Lessons from Texas Medical Malpractice Insurance Reforms

side note: Texas is being heralded as a model state by tort reform advocates. We do think more time is needed to realize the full impact, because there may be unforeseen problems that arise….say for example, access to care. Enjoy the interview.

Metro Corp Counsel

Editor: John, we congratulate you for being a leader in so many organizations dedicated to relieving corporations from the burden of unmeritorious litigation and its costs. What has been your role in some of these organizations?

Martin: I served as chairman of the Dallas Association of Defense Counsel in the 1980s. I was president of the Texas Association of Defense Counsel (TADC) for one year in 1996-97. I was president of DRI for one year 2007-08, and will become president of Lawyers for Civil Justice in May 2010.

Editor: Describe the Texas medical malpractice litigation reform effort.

Martin: The most recent Texas malpractice legislation was passed in 2003. There have been several periods dating back to the late 1970s when special legislation was passed to benefit healthcare providers. In the late 1970s, a shortened statute of limitations was enacted. This was partially declared unconstitutional by the Texas Supreme Court. There were efforts in the 1980s and ’90s that resulted in the creation of the Texas Medical Disclosure Panel that set standards for informed consent.

The most significant changes took place as part of Texas House Bill 4 in 2003. It put a $250,000 cap on non-economic damages. Its passage reflected a belief in the Texas legislature that there were too many lawsuits against healthcare providers. In the early 2000s, doctors were leaving Texas, resulting in a shortage of healthcare providers. This occurred primarily in parts of our state where medical malpractice insurance had become very expensive as a result of very high jury awards. I never really heard any convincing evidence that we had a problem attracting doctors to Dallas or Houston.

Editor: Has the business community supported litigation reform?

Martin: There are several business groups that have been active in the Texas legislature in the litigation reform area. The Texas Civil Justice League and Texans for Lawsuit Reform have been very active in the Texas Legislature on tort reform generally. They don’t always have the same agenda, but they have been very active. When it comes to medical malpractice legislation reform, the Texas Medical Association and the Texas Hospital Association have been extremely active.

Editor: Have tort reforms attracted business to Texas?

Martin: There are a lot of reasons why Texas is attractive to business. It is a great place to live for one thing – for many reasons including the climate.

Government is business-friendly, both at the state and local levels – more than in most other states. Texas has a very good tax situation for business and no personal income tax. Those reasons have been very important in attracting business to Texas. And, Texas has done a great job in attracting corporate headquarters.

Certainly, some industries were hit hard by litigation and I am sure that some of the reforms that took place in 2003 as part of House Bill 4 increased the state’s attractiveness for these businesses. Other industries don’t seem to worry as much about litigation.

Editor: What was the role of defense counsel and their organizations in the tort reform effort?

Martin: Defense counsel monitor all of these legislative efforts and sometimes the TADC will take a position on a certain bill or parts of certain bills. Other times, because of the diverse constituencies that defense lawyers represent, it seems prudent not to take a position.

I was not involved in the legislative sessions when House Bill 4 was passed, but I know that TADC supported certain parts of it and did not support other parts of it.

Different constituencies in the business community had different perspectives on this legislation. House Bill 4’s medical malpractice provisions placed a $250,000 dollar cap on non-economic damages in suits against doctors and hospitals. This was very advantageous obviously to the doctors, hospitals and their insurers. However, where the doctor or a hospital is a codefendant along with a pharmaceutical company or a medical device manufacturer, the fact the doctors’ and hospitals’ liability is capped can place the manufacturer at a disadvantage. The fact that some provisions of H.B. 4 had the potential to disadvantage some corporations meant that defense counsel and their organizations were divided in their support.

Editor: How significant are the direct costs of tort litigation (defense costs and cost of judgments and settlements)?

Martin: Civil litigation is too expensive. Efforts are being made at the national level as a result of recommendations made in the Final Report of the American College of Trial Lawyers Task Force on Discovery and of the Institute For The Advancement Of The American Legal System (IAALS), which is an organization based in Denver. There is a major initiative going on at the federal rule-making level to consider adopting some of the recommendations to reduce the costs of civil litigation in the federal courts.

Sometimes reform legislation spawns a lot of litigation that results in more costs. Let me give you a good example. Our Texas medical malpractice legislation requires plaintiffs to file an expert report before proceeding with a medical malpractice suit. The law is less than crystal clear because the statute was not particularly well written. Its ambiguity has spawned a tremendous amount of appellate litigation, which has increased the cost of litigation – exactly what the legislation was intended to prevent.

The legislation on expert reports needs to be tightened up so that there isn’t as much litigation about it. It seems that every time I open the advance sheets there are cases dealing with the adequacy of expert reports and, if the law were clarified, that wouldn’t happen as much.

Editor: Has e-discovery imposed a significant burden on doctors, hospitals and their insurers?

Martin: I haven’t seen it as being a huge issue in Texas state court litigation. One reason is that Texas was the first state, and for a long time the only state, to have an electronic discovery rule. It is a very short and simple rule, but it basically puts the burden on the party requesting the electronically stored information. If the electronically stored documents are not reasonably available, then the requesting party has to pay for discovery. It is a very effective cost-shifting device that stops a lot of the abuse. I wish that the federal rules had incorporated this. I testified before the Federal Rules Advisory Committee, as did the president of the Texas Trial Lawyers Association, and both of us advocated the Texas rule as the way to go, but the federal committee decided to go in the other direction and not impose cost shifting.

Editor: Do you believe that doctors should be protected against malpractice suits if they follow standard medical guidelines or governmental standards.

Martin: I think that concept is a good idea. One of the early medical malpractice reforms in Texas was to establish a body called the Texas Medical Disclosure Panel that created a set of informed consent guidelines. If a physician complies with those guidelines and obtains the informed consent of the patient, it’s presumptively a valid consent and creates a pretty heavy burden for the plaintiff to overcome. I think the problem is that doctors don’t practice medicine out of a cookbook. It really is an art in addition to being a science, so this would not be workable in all areas of medical practice. Nevertheless, in informed consent cases, it has worked pretty well in Texas.

It is very difficult to cover the entire waterfront with standards of medical care. For one thing, they change all the time. Where certain standards can be set, it is a great concept that works well in limited areas of medical practice, but I don’t think it’s practical to think it would work for every medical situation that comes up.

Editor: One of the goals of the pending federal healthcare legislation is reducing overall healthcare costs. In your judgment, would the Texas legislation be a good model for incorporation in a federal healthcare reform package?

Martin: My personal belief is that tort law should be handled at the state level, not the federal level. Handling tort law at the federal level is yet another example of the federal government meddling in what should be the states’ business.

If there were to be federal legislation in an area, I think some aspects of the Texas medical malpractice laws are good. I think the informed consent and expert reports parts are good. However, the expert report concept could be written much better than the one we have in Texas so that less litigation is required.

I personally believe that the biggest fix that is needed in our tort system in general, and not just in medical liability cases, is in the area of punitive damages. All too often the threat of punitive damages scares defendants into settling cases that should not be settled or that should not be settled for the amount that is ultimately paid.

Read the rest of the interview here

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