Malpractice rate break
Doctors’ surcharges down 19.1%; hospitals 1.3%
By Michael Schroeder
The Journal Gazette
Health care costs continue to climb, but Indiana doctors are getting a break on payments to a state fund that covers the lionâ€™s share of costs for larger malpractice judgments.
Effective March 1, physiciansâ€™ annual surcharges to the Patientâ€™s Compensation Fund will drop 19.1 percent. Hospitals will see a modest decrease, averaging 1.3 percent. This is the first rate reduction for doctors and hospitals since the fundâ€™s inception in 1975.
The decrease amounts to a savings of $571 to $6,480 per physician, depending on specialty.
But donâ€™t expect discounted rates at your next doctorâ€™s visit. With rising overhead costs and lagging reimbursement from Medicare, Medicaid and some private insurers, doctors and practice managers say this surcharge decrease will have limited effect.
Still, proponents of Indianaâ€™s malpractice system say the relatively low cost of malpractice coverage in the state â€“ including private insurance â€“ means more dollars for patient care.
â€œI think this is great,â€? said Michael L. Jones, practice administrator for Womenâ€™s Health Advantage, which has three locations in Fort Wayne: â€“ near Dupont Hospital, where Jones is based; at Lutheran Hospital; and at Parkview Hospital.
The practice employs 20 doctors, mostly OB/GYN physicians who perform surgery â€“ the medical specialty that consistently pays the highest malpractice insurance rates.
In 2007, OB/GYNs paid $33,969 in annual surcharges to the compensation fund; this year, they will pay $27,489, according to figures provided by the Indiana Department of Insurance, which oversees the fund. That will save Womenâ€™s Health Advantage nearly $130,000.
Part of the savings will return to the compensation fund through a requirement that nurse practitioners be covered under separate insurance rather than a corporate plan, Jones said.
Effective June 1, the change will initially cost the practice about $2,000 more per nurse practitioner, he said. In about three years when the policy has matured, he estimated it will cost $5,000 per nurse practitioner, or $35,000 for the seven nurse practitioners employed by Womenâ€™s Health.
But what really overshadows compensation fund surcharge reductions are reimbursement rates that donâ€™t keep pace with rising costs, doctors and practice managers say. Jones said a shift of 6 percent of the practiceâ€™s patients to coverage by Indianapolis-based insurance giant Anthem reduced payments by $600,000 last year.
Though Anthemâ€™s reimbursement rates are higher than Medicare and Medicaid, he said, the insurer â€œpays physicians very poorlyâ€? compared with other private insurers. Jones didnâ€™t provide specific figures, citing contractual obligations prohibiting him from doing so.
In response, Anthem said in a statement that its reimbursement to health care providers is fair and competitive enabling the company to assemble the largest provider network in the state. â€œAt the same time, we are committed to controlling the rising cost of health care and enhancing the quality of care our members receive,â€? the company said. â€œThatâ€™s what our customers expect of us.â€?
Irrespective of reimbursement rates, savings on surcharge rates make up a fraction of total practice costs, doctors and practice managers said.
Most doctors carry private malpractice coverage for claims up to $250,000. But they also pay into the patient compensation fund to cover claims exceeding that amount, up to $1 million, or $1.25 million total.
The cost of private malpractice insurance through Medical Assurance Co. (ProAssurance) ranged from $5,524 for internal medicine to $30,769 for an OB/GYN in most of Indiana, according to figures from Medical Liability Monitor. The Monitor is an independent newsletter covering medical professional liability insurance and risk management.
Malpractice costs in Indiana are still far more reasonable than those of many other states, Jones said, and that translates to more money for patient care. He managed an OB/GYN practice and a radiology practice in Ohio before coming to Indiana.
Because of prohibitively high malpractice costs, neither practice had registered nurses, Jones said. Womenâ€™s Health Advantage employs 25 registered nurses.
â€œI think having them present raises the level of care.â€?
Nurses triage patients and provide them with background information on disease and pregnancy issues, said Ann Baker, director of nursing. They also broaden the connection between the practice and its patients.
Jones and other proponents of the Indiana medical malpractice system think its cap on damages â€“ at $1.25 million per claim â€“ has much to do with the lower cost of malpractice insurance.
That leaves not only money left over to hire additional staff but also makes the state an attractive place to practice, said Jones, who finds it easier to recruit doctors now than when he was in Ohio. Indianaâ€™s cap on damages rose from $750,000 in 1999. But opponents of the system say it unfairly burdens patients with legitimate claims exceeding the cap.
For those patients, â€œtheir hardship, their loss, their damages arenâ€™t cappedâ€? even though the financial compensation they can receive is, said attorney Bruce Kehoe, vice president of the Indiana Trial Lawyers Association.
Though he took issue with the stateâ€™s cap on damages, he didnâ€™t fault work done by counsel for the Department of Insurance in managing the fund.
A healthy balance in the patient compensation fund â€“ which had more $152 million after payouts for malpractice cases finalized in 2007 â€“ led to the 19.1 percent decrease in compensation fund surcharges for physicians. Recent appeals court rulings against multiple cap damages for the same claim also took away some of the potential for increased damages, said Doug Webber, chief legal counsel for the Department of Insurance.
Hospitals saw a smaller average compensation fund surcharge decrease basically because they were paying in about the right amount to cover damages. But Webber said physicians â€œwere paying for more than their share.â€? A total of 141 malpractice payments amounting to $94.6 million were made for cases finalized in 2007, within the normal range for annual payments.
â€œWe did not do this on the backs of malpractice victims,â€? Webber said.
He hoped passing on the savings to physicians could at least help slow increasing medical costs endured by patients. Though met with open arms, physicians were checked in their response.
The reduction will save Fort Wayne Cardiology an estimated $24,500, managing partner Dr. Raymond Dusman said. But that â€œdwarfs in relationship to all the expenses we have.â€?
Fort Wayne Cardiology has offices at Lutheran Hospital and Carew Medical Park, one block from Parkview Hospital and employs more than 200.
The practiceâ€™s largest overhead cost is employee wages and benefits, which are affected by rising health care costs like any other organization, Dusman said.
In addition, staff raises, merit-based and average 3 percent cost-of-living raises, and retirement benefits also contribute to overhead cost increases. So does the latest medical and diagnostic equipment, such as nuclear cameras used to obtain images of the heart for cardiac stress tests.
All told, the savings from patient fund surcharge reductions account for â€œmuch less than 1 percentâ€? of total practice costs, Dusman said. Still, â€œAnything that can be done to reduce business expenses is certainly welcome.â€?