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Protecting Texas’ Medical Liability Reforms

By Jon Opelt

Executive Director

Texas Alliance For Patient Access

During the next several minutes we’ll be talking about protecting Texas’

medical lawsuit reforms. We will discuss those reforms that have been

affirmed by the courts as well as elements that remain unresolved. I will

show you proof that the Texas reforms are working and lastly I’ll discuss the

challenges that remain ahead.

What is a medical liability case worth? It’s a simple question but in Texas,

prior to September 2003, it was not an easy question to answer.

Parties argued over the value of past medical bills.

Non-economic damages were constantly in dispute. Settlement

discussions were often influenced by where the case was filed and

who was representing the plaintiff.

Plaintiff lawyers regularly sent demand letters seeking a doctor’s

policy limits.

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The demand letter might conclude with a statement to this effect: You

will put a check on my desk for the policy limits of the insured in no

less than 10 days. If you fail to do so, I will take you to court and win

a verdict larger than the policy limits for which you will pay.

Even if the case was marginal, you had to respect the plaintiff’s

bargaining position.

And so, the insurance company paid—and oh did they pay.

In 2003 Texas lawmakers passed comprehensive medical liability reforms in

an attempt to lift the state out of an acknowledged access to care crisis. (2)

Chief among those reforms was a $750,000 stacked cap for non-economic

damages. The cap is not indexed for inflation. There are no exceptions.

The total capped amount varies depending upon the number and variety of

defendants in a suit. Doctors can be held responsible for no more than

$250,000 in non-economic damages. The same is true of hospitals and

nursing homes. If an unrelated health care institution is involved, they too

can be held responsible for an additional $250,000 in non-economic

damages. The combined non-economic award against all parties in a health

care claim may not exceed $750,000.

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Other elements of the Texas medical reform bill include: (3)

A $1.9 million wrongful death cap. Punitive damages are included

within the cap.

The plaintiff may only collect actual medical bills incurred. Prior to

2003, plaintiffs routinely sought recovery of medical charges they did

not pay, were not paid on their behalf and they didn’t owe. These

phantom damages typically involved the pursuit of full medical

charges billed by the healthcare provider rather than the reduced

amount paid by the health insurer.

Sweeping expert witness reforms were adopted.

The plaintiff is now required to produce an expert witness report

within 120 days and the witness can be struck if it is determined he or

she lacks the requisite knowledge, experience or qualifications to

serve as an expert. This and other procedural changes have

substantially reduced lawsuit costs and filings.

Other elements of the Texas reform package include: (4)

A demonstration of “willful and wanton” conduct in order to prove a

negligence case involving emergency care.

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The courts have defined willful and wanton as gross negligence.

The heightened ER standard provides significant protection for a physician

who had no prior contact with or health history from the patient

Texas law now requires periodic payment for future medical costs and

gives the judge the option of allowing periodic payment for other

future damages.

Doctors are now granted a 10-year statute of repose. A plaintiff must

file suit within 10 years of the incident otherwise the case is time

barred. This effectively cuts in half the tail of an obstetrician and

those specializing in newborns and premature infants.

Lastly, (5) we capped the excess policy limits for physician liability

carriers. The language simply states, “ The liability of any insurer may

not exceed the liability of the insured.

In addition to passing the reform bill, (6) we took the extraordinary step of

passing a constitutional amendment.

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The purpose: To protect the cap from court challenges and to expedite the

anticipated benefits for patients and healthcare providers.

Enacting a damage cap, we argued, would improve access to care. It would

stem the loss of doctors who were leaving or limiting their practice due to

soaring liability costs. And, it would stabilize the insurance costs paid by

doctors, hospitals and nursing homes thus allowing them to remain in

practice to treat sick and injured patients.

The ballot initiative was a risky proposition. (7) We knew the sooner the

cap was deemed constitutional; the sooner rate relief became viable. But if

we lost the ballot initiative then lawmakers could say they misread the will

of voters and go back into session and undue the reforms they had just

passed.

(8) Supporters and opponents spent more than $17 million in the battle over

lawsuit limits, making it the most expensive campaign ever on a state

constitutional question. Despite being outspent by the trial lawyers by $1.4

million, we prevailed; winning by a scant 33,000 votes.

(9) During the past 10 years we have kept our entire reform package intact.

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We have filed 27 friend of the court briefs in an attempt to preserve

legislative intent and we spent four years in court and $1.1 million in legal

fees in successfully defending our non-economic cap in federal court.

Additionally, we spent $100,000 on a comprehensive law review article. It is

a project that continues to pay dividends. (10) The law review weaves

together legislative testimony and debate, commentary during floor votes

and research submitted for the record to capture what legislators were

considering and why they made the decisions they did.

The law review article has been cited in 5 Texas Supreme Court decisions,

16 intermediate court opinions and 53 appellate briefs.

In 2007, (11) our organization successfully lobbied for an emergency

appropriation and increased biennial funding for the Texas Medical Board to

hire licensing personnel. This allowed the medical board to clear a lengthy

backlog in physician applicants and paved the way for a record number of

new licensees.

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Applicants were waiting as much as nine months to get their Texas medical

license approved. We feared if the backlog wasn’t cleared the applicants

would lose interest in Texas and choose to practice elsewhere. Then, the trial

lawyers would argue that the reforms had not produced the influx of new

physicians that tort reformers had promised. And therefore, the reforms were

a failure.

The Texas reforms are not a failure. They are a rousing success.

(12) More than two-thirds of the state’s 22 trauma service areas experienced

a per population loss in direct patient care physicians during the liability

crisis period. Since then, (13) 80% of the state’s trauma service areas have

experienced a per population gain.

(14) During the crisis years, the number of new applicants and new licensees

stagnated or declined. Since then, (15) the number of new physicians

applying for a Texas license is at an all-time high and the number of licenses

granted continues at near record levels—growing even faster than our fast

growing population.

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Since the passage of reforms (16) in 2003, Texas has added 8,810 more in-

state active physicians than can be accounted for by population growth

alone. The bottom line of this chart holds the 2003 physicians per capita

number constant adjusting for population growth. The top line is the actual

number of in-state active physicians.

Population growth may well account for 42 percent of the state’s new

physicians. The other 58 percent above the trend were produced by some

other factor. Many of the state’s newly minted doctors have cited the state’s

more hospitable legal climate as a significant factor in their choosing to

practice in Texas.

(17) During the post-crisis years, the numbers of high-risk specialists in

Texas have grown more than twice as fast as the state’s population.

(18) Rural Texas was losing physicians per population during the liability

crisis years. (19) Today, those numbers are on the upswing. Since the (20)

passage of reforms, thirty-two rural counties have added an obstetrician. (21)

Twenty-four rural counties have added a cardiologist and (22) seventeen

have added an orthopedic surgeon.

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The rural gains are not simply a bi-product of population growth. (23) For

instance, 50 counties that did not have a single ER doctor at the passage of

reforms now do. Forty of those counties are rural. Fifteen rural counties that

lacked a cardiologist and thirteen counties that lacked an obstetrician now

have one.

(24) The Association of American Medical Colleges collects comparative

data on physician supply in all 50 states. During the past four years, only

California has added more patient care doctors than Texas (and not by

much). Remember, California’s population is 50% greater than that of

Texas. Only Utah bested Texas in percentage growth. (25)

From 2008-2012, the most current years (26) for which comparative data is

available, the Lone Star State ranked 17th in per population physician

growth; a remarkable accomplishment given our explosive population

growth.

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In the run-up to reform, (27) the trial lawyers argued that capping pain-and-

suffering-type awards would have little effect in lowering the insurance

premiums of doctors and hospitals.

Boy, were they wrong. Roughly 30 rate cuts, numerous dividends, and more

than $2 billion in liability savings later, the trial lawyers are absolutely

wrong. Most Texas doctors haven their liability rates cut in half.

Imposition of the cap on pain and suffering has dramatically reduced

liability costs for health care providers, increased critical care services for

patients and been a magnet for attracting a record number of new doctors to

our state.

(28) In 2003 Texas doctors were paying slightly more than their New York

counterparts for liability coverage. Texas adopted much-needed reforms.

New York did not. Today, Texas doctors pay half the rates they were paying

10 years ago. Meanwhile, New York physicians have seen their rates hiked

60 percent.

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Therefore, it should not surprise you that since the passage of reforms in

2003, more than 1,200 New York trained doctors have pulled up stakes and

moved their practice to Texas.

(29) The law is what the courts say it is. Many, if not most, aspects of the

reform package have been affirmed.

For instance:

The periodic payment provision was upheld.

The plaintiff is required to produce an expert witness report within

120 days of filing suit.

The expert report requirement is neither unconstitutional nor vague.

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The willful or wanton standard was upheld for emergency room care.

A medical malpractice suit cannot be artfully pled as simple

negligence. Likewise, ordinary negligence and medical malpractice

cannot be pursued within the same claim.

(31)

The court limited damages and evidence regarding “phantom”

medical expenses.

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Specifically, our state Supreme Court limited the recovery of medical

expenses to only those damages that a health care provider is actually

entitled to collect. And based on the limitation, the court held that only

recoverable medical expenses are admissible at trial.

Because juries often base awards of non-economic damages, such as pain

and suffering, on a multiple of economic damages in the case, this decision

will also temper excessive awards for soft damages.

The ten-year statute of repose was upheld.

The Texas high court ruled that a plaintiff must file a health care claim

within 10 years of the act or omission otherwise the case is time barred. This

so-called “statute or repose” is different than a statute of limitations in that it

addresses deferred claims for potential injuries that may be inherently

undiscoverable.

(32) The law is what the courts say it is.

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The Fort Worth Court of Appeals held that prejudgment interest is

economic in nature and not subject to the $250,000 non-economic

cap.

Two Texas appellate courts have held that the non-economic cap is a

sub-cap of the wrongful death cap. That is, in a death case, both caps

apply.

(33)

A federal court has upheld Texas’ non-economic cap as has the Dallas

Court of Appeals. However, the Texas Supreme Court has not heard a

cap case. Thus, the constitutionality of Texas’ cap in state court

remains an open question.

As previously mentioned, the Texas Supreme Court has upheld the

10-year statute of repose. However, the El Paso Court of Appeals

ruled this provision does not apply to minors if the injury occurred

prior to the minor’s eighth birthday. The court held that the statute is

in violation of the Open Courts provision since it necessitates a parent

or guardian filing suit on behalf of the child.

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This is not a revelation. Parents and guardians customarily file suit on

behalf of a minor. Most of the cases that are filed more than 10 years

from the date of treatment involve minors rather than adults. So, if the

statute of repose is limited to adults, then the primary effect of the law

will have been lost and doctors will need to buy extensive tail

coverage.

We have filed a friend of the court brief in this matter and the Texas

Supreme Court has agreed to hear the case.

(34) True, our non-economic damage cap is constitutionally protected. But

that does not mean it is untouchable. The Legislature could raise the cap or

index it for inflation. Or it could carve out exceptions to the cap for

misconduct or permanent injury or the providing of abortions. I’ll talk about

that cap-busting strategy later.

(35) The greatest threats to Texas tort reforms are the fallout of a ballot

initiative in California and a court decision in Florida.

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As you have heard , California’s long-standing non-economic cap is being

challenged through ballot initiative. The measure contains a provision to

force a cost of living adjustment to the $250,000 cap. If the provision

passes, the cap will be raised to just over $1.1 million, with a mandated cost

of living adjustment going forward.

Quadrupling of the California cap and tripling the amount lawyers can take

in fees would be devastating to the California health care community and

would put great pressure on the Texas Legislature to consider raising our

cap. We are closely monitoring the arguments being raised by both sides and

the how the public and opinion shapers are responding to those arguments.

Also, we’ve made a financial contribution in defense of the California cap

And encourage you to do the same.

(36)

In March, the Florida Supreme Court ruled that the state’s non-economic

damage cap in wrongful death cases was unconstitutional because it failed

the rational basis challenge and violated Florida’s Equal Protection Clause.

In essence, the court concluded that even if a crisis existed when the cap was

passed, a crisis is not a permanent condition and there was no evidence that

a crisis exists today.

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Specifically, the court stated that, “Conditions can change which remove or

negate the justification for a law, transforming what may have once been

reasonable into arbitrary and irrational legislation.”

Look for the trial lawyers to raise a similar argument in Texas claiming the

success of Texas’ cap in reducing premiums and increasing access to care

makes the cap unnecessary.

Of course, abolition of our cap would thrust us back into crisis.

(37)

We fully expect the Texas trial lawyers to try and move a bill that would

lower the standard in an emergency care case to something less than gross

negligence. The trial lawyers have argued that patients can’t find

representation and can’t collect damages under Texas’ heightened

emergency care standard. Clearly, the facts show otherwise.

(38)

In conclusion, a bill will likely be filed that creates an exception to the cap.

The current trial lawyer strategy is to ask social conservatives to move a bill

that denies cap privileges to any physician, hospital or clinic that provides an

abortion. This is simply a Trojan Horse approach to getting a cap busting

bill on the floor of the House or Senate. Once they’ve got the bill on the

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floor they can amend it to create broad exceptions to the cap.

The Texas trial lawyers aren’t conceding nor are they retreating. They are

simply recalibrating how best to move their agenda. This includes attempts

to discredit tort reform’s success in the press, cloaking trial lawyer issues in

the social agenda of the Republican Party, and relentlessly mounting tort

challenges in the court.

We take all of these threats seriously and remain committed to keeping the

Texas turnaround intact.

Thank you for inviting me to speak.

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