Health Care Market May Be Safer to Operate In

By | April 21, 2008

Tort reform, soft market, drive down claims frequency in health care facility liability market

Health care facility professional liability has faced new challenges due to recent tort reform efforts, the soft market and a changing perception of how hospitals, the public, insurers and attorneys interact.

“I’m a bit skeptical to think the world of medicine has become incredibly so much safer. I do think … there is a better environment for practitioners to practice and hospitals to identify losses earlier,” said Paul McKeon, senior vice president, Transatlantic Reinsurance Co. “I think the patients and the insurers finally made that link between awarding a $30 million verdict today and then going to see the doctor the next day and wondering why they’re making them sign a form about arbitration.”

McKeon was part of a panel in Chicago in March that discussed changes in liability trends for health care facilities hosted by the Professional Liability Underwriters Society. McKeon said that said he didn’t know why frequency of claims was down for health care facilities but “something’s changed in the psyche of jurors or defense attorneys, perhaps, and plaintiff attorneys on this subject.”

Law Firms Diversify, Dissolve

Attorney Donna Modestine of Marshall Dennehey, Warner, Coleman & Groggin said that the tort reform efforts in the soft market have affected defense attorneys and the firms in surprising ways.

“Soft market means declining case loads. Good for insurers, bad for me,” Modestine said. “In states where we practice, we’ve seen about a 35 to 40 percent decrease in claims.”

Modestine said that in the Philadelphia area where she practices law, tort reform efforts have had a dramatic effect on small and large firms.

“When you practiced in Philly before tort reform you could bring in any case and juries there awarded lots of money,” Modestine said. “But with the new venue changes attorneys actually have to bring a case where the negligence took place. You have to have substantial damages and you actually have to go out and retain experts.”

Smaller plaintiff’s firms aren’t willing to spend the money for experts, Modestine said. “For example, I got a fee schedule in the other day for a proposed orthopedic surgeon who charges $1,000 an hour for a review, $1,500 an hour for the report and up to $30,000 for trial testimony.” Modestine added that smaller claims firms aren’t willing to pay the cost to bring cases in the counties and large firms aren’t willing to go to those counties because the defense verdict rates are very high.

The result of this tort reform is there is a real decline in the medical malpractice cases, Modestine said.

Another fallout is that a lot of Philadelphia’s smaller medical malpractice defense firms are actually either dissolving or being incorporated within bigger firms, she said.

“The bigger firms — and I work in a bigger firm — are actually diversifying and not solely focusing on medical malpractice,” Modestine said. “We are now offering our health care clients such as our hospitals, universities, and the large health care systems, a variety of options from more of a regulatory standpoint, the false claims act, Medicare deed claims, challenges against a doctor’s credentials and things like that. So we’re really diversifying.”

Modestine also noted she has seen a lot of the smaller firms that solely practice medical malpractice dissolving.

Hospitals Handle Changes

Panel moderator Pamela K. Haughawout, senior vice president, Hilb Rogal & Hobbs asked the panelists if the economic downturn overall and real estate foreclosures has had any impact on the state of liability for health care facilities.

“I think to an extent the insurance world operates a little differently than the U.S. economy as a whole,” said Transatlantic’s McKeon. “However, there are some elements of our business that are affected by the economy.”

McKeon said that high foreclosure rates in states such as Florida, Ohio, and Michigan could possibly have some effect on the health care professional liability market. Societal factors and the downturn in frequency could be connected, he said.

“I do believe the economy, if it is as bleak as it appears on paper, could certainly be one of the reasons why there are changes in health care liability coverages,” he said.

Panelists also noted that the availability of the Internet has allowed people in rural settings to expect the same kind of care and expertise in small hospitals as in larger, teaching hospitals in urban areas. These expectations aren’t always realized, the group said.

Even with the liability exposures facing health care facilities, most of the panelists agreed that no hospital has ever “gone under” because of an excessively high verdict.

“I haven’t seen too many hospitals being taken over because they’ve had a verdict that went above policy limits,” said Joe Sullivan, senior vice president of Healthcare Group Executive, Zurich. “There are very few cases of hospitals actually turning over the keys to the plaintiff or the state,” Sullivan said, but cautioned that facilities should not be underinsured. “Those $90 million verdicts, they only get upheld to the extent there’s insurance available,” he said.

The 2008 PLUS Medical Professional Liability Symposium was held on March 11-12. Visit

Topics Market Professional Liability Medical Professional Liability

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