Soaring Malpractice Premiums & Plummeting Medicare Payments Hitting Oncologists Hard (2002)

FigureMalpractice and crisis—the words go together like ham and eggs and may be just as harmful to the cardiovascular system of a physician. Moreover, the latest malpractice crisis—like its predecessors in the 1970s and 1980s—is a cautionary tale being told in dollars and cents. In Alabama, internists insured by Medical Assurance, Inc. paid $6,093 for $1 million/$3 million coverage in 2000. The premium bill in 2001 was $8,269—a 36% hike. In Philadelphia, the Pennsylvania Medical Society Liability Insurance Company (PMSLIC) increased rates charged to hematologist/oncologists by 30 percent in 2001 and plans another rate increase this year. American Medical Association trustee Donald J. Palmisano, MD, JD, the AMA's point man on medical malpractice, puts it this way: “There is a crisis now in the professional liability market, and this crisis is of greater magnitude [than previous medical malpractice crises] because physicians are under severe price controls. There is no way to adjust for an increase in overhead.” Other Shoe And that is the other shoe that may drop on the oncology community, said J. Leonard Lichtenfeld, MD, of Atlanta, a medical editor at the American Cancer Society's national office, who serves on the AMA's Resource Based Relative Value System (RBRVS) Update Committee (RUC), a quasi-official entity that reviews Medicare fees and makes recommendations for changes. While many physicians are reeling from the 5.4% Medicare pay cut this year, the news is likely to get worse, he said. “The projection is for about a 20% cut over the next three years. But that's only part of the story. The significant part for oncologists is that there will be changes in payment for administering chemotherapy drugs.” This is a big-ticket item to Congressional bean counters, who suggest that Medicare is overpaying by as much as $800 million. Medicare fees for administering chemotherapy agents have “provided oncologists with the needed financial wiggle room to weather storms like malpractice increases,” Dr. Lichtenfeld said. Without that “cushion,” however, the impact of even minimal malpractice premium increases on the financial stability of an oncology practice could be crippling. This two-way squeeze—lower Medicare payments coupled with soaring malpractice costs—makes the current malpractice crisis really difficult for most physicians, explained Patrick Hope, legislative counsel for the American College of Physicians-American Society of Internal Medicine.Figure: Donald J. Palmisano, MD, JDFigure: Joseph S. Bailes, MDIt's no stretch of the imagination to realize out that taking a 20 percent or higher hit in Medicare revenue, while facing malpractice insurance premium increases that range from eight percent for a doctor-owned mutual company in Minnesota to 65 percent for a commercial carrier in Orlando doesn't add up to a secure future, Mr. Hope said. “That's why we are hearing from physicians who are 50 or older who are telling us that they are considering leaving practice all together.” Joining the fight Joseph S. Bailes, MD, Executive Vice President of Clinical Affairs for US Oncology in Houston and a past president of the American Society of Clinical Oncology, said that is a worry for oncologists. He is increasingly hearing about oncologists seriously considering taking early retirement and said he has little doubt that issues like reimbursement and malpractice costs are the main factors behind such decisions. That is one reason ASCO has signed on to an AMA-led coalition that has been knocking on doors in Washington and state offices around the country seeking relief in the current crisis, Dr. Bailes noted. “So far we have not seen a direct impact [of premium increases] on oncologists in practice. But it's out there. In Houston, where I practice, we have definitely been hit with big premium increases, and there is a concern that there will be no way to recoup this additional expense if reimbursement is ratcheted down even more.” Dr. Bailes said that thus far medical oncologists have “been fairly stable” in terms of premiums, but “the surgical oncologists, particularly subspecialties like GYN oncologists, seem to be feeling the pinch.” Katherine Look, MD, Chair of the Government Relations Committee of the Society of Gynecologic Oncologists (SGO), said the malpractice crisis is certainly affecting gynecologic oncologists, although she said that in her own state—Indiana—an effective tort reform law has shielded physicians from the current crisis. Nonetheless, Dr. Look, Professor of Obstetrics and Gynecology at Indiana University in Indianapolis, said that gynecologic oncologists often suffer the consequences of being lumped in with “our larger specialty—obstetrics and gynecology. When this happens it is really unfortunate, because OBGYNs have been hit with the biggest premiums.” Dr. Look said that she is covered by a University malpractice policy that does allow her to cover for her “OB colleagues. My coverage costs about $15,000 a year, but if I was in private practice the premiums could be eight to 10 times that.” Worries in the Trenches SGO has been receiving calls and letters from members who are either feeling the pinch or anticipating future problems, she noted. One of the members who contacted her, Don J. Hall, MD, a gynecologic oncologist in Knoxville, TN, is one of several thousand physicians who found themselves scrambling to find another insurer when St. Paul Companies announced late last year that it was puling out of the medical liability market. “St. Paul covered me for 23 years,” Dr. Hall said. He and his partner, David Martin, MD, each paid about $40,000 for their coverage from St. Paul. “When a company like St. Paul up and quits the malpractice market, that is fairly significant,” Dr. Hall said. It was significant enough to turn him into an activist physician. “I'm Joe Doe, the doctor practicing in the trenches, but I know we have to change something. We have to turn this thing around, because it is killing medicine,” he remarked. He and his partner have signed on with another carrier—initially at a slightly lower premium than the premiums at St. Paul—“but that is just the way it will be at the outset,” he said. “The cost will go up. We know that.” Since he received his notice from St. Paul, Dr. Hall has written to SGO, the American College of Obstetrics and Gynecologists, and the AMA, he said. “I am not a letter-writer, not a protestor, and not crusader, but I want to get the message out that we need to change the legal system in this country to a ‘loser-pays’ system—that is, where the party that loses a lawsuit would be required to pay the legal costs of the other side. This is the type of system used in the UK, and it has worked very well there for decades.” Reforming the System The AMA is a major proponent of tort reform, which would include a requirement aimed at reducing frivolous suits by requiring a pre-trial certification of the claim. Dr. Hall, however, said he thinks of tort reform “as window dressing—it isn't enough.” He claims the only way to solve the current crisis and eliminate future problems is to “make the loser pay.” That, according to the AMA, may be a pill that is too bitter for the American legal system to swallow. Nonetheless, Dr. Palmisano agrees that record-breaking jury awards and an increased volume of suits are both potent forces driving up malpractice premiums. To illustrate that point, he said that currently two thirds of the physicians in the Rio Grande Valley have claims filed against them. Moreover, data from Jury Verdict Research & West Law, a company that tracks jury verdicts and wards in liability cases, indicate an alarming trend: The highest award in 1997 was a $27.6 million verdict handed down in a Queens County, NY, court in June 1997, which was only a fraction of the highest award recorded in 2001—$269 million awarded by a Dallas County jury in January 2001. “There is no doubt that tort reform is the answer,” Dr. Palmisano said. And there are data to back up this claim. As Dr. Look suggests, states that enacted effective tort reform during earlier malpractice crises in the 1970s and 1980s appear to be weathering the current storm with few problems. The favorite success story among tort reform advocates is California. The Medical Injury Compensation Report Act of 1975 (MICRA) caps non-economic damages at $250,000, modifies the collateral source rule, puts an eight-year statute of limitations on birth injuries, limits attorney's fees, and mandates periodic payments. After a decade of court challenges, the US Supreme Court rejected a final challenge in 1985, and since that time the full impact of MICRA has been evident in California. For example, according to an October 2001 survey by Medical Liability Monitor, malpractice premiums for internists practicing in Los Angeles ranged from $7,883 to $12,959 in July 2001. During the same period, internists in Miami and Fort Lauderdale were paying $17,611 to $50,744. Thus is not surprising that the AMA is making tort reform—at both the state and federal levels—a top priority this year. But Dr. Palmisano admitted that the prospects in Washington are not good. “Tort reform was passed by the House three times since 1995,” he said, but each time the bill died in the Senate. Dr. Look and other physicians traveled to Washington in early spring with the goal of finding some Democrats to sign on to a tort reform bill, she said. “But, we weren't successful.” Dr. Palmisano blames the failure on the lobbying success of plaintiff lawyers, who, he said, form a well-financed and unified lobby—unlike physicians, who often fail to unit behind a single cause. But the efforts appear to be gaining momentum in state houses. So far legislatures in Pennsylvania, West Virginia, Mississippi, and Florida have tort reform bills under consideration. In Texas and Nevada the legislatures don't meet again until 2003, so any reforms will take at least another two years. Mammography Litigation Expected to Skyrocket An analysis whose grim findings were presented in April at the annual meeting of the American Roentgen Ray Society forecast that the cost of screening mammography litigation could top $250 million a year in 10 years. “We are looking at a potential medical-legal meltdown,” Richard Tello, MD, MSME, MPH, said. He noted that the aging population of baby boomers will require more mammograms to be performed, thus increasing the chances of litigation. “We were conservative in our calculations [for the study], assuming that only one in 10 women who are litigation candidates will sue; that half of the women who sue will have a lesion on a previous mammogram that was missed; and that half of this subset will actually win their case,” said Dr. Tello, Professor of Radiology, Epidemiology and Biostatistics at Boston University. He added that those estimated costs could go even higher. The study, which was conducted in conjunction with Bethany Richman, MD, and the radiology department's predictive modeling group, assumed that about half of eligible women would have 20 mammograms over their lifetimes. “The analysis found that $70 per woman per mammogram would need to be saved starting now to pay for these future costs,” Dr. Tello said. “The $70 figure is based on conservative estimates. Using less conservative estimates we found that the amount needed could be as high at $200 per woman per mammogram.” Even using the more conservative estimate, this presents a major problem. Some insurance reimbursement for mammograms is just at or near the $70 level, a rate that makes it impossible for radiologists to contribute to a litigation pool. Insurance companies are hardly likely to contribute to such a pool, nor would patients be willing to pay out-of-pocket to support one. To make matters worse, malpractice insurance companies would probably increase their premiums as litigation costs go up. Dr. Tello suggested that a federally sponsored litigation pool, similar to the one that currently exists for vaccine lawsuits, would be the best solution. He urged immediate action to avoid a crisis in which litigation costs force mammography facilities around the country to shut down.