No-malpractice contracts test boundaries of medicine
By MARY JO LAYTON
If you want to see Ridgewood gynecologist Ruth J. Schulze, you’ll have to sign a contract promising never to sue her for malpractice.
The veteran physician and a dozen other gynecologists in New Jersey require the contracts as a condition of treatment.
Schulze sees it as the only way to control the rising malpractice premiums that have put some of her brethren out of business. But patient advocates and legal experts are troubled by the idea of asking patients to sacrifice their legal rights — and they worry that the practice could spread.
By signing the contract, patients forfeit their right to a jury trial and agree to limits on pain and suffering awards and punitive damages. The contract blames patient lawsuits for “ever-escalating” malpractice insurance rates.
Schulze said most of her patients haven’t balked at signing the contract.
“About 80 to 90 percent sign up and don’t have a problem with it,” said Schulze, a former president of the Bergen County Medical Society.
“Some people ask a few questions to understand what it is,” she said. “Other people say: ‘God, I hear what you’re going through; let me sign.’ Some people ask to take it home.”
Patient advocates, however, say these contracts have no place in a doctor-patient relationship.
“They’re asking patients to sign away their rights preemptively before they’ve even delivered medical services,” said Laura MacCleery of Public Citizen Health Research Group, a Washington, D.C., patient-advocacy organization. “This is outrageous.”
Gary Saperstein, a Teaneck lawyer and president of the Association of Trial Lawyers of America-New Jersey, doesn’t think the contracts will hold up in court.
“People are under duress when they’re seeking medical care,” he said. “I think it’s unconscionable that they’re trying to conduct business in this form and fashion.”
Doctors pay less
The president of the company that insures Schulze insists the contracts are legally binding. Eugene A. Rosov said they are modeled after conflict resolution programs used in a variety of businesses.
In fact, California’s largest health insurer, Kaiser Permanente, requires patients to agree to binding arbitration rather than a jury or court trial.
For physicians who have struggled as malpractice premiums skyrocketed in recent years, these new policies are significantly less expensive. OB-GYNs practicing in New Jersey paid $87,081 to $171,199 last year for regular malpractice coverage — more than double the base rates four years ago that ranged from $41,391 to $77,983, according to Medical Liability Monitor, which tracks rates nationally.
Schulze’s new policy costs her half of what she had paid. She refused to disclose the actual cost.
She is one of more than a dozen New Jersey doctors who have joined Obstetricians & Gynecologists Risk Retention Group of America Inc. (OGRRGA).
“This is a choice for physicians and patients,” Schulze said. “It keeps premiums under control.”
Two other physicians in her busy group, Sybil E. Duchin and Gail M. Sobel are also insured by the company — and also require patients to sign a contract. They declined to comment.
Old Bridge gynecologist Robert Schaeger, another OGRRGA member, also declined to talk about the policy.
Schulze insists that switching to OGRRGA isn’t just about saving money. The company requires extensive risk management — independent review of medical charts, for instance — which she said will lead to better medicine.
“We’re going to tell them when their charting is bad, when they’re not properly doing informed consent,” Rosov said. “We’re going to criticize record keeping. It’s designed to make them question themselves all the time and challenge themselves to make them better doctors.”
In North Jersey, Ruth Schulze has been the very public face of what doctors dubbed the “malpractice crisis.” A respected practitioner who has tended to 2,900 births, Schulze has a clean record — she was sued twice and won both cases. Yet her premiums continued to climb.
In 2003, Schulze was an eloquent leader in the campaign to curtail rising liability costs. She urged her colleagues to strike and march on Trenton to demand limits on malpractice awards.
The effort failed.
In 2005, she stopped delivering babies, a move that lowered her insurance costs but left Schulze and some of her patients tearful. She now practices gynecology part-time.
Schulze sees the contract she asks patients to sign as a way to “level the playing field between patient and doctor.” If a patient she has treated for years declines to sign, she said she would consider still providing care.
By signing, patients agree to forgo their right to a jury trial and agree to binding arbitration. Pain-and-suffering awards are capped at $250,000. Punitive damages are limited.
In the event of a claim, the physician and patient each select an arbitrator, then jointly agree on a third. Experts in gynecology and obstetrics decide the case, not a jury. There are no appeals.
Arbitration eliminates the need for lengthy and expensive trials, Rosov said. Defending a physician costs up to $200,000, even when the verdict is in their favor — the case in the vast majority of malpractice trials, he said.
If patients win an award in arbitration, attorneys aren’t taking one-third or more of the money, as they often do in trial awards, Schulze pointed out. In arbitration, claims are resolved much more quickly.
But limiting a patient’s legal rights raises many questions for patient advocates.
Robert Hunter, an insurance expert with Consumer Federation of America, considers arbitration “nowhere near as consumer friendly as a court and jury. It’s very one-sided.”
Lee Goldsmith, an Englewood Cliffs medical malpractice attorney, said an “angry” patient recently provided him with a copy of one of the contracts.
The 61-year-old Paramus woman’s gynecologist had asked her to sign it.
She refused and found another doctor, he said.
“What disturbs me is that the physician seems more concerned with litigation than quality of care,” Goldsmith said.
“Doctors are trying to intimidate patients.”
Others question the very premise of the contracts — that excessive payouts to litigious patients are driving up malpractice premiums. In a recent national study of malpractice payouts, Public Citizen found that payouts declined 15.4 percent between 1991 and 2005. In New Jersey, data show a 21 percent decline in medical malpractice payouts from 2001 to 2003.
“We call it ‘the great medical malpractice hoax,’ ” MacCleery said.
At the Medical Society of New Jersey, the chief executive officer said he’s not sure the contracts will hold up in court. But Michael Kornett said it’s up to patients to decide if they want to sign.
“They do know that by signing the document what the rules of the game are,” he said.
He is, however, worried these policies put physicians at risk. They are what is known as self-insurance pools or risk-retention groups. They are not licensed by New Jersey and not covered by the state guarantee fund, which will pay a claim on a doctor’s behalf if an insurer becomes insolvent.
Without the protection, doctors are on the hook. And patients have no recourse if their physician can’t pay.
“I applaud doctors for trying to stay in business, but they’re taking on too much risk,” Kornett said.
The state Department of Banking and Insurance is also warning physicians these plans limit their rights and protections.
In a letter to OGRRGA acknowledging its registration with the state, the department said the company hasn’t met minimal capital requirements it requires of traditional insurers. The company doesn’t have to — it’s headquartered in Montana, Rosov says, where the company has met its capital requirement of $750,000 — a fraction of the $4.2 million required by New Jersey.
“The laws that apply to risk retention groups are much more limited,” said Marshall McKnight, a banking department spokesman.
Risk-retention groups have grown rapidly across the nation in the last few years — in New Jersey alone, three dozen have registered to insure physicians and health-care providers, state banking officials said. Owned by policyholders rather than investors, they emphasize profits less, Rosov said.
Not all require patients to sign contracts forfeiting their rights to a jury trial.
The Government Accountability Office, the investigative arm of Congress, is concerned about the rise in these plans. In a 2005 report, it warned about “the potential for future solvency risks.”
Schulze, convinced that the new policies will lead to fewer lawsuits and better medicine, is willing to take the chance.
Two years ago, she estimated that between one-quarter and one-third of OB-GYNs in North Jersey had either quit practicing or stopped delivering babies. Lower malpractice rates will keep doctors in business and attract younger physicians who currently find liability costs prohibitive, she said.
“When all is said and done, the analysis will come down to this: It’s fair to all parties concerned and it is where American medicine should go,” Schulze said.