MALPRACTICE LITIGATION RISKS TO OPHTHALMOLOGISTS
"Going Bare?"
No insurance could end up costing you more.
BY JOSEPH J. FELTES, J.D.

Of course it also depends on which state you practice in, as this option is not available to all physicians. Eight states require physicians to carry malpractice insurance as a condition of licensure. (States requiring physicians to carry malpractice insurance as a condition of licensure are: Colorado, Connecticut, Kansas, Massachusetts, Missouri, New Jersey, Wisconsin and Pennsylvania.) Five states mandate insurance coverage as a condition to qualify for tort reform protection. (States requiring physicians to carry malpractice insurance as a condition of availing themselves of malpractice reform protection are Indiana, Nebraska, Nevada, New Mexico, and New York). A majority of hospitals (particularly those outside of Florida) condition medical staff membership on the physicians' satisfying requirements for minimum insurance coverage with an acceptable carrier.

It might be tempting for some physicians to put aside counseling about asset protection and place all assets in the hands of a spouse; however, when roughly half of all marriages wind up in divorce, this might not be the solution either. Here are other reasons to hold off on going bare.

Negligence vs. Intentional Torts

Malpractice is synonymous with professional negligence. Negligence deals with situations in which a physician mistakenly deviates from the standard of acceptable medical care, which directly results in injury to a patient-turned-plaintiff. Physicians purchase insurance to cover claims alleging malpractice or professional negligence.

In professional negligence cases, plaintiffs generally recover only compensatory damages, which consist of economic damages (lost wages, recovery of past medical expenses and allowance for future medical expenses when the injury is ongoing) and non-economic damages (traditionally referred to as "pain and suffering"). A hallmark to malpractice tort reform is the imposition of monetary caps, particularly with respect to non-economic damages.

Unlike cases in which the plaintiff claims a physician was negligent in rendering care, claims that allege intentional torts focus on a physician's intent to harm, mislead or otherwise act with willful and reckless disregard to the care and safety of the patient. Examples of intentional torts include assault, battery, intentional infliction of emotional distress and "fraud."

In cases alleging intentional tort, there are no such monetary caps on compensatory damages. In these situations, juries may award punitive damages over and above compensatory damages in order to teach the offending doctor a lesson or to "send a message" to others that this type of behavior will not be tolerated. Punitive damages cannot be discharged in bankruptcy.

Although there is an opportunity to receive a much larger verdict in an intentional tort case, typically, plaintiff attorneys have been reluctant to file such lawsuits because malpractice insurance does not cover intentional torts. Such coverage would be against public policy. Consequently, attorneys do not want to jeopardize the opportunity to recover from the deep pockets of the insurance carrier, which otherwise may have legal grounds for denying coverage.

Malpractice insurance coverage has not only protected physicians against claims for professional negligence, it has also served as a buffer and deterrent against a spate of claims alleging far more serious misdeeds.

If a physician goes bare, the protective barrier insurance offers no longer exists. When a doctor is not covered, a plaintiff attorney is then not concerned about losing a claim to collect from the insurance carrier, and a lawyer may have every incentive to file an intentional tort action.

A lack of informed consent case (negligence claim) instead may be transformed into a fraudulent misrepresentation case, where the plaintiff claims the physician misrepresented his or her experience, success rate, or the risks associated with a particular procedure, which resulted in a less than favorable surgical outcome.

Similarly, attorneys and their experts may be motivated to scrutinize a "bare" physician's medical and billing records in an effort to establish fraudulence. If that can be established, a verdict against the doctor and an invitation for an inflamed jury to award punitive damages may result.

If a physician is found liable for an intentional tort, especially fraud, there can be additional, even more serious consequences that exceed the boundary of the courtroom. A verdict predicated on a finding of civil fraud, for example, likely would trigger an investigation by the state
medical board.

It could even pique the interest of the Office of Inspector General of the Department of Health and Human Services. This agency is charged with protecting the Medicare trust and could launch an investigation that could potentially jeopardize a physician's participation in Medicare and Medicaid.

Penny-Wise, Pound-Foolish

Some physicians believe if they drop their malpractice coverage, they somehow escape being named as defendants in lawsuits. Going bare only means the physician will find himself squirming without coverage in the net the attorneys broadly cast.

This especially may be the case in those jurisdictions where pure joint and several liability still exists, or in those cases where the plaintiff can establish liability which can be satisfied by the doctor's accounts receivable and which may not be discharged in bankruptcy.

"Joint and several liability" is a common law rule, which sometimes is referred to as the "deep pocket" rule. In states where joint and several liability applies, each and every physician defendant in a malpractice case is liable for the entire amount of the plaintiff's damages, regardless of the relative degree of fault or responsibility by all defendants. The plaintiff has the option of collecting a verdict from all defendants, from several, or from one. Modifying the rule of "joint and several liability" is a focal concern in malpractice tort reform.

Physicians who are struggling to keep their heads above water often believe if they practice good medicine, they can avoid being sued and thus save money they otherwise would have spent on malpractice premiums. Unfortunately, practicing good medicine provides no such guarantee. Every patient is a potential plaintiff when a bad surgical outcome or unexpected complication occurs.

Recently, a physician who was contemplating going without coverage contacted me. When I asked him how he was going to reduce his potential liability exposure, he replied that he planned to re-engineer his practice to eliminate the high-risk patients. I asked him to define high-risk patients. He told me — with a straight face — "the sick ones." I suggested that, perhaps, the strategy might have an adverse effect on his revenue stream.

A related misperception is that money saved by not paying premiums can be used to defend claims. Unfortunately, the expense for defending even baseless claims could quickly drain a bare physician's risk management savings.

Finally, if a physician who goes bare wishes to obtain insurance at a later point, the cost of doing so may wash away any of the previous savings. All in all, the risks of going without coverage could have a potentially devastating effect on an ophthalmologist's practice.

Safe Ports in the Storm

Alternative solutions are becoming available to enable doctors to gain coverage. The inspector general's office has issued two advisory opinions over the past 6 months that recognize the legitimacy of hospitals offering malpractice premium assistance to physicians who are struggling to pay exorbitant increases in the cost of obtaining or maintaining professional negligence insurance.

In its latest advisory opinion (No.04-19), posted on Jan. 6, 2005, the inspector general's office allowed an arrangement in which a hospital agreed to subsidize the malpractice insurance expenses for two neurologists who were faced with the prospect of retiring early rather than bearing the burden of purchasing expensive tail coverage.

The significance of the latest advisory opinion is that, for the first time, the inspector general's office ventured beyond a situation that involved an obstetrician being given malpractice premium assistance.

Several years ago, the Department of Health and Human Services created a narrow "safe harbor" for obstetrical malpractice insurance subsidies by hospitals to obstetricians who practice in health practice shortage areas or medically underserved areas. A subsequent advisory opinion from September of last year focused on a proposed subsidy arrangement between a hospital and obstetricians.

Presumably, the inspector general's office will permit malpractice premium assistance for all specialties, including ophthalmology, in areas where a potential physician shortage could occur because of premium expenses. These types of arrangements are temporary — meaning that assistance generally should not last for more than 1 or 2 years, and other conditions are met.

These conditions include: (a) the amount of premium support cannot take into account in any way the volume or value of referrals or business otherwise generated by the physicians for the hospital; (b) the physicians are not required to refer patients or otherwise generate business for the hospital; (c) the physicians may furnish services at other sites; (d) the physicians must maintain a full-time practice in their specialty in the community; (e) the physicians must take emergency calls in their specialty; (f) the physicians must participate in assigned hospital committees; and (g) the physicians must provide care to Medicare beneficiaries, as well as to Medicaid beneficiaries and the indigent.

Hospitals themselves face potentially serious consequences if physicians on staff move out of the service area, re-engineer their practice, retire or go bare. Consequently, hospitals should be motivated to help their physicians ride out the storm.

Tort Reform

Enacted in several states to repair the damage the malpractice maelstrom has wreaked on the ability of physicians to obtain affordable coverage, tort reform is slowly beginning to take hold.

Still, it will take time for insurance carriers, which either had raised premiums to shore up depleted reserves against waves of high verdicts or abandoned certain markets altogether, to feel comfortable after testing the waters in post-tort reform states to allow premium costs to subside.

And even in the best case scenarios, it is highly unlikely that malpractice premiums will return to those artificially low levels enjoyed in the mid-90s, when the desire for increasing market share took precedence over premium dollars in carriers' strategic plans.

Nonetheless, as tort reform begins to take hold, more affordable malpractice insurance is on the horizon. Ophthalmologists should stay the course and not succumb to the temptation to go without coverage, which would leave them to go it alone with potentially dire consequences. 

Joseph J. Feltes is a partner in the law firm of Buckingham, Doolittle & Burroughs, LLP, which has offices in Ohio and Florida. He has 27 years' experience representing physicians and hospitals in health care and litigation matters.