes-Barre Times Leader stated: “Suggesting a cap as a solution to this complex problem is insulting.  It takes away rights from patients and leaves the predicament unresolved.”  Id. January 21, 2003.  

            The Lackawanna Medical Society challenges these statistics by arguing that physicians have stopped performing surgery because of higher rates.  They frequently list a very nice Scranton surgeon as a physician who stopped practicing surgery because of liability rates.  This particular surgeon has serious neurologic disease, yet is frequently cited as a victim of rising insurance rates.  

            The National Association of Insurance Commissioners  made up of state regulators, but funded by insurance companies, recently endorsed an industry plan to deregulate life insurance.  It called for the transfer of all government authority  – executive, legislative and judicial, from the states to a private national agency dominated by the insurance industry.  

            President Bush joined the insurer’s campaign for deregulation when he signed legislation requiring taxpayers to bail out insurers in the event of another serious terrorist attack.  Hidden in the new law is a provision that strips state regulators of their authority to block unjustified rate increases for terrorism insurance.  (See “The Insurers Flip the ‘Crisis’ Switch, Like Energy Companies, They Manufacture Losses,” 12/24/02, Henry Rossenfield, The Foundation for Taxpayer and Consumer  Rights)  

            On March 16, 2003, the New York Times reported that the Bush Administration was promoting changes in the Medicare program that would make it more difficult for beneficiaries to appeal the denial of critical benefits, such as nursing home care and skilled nursing home care (at the same time he is pushing for dividend tax breaks that will disproportionately benefit the richest of the rich.)  See New York Times, “Bush Pushes Plan to Curb Appeals in Medicare Cases”, March 16, 2003.  The Bush Plan would compromise the independence of administrative law judges who have protected beneficiaries from arbitrary agency action over the years by revising over 50 percent of agency action.  President Bush seeks to save money by telling judges how to think, by requiring “deference to policies adopted by Medicare and its contractors, which review and pay claim for the government.”  Elderly and often debilitated persons seeking to pay for home health care and nursing home services “would have to show why such policies should be disregarded” in a legal system stacked against the often disabled beneficiary.  President Bush seeks to delegate power to contractors and insulate the decisions from independent judicial review under the Administrative Procedure Act.  

            Phillip Howard, a conservative legal author, has favorably cited critics of this type of “legal reform”, stating:  

“Insulating state power from fallible human choices became the number one priority of legal reform.  No error or bias could occur if officials no longer had discretion.  For regulation, making law a precise as possible became the way to remove personal authority by government officials.  The burgeoning regulatory state was constructed as a detailed instruction manual that admitted no human judgment.  Every year, thousands of pages of detailed rules specified exactly what everyone had to do, like setting the height of factory railings at exactly forty-two inches.  Regulators and factory managers walked around with their noses in the rule books, squinting at the fine print rather than trying to make sense of the particular situation.  Pretty soon, the regulatory system began to function about as badly as the system of authoritarian central planning that everyone was trying to avoid.”  

(Howard, “The Collapse of the Common Good”, p. 37) Now contemporary conservatives seek to abandon this anti-regulatory mantra where common folks’ medicare benefits are being reduced by proposed Bush Administration regulations.  

            MICRA  Is Not The Answer.   In 1986, after a decade of MICRA, California was once again mired in an insurance crisis, with medical malpractice premiums rising at a rate of 26% annually, faster than premiums rose nationally during the same period.  In fact, the year MICRA’s cap of damages was upheld in court (1985), California malpractice premiums increased by 20%.  

            Conversely, after passage of insurance regulation under Prop. 103, – enacted in 1988, and implemented in 1991 medical malpractice rates had fallen by more than 20%.  “Insurance Regulation, Not Malpractice Caps, Stabilize Doctor’s Premium,” 1/29/03, The Foundation for Taxpayer and Consumer Rights.  California made physician information readily available, provided for an elected Insurance Commissioner, and granted taxpayer standing to challenge proposed rate increases in excess of 15%.

            MICRA carries a heavy price.  “With a limit on pain and suffering, plaintiffs must rely more on economic damages to win judgments in California, injured patients and their advocates say MICRA makes it harder for non-working mothers and the elderly to find a lawyers.  The limit “affects the most vulnerable elements of our society ...”  (Philadelphia Inquirer, May 22, 2003, p. A6)  

            Based upon the Consumer Index for Medical Care, medical care items which had a cost of $250,000 in the year 1975 would have a current cost in the year 2003 of $1,533,250.  Conversely, medical costs in the year 2003 of $250,000 would have cost approximately $40,764 in the year 1975.  (See report by Bunin Associates, Wynnewood, PA, February 25, 2003)  

            Based upon the general Consumer Price Index for All Items, items which had a cost of $250,000 in the year 1975 would have a current cost in the year 2003 of $835,750.  Conversely, costs in the year 2003 of $250,000 would have been approximately $74,783 in the year 1975.  The Philadelphia Inquirer has reported that “the limit of $250,000.00 set in 1975 is now worth about $73,000.00" May 22, 2003 at A7.  

            From a philosophical standpoint, it really makes little difference whether MICRA was successful or unsuccessful, because any law that does not provide a complete remedy for a violation of a person’s natural right to personal security, the right to be free of tortious wrongdoing, is simply unjust.  Slavery in the ante-bellum South saved money on the cost of production of cotton and other goods, but the economic justification that subverted the rights of black Americans for the economic convenience of the white landed aristocracy did not make the law just.  It may be easier and ultimately cheaper for physicians to do away with the just compensation for violation of the natural rights of victims of medical malpractice.  It is not just, however.  There certainly is a better way to provide deserving physicians with affordable malpractice coverage.  

            Do we deprive common folks of an impartial fundamental remedy when William Donaldson, an executive at Aetna, Inc., had a salary and benefits reported of $12,650,398 in 2000.   AIG executive Eli Broad was paid a reported $33,502,572 in salary and benefits in 2000.  Citigroup (Travelers) President, Sanford Weill was paid $28,628,118 in Salary and benefits in 2000.  President Bush seeks to limit the money value of mothers who lose their reproductive capacity because of negligent gynecological error to $250,000.    

            In November 14, 2002, the New York Post reported in an article entitled “Sandy’s Flip-Flop: Now says He Asked Grubman to Look at AT&T”, p. 32, the New York Post reported that:  

“In a stunning admission he tinkered with his firm’s analysts, Citigroup Chief Sandy Weill seems to have played a major role in the firm’s research shenanigans....  The 69-year-old Citibank chairman has been besieged by probes into whether he encouraged his analysts to cover up weaknesses of certain companies and hype their stocks just to reel in investment banking business from firms ... [Y]esterday Weill flip-flopped and admitted he did ask his former star analyst, Jack Grubman, to “take a fresh look” at upgrading AT&T – a firm where Weill sat on the board ...”  The latest bombshell in the Weill saga triggered a major selloff of Citigroup, causing it to lose more value than any stock traded in the U.S. yesterday – wiping out a total $972.7 million of investor value.”  Id.  

            By comparison, that $972.7 million figure represents more money than the total payouts received by medical malpractice victims in Pennsylvania in all of 2002.  

            In conclusion, this “crisis” is a well financed and exaggerated effort to undermine the natural rights of personal security upon which our Founding Fathers based both the Pennsylvania and United States Constitutions.  

            Long ago, when the railroads in Pennsylvania successfully lobbied for damage caps in Pennsylvania in the years after the Civil War (1868), the people of Pennsylvania rejected damage caps by enacting Article III, Section 18 (formerly Section 21) of the Pennsylvania Constitution in 1874.  

            Former Pennsylvania Secretary of State Black, a delegate to the Convention To Amend the Constitution of Pennsylvania in 1873 argued to the Convention:  

“You cannot say that a man who has suffered an injury at the hands of another shall not recover full compensation, without committing an outrage upon the elementary principles of justice.”   

II  Debates of the Convention to Amend the Constitution of Pennsylvania, p. 740 (1873).  

            In his “I have a dream" speech, Dr. Martin Luther King, Jr. spoke at the Lincoln Memorial on August 28, 1963, saying:  

“When the architects of our republic wrote the magnificent words of the Constitution and the Declaration of Independence, they were signing a promissory note to which every American was to fall heir.  This note was a promise that all men would be guaranteed the unalienable rights of life, liberty and the pursuit of happiness.”  

            Today, Reverend King might say: Are we to say to the victims of malpractice, that the bank of justice is bankrupt for them, that our society cannot provide a full cup of justice for the most seriously and catastrophically injured victims of medical malpractice?  Surely, even in wobbly economic times, our government can find ways to provide affordable malpractice coverage to deserving physicians without undermining our system of justice for the most deserving and catastrophically injured victims of medical malpractice.

                                                  Michael J. Foley, Esquire
                                                 Foley, McLane, Foley, McDonald & MacGregor, P.C.
                                                 600 Linden Street, Second Floor
                                                 P.O. Box 1108
                                                 Scranton, PA 18501
                                                 Telephone (570) 342-8194
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                                                 E-mail: mjf@foleylawfirm.com