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PIAA 2017: Current Trends & Future Concerns

Amidst Healthcare Uncertainty, PIAA 2017 Medical Liability Conference Focused on Current Challenges, Future Concerns

Hosted at the Broadmoor Hotel in Colorado Springs, Colo., with the backdrop of a Republican plan to repeal and replace the Affordable Care Act stalled between the U.S. House and Senate, the 2017 PIAA Medical Liability Conference convened from May 17 – 19 to examine the many challenges currently facing the medical professional liability insurance industry.

“This is a time of significant uncertainty for PIAA, the medical profession and the professional liability community,” acknowledged Richard Anderson, MD, PIAA chair as well as chairman and chief executive of The Doctors Company, during the opening remarks to the conference. “The evolution in healthcare delivery is transforming healthcare financing, organization and regulation, while challenging traditional definitions of good medicine. … The consolidation of healthcare delivery is well into its second decade and will be only marginally affected by national politics. Eighteen-percent of the American economy is in play. This is a non-partisan process that is unlikely to be interrupted. PIAA is working to move the process of ‘repeal and replace’ toward reasonable solutions, if this is possible in Washington today.”

Following are some of the highlights from the educational sessions at this year’s Medical Liability Conference.

Healthcare in the Digital Age
Keynote speaker Robert M. Wachter, MD, professor and chair of the Department of Medicine at the University of California, San Francisco, launched the two-day Medical Liability Conference with a session titled, 21st Century Medicine: IT, New Practice Methods and More.

Wachter started by acknowledging, “the angst of the modern physician is the challenge to “deliver high-quality, safer, satisfying and more affordable care.”

The answer to that challenge is clearly tech-enabled, but the medical industry remains in its infancy stage regarding information technology. Wachter illustrated this point by citing statistics from the Office of the National Coordinator for Health IT that show only 9.4 percent of hospitals employed electronic health record technology in 2008, but that number jumped to 83.8 percent by 2015.

Drawing upon his professional experience and real-life case examples to explore some of the unforeseen consequences in healthcare’s adoption of data information technology, Wachter noted how the clerical burden of electronic health records has pushed physician burnout rates above 50 percent (up 9 percent in the last three years); how the intensive care unit at his hospital has an average of 2,558,760 audible alerts per month, which has created staff alert fatigue; and how digitization has threatened the doctor-nurse collaboration as well as the doctor-patient relationship.

Later that day — and in the wake of the previous week’s massive “Wanna Cry” ransomware attack that paralyzed many hospitals and physician offices in the United Kingdom — a chilling session titled The Data Privacy & Security Landscape: Today’s Threats & Risk Mitigation explored the many ways digital criminals are targeting the healthcare sector.

Panelist Gamelah Palagonia, Willis Towers Watson senior vice president, walked attendees through the increasing complexity and endless array of developing threats such as Ransomware, Distributed Denial of Service (DDoS) attacks and vulnerabilities associated with the “Internet of Things” (IoT) that has propelled the cyber risk landscape into uncharted territory.

“Healthcare is the most vulnerable industry in America,” Palagonia said, noting that the healthcare sector accounted for 22 percent of all hacking incidents by industry. The good news, she said, is that proper employee training can mitigate two-thirds of all cyber risks facing healthcare.

Emerging Trends
In a session titled Storm on the Horizon: Determining the Next Claims Hurricane, moderator Sarah Pacini, JD, chief executive of the Cooperative of American Physicians, led panelists through emerging trends in handling medical professional liability claims.

Panelist Matthew Nielsen, Esq., vice president of claims for OMS National Security Co. RRG, brought attendees’ attention to the relatively growing trend where medical liability plaintiff attorneys invest in litigation cost insurance, which covers expert fees, deposition transcripts, travel, trial exhibits, mediator expenses, copies, etc., in the event that the plaintiff loses at trial. Such coverage is currently available in 16 states. Nielsen opined that this insurance product carries the potential to spike the volume of medical liability claims filed, swell the number of cases that go to trial, increase indemnity and embolden plaintiff attorneys to spend more money on expert witnesses and the overall amount they are willing to spend on a medical malpractice trial.

Joel Hopkins, Esq., partner at Saul Ewing LLP, spent significant time exploring the inherent challenges presented by electronic health records and the discoverable metadata found in the technology’s audit trails. Not only does the available metadata raise issues of privilege and confidentiality, it can push an insurer’s loss adjustment expense into the five figures.

During the session Employment or Private Practice: Factors Influencing this Key Decision, moderator Mary Ursul, Coverys executive vice president, and panelists looked at the data indicating physician employment continues to increase as well as the factors leading to a doctor’s decision to remain in private or employed practice.

Panelists cited data from a 2015 Merritt Hawkins “Survey of Final-Year Medical Residents” that indicates 36 percent of today’s physicians finishing their residency or fellowship are open to a hospital-employed practice — up from just 3 percent in 2003. These young doctors most value free time, educational debt relief and a good income when determining how to practice. Panelists also noted medical liability as a “significant concern” to young physicians has dropped significantly since 2011.

During Leveraging Data to Change the Risk Mitigation Game, Rick Hammer, MD, senior vice president at SE Healthcare Quality Consulting, and James Saxton, Esq., chief executive at Saxton & Stump LLC, discussed how empowering doctors with their own data could serve as one of the foundational elements necessary for success. They noted that — when utilized in a very specific way — data could be a gateway to professional liability risk mitigation. To illustrate this point, the panelists looked at how the implementation of a data-driven obstetric patient safety program at the New York Weill Cornell Medical Center decreased its number of sentinel events from five in 2000 to none in 2008 and 2009; during the same period, the hospital’s obstetric department reduced its average annual compensation payments from $27,591,610 between 2003 and 2006 to $2,550,136 between 2008 and 2009.

The Financial State of MPLI
Diving deep into the financial health of the medical professional liability insurance industry, during the session MPL Insurance Industry Performance: What’s the Latest?, Chad Karls, principal and consulting actuary at Milliman Inc., examined the underlying drivers of the medical professional liability industry’s financial condition.

Karls began his presentation with the unsettling fact that the industry’s overall direct written premium decreased by 24 percent between 2006 and 2016. That number is an even bigger 32 percent when looking solely at the direct written premium from traditional physician liability insurance — as opposed to including hospitals, other facilities and other providers.

The most impressive news Karls shared was the extreme slide in claims frequency, which has fallen around 40 percent since 2001. “This is really big stuff,” he marveled. “It’s huge.” Karls later explained how the industry’s almost 40-percent drop (relative to 2000 – 2002 levels) in physician paid indemnity is “driven totally by the fall in claims frequency.”

While the decline in claims frequency and paid indemnity is a positive, Karls brought attention to “the fly in the ointment” — allocated loss adjustment expenses (ALAE) have ballooned by 6.3 percent between 2005 and 2015. Even more concerning, 38 percent of ALAE costs are spent on claims that are dropped, withdrawn or dismissed, and ALAE severity is outpacing indemnity severity. Obviously, defense costs are getting out of control.

Combined ratios inched above 100 percent for the first time since 2005, denoting an underwriting loss, but Karls noted medical professional liability insurers are buoyed by “incredibly strong balance sheets … the strongest balance sheets we’ve ever had.”

 

President-Elect Trump

Special Report: The Future of the Medical Professional Liability Industry and the PPACA under a Trump Administration

The Future of the Medical Professional Liability, Patient Protection & Affordable Care Act Under a Trump Administration

Having weathered two Supreme Court challenges and more than 60 repeal attempts by a GOP-controlled Congress, it was the 2016 election that ultimately handed the Republican Party the ammunition it needs to neuter the Patient Protection & Affordable Care Act of 2010.

With a President-elect who campaigned on a full repeal and replacement of the Affordable Care Act as well as Republicans in control of both houses of Congress, it’s safe to say that President Obama’s signature health law — if not fully repealed — will undergo significant changes.

Despite the unified Republican government, Democrats in the Senate are likely to filibuster any wholesale attempt at repealing the landmark legislation that brought 22 million Americans healthcare coverage for the first time, leaving Republicans the parliamentary procedure known as reconciliation to hamstring the law often pejoratively referred to as Obamacare. The reconciliation process is restricted to matters that relate to spending, require only a majority vote and would allow Republicans to repeal the individual mandate that all Americans purchase health insurance, take apart the Affordable Care Act’s expansion of Medicaid and rescind the premium tax credits for low- and middle-income individuals purchasing health insurance on the open market.

The Republican Congress moved a reconciliation bill that would have repealed those portions of the Affordable Care Act to President Obama’s desk where it was promptly vetoed in December of last year, and the rhetoric so far suggests they are likely to use that bill — or one very similar — to financially hobble the healthcare law early in the Trump presidency.

The replacement portion of “repeal and replace” will likely take much longer as Republicans try to coalesce around legislation that its members can support and doesn’t result in the politically untenable position of abruptly throwing the newly insured out of healthcare access. Add to that the fact that many of the Affordable Care Act’s regulations have woven themselves into the healthcare delivery system during the last six years, and any quick, complete replacement of the Affordable Care Act is unlikely.

How Will Medical Liability Be Affected?

President-elect Trump has been mute so far on what role medical liability tort reform might play in his vision for the American healthcare delivery system, but Speaker of the House Paul Ryan released a 37-page white paper in June of this year where he broadly outlined his goals for replacing the Affordable Care Act.

Ryan’s white paper makes several calls for federal-level medical liability tort reforms. It argues the United States’ current system for medical malpractice remedy has “imperiled patient access and imposed tremendous costs on our nation. The current system has forced doctors out of practicing in certain specialties; it has caused trauma centers to close; and it has forced pregnant women to drive hours to find an obstetrician. The current system also has imposed a tremendous burden in unnecessary costs on our national healthcare system and federal government. Estimates are that the failure to enact meaningful medical liability reform costs our nation’s healthcare system as much as $300 billion each year.”

In its plea for tort reform, Ryan’s white paper argues “comprehensive medical liability reform that includes caps on noneconomic damages will improve patients’ access to quality care while reducing the overall cost of healthcare in America. Our plan will include liability reform that includes caps on noneconomic damage awards.”

The white paper further promises to “work with the states to pursue a wide variety of options such as loser-pays, proportional liability, the collateral source rule, consideration of the statute of limitation, safe harbor provisions, health courts and independent pre-discovery medical review panels.”

If President-elect Trump were a typical Republican, one could assume he holds views similar to Ryan, but the mercurial populist and serial-filer-of-lawsuits Trump campaigned on sticking up for the “little guy” and never officially disclosed his views on tort reform.

“One of the big questions is where the Trump Administration will be on tort reform,” said Mike Stinson, vice president of governmental relations and public policy for PIAA, the insurance industry trade association that represents entities doing business in the medical professional liability arena. “We’re not 100-percent sure we have a pro-business President-elect who is also going to be pro-tort reform. We usually link those two ideas together, but he could go in directions that would normally seem contradictory.”

Add to that the Freedom Caucus — comprised of conservative, libertarian-leaning Republican members of the House — having thwarted their own party’s Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act, which would have imposed a nationwide cap on damages, from getting out of committee earlier this year on grounds that the federal government has no authority to overwrite state civil liability laws, and nationwide medical liability tort reform under a unified Republican government seems like even less of a slam dunk.

How Will Malpractice Litigation Be Affected?

While political partisans and healthcare pundits debated the constitutionality and/or practical effectiveness of the Affordable Care Act, the medical malpractice insurance industry was closely watching the U.S. court system as medical malpractice defense attorneys argued — both successfully and unsuccessfully — that provisions of the Affordable Care Act should impact a plaintiff’s ability to recover the cost of future medical expenses.

When a negative medical outcome occurs, the lion’s share of economic damages to a plaintiff is most often the costs pertaining to his or her future medical care. Depending on the age of the patient and the severity of the medical injury, the cost of future healthcare needs can easily stretch into the millions of dollars. Traditionally, it has been generally assumed that 100 percent of these medical expenses would be paid for out-of-pocket by the plaintiff. Life care plans have rarely, if ever, taken into consideration the benefits of the plaintiff’s health insurance that would abrogate many of the projected expenses. This is because — prior to the Affordable Care Act — healthcare insurance almost always carried preexisting condition exclusions as well as annual and lifetime expenditure limits.

Savvy medical liability defense attorneys recognized that the Affordable Care Act removed preexisting condition barriers and expenditure limits as well as required all Americans to obtain some basic level of healthcare insurance. If this is the case, they contended, why can’t the defense argue future medical expenses will never be fully paid by the plaintiff out-of-pocket, and as such, the health insurance they are required to carry should be considered as a collateral source of recovery, subrogating portions of the total cost of economic damages?

Rather than paying the total cost of the plaintiff’s life care plan, these defense attorneys argued, the defendant should only be required to pay for the premium costs of obtaining the plaintiff’s healthcare insurance as well as any associated co-pays and deductibles. This argument has had mixed results so far in the American court system.

In court decisions that barred consideration of the Affordable Care Act offset potential, the most common reasoning had been that the Affordable Care Act’s future is too unsettled. Judges opined that with the heated politics surrounding the Affordable Care Act, the legislation could be struck down in one of the many lawsuits challenging its constitutionality or repealed when the balance of power shifts in Washington, D.C. — especially when one political party has been campaigning almost exclusively on doing just that. This was the reasoning in a 2012 case in Alabama, a 2013 case in Illinois and a 2014 case in Pennsylvania, among others.

Conversely, courts in Arizona, California, Hawaii, Illinois, Michigan and Ohio have allowed the Affordable Care Act’s mitigating effect to be admitted into evidence. In the Hawaii case, the defendant was allowed to cross-examine the plaintiff’s life care planner on the setoff effect of the Affordable Care Act on future medical expenses. In the Michigan case, the court found that “insurance provided under the Affordable Care Act is reasonably likely to continue into the future and that its discussion before the jury is not precluded.” In the Ohio case, Jones v. MetroHealth Medical Center, the court reduced a $14.5 million future damage award to $2.9 million by offsetting amounts covered under the Affordable Care Act, but allowing recovery for premiums, out-of-pocket costs and other expenses.

“If the Affordable Care Act is repealed, you’re no longer going to be able to compel people to purchase health insurance and you’re going to lose the future damages argument,” said Paul Greve, JD, RPLU, executive vice president/senior consultant of the Willis Towers Watson Health Care Practice. “Everyone in our industry had been watching the case Jones v. MetroHealth Medical Center in Ohio. The lower courts agreed with our argument and it was on its way to the state Supreme Court where we hoped it would set precedent. If Hillary Clinton had been elected president and Ohio maintained a Republican Supreme Court, which it did, the chances were very high that Jones was going to be upheld at the highest level, and we would then have a case other courts around the country could look to. That’s probably not going to happen now. If the requirement to purchase insurance is repealed, the argument is probably dead.“

By Michael Matray, the Editor of the Medical Liability Monitor. He can be reached at editor@mlmonitor.com