Governor s Select Task Force on Healthcare Professional Liability Insurance

Governor s Select Task Force on Healthcare Professional Liability Insurance

Table of Contents Executive Summary................................................ iii Chapter 1 Introduction........................................... 1 Chapter r 2 Medical Malpractice: The National Perspective............. 666 Chapter 3 Medical Malpractice Insurance........................... 24 Chapter 4 Medical Malpractice: The Florida Perspective.............. 33 Chapter 5 Findings.............................................. 145 Chapter 6 Improving the Quality of Care........................... 149 Chapter 7 Physician Discipline.................................... 173 Chapter 8 Tort Reform........................................... 189 Cap on Non-Economic Damages.......................... 189 Communications with Subsequent Treating Physicians....... 222 Expert Witness Qualifications............................ 235 Limitation on Liability Related to Emergency Services....... 240 Sovereign Immunity.................................... 247 Periodic Payment of Damages............................ 258 Pre-Suit Reform....................................... 263 Joint and Several Liability............................... 271 Set Off of Settlement Proceeds........................... 278 Chapter 9 Alternative Dispute Resolution........................... 285 Mandatory Mediation.................................. 285 Voluntary Binding Arbitration........................... 291 Chapter 10 Insurance Reform...................................... 301 i

NICA................................................ 301 Bad Faith............................................. 309 Alternative Insurance Products.......................... 324 Insurance Code Reform................................. 328 Chapter 11 Conclusion............................................ 335 ii

Executive Summary Is there a doctor in the house? Increasingly, in Florida and around the country, the answer is no not in the house, not in the doctor s office, and not in the hospital. Many physicians are choosing to retire early or to practice in other states because medical malpractice insurance in Florida has become unaffordable and, in some cases, unavailable. James C. McDowell, Is There a Doctor in the House?, 23 The Journal of the James Madison Institute 10 (Winter 2003) Florida is among the states with the highest medical malpractice insurance premiums in the nation. This increase in healthcare liability insurance rates is forcing physicians to practice medicine without professional liability insurance, to leave Florida, to not perform high-risk procedures, or to retire early from the practice of medicine. In April 2002, the American Medical Association issued a report declaring Florida one of the twelve states in the midst of a medical liability insurance crisis. This crisis in the availability and affordability of medical malpractice insurance is causing a critical reduction in the quality of healthcare available in Florida. If no corrective action is taken, this crisis will lead to the continued deterioration of patient access to medical care. During the past three years, numerous healthcare liability insurance carriers in Florida have been liquidated, forced into rehabilitation, or have decided to stop selling medical malpractice insurance in Florida. In the late 1990s, there was an industry high of sixty-six insurance companies active in Florida. Since that time, the number of companies has decreased to only twelve. Those remaining companies are quickly reaching capacity and are unable to expand their risk base to cover the physicians whose policies are being terminated by other companies. The Governor s Select Task Force on Healthcare Professional Liability Insurance was created on August 28, 2002 by Executive Order No. 02-041, to examine Florida s current crisis in the availability and affordability of medical malpractice insurance. The Executive Order also directed the Task Force to make iii

recommendations for protecting Floridians access to high-quality and affordable healthcare. The Task Force had ten meetings. During these meetings, the Task Force received testimony and information in five major areas which impact Floridians access to high-quality and affordable healthcare. The Task Force examined healthcare quality issues and how those issues are impacted by medical malpractice insurance rates. The Task Force further reviewed state procedures for healthcare professional discipline. Likewise, the tort system s impact on the frequency and severity of claims was examined extensively. Moreover, the Task Force examined alternative dispute resolution processes in order to ensure victims of medical malpractice are fairly compensated for injuries in a timely manner. Finally, the Task Force examined factors influencing medical malpractice insurance rates and the regulation of rate setting by the state along with suggestions for improving the rate setting process to reduce the impact of the insurance business cycle. In sum, these areas can be divided into the following five categories: (1) healthcare quality; (2) physician discipline; (3) the need for tort reform; (4) alternative dispute resolution; and (5) insurance premiums and markets. In addition to receiving information on the medical malpractice crisis the Task Force requested interested persons and entities to provide proposed solutions to the problem. The Task Force, as a result of this request, received over 100 proposals for change. In reviewing the proposals the Task Force used the following four criteria: Would the proposed change improve access to specialists, critical care providers, medical facilities for emergency care, obstetrical services, neurological services, or surgery? Would the proposed change facilitate the availability of malpractice insurance or other means for injured parties to recover reasonable compensation for injuries caused by the negligent acts of healthcare providers? Would the proposed change facilitate identifying and addressing healthcare provider problems as soon as possible to reduce or eliminate the risk to patients? iv

Would the proposed change assist in reducing or holding down the cost of medical care to citizens and their health insurance providers to facilitate access to healthcare? The reports and information received by the Task Force as well as transcripts of the meetings are compiled in the thirteen volumes that accompany the main report. The Governor, the President of the Senate, the Speaker of the House of Representatives, and the Legislative Library will be presented with the main report and the thirteen volumes. Thus, it must be emphasized that in order to properly understand the context of these findings and recommendations, we encourage the reader to read the entire text of the main report. The contents of this report were approved by the Task Force in a 4-0 vote on January 30, 2003. The Task Force proposes a comprehensive solution, in the following five areas of reforms: (1) healthcare quality (2) physician discipline; (3) tort compensation; (4) alternative dispute resolution; and (5) insurance code reform. Based on the testimony and information received and legal research of the Task Force s staff, the Task Force makes the following findings and recommendations to address the medical malpractice crisis in Florida. Findings Affordability: The cost of medical malpractice insurance has increased dramatically during the last few years. In 2002 the average medical malpractice premium per doctor in Florida was 55 percent higher than the national average. Florida s average insurance premiums have increased 64 percent since 1996 while nationally the average insurance premiums have increased 26 percent. Availability: The number of insurance companies writing medical malpractice policies in Florida went from a high of sixty-six companies in 1999 to twelve currently, and of the twelve currently writing premiums only four are generally writing medical malpractice insurance. The remaining eight are writing only selected policies. Impact of the Underwriting Cycle: The business cycle for medical malpractice insurance companies has had a significant impact on the increases in medical malpractice insurance levels in Florida but v

claims paid has been the main cause of such increases. The late- 1990s produced some of the largest investment gains for the market since the mid-1980s, but this increased income was not sufficient to offset the large increases in claims paid for the industry. As a result, insurance companies writing medical malpractice insurance suffered a loss ratio of 184 percent. Frequency of Claims Payments: Florida s claims frequency which was an average of 4.82 claims per 100,000 population in 1991 has increased to an average of 7.56 claims per 100,000 in 2000. The national average has been between 5.11 and 5.77 claims from 1991 to 2000 with an average of 5.54 claims per 100,000 population in 2000. Thus, in 2000, Florida s frequency of claims was 36 percent higher than the national average. Severity of o f Claims Payments: The severity of claims in Florida and nationally showed a significant increase between 1998 and 2000. Further, the average per premium loss per Florida doctor has grown from 15 percent above the national average in 1991 to 50 percent above that average in 2000. Variations Among Medical Specialties: Specialists and other physicians performing high-risk procedures are much more likely to be sued. These specialists, particularly obstetricians and neurosurgeons, also pay much higher medical malpractice insurance rates, regardless of their litigation history. Changes in the Law: The very existence of the continuing medical malpractice crisis is proof that the previous reforms have failed to provide a solution to the problem. Florida s use of many of the reforms considered or adopted by other states further demonstrates that the provisions related to medical malpractice adopted in Florida have not been sufficient in addressing the problem. The limitation on damages, the only provision proven to be effective in reducing the severity of judgments, was stricken by the Florida Supreme Court. Access to Healthcare Services: The concern over litigation and the cost and lack of medical malpractice insurance have caused doctors to discontinue high-risk procedures, turn away high-risk patients, close practices, and move out of the state. In some communities, doctors have ceased or discontinued delivering babies and discontinued hospital care. Compensation of Victims: As the cost of medical malpractice insurance has increased some healthcare providers carry only vi

minimum insurance of $250,000 or are going bare. This leaves victims with minimal or no compensation should they be injured. Professional Regulation of Medical Care: The current disciplinary process requires the Division of Administrative Hearings judges to make the determination when conduct fails to meet minimum standards of care and is formally charged against a healthcare provider or facility. Frequently those rulings frustrate and thwart the ability of the healthcare provider regulatory boards to appropriately discipline healthcare providers. Issues such as defining the standard of care in a given set of facts and whether the practitioner breached that standard are responsibilities best left to the professional boards. Additionally, hospitals find it very difficult to discipline or remove healthcare professionals for actions below the accepted standard of care. Recommendations Healthcare Quality Recommendation 1. The Legislature should establish a Patient Safety Authority, or an entity similar in concept, as both a shortterm and long-term strategy to improve patient safety. There are two options that should be considered. The first option, which is recommended by the Institute of Medicine (IOM), is to have two systems, one for the mandatory reporting of adverse events and another system for the voluntary reporting of near misses. The second option is similar to the Patient Safety Authority established and existing in Pennsylvania, which analyzes all adverse events and near misses in that state. Experts employed by both systems would analyze data received and make recommendations about how to reduce these adverse events and near misses. Information would not be subject to discovery in lawsuits. Recommendation 2. The Legislature should timely develop or adopt statewide electronic medical records and protocols for a physician medication ordering system. The system should be developed collaboratively with hospitals, physicians, and other healthcare providers. The physician medication ordering system should be implemented first. The system could be implemented initially with a web-based data exchange platform which establishes interconnectivity among providers. Another possibility is to begin with business functions, which provide an early return on investment, and then include clinical functions. vii

Recommendation 3. The Legislature should consider creating a statutory public-private non-profit entity that would administer the Patient Safety Authority, statewide electronic medical records, and build an information technology infrastructure to support the delivery of healthcare that would include a statewide physician medication ordering system. Funding could possibly come from a $1 per year surcharge on all health professional licenses; all hospital, ambulatory care surgery center, nursing home, home health agency, and birth center discharges; and all individuals in managed care plans and insurance plans licensed under chapters 627 and 640, Florida Statutes. Healthcare providers, insurers, businesses, and government would be represented on the governing board of directors. Options for implementation include: Affiliating with a university for the analysis of voluntarily reported adverse events and near misses. Contracting with an Information Technology firm(s) for a statewide physician medication ordering system, webbased platform for health provider interconnectivity, and electronic patient record. Developing a business plan and future financing strategy to supplement the $1 annual surcharge, which will likely be necessary to achieve full implementation. Including in the business plan a strategy to begin with computerizing business functions, for providers to quickly achieve cost-savings due to automation efficiencies, and then include clinical functions. Recommendation 4. The Legislature should be encouraged to authorize the two no fault medical malpractice demonstration projects recommended in the November 2002 report, Fostering Rapid Advances in Healthcare, by the IOM at a university healthcare system or statutory teaching hospital. This project would be governed by criteria compatible with that proposed by the IOM. Recommendation 5. If Recommendation 4 is implemented, contingency fees for attorneys should be eliminated from the claims bill process in the no-fault demonstration project. Recommendation 6. The Legislature should require each hospital and ambulatory surgery center to have a patient safety plan, a patient safety committee, and a patient safety officer. Members of the public should have representation on patient safety committees. viii

Recommendation 7. The Legislature should require healthcare providers to notify patients who experience serious medical injuries to be notified of the injury in person. Recommendation 8. The Legislature should examine the feasibility of using Medicaid funding to create a pilot project for an electronic medical record and a physician medication ordering system for Medicaid patients. Recommendation 9. The Legislature should examine the feasibility of developing a process in the Insurance Code for hospitals and other healthcare facilities to receive malpractice insurance discounts if they implement certified patient safety programs. Recommendation 10. The Legislature should establish a hightechnology simulation center for use by all health providers. Florida should encourage use of this center by practitioners in other states to help offset the costs for the center. Recommendation 11. The Legislature should require all medical schools, nursing schools, and allied health schools to include in their curricula courses on patient safety and patient safety improvement. Recommendation 12. The Legislature should require the Agency for Health Care Administration (AHCA) to conduct a study to determine if it is feasible to provide information to the public to help them make better healthcare decisions regarding the choice of a hospital. The information would not be presented in a report card format. AHCA should be provided with sufficient resources to conduct the study in cooperation with hospitals, physicians, and other healthcare providers and provide the Governor and Legislature with a report. Physician Discipline Recommendation 13. The Legislature should allow the healthcare provider regulatory boards to appoint administrative law judges with expertise in the profession to hear standard of care cases. Recommendation 14. The Legislature should statutorily provide that standard of care decisions are, as a matter of law, infused with ix

overriding policy considerations best left to the healthcare provider regulatory boards. Recommendation 15. The Legislature should authorize the healthcare provider regulatory boards to reassess and resolve conflicting evidence in standard of care cases based on the record in the case. Recommendation 16. The Legislature should require physician profiles to provide professional qualifications information regarding physicians to consumers. Recommendation 17. The Legislature should provide for an audit of the Department of Health s (DOH) disciplinary process and closed claims files. Recommendation 18. The Florida Legislature should strengthen Florida s peer review requirements so they can lead to earlier dismissal of meritless claims brought against hospitals by aggrieved physicians and protect physicians and hospitals from costly lawsuits and liability. Recommendation 19. The Legislature should expand the DOH s subpoena authority to include the retrieval of patient records when the patient refuses to cooperate, is unavailable, or fails to execute a patient release. Records obtained under these circumstances would be confidential. Recommendation 20. The Legislature should require that all first offense citations be non-disciplinary and non-reportable to the national data banks. Recommendation 21. The Legislature should expand the timeframe for forwarding cases to the Division of Administrative Hearings from fifteen days to forty-five days when a demand for a formal hearing, pursuant to section 120.57(1), Florida Statutes, is received. Recommendation 22. The Legislature should require all healthcare provider regulatory boards to designate those violations that may be handled in a one-time, non-reportable, and confidential mediation proceeding. Appropriate standard of care cases should be included. x

Recommendation 23. The Legislature should modify upward the dollar amount threshold for closed claims cases to be reported and investigated by the Department. Recommendation 24. The Legislature should grant exclusive authority to the healthcare provider regulatory boards to determine the amount of administrative costs to be recovered when final action occurs and a respondent is disciplined. Recommendation 25. The Legislature should change the burden of proof in disciplinary actions from the clear and convincing evidence standard, to the greater weight of the evidence standard, which is the same burden of proof for a medical malpractice case. Recommendation 26. The Legislature should expand the healthcare provider regulatory board s rulemaking authority in the areas of Internet prescribing and sexual misconduct cases so as to better address critical areas of discipline. Tort Reform Cap on Non-Economic Damages Recommendation 27. The Legislature should, in medical malpractice cases, cap non-economic damages at $250,000 per incident. The Task Force believes that a cap on non-economic damages will bring relief to this current crisis. Without the inclusion of a cap on potential awards of non-economic damages in a legislative package, no legislative reform plan can be successful in achieving the goal of controlling increases in healthcare costs, and thereby promoting improved access to healthcare. Although the Task Force was offered other solutions, there is no other alternative remedy that will immediately alleviate Florida s crisis of availability and affordability of healthcare. The evidence before the Task Force indicates that a cap of $250,000 per incident will lead to significantly lower malpractice premiums. The Legislature should commission and fund a study of the impact of the $250,000 cap on non-economic damages. An interim report should be submitted to the legislature five years after date of enactment. xi

Communications with Subsequent Treating Physicians Recommendation 28. The Legislature should amend the statutes to allow ex parte communication between defense counsel for a defendant in a medical malpractice lawsuit and the plaintiff s treating physicians. Recommendation 29. As an alternative, the Legislature may consider requiring the plaintiff to execute a medical information release when filing a lawsuit that would allow for the defendant to conduct ex parte interviews with the plaintiff s treating physicians only in areas potentially relevant to the plaintiff s alleged injury or illness. Expert Witness Qualifications Recommendation 30. The Legislature should examine ways to improve the use of in-kind experts at trial. Limitation on Liability Related to Emergency Services Recommendation 31. The Legislature should retain the definition of reckless disregard, as that term is currently defined by statute, as it is sufficient. Recommendation 32. The Legislature should repeal references to patient stabilization in section 768.13(2)(b)2a, Florida Statutes. Sovereign Immunity Recommendation 33. The Legislature should amend section 768.28, Florida Statutes, to define healthcare professionals providing services in emergency rooms or trauma centers as agents of the state for purposes of sovereign immunity. Periodic Payment of Damages Recommendation 34. The Legislature should amend the statutes to allow the periodic payment of future non-economic damages. xii

Recommendation mendation 35. The Legislature should amend the statutes to terminate the payment of future economic and non-economic damages upon the death of the plaintiff. Pre-Suit Reform Recommendation 36. The Legislature should require experts reviewing pre-suit claims and defenses and rendering opinions be qualified, in that they possess similar if not identical credentials and expertise in the field of healthcare services of the defendant s particular specialty. Recommendation 37. The Legislature should require the expert who reviews pre-suit claims and defenses and renders opinions be subject to discovery and his or her testimony be admissible in any future proceeding. Joint and Several Liability Recommendation 38. Joint liability has a negative impact on a medical malpractice insurer's ability to forecast future losses and contributes to the insurer's paid losses. Accordingly, the Legislature should amend section 768.81, Florida Statutes, to provide that a defendant's liability for both economic and noneconomic damages be several only. Set Off of Settlement Proceeds Recommendation 39. The Legislature should amend the set off statutes, sections 46.015 and 768.041, Florida Statutes, to clarify that set off amounts should be applied to jury damage awards, including both economic and non-economic damages, even when fault is several only. Alternative Dispute Resolution Mandatory Mediation Recommendation 40. The Legislature should encourage pre-suit mediation by providing for confidentiality of any pre-suit xiii

mediation in a medical malpractice case in the same manner as is provided for mediation occurring after suit is filed. Recommendation 41. The Legislature should amend the mandatory mediation provisions of section 766.108, Florida Statutes, to require mediation within 120 days of filing suit and to provide sanctions if a good faith offer of settlement is refused. Recommendation 42. The Legislature should not make admissible at trial the fact that mandatory mediation occurred or that offers of settlement were made, but should make this fact admissible for purposes of enforcing the attorney fees and costs. The mediator should maintain a report of the issues and facts presented at the mediation and the final settlement offers of each party at the mandatory mediation. Recommendation 43. The Legislature should enact specific criteria similar to those in the offer of judgment statute to be considered by the court in making the determination as to how close in amount the judgment must be to the offer and the criteria to be used in evaluating the amount of the attorney fees and costs to be awarded in addition to the standards generally considered in awarding fees and costs. Recommendation 44. The Legislature should require the court to consider, in addition to all other criteria, whether the issues and facts presented at mediation were significantly the same issues presented at trial. Voluntary Binding Arbitration Recommendation 45. The Legislature should amend the definitions of economic damages and non-economic damages as provided in sections 766.202 and 766.207, Florida Statutes, to provide that such damages are recoverable in voluntary binding arbitration only if the claimant has the right to recover such damages under general law, including the Wrongful Death Act. Recommendation 46. The Legislature should provide for an aggregate cap on non-economic damages in arbitrated cases of multiple defendants. xiv

Insurance Reform NICA Recommendation 47. The Legislature should maintain the NICA program because of its success and should further consider and study the issues for broadening the NICA program, as discussed in this report. Bad Faith Recommendation 48. The Legislature should restore the insured as the owner of the bad faith cause of action. The common law cause of action, as outlined by the Supreme Court in 1980 should be legislatively cured so that the Florida Legislature preempts that rule and only insureds, not third party plaintiffs, can bring a bad faith cause of action against its insurer. In addition, section 624.155, Florida Statutes, should be amended to also limit the proper party in a bad faith cause of action to the insured only. Recommendation 49. The Legislature should articulate standards of what constitutes bad faith on the part of an insurer. Recommendation 50. The Legislature should require that the maximum liability for bad faith be calculated as the amount of damages that were actually caused by the acts of bad faith, limited by the amount of the reachable assets of the insured. Recommendation 51. The Legislature should require that, if an insurer is found to be in bad faith or settles a case for bad faith, the Department of Insurance be notified of such finding. Recommendation 52. The Department of Insurance should conduct an investigation into the specific allegations of the insurer and into the insurer s general practices and should take necessary action against the insurer to punish and prevent future bad faith practices. Alternative Insurance Products Recommendation 53. The Legislature should repeal the prohibition against creating Medical Malpractice Risk Management Trust Funds in section 627.357, Florida Statutes. xv

Recommendation 54. The Legislature should encourage the creation of self-insured options for healthcare providers. Recommendation 55. The Legislature should expand the rulemaking authority of the Department of Insurance for selfinsurance programs to ensure they remain solvent and provide the insurance coverage purchased by participants. Conclusion Insurance Company Regulation Recommendation 56. The Legislature should authorize the Department of Insurance to require insurers to provide additional information on closed claims and to penalize the insurers for failure to provide the required data. Recommendation 57. The Department of Health should forward the information collected pursuant to section 456.049, Florida Statutes, to the Department of Insurance. Recommendation 58. The Legislature should require every entity reporting to the National Practitioner Data Bank to report the same information to the Department of Insurance for inclusion in the closed claim data files. Recommendation 59. The Legislature should require the Department of Insurance to compile and review the collected data and fine those entities failing to fully comply with the requirements of law. Recommendation 60. The Legislature should include in section 627.062, Florida Statutes, related to the setting of rates for most insurers, the provisions of section 627.0651(12), Florida Statutes, prohibiting the inclusion of payments made by insurers for bad faith or punitive damages claims. Although all of the above recommendations are important, the most important one is a cap on non-economic damages in the amount of $250,000. In an Issue Brief on federal medical malpractice tort reform, the American Academy of Actuaries recommend that Congress look to California s successful experience with a cap on non-economic damages. The Academy concluded: xvi

For reform to be effective in reducing costs, the cap on non-economic awards should be established on a per-medical-injury basis at a level low enough to have an impact (e.g., $250,000). In light of this recommendation of the Academy of Actuaries and California s successful experience at the $250,000 level, the Task Force finds that a cap at the level of $250,000 on a per incident basis will be effective. The Task Force finds that actual and potential jury awards of noneconomic damages (such as pain and suffering) are a key factor (perhaps the most important factor) behind the unavailability and un-affordability of medical malpractice insurance in Florida. The Task Force further finds that malpractice insurance premiums are a large component of the cost and availability of healthcare in Florida. Based upon the evidence before it, including evidence of Florida s unsuccessful previous efforts to eliminate the ongoing medical malpractice crises, and the successful experiences of other states that have imposed caps on potential jury awards of non-economic damages, the Task Force finds that imposing caps on noneconomic damages in medical malpractice cases will significantly reduce the exposure of Florida healthcare providers to risk of loss from jury awards of inherently subjective damages. Such a reduction of risk will make malpractice losses much more predictable, and thereby lead to stability in malpractice insurance premium rates. A reduction in potential liability and resulting stability will encourage more malpractice insurers to participate in the Florida market. This, along with the reduced exposure to risk, will permit insurers to charge lower premiums, on a sound financial basis. Lower premiums will encourage providers (particularly those in high-risk specialties) to offer healthcare services to Floridians, and persons visiting this state, and to do so at lower prices. The Task Force respectfully finds and concludes that the proposed recommendations will provide a benefit to the citizens of the State of Florida. The Task Force is of the opinion that, while these comprehensive reforms are important, the centerpiece and the recommendation that will have the greatest long-term impact on healthcare provider liability insurance rates, and thus eliminate the crisis of availability and affordability of healthcare in Florida, is a $250,000 cap on non-economic damages. The Legislature should xvii

commission and fund a study of the impact of the $250,000 cap on non-economic damages. An interim report should be submitted to the Legislature five years after date of enactment. xviii

Chapter 1 INTRODUCTION The quality of medical care today is threatened by the pervasive, unwelcome, crushing embrace of the law. Every participant in the health care system is beset by an onslaught of new laws and regulations. Worst of all, because it is the most personal, physicians are forced to live with the specter of malpractice litigation constantly in their mind s eye. This legal assault has occurred so swiftly and has been implemented so harshly that it has begun to erase some of the very attractions long associated with pursuing a medical career autonomy, independence, approbation, inquiry. In sum, it is this peculiar combination of financial cost and psychological stress that has generated the passionate resentment that so many doctors feel toward the malpractice regime. Paul C. Weiler, Medical Malpractice on Trial 7 (1991) (quoting Leon Rosenberg, Dean of the Yale Medical School) The Governor s Select Task Force On Healthcare Professional Liability Insurance Physicians and hospitals in Florida currently are experiencing a crisis in the availability and affordability of healthcare liability insurance. This crisis has adversely affected patient access to medical care in Florida. Florida is among the states with the highest medical malpractice insurance premiums in the nation. This increase in healthcare liability insurance rates is forcing physicians to practice medicine without professional liability insurance, to leave Florida, to not perform high-risk procedures, or to retire early from the practice of medicine. During the past three years, numerous healthcare liability insurance carriers in Florida have been liquidated, forced into rehabilitation, or have decided to stop selling medical malpractice insurance in Florida. Those companies that remain are quickly reaching capacity and are unable to expand their risk base to cover the physicians whose policies are being terminated by other companies. Recognizing this crisis existed, Governor Jeb Bush created a Task Force to study this crisis effects and to offer solutions. 1

On August 28, 2002, Executive Order No. 02-241 created the Governor s Select Task Force on Healthcare Professional Liability Insurance (Task Force), which has the ultimate goal of protecting Floridians access to high-quality and affordable healthcare. Governor Jeb Bush directed the Task Force to: Examine Florida s healthcare liability insurance market, pertinent tort laws, claims, and premium data compared to other states of similar size and diversity; Assess the impact of the cost, accessibility, and availability of healthcare liability insurance on the cost, accessibility, and availability of high quality healthcare in this state; Examine specific strategies to ease the healthcare liability insurance crisis faced by Florida s physicians, hospitals and other healthcare providers; and Provide a written report and recommendations to the Governor, the President of the Senate, and the Speaker of the House of Representatives by January 31, 2003. 2

Task Force Appointments and Process The five members of the Task Force are: John C. Hitt, Ph.D., Chair President, University of Central Florida Richard A. Beard Trustee, University of South Florida Marshall Criser, Jr., J.D. President Emeritus, University of Florida Fred Gainous, Ph.D. President, Florida A & M University Donna E. Shalala, Ph.D. President, University of Miami During the past five months, the Task Force studied the history of medical malpractice, and the current medical malpractice insurance crisis in Florida, through extensive testimony, hundreds of letters, and its own independent research. Representatives of various healthcare professions, as well as those who have been injured as a result of medical maloccurrences and their lawyers, spoke frequently and passionately about the medical malpractice insurance situation at publicly-noticed hearings throughout the state. The Task Force met on the following occasions: October 21, 2002 Orlando November 4, 2002 Miami November 22, 2002 Orlando December 3, 2002 Tallahassee December 20, 2002 Tallahassee January 8, 2003 Telephone Conference January 16, 2003 Tallahassee January 28, 2003 Telephone Conference January 29, 2003 Telephone Conference January 30, 2003 Telephone Conference These meetings were designed to provide Task Force members with general background information about medical malpractice issues. In addition, the Task Force undertook a comprehensive review of published studies and relevant literature. 3

Task Force Overview This current Task Force follows in the footsteps of two previous task forces and three previous task force reports that addressed this same problem. After reviewing the 1985, 1987, and1988 Task Force reports, the current Task Force was reminded of an often-quoted remark usually attributed to Yogi Berra: Its déjà vu all over again. Indeed, many of the factual findings of the preceding panels are as valid today as they were fifteen years ago. If anything, the problem has only compounded. At the December 20, January 8, January 16, January 28, January 29, and January 30 Task Force meetings, specific proposals were voted on for inclusion in the report. Those proposals were grouped into five broad categories: Quality healthcare reform Physician discipline reform Tort reform Alternative dispute resolution reform Insurance reform The Task Force evaluated each proposal using the following criteria: Would the proposed change improve access to specialists, critical care providers, medical facilities for emergency care, obstetrical services, neurological services, or surgery? Would the proposed change facilitate the availability of malpractice insurance or other means for injured parties to recover reasonable compensation for injuries caused by the negligent acts of healthcare providers? Would the proposed change facilitate identifying and addressing healthcare provider problems as soon as possible to reduce or eliminate the risk to patients? Would the proposed change assist in reducing or holding down the cost of medical care to citizens and their health insurance providers to facilitate access to healthcare? The background of the medical malpractice insurance problem as presented to the Task Force is included in chapters 1-4 of this report. A review of laws enacted by Florida and other states to address the problem is also included. The first four chapters also include definitions, testimonials, stakeholder perspectives at the national level, a review of 4

Florida s past legislative action, a summary of the testimony and letters received, and research conducted by the current Task Force. Task Force policy recommendations are presented in chapters 6-10. These recommendations were derived from careful deliberations of testimony, letters, and research presented to the Task Force. The Task Force conclusion and recommendations are presented in chapter 11. In addition to this report, the Task Force is submitting thirteen volumes containing reports, presentations, letters, and testimony received by the Task Force. These volumes will be submitted along with the report to the Governor, the President of the Senate, the Speaker of the House of Representatives, and the legislative library. The Task Force has taken great care to conform its recommendations to the requirements of the Florida Constitution and case law to ensure the continued success of the necessary reforms recommended herein. Any legislation seeking to reform the current system of remuneration for medical malpractice damages must take into consideration important limitations on such initiatives presented under the requirements of the Florida Constitution. These requirements have been explained in several Florida Supreme Court decisions, which the Task Force discusses, where relevant, in chapters 6 through 10. 5

Chapter 2 - MEDICAL MALPRACTICE: THE NATIONAL PERSPECTIVE [From 1840 and 1860 the number of malpractice cases... roared ahead 950%.] The vast majority of lawsuits... involved orthopedic cases in which a limb had healed to a shortened, deformed or frozen position following compound fracture..... Patients found themselves with an unambiguous... problem and sued the physicians who had set their bone fragments and dressed their wounds. What made this situation ironic was that 20 years earlier, most compound fractures would have been amputated. The patient would have had no limb at all, but no malpractice case either, since the physician would have been following safe and standard procedures. James C. Mohr, American Medical Malpractice Litigation in Historical Perspective, 283(13) Journal of the American Medical Association 4 (April 5, 2000) Medical Malpractice Synopsis A claim for medical malpractice means a claim arising out of the rendering of, or the failure to render medical care or services. 1 An action for medical malpractice is a tort or contract claim for damages due to the death, injury, or monetary loss to any person arising out of any medical, dental, or surgical diagnosis, treatment, or care by any provider of healthcare. 2 In any action for recovery of damages based upon medical malpractice, the claimant has the burden of proving the alleged actions of the healthcare provider represented a breach in the prevailing standard of care for that healthcare provider. The prevailing professional standard of care for a given healthcare provider is that level of care, skill, and treatment which, in light of all relevant surrounding circumstances, is recognized as acceptable and appropriate by reasonably prudent, similar healthcare providers. 3 There is a threefold purpose for medical malpractice awards: 1 Section 766.106(1)(a), Florida Statutes. 2 36 Florida Jurisprudence 2d Medical Malpractice, section 1 (2002). 3 Section 766.012(1), Florida Statutes. 6

Compensate the injured Deter further injuries Gain retribution. 4 Most commentators agree that compensation is the paramount goal of medical malpractice awards. 5 Malpractice awards can be divided into two categories: Prevention costs Injury costs. 6 Prevention costs are those expenditures made to reduce the number of future injuries. 7 In other words, by assessing penalties for failure to use the prevailing standard of care, the system is designed to send a message to healthcare providers that they will bear the cost of such failure. 8 Additionally, the healthcare provider is required to balance the cost of preventing the injury against the cost of paying the injured patient through the tort system. 9 In a non-medical business transaction or purchase of goods or services the consumer can evaluate the risks of making the purchase and from whom they want to make the purchase. In a medical environment where the professional has specialized knowledge and expertise, the consumer typically lacks information to make that evaluation. 10 In a simple model, with perfect information and homogenous physicians, a negligence rule of liability with an appropriately defined due care standard should induce complete compliance: there should be no malpractice, no malpractice claims and no demand for malpractice insurance. 11 Although the medical malpractice system is designed to prevent injuries, empirical evidence proving it does is often lacking. 12 One speaker addressing the Task Force noted, One reason for the paucity of information on the system s performance in deterring injuries, compensating victims, and providing a safety valve for victims grievances is that the requisite data are so difficult and expensive to 4 Vasanthakumar N. Bhat, Medical Malpractice 10 (2001). 5 Id. 6 Id. 7 Id. 8 Frank A. Sloan et al., Suing for Medical Malpractice 1 (1993). 9 Patricia M. Danzon, Medical Malpractice: Theory, Evidence, and Public Policy 9 (1985). 10 Id. 11 Patricia M. Danzon, Liability for Medical Malpractice, 5(3) Journal of Economic Perspectives 51 (Summer 1991). 12 Frank A. Sloan et al., Suing for Medical Malpractice 1 (1993). 7

collect. Or more cynically, the various interested parties do not want to let the facts interfere with their arguments. 13 Injury costs can be further divided into the following four categories: (1) medical and non-medical costs, (2) morbidity costs, (3) mortality costs, and (4) costs of pain and suffering. 14 Examples of medical costs would include: hospital care, physician examinations, prosthetics, occupational therapy, and so on. Examples of non-medical costs might include home modifications. 15 Morbidity costs are the value of goods and services a person would have produced if that person were not injured. 16 Mortality costs are the net present value of future earnings lost due to death. 17 Pain and suffering costs are meant to compensate a plaintiff for emotional distress caused by injury. Examples would include: worry, anxiety, embarrassment, and the loss of the pleasures and enjoyment of life. Prevention costs are those monies spent on reducing injuries. Examples of these costs would include: costs of physician discipline, continuing medical education, additional testing, and so on. 18 The supposed goal of the medical malpractice system is to reduce injury and prevention costs. 19 Medical Malpractice: ce: A National Crisis Affordability and Availability of Insurance Although the concept of holding a physician responsible for medical malpractice may seem like a new phenomenon, it has actually been around since the beginning of time. The first instances of holding medical providers liable for their mistakes occurred in the second century B.C. 20 According to the Babylonian legal code of Hammurabi, healthcare providers could be punished for the death or injury of a patient. 21 For example, a physician s finger could be cut off if he caused someone to die, and a nurse had to sacrifice her breasts if she accidentally exchanged two infants at birth. 22 The first recorded malpractice lawsuit in the United States occurred in 1794 in Connecticut, and involved a surgeon named Guthrie and a plaintiff 13 Id. at 2. 14 Id. 15 Id. 16 Id. 17 Id. 18 Id. 19 Guido Cabresi, The Cost of Accidents (1970). 20 Vasanthakumar N. Bhat, Medical Malpractice 5 (2001). 21 Id. 22 Id., citing Marshall B. Kapp, Our Hands Are Tied: Legal Tensions and Medical Ethics 142 (1998). 8

named Cross. 23 After Mr. Cross wife expired, he sued Dr. Guthrie, and a jury awarded him 40 pounds for loss of companionship. 24 Although physicians have faced medical malpractice lawsuits for centuries, medical malpractice only became a focus on the part of policy makers in the latter part of the twentieth century. 25 However, some have argued that medical malpractice actually became a crisis as early as 1835. 26 There were 217 medical malpractice cases in federal appellate courts between 1790 and 1900. 27 That figure rose to 1,712 cases between 1900 and 1955. 28 Median jury awards calculated in 1999 dollars rose from $7,425 between 1843-1849 to $478,483 between 1935 and 1955. 29 This explosion in litigation was partially fueled by the decisions of the courts. Between 1794 and 1861 various state supreme courts heard 27 malpractice appeals. Through their decisions, courts raised the applicable standard of care that physicians were required to use in the care of patients to a level consistent with modern medical practice. This upgraded standard of care fueled an increase in malpractice claims. 30 The 1970s saw a sudden increase in medical malpractice cases. For the period between 1935 and 1975, 80 percent of all medical malpractice suits were filed during the last five years. This increase in claims caused significant losses to insurance companies, resulting in medical malpractice insurance companies and many of the commercial insurers leaving the market. 31 [P]hysicians began to perceive the increase in the number, and size of malpractice claims as a growing threat to their profession. In response, members of the medical community instigated job actions, strikes, and sit-downs. Physicians, insurance companies, and state legislators referred to this phenomenon as a medical malpractice crisis. Hospital malpractice insurance premiums rose from $61 million in 1960 to $1.2 billion in 1976. Additionally, insurance premiums for physicians skyrocketed. 32 By 1975, there were serious concerns as to whether 23 Vasanthakumar N. Bhat, Medical Malpractice 5 (2001), citing Frank J. Edwards, Medical Malpractice: Solving the Crisis 15-16 (1989). 24 Id. 25 Id. 26 Id. at 26, citing Allen D. Spiegel & Florence Kavaler, America s First Medical Malpractice Crisis, 1835-1865, 22(4) Journal of Community Health 288 (Aug. 1997). 27 Vasanthakumar N. Bhat, Medical Malpractice 5 (2001). 28 Id. 29 Id. 30 Daryl L. Jones, Fein v. Permanente Medical Group: The Supreme Court Uncaps the Constitutionality of Statutory Limitations on Medical Malpractice Recoveries, 40 University of Miami Law Review 1075, 1077 (1986). 31 Lawrence E. Smarr, testimony before the Subcommittee on Commercial and Administrative Law of the House Committee on the Judiciary (June 12, 2002). 32 Daryl L. Jones, Fein v. Permanente Medical Group: The Supreme Court Uncaps the Constitutionality of Statutory Limitations on Medical Malpractice Recoveries, 40 University of Miami Law Review 1075, 1077-1078 (1986). 9

insurers would continue to offer liability insurance for medical malpractice. In states seriously impacted by the rise in medical malpractice cases, insurers claimed that providing malpractice insurance was risky and unprofitable. 33 In 1973, the federal government concluded its first extensive study of the medical malpractice crisis. Its findings noted: In part, [the increase] was due to the simple fact that many more people were able to afford, and received, medical care, automatically increasing the exposure to incidents that could lead to suits. At the same time, innovations in medical science increased the complexities of the health care system. Some of the new diagnostic and therapeutic procedures brought with them new risks of injury; as the potency of drugs increased, so did the potential hazards of using them. Few would challenge the value of these advances, but they did tend to produce a concomitant number of adverse results, sometimes resulting in severe disability. 34 In the 1980s, medical malpractice insurance premiums were once again growing rapidly with an increase in the frequency of claims, and the size of malpractice awards and settlements. 35 A study performed by the United States General Accounting Office in 1985 reported that total medical malpractice insurance costs for physicians and hospitals had increased from $2.5 billion in 1983 to $4.7 billion in 1985. 36 However, they also found the increases in insurance rates varied greatly by specialty and by state: As of July 1, 1985, malpractice rates of $50,000 and above per year were concentrated in three specialties obstetrics/gynecology, neurosurgery, and orthopedic surgery, and in Florida, Illinois, Michigan, New York, and the District of Columbia. 37 Plaintiff s representatives argued the increases were due to medical negligence and excessive profits of malpractice insurers. 38 The medical insurers argued the insurance premiums reflected funds needed to cover current, and anticipated future loss payments. 39 33 Id. at 1078. 34 Medical Malpractice: Report of the Secretary s Commission on Medical Malpractice 3 (1973). 35 U.S. General Accounting Office, Medical Malpractice: A Framework for Action 8 (May 1987) (Vol. 1, Tab 10). 36 Id. 37 Id. at 9. 38 Id. 39 Id. 10

Now in this new millennium, medical providers are again facing a crisis in the availability and affordability of professional liability insurance, which is negatively impacting the provision of healthcare. Medical care is becoming less accessible, tests and treatments are occurring beyond what may be medically necessary, and the critical evaluation of the healthcare system is inhibited by a fear of increased litigation. This contributes to a deterioration of the healthcare system with increased costs to the patient, and his or her healthcare provider. Availability of Care Physicians are closing their practices or scaling back services, and hospitals are eliminating services because they are unable to find physicians willing or able to carry the required insurance. 40 A 2002 survey of physicians revealed that one-third of the doctors surveyed avoided practicing a certain specialty, because they feared it would subject them to greater liability exposure. 41 Defensive Medicine Patients are enduring and paying for additional tests and treatments that may be unnecessary as doctors practice defensive medicine to avoid potential malpractice claims. According to a physician survey, more than 76 percent of the respondents were concerned that malpractice litigation has hurt their ability to provide quality care to patients. 42 Seventy-nine percent indicated they had ordered more tests than they might otherwise believe were medically necessary. 43 Seventy-four percent stated they had referred patients to specialists more often than was medically necessary. 44 Further, 51 percent indicated they had recommended invasive procedures to confirm diagnoses more often than may have been medically necessary, 41 percent had prescribed more medications, and 73 percent had noticed other doctors similarly prescribing more medication than may be medically necessary. 45 Empirical analysis of the extent to which the medical malpractice process has had an impact on the decisions healthcare providers make in treating patients, which could be classified as defensive medicine, has proved to be very difficult. A number of studies have attempted to use various 40 U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, Confronting the New Healthcare Crisis: Improving Healthcare Quality and Lowering Costs By Fixing Our Medical Liability System 2-4 (July 24, 2002). 41 Id. at 4. 42 Id. 43 Id. 44 Id. 45 Id. 11

analytical methods to examine the practice of defensive medicine, and the results of those studies are heavily challenged. 46 In fact, it has been suggested that the incidence of defensive medicine may have diminished, if it ever occurred, as a result of managed care. 47 However, one study did attempt to perform such an analysis. Claims regarding defensive medicine were examined at an empirical level in a 1996 study entitled Do Doctors Practice Defensive Medicine? 48 The study examined the impact of medical malpractice reforms in treatment of cardiac illness in the elderly. 49 The report found malpractice reforms that directly reduce provider liability pressure led to reductions of 5 to 9 percent in medical expenditures without substantial effects on mortality or medical complications. 50 If reforms, such as caps on damages, abolition of punitive damages, no mandatory prejudgment interest, and reform of the collateral source rule, had been applied throughout the United States between 1984 and 1990, the study projected expenditures on cardiac disease would have been lowered by $450 million per year in each of the first two years after adoption, and close to $600 million per year for years three through five. 51 Cost of Care These reductions in healthcare services and the use of defensive medicine along with the increased cost of malpractice insurance result in an excessively expensive healthcare system. In 2000, doctors spent $6.3 billion in direct costs on medical malpractice insurance, which does not include the amounts spent on insurance by hospitals and nursing homes. 52 The U.S. Department of Health study calculated that the 5 to 9 percent reduction in costs of medical malpractice insurance could result in saving $60 billion to $108 billion in healthcare costs nationwide each year. 53 46 Michelle M. Mello & Troyen A. Brennan, Deterrence of Medical Errors: Theory and Evidence for Malpractice Reform, 80 Texas Law Review 1595 (2002). 47 Id. at 1607. 48 Daniel Kessler & Mark McClellan, Do Doctors Practice Defensive Medicine?, The Quarterly Journal of Economics (May 1996). 49 Id. at 367-368. Cardiac illness was selected for study because the researchers found that at the time it was the leading cause of medical expenditures and mortality in the United States. The elderly were chosen because of the frequency of this illness in the elderly providing a broad base of homogenous data for study. 50 Id. at 370. The study classified tort reform changes into those believed to directly reduce malpractice awards and those believed to only reduce awards indirectly. The direct changes were those that cut off the upper levels of awards or otherwise reduced the amount of the award. These included: caps on damages, abolition of punitive damages, collateral source rule reform, and abolition of mandatory prejudgment interest. The indirect changes included: caps on contingency fees, mandatory periodic payments, reform of joint and several liability and patient compensation funds. 51 Id. at 387. 52 Id. at 7. 53 Id. 12

These cost savings would positively impact the cost of medical malpractice insurance, and the cost of healthcare insurance to businesses and individuals. The rapid rise in malpractice insurance rates has particularly impacted internists, general surgeons, and obstetricians/gynecologists, who have seen increases averaging 20 percent in December of 2001 on top of increases ranging from 11 percent to 17 percent in July 2000, and averaging 10 percent in July 2001. 54 It should be noted that the insurance premium increases are much higher in states without caps, and it particularly should be noted how rates in non-cap states compare to the insurance rates in California. California (a state with caps on noneconomic damages) has much lower annual premiums for physicians. Table 1 States with High Annual Premiums in 2001 by Specialty Compared to California OB/GYN Surgeon Internists Florida $143K-203K $63K-159K $27K-51K Michigan $87K-124K $67K-94K $18K-40K Illinois $89K-110K $50K-70K $16K-28K Ohio $58K-95K $33K-60K $11K-16K Nevada $60K-95K $32K-57K $9K-16K New York $34K-115K $19K-63K $6K-22K West Virginia $63K-85K $44K-56K $8K-16K California $23K-72K $14K-42K $4K-16K Source: Medical Liability Monitor s Trends in 2001 Rates for Physicians Medical Professional Liability Insurance, Vol.25, No. 10, October 2001. Debate Pressure groups have different perspectives on the medical malpractice debate depending on how malpractice affects their economic, social, political, and professional interests. 55 It seems there is little common ground between the different warring factions on this debate. In sum, the only point of agreement is that the medical malpractice system has failed as a compensation mechanism. The majority of testimony echoes the following themes: 54 Id. at 12. 55 Vasanthakumar N. Bhat, Medical Malpractice 7 (2001). 13

The medical malpractice system does not reduce medical errors. 56 The medical malpractice system does not allow parties to learn from their mistakes. 57 The medical malpractice system does not adequately compensate the injured. 58 The medical malpractice system is in reality nothing more than jack pot justice. 59 The medical malpractice system leads to unnecessary defensive medicine. 60 The medical malpractice system takes too long to resolve claims. 61 The medical malpractice system benefits the lawyers and not the injured. 62 The medical malpractice system makes it too difficult for the truly injured to bring suit. 63 The medical malpractice system is too costly. 64 The medical malpractice system leads to awards that are subjective and variable. 65 In sum, there are various perspectives of this debate. Some interest groups offer concrete methods of reform, while others only offer vague proposals. 56 Steve Demontmolin, J.D., testimony, Oct. 21, 2002, pg. 112. In a national poll of physicians, the overwhelming majority of doctors say that the threat of malpractice lawsuits does not make them deliver better quality care. 57 Troy Tippet, M.D., testimony, Oct. 21, 2002, pg. 90; Nick Bartol, testimony, Oct. 21, 2002, pgs. 139-141. 58 Jackson Williams, testimony, Oct. 21, 2002, pg. 154; George Meros, J.D., testimony, Oct. 21, 2002, pg. 249. 59 Robert Cline, M.D., testimony, Oct. 21, 2002, pgs. 23-24; David McKenney, testimony, Oct. 21, 2002, pg. 193. 60 David Lubben, J.D., testimony, Oct. 21, 2002, pgs. 107-108. 61 Richard Anderson, M.D., testimony, Nov. 4, 2002, pg. 52. 62 George Meros, J.D., testimony, Oct. 21, 2002, pg. 249 (noting that, after a 40 percent contingency fee and costs are considered, patients often receive only 30 to 45 percent of an award). 63 Jackson Williams, testimony, Oct. 21, 2002, pgs. 157-159. 64 Robert Yelverton, M.D., testimony, Oct. 21, 2002, pgs. 55-60. 65 Charles Bond, J.D., testimony, Nov. 4, 2002, pg. 67. 14

Some interest groups merely offer anecdotal data to support their position, while others offer hard data. Medical Malpractice Law Attempts to Address the Problem No examination of this, the third medical malpractice insurance crisis in thirty years, can be complete without an examination of legislative attempts to address the problem in the past. Major changes in law were adopted in the 1970s and 1980s throughout the country, and legislatures hoped those changes would reduce the incidence of medical malpractice, provide for better run insurance companies, and would reduce the severity and frequency of claims. These reforms were intended to provide more stability and predictability in the insurance market, thus ensuring medical malpractice insurance would be available and affordable for medical professionals and healthcare institutions. In the early to mid 1990s, it appeared the desired result had been achieved, but as the country moved into the second half of the 1990s, the cost of personal injury generally, and specifically medical malpractice insurance, began to raise concerns again. Then in the late 1990s the Institute of Medicine released a report, To Err is Human, raising the issue of medical malpractice to new heights, 66 and in response, states enacted significant patient protection measures. The reforms enacted over this thirty-year period can be categorized as quality-of-care reforms, healthcare provider discipline reforms, tort reforms, alternative dispute resolution reforms, and insurance reforms. Many of these reforms, particularly the tort reform issues, were strenuously opposed in the state legislatures and once enacted many were attacked on constitutional grounds with some reforms stricken by state supreme courts. 67 Healthcare quality improvement Mandatory Reporting: In 1999, in response to the report To Err is Human, published by the Institute of Medicine, twenty-six state legislatures enacted patient safety reforms. Most of the reforms required reporting of hospital-based events that caused serious injury or death. 68 However, the 66 Mimi Marchev, National Academy for State Health Policy, The Medical Malpractice Insurance Crisis: Opportunity for State Action (July 2002). 67 Daryl L. Jones, Fein v. Permanente Medical Group: The Supreme Court Uncaps the Constitutionality of Statutory Limitations on Medical Malpractice Recoveries, 40 University of Miami Law Review 1075, 1079 (1986). 68 Common Good, The Effects of Law on Health Care (2002). 15

medical community has strongly objected to reporting unless it is voluntary and confidential. 69 National Practitioner Database: The national practitioner database was established in the Health Care Quality Improvement Act of 1986, to provide for reporting of claims and disciplinary actions against healthcare providers. The database was created so hospitals could determine the claims experience of doctors before allowing a doctor to provide services through the hospital. This was done to prevent doctors with numerous claims from simply moving to a new area and continuing in practice. 70 Additionally, the Health Insurance Portability and Accountability Act of 1996 created the Healthcare Integrity and Protection Data Bank. This data bank collects information regarding a person s exclusion from participation in federal and state healthcare programs, convictions and civil judgments and other adjudicative actions relating to fraud and abuse in healthcare insurance and delivery. Healthcare provider discipline Regulation through Boards or Councils: In the United States, most regulatory entities that police healthcare practitioners and the practice of the profession are commonly called boards or councils. These boards or councils operate at arms-length from the government or explicitly through individual state statute. Members of these boards are generally members of the profession and/or the public. Irrespective of the jurisdiction, a number of common characteristics are found in the laws of the regulatory boards or councils: Boards are mandated to regulate the practice of a given profession in the public interest. Differing boards or councils may use different models of governance, however, the basic roles are to set policy direction and to oversee its function. Boards set standards for entry into the profession and ensure that practitioners offering healthcare services meet those standards. Registration is required, without which a person may not be entitled to practice the profession, and it is commonly in the form of a certification or license. Board members perform adjudicative responsibilities in determining guilt with respect to those practitioners who fail to meet the standards of practice or are accused of misconduct, incompetence, or incapacity. 71 69 Mimi Marchev, National Academy for State Health Policy, The Medical Malpractice Insurance Crisis: Opportunity for State Action 18 (July 2002). 70 Common Good, The Effects of Law on Health Care (2002). 71 Barbara Smith, Council on Licensure, Enforcement, and Regulation (CLEAR), Role of a Person: The Governing Body of a Regulatory Entity (2000). 16

Professional regulation is generally a state s right. Although the federal government has taken some interest in healthcare regulation, the majority of disciplinary regulation is structured through individual state statutes. Former President Clinton s proposal for a federal override of state licensing laws attracted opposition from many stakeholders including professional associations; individual state licensing boards; the Council on Licensure, Enforcement and Regulation; and the Federation of State Medical Boards. Thus, disciplinary regulation has been left primarily to the individual states for licensure standards and regulatory discipline. 72 Tort reforms Statute of Limitations: During the 1975 medical malpractice reforms states shortened the statutes of limitations to reduce the number of potential claims. The statutory time periods generally adopted were from one to four years and the time from which the statute of limitations was measured varied from state to state. Some states used the date treatment was completed; others used the date of the act causing the injury; the date of the injury; or the date the injury should have been discovered. 73 Additionally, most states included a statute of repose to set the limit for bringing a claim regardless of when the injury had been discovered. 74 Ad Damnum Clauses: This is a clause in a complaint stating the amount of damages claimed. 75 Generally, when a lawsuit is filed the complaint sets out the amount of damages the plaintiff is seeking to recover. In the early 1970s, these clauses were believed to influence the jury when the amounts requested were large. 76 Thus, in the 1975 malpractice reforms, states prohibited plaintiffs from including the amount of damages sought in the complaint. 77 Collateral Sources: The so called collateral source rule prohibits the defendant from informing the jury that a plaintiff has or will recover damages for the plaintiff s injuries from some source other than the defendant. Collateral sources are often insurance policies the plaintiff or the plaintiff s employer has paid for or in some cases government benefits such as Medicaid, Medicare, or possibly military benefits. In 1975, a number of states altered the collateral source rule in one of two ways. The more common change allowed the defendant to introduce evidence of 72 Richard Morrison, Council on Licensure, Enforcement, and Regulation (CLEAR), Webs of Affiliation: The Organizational Context of Health Professional Regulation (2000). 73 Barry L. Anderson et al., Florida Medical Association, Medical Malpractice Policy Guidebook 56 (1985). 74 Id. at 57. 75 Black s Law Dictionary 37 (6th ed. 1990). 76 Id. 77 Id. 17

collateral payments and allowed the plaintiff to introduce evidence regarding the cost of the insurance and whether the insurance company had a subrogation right against any award of damages from the plaintiff. 78 The second type provided credit would be given against a judgment for some or all of the collateral sources, but no evidence of the collateral sources would be presented to the jury. 79 Thirty-four states passed changes to the collateral source rule but in three states those changes were found to be unconstitutional. 80 Attorneys fees: Most medical malpractice cases are funded on a contingency basis with the attorney not collecting fees or costs unless or until the plaintiff receives payment for damages. The 1975 medical malpractice acts often included a limit on the amount of the attorney contingency fees. The variations adopted included authorizing either party to request the court to review the other parties attorneys fees, establishing standards for the courts to use in reviewing contingency fees, and setting a fee schedule either as a flat percent of the award or a sliding scale. 81 Sixteen states have adopted some limits on attorneys fees. 82 Limitation on Recovery (Caps): Another method used to control the cost of medical malpractice insurance was caps on recovery for damages. Most of the states imposing caps limited recovery for non-economic damages and the caps ran from $150,000 to $750,000. California limited only noneconomic damages to $250,000. Louisiana limited the recovery, excluding future medical care, to $500,000. Over the years, thirty-two states have adopted caps on damages. The courts in seven states, including Florida, found the caps to be unconstitutional. 83 A study performed by Patricia M. Danzon 84 found [t]he average impact of the various statutes to cap all or part of the plaintiff s recover has been to reduce average severity by twenty-three percent. 85 Periodic Payments: Another major component common to many states medical malpractice reforms was a provision allowing periodic payment 78 Id. at 58. 79 Id. 80 Mimi Marchev, National Academy for State Health Policy, The Medical Malpractice Insurance Crisis: Opportunity for State Action (July 2002). 81 Barry L. Anderson et al., Florida Medical Association, Medical Malpractice Policy Guidebook 59 (1985). 82 Mimi Marchev, National Academy for State Health Policy, The Medical Malpractice Insurance Crisis: Opportunity for State Action (July 2002). 83 Id. 84 Patricia M. Danzon, The Frequency and Severity of Medical Malpractice Claims: New Evidence, 49(2) Law and Contemporary Problems 76 (Spring 1986). 85 Id. 18

of damage awards. 86 This allowed payments for awards for future medical or future lost wages to be paid over time rather than in a lump sum. 87 The distinguishing characteristic of the various state laws was whether the payments ended on the death of the plaintiff or if that portion related to future expenses ended while payments for future pain and suffering or other damages were made to the plaintiff s estate. 88 At least 28 states have adopted some type of periodic payment of damages. 89 Informed Consent: Prior to performing a medical procedure on a patient the doctor should have the patients informed consent. For the consent to be considered informed the patient must be told of the risks related to the procedure to be performed. When reviewing whether the patient has been properly informed of the risk, courts often look to what the reasonable patient would want to know. Some state legislatures changed the standard for determining whether the consent had been informed from the reasonable patient standard to what a reasonable doctor would have told the patient. 90 Res Ipsa Loquitor: More than a dozen states tried to clarify that the burden of proving fault for medical malpractice remained with the plaintiff even when the court applied the res ipsa loquito rule to find some actions carried a presumption of malpractice. 91 Res ipsa loquitor literally means the thing speaks for itself. Under this doctrine, when a thing which causes injury, without fault of the injured person, is shown to be under exclusive control of the defendant, and injury is such that in the ordinary course of things it does not occur the defendant is presumed to have caused the harm. 92 An example in the medical malpractice setting would be a surgical sponge left in a patient after surgery. Joint and Several Liability: Joint and several liability provides that all of the individuals or entities responsible for an injury are liable for the full amount of any judgment. If any liable party cannot pay his or her portion of the judgment the other defendants are responsible for the amount owed. 93 The doctrine is based on the premise that the plaintiff should be fully compensated for the injury and the plaintiff should not be required to bear the burden of an insolvent defendant. 94 Comparative fault provides 86 Barry L. Anderson et al., Florida Medical Association, Medical Malpractice Policy Guidebook 65 (1985). 87 Id. 88 Id. 89 Mimi Marchev, National Academy for State Health Policy, The Medical Malpractice Insurance Crisis: Opportunity for State Action (July 2002). 90 Barry L. Anderson et al., Florida Medical Association, Medical Malpractice Policy Guidebook (1985). 91 Id. 92 Black s Law Dictionary 1305 (6th ed. 1990). 93 32 Florida Jurisprudence 2d 448. 94 Id. 19

that each defendant is only responsible for the portion of damages assigned by the jury or court to that defendant. 95 Some states have abrogated either partially or fully the doctrine of joint and several liability with comparative fault. In two of those states the changes were found to be unconstitutional. 96 Standard of Care: Courts in some states eliminated the requirement that a healthcare provider accused of malpractice should be judged against the standard of care prevalent in the doctor s community or a similar community. Legislatures in about a dozen states passed laws to return to the community standard of care in medical malpractice cases. 97 Alternative dispute resolution reforms Medical Review Panels: Medical review panels were created in some states to review medical malpractice claims outside the court system. 98 Review panels generally consisted of medical providers, attorneys, and at times, lay members. 99 The panels would hear testimony on the case and in some states the panel decided liability only; in some states the panel decided liability and damages; but in most states the panels simply made a recommendation that was admissible at trial. 100 Currently, eleven states have pre-trial screening through a medical review panel. 101 Arbitration: Some states attempted to address faster resolution of medical malpractice claims by providing for a pre-suit arbitration process. In some states the arbitration was mandatory and in other states, such as Florida, the choice as to whether to enter into pre-suit arbitration was voluntary. 102 Currently, twenty-two states have some pre-suit arbitration process. 103 Insurance reforms Patients Compensation Fund: Some states capped recovery using a patients compensation fund. In those states using a patients compensation fund it served as a state insurance fund to address the medical malpractice insurance crisis. The money for the fund was 95 Id. 96 Mimi Marchev, National Academy for State Health Policy, The Medical Malpractice Insurance Crisis: Opportunity for State Action (July 2002). 97 Id. 98 Barry L. Anderson et al., Florida Medical Association, Medical Malpractice Policy Guidebook 61 (1985). 99 Id. at 58. 100 Id. 101 Mimi Marchev, National Academy for State Health Policy, The Medical Malpractice Insurance Crisis: Opportunity for State Action (July 2002). 102 Section 766.207, Florida Statutes. 103 Id. 20

collected from either participating healthcare providers, specified providers, or from all healthcare providers. 104 The fund generally served as a second tier of insurance to cover the healthcare provider when a claim exceeded the provider s insurance limits. 105 Usually, a medical provider had to qualify for coverage by maintaining certain insurance limits, and paying into the fund. When the amount of the fund was exceeded for a given year, the states provide various methods for addressing any shortfall; the claimants share in the fund on a pro rata basis, additional assessments were made to cover any shortfall, or the shortfall was carried over to successive fiscal years until paid. 106 Currently ten states have this system. 107 Florida has a patient s compensation fund but no doctors are participating at this time. No-Fault Systems: Florida and Virginia adopted no-fault systems for payment for injuries to newborns with severe birth-related neurological impairments. 108 These systems provide that an obstetrician may elect to participate in this no-fault program. 109 To participate in the program a physician must either pay or be exempt from paying the assessment for the year coverage is sought. Further, the physician must provide notice to patients of participation in the no-fault program. 110 The program covers infants who suffer a birth-related neurological injury. 111 The issues addressed regarding a claim are whether the physician is a participating physician, whether the injury is a covered injury, and how much compensation, if any, is awardable. 112 The program provides compensation to the parents or legal guardian of up to $100,000, and provides for lifetime care of the child and a set amount for funeral expenses. 113 Joint Underwriting Associations (JUAs): This is a type of insurance program that provides insurance to healthcare providers who cannot otherwise obtain private insurance. JUAs are generally state-run insurance companies of last resort, funded by premiums, and when necessary assessments. JUAs are usually set up as non-profit pooling arrangements created by state legislatures. Although created by a number of states as 104 Barry L. Anderson et al., Florida Medical Association, Medical Malpractice Policy Guidebook 64 (1985). 105 Id. 106 Id. 107 National Governors Association, Center for Best Practices, Health Policy Studies Division (Dec. 2002). 108 Barry L. Anderson et al., Florida Medical Association, Medical Malpractice Policy Guidebook (1985). 109 Section 766.302(7), Florida Statutes. 110 Id. 111 Id. 112 Section 766.309(1), Florida Statutes. 113 Sections 766.309, 766.31, Florida Statutes. 21

interim measures during the mid-1970s, JUAs continue to exist in many states. 114 The effectiveness of these various reforms have been debated by pressure groups in the halls of Congress and in almost every state capitol. One study to look at the effect of 1970s-era changes was performed by Patricia Danzon. 115 Professor Danzon concluded: states with caps on awards had awards 19 percent lower two years after the effective date of the statues; states with contingency fee limits had a somewhat lower amount paid per claim and total claim cost; states eliminating the ad damnum clause had lower total claim costs; there was otherwise no effect on the frequency or amount paid per claim; states requiring collateral source offset had 50 percent lower awards two years after the statute s effective date, but states admitting evidence of collateral sources without required offset displayed no significant effect; several other reforms displayed no significant effects, including pretrial screening panels, arbitration, res ipsa loquitur or informed consent limitations, and periodic payments. Another study done by Patricia Danzon updated her earlier studies based upon analysis of claims nationally over the decade 1975 to 1984. The study examined up to forty-nine states, based on data from insurance companies that insured approximately 100,000 physicians. 116 Her conclusions were: the severity of claims rose twice as fast as the Consumer Price Index, a fact related to a rise in healthcare prices that was faster than consumer prices, generally; claim severity continued to be higher in urbanized states, consistent with earlier studies, and was also higher in states with a high ratio of surgical specialists relative to medical specialists ; 117 severity was less in states with large elderly populations, a fact related to the low wage loss of the elderly and the low potential for damages in a tort suit; 114 B.R. Furrow et al., Health Law: Cases, Materials and Problems 4 (2001). 115 Patricia Danzon, The Frequency and Severity of Medical Malpractice Claims (1982). 116 Patricia Danzon, The Frequency and Severity of Medical Malpractice Claims: New Evidence, 49 Law & Contemporary Problems 57 (1986). 117 Id. at 76. 22

no correlation was found between the number of lawyers per capita and claim severity; the newer data was consistent with earlier findings as to the impact of tort reforms. Statutory caps reduced average severity by 23 percent. Collateral source offsets appeared to reduce awards by a range of 11 to 18 percent. Arbitration reduced claim severity by 20 percent, compared to states without such statutory arbitration. Screening panels did not have a consistent effect in reducing claims severity. The ultimate conclusions as to the merits and nature of reform still depend upon the goals sought for the system. 118 Some of the reforms, such as caps and collateral source offset, appear to have slowed the growth of awards in some states. Some reforms, such as statutes of repose, reduced claim filings over the longer term. 119 118 B.R. Furrow et al., Health Law: Cases, Materials and Problems 27 (2001). 119 Id. 23

Chapter 3 - MEDICAL MALPRACTICE INSURANCE Insurance St. Paul Companies, which was the largest malpractice carrier in the United States, covering 9% of doctors, announced in December 2001 that it would no longer offer coverage to any doctor in the country. U.S. Department of Health and Human Services, Confronting the Health Care Crisis: Improving Health Care Quality and Lowering Costs by Fixing Our Medical Liability System 14 (July 24, 2002) No analysis of the medical malpractice crisis could be done without a basic explanation of how medical malpractice insurance works. Medical malpractice insurance (as with all insurance) is about risk. 120 Medical malpractice insurance is meant to cover low-frequency, high-severity risk. 121 Medical malpractice insurance covers only the damage deemed the responsibility of the insured policyholder. 122 Unlike a typical insurance policy, claims are not filed with an insurance company. Instead, a claimant enters the complex world of tort law, where juries determine damages, or cases are settled in expectation of what juries might do. 123 Typically, there is a significant amount of time between premiums being paid and claims being paid out. 124 As a result, malpractice insurers have the opportunity to make money by investing premium dollars. 125 The variations in the investments can significantly affect the malpractice premiums a physician pays each year. 126 The insurer is in the business of risk bearing and risk management. 127 A healthcare provider purchases malpractice insurance to pass the risk of that provider making a mistake on to the insurer. The insurer, when selling the insurance policy, must assess the risk of future claims against that policy and the cost of resolving those claims. Thus, the insurer uses underwriters to assess the risk of any given insured, claims managers to settle the claims and determine necessary reserves to resolve those claims, and 120 Frank A. Sloan et al., Suing for Medical Malpractice 20 (1993). 121 Vasanthakumar N. Bhat, Medical Malpractice 95 (2001). 122 Frank A. Sloan et al., Suing for Medical Malpractice 22 (1993). 123 Id. at 23. 124 Id. 125 Vasanthakumar N. Bhat, Medical Malpractice 95 (2001). 126 Id. 127 Frank Sloan et al., Insuring Medical Malpractice 22 (1991). 24

actuaries to predict the course of future claims based on patterns of past and pending claims. 128 But, no matter how well a medical malpractice insurance company assesses its insureds, and predicts future claim costs, the results are uncertain. The ideal insurance market consists of a pooling by the insurer of a large number of insureds. 129 A good example is the auto insurance market. The large number of insureds make outcomes for the insurance pool actuarially predictable. 130 The medical malpractice market is just the opposite: the pool of potential policyholders is small, as is the pool of claims. 131 Likewise, the awards vary tremendously, with 50% of the dollars paid out on 3% of the claims. 132 The insurer is primarily interested in reducing uncertainty to the maximum extent possible but there are extensive unpredictable external forces. In medical malpractice the extent of the risk is not controlled solely by the terms of the contract but by the actions of the insured healthcare provider and the application of tort law of the state where the insured resides. 133 In predicting the risk related to tort law the insurer must consider the law in the applicable state, the propensity of patients to sue, and the general attitudes of juries in the state. 134 Additionally, when assessing a specific claim the insurer must examine the precedent for future cases that may be established in taking a case to trial. 135 This interest of the insurer may be adverse to the insured healthcare provider who is primarily interested in the impact on the healthcare provider s assets and reputation. 136 Actuaries are retained by insurance companies to predict future premium needs based on past experience using various assumptions, numerical extrapolations, and professional judgment. 137 The goal of this process is for the insurer to be able to set a premium for specific insurance policies sold. The rates established must cover future claims losses and the associated expenses referred to as loss adjustment expense, 138 general operating expenses of the insurance company, 139 and profit. 140 Predictions 128 Id. 129 Patricia Danzon, Medical Malpractice: Theory, Evidence, and Public Policy 90 (1985). 130 Id. 131 Id. 132 Id. 133 Id. 134 Id. at 22-23. 135 Id. at 23. 136 Id. 137 Sloan et al., Insuring Medical Malpractice 146 (1991). 138 Id. Loss adjustment expenses generally include cost of investigation, cost of defense including fees paid to attorneys and court costs, and, finally, claims department expenses. 139 Id. at 148. General operating expenses include commission paid to brokers and agents, costs of field staff, advertising printing, home office costs, and taxes. 25

can be very difficult because the length of time for medical malpractice claims to resolve requires the actuary to project expenses far into the future. 141 To make predictions regarding the cost of future claims the actuary first examines historical claims data on a year-by-year basis. 142 In examining this data the actuary collects data over a number of years and determines what the payout or runout for each claim year has been to date. This is what amount of claims has been paid. 143 Second, the actuary predicts the ultimate losses for each premium year examined. This requires a projection of what will be paid when all claims for the specific year are settled. 144 Third, the actuary develops a trend to predict future premiums needed to cover predicted losses. 145 In developing the trend the actuary will examine the premiums divided by losses or loss ratios for past years. 146 The actuary will also examine changes in the frequency and severity of claims along with changes in state laws that may impact either of those factors. 147 Based on this analysis the actuary will then project the premium needed to provide for payment of losses, costs of defending claims, overhead of the insurance company, and profits with any discount for projected investment income subtracted. 148 Types of Medical Malpractice Insurance Vehicles Commercial carriers are for-profit companies that are regulated by state departments of insurance. Assessable insurance trusts are non-profit entities formed by physicians to insure against malpractice claims. 149 Typically, member physicians are assessed a fee at the end of each year based upon operating expenses and claim payouts. 150 In Florida, prior to October 1, 1992, a group or association of healthcare providers composed of any number of members 140 Id. Profit includes an allowance for contingencies. 141 Id. 142 Id. at 147. 143 Id. 144 Id. 145 Id. at 152. 146 Id. at 152-153. 147 Id. at 153. 148 Id. at 153. 149 Id. at 96. 150 Id. 26

could establish a self-insurance trust fund as long as the Department of Insurance approved the fund. 151 However, a self-insurance trust fund may no longer be formed, and only two have been found still to be in operation. 152 Physician-owned companies are owned and operated by physicians. Most physician-owned companies are run on a not-for-profit basis. Supposedly, this leads to lower expense ratios. The physician-owners are the ones that make the decision on who to insure and who not to insure. Surplus-line line companies are entities that specialize in providing coverage to physicians who can t get insurance from traditional sources. These companies typically charge higher premiums. 153 Risk retention groups are organized corporations or limited liability companies that spread the malpractice risk exposure among their members. 154 Joint underwriting associations (JUAs) are non-profit entities established by state legislatures to provide malpractice insurance within the state. Florida s JUA was established in 1975. 155 Reinsurers ers are entities that purchase risk contracts from other types of insurers. Typically an insurer makes a contract with a reinsurer to protect the first insurer from a risk it has already assumed. 156 A reinsurance contract seeks to diversify the risk of loss from one insurer to another by providing that the reinsured insurer cedes all or part of its risk to the reinsurer. 157 The reinsurance market was tightened significantly after the terrorist events of September 11, 2001. Types of Medical Malpractice Insurance Policies Medical malpractice insurers provide coverage using two types of policies: occurrence based and claims-made policies. 158 Occurrence Policies: Most non-medical malpractice insurance policies have coverage triggered by an occurrence of an event or an accident 151 Section 627.357(2), Florida Statutes. 152 Section 627.357(10), Florida Statutes. 153 Vasanthakumar N. Bhat, Medical Malpractice 96 (2001); see also section 626.915, Florida Statutes. 154 Vasanthakumar N. Bhat, Medical Malpractice 96 (2001); see also chapter 627, part XIX, Florida Statutes. 155 Chapter 75-9, Laws of Florida. 156 30 Florida Jurisprudence 2d Insurance, section 24 (2002). 157 Id. at section 46. 158 Robert E. Keeton & Alan I. Widiss, Insurance Law 594 (1988). 27

within the time period specified in the policy. 159 Most automobile insurance policies operate under occurrence policies. For example, an insured has coverage for claims made, and damages awarded, years after the policy may have terminated, if the accident resulted from an occurrence within the stated time limits. 160 Claims-Made Policies: Beginning in the 1970s, most medical malpractice insurers discontinued use of occurrence policies and offered coverage only on a claims-made basis. 161 These types of policies are written to provide indemnification for claims that are made during the coverage period, hence the name claims made. 162 A typical medical malpractice policy will read as follows: To pay on behalf of the physician all sums which the physician must become legally obligated to pay as damages because of any claim or claims made against the physician during the policy period arising out of the performance of professional services rendered or which should have been rendered, subsequent to the retroactive date by any person for whose acts or omissions the physician partnership, corporation, or professional association is legally responsible. 163 One disadvantage of claims-made policies is the need for tail coverage. A physician who has a claims-made policy must make arrangements to protect against risks of claims made in future years, including for those periods long after the insured has retired from the profession. 164 While the change from occurrence policies to claims-made policies should not change the filing of claims by patients or the actions of doctors, it can impact the data collected and the projection of trends. 165 This is because the number of claims reported tends to be low in the early years of claimsmade coverage, rising as the policy matures. 166 159 Id. 160 Id. 161 Id. at 598. 162 Id. 163 Id. 164 Id. at 598-599. 165 Patricia M. Danzon, The Frequency and Severity of Medical Malpractice Claims: New Evidence, 49(2) Law and Contemporary Problems 60 (Spring 1986). 166 Id. 28

Characteristics of Medical Malpractice Insurance Low-Frequency, High-Severity Risk: Traditionally, medical malpractice insurance has featured low claims frequency, yet high severity. 167 Depending on the medical specialty, approximately 5 to 20 percent of physicians may face a claim during the policy period. 168 Lag Time Between Premium Inflows and Cash Outflows: All types of insurance companies operate under a lag time. Before claims are paid out, premiums must be paid in advance. Claims for automobile insurance, for example, will typically come in quickly during a claims year and be settled in short order. The same is true for workers compensation and health insurance claims. Medical malpractice insurance, on the other hand, has a significant lag time between when the premium is paid and when the claim is paid out. 169 Medical malpractice claims are only paid after liability is proved, or when the insurer believes that there is the likelihood that liability will be proved. The time it takes to determine possible liability is significant in the typical medical malpractice case, hence the long lag time. For example, in Florida, the statute of limitations in a medical malpractice action must be started within two years from the time the incident giving rise to the action occurred, or, with the exercise of due diligence, within two years from the time the incident is discovered. However, in no event can the action be started later than four years from the date of the incident or occurrence out of which the cause of action originated. 170 There also is a fraud exception that allows claims to be filed up to seven years from the date of occurrence. 171 The Florida Supreme Court ruled the statutory section prescribes a statute of: Limitations of two years; Repose of four years, absent fraud or intentional misconduct; and Repose of seven years, where there are allegations that fraud, concealment, or intentional misrepresentation of fact prevented discovery of the negligent conduct. 172 Under the statute of limitations a claimant is required to file a medical malpractice action within two years of the time that the person had knowledge, or reasonably should have had knowledge of the injury, and 167 Frank A. Sloan et al., Suing for Medical Malpractice 24 (1993). 168 Id. 169 Frank Sloan et al., Insuring Medical Malpractice 24 (1991). 170 Section 95.11(4)(b), Florida Statutes. 171 Id. 172 Carr v. Broward County, 656 So. 2d 248, 250 (Fla. 2d DCA 1995). 29

the knowledge that there was a reasonable possibility that medical malpractice caused the injury. 173 The statute of repose, however, operates in a different manner by banning a cause of action, if that action is filed after a specified time period. 174 A statute of limitation will only bar the cause of action after a specified period of time has elapsed since the accrual of the cause of action. 175 These time limitations mean that in some instances, causes of action will not be filed until four or seven years after the alleged medical malpractice occurred. From there, once a case is filed, the case may have a life span of two to five years before it is tried or settled. 176 This creates a very long lag time between the time insurance premiums are received and the time they are eventually paid. This lag time is a complicating factor in medical malpractice lines of insurance because the database used for estimating future losses may not reflect actual losses. 177 For example, one insurer, St. Paul (which is no longer writing this type of insurance) reported the manner in which claims were made: 30 percent in the year after treatment, 25 percent in the third year, 7 percent in the fourth year, and 8 percent in years five through 10. 178 Investment Income: The core business of insurance companies is to assume the risk of an uncertain event in exchange for an insurance premium. 179 Profits are derived from the difference between premiums taken in and claims paid out. 180 However, insurers also derive income from investments. Insurers resemble a bank in many ways since income earned from premiums is available for investment until a claim is paid. Insurers hold premiums received from their customers, and pay them out when there is a claim. 181 Thus, these variables determine an insurance companies real profits: how much is earned from risk premiums charged; the lag time for claims payment; and the actual return derived from investments made with the premiums in the interim. 182 Some commentators have stated that the medical malpractice insurance industry engages in cash flow underwriting, in which insurers invest the 173 Tanner v. Hartog, 618 So. 2d 177, 181 (Fla. 1993). 174 Kush v. Lloyd, 616 So. 2d 415 (Fla. 1992). 175 Id. at 481. 176 Frank Sloan et al., Insuring Medical Malpractice 24 (1991). 177 B.R. Furrow et al., Health Law: Cases, Materials and Problems 5 (2001). 178 Id. 179 Frank A. Sloan et al., Suing for Medical Malpractice 25 (1993). 180 Id. 181 Id. 182 Id. 30

premiums they collect. 183 When interest rates and investment returns are high, insurance companies accept riskier exposures to acquire more investable premiums... If underwriting and investment results are combined during this period, investment gains more than offset losses. 184 In 1987, the Government Accounting Office contended that the medical malpractice insurance crisis of the 1980s resulted, in part, from the industry s cash flow underwriting policy strategy in which companies sacrificed underwriting gains in an attempt to attract more business and thereby enhance investment gains. 185 Insurance Cycles: Medical malpractice insurance has been subject to sudden jolts, both in availability of coverage and cost. 186 An entire cycle has been defined as the period of years in which insurer underwriting profits cycle from above average to below average. These cycles have always occurred in the insurance industry, particularly in medical malpractice insurance. 187 The cycle begins when insurance is profitable thus attracting capital and the formation of new companies. 188 The new companies lower rates to attract business away from existing companies because the number of healthcare providers requiring insurance is fairly stable but the providers will change companies to acquire the best rates. 189 The cutting of rates by new companies forces the existing companies to also cut rates to protect their market share. 190 This rate cutting can continue until underwriting losses exceed the amount that insurers are willing to bear. 191 This will cause some insurers to withdraw from the market and the remaining insurers will raise rates. 192 These rate increases are usually accompanied by tighter standards regarding what providers the remaining companies will insure. 193 The higher rates and resulting profitability will attract new business to the industry and the cycle begins again. 194 183 B.R. Furrow et al., Health Law: Cases, Materials and Problems 7 (2001). 184 Id. 185 Government Accounting Office, Insurance: Profitability of Medical Malpractice and General Liability Lines (1987). 186 Id. at 27. 187 Academic Task Force for Review of the Insurance and Tort Systems, Preliminary Fact-Finding Report 89 (Aug. 14, 1987). 188 Id. 189 Id. 190 Id. 191 Id. 192 Id. 193 Id. 194 Id. 31

State Regulation of Medical Malpractice Insurance The Department of Insurance governs medical malpractice insurance. 195 All medical malpractice policies must include the following policy clauses: Directing the insured to cooperate in the statutory review process if a notice of intent to file a claim for medical malpractice is made against the insured. 196 Authorizing the insurer to determine, make, and conclude, without the permission of the insured, any offer of admission of liability and of arbitration, settlement offer, or offer of judgment within policy limits if in good faith and in the best interests of the insured. 197 Requiring the insurer to give a specified amount of notice of cancellation or non-renewal to the insured. 198 Each insurer may require the insured to be a member in good standing of a duly recognized state or local professional society of healthcare providers that maintains a medical review committee. 199 Department of Health/Board of Medicine: As a condition of licensing, and prior to the issuance or renewal of an active license or reactivation of an inactive license for the practice of medicine, a physician must demonstrate to the Department of Health and the Board of Medicine his or her financial responsibility to pay claims and costs. 200 Hospital Privileges: Physicians with hospital staff privileges are required to establish financial responsibility as a continuing condition of hospital staff privileges. 201 195 Se chapters 626, 627, Florida Statutes. 196 Section 627.4147(1)(a), Florida Statutes; see also 36 Florida Jurisprudence 2d Medical Malpractice, section 88 (2002). 197 Section 627.4147(1)(b), Florida Statutes; see also 36 Florida Jurisprudence 2d Medical Malpractice, section 88 (2002). 198 Section 627.4147(1)(c), Florida Statutes; see also 36 Florida Jurisprudence 2d Medical Malpractice, section 88 (2002). 199 Section 627.4147(2), Florida Statutes; see also 36 Florida Jurisprudence 2d Medical Malpractice, section 88 (2002). 200 Section 458.320(1), Florida Statutes. 201 Section 458.320(2), Florida Statutes. 32

Chapter 4 - MEDICAL MALPRACTICE: THE FLORIDA PERSPECTIVE At its core, malpractice law involves a set of adversarial proceedings, beginning with a patient s allegation of negligence against an individual provider. Processes of care are relevant only insofar as they prove or disprove the defendant s negligence against an individual provider. Malpractice litigation induces silence and bitterness. David M. Studdert & Troyen A. Brennan, The American Medical Association, No-Fault Compensation for Medical Injury: The Prospect for Error Prevention (2001) Florida Medical Malpractice Synopsis 1970s Medical Malpractice Law Changes In 1975, the state refused a request for a rate increase from the Argonaut Insurance Company, which during 1974 insured 5,342 of Florida s 8,103 physicians. 202 Argonaut then threatened to discontinue malpractice insurance in Florida, which would have left 60 percent of Florida s physicians without malpractice coverage. 203 This precipitated the 1975 Legislature s determination that there was a medical malpractice insurance crisis, resulting in the enactment of a series of reforms to ensure the availability of malpractice insurance to physicians and hospitals, and to change the process of addressing medical malpractice claims. 204 The provisions of the bill addressed four issues: Healthcare quality improvement Tort reform Alternative insurance Alternative dispute resolution Healthcare Quality of Care Improvement Risk Management Programs: The 1975 act required every facility with more than 300 beds for in-house patient care to establish a risk management program. All injuries and adverse incidents were to be 202 Representative Barry Kutun, comments to Southern Legislative Conference, Human Resources and Urban Affairs Committee, Malpractice Legislation in Florida (Nov. 11, 1975). 203 Id. 204 Chapter 75-9, Laws of Florida. 33

reported to the risk manager. The risk management program was to provide for investigation and analysis of the causes of adverse incidents, the establishment of processes to minimize the risk of injury and adverse incidents, and a process for addressing patient grievances. 205 Increase Healthcare Provider Regulation: The 1975 act provided tougher discipline procedures to be applied by the Board of Medicine. 206 Tort reform Statute of Limitations: In the 1975 act, the Legislature clarified the statute of limitations to provide a two-year limit from the time the incident occurred, or from the time the incident was discovered or should have been discovered. The bill also created a four-year statute of repose ending all rights to file a claim after four years, regardless of whether the injury had been discovered or not. Additionally, a provision was added to extend the statute of repose to two years beyond the date of discovery of the injury, if fraud prevented discovery. However, in no instance could the case be brought more than seven years after the incident occurred that gave rise to the injury. 207 Ad Damnum Clauses: The 1975 act prohibited a statement of the requested amount of general damages in a complaint, but did allow a statement of the jurisdictional amount and the amount of special damages. 208 Informed Consent: The 1975 act established criteria for what constituted informed consent to ensure patients were informed of the risks associated with medical procedures. 209 Insurance Reform To improve the availability of malpractice insurance, the 1975 act established alternative methods to insure healthcare providers. 210 Joint Underwriting Association: The 1975 act created a Joint Underwriting Association to spread the risk of insuring hospitals and physicians over casualty insurers, generally. 211 205 Chapter 75-9, section 3, Laws of Florida. 206 Chapter 75-9, sections 13-14, Laws of Florida. 207 Chapter 75-9, section 7, Laws of Florida. 208 Chapter 75-9, section 8, Laws of Florida. 209 Chapter 75-9, section 11, Laws of Florida. 210 Chapter 75-9, sections 4, 13-15, Laws of Florida. 211 Chapter 75-9, section 4, Laws of Florida. 34

Medical Malpractice Risk Management Fund: The 1975 act allowed a group of physicians or healthcare facilities to establish a medical malpractice risk management fund to self-insure. 212 Patients Compensation Fund: The 1975 act created a Patients Compensation Fund to pay claims over $100,000 for participating physicians, who pay into the fund and maintain the required level of personal coverage. 213 In 1985, the Florida Supreme Court ruled on a constitutional challenge to the limits included in the Patients Compensation Fund, and determined that the limits were constitutional. In Florida Patients Compensation Fund v. Von Stetina, 214 the court concluded the Legislature could reasonably find that the increasing costs of medical malpractice insurance posed a threat to the continued availability and adequacy of health care services, and that the public health could be protected by the enactment of the subject measures, which were designed to reform the medical malpractice insurance system. 215 The court further found that the Legislature had provided a source for paying malpractice judgments, which was within the Legislature s constitutional prerogative, but had not modified the dollar amount of the judgment rendered. 216 Alternative dispute resolution Medical Review Panels: To assist in resolving claims, the 1975 act created a procedure for establishing three-member, medical liability mediation panels in each judicial circuit. 217 These panels were authorized to make findings as to liability and recommend the amount of damages, except punitive damages. The Florida Supreme Court twice reviewed the constitutionality of medical review panels. The first review, in Carter v. Sparkman, 218 found the provision to be constitutional. In the second review in 1980, Aldana v. Holub, 219 the Florida Supreme Court found the statute to be unconstitutional, and in violation of the due process rights of both the state and Federal constitutions. In Aldana, the court stated [I]t should be emphasized that today s decision is not premised on a reevaluation of the wisdom of the Carter decision. Rather, it is based on the unfortunate fact that the medical mediation statute has proven unworkable and inequitable in practical operation. 220 212 Id. 213 Chapter 75-9, section 15, Laws of Florida. 214 Florida Patients Compensation Fund v. Von Stetina, 474 So. 2d 787, 789 (Fla. 1985). 215 Id. 216 Id. 217 Chapter 75-9, section 5, Laws of Florida. 218 335 So. 2d 802 (Fla. 1976), cert. denied, 429 U.S. 1041 (1977). 219 381 So. 2d 231 (Fla. 1980). 220 Id. at 237. 35

In 1976, the Legislature added three additional reforms to the tort laws impacting medical malpractice. Remittitur and Additur: The 1976 act authorized the courts to review the amount of damages awarded by a jury in a malpractice case to determine if the award was clearly excessive or inadequate based on the evidence presented. If the judge found the award excessive, the court could reduce it, or if the award was found inadequate, the court could increase the award. If the negatively impacted party objected to the court s action, the judge was required to order a new trial on damages. 221 Collateral Source Rule: The 1976 act provided that all medical malpractice awards must be reduced by the amount paid from all collateral sources to the plaintiff, except where the payer of the benefit has a right to claim reimbursement from any award of damages. 222 In 1981, the Florida Supreme Court upheld this amendment to the collateral source rule. In the case of Pinillos v. Cedars of Lebanon Hospital Corp., 223 the court stated: We hold that the classification created by section 768.50, Florida Statutes, bears a reasonable relationship to the legitimate state interest of protecting the public health by ensuring the availability of adequate medical care for the citizens of this state. 224 Periodic Payment of Damages: This provision of the 1976 act allows the court, upon the request of either party, to provide for periodic payment of future losses. The act specified the payments must be made over the time period for the losses determined by the jury; however, the defendant must pay the actual economic losses during the period, even if they exceed the scheduled payment. If the patient dies before all of the payments are made, then the payments for pain and suffering and medical care may stop. However, if the plaintiff lives beyond the period of the scheduled payments, the defendant must continue to pay at the amount of the last scheduled payment. 225 1980s Medical Malpractice Law Changes In the early-1980s medical malpractice insurance rates were again increasing. 226 Florida experienced increases in the frequency of claims 221 Chapter 76-260, Laws of Florida. 222 Id. 223 403 So. 2d 365 (Fla. 1981). 224 Id. at 368. 225 Chapter 76-260, Laws of Florida. 226 Governor s Task Force on Medical Malpractice, Report of the Governor s Task Force on Medical Malpractice (March 1985). 36

generally, increases in the cost per claim, and particularly, increases in the frequency of claims in excess of $100,000. 227 In 1984, an attempt was made to address some of these issues by amending the constitution. An amendment petition was filed to place a cap of $100,000 on non-economic damages, eliminate joint and several liability, and make changes to the summary judgment process. The Supreme Court held the petition to be unconstitutional on the basis of violations of the single subject and ballot summary requirements, and the proposed amendment did not appear on the ballot. 228 Report of the 1984 Florida Governor s Task Force on Medical Malpractice In 1984, recognizing there still existed medical malpractice insurance problems, the Governor created the 1984 task force by Executive Order (1984 task force) 229 and directed that the 1984 task force recommendations be submitted by April 1985. 230 The 1984 task force found that the factors contributing to the medical malpractice insurance problems were the: Medical advances that had taken place in medicine with the increased use of unknown specialists in large institutions; Increased access to the courts; and General rise in consumerism. 231 After four months of study, the 1984 task force made recommendations to address maximizing the quality of care provided while minimizing injury. Additionally, recommendations hoped to address the high cost of the existing dispute resolution process through incentives and mechanisms to induce earlier settlement of disputes. 232 The specific recommendations were: 233 Healthcare Quality Improvement Section 768.40, Florida Statutes, must be amended to expand civil immunity for peer review participants to include all persons who provide information, serve as witnesses, or conduct investigations. 227 Id. at 1. 228 Evans v. Firestone, 457 So. 2d 1351 (Fla. 1984). 229 Executive Order No. 84-202. 230 Governor s Task Force on Medical Malpractice, Report of the Governor s Task Force on Medical Malpractice 2 (March 1985). 231 Id. 232 Transmittal letter from M. Anthony Burns to Governor Graham (April 1, 1998). 233 Governor s Task Force on Medical Malpractice, Report of the Governor s Task Force on Medical Malpractice 3-15 (March 1985). 37

A person who files a civil action seeking damages against a peer review participant must be required to post a bond sufficient to pay cost and attorney s fees in the event the plaintiff is unsuccessful. A statutory presumption of good faith must be established for peer review participants. All information and records used by a peer review committee must be discoverable by a healthcare provider in a civil action brought by the provider. However, the deliberations of the peer review committee must not be discoverable in any civil action. The governing boards of hospitals must be required to demonstrate and document a consistent effort to deliver high quality medical services through operation of a quality assurance program in accordance with Joint Commission on Accreditation of Hospitals standards for the governing body, medical staff, and quality assurance. Hospitals must be required to investigate conduct that would constitute good cause for action upon a physician s staff privileges. Florida should participate in a joint effort with the Florida Medical Association, the Florida Osteopathic Association, Florida Hospital Association, and insurance companies to provide funding for research on risk management, voluntary resolution, and quality assurance programs. Insurers should be encouraged to develop premium discounts for utilization of effective risk management programs by healthcare providers. Improved doctor-patient communication should be encouraged, and toward that end providers should be encouraged to better inform patients of the patient s physical and mental condition. In order to gather the necessary information for future policy-making regarding medical malpractice, there should be ongoing data collection and special studies. Regulation and discipline of healthcare providers No graduate of an unaccredited foreign educational institution should be eligible for licensure, unless the Department certifies that institution. 38

The penalty for knowingly giving false information when obtaining a new or renewed license as a healthcare practitioner (licensed under chapters 458, 459, 460, 461, 463, 464, 465, 466, 474, or 490, Florida Statutes), should result in a third degree felony. Obtaining a license to practice medicine by fraudulent misrepresentation or fraudulently misrepresenting education, training or experience in obtaining a position as a medical practitioner or medical resident, should result in a third degree felony. The number of times an individual may take the state licensure exam must be limited to four. After failing three times, the applicant must be required to take one year of postgraduate training in a program approved by the American Medical Association prior to attempting the examination for a fourth, and final, time. Continuing medical education should be required as a condition of relicensure for physicians. The Department of Insurance should be required to notify and send reports to the Department of Business and Professional Regulation on any individual healthcare provider, who has three or more claims paid in excess of $10,000 over a five-year period, and is subject to regulation by the Department of Business and Professional Regulation. Hospitals, licensed under chapter 395, Florida Statutes, should be required to provide the reason for disciplining a member of the medical staff and the action that was taken. Peer review records should be made available to the Department, upon subpoena, to be used in disciplinary proceedings. The resources of the Department of Business and Professional Regulation and health provider boards should be increased to support increased investigation staff to review and investigate reports from hospital governing boards, and trigger reviews of providers. The Board of Medical Examiners should be expanded to thirteen members. Four of those members should be laypersons. At least one member of the probable cause panel should be a layperson. As a condition of licensure and licensure renewal, all physicians should be required to carry professional liability insurance or demonstrate alternative means of financial responsibility. The amount of required coverage should be between $500,000 per occurrence/$1,500,000 annual aggregate, and $1,000,000 per occurrence/$3,000,000 annual aggregate. 39

Tort reform Any plaintiff s attorney who brings three cases in five years, which are unsuccessful in both arbitration and trial, and where a formal offer of judgment or settlement was not made, should be reviewed by the grievance committee of the Florida Bar, and appropriate action taken upon review of the case. Section 768.56, Florida Statutes, which requires the court to award attorney s fees to the prevailing party in medical malpractice cases, should be repealed. Section 768.49, Florida Statutes, regarding remittitur and additur should be amended to delete the word clearly from the requirement that any judgment be clearly excessive or inadequate before the judge may exercise remittitur and additur powers. Any provision for contracting out of the tort system must have clearly-drawn safeguards. The 1984 task force stated there had been insufficient time to address this issue with the detailed attention it requires. Others, or the 1984 task force if it is continued, should further explore this issue. No other tort reforms should be undertaken. Specifically, there should be no caps placed on damages, no further caps on attorney s fees, and joint and several liability should be retained. Alternative dispute resolution A procedure should be established which would require the defendant(s) in a medical malpractice action to choose either binding or non-binding arbitration within ninety days from the date a complaint is filed. This procedure is designed to provide for early resolution, and encourage early settlement of claims. Either party can make offers of judgment or settlement after the complaint is filed. Insurance Reform The Department of Insurance should explore the feasibility of malpractice insurance programs that provide integrated or linked rates for hospitals and their medical staff. 40

The 1984 task force expressed antipathy toward further, privately financed, subsidization for malpractice liability coverage, and encouraged the Legislature to explore the necessity and feasibility of public subsidization alternatives. However, given the constraints of time and resources, the 1984 task force felt unable to adequately explore or further advise on the specifics of such alternatives. A study should be conducted in order to: develop estimates of the number of medical injuries in Florida, determine the availability of third party collateral sources of payment and therefore an estimate of net economic losses, and apply such findings to alternative proposals in order to determine variously designed system costs. 1985 Legislative Changes Following receipt of the report of the 1984 task force, the 1985 Legislature in chapter 85-175, Laws of Florida, set out findings related to the medical malpractice insurance crisis in the preamble to the act. 234 234 WHEREAS, high-risk physicians in this state sometimes pay disproportionate amounts of their income for malpractice insurance, and WHEREAS, professional liability insurance premiums for Florida physicians have continued to rise and, according to the best available projections, will continue to rise at a dramatic rate, and WHEREAS, the maximum rates for essential medical specialists, such as obstetricians, cardiovascular surgeons, neurosurgeons, orthopedic surgeons, and anesthesiologists have become a matter of great public concern, and WHEREAS, these premium costs are passed on to the consuming public through higher costs for health care services in addition to the heavy and costly burden of defensive medicine as physicians are forced to practice with an overabundance of caution to avoid potential litigation, and WHEREAS, this situation threatens the quality of health care services in Florida as physicians become increasingly wary of high-risk procedures, and are forced to downgrade their specialties to obtain relief from oppressive insurance rates, and WHEREAS, this situation also poses a dire threat to the continuing availability of health care in our state as new young physicians decide to practice elsewhere because they cannot afford high insurance premiums, and as older physicians choose premature retirement in lieu of a continuing diminution of their assets by spiraling insurance rates, and WHEREAS, our present tort law/liability insurance system for medical malpractice will eventually break down and costs will continue to rise above acceptable levels, unless fundamental reforms of said tort law/liability insurance system are undertaken, and WHEREAS, the magnitude of this compelling social problem demands immediate and dramatic legislative action, and 41

Based on these findings, the Legislature enacted a number of changes to improve prevention of medical malpractice, resolution of claims when an injury occurs, and to spread the cost of insurance beyond those specialists currently impacted most significantly. 235 These changes included: Healthcare Quality Improvement Risk management programs at medical facilities: The bill clarified the responsibility of healthcare facilities to not only implement a risk management program, but to assure the implementation of the risk management program, and the competence of the staff. Failure to use due care to comply with the act, would expose the facility to liability for injury resulting from the failure to implement the laws. 236 Discipline and licensing of healthcare providers Discipline of providers: To improve prevention of medical malpractice the requirements for investigation and discipline of healthcare practitioners/providers were increased, and the Board of Medicine was required to investigate a healthcare practitioner/provider when there were two or more claims of $10,000 or more paid within a five-year period. These incidents were to be reported to the Board of Medicine by the Department of Insurance. 237 Risk management programs: The responsibility of the Board of Medicine, relative to review of risk management programs, was increased; and, the bill improved testing, continuing education requirements, and increased penalties for misrepresentation related to licensing. 238 Tort reform Pre-suit screening and investigation: The bill established a ninety-day notice of intent to initiate litigation, with a required investigation by the defendant. Additionally, the plaintiff s attorney was required to certify that a reasonable investigation had been conducted prior to filing the claim. If the court determined that the certification was not made in good faith, and WHEREAS, medical injuries can often be prevented through comprehensive risk management programs and monitoring of physician quality, and WHEREAS, it is in the public interest to encourage health care providers to practice in Florida, NOW THEREFORE, 235 Chapter 85-175, Laws of Florida. 236 Chapter 85-175, section 23, Laws of Florida. 237 Chapter 85-175, sections 1, 5, Laws of Florida. 238 Chapter 85-175, section 9, Laws of Florida. 42

that no issue requiring the court s attention was presented, the court could award attorney fees and costs against the claimant s counsel, and submit the issue to the Florida Bar for disciplinary review. 239 Voluntary binding arbitration: The bill established a non-binding arbitration process for resolving claims of medical malpractice. The process allowed either party to request arbitration. The arbitration panel considered the evidence and decided the issues of liability and damages, and apportionment of responsibility among the parties. The arbitration panel was prohibited from awarding punitive damages. 240 Offer of judgment and demand for judgment: This bill allowed a defendant to file an offer of judgment that would subject the plaintiff to payment of the defendant s costs and attorney fees, if the final judgment was at least 25 percent less than the offer. 241 Changes to periodic payment of damages: The bill authorized the periodic payment of future losses exceeding $500,000. The bill provided for the periodic payments to be for the term upon which the jury calculated the damages, and the payments could be in equal or unequal amounts based on the needs of the plaintiff. Upon the plaintiff s death the remaining benefits were to be paid to the estate of the plaintiff in a lump sum. The defendant posted security for the payments at the time judgment was entered, and paid the attorneys fees due on the periodic payments at the time of the judgment. 242 Attorneys fees: A schedule of attorneys fees was set out in the bill to expire in 1988. The fee schedule began with a limitation on recoveries under $2 million at 15 percent of a settlement, where an offer was made and accepted within the ninety-day period, and extended to 45 percent where the case went to appeal. For cases resulting in more than $2 million, the fee was limited to 15 percent of the award. For all actions, a client could request the court to review the requested attorney fee to determine if it was illegal or excessive. 243 Mandatory settlement conference: The bill required a settlement conference at least three weeks before the case went to trial. 244 Joint and several liability: The bill codified joint and several liability and amended liability and prior practice to allocate any un-collectable portions 239 Chapter 85-175, sections 12, 14, Laws of Florida. 240 Chapter 85-175, sections 14, 15, Laws of Florida. 241 Chapter 85-175, section 16, Laws of Florida. 242 Chapter 85-175, section 13, Laws of Florida. 243 Chapter 85-175, section 17, Laws of Florida. 244 Chapter 85-175, section 19, Laws of Florida. 43

of a judgment across all solvent defendants in proportion to each defendant s portion of fault. The act included provisions for addressing joint and several liability in settlements and releases. 245 Insurance reform Mandatory insurance for healthcare providers: The bill required physicians and osteopathic physicians to maintain insurance equivalent to $100,000 per claim with an aggregate amount of not less than $300,000. To maintain staff privileges at a hospital, a physician had to have insurance equivalent to $250,000 per claim with an aggregate amount of not less than $750,000. 246 1986 MEDICAL MALPRACTICE LAW CHANGES In 1986, the Legislature identified a financial crisis in the entire liability insurance industry that it believed caused a serious lack of many lines of commercial liability insurance, including medical malpractice insurance, and a dramatic increase in the cost of insurance coverage. 247 In response, the Legislature passed the Tort Reform and Insurance Act of 1986. 248 The Legislature stated that the absence of insurance was seriously adverse to sectors of the Florida economy, and that if the problem was not addressed many people would not be able to purchase insurance, and thus many injured persons would be unable to recover damages for their economic or non-economic losses. 249 Further, the Legislature stated, the current tort system has significantly contributed to the insurance availability and affordability crisis. 250 Chapter 86-160, section 2, Laws of Florida, set out the legislative findings that were the basis for the bill: The Legislature finds and declares that a solution to the current crisis in liability insurance has created an overpowering public necessity for a comprehensive combination of reforms to both the tort system and the insurance regulatory system. This act is a remedial measure, and is intended to cure the current crisis, and to prevent the recurrence of such a crisis. It is the purpose of this act to ensure the widest possible availability of liability insurance at reasonable rates, to ensure a stable market for 245 Chapter 85-175, section 20, Laws of Florida. 246 Chapter 85-75, section 28, Laws of Florida. 247 Chapter 86-160, Laws of Florida. 248 Id. at section 1. 249 Id. 250 Id. 44

liability insurers, to ensure that injured persons recover reasonable damages, and to encourage the settlement of civil actions prior to trial. 251 As a result of these findings the Legislature enacted a series of reforms to the tort system and the insurance regulatory system, some of which impacted medical malpractice actions and the financial responsibility requirements for physicians. Those impacting medical malpractice cases included: Tort reform Cap on Damages: A $450,000 cap was placed on non-economic damage awards, and a cap of three times compensatory damages was placed on punitive damages, unless the plaintiff showed that a greater cap was not excessive. 252 The Supreme Court of Florida struck down the caps on noneconomic damages in 1987. 253 In Smith, 254 the court found that the statute did not offer any reasonable alternative remedy or commensurate benefit, and that there was no showing that the imposition of the cap was based on a legislative showing of an overpowering public necessity for the abolishment of such right, and no alternative method of meeting such public necessity can be shown. 255 Immunity for Emergency Room Services: Licensed physicians providing code blue services in an emergency room were provided immunity under the Good Samaritan law, 256 and contributory and joint and several liability provisions were modified for those physicians. 257 Contributory Negligence: Contributory negligence was modified to reduce the total award to a plaintiff by the amount of negligence assigned to the plaintiff. 258 Joint and Several Liability: The application of joint and several liability was modified, first to apply to awards under $25,000, and to apply in other cases only when the percentage of fault assigned to the defendant exceeded the fault assigned to the plaintiff. 259 251 Chapter 86-160, Laws of Florida. 252 Chapter 86-160, section 59, Laws of Florida. 253 Smith v. Department of Insurance, 507 So. 2d 1080 (Fla. 1987), reh g denied (June 2, 1987). 254 Id. 255 Id. at 1089. 256 Chapter 86-160, section 62, Laws of Florida. 257 Chapter 86-160, section 60, Laws of Florida. 258 Id.. 259 Id. 45

Financial Responsibility Requirements for Healthcare Providers: The financial responsibility requirements for physicians were modified to ease the burden on physicians. A physician was allowed to meet financial responsibility requirements with a letter of credit for the required amounts of coverage. Additionally, the bill allowed a physician to go bare, if notice was given to patients through the posting of a notice and the physician covered all judgments of malpractice up to the amount of the financial responsibility limits. 260 THE 1986 ACADEMIC TASK FORCE FOR REVIEW OF THE INSURANCE AND TORT SYSTEMS The 1986 bill also created within the Executive Office of the Governor, the Academic Task Force for Review of the Insurance and Tort Systems, to serve from July 1, 1986 through adjournment of the 1988 legislative session. 261 The 1986 task force was directed by the Legislature to investigate the insurance and tort systems, generally, as indicated by the title of the 1986 task force. However, as the 1986 task force began their review the members and staff recognized that medical malpractice was the area of the insurance and tort systems most in jeopardy. 262 In July of 1987, Governor Martinez informed Marshall Criser, Chairman of the 1986 task force, that a special session would be called in the fall of 1987 to focus on medical malpractice, and Governor Martinez requested the 1986 task force to assist in preparing for that special session. 263 In response to that request, the 1986 task force issued a Preliminary Fact- Finding Report on Medical Malpractice. 264 The interim report was intended to analyze the extent of the problems in Florida regarding the affordability and availability of medical malpractice insurance. 265 The report then discussed the underlying causes of the problems. 266 Specific 1986 Academic Task Force Findings Made in 1987 Affordability: The cost of medical malpractice liability insurance had increased dramatically during the previous eight years, with the largest share of this increase coming during the most recent two years. The extent 260 Chapter 86-160, sections 47-48, Laws of Florida. 261 Chapter 86-160, section 63, Laws of Florida. 262 Academic Task Force for Review of the Insurance and Tort Systems, Executive Summary of the Preliminary Fact-Finding Report on Medical Malpractice (Aug. 14, 1987). 263 Id. 264 Id. 265 Id. 266 Id. 46

of the problem of affordability varied greatly among medical specialties, and among South Florida physicians and those in the remainder of the state. Availability: At that time, the availability of liability insurance for physicians did not pose a serious problem in Florida. Cause of Price Increase: The primary cause of increased malpractice premiums was the substantial increase in loss payments to claimants. Profitability: During the period 1977 through 1985, medical malpractice insurers were slightly more profitable than the property-liability insurance industry as a whole. For the same time period, the profitability of the property-liability insurance industry was slightly less than that of American industrial and financial corporations. The profitability of insurance companies varied dramatically from year to year. Market Structure: The medical malpractice insurance market in Florida was highly concentrated, but that market concentration did not appear to have contributed to the problem of affordability of liability insurance. Impact of Underwriting Cycle: The rate of price increases during the period 1983 through 1987 was disproportionately dramatic, because of the insurance underwriting cycle. Over the course of an entire underwriting cycle, however, it was the increase in paid claims that caused higher premiums. Risk Classes: The practice of dividing Florida physicians into risk classes by specialty, and into two different geographic areas for rating and pricing purposes, contributed to the affordability problems for high risk specialty practitioners, particularly those in South Florida. Frequency of Claims Payments: The frequency of claims payments in Florida had increased 4.6 percent when adjusted for the increase in population. Amounts of Claims Payments: The average cost of paid claims had increased at a compound rate of 14.8 percent per year since 1975. The increase in the size of loss payments was a substantially more important factor in the overall increase in paid claims than was the increasing frequency of paid claims. Geographic Variations in Claims Payments: The frequency of paid claims per capita was twice as great in Dade and Broward Counties as in the rest of the state. The severity of claims also was greater in South Florida than in the remainder of the state, but the difference was not nearly so dramatic. 47

Variations Among Medical Specialties: There were considerable variations both in frequency and in severity of paid claims among medical specialties. Obstetrics and gynecology accounted for 13.5 percent of all paid claims, while specialties such as endocrinology, psychiatry and thoracic surgery each accounted for less than 2 percent of all paid claims. The largest average claims payments (1986) were in pediatrics, neurosurgery and thoracic surgery, with the average claim payment for pediatrics exceeding $350,000. Multiple Claims: Physicians with two or more paid claims accounted for nearly half of the amount of paid claims during the period 1975-1986. Physicians with two or more paid claims during this eleven-year period were not necessarily bad doctors. Changes in the Law: During the previous thirty years, there had been a national trend toward expanded legal liability for medical malpractice. The research conducted for this report did not reveal any major proplaintiff development in medical liability rules of law in Florida during the previous two decades, but overall changes in the environment of the legal system appeared to benefit plaintiffs. Attorneys Fees and Other Litigation Costs: Attorneys fees and other litigation costs represented approximately 40 percent of the total incurred costs of insurance carriers, with claimants receiving 43.1 percent of the total incurred costs. The total amount of attorneys fees was divided approximately equally between plaintiff s attorneys and defense attorneys. During the previous eleven years, the average legal cost of defending a malpractice claim had increased at an annual compound rate of 17 percent. Possible Explanations for Increased Claims Frequency: Increased claims frequency probably resulted both from a greater number of injuries occurring as a result of medical mal-occurrences, and from a much greater likelihood that injured plaintiffs would file claims. Any increase in the aggregate number of contacts between physicians and patients as the number of Florida residents and physicians both increased, and did not imply any increase in the frequency of medical mal-occurrences per physician. Professional Regulation of Medical Care: The Department of Business and Professional Regulation disciplined a relatively low percentage of physicians with multiple paid claims. 48

Specific 1986 Academic Task Force Recommendations Made in 1988 In 1988, the Academic Task Force made specific recommendations for changes to address the medical malpractice insurance crisis in response to the Governor s request for the task force to make such recommendations. 267 The recommendations were formulated to address the underlying causes of Florida s medical malpractice problems. 268 Healthcare Quality: Create a separate division, to be known as the Division of Medical Quality, within the Department of Business and Professional Regulation to discipline and license healthcare providers. This division would be funded, entirely or in part, by increases in professional licensing fees for healthcare providers. Discipline of Healthcare Practitioners/Providers: Substantially strengthen regulation of healthcare providers in Florida. This more robust professional regulation was to include, not only a commitment by the Legislature to provide more resources, but also an improved administrative structure that would enable the state agency to pursue vigorously its obligation to discipline physicians whose incompetence resulted in medical malpractice. Pass legislation to require the state healthcare regulatory division to assume greater responsibility for medical professional discipline and quality assurance at the local level. The division was to establish local quality assurance boards to identify healthcare provider competency and disciplinary problems at their source, and coordinate with peer review and quality assurance programs conducted by local medical societies and hospitals. Tort reform: Adoption of the Prompt Resolution of the Meritorious Medical Negligence Claims Plan that included the following provisions: o Claims against physicians, and denials of such claims, must be preceded by reasonable investigation and accompanied by an expert s written opinion. 267 Id. 268 Id. at 9. 49

o o o Incentives should be provided for claimants and healthcare providers to submit claims to a binding arbitration proceeding to determine the amounts of economic damages, non-economic benefits not to exceed $250,000, and reasonable attorneys fees. If the defendant refuses to submit a claim to arbitration, the plaintiff would retain all existing rights to a jury trial. If the plaintiff refused to submit a claim to arbitration, plaintiff s non-economic damages at trial would be limited to $350,000. This was intended to stabilize and reduce premiums for medical malpractice insurance and was to be accomplished through a balance of civil justice reforms aimed at addressing the 1986 task force findings. The 1986 task force anticipated there would be substantial cost savings from the reduced litigation expenses, and anticipated a reduction in frivolous claims and defenses as well as the limits on noneconomic damages. Do not adopt any plan that would eliminate recovery for all noneconomic damages and the right to jury trial, while requiring the claimant to prove fault. Rejection of any plan to limit recovery of non-economic damages to $100,000 in all tort cases, including claims for medical negligence, as an attempt to solve Florida s medical malpractice problems. Insurance Reform: Adoption of legislation allowing physicians and hospitals to participate in a no-fault plan limited to birth-related neurological injuries (NICA). Adoption of the Premium Impact Equity Plan. This plan would provide equity payments for those physicians who could demonstrate affirmatively that high medical malpractice premiums were creating genuine financial difficulties. The plan was to be financed solely by a small tax on all medical malpractice insurance premiums. Rejection of any risk class compression plan requiring a stateoperated (or other mandatory) insurance pool. Rejection of any proposal that uses existing tax revenues, or any other general revenues, to subsidize high medical malpractice insurance premiums. 50

1988 MEDICAL MALPRACTICE LEGISLATION In a 1988 special session, the Legislature passed chapter 88-1, Laws of Florida, to address medical malpractice issues in Florida. The preamble to the bill enumerates many of the same issues facing Florida today, such as the inability of practitioners to find and purchase reasonably priced liability insurance, the rising costs of litigation, and the arbitrary nature of damage awards. The Legislature declared in this bill, the primary cause of increased medical malpractice liability insurance premiums has been the substantial increase in loss payments to claimants caused by tremendous increases in the amounts of paid claims. Discipline of healthcare providers The centerpiece of the bill was healthcare practitioner regulatory reform. The legislative goal was expressed in the finding that: the strict regulation of healthcare practitioners is imperative to maintaining the quality of health care delivered in the state. It is, therefore, the intent of the Legislature to encourage healthcare practitioners to report possible instances of malpractice by offering them protection from civil suit. It is, further, the intent of the Legislature to facilitate the maintenance of medical practice in Florida by promptly and fairly disciplining healthcare practitioners whose performance is outside acceptable limits. Division of Medical Quality Assurance: To this end, the bill created, staffed, and funded the Division of Medical Quality Assurance (MQA) within the Department of Business and Professional Regulation (DBPR) 269 to concentrate resources in identifying and disciplining unsafe professionals. All regulatory boards that licensed health professionals were established within this new division. 270 Included among the statutory authority and responsibilities granted to this new division, were the following: Established a disciplinary training program for division staff and board members. 269 This Division was subsequently moved to the Florida Department of Health in 1997. 270 Chapter 88-1, sections 2-44, Laws of Florida. 51

Mandated facilities to report to MQA within ten days, any final disciplinary action against staff, and to report any physician who resigned or withdrew from practice to avoid such disciplinary action. Required all adverse incident reports by facilities to be forwarded to MQA for review for potential disciplinary action against practitioners involved. Required the Secretary of DBPR to review for emergency suspension any practitioner who has been found by a probable cause panel to practice below the standard of care in the treatment of three or more patients. Subjected to discipline any physician, who knew a second physician, working in the same facility, had violated the Medical Practice Act. Allowed MQA to petition circuit courts to enjoin from practice any physician who presented a danger to patients. Required unlicensed residents, house physicians and interns to register every two years, and disallowed such registration for persons under investigation. Mandated the review of all pre-suit notices, and closed claims for damages against licensees, to determine if disciplinary action should be taken. Tort reform Pre-suit investigation: The pre-suit investigation provisions adopted in 1976 were amended to require the plaintiff to investigate the claim prior to filing a notice of claim, instead of prior to filing suit, so the defendant would have the physician affidavit to use in evaluating the claim. The defendant was then required to obtain a similar affidavit if claiming no malpractice occurred. Additionally, the bill provided for sanctions against attorneys who failed to comply with these requirements, and against medical professionals who completed an affidavit without reasonable investigation. 271 Pre-suit arbitration: The pre-suit arbitration process was amended to its current format to allow the parties to select pre-suit arbitration, and when selected by or agreed to by the plaintiff, it was binding with limited appeal rights. When offered by the defendant, the bill provided caps on noneconomic damages in the arbitration process, and when the claimant 271 Chapter 88-1, sections 50-53, Laws of Florida. 52

refused arbitration. All defendants who participated in arbitration were jointly and severally liable to the claimant for damages. 272 Immunity for emergency room services absent reckless disregard: Absent any reckless disregard, civil immunity in hospital emergency rooms was altered to provide immunity for hospitals, hospital employees, and persons licensed to practice medicine and rendering medical care, in an emergency room. The immunity was in effect only while the patient was being treated for an emergency, and did not apply after the patient had been stabilized, unless surgery was required. 273 Expert testimony: Expert testimony against a physician, osteopath, podiatrist, or chiropractor, who provided emergency medical services in a hospital emergency department, was limited to testimony from other like healthcare providers who had substantial professional experience within the preceding five years while assigned in an emergency department. Further, the bill requested the Florida Supreme Court to develop a standard jury instruction for use in medical negligence cases involving alleged negligence occurring in hospital emergency rooms. 274 Payment of future economic damages: The bill established a periodic payment provision specific to medical malpractice. The bill provided for payment of an award for future economic damages to be made as a lump sum reduced to present value; or, at the request of either party, the court would order the award to be paid by periodic payments offset by collateral sources. Where periodic payments were made the defendant posted a bond or other security to assure full payment. 275 Insurance reform NICA: To address particular problems of obstetricians found by the 1986 task force, the bill created the Florida Birth-Related Neurological Injury Compensation Act (NICA). The plan provides a no-fault compensation plan for specified birth-related injuries. 276 With the exception of the review of pre-suit notices, which was terminated by legislation on July 1, 2000, all of the above measures are still in effect. 272 Chapter 88-1, sections 54-58, Laws of Florida. 273 Chapter 88-1, section 46, Laws of Florida. 274 Chapter 88-1, section 78, Laws of Florida. 275 Chapter 88-1, section 47, Laws of Florida. 276 Chapter 88-1, sections 60-75, Laws of Florida. 53

1988 Proposed Constitutional Amendment On Caps In 1988, a proposed constitutional amendment petition, proposed by the Florida Committee for Liability Reform, to place a $100,000 cap on noneconomic damages was defeated at the polls. 277 1990s Medical Malpractice Law Changes 1999 Tort Reform Act It was a full ten years before even general tort reform, again, became a major issue warranting the Legislature s attention. In 1998, the Legislature began examining the need for general tort reform, and in 1999, a comprehensive package of tort reform legislation was passed. While chapter 99-225, Laws of Florida, did not specifically address medical malpractice, a few provisions did impact the apportionment of fault, and the collection of punitive damages in medical malpractice cases. Tort reform Joint and Several Liability: The bill amended joint and several liability to further limit its application to damage awards. It was completely eliminated for all non-economic damages, and its application to economic damages was based on a scale of fault. Where the defendant had a lower percentage of fault than the plaintiff, or the defendant was 10 percent or less at fault, joint and several liability was eliminated for economic damages. When the defendant was found more than 10 percent, but less than 25 percent at fault, joint and several liability was capped at $200,000. When the defendant was found to be 25 percent or more at fault but not more than 50 percent at fault, joint and several liability was capped at $500,000. When the defendant was found to be more than 50 percent at fault, joint and several liability was capped at $2,000,000. 278 Unknown Defendant Defense: The bill also addressed when a defendant might claim that a non-party was liable for the injury to the plaintiff. In order to claim a non-party to be at fault, the defendant must affirmatively plead that defense, and absent a showing of good cause, the defendant must identify the non-party. To include the non-party on the verdict form, the defendant must prove the non-party s fault in causing the claimant s injuries by a preponderance of the evidence. 279 277 Florida Constitution Revision Commission website (www.law.fsu.edu/crc/conhist/1988amen.html). 278 Chapter 99-225, section 27, Laws of Florida. 279 Id. 54

Punitive Damages: Punitive damages were significantly altered to limit claims for punitive damages, and to limit the amount of any award. The standard of culpability required to hold a defendant liable for punitive damages was changed. A defendant might only be liable for punitive damages, if the plaintiff proved by clear and convincing evidence that the defendant was personally guilty of intentional misconduct or gross negligence. Intentional misconduct was defined as conduct the defendant knew was wrongful, and there was a high probability it would result in injury or damage to the claimant, but intentionally pursued anyway. The term gross negligence was defined as conduct so reckless or wanting in care that it constituted a conscious disregard or indifference to the life, safety, or rights of persons exposed to such conduct. Further, the legislation provided for structured caps on punitive damages. These provisions were made applicable to arbitration proceedings. 280 2000s Medical Malpractice Law Changes The Florida Commission on Excellence in Health Care The Florida Commission on Excellence in Health Care was created in 2000 by chapters 00-256 and 00-367, Laws of Florida, to assist in the development of a comprehensive statewide strategy for improving the healthcare delivery system. The Commission report addressed improvements in reporting standards, data collection and review, and quality measurement. It recommended the Legislature provide for the implementation of public reporting systems so clinical outcomes would be available to consumers, and recommended the creation of a Center for Public Safety and Excellence in Health Care to collect and analyze healthcare errors, adverse incidents, and near misses. 2001 Legislation Chapter 01-277, Laws of Florida, was enacted by the 2001 Legislature as a comprehensive healthcare package. Included were provisions to implement the recommendations of the Commission on Excellence in Health Care. These recommendations included: Continuing Education: The 2001 act required all healthcare personnel in hospitals and ambulatory surgical centers complete a two-hour course approved by the Board of Medicine relating to the prevention of medical errors. 281 280 Chapter 99-225, sections 21-25, Laws of Florida. 281 Chapter 01-277, Laws of Florida. 55

Acts for Which a Physician May Be Disciplined: The 2001 act added specific standards of care, including wrong site surgery and leaving a foreign body in the patient, to the acts for which a licensee may be disciplined. 282 Risk Management ement: The 2001 act required risk management programs in hospitals and ambulatory surgical centers implement measures to minimize surgical mistakes. 283 Notice Regarding Disciplinary Investigations: The 2001 act allowed the Department of Health, if requested, to notify patients, or their legal representatives, of the status of disciplinary investigations, and to provide any reports from experts held by the Department. 284 Notice to Public: The 2001 act required the Department of Health maintain a website that contains copies of healthcare regulatory board newsletters, information relating to adverse incident reports, and information about error prevention and safety strategies. 285 Access to Medical Malpractice Insurance Like the rest of the nation, Florida is again facing a crisis in the availability and affordability of medical malpractice insurance that is causing a critical reduction in the quality of healthcare available in Florida. The state has lost several major carriers of medical malpractice insurance, and has seen major reductions in the availability of insurance products from the remaining providers with astronomical price increases for the coverage offered. During 2001 and 2002, five of the major insurance companies have withdrawn from the Florida market. Table 2 listing the companies includes the reason each insurance company provided for leaving the market, and the loss ratio for each company for the years 1999 through 2001. 286 With the loss of American Physicians Assurance Corporation, St. Paul Fire & Marine Insurance Company, and American Healthcare Indemnity Company, Florida lost coverage for 12.3 percent of the total market in Florida. 287 282 Id. 283 Id. 284 Id. 285 Id. 286 The loss ratio is the amount of premiums collected divided by the claims paid. 287 Table 2. 56

Of the remaining twelve top companies listed in Table 3, only four are accepting new business generally, and three are accepting only specific types of new business. These companies were writing 64 percent of the insurance in Florida. This means that companies previously writing only 23.7 percent of Florida s medical malpractice business are trying to cover at least the 12.3 percent of the business from insurance companies leaving the state, and any new business for Florida. 288 The speed with which lack of insurance has become a problem is further illustrated by the tremendous growth in the use of the insurer of last resort, the Joint Underwriting Association. Table 4 shows that in November 2001 only eighteen doctors were covered by the JUA; by November 2002 that number had increased to 460. 288 Table 3. 57

TABLE 2 Physicians and Surgeons Liability Insurers (Medical Malpractice) Departures from Florida Market Company Year Left Florida Reason 2001* 2001* 2000* 2000* 1999* 1999* Direct Written Premium Loss Ratio Direct Written Premium Loss Ratio Direct Written Premium Loss Ratio American Healthcare Indemnity Company March-03 1. Notified the Department pursuant to section 624.430, Florida Statutes, they would no longer be writing. Effective 3/03 20,235,101 157.5% 18,275,286 88.1% 12,743,355 75.6% American Physicians Assurance Company 2002 Frontier 2001 PHICO 2002 2. Announced on 6/24/02 that they were pulling out of Florida due to legal climate and inability to write business profitably. 26,690,239 120.2% 20,181,528 92.6% 13,857,344 62.3% 3. COA was suspended in Florida on 6/21/2001. 0 0.0% 2,228,932 22.9% 4,090,855 58.4% 4. Company placed in liquidation in Pennsylvania on 2/1/2002. 0 0.0% 15,786,263 157.1% 24,062,278 151.7% St. Paul Fire & Marine Insurance Company 2002 5. Announced on 12/12/2001 that they would exit medical malpractice business nationwide to improve profitably. 24,422,097 170.3% 12,744,190 227.5% 21,372,913 125.3% *Direct Written Premium Reported in Annual Statement 12/31/01 (includes all medical specialties and facilities). 1. Source: Letter dated 10/4/2002 from American Healthcare Indemnity Company advises intention to leave market March 2003. 2. Source: Press release from Business Insurance. 3. Source: CORE - DOI Database. 4. Source: CORE - DOI Database. 5. Source: The St. Paul News Release website. 58

TABLE 3 Professional Liability Insurance (Medical Malpractice) Status of Writing New Business for Physicians and Surgeons as of November 30, 2002 Top 15 Writers and Other Known Active Writers Ranking Name Market Share* Type Have rates currently filed with Department Accepting new business 1 First Professionals Insurance Company 19.10% Company yes no, will add to existing groups 2 Health Care Indemnity, Inc. 15.50% Company yes yes, their hospital (Hospitals Only) group only 3 Pronational Insurance Company 9.60% Company yes yes 4 Truck Insurance Exchange 6.10% Company yes no 5 The Medical Protective Company 5.40% Company yes yes 6 American Physicians Assurance Corporation** 4.60% SI Fund yes no new business; intend to withdraw 7 MAG Mutual Insurance Company 4.60% Company yes yes 8 St. Paul Fire & Marine Insurance Co.** 4.20% Company yes no 9 Continental Casualty Company 4.10% Company yes no doctors yes nurses, others 10 The Doctors' Company, An Interinsurance 4% Company yes yes Exchange 11 TIG Insurance Company 3.70% Company yes yes surgeons no physicians 12 Clarendon National Insurance Company 3.70% Company yes no 13 American Healthcare Indemnity Company** 3.50% Company yes no effective 3/03 14 Chicago Insurance Company 2% Company yes no 15 Anesthesiologists' Professional Assurance Co. 2% Company yes no, will add Company (Anesthesiologists Only) to existing groups FL Medical Malpractice Joint Underwriting Residual yes yes Assoc. Market Ophthalmic Mutual Insurance Co. - RRG Risk yes yes (Ophthalmologists Only) Retention Preferred Physicians Medical - RRG Risk yes yes (Anesthesiologists Only) Retention *Direct Written Premium as reported in 12/31/01 Annual Statement. (includes all medical specialties and facilities) **Companies in italics have indicated departure from the Florida market. 59

TABLE 4 Florida Medical Malpractice Joint Underwriting Association 289 Policy Count for MD s and DO s November 01 18 December-01 25 January-02 46 February-02 63 March-02 72 April-02 95 May-02 117 June-02 133 July-02 181 August-02 192 September-02 311 October-02 415 November-02 460 Table 5 illustrates the growth of Florida s medical malpractice insurance industry during the late-1990s into 2001. There was a high of sixty-six insurance companies active in Florida in 1999. Since that time, the number of companies has decreased such that only twelve companies are writing over 99 percent of the business in Florida with only four of the top companies writing new general business. 290 These charts list the insurance companies collecting premiums in Florida since 1999, with the companies ranked from the highest to the lowest premiums collected in 2001. The charts dramatically illustrate the drop in insurance companies over the past three years. In April 2002, the American Medical Association issued a report declaring Florida one of twelve states in the midst of a medical liability insurance crisis. Many Florida doctors are reporting that their insurance premiums have doubled or tripled in the past two years. Their plight was demonstrated in an October 2001 survey of rates in Miami/Fort Lauderdale, and five other metropolitan areas, conducted by the Medical Liability Report. (The other areas were Detroit, Chicago, Dallas/Houston, New York City/Long Island and Los Angeles.) That study reported: Florida internists paid the highest rates among internists, ranging from a low of $17,611 to a high of $50,744. 289 Department of Insurance report (Nov. 2002). 290 See Table 2. 60

Florida general surgeons paid the second highest rates, ranging from $57,762 to $126,599. Florida obstetrician/gynecologists paid the highest rates of the obstetricians and gynecologists surveyed, ranging from $108,043 to $202,949. 61

Table 5 2001 Med Mal Dir Prem Written 2001 Med Mal Dir Pre Earned 2001 Med Mal Dir Losses Incurred 2001 Med Mal Loss Ratio 2000 Med Mal Dir Prem Written Company Name First Professionals Ins Co 109,672,505 89,044,736 60,151,888 67.6% 69,981,763 65,649,122 36,456,829 55.5% 70,073,897 70,853,737 30,410,053 42.9% Health Care Ind Inc 88,970,154 88,970,154 95,305,166 107.1% 79,146,087 79,146,087 55,599,597 70.2% 74,707,458 74,707,458 61,986,675 83.0% Pronational Ins Co 55,259,931 57,149,827 51,412,895 90.0% 57,609,425 56,801,083 82,177,140 144.7% 57,114,420 56,442,471 10,419,812 18.5% Truck Ins Exch 35,245,611 28,668,519 15,102,796 52.7% 23,585,973 23,381,222 40,439,254 173.0% 12,885,174 15,432,591 31,141,555 201.8% Medical Protective Co 31,096,627 30,731,371 33,677,746 109.6% 25,368,190 21,618,073 39,506,544 182.7% 23,368,640 19,921,593 11,901,815 59.7% American Physicians Assur Corp 26,690,239 21,451,709 25,789,305 120.2% 20,181,528 17,094,630 15,834,126 92.6% 13,857,344 9,682,763 6,029,043 62.3% MAG Mut Ins Co 26,525,321 19,808,077 22,262,490 112.4% 11,788,918 9,493,590 7,392,550 77.9% 6,612,025 8,121,409 10,123,100 124.6% St Paul Fire & Marine Ins Co 24,422,097 21,024,763 35,808,730 170.3% 12,744,190 12,941,477 29,444,458 227.5% 21,372,913 25,902,809 32,443,850 125.3% Continental Cas Co 23,542,376 22,609,659 5,398,082 23.9% 7,661,250 6,689,494 (1,261,220) -18.9% 4,970,235 6,933,732 5,719,685 82.5% Doctors Co An Interins Exchn 23,223,681 20,422,981 10,707,616 52.4% 15,855,742 12,617,508 5,576,532 44.2% 8,450,127 5,158,899 3,545,474 68.7% TIG Ins Co 21,469,578 21,880,706 15,938,329 72.8% 18,604,025 16,545,926 11,658,616 70.5% 15,081,057 14,017,435 7,830,855 55.9% Clarendon Natl Ins Co 21,456,110 24,438,787 39,960,548 163.5% 20,192,134 16,650,086 16,648,711 100.0% 17,981,931 16,871,289 11,309,121 67.0% American Healthcare Ind Co 20,235,101 16,151,733 25,445,948 157.5% 18,275,286 13,121,060 11,561,639 88.1% 12,743,355 11,824,723 8,940,951 75.6% Chicago Ins Co 12,461,372 10,546,455 12,555,545 119.0% 7,850,374 6,719,822 5,161,593 76.8% 5,052,089 4,586,244 3,402,503 74.2% Anesthesiologists Pro Assur Co 11,835,465 10,699,479 3,539,170 33.1% 8,812,061 8,332,314 5,091,966 61.1% 7,465,806 7,122,492 3,628,839 50.9% Zurich American Ins Co 7,617,101 12,588,915 25,236,100 200.5% 14,358,978 11,176,269 28,761,206 257.3% 13,125,285 12,149,144 16,125,585 132.7% 2000 Med Mal Dir Pre Earned 2000 Med Mal Dir Losses Incurred 2000 Med Mal Loss Ratio 1999 Med Mal Dir Prem Written 1999 Med Mal Dir Pre Earned 1999 Med Mal Dir Losses Incurred American Cas Co Of Reading PA 4,828,738 5,460,507 15,265,523 279.6% 6,091,375 6,753,200 83,204 1.2% 6,561,361 6,814,985 14,179,758 208.1% Medical Assur Co Inc 4,748,067 6,923,930 2,917,199 42.1% 7,414,448 6,410,726 1,865,946 29.1% 3,993,603 5,022,572 2,783,222 55.4% Firemans Fund Ins Co 4,306,718 3,719,127 2,147,009 57.7% 1,261,151 1,053,226 776,676 73.7% 1,501 1,501 167,281 11144.6% Harbor Specialty Ins Co 3,577,711 3,130,497 2,438,083 77.9% - - - 0.0% - - - 0.0% NCMIC Ins Co 3,221,697 2,926,417 (108,985) -3.7% 2,739,235 2,745,040 900,126 32.8% 2,710,058 2,840,440 619,627 21.8% American Continental Ins Co 2,515,415 8,519,103 21,726,601 255.0% 15,177,864 14,911,499 68,482,569 459.3% 17,650,592 17,048,975 5,997,640 35.2% Legion Ins Co 2,464,430 2,266,809 2,353,200 103.8% 2,597,484 2,084,319 1,214,946 58.3% 961,926 1,485,250 3,418,506 230.2% Ace American Ins Co 1,695,846 1,501,882 1,119,254 74.5% 1,058,425 637,922 (37,321) -5.9% 264,246 215,039 66,904 31.1% Gulf Ins Co 1,536,909 1,659,953 2,243,578 135.2% 1,783,470 1,750,743 600,716 34.3% 1,824,791 1,693,975 2,055,132 121.3% Cincinnati Ins Co 1,068,916 895,455 (198,771) -22.2% 741,307 746,353 298,481 40.0% 735,195 737,913 665,290 90.2% Executive Risk Ind Inc 843,225 1,109,823 2,863,729 258.0% 1,946,504 1,721,801 3,082,116 179.0% 1,243,690 1,091,131 581,355 53.3% PACO Assur Co Inc 493,747 189,124-0.0% - - - 0.0% - - - 0.0% Westport Ins Corp 464,552 420,165 555,596 132.2% 183,838 175,049 24,939 14.2% 139,392 131,796 (401) -0.3% St Paul Mercury Ins Co 445,701 947,995 (45,410) -4.8% 991,794 701,423 7,810,017 1113.5% 688,296 715,412 10,304,841 1440.4% Lion Ins Co 435,418 556,913 3,211,788 576.7% 550,608 566,952 1,445,236 254.9% 884,975 303,292 215,000 70.9% St Paul Guardian Ins Co 427,533 571,934 4,387,539 767.1% 1,560,427 2,543,116 10,851,298 426.7% 1,498,684 3,437,219 4,531,489 131.8% Connecticut Ind Co 368,422 342,100 76,530 22.4% 338,905 257,483 40,791 15.8% 108,731 33,133-0.0% Granite State Ins Co 366,510 355,814 1,162,430 326.7% 344,304 322,409 196,636 61.0% 280,273 132,617 1,278,693 964.2% Athena Assur Co 350,252 440,000 908,730 206.5% 945,801 1,596,217 3,593,057 225.1% 2,163,918 2,297,639 1,825,485 79.5% American Home Assur Co 264,868 179,213 (674) -0.4% - - - 0.0% 100,000 447,398 (202,367) -45.2% National Union Fire Ins Co Of Pitts 186,737 223,577 8,033,243 3593.1% 374,626 1,269,119 8,536,785 672.7% 2,468,114 3,461,738 8,639,937 249.6% TIG Ind Co 152,070 220,934 624,110 282.5% 261,085 245,785 308,179 125.4% 185,387 104,399 73,821 70.7% General Ins Co Of Amer 135,311 104,883 36,276 34.6% 47,605 32,478 (10,538) -32.4% 7,246 5,120 13,332 260.4% National Fire Ins Co Of Hartford 56,211 619,348 8,949,312 1445.0% 3,445,058 2,977,794 (1,328,018) -44.6% 977,662 861,878 1,726,026 200.3% Church Mut Ins Co 43,062 30,669 51,106 166.6% 23,950 23,880 152,658 639.3% 24,475 24,313 65,902 271.1% Lawrenceville Prop & Cas Co 34,226 32,493 25,011 77.0% 26,182 24,801 16,232 65.4% - - - 0.0% Company explanations for abnormal loss ratios include the following: (1) several large paid losses in a given year, (2) only one or two polices written in respective year, (3) reserve strengthening, and (4) decreases in the amount of new medical malpractice business written, due to an unfavorable pricing environment and unacceptable loss experience 1999 Med Mal Loss Ratio 62

2001 Med Mal Dir Prem Written 2001 Med Mal Dir Pre Earned 2001 Med Mal Dir Losses Incurred 2001 Med Mal Loss Ratio 2000 Med Mal Dir Prem Written Company Name National Cas Co 11,631 178,765 1,147,391 641.8% 484,414 485,078 1,974,421 407.0% 453,257 454,467 292,509 64.4% National Surety Corp 5,143 3,392-0.0% 2,160 630-0.0% - - - 0.0% Insurance Co Of The State Of PA 1,987 3,076 (7,543) -245.2% 4,385 5,117 (7,446) -145.5% 9,457 15,177 (11,935) -78.6% Colony National Ins Co 1,875 2,454 (105,377) -4294.1% 2,042 75,148 98,400 130.9% 219,817 302,389 (30,952) -10.2% Nationwide Mut Fire Ins Co 1,787 1,787 (391) -21.9% 1,774 2,048 207 10.1% 2,061 2,237 (169) -7.6% Kemper Cas Ins Co 1,443 544-0.0% - - - 0.0% - - - 0.0% Bankers Standard Ins Co 882 4,526 (1,209) -26.7% 8,133 6,383 (6,646) -104.1% 4,206 7,054 (2,928) -41.5% Nationwide Mut Ins Co 512 918 100 10.9% 918 1,443 (656) -45.5% 2,295 2,283 267 11.7% American States Ins Co 486 486 154 31.7% 486 486-0.0% 486 486 (2) -0.4% Reciprocal of America - - - 0.0% 5,157 645 (15,013) -2327.6% - - - 0.0% Valley Forge Ins Co - - - 0.0% 739 739-0.0% - - - 0.0% Continental Ins Co - - - 0.0% 1,307 1,307 163,205 12487.0% - - - 0.0% Phico Ins Co - - - 0.0% 15,786,263 22,919,498 36,004,638 157.1% 24,062,278 19,204,861 29,136,738 151.7% Unisource Ins Co - - - 0.0% 1,709,190 4,456,439 6,187,349 138.8% 7,454,123 7,672,664 12,153,382 158.4% Genesis Ins Co - - - 0.0% 35,983 35,982 12,000 33.4% 32,424 37,699 26,000 69.0% Insurance Co Of North Amer - - - 0.0% 4,802 3,960 786,052 19849.8% - - - 0.0% 2000 Med Mal Dir Pre Earned 2000 Med Mal Dir Losses Incurred 2000 Med Mal Loss Ratio 1999 Med Mal Dir Prem Written 1999 Med Mal Dir Pre Earned 1999 Med Mal Dir Losses Incurred Travelers Ind Co Of IL - - - 0.0% 231,102 231,102 1,565,948 677.6% 141,914 998,579 314,138 31.5% Frontier Ins Co - - - 0.0% 2,228,932 3,429,691 786,007 22.9% 4,090,855 5,882,715 3,435,236 58.4% Transportation Ins Co - - - 0.0% 15,901 20,144-0.0% 7,687 23,953 12,763 53.3% Valiant Ins Co - - - 0.0% - - - 0.0% 89 89-0.0% Fremont Ind Co - - - 0.0% - - - 0.0% 21,660 29,119-0.0% Ace Fire Underwriters Ins Co - - - 0.0% - - - 0.0% 309,689 365,073 4,297,778 1177.2% Nationwide Prop & Cas Ins Co - - - 0.0% - - - 0.0% 308 308 5 1.6% Reliance Natl Ind Co - - - 0.0% - - - 0.0% 134,402 140,935 (49,232) -34.9% Century American Cas Co - - - 0.0% - - - 0.0% 11,077 14,146 958,668 6777.0% Reliance Natl Ins Co - - - 0.0% - - - 0.0% 1,138 1,033 13 1.3% Odyssey American Reins Co - - - 0.0% - - - 0.0% 2,760 58,117 310,622 534.5% Pennsylvania General Ins Co - - - 0.0% - - - 0.0% 2,192 1,331 24,070 1808.4% Reliance Ins Co - - - 0.0% - - - 0.0% 100,637 99,419 (73,780) -74.2% OneBeacon Ins Co - - - 0.0% - - - 0.0% 2,409 1,939 20,870 1076.3% Illinois Natl Ins Co - - - 0.0% - - - 0.0% 28,524 125,480 (77,816) -62.0% Interstate Ind Co - - - 0.0% - - - 0.0% 10,400 10,400 1,095 10.5% Travelers Ind Co - - - 0.0% - - - 0.0% - - - 0.0% American Guarantee & Liability Ins - - - 0.0% - - - 0.0% - - - 0.0% Century American Ins Co - - - 0.0% - - - 0.0% - - - 0.0% Ace Prop & Cas Ins Co - - - 0.0% - - - 0.0% - - - 0.0% Home Ins Co - - - 0.0% - - - 0.0% - - - 0.0% Glens Falls Ins Co - - - 0.0% - - - 0.0% - - - 0.0% Kansas City Fire & Marine Ins Co - - - 0.0% - - - 0.0% - - - 0.0% Century Ind Co - - - 0.0% - - - 0.0% - - - 0.0% Fidelity & Cas Co Of NY - - - 0.0% - - - 0.0% - - - 0.0% Travelers Ind Co Of Amer - - - 0.0% - - - 0.0% - - - 0.0% Company explanations for abnormal loss ratios include the following: (1) several large paid losses in a given year, (2) only one or two polices written in respective year, (3) reserve strengthening, and (4) decreases in the amount of new medical malpractice business written, due to an unfavorable pricing environment and unacceptable loss experience 1999 Med Mal Loss Ratio 63

Testimony About The Florida Problem Consumer Perspective Upon being injured, the victim of medical malpractice is forced to step into the legal system in order to receive some type of remedy. At the same time, patients are aware of the need to have access to affordable healthcare. The Task Force heard that consumers want a system that ensures quality medical coverage is available in Florida. 291 Consumers also want a system that minimizes medical errors; and, when they are made, to hold medical care providers responsible. 292 Finally, consumers want a system that allows physicians to learn from their mistakes. 293 Some consumers argue that this so-called crisis is nothing more than the underwriting cycle of the insurance industry, and driven by the same factors that caused the crises in the 1970s and 1980s. 294 According to consumer activist, Ms. Joanne Doroshow, with each crisis, there has been a severe drop in the investment income for insurers, which has been compounded by sever under-pricing of insurance premiums in the prior years. 295 Ms. Doroshow explained, during years of high interest rates or excellent insurer profits that are invested for maximum return, the insurance companies engage in fierce competition for premium dollars by selling under-priced premiums and insuring very poor risks. 296 Then, Ms. Doroshow noted, when investment income drops, either due to decreases in interest rates or the stock market, or due to low income resulting from unbearably low premiums, the insurance industry responds by sharply increasing premiums and reducing coverage. 297 Thus, tort reform changes will do nothing to alleviate the insurance crisis, but will impact significantly injured patients. 298 The tort reform changes in the 1980s had nothing to do with the flattening of rates. The flattening was caused instead by modulations in the insurance cycle throughout the country. 299 291 Nick Bartol, testimony, Oct. 21, 2002, pg. 138. 292 Id. at 112. 293 Id. 294 Joanne Doroshow, testimony before the U.S. House Subcommittee on Commercial and Administrative Law, Oversight Hearing on Healthcare Litigations Reform, Does Limitless Litigation Restrict Access To Health Care? (June 2, 2002). 295 Id. at 2. 296 Id. at 6. 297 Id. 298 Id. 299 Id. at 3. 64

To illustrate this and support their claim, the Center for Justice and Democracy presented actuarial data to the Task Force. The data show tort reform changes in California, including the cap on damages, did not cause the rate of change in insurance premiums in California to be significantly different from the rate of change in the rest of the country. 300 The Center further argued that, although the California law had little impact on premiums, it had a devastating impact on people injured by malpractice. 301 Testimony to the Task Force meetings included the following statements regarding consumer concerns: The 1999 Institute of Medicine (IOM) report stated that 44,000 to 98,000 patients die every year as a result of medical errors in hospitals. 302 Evidence indicates that between 8 to 15 percent of companies are dropping health insurance coverage for their employees. In small companies, those with between two and fifty employees, the figure is much higher. 303 About 14 to 15 percent of Americans are uninsured. Last year there were 142 million Americans who had employer-sponsored coverage. If one in seven of them fell out of the system, the number of uninsureds would increase by approximately 20 million people, which would be a 50 percent increase. 304 The message from the IOM report regarding patient safety has become distorted. A Kaiser Family Foundation survey done after the release of the IOM report found that about one-third of the public believes that the IOM report was about bad doctors and that the necessary solution is more punitive malpractice laws to punish those doctors. 305 In the 1990s, numerous insurance companies with no experience in medical malpractice entered Florida s medical malpractice insurance market. Their inexperience led them to take bigger risks than other companies, which drove up costs, because of their mishandling of claims. These insurers also kept rates artificially low as they tried to 300 Id. at 4. J. Robert Hunter, former Texas Insurance Commissioner and Federal Insurance Administrator under Presidents Ford and Carter, compared national malpractice premiums trends to those in California. 301 Id. at 4. 302 Becky Cherney, testimony, Oct. 21, 2002, pgs. 123-125. 303 Brian Klepper, Ph.D., testimony, Nov. 4, 2002, pgs. 231-232. 304 Id. at 233-234. 305 Michelle Mello, J.D., Ph.D., testimony, Nov. 4, 2002, pg. 293. 65

undercut the established insurers, and write as many policies as possible to better turn this capital into investment income. 306 At the same time doctors are being squeezed by their malpractice insurers, they also are facing reduced reimbursement rates from Medicare and HMOs. 307 According to the National Practitioner Data Bank, the average payout to victims of medical negligence in Florida for the year 2000 is only $259,000. This places Florida twenty-first in the nation in average payout to victims. 308 Punitive damages are very rare. According to the Bureau of Justice Statistics, only 1.1 percent of medical malpractice plaintiffs, who won their cases, were awarded punitive damages in 1996. 309 According to the American Medical Association, states without caps have 4.4 percent more physicians per capita than those states that do have caps on damages. Also, the average malpractice premium for doctors of internal medicine is 2.2 percent higher in states that cap damages than in states that do not cap damages. 310 In Nevada, even after caps were passed, the insurance companies stated that they would not bring down rates. In Mississippi, they said the same thing. Even after tort reform was enacted in Florida in 1986, capping non-economic damages, Aetna and St. Paul said they were not going to reduce rates. 311 Filings by 104 insurers in Florida in 1986 showed that out of 277 filings, 175, or 63 percent, showed no savings from tort reform, while none showed savings of more than 10 percent. 312 In a 1999 study, trends in insurance rates since the mid-1980s in every state in the country were plotted against and correlated with the exact tort reforms that had passed. The study found absolutely no correlation between the enactment of tort reform and insurance rates. 306 Academy of Florida Trial Lawyers, Medical Malpractice: The Facts Behind the Insurance Rate Increases, 1-2. 307 Id. at 2. 308 Id. at 3. 309 Id. 310 Id. 311 Joanne Doroshow, testimony, Oct. 21, 2002, pg. 150. 312 Id. 66

Many states that had enacted severe tort reform saw approximately the same kind of rate increases as states that did nothing. 313 The cost of medical negligence has been estimated variously at $20 billion to $29 billion a year, depending on the source. The total cost of medical liability insurance in this country is $6.4 billion, or approximately one-third the cost of medical errors. 314 There are approximately 710,000 adverse events a year. However, there are only 10,000 payments made a year to plaintiffs for medical malpractice. 315 Physicians tend to misjudge their legal risks on a radical scale. Physicians have about a 2 percent risk of being sued over a negligent injury. Nonetheless, when physicians are surveyed about their perceived risk, they believe it is closer to 60 percent. Additionally, physicians underestimate the link between injuring their patients negligently, and being sued. 316 A company with 5,000 active employees and approximately 1,500 retirees is forecasting double-digit benefit cost increases for the next five years. Its costs will escalate from $41 million in 2002, $49 million in 2003, $58 million in 2004, and $68 million by the year 2005 if changes are not made to its benefits program. Owing to costly ineffective insurance products, in order to afford retiree healthcare costs, this company is going to have to either reduce its costs or make reductions in benefits. 317 Iris Roche is a 94-year-old woman who has just learned that her own surgeon is retiring early because his insurance costs increased greatly. 318 In the thirtieth week of her pregnancy, Carla Rachel Borchers obstetrician informed her that her doctor would not longer practice obstetrics due to rising malpractice insurance costs. Ms. Borchers had to find a new obstetrician to deliver her daughter, even though she was well into her third trimester. 319 313 Id. at 150-151. 314 Jackson Williams, testimony, Oct. 21, 2002, pg. 155. 315 Id. at 157. 316 Michelle Mello, J.D., Ph.D., testimony, Nov. 4, 2002, pg. 295. 317 Wendy McCoy, testimony, Oct. 21, 2002, pgs. 126-129. 318 Iris Roche, testimony, Oct. 21, 2002, pgs. 129-133. 319 E-mail from Carla Rachel Borchers to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 27, 2003) (Vol. 11, Tab 585). 67

In June 1980, Nick Bartol s wife died of a malpractice issue. He believes there should be fair compensation for individuals affected by medical errors and related medical costs and loss of income potential where applicable. However, with regard to medical care, he is also concerned that physicians will not try new procedures because of the risk. 320 Two academic studies have found that the number of medical errors greatly exceeds the number of claims for malpractice. Data from the Florida Agency for Health Care Administration indicate that reports of preventable adverse incidents coming from Florida hospitals exceed malpractice claims reported by those hospitals by a ratio of six-to-one. 321 In 1999, Jacqueline Imbertson s husband was the victim of medical negligence, when he was hospitalized for heart by-pass surgery. A nurse mistakenly gave him an entire bag of Lidocaine in less than five minutes, instead of the Hespan that he was supposed to have received. As a result, he went into cardiac arrest, suffered catastrophic damage, is in constant and excruciating pain and must now undergo a heart transplant. Jacqueline Imbertson has taken on the role of her husband s full-time caregiver. 322 Charles Dubie s mother died after having negligently been given an overdose of a heart medication at a nursing home. Although he and his brother retained legal counsel, he states that he would trade any amount of money to have his mother back or at least know that her final days were peaceful. 323 Data from the Department of Insurance shows that, per 100,000 people, from 1991 to 2001, there has been no dramatic increase in the number of claims being paid or the number of lawsuits being brought. In fact, they are now looking to be below the 1991 level. 324 The average paid claim for 2001 was $249,000, which was below the national average of approximately $310,000. The National Practitioner Database ranks Florida 21st in the nation in average payouts. 325 320 Nick Bartol, testimony, Oct. 21, 2002, pgs. 138-139. 321 Jackson Williams, testimony, Oct. 21, 2002, pgs. 153-154. 322 Jacqueline Imbertson, testimony, Oct. 21, 2002, pgs. 162-165. 323 Charles Dubie, testimony, Oct. 21, 2002, pgs. 349-350. 324 Neal Roth, J.D., testimony, Oct. 21, 2002, pg. 273. 325 Id. 68

Florida has seen a 40 percent increase in the number of physicians practicing in the state over the last forty years. 326 Florida s two largest medical malpractice insurers are FPIC and Pro Assurance. Both are healthy and very profitable. FPIC has made a profit in each of the last ten years and Pro Assurance has made profits in nine out of the last ten years. FPIC and Pro Assurance also saw their surpluses grow from 1991 to 2001, by over 259 percent and 563 percent, respectively. 327 Healthcare Provider Perspective The testimony of healthcare providers indicated a very different perspective. As a group, physicians and hospitals are reeling from the rapid increase in medical malpractice insurance premiums. Physicians are being forced to leave Florida to practice in other states where insurance rates are more acceptable or obtainable. 328 The Task Force heard that the financial burden of escalating liability insurance premiums makes the continued practice of medicine in Florida increasingly unsustainable. 329 The immediate and long-term affects of this crisis are a decreasing number of doctors staying in practice. 330 The doctors that remain are forced to practice unnecessary defensive medicine. 331 Many high-risk specialties are even more acutely affected by this crisis. Obstetricians in Florida have seen a 40 percent increase in premium rates since 1999, with even more substantial increases looming on the immediate horizon. 332 At present, obstetricians contracting for the statutorily required $250,000 worth of coverage pay premiums ranging from $90,000 to $107,000 a year. In addition, many of these obstetricians are seeing their insurance carriers leave the market, and find themselves unable to find coverage elsewhere. 333 The results are that hospitals are discontinuing obstetrical services and obstetricians are curtailing medical care to high-risk patients for fear of liability exposure. 334 At the same time, physicians that do continue to practice, practice expensive and unnecessary defensive medicine. One physician noted, 326 Id. at 274. 327 Id. at 275. 328 Joel Rose, D.O., testimony, Oct. 21, 2002, pg. 37. 329 Joel Saranko, M.D., testimony, Oct. 21, 2002, pg. 39. 330 George Tershakovec, M.D., testimony, Oct. 21, 2002, pg. 45. 331 Robert W. Yelverton, M.D., The Impact of the Professional Liability Insurance Crisis on Quality Healthcare for Florida Women, presentation, Oct. 20, 2002. 332 Robert Yelverton, M.D., testimony, Oct. 21, 2002, pg. 56. 333 Id. 334 Id. at 56 61. 69

Defensive medicine is the seldom-discussed tragedy of the litigation crisis. Unable to rely any longer on sound judgment molded by years of training and experience, OB/GYNs, by necessity, are performing more Cesarean sections and ordering expensive diagnostic procedures in order to protect themselves legally,... discontinuing or severely limiting high risk or technically sophisticated surgical procedures. 335 Testimony from the Task Force meetings, related to doctors concerns, included the following statements: 1975 was the first year that actuaries informed insurance carriers that they could not guarantee the premiums that they were recommending the carriers charge today, would pay tomorrow s claims. 336 What we have, after 27 years of studying and trying to solve this problem, is a problem that is 3,074 percent worse than it was when we started. 337 The Physician Insurers Association of America (PIAA) Data Sharing Project is a medical cause-of-loss database with information from nearly 190,000 claims made since 1985. Data from this source show that the mean average indemnity payment over this period of years has risen precipitously. Today, the average indemnity payment is about $326,000 per defendant in a medical malpractice case, and in each malpractice claim, there is usually more than one defendant. 338 If an indemnity payment is made on a claim, the average payment is about $43,000 in mostly legal fees. If an indemnity payment is not made, insurance companies still pay about $23,000 to $24,000 in legal fees just to handle those claims. 339 Of all claims reported to the database in 2001, 61 percent were dropped or dismissed, because they were without merit; in 5.7 percent, there was a verdict for the defense. In two-thirds of all claims, there was no payment to the plaintiff. Only 1.3 percent of the claims ever reported, were paid verdicts; the remaining payments were made via settlements. 340 335 Robert W. Yelverton, M.D., The Impact of the Professional Liability Insurance Crisis on Quality Healthcare for Florida Women, presentation, Oct. 20, 2002. 336 Robert E. White, Jr., testimony, Oct. 21, 2002, pg. 181. 337 Id. 338 Lawrence Smarr, testimony, Oct. 21, 2002, pgs. 201-202. 339 Id. at 202. 340 Id. at 202-203. 70

The mean verdict was almost $500,000 on behalf of an individual doctor and claim. When an insurance company wins at trial, it pays $91,000 to win the case. If it loses, it spends about $86,000. Whether or not the suit is dropped or dismissed, the company still spends almost $17,000 to handle those cases. 341 Between 1997 and 2000, the average jury award in medical malpractice cases doubled from about $500,000 to about $1,000,000. Settlements also have gone up commensurately. 342 On average nationally, there are 10,454 services per thousand; in Florida, there are 12,602. On a national basis, radiology services represent 252 per thousand, but 368 in Florida; nationally there are 758 lab services per thousand, but 1,087 in Florida. 343 In a national poll of physicians, the overwhelming majority of doctors say that the threat of malpractice lawsuits does not make them deliver better quality care. Over nine out of ten doctors think the threat of liability suit has increased defensive medicine. And over half of the physicians surveyed say that the current medical liability system makes physicians less willing to report medical errors. 344 The average neurosurgeon has a claim every other year. Fifty percent of neurosurgeons are sued every year, 40 percent of plastic surgeons, 35 percent of orthopedists, 30 percent of general surgeons, and 30 percent of obstetricians. We are not suing America s bad doctors; we are suing all physicians in America. 345 A 1996 Harvard Medical Practice study that appeared in the New England Journal of Medicine concluded that there is no correlation between the presence or absence of medical negligence, and the outcome of malpractice litigation. The only variable that they could find that related to the outcome of medical malpractice litigation was the degree of injury. If you are more severally injured, you are more likely to be compensated. 346 Health and Human Services estimates that the cost of defensive medicine is $100 billion a year. 347 341 Id. at 203. 342 Richard Anderson, M.D., testimony, Nov. 4, 2002, pgs. 41-42. 343 David Lubben, J.D., testimony, Oct. 21, 2002, pgs. 107-108. 344 Steve Demontmolin, testimony, Oct. 21, 2002, pgs. 111-113. 345 Richard Anderson, M.D., testimony, Nov. 4, 2002, pg. 37. 346 Id. at 48-49. 347 Id. at 59. 71

Over the past twenty years, healthcare premiums have risen at a constant multiple of twice the general inflation. In 2001, those premiums increased an average of 12.7 percent across the United States. This was eight times the rate of general inflation. In 2002, healthcare premiums are expected to go up between 15 and 23 percent, or about ten to eleven times the general inflation. 348 Many hospitals are facing premium increases of 300 percent. 349 Many physicians on staff at statutory teaching hospitals are refusing to continue voluntary teaching. These physicians do not want the liability associated with the medical students and high-risk patients, given the kind of medical malpractice verdicts that are occurring. 350 At the same time, as not-for-profit hospitals find their insurance premiums increasing, they are unable to invest services back into their hospital. 351 Although hospitals realize that they may be able to operate without capital, they are fearful that they will not be able to operate without physicians. 352 In Broward County alone, 400 physicians have left the state, or retired early in the past year. Nationally, since 1991, overhead costs have increased by 48 percent. In Florida, due to the increase in premiums for liability insurance, [overhead costs] have increased about 60 percent. In South Florida, physicians are working seven to eight months of the year to simply pay their overhead costs, and much of the overhead dollars are attributed to liability premiums. In one instance, a Fort Lauderdale pediatric orthopedic surgeon s premiums went from $32,000 to $96,000 a year. Because of the increase, this physician is planning to return to his home state, Louisiana, as that state has tort reform. 353 In Florida, one in every two neurosurgeons and one in every three general surgeons will be sued at some point. 354 Palm Beach Gardens Hospital has lost all but one of its neurosurgeons, and this particular surgeon can take calls only part of 348 Brian Klepper, Ph.D., testimony, Nov. 4, 2002, pgs. 230-231. 349 Rich Reiner, testimony, Oct. 21, 2002, pg. 296. 350 John Hillenmeyer, testimony, Oct. 21, 2002, pg. 289. 351 Id. at 294. 352 Rich Reiner, testimony, Oct. 21, 2002, pg. 298. 353 Robert E. Cline, M.D., testimony, Oct. 21, 2002, pgs. 19-20. 354 Id. at 21. 72

the time. As a result, neurological surgical care is void for a couple of weeks a month. 355 Jacksonville s forty-four obstetricians will see their premiums go from $40,000 to $100,000 per year per person. The same is true for the fifty-two physicians providing obstetrical services in Tampa. 356 Teriesita Hernandez, M.D. completed a geriatric fellowship because she wanted to help nursing home patients, but has since found that she is unable to practice that profession because the malpractice insurance is so high. She is unable to find a carrier outside the state, and for part-time coverage, she would have to pay $31,000. She has become so frustrated that she is no longer seeing patients. 357 According to testimony provided by a representative of the Florida Medical Directors Association (FMDA) to the Florida House Select Committee on Liability Insurance for Long Term Care Facilities, medical malpractice premiums for medical directors increased 500 percent in the last year. In addition, results from a recent FMDA survey showed that 27 percent of the physicians who practice in nursing homes have been notified that their medical malpractice insurance will either not be renewed or that their premiums will increase further specifically because they are primary care physicians for nursing home residents. Fifty-six percent of the medical directors who responded to the survey indicated that they would not continue to serve as a medical director if their professional liability insurance is cancelled. 358 Largo Medical Center is just one of six obstetrical centers that has closed, or will be closing, its maternity ward by the end of the year, because it has lost two obstetricians because of the soaring costs of liability insurance. Liability rates for one of the obstetricians went from $43,000 per year to $180,000, which forced her to stop practicing. The patients left behind are impacted because they must find another physician to deliver their babies, if they can. 359 Nearly 70 percent of all residents trained in family medicine traditionally have remained in Florida to practice their specialty. Conversely, in 2002, new residency graduates often cannot practice in 355 Id. at 26. 356 Id. at 27. 357 Teriesita Hernandez, M.D., testimony, Oct. 21, 2002, pg. 35. 358 Letter from Janegale Boyd, President/CEO & Jack M. Norton, Chair, Florida Association of Homes for the Aging, to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Oct. 14, 2002) (Vol. 11, Tab 480). 359 Joel Rose, D.O., testimony, Oct. 21, 2002, pg. 37. 73

Florida because they cannot obtain or afford the insurance necessary to do so. 360 Insurance premiums for general surgeons have skyrocketed 300 percent from 1999 to 2001. The rates for 2002 will increase another 20 to 30 percent and it is anticipated that the following two to three years will show a continued upward increase in premium charges at that rate or higher. 361 This past May, one physician group that staffs six emergency departments in South Florida experienced a 400 percent increase in its malpractice premiums. 362 OB/GYN physicians have experienced a 40 percent increase in medical malpractice premiums beginning in 1999. 363 One million dollars in coverage, a traditional policy amount for OB/GYNs, costs $70,000 to $110,000 per year for those OB/GYN physicians who can even find such a policy. Policy coverage in the amount of $250,000 is what most Florida obstetricians have had to settle for, and this minimum policy amount ranges in price from $90,000 to $107,000 per year. 364 Most Florida obstetricians are taking legal measures to protect assets with plans to meet the state requirements for practicing without professional liability insurance. For example, in Miami, 80 percent of the OB/GYNs currently carry no insurance, and it is anticipated that the rest will follow their lead in 2003. 365 Orlando has lost twelve OB/GYNs in the last year, which represents 10 percent of their work force. Twenty to 25 percent of the OB/GYNs now work without insurance. 366 In Tampa, a similar phenomenon is occurring. Three OB/GYNs have quit or retired early and many more are planning to practice without insurance. 367 360 Id. at 38. 361 George Tershakovec, M.D., testimony, Oct. 21, 2002, pg. 44. 362 Arthur Diskin, M.D., testimony, Oct. 21, 2002, pg. 50. 363 Robert Yelverton, M.D., testimony, Oct. 21, 2002, pg. 56. 364 Id. at 56-57. 365 Id. at 58-60. 366 Id. at 59. 367 Id. at 59-60. 74

Judeo Christian Clinic is going to have to close its gynecological clinic for lack of staffing. Largo Medical Center and Doctors Hospital have also closed. 368 Because of the egress of doctors from the state, Arnold Lazar, M.D., an OB/GYN, has several patients in his practice who have seen two other obstetricians during their current pregnancy. 369 Collier County has 50,000 residents under the age of eighteen. Although there are five neurosurgeons in Collier County, none of them see pediatric patients. Last year, 139 Collier trauma patients had to be transported by helicopter to the nearest Level II trauma center in Lee County for treatment. Some of these were pediatric patients who had suffered head trauma. However, neurosurgeons in Lee County also avoid taking on patients under the age of eighteen. Thus, these patients are typically flown in a second helicopter to Tampa for treatment. The reason neurosurgeons in Collier County and Lee County are avoiding these young patients is because of the risk of $10,000,000 jury awards. 370 Rates for physicians practicing in skilled nursing facilities and nursing homes have increased by as much as 500 percent. 371 A survey requested by the Florida House Select Committee on Liability Insurance for Longer-Term Care Facilities and conducted by the Florida Medical Directors Association shows that 16 percent of physicians have stopped following nursing home patients in the last twelve months due to the liability coverage. Another 22 percent of physicians in nursing homes report they will not be able to see patients due to the liability rate increases in the coming year. And 27 percent report that they have been notified that their insurance will not be renewed this year due to the fact that they follow nursing home residents. 372 Fleur Sack, M.D. is a physician who, although trained to take care of fractured fingers, is no longer able to do so as her insurance carrier does not support this. Dr. Fleur must now refer those patients to orthopedists who in turn are starting to refer the patients to even more specialized hand surgeons who already have high caseloads. 373 368 Id. at 60. 369 Arnold Lazar, M.D., testimony, Oct. 21, 2002, pg. 65. 370 Frank Schwerin, M.D., testimony, Oct. 21, 2002, pgs. 67-70. 371 John Potomski, M.D., testimony, Oct. 21, 2002, pgs. 75-76. 372 Id. at 77-79. 373 Fleur Sack, M.D., testimony, Oct. 21, 2002, pgs. 80-83. 75

Florida neurosurgeons get sued once every 2.5 years. As a result, many neurologists are no longer performing brain surgery. For example, one neurosurgery group is no longer performing pediatric neurosurgery after having done so for the last twenty years because of the threat of suit. 374 In 1988, Florida was the site of 25 percent of all the United Health Group Company s professional liability litigation; it has now become home to 42 percent of such litigation. During the same period, Florida s share of the company s litigation costs for the entire enterprise has increased from 30 to 42 percent. Over half of the company s professional liability suits are in Florida. 375 According to the National Practitioner s Data Bank, $326,000,000 was paid out on behalf of Florida physicians only last year, and the total paid to patients has increased 33 percent since 1999. 376 The top-ten jury awards in Florida have all occurred since 1998. 377 Nationally, one out of every forty-four doctors pays an indemnity payment; in Florida, it is one out of every eighteen doctors. 378 The most prevalent rate in the rest of the United States for a doctor is one million dollars per claim. Many states doctors carry multimillion dollar claim limits. However, in Florida, over half the doctors that carry insurance today can only afford to carry a $250,000 policy limit. 379 In Georgia, physicians pay from $5,000 to $6,000 for $1,000,000 of coverage. Thirty miles south, in Jacksonville, that costs $27,000. This difference is due to the difference in the tort system between the two states. 380 The nation s second largest medical malpractice carrier, St. Paul, had its loss ratio from 1997 to 2001 range from 107.5 percent to 365 percent. They withdrew from the Florida market. 381 374 Id. at 87. 375 David Lubben, J.D., testimony, Oct. 21, 2002, pgs. 106-107. 376 Robert E. White, Jr., testimony, Oct. 21, 2002, pgs. 181-182. 377 Id. at 182. 378 Id. at 183. 379 Id. 380 Id. at 185. 381 David McKenney, testimony, Oct. 21, 2002, pg. 191. 76

Nationwide, just over 30 percent of plaintiffs receive an indemnity payment; in Florida, one out of every two individuals receives an indemnity payment. 382 The GE Medical Protective Insurance Company is the oldest writer of medical malpractice insurance in the United States. In Florida, its frequency of claims has been consistently higher compared to those countrywide. In 2001, there were approximately fourteen claims per 100 physicians insured in Florida, versus approximately nine claims per 100 physicians insured on a nationwide basis. 383 It is more difficult to close non-meritorious claims here in Florida as compared to the rest of the country. On a paid-to-reported basis in 1996, it was paying out approximately 44 percent of the cases that were reported in Florida; on a nationwide basis, this figure is between 32 to 33 percent. In 1996, its average Florida payment was $200,000, compared to the nationwide average of $210,000. However, by 2001, the average had increased to approximately $280,000 per Florida case, versus $225,000 countrywide. 384 From 1981 to 1991, Florida has experienced an 86 percent increase in litigation as its population increased only 41 percent. 385 Orlando Regional Healthcare s medical liability insurance program, which was a $2 million self-insured retention with up to $40 million in aggregate coverage, was costing it $1.3 million a year. Beginning May 1, 2002, its self-insured retention was raised to $5 million, and for the same $40 million coverage, Orlando Regional Healthcare s new premium is $9.8 million a year. 386 Orlando Regional Healthcare s Level I trauma center is at risk because it takes in the highest-risk cases from a twenty to twenty-five county area. It now has physicians who will not take Level I trauma calls. 387 On average, statutory teaching hospitals lose about $93,000 per resident each year, because training residents requires more time and additional staff. Orlando Regional Healthcare depends on private community physicians to help train its residents. But, it is finding that more and more physicians are refusing to continue the voluntary 382 Id. at 194. 383 William E. Daley, testimony, Oct. 21, 2002, pgs. 208-209. 384 Id. at 209-210. 385 George Meros, J.D., testimony, Oct. 21, 2002, pg. 249. 386 John Hillenmeyer, testimony, Oct. 21, 2002, pg. 286. 387 Id. at 287. 77

teaching, because they do not want the liability associated with the students. 388 The Florida Hospital Association s most pressing issue is dealing with the physician shortage. Some of its member facilities are unable to provide basic services such as orthopedics. For example, a hospital in Highlands County has four orthopedists on the medical staff. One, in his middle-50s and who has served that community for twenty-five years, cannot afford the 100 percent increase in his insurance premiums and will leave by January 1. Three remaining orthopedists in the community may pick up the slack, or may alternatively choose to limit their exposure. Thus, people living in this rural community may have to go to Orlando emergency rooms for their care. 389 In East Pasco, two OB/GYNs half the OB department have dropped off staff because they were unwilling to pay the insurance premiums. 390 The Orlando area has lost four neurosurgeons this year because they will not pay the increases. These doctors are going to states where there is a better environment for the practicing of medicine. 391 Because of this crisis, one large radiology group cannot recruit new radiologists, using the same caliber and yardstick of quality they historically have wanted to use. This radiology group recently found that their rates had tripled, yet their coverage had been reduced by two- thirds. Most of the radiologists are contemplating eliminating the reading of any mammograms, in order to eliminate that high-risk exposure. 392 Between eight to ten OBs in Central Florida have left the state, or have dropped their OB privileges. This will translate into longer emergency room waits. 393 An OB/GYN recently came to work in Central Florida and was told by her group that her medical malpractice insurance was going to be $137,000 for $250,000 worth of coverage, so they revoked her offer of employment. 394 388 Id. at 289-290. 389 Rich Reiner, testimony, Oct. 21, 2002, pg. 297. 390 Id. 391 Id. at 298. 392 Id. 393 Id. at 299. 394 Id. at 302-303. 78

The malpractice crisis is affecting the midwives profession in a manner similar to the way it is affecting the other practitioners. However, midwives are unique in that the JUA is their only source of malpractice coverage at this time. Their premiums constitute 10 to 20 percent of their annual income. In the last year, their premiums have increased about 25 percent. Fees in Florida are about 30 to 40 percent higher than the fees of other midwives in other states. 395 Dr. Elizabeth Hancock, a family physician in private practice in Indialantic does not offer health insurance to her employees, nor does she herself have it. She does not give her employees paid days off because she cannot afford to. Dr. Hancock states that she is looking for a job in radio broadcasting. 396 Florida has thirty-three rural counties, twelve of which have been designated as severely underserved with less than fifty physicians per 100,000 population. 397 We have major disparities in healthcare delivery, particularly for minorities in our cities and rural areas. The infant mortality rate is over twice that of Caucasians in the African-American population in Florida. 398 Although we are the state with the largest percentages of geriatric patients, we already have a shortage of geriatricians. 399 Because healthcare represents one in every eleven jobs in the workforce right now, and one dollar in every seven in the economy right now, the dramatic reductions in funding healthcare in the economy would ripple throughout all healthcare and would also ripple through the economy at large, and it would be a very catastrophic event that would be unprecedented. 400 In 1995, average nursing home insurance costs were $240 a bed. In 2001, they were almost $2,400 a bed, or a 100-fold increase over six years. In Florida, the average cost is even higher than that, in excess of $10,000 a bed, according to some data. 401 395 Rebecca Ricco, testimony, Oct. 21, 2002, pgs. 315-316. 396 Elizabeth Hancock, M.D., testimony, Oct. 21, 2002, pgs. 321-322. 397 Robert Brooks, M.D., testimony, Nov. 4, 2002, pg. 191. 398 Id. 399 Id. 400 Brian Klepper, Ph.D., testimony, Nov. 4, 2002, pgs. 234-235. 401 William Sage, M.D., J.D., testimony, Nov. 4, 2002, pg. 261. 79

In 1998, there were thirty-two carriers that were writing premiums in Florida. In 2001, that number has fallen to twenty-six insurance companies. Since the beginning of 2001, nine insurance companies have notified the Department of Insurance that they are leaving the state; this represents 18 percent of 2001 s written premiums. Of the top fifteen carriers that remain here in the state, four of them have said that they will not be writing any new business. 402 A collective of five nursing home facilities in Florida experienced a 57.42 percent increase in their insurance rates. Additionally, although one of the companies that currently writes for them, Hartford, has renewed this year, it is not going to renew next year. More significantly, another one of their current insurance companies, Lloyds of London, has withdrawn their umbrella this year, so now the facilities are unable to get umbrella insurance. 403 Don Robertson, M.D. is a family physician with fourteen years experience in Florida, and who has never been sued for malpractice. Nevertheless, Dr. Robertson s malpractice insurance rate has increased over 400 percent in thirteen months. He can find only one malpractice carrier who will write him a policy. After fourteen years in practice, he had to borrow money from the bank to pay his malpractice premiums. 404 Aaron Elkin, M.D. 405 has been in practice for eight years and has no claims. In spite of this, his rates have increased 55 percent this year. He cannot afford to carry insurance anymore. Aventura Hospital, where Dr. Elkin is the Vice Chief of Obstetrics, will no longer be delivering babies, even though it has had no claims. It costs the hospital $1,000 per birth just for insurance, while the average reimbursement for the hospital is just $2,500 per delivery. 406 Raymond S. Waters, M.D. is a cardiovascular surgeon who has practiced for twenty-three years, and has practiced fourteen years at Bayonet Point Regional Medical Center in Hudson; earlier this year, Bayonet Point was ranked 27th in the nation in the latest U.S. News and World Report categories for cardiovascular surgery. Although Dr. Waters himself has never had a successful malpractice claim placed against him, this year his insurance company is leaving the state because it can no longer practice under the business pressures that it finds itself. He notes that the company has asked him to 402 Steve Roddenberry, testimony, Nov. 4, 2002, pgs. 386-388. 403 Judy Boco, testimony, Nov. 4, 2002, pgs. 417-418. 404 Don Robertson, M.D., testimony, Nov. 4, 2002, pgs. 418-419. 405 In the Nov. 4, 2002 transcript, Dr. Elkin is improperly identified as Dr. Narkin. 406 Dr. Aaron Elkin, M.D., testimony, Nov. 4, 2002, pgs. 425-427. 80

purchase tail coverage for $146,000, which Dr. Waters cannot afford. On December 31, he will therefore have no malpractice insurance. His partner, Dr. Marshall DeSantis, just accepted a premium of $120,000 a year for $250,000 worth of coverage per year with a $20,000 deductible from FPIC. 407 John D. Guarneri, M.D., FACOG, an obstetrician in Winter Park, states that [i]t is simply not possible for physicians to continue to practice in Florida if the medical liability insurance rates continue to skyrocket. According to Dr. Guarneri, patients are having to wait longer to see doctors, and sometimes cannot get an appointment for months. Dr. Guarneri has personally had to book patients two months in advance. This added stress is leading many doctors to restrict taking on new patients or to retire early. In fact, he notes, if the Legislature fails to act, he will forced to give up his obstetrics practice. 408 Elizabeth M. Louie, M.D., 43-years-old, will be retiring from medicine on February 28 because her malpractice has risen to a point where she can no longer afford to practice medicine. She is not willing to risk going bare although she has very few assets at this time in her life. Her malpractice insurance cost just went up to 58 percent of her gross income. She works part-time, three days a week. The cost of her malpractice insurance went from just over $8000 to $40,000. It has increased almost five-fold. She makes about $69,000 a year gross income. After taxes, answering service, beeper, and cell phone expenses for the year, she has very little income left to continue to live on. She is leaving the practice of medicine to start a center to evaluate children with learning differences. 409 Richard L. Beck, M.D., F.A.C.S., P.A., is an Altamonte Springs plastic surgeon who recently learned that his medical malpractice insurance rate for 2003 increased 75 percent. Dr. Beck has tried to obtain the services of M.D. anesthesiologists, but has had no success. 410 Dale L. Lind has been a nursing home professional for nearly 30 years. He currently serves as the Executive Director of Waterman Village of Mount Dora, a facility that has been widely recognized as a quality provider, traditionally receiving good state surveys and 407 Letter from Raymond S. Waters, M.D. to Governor Jeb Bush (Nov. 5, 2002) (Vol. 10, Tab 313). 408 Letter from John D. Guarneri, M.D., FACOG to Governor Jeb Bush (Sept. 26, 2002) (Vol. 10, Tab 120). 409 E-mail from Elizabeth M. Louie, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 9, 2003) (Vol. 11, Tab 487). 410 Letter from Richard L. Beck, M.D., F.A.C.S., P.A. to Governor Jeb Bush (Sept. 27, 2002) (Vol. 10, Tab 121). 81

experiencing no major lawsuits. In fiscal year 2000, Waterman Village of Mount Dora enjoyed liability insurance coverage with $1,000,000/$3,000,000 coverage and a $5,000,000 umbrella; the cost for this coverage was $70,000 for the year. In fiscal year 2001, the facility s costs had skyrocketed to $400,000 for the year for $1,000,000/$3,000,000 coverage with no umbrella and a $100,000 deductible. In fiscal year 2002, faced with a premium increase to $550,000, and acting on the advice of its insurance consultant and attorney, Waterman Village of Mount Dora elected to self-insure. When it became clear that the law required the facility to be insured, it purchased a $50,000 compliance policy at a cost of $57,000. 411 Nadia Hilal, R.Ph. is the Administrator of the MNH Surgical Center in Maitland. She states that its tail coverage quote is $63,000 per year. They started their surgery center (Endoscopy Suite) in 1998, and were then paying $5,000 annually for facility malpractice insurance. This year they had to go with a new company at $30,000 annually, and next year they are looking at malpractice premiums of $90,000 per year. 412 Scott Ravede, D.O., an emergency room physician in Volusia County, writes that his malpractice insurer is no longer providing coverage for emergency medicine, and as a result, his group is scrambling to find alternate coverage. 413 Elizabeth A. Etkin-Kramer, MD, FACOG had to give up obstetrics because she could not afford professional liability insurance. In the 1990s she was insured through her employer and now has a tail for those years. However, since 2001, she has been financially responsible for her own insurance. With a clean record, her rates for 250K/750K went from $18,000 in 2000, to $48,000 in 2001. If she had continued to practice obstetrics, the rates would have increased again to $96,000 in 2002. Also, these rates do not include the NICA assessment of $5,000 per year. After her partner and she realized that they could not afford to practice obstetrics with insurance unless they did very high volume (which could have significantly compromised patient care), they made the decision to practice gynecology only. However, now they are finding that, essentially, they cannot get professional liability insurance for gynecology only. As a result, they have been forced to self-insure or go bare. There are two firms that write for OB/GYN in South Florida. The first, FPIC, would only 411 Letter from Dale L. Lind, Executive Director, Waterman Village of Mount Dora, to John C. Hitt, Ph.D., President, University of Central Florida (Nov. 8, 2002) (Vol. 11, Tab 328). 412 Letter from Madia Hilal, R.Ph., Administrator, MNH Surgical Center, to Governor Jeb Bush (Nov. 6, 2002) (Vol. 10, Tab 316). 413 Letter from Scott Ravede, D.O. to U.S. Representative John Mica (Aug. 13, 2002) (Vol. 10, Tab 93). 82

offer gynecology-only coverage at $40,000 a year if Dr. Etkin-Kramer and her partner maintained tail insurance for the two years of obstetrics (2001 and 2002) at an additional flat rate of $123,000. The second company, Pronational/Proassurance denied them any quotes. Many of Dr. Etkin-Kramer s patients have begged her to deliver their babies, and have asked her whether they could not just sign a form stating that they would not sue. 414 Timothy H. Tillo, DPM, President of the Florida Podiatric Medical Association, writes that the medical malpractice crisis will have a number of adverse effects on the delivery of podiatric medical care in Florida. For example, he explains that the risk of a malpractice claim is higher in the diabetic podiatric patient, and that in an attempt to lower their exposure to this risk, podiatric physicians may refuse to treat the diabetic patient. As a result of this denied access to healthcare, important preventative foot care is not rendered, leading to a possible increase in complications related to diabetes, as well as an increase in healthcare costs. 415 Michael Branch, M.D., an ear, nose, and throat physician in Central Florida, has been trying to recruit a partner to expand his practice and fill a void in a nearby city where there is no ear, nose, and throat physician. However, because of the malpractice crisis in Florida, the candidate for the position is declining to relocate from another state. Thus, patients in that city will continue to go without a local ear, nose, and throat physician. Dr. Branch also notes that he must restrict his practice from doing some of the high-risk surgical procedures he is trained to do because of the serious and ever-present threat of malpractice lawsuits. As a result, Dr. Branch s patients are often required to travel long distances to undergo these procedures. 416 Jason Conley, M.D., a second-year emergency medicine resident in Orlando writes: I truly want to stay and practice in Central Florida, but I am afraid that the current medical liability crisis will make that unfeasible. Once I am finished with residency, I will have put in 13 years of higher education and assumed almost $150,000 in debt. I have taken on these responsibilities so that I may have the privilege of taking care of my patients. It is disheartening to know that after all of 414 E-mail from Elizabeth A. Etkin-Kramer, MD, FACOG to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 9, 2003) (Vol. 11, Tab 494). 415 Letter from Timothy H. Tillo, DPM, President, Florida Podiatric Medical Association, to unidentified recipient (Oct. 2002) (Vol. 10, Tab 127). 416 Letter from Michael Branch, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Oct. 16, 2002) (Vol. 10, Tab 243). 83

my studying, all of my tests and years of training, that my best may not be good enough. 417 Tom Mahan, M.D., F.A.C.S. is a general surgeon in his fourth year of practice in Winter Park and at Florida Hospital. As of January 1, 2003, he will have no insurance, and may end up having to leave the state for the safety of his career and family. Alternatively, if he remains in Florida, he will have to practice without insurance. 418 Tom Hicks, M.D. is one of sixteen family doctors in the Patients First group in Tallahassee. The 80 percent increase the group experienced in PLI premiums in January 2002 had to be recovered in order for the group to stay in practice. The entire increase was distributed to the very patients who often are the least able to pay the uninsured or underinsured. These patients now pay a 20 percent surcharge for PLI premiums when they come to Dr. Hicks office. His question to these patients is Do you value [the] unlimited right to sue me enough to pay a 20 percent tax on your bill? 419 David P. Johnston, Jr., M.D. practices general surgery and is Chief of the Department of Surgery at St. Vincent s Medical in Jacksonville. His group has elected to cease performing high-risk surgery such as pancreatic surgery. If the group s radiologists cannot obtain adequate malpractice insurance before January 1, 2003, it will elect to discontinue performing all breast surgery. 420 Mark Antony LaPorta, M.D., FACP found that his MLI went from $5,000 to $21,000 the same year. His office is now closed. 421 Gerald Tuite, M.D. is a pediatric neurosurgeon in Tampa Bay. His practice is cutting its coverage to $250,000/$750,000, is not seeing certain patients who may require high-risk procedures, and is considering positions in other states where the medical malpractice risk is less. 422 Hieu T. Nguyen, M.D. recently received a letter of non-renewal of the general practitioner s malpractice insurance from the carrier APA Capital. The company asked for $25,000 for only the tail coverage. 417 Letter from Jason Conley, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Oct. 25, 2002) (Vol. 10, Tab 288). 418 E-mail from Tom Mahan, M.D., F.A.C.S. to Michelle Jacquis (Dec. 7, 2002) (Vol. 11, Tab 406). 419 E-mail from Thomas Hicks, M.D. to Michelle Jacquis (Dec. 9, 2002) (Vol. 11, Tab 422). 420 E-mail from David P. Johnston, Jr., M.D., Chief, Department of Surgery, St. Vincent s Medical, to Michelle Jacquis (Dec. 10, 2002) (Vol. 11, Tab 428). 421 E-mail from Mark Antony LaPorta, M.D., FACP to Michelle Jacquis (Dec. 9, 2002) (Vol. 11, Tab 421). 422 E-mail from Gerald Tuite, M.D. to Michelle Jacquis (Dec. 9, 2002) (Vol. 11, Tab 419). 84

Dr. Nguyen s 2001 premium was $7,200. Dr. Nguyen tried to apply for insurance with several other insurance companies, but was declined; one company gave a premium quote of $46,995. 423 Steven Varady, M.D. is a urologist whose group has stopped seeing pregnant patients since they represent an overwhelming level of risk. The practice has been much more likely to refer complex and risky patients to tertiary referral centers. It has had to deal with the stress of looking at every single patient, every single day, as a potential threat. Dr. Varady writes that it is very difficult to be caring when every patient is a potential threat; I often feel as though a man or a woman enters the examination room and aims a bow and arrow at me, pulls back on the bow and says, Help me. 424 Scott Posgai, M.D. is a family practitioner in Orlando who has stopped doing hospital admissions. 425 Gary J. Bowers, M.D. is a general surgeon and surgical oncologist practicing with North Florida Surgeons in Jacksonville. Because of the current malpractice climate, he no longer offers limb perfusions for melanoma patients. This is a high-risk procedure for select patients with extremity disease. He is the only surgeon in North Florida who has offered this procedure for the past nine years. Recently, he was referred a patient from within the community who was in need of the procedure, but because of the present situation, he referred the patient out-of-state. 426 Dolores Lowe, M.D. and her partner found out that their carrier is leaving the state; the carrier offered to put them in a pool with other physicians that were rated at more than twice the cost. She writes that a career at McDonald s sounds inviting about now! 427 Ivan Castro, M.D. is a practicing general internist in Winter Park. For the second year in a row, his malpractice carrier has left Florida, necessitating him to obtain tail coverage two years in a row. From last year to this year, he has experienced a 100 percent increase in his yearly premium. Finally, as of this year, due to stipulations from his new carrier, he can no longer see patients in nursing homes. 428 423 Letter from Hieu T. Nguyen, M.D. to unidentified Senator (date unknown) (Vol. 11, Tab 426). 424 E-mail from Steven Varady, M.D. to Michelle Jacquis (Dec. 9, 2002) (Vol. 11, Tab 420). 425 E-mail from Scott Posgai, M.D. to Michelle Jacquis (Dec. 8, 2002) (Vol. 11, Tab 407). 426 E-mail from Gary Bowers, M.D. to Michelle Jacquis (Dec. 9, 2002) (Vol. 11, Tab 418). 427 E-mail from Dolores Lowe, M.D. to Michelle Jacquis (Dec. 8, 2002) (Vol. 11, Tab 410). 428 E-mail from Ivan Castro, M.D. to Michelle Jacquis (Dec. 8, 2002) (Vol. 11, Tab 409). 85

Nigel A. Spier, M.D., FACOG was forced to cut his practice s staff positions by four employees. As a result, patients now have longer waiting times to get an appointment, longer waiting times for the phones to be answered, and longer waiting times to speak to a physician. 429 Marcelle G. Habib, M.D., FAAP, P.A., a pediatrician who opened his own practice in Palm Harbor in early 2001 has found that his alreadyhigh malpractice insurance has increased to the point where it is unaffordable for the year 2003. 430 Scott A. Rodger, M.D., a family practitioner in the small town of Eustis, states that his malpractice carrier has left the state, as have most of the other insurance carriers. This has forced him to buy two policies, resulting in an increase in his insurance costs of over 400 percent. At 49 years of age, Dr. Rodger is strongly considering early retirement, or moving to a more favorable malpractice climate. In Eustis alone, he notes, two of the community s best gastroenterologists have elected to retire early, and one of its best surgeons was lured to another state without malpractice policies such as those currently found in Florida. 431 Alexis Rojas, M.D. is an OB/GYN in Leesburg. Dr. Rojas insurance carrier left the state and now this physician is finding it increasingly difficult to find adequate liability coverage. 432 Lubomir Yazov, M.D., is a doctor in Fort Lauderdale who is facing double or triple increases in his medical malpractice insurance premium (which, he notes, is for one-fourth his previous coverage, and which offers no coverage for past events). According to Dr. Yazov, this precludes him from practicing normal medical and compels him to close his office. 433 Wei-Shen Chin, M.D., a radiologist in Orlando, writes that the escalating cost of malpractice insurance has placed the doctor in a difficult situation. Dr. Chin explains,...either I stop reading the 429 E-mail from Nigel A. Spier, M.D., FACOG to Michelle Jacquis (Dec. 8, 2002) (Vol. 11, Tab 408). 430 Letter from Marcelle G. Habib, M.D., FAAP, P.A. to Governor Jeb Bush (Oct. 25, 2002) (Vol. 10, Tab 289). 431 Letter from Scott A. Rodger, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Oct. 17, 2002) (Vol. 10, Tab 253). 432 Letter from Alexis Rojas, M.D. to unidentified recipient (Oct. 17, 2002) (Vol. 10, Tab 255). 433 Letter from Lubomir Yazov, M.D. to Governor Jeb Bush (Oct. 22, 2002) (Vol. 10, Tab 271). 86

approximately 4000 mammograms that walk through my clinic each year or I leave the state in order to protect my family. 434 Silvia F. Garcia, M.D. is a solo practitioner who recently found that the insurance company that underwrote her policy for the past two years (AP Capital) decided to leave Florida in order to remain financially solvent, due to the very high numbers of claims and awards. As a result, this dermatologist will be underwritten by a new plan at a much higher (125 percent) rate increase, and she must pay $11,785 in tail insurance. Like many other doctors, Dr. Garcia has dropped the most risky procedures from her practice, in her case, the skin surgeries and flaps and grafts; she notes that if other dermatologists follow suit, such advanced treatments will no longer be available in Collier County. Dr. Garcia notes that she has a spotless liability record with absolutely no claims and asserts that she should not be penalized with such heavy fees for malpractice insurance because of the litigious nature of the Florida healthcare system. 435 Gaspar R. Salvador, M.D., a physician who has practiced family medicine in Sun City Center since 1979, recently found his medical professional liability policy with Interstate Fire and Casualty nonrenewed when the company stopped writing medical liability insurance. Through an insurance agency, Dr. Salvador applied to seven carriers to obtain coverage. Five of these carriers turned him down due to nursing home exposure because, in addition to his private practice, for twenty-three years he has also been the Medical Director of a nursing home. Two companies turned him down due to claims history although, he notes, he has not had a claim in almost ten years. Thus, he writes that he was forced to turn to the Florida Medical Malpractice Joint Underwriting Association for coverage for an annual premium of $31,103, which does not include any prior acts coverage. Interstate offered an Extended Reporting Period option, which would cover his prior acts for one year for $49,596. Because he cannot afford this astronomical premium, Dr. Salvador reports that he has no choice but to go bare on his prior acts coverage. 436 Dumitru-Dan Teodorescu, M.D. is an Arcadia-based OB/GYN who has been in practice since 1981, and is one of two obstetricians who 434 Facsimile from Wei-Shen Chin, M.D., Chairman, Department of Radiology, Orlando Regional Medical Center, to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Oct. 28, 2002) (Vol. 10, Tab 294). 435 Letter from Silvia F. Garcia, M.D. to Governor Jeb Bush (Oct. 25, 2002) (Vol. 10, Tab 295). 436 Letter from Gaspar R. Salvador, M.D. to John C. Hitt, Ph.D., President, University of Central Florida (Oct. 21, 2002) (Vol. 10, Tab 270). 87

take care of the obstetrical needs of the population of DeSoto County and part of Hardee County. One week before writing to Governor Jeb Bush, Dr. Teodorescu was informed that American Healthcare Indemnity Company, Physicians Protection Plan will not be renewing the doctor s medical professional liability insurance for the coming year (2003). Thus, if Dr. Teodorescu cannot find another carrier, the doctor will no longer be able to practice in Florida. There will be only one obstetrician left here in DeSoto County and I am not sure that he will not be in a similar position, Dr. Teodorescu laments. 437 George H. Pope, M.D. is a plastic surgeon in Winter Park who has been in private practice in the Orlando area for fifteen years, and a member of a four-surgeon group, the largest plastic surgery group in Central Florida. His group is losing its medical liability insurance after December 31, 2002, because its insurance company will no longer be writing medical liability insurance in Florida after that date. The cost of tail coverage for Dr. Pope is $94,044. His group has been unable to find a new liability insurance carrier. The two largest general surgery practices in Orlando area in the same situation. Dr. Pope s fear is that any new premium for coverage will be exorbitant. With his three children rapidly approaching college age, he is worried about his ability to pay for their college educations. His wife and he may need to sell their home. Dr. Pope currently holds a medical license in Louisiana, the state where he was raised and trained, and although he considers Florida his home state, he hopes that he will not have to return to Louisiana (a state which has a cap on pain and suffering awards) to be able to work with medical liability insurance. 438 Sebastian J. Ciancio, M.D. is an urologist in private practice in Orlando. His group of three urologists has cut back on the number and types of patients they will operate on because of concerns regarding liability. They are unable to afford to see Medicaid patients anymore, and the group s most senior partner is considering retiring early to avoid the ominous malpractice issues. 439 Douglas Slotkoff, M.D. practices in Miami, where he cares for a population of developmentally disabled children and adults at Sunrise Communities in South Miami. Although he has cared for them for about eight years, this year may be the last that he is able to do so, because of the rise in malpractice insurance rates. 440 437 Letter from Dumitru-Dan Teodorescu, M.D. to Governor Jeb Bush (Oct. 25, 2002) (Vol. 10, Tab 296). 438 Letter from George H. Pope, M.D. to John Hitt, President, University of Central Florida (Nov. 18, 2002) (Vol. 11, Tab 350). 439 E-mail from Sebastian Ciancio, M.D. to Michelle Jacquis (Dec. 7, 2002) (Vol. 11, Tab 404). 440 E-mail from Douglas Slotkoff, M.D. to Michelle Jacquis (Dec. 7, 2002) (Vol. 11, Tab 403). 88

Gerald Alan Spunt, M.D., FAAP is a pediatrician in Broward County, who has been in private practice for the last twenty-five years. Last year, when his group s malpractice insurance was due to renew, it found that its insurance cost had doubled. This year, the group received notice from its insurance carrier that the carrier is leaving the state. There are now only two malpractice insurance companies available to the group, and if it can obtain malpractice insurance, the rate will double again. According to Dr. Spunt, the best-case scenario is that the group will pay four times the rate it did two years ago. The worst-case scenario is that either it will be unable to afford malpractice insurance, or will be denied malpractice insurance and will be forced to go bare. 441 Larry Vickman, M.D., MHA, FACEP, FACPE received his license to practice medicine in Florida in May 2002, and has been looking for a part-time position doing urgent care. Dr. Vickman interviewed at one site in Pinellas County, where he discovered that of the four companies that offered to insure him, two would not even consider him because of their all-or-none rule (i.e., if the company does not insure all the members of the group offering service at a site, it will not insure an individual doctor). Of the two remaining groups, the costs of the insurance were too high for him to consider. One group quoted him $6,380 for the first year, leveling off at $15,820 at the fifth year; the other group quoted him $9,050 for the first year, and only told him it would be into the mid-$20,000 level by the fifth year. The tail policy would be double or triple last year s premium. 442 Leffie M. Carlton, III, M.D. is a urologist and urologic surgeon who has scaled back his practice by no longer performing any open abdominal or pelvic cancer surgeries from a urologic standpoint. 443 Larry Fishman, M.D. is a neurosurgeon who has practiced in Hillsborough County for the past fourteen years. There are now many procedures which Dr. Fishman does not feel comfortable performing anymore due to the fact that they are high-risk, such as aneurysm surgery, surgery on many brain tumors, and most pediatric neurosurgery. For the past six months, he has also basically stopped providing care to Medicaid patients, because the potential risks and liability are simply too great. As time goes on, he is cutting back on his practice more and more and is basically just trying to do simple 441 Letter from Gerald Alan Spunt, M.D., FAAP to Governor Jeb Bush (Dec. 4, 2002) (Vol. 11, Tab 367). 442 Letter from Larry Vickman, M.D., MHA, FACEP, FACPE to Debbie Zorian, Executive Director, Hillsborough County Medical Association (Dec. 5, 2002) (Vol. 11, Tab 370). 443 Letter from Leffie M. Carlton, III, M.D. to Debbie Zorian, Executive Director, Hillsborough County Medical Association (Dec. 11, 2002) (Vol. 11, Tab 370). 89

bread and butter procedures. He refers anything more complicated to a major medical center, which is often time-consuming, quite costly, and not covered by his patients insurance. 444 Carlos J. Vazquez, M.D. had a very successful OB/GYN practice in Pinellas County. However, his malpractice insurance went up from $30,000 to $160,000, and he had no resort but to liquidate his practice and move to Broward County were he was permitted to practice without malpractice insurance. 445 Peter J. Pernicone, M.D., a physician based in Orlando, came to Florida ten years ago after completing a five-year training program in pathology at the Mayo Clinic in Rochester, Minnesota. Last year, he came very close to accepting a position in Idaho in an effort to escape the stress of the litigious climate of Florida. He notes that he knows of several young, competent physicians who have left Florida to find employment in other, friendlier, states. 446 Michael P. Kahky, M.D. is a general surgeon and surgical oncologist practicing in Orlando. In the past year he has referred many patients with complex problems to either Gainesville or Tampa. These are patients who he would have cared for locally a year ago, but now the risk is too great. Additionally, his six-person surgical group will be self-insured as of January 1, 2003. 447 Scottie Whiddon, M.D. is a family physician practicing in a rural setting for the last sixteen years. He is a medical director of a longterm care facility and all but one of the sixty patients there are under his care. This nursing home is now being threatened with closure, as a number in Florida already have, because of the incredible rise in malpractice insurance. If the nursing home goes bare, then Dr. Whiddon, as the medical director of the facility, would be the one the lawyers would go after, even though his is a minimally compensated position. As a result, Dr. Whiddon may be forced out of seeing patients in the long-term care setting. 448 444 Letter from Larry Fishman, M.D. to Debbie Zorian, Executive Director, Hillsborough County Medical Association (Dec. 4, 2002) (Vol. 11, Tab 370). 445 E-mail from Carlos J. Vazquez, M.D. to Michelle Jacquis (Dec. 6, 2002) (Vol. 11, Tab 385). 446 Letter from Peter J. Pernicone, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Oct. 17, 2002) (Vol. 10, Tab 256). 447 E-mail from Michael P. Kahky, M.D. to Michelle Jacquis (Dec. 6, 2002) (Vol. 11, Tab 387). 448 E-mail from G.R. (Scottie) Whiddon, M.D. to Michelle Jacquis (Dec. 6, 2002) (Vol. 11, Tab 340). 90

Kenneth Beer, M.D. is a physician who has had to fire employees. He has also stopped performing liposuction, and will stop taking melanoma patients because of the risk. 449 Suzan Streichenwein, M.D. practices geriatric psychiatry. Due to the malpractice crisis, she has stopped seeing patients at skilled nursing facilities and nursing homes, and has decided not to do inpatient psychiatry. Dr. Streichenwein is also decreasing the number of hours she spends seeing patients due to the high cost of insurance. Her carrier, FPIC, was just downgraded from an A- to a B+ ; she says she is holding her breath dreading a letter that the company will be leaving Florida any day. 450 Michael Binder, M.D. is a Tampa urologist. As of January 1, 2003, his malpractice insurance payments will have increased 113 percent over the past two years, in spite of the fact that he has never been sued in fifteen years of private practice. To help keep his rates down, he has given up performing any radical surgery, such as cystectomies and prostatectomies. He no longer performs any cosmetic surgery, and is also considering eliminating prosthetic surgeries. If these efforts fail to improve the situation, he will be forced to leave the state or retire. Finally, Dr. Binder notes, it has proven impossible to bring an associate in to help him. 451 Nak Y. Paek, M.D. has been practicing general surgery in Jacksonville for the last twenty-two years. In 2002, Dr. Paek s liability insurance premium was $26,000. In November 2002, Dr. Paek received a letter from the insurance company stating that it was pulling out of Florida. After two months of searching for coverage for general surgery, the best quote this surgeon received for 2003 was $91,000. Dr. Paek cannot afford this more than 300 percent increase. Faced with losing hospital staff privileges, the only option Dr. Paek has is to try general practice. 452 Brad Chayet, M.D. is a member of a seven-person multi-specialty orthopedic group in West Broward. His medical premiums have just doubled, and are now more that $90,000 per doctor for $250,000/$750,000 coverage. His intention is to go bare, and to avoid very high-risk procedures. 453 449 E-mail from Kenneth Beer, M.D. to Michelle Jacquis (Dec. 6, 2002) (Vol. 11, Tab 389). 450 E-mail from Suzan Streichenwein, M.D. to Michelle Jacquis (Dec. 7, 2002) (Vol. 11, Tab 390). 451 E-mail from Michael Binder, M.D. to Michelle Jacquis (Dec. 7, 2002) (Vol. 11, Tab 398). 452 E-mail from Nak Y. Paek, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 6, 2002) (Vol. 11, Tab 474). 453 E-mail from Brad Chayet, M.D. to Michelle Jacquis (Dec. 7, 2002) (Vol. 11, Tab 399). 91

Wayne Maxson, M.D. is a doctor who has responded to the malpractice crisis by dropping coverage and discontinuing hysterectomies, and by not performing more complicated operative laparoscopies. 454 Marc A. Melser, M.D., F.A.C.S. is an urologist who has never been sued. Nevertheless, his malpractice insurance has increased 88 percent this year. As a result, he may have to stop performing bladder removal surgery; he may also have to have a lower threshold for sending patients to a major referral center. 455 Desiree A. Rosenthal, M.D., a 54-year-old family practice physician who had practiced in Florida for the past twenty-two years, was forced to resign from her part-time practice of clinical medicine on November 1, 2002, some fifteen years before she had planned. In her letter to her patients informing them of her resignation, Dr. Rosenthal explained that she was no longer able to pay her malpractice insurance premium. The $26,000 premium for her part-time work exceeded her part-time earnings of $22,000. Dr. Rosenthal s premium increased from $6,000 in 1999, to $7,5000 in 2000, to $10,000 in 2001, to $12,500 in 2002, and finally, to $26,400 for 2003. 456 Kathryn Pearson, M.D. is a fellowship-trained, breast-imaging radiologist in Jacksonville. Dr. Pearson believes that she may end up eliminating screening mammography with her forty-person radiology group if additional radiologists refuse to read mammography, and/or insurance companies refuse to cover mammography, as the limited manpower will only allow for diagnostic mammography. Furthermore, if her group s current insurance carrier (Mag Mutual) is forced to drop mammography from its coverage, she is prepared to leave Florida to return to California (where she has a medical license and is pursuing renewal of the same for this purpose alone). 457 Jonathon Bloch, M.D., a general surgeon, reiterates the point that many talented physicians are being forced to either retire early or leave Florida because of escalating malpractice costs and decreasing reimbursements. 458 454 E-mail from Mayne Maxson, M.D. to Michelle Jacquis (Dec. 6, 2002) (Vol. 11, Tab 400). 455 E-mail from Marc A. Melser, M.D., F.A.C.S. to Michelle Jacquis (Dec. 7, 2002) (Vol. 11, Tab 401). 456 Letter from Desiree A. Rosenthal, M.D. to Patricia Handler, Executive Vice-President, Dade County Medical Association (Nov. 8, 2002) (Vol. 10, Tab 327). 457 E-mail from Kathryn L. Pearson, M.D. to Michelle Jacquis (Dec. 7, 2002) (Vol. 11, Tab 402). 458 E-mail from Jonathan Bloch, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Nov. 17, 2002) (Vol. 11, Tab 347). 92

Richard M. Gray, M.D. is an orthopedic surgeon who specializes in hand and microvascular surgery. Doctors such as him are seeing rate increases of 100 percent last year and expect them to probably double again this year. This is not because of pending lawsuits, but rather because of their specialized field of practice, orthopedic surgery. The financial impact on Dr. Gray s group has prevented any further recruitment of new physicians. Also, patients are having to wait longer to see doctors and sometimes cannot get an appointment for months. Dr. Gray has personally had to increase new and follow-up patients slots and is now seeing patients from 8:30 a.m. until 7:00 p.m. His group is overbooking patient slots by 20-30 percent, and has also had to increase its operating room time, which now spans from 7:30 a.m. until 7:00 p.m. 459 Peter Marmerstein is the Chief Executive Officer of St. Mary s Medical Center in West Palm Beach. St. Mary s operates one of only eleven Regional Perinatal Intensive Care Centers (RPICC) in the state. These centers are designed to ensure that poor and low-income women who are high-risk obstetrical patients are provided with necessary perinatal services. The St. Mary s RPICC physician group has been confronted with a 124.8 percent ($911,566) increase in their malpractice insurance premiums for 2003. As a result, these physicians have been confronted with the choice of paying this increased premium or foregoing medical malpractice insurance; should they choose the latter, the group has determined that it would be forced to abandon its coverage of St.Mary s RPICC and indigent obstetrical programs. Without physician providers, these programs cannot continue. 460 Celestino Palomino, M.D. has been with the same insurance company (Farmer s Insurance Group) for seventeen years, and has never been named in a malpractice suit. Nevertheless, two months ago, the company informed Dr. Palomino that his policy would not be renewed. As of January 1, 2003, he has not been issued a new policy and was forced to ask for a leave of absence from all three hospitals where he practices, as well as the five dialysis units where he has patients. 461 Arthur Graves, M.D. is Chief of the Medical Staff at South Bay Hospital in Sun City Center. Thus far, the hospital has lost five qualified and competent physicians due to the medical liability problem. He writes that the hospital is finding it increasingly difficult 459 Letter from Richard M. Gray, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Nov. 17, 2002) (Vol. 11, Tab 348). 460 Facsimile from Peter Marmerstein to Dwight Chenette (Dec. 6, 2002) (Vol. 11, Tab 393). 461 Letter from Celestino Palomino, M.D. to Governor Jeb Bush (January 3, 2003) (Vol. 11, Tab 464). 93

to replace experienced, highly capable physicians who are restricting their practices or retiring early. 462 Thomas Peurifoy, M.D. is a general vascular surgeon who practiced in Sun City Center and Manatee County for nearly two decades. He moved to another state when his insurance carrier left the state and his premiums went up 300 percent. 463 John Dunne, M.D. is a board certified thoracic and vascular surgeon who has practiced in Sun City Center for twenty years. When his premiums went up to more than $120,000, he limited his practice to cosmetic vein surgery in his office. He currently has no insurance for thoracic and vascular surgery, will not practice bare, and has therefore been removed from emergency room call. 464 Richard Landrigan, M.D. is an urologist who, in October 2002, resigned from South Bay Hospital s emergency staff because of his inability to obtain insurance. He is no longer practicing in a hospital setting. 465 Jorge J. Villalba, M.D. was unable to obtain coverage from any carrier other than the JUA, which he could not afford. His premiums increased from $3,800 for a $1,000,000 policy to $34,000 for a $250,000 policy. Dr. Villalba is a child and adolescent psychiatrist who had to stop seeing developmentally disabled children in group homes when his insurance carrier left the state. He has been offered employment as a child psychologist in New Zealand and is considering moving his family there, although he hopes that the system will be changed and that truth will prevail. 466 Ann Giganti, A.R.N.P. works with a physician in Palm Bay and Indian Harbor Beach. She notes that in Miami, it costs an obstetrician $200,000 for malpractice insurance. In Broward County, 400 physicians have left, and new graduates cannot afford to take their places. The surgeon who corrected undescended testes for their toddlers is no longer practicing, and she notes that his malpractice insurance would increase to $150,000 over the next few years. They 462 Letter from Arthur Graves, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 2, 2003) (Vol. 11, Tab 463). 463 Letter from Arthur Graves, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 2, 2003) (Vol. 11, Tab 463). 464 Letter from Arthur Graves, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 2, 2003) (Vol. 11, Tab 463). 465 Letter from Arthur Graves, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 2, 2003) (Vol. 11, Tab 463). 466 E-mail from Jorge J. Villalba, M.D. to Michelle Jacquis (Dec. 6, 2002) (Vol. 11, Tab 386). 94

now must send their patients an hour and a half away, to Orlando, where there is a backlog of patients needing care. In fact, she notes, the majority of adult specialists refuse to see her pediatric patients at all. 467 Douglas L. Shepard, M.D. is a neurologist in Naples. Although no suits or claims have been made against him, his rates have escalated to the point that he will be going with minimum coverage to maintain hospital privileges. Although he realizes that this maneuver may be somewhat risky, Dr. Shepard believes that it is morally reprehensible to pay the outrageous premiums to subsidize a flawed legal and, perhaps, insurance system. 468 Frank Loh, M.D., P.A. has been a practicing neurologist for the last twelve years, and relocated his practice to Bradenton from New York City two years ago. While practicing in New York, Dr. Loh's malpractice premiums were about $22,000 per year. Last year, Dr. Loh was asked to pay $35,000 in malpractice; this year his premium has tripled to $104,000. Dr. Loh's earnings do not justify this expense. It was only two years ago that he was able to finish paying his medical school education loans. The thought of practicing without insurance causes him anxiety, and he has started to consider alternative occupations. 469 Marc A. Melser, M.D. is an urologist in Port Charlotte whose malpractice insurance went up 88 percent from about $13,000 per year to $24,500 per year. Dr. Melser is in a multispecialty group; this group has opted to reduce its coverage in an effort to cut costs. Dr. Melser will also be reducing the services he provides, as he will no longer perform bladder removals. Patients needing this surgery will now have to go to a university setting. 470 Paul Shirley, M.D., who has been in practice for twenty-six years, has had to limit his Jacksonville practice to knee arthroscopy, a low-risk area of medicine. He had a $500,000/$1,500,000 policy, which increased 50 percent last year, from $24,000 to $36,000. In October, the insurance company informed Dr. Shirley that it would be leaving the market in Florida. He elected to "go bare," but has since discovered that many of the healthcare providers he contracts with do 467 Letter from Ann Giganti, A.R.N.P. to U.S. Senator Bill Nelson (Oct. 16, 2002) (Vol. 10, Tab 209). 468 E-mail from Douglas L. Shepard, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 9, 2003) (Vol. 11, Tab 497). 469 E-mail from Frank Loh, M.D., P.A. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 13, 2003) (Vol. 11, Tab 520). 470 E-mail from Marc A. Melser, M.D., to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 12, 2003) (Vol. 11, Tab 509). 95

not wish to keep providers who go bare. To maintain his practice, Dr. Shirley has again been soliciting quotes from insurance brokers. One quote he received was for $250,000/$750,000 for $90,000, up 175 percent for one-half the coverage. A second was for $250,000/$750,000 for $46,000. He is currently interviewing for positions in other states. 471 Jonathan Daitch, M.D. is a pain anesthesiologist who has been insured through FPIC for the past twelve years. Although he has no claims against him, his professional liability insurance costs increased 50 percent in 2002, from $14,000 to $21,000. In 2003, his rate (after a 15 percent discount for no claims) will increase to $52,000. 472 Robert S. Spiegel, M.D. is a St. Petersburg urologist who has been practicing in Florida for almost twenty years. Until October 2002, his malpractice carrier was Farmer's Insurance, and his premium for the last year of coverage was about $16,000 for $1,000,000 in coverage. Farmer's did not renew his policy and is pulling out of Florida. Dr. Spiegel obtained malpractice coverage from the South Pinellas Trust, also for $1,000,000 in coverage. That premium is $34,000 annually. He has curtailed some services due to concerns about liability/malpractice suits. For the past three years, he was the only urologist treating patients insured by Pinellas County Social Services, in the lower-third of Pinellas County. He has resigned as a participant in that plan because of his perception that those patients tended to be potentially more litigious than the population as a whole. He has also resigned from the staff at a local hospital, Northside, to avoid taking ER calls, which lead to potentially greater liability exposure. Finally, he has stopped performing a few surgeries, specifically cystectomies for bladder cancer, urinary diversions using segments of bowel, and penile prostheses. The reason for this change in practice is that these procedures are by their nature, more complex and more complications are possible. He prefers to avoid this exposure in today's medicallegal climate. 473 Thomas L. Greene, M.D. is a Tampa physician who has been practicing orthopedic hand surgery in Florida for twenty years, and who has not had any malpractice claims against him in that time. He has had the same carrier, The Medical Protective, for the past seven years. From March 2001 to March 2002, his annual premium was 471 E-mail from Paul Shirley, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 12, 2003) (Vol. 11, Tab 508). 472 E-mail from Jonathan Daitch, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 12, 2003) (Vol. 11, Tab 510). 473 E-mail from Robert S. Spiegel, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 12, 2003) (Vol. 11, Tab 512). 96

$19, 709 for coverage of $1,000,000/$3,000,000. From March 2002 to March 2003, the rate increased to $46,120, so Dr. Greene changed coverage at greater risk of personal exposure to $250,000/$750,000; for this coverage, his annual premium was $27,296. He has received notice that for March 2003 to March 2004, for the same $250,000/$750,000 coverage, the annual premium will increase 63 percent to $44,355. The new premium will be 125 percent more than what he was paying in 2001 to 2002 for one-third of the protection. 474 Matthew R. Mervis, M.D. is the administrative partner for a tenphysician OB/GYN practice in Winter Park. During the past six months, because multiple obstetricians have ceased practicing in metro Orlando, the practice has seen its wait times for new gynecological appointments balloon to four to six months. Additionally, its delivery volume has increased approximately 20 percent. Last year, the practice had liability coverage with limits of $500,000/$1,500,000, at $40,000 per physician. To receive equal coverage in February 2003 would cost $70,000 per physician. This practice has reduced coverage to $250,000/$750,000, at a cost of $55,000 per physician a 37 percent increase for only half the coverage. This practice has provided services to patients at two hospitals (ORHS and FHS) for twenty-six years, but starting January 1, has curtailed its practice to a single hospital because of potential legal liability. Finally, with a changing liability climate, the practice has seen a significant increase in its caesarian rate. Dr. Mervis will leave Florida in three years (when his child completes high school), if the malpractice insurance crisis remains. 475 John Fifer, M.D. is an orthopedic surgeon who no longer goes to the emergency room or performs spine or pelvic fracture work. Dr. Fifer was sued after he consulted on a trauma case for which he did not get paid, and because he was the only party with insurance and not covered by sovereign immunity, he ended up becoming the deep pocket in a directed verdict. 476 Jeffrey Livingston, M.D., is a young ear, nose, and throat doctor who was almost forced out of practice because malpractice insurance was exceedingly difficult for him to obtain. The local hospital required a $250,000 letter of credit in lieu of insurance, and Dr. Livingston encountered great difficulty obtaining such a letter of credit because 474 E-mail from Thomas L. Greene, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 13, 2003) (Vol. 11, Tab 518). 475 E-mail from Matthew R. Mervis, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 12, 2003) (Vol. 11, Tab 513). 476 E-mail from John Fifer, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 12, 2003) (Vol. 11, Tab 514). 97

he has no assets. Eventually, he obtained malpractice insurance in the minimum amount required by law from the JUA. However, this coverage came at a more than 600 percent increase. His 2001 $250,000/$750,000 coverage, which was written by Clarendon (which has left Florida) was $7,071; his 2002 insurance through the JUA increased to $42,945. Dr. Livingston received several other quotes. Pulic gave him a quote of $67,000 per year with a $10,000 deductible, and no tail coverage. Evanston gave him a quote of $87,000 per year plus taxes and fees, and no tail coverage. General Star gave him a quote of $47,458 per year with a $10,000 deductible, and no tail coverage. As a survival tactic, and for fear that a lawsuit could put him out of business, Dr. Livingston is limiting performance of complex otologic and head and neck procedures. He is also less able to participate in programs that do not reimburse well, and is considering canceling his contract with Children's Medical Services, even though he is the only CMS provider of ENT services in Indian River County that he is aware of. 477 Michael Widick, M.D. is an otolaryngologist in Cocoa Beach who recently separated from the Air Force. He has a "new physician's discount rate" that more than doubled last year, from $6,000 to $12,500. He anticipates that his rates will reach about $50,000 per year after the next three years. 478 Martin Rothberg, M.D. is an internist who has practiced in Miami for twenty-eight years. Last year, his malpractice premium for a $1,000,000/$3,000,000 policy was $21,000. His insurance company declined to reinsure him for this year, and made available a "tail" policy for $61,000. The only coverage he could find for this year was a $250,00/$750,000 policy with a $10,000 deductible for a premium of $32,000. Because he could not afford $93,000 in insurance premiums, he has been "bare" since October 1, 2002. 479 Mark Rubenstein, M.D. specializes in physical medicine and rehabilitation, and as such has always been on the "low end" of the malpractice insurance premium list. Nevertheless, his malpractice insurance has gone up by more than 200 percent, and his premium more than tripled from last year. After his insurance was renewed, the company informed him that it is leaving the state of Florida. He will therefore have to find replacement coverage in a market that is 477 E-mail from Jeffrey A. Livingston, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 12, 2003) (Vol. 11, Tab 511). 478 E-mail from Michael Widick, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 12, 2003) (Vol. 11, Tab 515). 479 E-mail from Martin Rothberg, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 11, 2003) (Vol. 11, Tab 502). 98

very difficult. As a result of this crisis, he has stopped taking referrals to do epidural steroid injections, a procedure he has been doing clinically in private practice for ten years. That procedure is the riskiest that he performs in his pain practice, so he has stopped performing it in an effort to avoid any insurance denial in the future. 480 Lee Fischer, M.D. has stopped admitting patients to the hospital and now uses hospitalists to care for his patients. Dr. Fischer has $500,000/$1,500,000coverage. The premium for this in 2001 was about $5,000, and in 2002, $8,000. The one company that offered him insurance for 2003 for $250,000/$750,000 coverage quoted him $19,000. He has elected to take it, and now has half the coverage and a 125 percent increase in his premium for doing nothing more then office family practice and no procedures. 481 Christina Delgado, M.D. is a young practicing anesthesiologist in the Tampa Bay area whose malpractice insurance premiums jumped from $12,000 with limits of $1,000,000/$3,000,000 to $17,000 with limits dropped to $250,000/$750,000. This is an almost 40 percent increase in her premium, in spite of the fact that her coverage decreased. She is very concerned about her future ability to practice as an anesthesiologist. 482 Patrick T.G. Hennessey, M.D., MPH, FACP practices in the Orlando area. In 2001, his group's malpractice premium for $500,000/$1,500,000/$3,000,000 shared policy was approximately $7,800. In 2002, this was increased to almost $18,000. Its renewal for 2003 was quoted at $38,000, an increase of 487 percent in eighteen months. The group has had to restrict some of its services due to malpractice concerns. It has stopped caring for Workers Compensation patients and injured hotel guests. Even minor procedures (e.g., simple wound care, and minor gynecologic problems) now must routinely be sent to the emergency room because of malpractice concerns. Pregnant patients with non-ob problems are seen only on a case-by- case basis. Soon, the group will be unable to accept Medicare patients. 483 480 E-mail from Mark Rubenstein, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 11, 2003) (Vol. 11, Tab 505). 481 E-mail from Lee Fischer, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 11, 2003) (Vol. 11, Tab 506). 482 E-mail from Christina Delgado, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 11, 2003) (Vol. 11, Tab 501). 483 E-mail from Patrick T.G. Hennessey, M.D., MPH, FACP (Jan. 10, 2003) (Vol. 11, Tab 494). 99

James Floyd, M.D. is an orthopedic surgeon in Bradenton. He recently moved here from Birmingham, Alabama, where he had coverage of $1,000,000/$3,000,000 for $16,500 per year. Here in Florida, he must pay $34,000 for only $250,000/$750,000 coverage. If this situation does not improve, Dr. Floyd will go back to Alabama by 2004. 484 A. Braun, M.D. is a busy surgeon in an Orlando hospital who has been voted one of Orlando's best doctors. His renewal for liability insurance is in June. His current policy is $46,000 per year for general surgery, and his carrier will not discuss coverage or rates until required by law, forty-five days before. He is considering moving to another state to practice medicine. 485 Regina Bland, M.D., F.A.A.P. and Val Wynne, M.D., F.A.A.P. have been pediatricians in Palm Beach County since 1983 and 1989, respectively. Rather than close their practices, they dropped their medical malpractice insurance in December 2002, due to a rate increase of 600 percent from the prior year. They also dropped their hospital privileges and are now self-insured with responsibilities of $100,000. 486 Gordon Rafool, M.D. is one of about forty-five physicians in a multispecialty clinic in Winter Haven. The clinic's malpractice premium has increased this year from $1,200,000 to $1,800,000. The physicians are now self-insured for the first $50,000. One physician has given up obstetrics, and all of them have stopped doing any highrisk procedures. 487 Graham F. Whitfield, M.D. has dropped his professional liability insurance, effective January 1, 2003. The Medical Insurance Company of America (MICOA) notified him in October 2002 that it would no longer write medical professional liability insurance in Florida. He checked into the other plans that were writing in Florida but the premiums were triple in price without a tail. Dr. Whitfield 484 E-mail from James Floyd M.D. (Jan. 10, 2003) (Vol. 11, Tab 490). 485 E-mail from A. Braun, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 10, 2003) (Vol. 11, Tab 491). 486 E-mail from Regina Bland, M.D., F.A.A.P. and Val Wynne, M.D., F.A.A.P. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 10, 2003) (Vol. 11, Tab 492). 487 E-mail from Gordon Rafool, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 10, 2003) (Vol. 11, Tab 493). 100

stopped doing spinal surgery a couple years ago due to the cost of the premiums. 488 Jon D. Wiese, M.D. is a general surgeon in Longwood, and has practiced in this area since finishing his residency in August 1988. His premium for professional liability insurance increased from $30,576 in December 2001 to $48,051 in December 2002 for $500,000/$1,500,000 coverage. He elected to drop the limits on his professional liability insurance to $250,000/$750,000, effective December 2002; the premium was $35,002. He has stopped doing some surgical procedures and is contemplating leaving the state. 489 R. Gregory Smith, M.D. has practiced cosmetic surgery and maxillofacial surgery for the past twelve years in the Jacksonville area without a lawsuit. His insurance company (MICOA) suddenly decided to leave the state due to the "unsettled climate of the industry in the State of Florida," citing the increase in amounts of awards in Florida and the frequency of the occurrence of lawsuits. The offered him tail coverage for $132,000. He is currently paying $34,000 a year for coverage that will soon end. He expects to eventually have to go bare. 490 Ray Kordonowy, M.D. is a member of a five-person general internal medicine practice. The group is experiencing an average increase in annual premiums of 48 percent. The physicians are currently paying about $20,000 per person (on average) per year through their present carrier (MICOA), which is going to pull out of the Florida market in August. They expect increases for comparable coverage to cost 100 to 300 percent more, based on information from two companies willing to give them bids. The group is being offered $250,000 coverage with premium quotes higher than they paid for $1,000,000coverage a year ago. Members of the group cease inhospital coverage in the next 3 to 9 months, so that arrangements can be made for asset protection and no liability insurance. They have already stopped admitting to two of the three hospitals they were attending. They ultimately plan on leaving Florida. 491 488 E-mail from Graham F. Whitfield, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 15, 2003) (Vol. 11, Tab 534). 489 E-mail from Jon D. Wiese, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 15, 2003) (Vol. 11, Tab 535). 490 E-mail from R. Gregory Smith, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 16, 2003) (Vol. 11, Tab 540). 491 E-mail from Ray Kordonowy, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 14, 2003) (Vol. 11, Tab 532). 101

Donald R. Dunlap, M.D. experienced a 36 percent rate increase in 2003. Rather than "go bare," he has decided to work part-time and pay 50 percent of the premium. 492 Joel A. Schneider, M.D. is a radiologist whose specialty is mammography. He has just paid $94,000 for $250,000 in malpractice insurance. This will be his last year of practice unless there is some reasonable relief. 493 Data on the Problem Office of Insurance Regulation Medical Malpractice Data Call A recent data call by the Department of Insurance (now the Office of Insurance Regulation) ( Office ) indicates that: There are fewer insurance companies writing new medical malpractice policies in Florida; There are fewer insurance companies willing to renew such policies in Florida; and Those that are providing coverage have implemented more restrictive eligibility criteria for health care providers. In October 2002, the Office issued a data call to the top 15 writers of medical malpractice insurance in Florida. These insurers and their affiliates represent 94 percent of the market, as of December 31, 2001. By October 2002, three of these insurers had left or were in the process of leaving the market. The purpose of the data call was to determine the extent to which insurers were offering new and renewal medical malpractice policies. The data call was also designed to identify trends in the payment of claims at or in excess of policy amounts. The requested information was due November 30, 2002, and was collected via the Internet. Responses were received from all fifteen insurers. Additionally, some respondents provided information on behalf of affiliated companies within their insurer group, even though the affiliated insurers are not actually ranked among the top fifteen writers. As a result, 492 E-mail from Donald R. Dunlap, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 2003) (Vol. 11, Tab 531). 493 E-mail from Joel A. Schneider, M.D. to William Large, Counsel, Governor s Select Task Force on Healthcare Professional Liability Insurance (Jan. 17, 2003) (Vol. 11, Tab 548). 102

a total of twenty-six companies are represented in the responses. With two exceptions, (ProNational Insurance Company and Clarendon Insurance Company), 494 complete responses were received from all insurers. During the months of December and January, the Office reviewed the data received and contacted insurers for clarification or additional information where responses appeared inconsistent or incomplete. The data call queried two areas: coverage and writing practices and closed claim experience. Inquiries regarding closed claim experience were limited to claims in which an insurer s payout met or exceeded policy limits as well as those claims that included punitive damages or extra contractual (bad faith) obligations. The following highlights certain information contained in the responses received. Coverage and Writing Practices Most of the policies written are to physicians and surgeons. For these categories, since 2001, the number of insurers willing to write new risks has been reduced by approximately 50 percent. A similar reduction has been experienced relative to hospitals. The table below provides a summary of responses from insurers regarding their willingness to write new risks in the years indicated. 494 ProNational, actively writing new business, is ranked third in direct written premium with approximately 9.6 percent of market share. ProNational provided written responses to some questions in the coverage and writing practices section. It provided no detailed response to the closed claim experience section. ProNational s legal counsel asserted confidentiality or trade secret concerns regarding certain questions and indicated that some information being requested was not easily available as it was not stored in their computer system. Clarendon Insurance Company was ranked twelfth in direct written premium with approximately 3.7 percent of the market share. Clarendon Insurance Company is not actively writing new or renewal business. Clarendon Insurance Company provided complete responses to the coverage and writing practices section but provided no data for the closed claim experience section. These matters are being pursued with each insurer. 103

Table 6 Number of Insurers Writing New Risks in Years Indicated 2002 2001 2000 1999 1998 1997 Yes No Yes No Yes No Yes No Yes No Yes No Physicians 7 19 15 11 18 8 18 8 17 9 15 11 Surgeons 8 18 14 12 18 8 18 8 18 8 15 11 Hospitals 3 22 6 19 8 17 6 19 8 17 7 18 Pharmacists 5 20 6 19 6 19 6 19 5 20 5 20 Nurses 6 19 10 15 11 14 11 14 7 18 6 19 Occupational 6 19 7 18 6 19 7 18 6 19 5 20 Therapists Physical 6 19 7 18 8 17 6 19 6 19 5 20 Therapists Midwives 3 22 5 20 5 20 6 19 5 20 4 21 Others 9 16 14 11 17 8 19 6 20 5 18 7 Less than half of those responding to the data call have indicated a willingness to renew their existing risks. Insureds whose policies are not renewed must seek coverage from insurers with which they did not have an immediately preceding relationship. Table 7 Number of Insurers Currently Renewing Existing Business as of November 2002 Yes No Physicians 12 14 Surgeons 12 14 Hospitals 4 21 Pharmacists 6 19 Nurses 8 17 Occupational 7 18 Therapists Physical 7 18 Therapists Midwives 4 21 Others 9 16 The reduction in the number of insurers renewing existing business, in conjunction with departures of several insurers and the unwillingness to write new policies by most of those remaining, have combined to severely restrict access to medical malpractice insurance in Florida. Healthcare providers that were previously insured by one of the insurers that has left the market, are attempting to find coverage in a market that is not universally writing new business. These healthcare providers are also competing for coverage with those insureds that are being nonrenewed by their current insurer. Many insurers have indicated that they had implemented significant changes to their eligibility criteria in the last twenty-four months. These 104

changes have had the effect of reducing the number of applicants and insureds who would qualify for prospective coverage. These changes, when combined with the reduced number of insurers writing new and renewal business, have served to further restrict healthcare providers access to coverage. The data call requested that responders explain the nature and reason for such changes. Examples of changes in eligibility and underwriting criteria include: Enhanced limitation on willingness to provide coverage for prior acts ( tail ) coverage. Restricting maximum limits of coverage to $1,000,000 per occurrence with a $3,000,000 policy aggregate. Reviewing all physicians with past or present claims or suits by reunderwriting the entire book of business. Non-renewing policies with losses Non-renewing medical groups with over three physicians and physicians practicing within certain specialties. Thirty-one percent of insurers have policies which specifically exclude punitive damages. Arguably, the absence of this exclusion does not necessarily obligate an insurer to pay punitive damages. Closed Claim Experience The responses to the closed claim experience section obviously focus on claims that have been closed in the years indicated. The frequency and severity of claims closed in any one year will not likely reflect the frequency and severity of those claims currently being incurred. Typically, the frequency and severity of claims is reflected in loss reserves and reserves established relative to claims that have been incurred, but for which no claim has yet been filed. Some insurers have indicated, and the responses seem to reflect, an inability to easily identify and distinguish payout amounts of punitive and bad faith damages from the total amounts paid on each claim. Responses to the closed claim experience section indicate a measurable increase in the percentage of closed claims that were paid at or above policy limits. While the actual percentage relative to total closed claims for 2001 remains low at 5.5 percent, the substantial increase in the percentage from 1.5 percent in 1997, suggests an unfavorable trend that, if 105

continued, may further weaken the resolve of those insurers remaining in the market to continue to offer coverage. The impact of these percentages is even more telling when taking into account that there are fewer large insurers writing medical malpractice insurance in Florida today than there were in 1997. A growing number of claims paid in excess of policy limits is being spread among a smaller population of insurance companies. For a more detailed summary of responses, see Table 8. 106

Table 8 2001 - Market Share and Rank 2001 Market Share Rank Company Name Med Mal Dir Prem Written Market Share 1 First Professionals Ins Co 109,672,505 19.1% 2 Health Care Ind Inc 88,970,154 15.5% 3 Pronational Ins Co 55,259,931 9.6% 4 Truck Ins Exch 35,245,611 6.1% 5 Medical Protective Co 31,096,627 5.4% 6 American Physicians Assur Corp 26,690,239 4.6% 7 MAG Mut Ins Co 26,525,321 4.6% 8 St Paul Fire & Marine Ins Co 24,422,097 4.2% 9 Continental Cas Co 23,542,376 4.1% 10 Doctors Co An Interins Exchn 23,223,681 4.0% 11 TIG Ins Co 21,469,578 3.7% 12 Clarendon Natl Ins Co 21,456,110 3.7% 13 American Healthcare Ind Co 20,235,101 3.5% 14 Chicago Ins Co 12,461,372 2.0% 15 Anesthesiologists Pro Assur Co 11,835,465 2.0% 17 American Cas Co Of Reading PA 4,828,738 0.8% 22 American Continental Ins Co 2,515,415 0.4% 32 St Paul Guardian Ins Co 427,533 0.07% 35 Athena Assur Co 350,252 0.06% 38 TIG Ind Co 152,070 0.02% 40 National Fire Ins Co Of Hartford 56,211 0.00% 53 Valley Forge Ins Co - 61 Transportation Ins Co - St Paul Mercury Insurance TIG Insurance Co of Michigan Transcontinental Insurance Co 93.45% Source: Direct Written Premium as reported in 12/31/01 Annual Statement. 107

Florida Department of Health Financial Responsibility Florida, unlike most other large states, requires as a matter of licensure that the licensee must demonstrate to the satisfaction of the licensing boards and the Department of Health financial responsibility to pay claims and costs arising out of the failure to render the appropriate medical care. 495 The Florida Department of Health maintains data on physician financial responsibility. As of January 30, 2003, the Department s data on this issue is reflected in Table 9. Table 9 indicates: 35,416 Florida physicians carry medical malpractice insurance (32,500 medical doctors and 2,826 osteopathic doctors). 728 Florida physicians carry an irrevocable letter of credit (600 medical doctors and 128 osteopathic doctors). 2,076 Florida physicians do not carry medical malpractice (1,907 medical doctors and 105 osteopathic doctors). 18,587 physicians fall under one of the statutory exemptions listed above or do not practice in Florida (16,924 medical doctors and 1,663 osteopathic doctors). 496 495 Section 458.320(1), Florida Statutes. 496 Section 458.320(5)(a)-(f), Florida Statutes. 108

Table 9 pro_cde fin_resp_code financial_exempt CountOflic_nbr 1501 67 1501 Government 3910 1501 Limited License 47 1501 Teaching 1074 1501 Not Practicing in Florida 8740 1501 Other Criteria 3086 1501 Liability under $100,000 3800 1501 Liability under $100,000 Government 16 1501 Liability under $100,000 Limited License 1 1501 Liability under $100,000 Teaching 3 1501 Liability under $100,000 Not Practicing in Florida 88 1501 Liability under $100,000 Other Criteria 46 1501 Liability under $250,000 28356 1501 Liability under $250,000 Government 18 1501 Liability under $250,000 Limited License 1 1501 Liability under $250,000 Teaching 12 1501 Liability under $250,000 Not Practicing in Florida 188 1501 Liability under $250,000 Other Criteria 61 1501 Irrevocable Letter of Credit $100,000 142 1501 Irrevocable Letter of Credit $100,000 Other Criteria 1 1501 Irrevocable Letter of Credit $250,000 452 1501 Irrevocable Letter of Credit $250,000 Not Practicing in Florida 4 1501 Irrevocable Letter of Credit $250,000 Other Criteria 1 1501 Not to Carry Medical Malpractice 1907 1501 Not to Carry Medical Malpractice Government 3 1501 Not to Carry Medical Malpractice Teaching 2 1501 Not to Carry Medical Malpractice Not Practicing in Florida 20 1501 Not to Carry Medical Malpractice Other Criteria 39 1901 19 1901 Government 250 1901 Limited License 9 1901 Teaching 40 1901 Not Practicing in Florida 1098 1901 Other Criteria 247 1901 Liability under $100,000 468 1901 Liability under $100,000 Not Practicing in Florida 11 1901 Liability under $100,000 Other Criteria 4 1901 Liability under $250,000 2303 1901 Liability under $250,000 Government 2 1901 Liability under $250,000 Not Practicing in Florida 24 1901 Liability under $250,000 Other Criteria 14 1901 Irrevocable Letter of Credit $100,000 31 1901 Irrevocable Letter of Credit $100,000 Government 1 1901 Irrevocable Letter of Credit $250,000 95 1901 Irrevocable Letter of Credit $250,000 Not Practicing in Florida 1 1901 Not to Carry Medical Malpractice 100 1901 Not to Carry Medical Malpractice Not Practicing in Florida 2 1901 Not to Carry Medical Malpractice Other Criteria 3 109

Florida Hospital Association, January 2002 Survey In a survey conducted in January 2002, the Florida Hospital Association documented some of the difficulty in obtaining, or affording medical malpractice insurance. 497 Fifty-two percent of the acute care hospitals in Florida responded to the survey. 498 Seventy-five percent of the hospitals reported having problems obtaining professional liability coverage. Of those not reporting problems, many stated they had not yet received the 2002 renewal notice, but anticipated having problems. 499 Fourteen hospital systems reported their insurance company had refused to renew the policy. 500 Seven of those had been insured by St. Paul Insurance Company. 501 Seventeen hospitals reported premium amounts. For 10 of those hospitals, the liability costs more than doubled between 1999 and 2001, with premium increases averaging 140 percent for the two-year period. 502 Florida Medical Association, September 2002 Survey In September, the Florida Medical Association also conducted a survey of its members to determine the availability of medical malpractice insurance. This survey collected information on how physicians had changed their practice to deal with the high cost, and lack of available medical malpractice insurance. More than 2,647 physicians responded representing over 40 specialties, and 42 of 67 Florida counties. 503 Of the 2,647 respondents, 98 percent believed they were impacted by the increase in malpractice insurance, and provided the following explanations of the impact: 504 98, or 3.7 percent of the respondents, reported discontinuing the practice of medicine as a result of the lack of availability of medical malpractice insurance. 624, or 23.57 percent, had discontinued calls at nursing homes. 915, or 34.57 percent, had cut back on hospital coverage. 1,080, or 40.8 percent, had stopped, or reduced emergency room calls. 497 Florida Hospital Association, Survey on the Availability and Affordability of Liability Coverage in Florida (May 2002). 498 Id. at 5. 499 Id. 500 Id. 501 Id. 502 Id. 503 Florida Medical Association & Florida Hospital Association, Access to Care Survey, presentation, Dec. 20, 2002. 504 Id. 110

1,360, or 51.38 percent, had discontinued or cut back on Medicaid patients. 1,732, or 65.43 percent, had stopped seeing certain types of patients. 1,795, or 67.81 percent, had reduced or stopped certain procedures. 832, or 31.44 percent, had difficulty getting new partners. 981, or 37.05 percent, had changed referral patterns. 1,228, or 46.39 percent, were considering discontinuing the practice of medicine. Floridians for Quality Affordable Healthcare 2002 Survey Floridians for Quality Affordable Healthcare conducted a survey of physicians in Dade, Broward and Palm Beach Counties in late October and early November 2002 to assess the impact of the medical malpractice insurance crisis. 505 Surveys were sent to approximately 9,000 physicians in the area, and responses were received from 1,573. 506 The survey had the following findings: Most South Florida physicians have been sued at least once, with the odds of being sued highly correlated to certain specialties. (Table 10). 507 Every neurosurgeon and vascular surgeon in the survey had been sued, and for the 1,460 physicians who answered this question, the average number of suits was 1.44. 508 The highest number of lawsuits per individual physician occurred for neurosurgeons with an average of 5.2 suits per physician. 509 505 RCH Healthcare Advisors, LLC, Floridians for Quality Affordable Healthcare, Summary of Results, Physician Professional Liability Survey 1. 506 Id. 507 Id. 508 Id. 509 Id. 111

Table 10. Average Number of Lawsuits and Percentage of Physicians Who Have Been Sued by Specialty SPECIALTY LAWSUITS Ave. No. Total % Who Have Been Sued Sample Size Neurosurgery 5.21 100.0 14 Vascular Surgery 3.14 100.0 11 Cardiovascular or Thoracic Surgery 3.62 94.1 17 General Surgery 2.69 90.5 63 Radiology 3.31 88.9 27 OB-GYN 2.61 78.6 84 Emergency Medicine 1.69 77.8 9 Other Surgical 510 1.89 76.9 13 Infectious Diseases 3.22 71.4 14 Radiation Oncology 1.33 71.4 7 Cardiology 1.37 71.1 76 Physical Medicine & Rehabilitation 1.70 70.0 10 Neurology 1.55 68.3 41 Pulmonary 1.56 67.4 43 Gynecology 2.63 66.7 18 Pediatric Medical Specialties 1.19 66.7 9 Orthodedic Surgery 1.97 61.5 96 Anesthesiology & Pain Management 0.97 61.1 18 Otolaryngology 1.44 60.9 23 Urology 1.02 58.8 34 Pediatric Surgery/Surgical Specialties 1.97 58.3 12 Internal Medicine 1.28 54.6 183 Ophthalmology 0.93 52.6 57 Plastic Surgery 1.62 52.1 73 Hematology-Oncology 0.91 50.0 32 Pathology 0.84 50.0 12 Other Medical 511 2.00 50.0 8 Gastroenterology 0.92 48.4 64 Podiatry 1.48 47.1 17 Family Practice and General Practice 0.74 46.8 139 Dermatology 0.67 45.9 37 Unidentified Specialty 512 0.72 41.7 17 Nephrology 0.70 38.5 13 Pediatrics 0.40 29.3 99 Psychiatry 0.48 28.2 39 Endocrinology 0.25 25.0 8 Rheumatology 0.22 22.2 9 Allergy and Immunology 0.00 0.00 14 Weighted Averages & Total Sample 1.44 57.4 1,460 Source: RCH Healthcare survey of South Florida physicians, November 2002. 510 Includes hand surgery, maxillofacial, oculoplastics, oncologic, spine, and cataract surgery. 511 Includes critical care, geriatrics, infertility, neonatology, and nuclear medicine. 512 Specialty was not provided by respondent. 112

The number of physicians going bare has increased. In 2001-02, 94.6 percent of the respondents had purchased medical malpractice insurance. 513 When asked if they had purchased medical malpractice insurance this year (2002) only 83.6 percent answered yes. 514 The amount of coverage purchased has also decreased. 515 Table 11. Changes in Coverage Limitations Percentage Buying: Last Year This Year $1,000,000/$3,000,000 35.0% 20.7% $500,000/$1,500,000 12.5% 11.4% $250,000/$750,000 47.1% 51.5% No Malpractice Coverge 5.4% 16.4% Total 100.0% 100.0% Sample Size 1,506 1,454 Source: RCH Healthcare survey of South Florida physicians, November 2002 More than 52 percent of the respondents indicated they were considering going bare in 2003. 516 The cost of medical malpractice between 2001 and 2002 has increased by 33 percent. 517 When the decrease in coverage is factored out of the increase in cost, then the cost for the same coverage has increased from an average of $4,667 per $100,000 to a cost of $8,400 per $100,000, or an increase of 80 percent. 518 Some specialties, such as neurosurgery, thoracic surgery, and obstetrics, pay well over $100,000 per physician, per year, for medical malpractice coverage. 519 Fifty-four respondents closed their practice, retired early, or moved to another state, and 34 percent of all respondents report they are considering this option. 520 513 Id. at 3. 514 Id. 515 Id. 516 Id. 517 Id. 518 Id. 519 Id. 520 Id. at 4. 113

More than 41 percent, or 517 respondents, have already stopped offering some high-risk procedures. 521 An additional 15 percent are considering this action. 522 Eight of the 18 gynecologists responding to the survey have stopped delivering babies accounting for a loss of 745 deliveries. 523 Forty-five of the 94 obstetricians who responded have stopped some high-risk procedures. 524 Seven of the 29 radiologists responding have stopped reading mammograms taking more than 15,000 readings out of the system, and another eight radiologists are considering discontinuing this service. 525 About 41 percent, or 647 respondents, have cut back on staff or delayed purchasing equipment to reduce costs. 526 The types of equipment purchases delayed include: mammography, breast biopsy, ultrasound, laboratory, and x-ray equipment; a visual field machine, and retinal camera; electronic medical records software; computer upgrades; and office renovations. 527 Almost 31 percent, or 482 respondents indicated they have limited their hospital emergency room practice and 6 percent, or 87 respondents, are considering this reduction. 528 Approximately 16 percent, or 256 respondents, have limited nursing home practice and another 2 percent, or 30 respondents, are considering the reduction. 529 Approximately 11 percent, or 172 respondents, have limited services in ambulatory surgery centers and another 2 percent, or 23 respondents, are considering this limit on services. 530 521 Id. 522 Id. 523 Id. at 5. 524 Id. 525 Id. 526 Id. 527 Id. 528 Id. 529 Id. 530 Id. 114

50 percent, or 787 respondents, reported discontinuing services to some high-risk patients. 531 44 percent, or 699 respondents, are discontinuing some high-risk services. 532 66 percent, or 1,062 respondents, reported performing more tests for defensive reasons. 533 30 percent, or 467 respondents, reported longer waiting times for an appointment. 534 It should be noted that the Academy of Florida Trial Lawyers took exception to the techniques used by the Floridians for Quality Affordable Healthcare. According to the Academy, the conclusions of the materials are based on reported survey data. However, the methodology of the reported survey is flawed to the point that the results would not be accepted in any way in terms of the social science academic community. 535 According to Dr. James T. Kitchens, a statistician retained by the Academy, the use of mail or fax surveys always presents obstacles in obtaining valid results. The results of the materials presented represents one of the studies described by Norman Bradburn and Seymour Sudman, who have been honored for their contributions to methods of conducting surveys. In their book, Polls and Surveys: Understanding What They Tell Us, they write There are so many examples of carefully conducted mail surveys with cooperation rates in the 80-90 percent range. There are also horrible examples of mail surveys with cooperation rates in the 10-20 percent range, or even lower. The biases in such studies are so great as to make the results almost meaningless. The cooperation rate for the Floridians for Quality Healthcare study is 17.5 percent. This means the actual finding could vary by as much as 82.5 percent if the cooperation rate had been 100 percent. 536 Dr. Kitchens believes that without a true random sampling technique, the responses from a mail or faxed survey always have some built-in bias. The respondents to this study may be doctors more interested in the topic or they may have been sued more often than the average doctor. In this study, since there is no signature line on the response form, it is not even 531 Id. at 6. 532 Id. 533 Id. 534 Id. 535 James T. Kitchens, Ph.D., Analysis of Reports by RCH Healthcare Advisors (Jan. 2003). 536 Id. 115

certain the responses are from doctors. The form may have been completed by anyone, such as an office administrator or nurse. 537 Dr. Kitchen concluded, this survey cannot claim a legitimate margin of error or statistical confidence level. Therefore, the conclusions and the assertions made on the basis of this survey data must be viewed as suspect considering the lack of discipline in terms of acceptable research methodology. 538 Dr. Kitchen believes the survey and information presented to the Task Force amounts to no more than a public relations document presented by one side in a political policy debate. The methodology of this reported study is so flawed that the results have no statistical validity. If it were a research paper, it would receive a failing grade even in a basic undergraduate research course. 539 The Task Force finds the comments of Dr. Kitchens to have some merit. Dr. Kitchens main concern seems to be that there is a lack of responses from doctors to the survey. Dr. Kitchens notes, if the data indicates the respondent physicians are angry or frustrated, it may explain why they responded to the survey and the other 82.5 percent of the physicians did not. 540 The Task Force would welcome Dr. Kitchens or any other stakeholder to attempt to reach out to the remaining 82.5 percent of the physicians in South Florida. However, the Task Force believes that, based upon the numerous letters, e-mails, and testimonials, that the remaining 82.5 percent of the physicians who did not respond to this survey (if they are still practicing) would mirror the responses of the 17 percent of the physicians that did respond. Although there is always going to be a need for more data on this problem, the Task Force finds the FMA and RCH survey to be compelling measures of physicians attitudes in the state of Florida. Closed Claim Data In an effort to provide a quantitative analysis of the healthcare professional liability insurance problem and possible solutions, the Florida Hospital Association retained Milliman USA, Inc. to perform a data analysis. The Florida Academy of Trial Lawyers retained Dr. Lance dehaven-smith to perform an analysis of the Florida problem as well, and provide an independent study. To assist the Task Force in considering the 537 Id. 538 Id. 539 James T. Kitchens, Ph.D., Analysis of Reports by RCH Healthcare Advisors (Jan. 2003). 540 Id. 116

extensive data analyses performed in these two reports, Task Force staff performed an independent analysis of each of the reports. 541 Florida Hospital Association Report Analysis, Prepared by Milliman USA, Inc. The Florida Hospital Association contracted with Milliman USA, Inc. to evaluate the healthcare professional liability insurance problem in Florida, and formulate recommendations for changes that would be effective in addressing the problem. The report examined data from the Florida Department of Insurance Medical Malpractice Closed-Claim Database, the National Practitioner Data Bank Public Use Data File (NPDB), the Texas Department of Insurance Closed-Claim Database, the Physicians Insurers Association of America Claim-Trend Analysis, and the statement of rate filings in insurance company annual statements. 542 The report compared Florida, and national data and trends, with loss payments, including average payouts, ratios of economic to non-economic damages, and premium increases. Trends in Loss Payments and Premiums for Medical Liability Claims Total loss payments Total amount of paid losses in Florida for 2000 is more than 150 percent higher than the amount paid in 1991. This includes an increase of 28 percent from 1999 to 2000. In comparison, the total amount of paid losses for the United States is 80 percent higher in 2000 than the amount paid in 1991. Florida losses are now in excess of $400 million per year. 541 It should be noted that there have been previous well-documented attempts to study Florida s closedclaim data. A study of the Florida medical malpractice environment from 1975 to 1986 is particularly enlightening. See e.g., David J. Nye et. al., The Causes of the Medical Malpractice Crisis : An Analysis of Claim Data and Insurance Company Finance, 76 Georgetown Law Journal 1495 (1988). This study found that the primary cause of malpractice premium increases, measured over a nine-year period, was the increase in loss payments to claimants. The frequency of claims payments was not primarily responsible for increased claims costs, since the likelihood that a Florida physician would be sued for malpractice has not changed from 1975 to present. It is rather the huge increase in the size of claims payments, particularly the increasing frequency of very large payments that accounted for the total increase in paid losses. Nye et al. note: The causes of the increases in claims payments in Florida are not clear. The increases may reflect the belief of defense lawyers and insurance claims managers that their risk at trial would be greater than in 1975. This might be derived from more serious iatrogenic injuries, a concern that juries are more likely to award larger verdicts and that judges are less likely to control them, a sense that the plaintiffs trial bar is more able than before, or a concern that the insurer will be held liable under a bad faith claim if it fails to settle within policy limits. Id. at 1560. 542 Richard S. Biondi et al., Milliman USA, Inc., Florida Hospital Association, Medical Malpractice Analysis (Nov. 7, 2002). 117

Hospital losses account for 38 percent of total losses. Physician-paid losses grew from approximately $120 million in 1991 to more than $300 million in 2000 for an average annual growth of 10.8 percent. National losses are now in excess of $3.8 billion. Physician-paid losses grew only 6.8 percent from 1991 to 2000. Average loss payments (severity of claims) The average loss paid in Florida, and the nation, has shown an increasing trend since 1975. (Graph 1) 543 The loss per Florida doctor exceeds the national average, and has grown from 15 percent above the national average in 1991, to 50 percent higher in 2000. (Graph 2) 544 543 Id., Graph 1. 544 Id., Graph 2. 118

Graph 1 Florida Hospital Association Historical Average Paid Loss for Medical Liability Claims 500,000 400,000 300,000 200,000 Cost per Case 100,000 0 1975 1980 1985 1990 1995 2000 Year Case Closed FL DOI- Hospital FL DOI - Doctor PIAA - CW Doctor NPDB - FL Doctor 119

Graph 2 1.80 1.60 1.40 1.20 1.00 0.80 Florida Hospital Association Florida Loss per Doctor (pure premium) Compared to US Average Based on NPDB 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Year Case Closed 120 Ratio of Florida to US

California, Florida, Illinois, Massachusetts, Michigan, New Jersey, New York, Ohio, Pennsylvania, and Texas account for about twothirds of medical malpractice losses in the United States. 545 Frequency of claims Nationally, the frequency of claims based on number of claims per 100,000/population, has been relatively stable since 1991. The frequency of claims has varied from a low of 5.11 in 1998 to a high of 5.77 in 1994. (Graph 3) 546 Florida claims-frequency per 100,000/population increased over the same period with a low of 4.82 in 1991 to a high of 7.56 in 2000. (Graph 3) 547 This claims-frequency is only exceeded by Nevada, West Virginia, Pennsylvania, and Montana. 548 Ratios of economic and non-economic damages A review of available 549 data in the Department of Insurance Closed- Claim Database indicated economic damages were approximately 25 percent of awards, and non-economic damages were approximately 77 percent. (Graph 4) 550 Premium increases Since 1996, commercial insurance premiums for Florida have increased 64 percent to $650 million. 551 Since 1996, commercial insurance premiums nationally have increased only 26 percent. 552 The average malpractice premium, per doctor in Florida, is 55 percent greater than the national average. 553 545 Id. at 20. 546 Id. at 17. 547 Id. 548 Richard S. Biondi et al., Milliman USA, Inc., Florida Hospital Association, Medical Malpractice Analysis 20, Exhibit 7 (Nov. 7, 2002). 549 In Department of Insurance closed claim data, only about 25 percent of the archive database and about 87 percent of the current database contained a breakout of damages paid. 550 In only 55 percent of the cases did the non-economic and economic damages stated add to the total of damages paid. 551 Richard S. Biondi et al., Milliman USA, Inc., Florida Hospital Association, Medical Malpractice Analysis 13, Exhibit 2a. (Nov. 7, 2002). 552 Id. 553 Id. at 13, Exhibit 2b. 121

Graph 3 Florida Hospital Association Frequency of Cases Reported to the NPDB 1,600 Total Cases Reported 20,000 Number of Cases (FL) 1,200 800 400 15,000 10,000 5,000 Number of Cases (US) 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Year Case Closed 0 NPDB - Florida (left axis) NPDB -US Total (right axis) 8.0 Frequency of Cases (per 100,000 population) Cases per 100,000 6.0 4.0 2.0 0.0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Year Case Closed NPDB -Florida NPDB -US Frequency 122

Graph 4 Florida Hospital Association Percentage Split in Indemnity Payment (all years combined) Florida DOI - Hospitals Economic - Wage 3% Economic - Other 1% Economic - Medical 19% Non-Economic 77% 123

Florida Academy of Trial Lawyers Medical Malpractice Claims Analysis, Prepared by Lance dehaven-smith The Florida Academy of Trial Lawyers retained Dr. Lance dehaven-smith to perform an analysis of closed-claims data in the Department of Insurance Closed-Claims Database for physicians and surgeons. His analysis did not include hospitals. Total claims paid The claims-paid data for physicians, without an inflation adjustment, showed a 24 percent increase between 1999 and 2001. 554 Closed-claims peaked in 1996, dropped in 1997 and 1998, and began increasing again in 1999. (Graph 5) 555 When adjusted by medical-care inflation rates, the claims-paid have been down since 1996, and have just now reached the 1991 levels, approximately. (Graph 6) 556 Average claims paid The average claim value, adjusted for medical-care inflation, is down from the levels in 1991, and is even below levels for 1995 and 1996. (Graph 7). 557 Severe claims are rare. (Graph 8). 558 Non-econo economic damages vs. economic damages According to Dr. Smith, there is a.110 correlation between economic and non-economic damages. This indicates, if you get a high economic award, you re more likely to get a higher non-economic award.... [I]t is not a strong relationship, but it is statistically significant, and suggests that even those non-economic damages are not unexplainable or irrational. 559 554 Lance dehaven-smith, Ph.D., Figure 1, Total Value of Claims 1999-2001. 555 Lance dehaven-smith, Ph.D., Figure 2, Claims Adjusted for Inflation Table, and testimony, Nov. 22, 2002, pg. 84. 556 Id. Figure 3. 557 Lance dehaven-smith, Ph.D., Figure 5, Average Claim Value, Adjusted for Inflation. 558 Lance dehaven-smith, Ph.D., Figure 2, Outliers. 559 Lance dehaven-smith, Ph.D., testimony, Nov. 22, 2002, pg. 89. 124

2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 Graph 5: Total Payout per Year, Adjusted for Medical Care Cost Inflation Total Paid Adjusted for Medical Care Inflation 400000000 300000000 200000000 100000000 0 Year Graph 6: Total Payout per Year, Adjusted for Medical Care Cost Inflation Total Paid Adjusted for Medical Care Inflation 400000000 300000000 200000000 100000000 0 Year 125

Graph 7: Average Payout Per Claim, Adjusted for Medical Care Cost Inflation 400000 300000 Average Value of Claim 200000 100000 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Year 126

Graph 8 Scatterplot of Individual Payouts, Showing Outliers 12000000 10000000 M19951706 M200114681 M1999283 8000000 M1999221 Indemnity paid (adj for inflation) 6000000 4000000 2000000 0-2000000 1990 M19921101 1992 1994 1996 M1999713 M1999220 M20001923 1998 2000 2002 127

Analysis for the Governor s Select Task Force on Healthcare Professional Liability Insurance This analysis reviews the Florida Hospital Association Report prepared by Milliman USA, Inc., and the Florida Academy of Trial Lawyers Medical Malpractice Analysis prepared by Dr. dehaven-smith, and independently evaluates the condition of the Florida professional healthcare liability insurance industry. Comparison of Reports Databases Used The study by Dr. dehaven-smith consists of basic statistical analyses of the Florida Department of Insurance (FLDOI) medical professional liability databases for years 1991 through 2001. Milliman performs similar analyses of the entire FLDOI databases for the years 1974 through 2002. However, limited analysis is done for the year 2002 and the years prior to 1991. Milliman s report is primarily for years 1991 through 2001. The FLDOI database is composed of two different databases: Archive that contains data for claims closed before June 25, 1999 and Current that contains data for claims closed between June 25, 1999 and April 30, 2002. Milliman reports some adjustments to the two databases were required. Adjustments were made to the Current database to remove duplicate records in cases involving multiple defendants. The Archive database does not require this adjustment. However, the Archive database includes claims closed without payment while the Current database does not. To account for this discrepancy Milliman confined their analyses to claims closed with indemnity payments. Milliman performed overall analyses of the closed claim databases and they also examined closed claims broken down into physicians and hospitals. dehaven-smith reports he also analyzed non-zero closed claims for physicians and surgeons. He states the two datasets were restructured by the author to make them compatible and were then consolidated The specific steps taken were not reported. Milliman s report also included several other analyses including an analysis of closed claims for physicians reported to the National Practitioner Data Bank (NPDB), an analysis of the Texas Department of Insurance Closed Claim Databases (Texas DOI), an analysis of the claim trends of the Physicians Insurers Association of America (PIAA) and analyses of other data obtained from annual statements and rate filings. 128

Statistical Methods Used dehaven-smith Report dehaven-smith first computes the raw totals of claim amounts and then adjusts them by the Medical Care Cost Index. 560 He then performs basic statistical analyses based on these adjusted numbers. These analyses include total payout per year, average payout per claim, distribution of claims by severity, average payout for claims broken down by the severity of injury and a scatter plot showing outliers. He also performs analyses based on the number of closed claims per year and runs Pearson Correlations between the payout and other factors as well as between economic and non-economic damages. dehaven-smith calculates the medical care cost index has increased 54 percent from 1991 to 2001 and 14 percent since 1997. 561 The Medical Care Price Index (MCPI), a component of the Consumer Price Index, is in Table 12. 562 While claim severity is certainly affected by medical costs, weaknesses in the construction of the MCPI must be considered. Graboyes (1994) writes a price index measures the average price of a set of goods and services in one period against the average price of the same goods in another period. The index changes proportionally to the price of goods in the basket. Implicit in this calculation is that the basket of goods consumed does not change over time and the satisfaction level of the basket remains the same from period to period. Technological progress in the field of medicine has caused problems with accurately measuring the MCPI. Medical care received in 2001 greatly differs from medical care received in 1950. For example, diseases that were previously untreatable are now almost routine. Advanced techniques such as laparoscopic procedures now replace older ones. Advances such as antibiotics, vaccines, and electronic monitoring of patients have reduced costs. On the other hand the use of defensive medicine has increased costs. 563 In addition, the type and quality of medical care that people use over time changes. 560 Although this method is correct for adjusting prior years claims amounts to 2001 levels, one can t help but wonder what the effect would be if premiums were treated in a similar way. 561 This is an error. The MCPI has actually increased 16 percent since 1997. 562 Bureau of Labor Statistics, U.S. Department of Labor website (www.bls.gov). 563 Brostoff (1993) refers to a study by Lewin-VHI, Inc. that estimates costs of $36 billion per year for defensive medicine. 129

Table 12 A Comparison of the Consumer Price Index and the Medical Care Price Index Year CPI All Items YTY % change MCPI YTY % change 1991 136.2 177 1992 140.3 0.03 190.1 0.074 1993 144.5 0.03 201.4 0.059 1994 148.2 0.026 211 0.048 1995 152.4 0.028 220.5 0.045 1996 156.9 0.03 228.2 0.035 1997 160.5 0.023 234.6 0.028 1998 163 0.016 242.1 0.032 1999 166.6 0.022 250.6 0.035 2000 172.2 0.034 260.8 0.041 2001 177.1 0.028 272.8 0.046 Berndt, Griliches, and Rosett (1993) found the Bureau of Labor Statistics (BLS) gives too little weight to new goods. At the same time, new goods tend to have lower price increases compounding the effect and causing the price index to be too high. Prior to January 1995, the CPI did not adequately measure generic drugs. Scherer (1993) found that generic drugs were considered new products in the market basket and the resulting effect of a price decrease for the older drug did not show up. However, since that time, the BLS has implemented changes to more accurately measure the impact of generic drugs on costs to consumers. 564 Graboyes (1994) notes other problems with the price index. List prices are used instead of actual transaction prices. Prior to January 1997, the list price charged by a hospital was used in the calculation of the MCPI. However, beginning in January 1997 the BLS restructured the hospital portion of the CPI to focus more on treatment outcomes. 565 Now the unit of measure is a hospital visit rather than the individual components making up that visit. The BLS has also improved their data collection procedures and identifies the payor, diagnosis, and reimbursement agreement. Using the reimbursed rate for a hospital rather than the list price for services is a great improvement in the MCPI. There are also other sampling biases that occur. For example, a store may have a product listed at one price but actually sell it at another. The MCPI practice of measuring payments by non-medicare and Medicaid patients results in a higher index due to cost shifting. Graboyes 564 U.S. Department of Labor, Bureau of Labor Statistics, Measuring Price Change for Medical Care in the CPI website (www.bls.gov/cpi/cpifact4.htm). 565 Id. 130

notes that the MCPI includes health insurance premiums paid directly by the consumer but not by employers who benefit from group discounts. In summary, the MCPI most likely overstates the actual cost of medical care. Regardless, it is the best index that we have at this time to measure the cost of medical care. 566 Milliman Report Milliman performs many different statistical tests. As in dehaven-smith, they also compute the raw claims totals. They then use this unadjusted data and perform the following analyses using the FLDOI databases: Calculate the historical average annual increase in loss payments. Categorize the loss payments between economic and non-economic damages, defense costs, wages, and medical bills. Compare the wages and medical increases to the inflation index for wages and healthcare. Examine the rate at which economic, non-economic, and defense costs are growing. Compute historical trends on claim frequency and that same trend adjusted for population growth. Perform a comparison of claims and premium data between South and North Florida. Milliman also performs several other statistical tests using data other than that provided by the FLDOI. Using this other data they are able to make comparisons between Florida and the rest of the country. Each study uses vastly different methods. Therefore, only the raw claim totals illustrated in Table 13 are directly comparable between these two reports. Both reports calculate the total unadjusted payout per year and the number of claims closed per year. 566 Graboyes (1994) notes that some feel the MCPI is understated. 131

Table 13 Unadjusted Claim Totals DeHaven-Smith Milliman USA, Inc. Florida DOI Databases Florida DOI Databases NPDB Database* YEAR Total Amount Claims Total Amount Claims Total Amount Claims Paid ($) Closed Paid ($) Closed Paid ($) Closed 1991 148,875,447 786 146,534,933 771 121,368,350* 644 1992 131,380,435 643 133,781,196 657 144,527,850 719 1993 126,156,950 736 125,845,187 724 146,440,000 786 1994 152,405,900 769 159,777,554 802 169,668,850 811 1995 203,347,516 933 206,449,199 942 188,983,050 849 1996 241,080,279 1,100 239,875,827 1,087 237,694,550 1,076 1997 208,843,088 1,003 202,750,624 955 223,530,000 1,100 1998 189,263,865 1,032 182,241,758 1,001 214,219,300 1,025 1999 207,541,531 791 220,966,498 828 238,864,100 1,045 2000 214,481,970 881 223,149,549 891 306,424,550 1,209 2001 239,237,089** 958 205,677,297** 882 102,483,600** 427 * National Practitioner Data Bank Public Use File, April 30, 2001, U.S. Department of Health and Human Services, Health Resources and Services Administration, Bureau of Health Professions, Division of Quality Assurance as cited by Milliman USA, Inc. in their report provided to the Governor s Select Task Force on Healthcare Professional Liability Insurance meeting on November 22, 2002. **1991 was the first complete year that data was collected by the NPDB so the data may be incomplete. **This data may be incomplete depending on when the data was obtained due to delays in reporting. An examination of the raw numbers from the two reports reveals some mild to moderate discrepancies. While the total payout amounts appear to be similar in the earlier years appearing to diverge by only $1-2 million dollars from 1991 to 1993, beginning with 1994 the figures become more and more erratic. In 1999 there is a difference of $13 million, $9 million in 2000 and $34 million in 2001. Interestingly, dehaven-smith s totals are higher in 1991, 1993, 1996, 1997, 1998, and 2001. Milliman s totals are higher in the other years. In 2001, dehaven-smith s numbers are much larger but he may have had more complete data for 2001 if he obtained the data from the DOI much later in the year 2002 than did Milliman. The number of claims closed per year follows the same pattern as total amount paid. It appears these discrepancies result from different data screening procedures used by the researchers. Analysis of Findings dehaven-smith Report dehaven-smith presents a summary of findings in his written report. His main finding is the annual payout amount after adjusting for inflation has not escalated over the decade. He finds this holds for both annual payout totals and average payouts per claim. Based on the statistics and 132

adjustments that he performed and the information he provided the Task Force these are reasonable findings. His second major finding is payout amounts are quite rational and predictable. He appears to base this statement on the findings that (1) the amount paid for any given claim is largely a function of the severity of the injury sustained and (2) there is a statistically significant correlation between the payout for economic losses and payouts for noneconomic factors. The most complex statistical test that dehaven-smith performs is a Pearson Product Moment Coefficient of Correlation. The other tests performed are simple basic statistical calculations of totals, averages, and identification of outliers. He illustrates these figures with histograms. There is no indication that any other tests are performed. The Pearson correlation is a measure of the strength of the linear relationship between two random variables and ranges between +1 and 1. A value near or equal to 0 indicates there is little or no linear relationship between the two variables. The closer the value gets to 1, the stronger the relationship between the two variables. A 1 indicates a perfect negative relationship between the two variables. As the value of one variable decreases, the value of the other variable increases. A +1 indicates a perfect positive relationship between the two variables. It should be noted that Pearson correlations are simple correlations and do not calculate or remove any influence that other variables may have. Also, correlations between two variables do not indicate causation. This being said, dehaven-smith finds the Pearson correlation, r, for economic and non-economic damages is.110. Since r was found to be significant, he states there is a significant correlation between economic and noneconomic losses. However, while significant, the value of.110 actually indicates a very weak, positive linear relationship between economic and non-economic damages. In fact, there is very little linear relationship between economic and non-economic damages. dehaven-smith finds four payments exceeded $5 million in 1999, one payment exceeded $4 million in 2000, and in 2001 one payment exceeded $10 million dollars and was the highest payment ever. It is common knowledge that once a very high award occurs all parties expectations regarding the values of future, similar claims are raised accordingly. Therefore, even though the distribution of severity or the probability of the type of injury occurring may be highly predictable, the actual payout required to settle a claim may not be. dehaven-smith s conclusions that payout amounts are quite rational and predictable and future annual payouts can be predicted with a high degree of accuracy is not reasonable 133

based on his findings in his report and on the very weak relationship found between economic and non-economic damages. Lastly, dehaven-smith states payout amounts depend on injury severity. Once again, there is no statistical basis for making that conclusion. The simple correlations calculated between the payout and other variables appear to be the basis for this statement. As previously explained, correlation is not causation and should not be interpreted as such. Milliman Report In order to retain a common basis with the dehaven-smith report the findings by Milliman using data from the Texas DOI, New York, and PIAA will not be discussed. This report will concentrate on those findings that can be obtained from data available from the FLDOI closed claim databases. The unadjusted claim totals referred to below are in Table 14. NPDB data are also discussed since it contains many of the same data items contained in the FLDOI database. Milliman performed analyses based on FLDOI data and NPDB data. Their observations/conclusions are simply statements of statistical facts calculated by them. Their first conclusion is Florida medical malpractice paid losses rose over 150 percent between 1991 and 2000 and 28 percent from 1999 to 2000. These figures were obtained from the NPDB. The corresponding analysis using Milliman s figures from the FLDOI closed claim database shows only a 52 percent increase from 1991 to 2000 and a 1 percent increase from 1999 to 2000. dehaven-smith s unadjusted figures show a 44 percent increase from 1991 to 2000 and a 3 percent increase from 1999 to 2000. Similarly, using NPDB data, Milliman finds that claim frequency has increased 57 percent from 1991 to 2000 and 14 percent from 1999 to 2000. They adjusted these figures for population growth. Using unadjusted data for 1991 to 2000, Milliman shows an 88 percent increase in NPDB closed claims and a 16 percent increase in FLDOI closed claims. dehaven-smith s unadjusted figures reveal a 12 percent increase for this time period. From these figures it appears that the concerns raised by stakeholders at Task Force meetings that the FLDOI closed claim database understates claim amounts, especially in the later years, are valid. In addition, the United States General Accounting Office performed a study of reports received by the NPDB in September 1999. They found 24.4 percent of the malpractice payment reports did not include amounts for damages. Milliman also concludes non-economic damages account for approximately 77 percent of loss payments for hospitals in Florida. What 134

they do not point out is that they also find non-economic damages account for a similar large portion of loss payments for Florida physicians. In the last ten years non-economic damages have ranged from a low of 70 percent of total payout in 1998 to a high of 88 percent in 1992. Noneconomic damages accounted for 72 percent of total loss payouts in 2001 and 80 percent in 2002. 567 dehaven-smith did not provide information on this type of analysis so a direct comparison with his study on these figures cannot be made. Finally, Milliman found that from 1991 to 2000, medical malpractice paid loss dollars per unit of population increased 8.7 percent per year. dehaven-smith did not perform this type of analysis so no comparison can be made. Quality of Databases Florida Department of Insurance Closed Claim Databases (DOI) The FLDOI database is available on CD and comes with the following disclaimer. Neither the Department of Insurance nor the State of Florida accepts legal liability or responsibility for the accuracy, completeness or usefulness of this information on closed claim reports filed by insurers. This information is unaudited. The FLDOI database consists of two databases. Archive contains years 1975 up to mid-july 1999 and Current contains data from mid-july 1999 to present. The Department of Insurance provides very specific information regarding duplicate records and steps that need to be taken to successfully work with the data. Concerns have been raised by some stakeholders at Task Force meetings that this database is incomplete due to underreporting of claims. Steve Roddenberry, Deputy Director of the Division of Insurer Services at the Florida Department of Insurance, confirms that some insurers may not report to the FLDOI as required. In addition, self-insurers, off-shore captive companies, risk retention groups, and surplus line companies do not report to the closed claim database. 567 The 2002 FLDOI database was incomplete at the time Milliman obtained the data. 135

National Practitioner Data Bank Public Use File (NPDB) 568 Under Title IV of Public Law 99-660, the Health Care Quality Improvement Act of 1986, each entity that makes a medical malpractice payment for a healthcare practitioner must report to the NPDB. Payments made solely on behalf of entities such as group practices and hospitals as well as clinics are not required to report. Eligible payments must be reported within 30 days of payment date. In contrast to the FLDOI databases, each practitioner s portion of the claim payment is reported. The FLDOI reports the total claim payment for each physician and/or hospital, hence the duplicate records. Therefore, the average claim payment should be lower for NPDB data. As opposed to the FLDOI, the NPDB requires any entity that makes a payment on behalf of a healthcare practitioner to report that payment. This database should include those entities such as self-insurers, risk retention groups, etc., that are not included in the DOI database. As a result, the total amount paid out per year should be higher for NPDB data than for FLDOI figures. However, as previously mentioned, even the NPDB suffers from underreporting and incomplete filing of reports. In addition, neither database has ever taken legal action against entities that file late reports, do not file reports, or file incorrect or incomplete reports. In addition to the underreporting problems the General Accounting Office uncovered in their report dated November 2000 and referred to earlier in this report, they also found significant delays between the time payment was made and the data was actually entered into the NPDB. First, it was found that on average 25 percent of the reports received by the NPDB in September 1999 were approximately 85 days late. 569 Second, delays occurred between the time the report reached the NPDB and the information was added into the database. These delays ranged from a low of 5 days to a length of 1 year before the information was added to the database. The median delay was calculated to be 13 days. On the bright side, the NPDB was scheduled to begin Internet-based reporting on October 1, 2000. However, without improved controls this form of reporting may actually worsen the problems of inaccurate and incomplete reports. In summary, the NPDB requires more entities to report medical malpractice payments paid for healthcare practitioners. The NPDB total claim amount paid is more complete while the FLDOI database has more 568 Richard Biondi, Florida Hospital Association Medical Malpractice Analysis, presentation, Nov. 22, 2002, citing National Practitioner Data Bank Public Use File, U.S. Department of Health and Human Services, Health Resources and Services Administration, Bureau of Health Professions, Division of Quality Assurance (April 30, 2001). 569 Reports are supposed to be filed within 30 days of the initial payment date. 136

detailed information on specific claim information. For example, the FLDOI contains information on the injuries and types of damages paid including a breakdown of economic, non-economic, incurred, and future damages. The FLDOI also has claim information on hospitals while the NPDB does not. However, from the above information and reviewing Milliman s numbers for the year 2000, it is apparent that these numbers are incomplete. Analysis of NPDB Data Adjusting for Medical Costs Due to the very real concerns that more entities report payments to the NPDB and the increase in medical costs caused the increased claim payments, an analysis of the Milliman NPDB figures using dehaven- Smith s MCPI indexing formula is performed. 570 The results of this analysis are in Table 10. This analysis finds after adjusting for increases in medical care costs from 1991 to 2000, the total amount paid out in medical malpractice payments increased 71.3 percent and the average claim paid decreased by 8.7 percent. Using unadjusted figures for the same time period the total amount paid out increased 152.5 percent while the average claim paid increased 34.5 percent. Further, the number of claims filed increased 87.7 percent from 1991 to 2000 while the total population of Florida increased approximately 23.5 percent from 1990 to 2000. 571 This implies the increase in total claims paid is largely attributed to the increased number of claims filed. 570 The formula is as follows: adjusted value t = raw value t * index value 2001 /index value t where t = the year ranging from 1991 to 2001. 571 www.state.fl.us/edr/population. 137

TABLE 14 NPDB Data Using MCPI Indexing Figures Adjusted to 2001 Values* Year Unadjusted Total Amount Paid MCPI Adjusted Total Amount Paid % Change in Adjusted Total Paid Number of Claims Closed Adjusted Average Claim Paid % Change in Adj. Average Claim Paid 1991 121,368,350 177 187,058,112 644 290,463 1992 144,527,850 190.1 207,402,407 10.9% 719 288,460-0.7% 1993 146,440,000 201.4 198,355,670-4.4% 786 252,361-12.5% 1994 169,668,850 211 219,363,328 10.6% 811 270,485 7.2% 1995 188,983,050 220.5 233,807,601 6.6% 849 275,392 1.8% 1996 237,694,550 228.2 284,150,189 21.5% 1076 264,080-4.1% 1997 223,530,000 234.6 259,927,468-8.5% 1100 236,298-10.5% 1998 214,219,300 242.1 241,383,829-7.1% 1025 235,496-0.3% 1999 238,864,100 250.6 260,024,447 7.7% 1045 248,827 5.7% 2000 306,424,550 260.8 320,523,839 23.3% 1209 265,115 6.5% 2001** 102,483,600 272.8 102,483,600-68.0% 427 240,008-9.5% * Using the formula provided by Dr. dehaven-smith **Data for this year is incomplete. 138

Analysis of Florida Department of Insurance Market Performance Reports Overview of Florida Professional Healthcare Liability Insurance Market Insurance market performance reports for years 1988 through 2000 were provided to the Task Force by the Florida Department of Insurance. These yearly reports detail the Florida experience of twelve different lines of insurance. Copies of these reports are provided in Appendix 5 572. The lines of insurance contained in these reports are fire, homeowners, commercial multiple peril, medical malpractice, private passenger physical damage, private passenger auto liability, commercial auto liability, workers compensation, other liability, product liability and directors and officers liability. 573 Section 627.915, Florida Statutes, requires insurers writing at least 0.5 percent of the Florida market to report this information. A review of the healthcare professional liability insurance industry s performance reveals some disturbing trends in the Florida market. These trends are outlined in Graph 9. As can be seen, the market was profitable in the late 1980s and early 1990s. However, beginning with 1994 net income went negative and has been negative in 5 of the last 7 years. In fact, with the exception of spikes in years 1996 and 1998, industry profitability has steadily deteriorated. Although the year 2000 produced the largest investment gain for the market since 1988, this increased income was not enough to offset the large increase in direct losses incurred that year and shown in Graph 9. 574 As seen in Graph 10 direct losses incurred shows an increase in amount over the past 10 years with a large increase observed from 1999 to 2000. Specifically, direct losses incurred have increased 614 percent from 1991 to 2000 and 64 percent from 1999 to 2000. Similarly, direct losses paid have increased 352 percent from 1991 to 2000 and 50 percent from 1999 to 2000. 572 Appendix 5 can be found in Volume 6, Speaker Comments, November 22, 2002 Task Force Meeting. 573 The Florida Department of Insurance uses the term medical malpractice. The Task Force prefers the term healthcare professional liability. They are used interchangeably in this report. 574 Section 625.305, Florida Statutes restricts insurers costs of investments in stock authorized by s. 625.324 to 15 percent of admitted assets, costs of investments in common stock to 10 percent of admitted assets, and costs of investment in stock of any one corporation to 3 percent of admitted assets. Regardless, investment income has become more erratic since 1995; see app. 1 for actual figures. 139

Graph 9 Healthcare Professional Liability Market Performance 150,000,000 100,000,000 50,000,000 0 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000-50,000,000-100,000,000-150,000,000-200,000,000-250,000,000-300,000,000-350,000,000 Underwriting Gain or Loss Net Investment Gain or Loss Net Income After Dividends and Before Federal Income Tax 140 Amount ($)

Graph 10 500,000,000 450,000,000 400,000,000 350,000,000 300,000,000 250,000,000 200,000,000 150,000,000 100,000,000 50,000,000 0 Healthcare Professional Liability Losses and Expenses 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Direct Losses Incurred Allocated Loss Adj Expense Paid Unallocated Loss Adj Expense Paid Direct Losses Paid 141 Amount ($)

Allocated loss adjustment expense paid has increased over 111 percent in the last 6 years and 254 percent from 1991 to 2000. 575 Unallocated loss adjustment expense paid increased 258 percent from 1991 to 2000 and 85 percent in the past 6 years from 1995 to 2000. 576 It should be noted these market reports reveal underreporting especially in later years when negative net income for the industry is experienced. Please see Appendix 1 577 for the percentage of total market share of insurers reporting. Therefore, in years with negative net income total amounts are understated relative to years with positive net income. As a result, actual industry experience is most likely worse than reported. Analysis of Financial Ratios and Rankings of Insurance Lines The overall performance of the professional healthcare liability insurance market in the state of Florida can be measured by comparing its annual financial ratios realized with the ratios from the other 11 lines sold and referenced above. The use of ratios should mitigate the effects of underreporting by insurers both within and across lines of insurance. The use of ratios should also alleviate concerns regarding the effect of inflation on values. One measure of insurer performance is the loss ratio. The loss ratio is the ratio of direct losses incurred to premiums earned. 578 A 100 percent loss ratio means that for every $1 in premium earned there is $1 loss incurred. The annual loss ratios and resulting rankings for professional healthcare liability insurance are given in Table 15. The ratio of direct losses incurred to premiums earned and the resulting rankings for all lines is provided in Appendix 2. 579 The results show since 1994, excluding 1998, the professional healthcare liability industry has experienced high losses relative to other lines of insurance. Please see Appendix 3. 580 Interestingly, the cost to adjust these claims has always been relatively high compared to the cost of claims adjustment in other lines. Underwriting results are measured by calculating the ratio of underwriting gain (loss) to premiums earned. The underwriting results and the resulting rankings are also in Table 15. The ratio of underwriting gain (loss) to premiums earned and the resulting rankings for all lines is provided in 575 Allocated loss adjustment expenses are specific charges that can be assigned to a claim. For example, defense attorney fees, photographer fees, appraisal fees, and independent physician reports. 576 Unallocated loss adjustment expenses include charges such as overhead expenses and other expenses not included under allocated loss adjustment expenses. 577 Appendix 1 can be found in Volume 6 Speaker Comments, November 22, 2002 Task Force Meeting 578 Direct losses incurred to premiums earned are provided in the market performance reports by the Florida Department of Insurance. 579 Appendix 2 can be found in Volume 6, Speaker Comments, November 22, 2002 Task Force Meeting. 580 Appendix 3 can be found in Volume 6, Speaker Comments, November 22, 2002 Task Force Meeting. 142

Appendix 4. 581 It is clear from these results that underwriting performance for professional healthcare liability insurance has greatly deteriorated in the past few years. This deterioration appears to be due to both increased losses and expenses. From Table 15 the direct loss incurred ratio has increased (worsened) by a large percentage. It is also apparent that this industry ratio is highly variable. The total loss adjustment expense ratio has also worsened over the past years but not as drastically as the direct loss incurred ratio. 582 TABLE 15 Ratio Analysis of Healthcare Professional Liability Market Ranked Results with Total Market Year Direct Losses Incur / Rank Total LAE Incur / Rank UW Gain / Premiums Rank Premiums Earned Premiums Earned Earned 1988 72.2% 10 24.1% 10-11.6% 11 1989 44.7% 2 12.6% 8 29.8% 1 1990 29.2% 1 17.3% 9 41.7% 1 1991 34.5% 1 19.4% 10 32.0% 1 1992 68% 4 28.7% 8-15.10% 5 1993 59.7% 5 26.8% 11-8.0% 8 1994 75.5% 11 28.5% 11-21.3% 11 1995 87.1% 11 25.6% 11-31.6% 11 1996 71% 10 24.2% 10-9.8% 8 1997 113. 6% 12 37.4% 10-68.0% 12 1998 55.6% 5 34.5% 12-7.8% 9 1999 91.8% 12 38.3% 11-55.0% 11 2000 136.8% 12 47.4% 12-100.8% 11 *A rank of 1 means that line had the best ratio (most favorable experience) in the industry for that year. 581 Appendix 4 can be found in Volume 6, Speaker Comments, November 22, 2002 Task Force Meeting. 582 Total loss adjustment expense incurred to premiums earned is provided in the market performance reports by the Florida Department of Insurance. It is the sum of the allocated loss adjustment expense incurred and unallocated loss adjustment expense incurred. 143

TABLE 16 Combined Ratio for Healthcare Professional Liability Insurance Year Combined Ratio* 1988 96.3% 1989 57.3% 1990 46.5% 1991 53.9% 1992 96.7% 1993 86.5% 1994 104% 1995 112.7% 1996 95.2% 1997 151% 1998 90.1% 1999 130.1% 2000 184.2% The combined ratio is the sum of the loss ratio and the expense (LAE) ratio. A ratio of 100 percent means losses and expenses equal the premium earned or, in other words, for every $1 earned there is $1 in loss and expenses. The combined ratio is simply the sum of the loss and total loss adjustment expense ratios. A combined ratio of 100 percent means losses and expenses equal the premium earned. In Table 16 losses and expenses have exceeded the premium earned in 5 of the last 7 years. The year 2000 was particularly bleak for the industry as a whole with losses and expenses exceeding earned premium by 84.2 percent. In summary, the last few years have resulted in a marked decrease in profitability for healthcare professional liability insurance in the state of Florida. With an industry-combined ratio of 184.2 percent and a corresponding underwriting ratio of 100.8 percent in 2000, the viability of this market may be threatened if conditions continue to deteriorate. 144

Chapter 5 - FINDINGS Even in a world of perfect experience rating, the deterrent signal would still be blunted by a second problem: the poor fit between instances of negligence and suing. Research has found that most instances of medical negligence never give rise to a malpractice claim, and that many malpractice lawsuits are brought and won by patients even though expert reviewers can identify no evidence of negligent care.... A similarly poor fit between negligent injuries and claims was found in the [Harvard Medical Practice Study] sample. The total number of malpractice claims filed was about 14% of the total number of negligent injuries. However, this figure masks the incredibly small overlap between the group of patients injured by negligence and the group who brought suit. Less than 2% of those who were actually injured due to negligence filed a claim, and only about a sixth of the claims that were filed involved both negligence and an injury. Michelle Mello & Troyen A. Brennan, Deterrence of Medical Errors: Theory and Evidence for Malpractice Reform, 80 Texas Law Review 1595 (June 2002). Task Force Findings The Task Force received extensive testimony, documentation and letters related to the current medical malpractice insurance crisis. Based on the information and data received, the Task Force makes the following findings about the crisis: Affordability: The cost of medical malpractice insurance has increased dramatically during the last several years. In 2002 the average medical malpractice premium per doctor in Florida was 55 percent higher than the national average. Florida s average premiums have increased 64 percent since 1996 while nationally the average premiums have increased only 26 percent. Availability: The number of companies writing medical malpractice insurance in Florida went from a high of sixty-six companies in 1999 to only twelve currently. Further, of the twelve currently writing premiums only four are generally writing medical malpractice insurance. The remaining eight companies are writing only selected policies. 145

Impact of the Underwriting Cycle: The business cycle for medical malpractice insurance companies has exacerbated the increases in medical malpractice insurance rates in Florida but claims paid have had the most significant impact. The late-1990s produced some of the largest investment gains for the market since the mid-1980s, but this increased income was not sufficient to offset the large increase in direct losses for the medical malpractice insurance industry that year. As a result, insurance companies writing medical malpractice suffered a loss ratio of 184 percent. Frequency of Claims Payments ts: Florida s claims frequency which was an average of 4.82 claims per 100,000 population in 1991 has increased to an average of 7.56 claims per 100,000 in 2000. The national average has been between 5.11 and 5.77 claims during this same period with an average of 5.54 claims per 100,000 population in 2000. Thus, in 2000, Florida s frequency of claims was 36 percent higher than the nationwide average. Severity of Claims Payments: The severity of claims in Florida and nationally showed a significant increase between 1998 and 2000. Further, the average pure premium loss per Florida doctor has grown from 15 percent above the national average in 1991 to 50 percent above that average in 2000. Variations Among Medical Specialties: Specialists and other physicians performing high-risk procedures are much more likely to be sued. These specialties, particularly obstetricians and neurosurgeons, also see much higher medical malpractice insurance rates, regardless of whether they have ever been sued. Changes in i the Law: The very existence of the continuing medical malpractice crisis is proof that the previous reforms have failed to address the problem. Florida s use of many of the reforms considered or adopted by other states further demonstrates that the provisions related to medical malpractice adopted in Florida have not been sufficient in addressing the problem. The limitations on damages, the only provision shown to be effective in reducing the severity of judgments, was stricken by the Florida Supreme Court. Access to Healthcare Services: The concern over litigation and the cost and lack of medical malpractice insurance has caused doctors to discontinue high-risk procedures, turn away high-risk patients, close practices, and move out of state. In some communities, doctors have quit delivering babies and discontinued hospital care. 146

Proposals Heard Compensation of Victims: As the cost of medical malpractice insurance has increased some healthcare providers carry only minimum insurance of $250,000 or are going bare. This leaves victims with minimal or no compensation should they be injured. Professional Regulation of Medical Care: The current disciplinary process requires the Division of Administrative Hearings judges to make the determination when conduct fails to meet minimum standards of care and is formally charged against a healthcare provider or facility. Frequently those rulings frustrate and thwart the ability of the healthcare provider regulatory boards to appropriately discipline healthcare providers. Issues such as defining the standard of care in a given set of facts and whether the practitioner breached that standard are responsibilities best left to the professional boards. Additionally, hospitals find it very difficult to discipline or remove healthcare professionals for actions below the accepted standard of care. In addition to receiving extensive testimony regarding the existence of a medical malpractice insurance crisis and the current related law, the Task Force requested speakers and participants to offer the Task Force recommendations for addressing the problem. The Task Force requested proposals in the areas of: Improving the quality of medical care Discipline of healthcare practitioners/providers Tort reform Alternative dispute resolution Insurance reform In total the Task Force heard testimony regarding over 100 proposals for change, which fell into one of the categories below: (1) Improving healthcare quality (2) Physician discipline (3) Tort reform (4) Insurance reform (5) Alternative dispute resolution reform The remainder of this report contains the specific recommendations of the Task Force and the rationale for each recommendation. It is organized according to the above five issue areas. Chapter six contains the healthcare quality issues. Chapter seven contains the physician discipline reform. Chapter eight contains the tort reforms. Chapter nine contains the insurance reforms. Finally, chapter ten contains the alternative 147

dispute resolution reforms. These recommendations recognize that it is possible to reduce the cost of medical malpractice and the severity and frequency of claims. These recommendations include a comprehensive reform package designed to strengthen quality healthcare in Florida. The Task Force believes that these recommendations constitute a carefully balanced set of ideas, the content of which has been determined by the results of extensive testimony and research. The Task Force recommends that the Florida Legislature adopt these proposals. 148

Chapter 6 - Improving Healthcare Quality The culture of medicine creates an expectation of perfection and attributes errors to carelessness or incompetence. Liability concerns discourage the surfacing of errors and communication about how to correct them. Patient safety is also hindered through the liability system and the threat of malpractice, which discourages the disclosure of errors. The discoverability of data under legal proceedings encourages silence about errors committed or observed. Most errors and safety issues go undetected and unreported, both externally and within health care organizations. Institute of Medicine, To Err is Human: Building a Safer Health System 22, 43 (Linda T. Kohn et al. eds., 2000) Issue The Task Force voted on December 20, 2002, by a 5-0 vote, to examine the following issues with respect to reducing medical errors and improving healthcare quality: Should a patient safety authority or patient safety center be created to: Require mandatory reporting of serious events or near misses? o Should information be confidential? o Should information be subject to discovery? Analyze and make recommendations directly to medical facilities to improve care? o Require retraining or mentors for those with adverse events? Require all hospitals to have patient safety plans, patient safety committees, and patient safety officers? Require written notice of serious events to impacted patients or their representatives? Evaluate objective criteria for evaluating the effectiveness of the current mandatory reporting system? Evaluate factors that limit the effectiveness of the current reporting system? Implement a system for reporting near miss events? Develop objective criteria for evaluating the effectiveness of a near miss reporting system? 149

Analyze reported data and make recommendations directly to healthcare facilities and providers to improve care? Provide malpractice insurance discounts if a hospital implements a certified patient program? In addition, the Task Force requested staff to include the recommendations included in the testimony made by Donald Berwick, M.D. Dr. Berwick s recommendations were: Implement a safety reporting system, based on the aviation model, which uses the best people to analyze medical mistakes. This recommendation is similar to the Patient Safety Authority model in Pennsylvania that is based, in part, on the Institute of Medicine s recommended model described in the To Err is Human and Fostering Rapid Advances in Health Care reports. Adopt a strategy to provide all hospitals with a computerized physician order medication system. Develop a single inexpensive electronic medical record at the state level that would contain essential information so that all physicians, hospitals, and other facilities would have access to the record. Conduct a four-year no-fault medical malpractice demonstration project that would use the Workers Compensation method of compensation for injuries. The system would have five elements: (1) all patients are told when they are injured; (2) an apology to the patient is made; (3) injured patients are compensated just as in the workers compensation system; (4) the entity would be responsible for liability, not the individual; and (5) the demonstration project should have a study component to study injuries to continually reduce risk. Include courses on patient safety and safety improvement in medical and nursing school curricula. Establish a simulation center for high technology intervention surgery and intensive care for use by all hospitals. At the January 16 meeting of the Task Force, by a 4-0 vote, staff was directed to prepare a recommendation requiring state government to determine the feasibility of providing information to the public to assist in making better healthcare decisions. The information would not be made available as a report card. Current Situation Florida law requires hospitals, ambulatory surgery centers and nursing homes to have internal risk management programs that are designed to identify and minimize the risk of adverse incidents to patients. Florida law governing risk management programs for hospitals and ambulatory 150

surgery centers is found in section 395.0197, Florida Statutes. 583 This law was initially enacted in 1975 in response to an earlier crisis in malpractice insurance. In addition, legislation enacted in 1985 amended this statute to require hospitals and ambulatory surgery centers to have licensed healthcare risk managers. In 2001, legislation was passed requiring nursing homes and assisted living facilities to also have risk management programs. 584 Section 395.0197, Florida Statutes, governs internal risk management programs and requires that adverse incidents be investigated and analyzed, that measures be developed to minimize the risk of adverse incidents to patients, that patient grievances related to patient care and quality be analyzed, and that incident reporting systems be developed. In subsection (16), the Agency for Healthcare Administration (AHCA) is given the responsibility to determine if risk management programs are conducted in a manner designed to reduce adverse incidents, and whether the program is appropriately reporting incidents. Internal risk management programs are confidential pursuant to subsection (15), which states that meetings held solely for the purposes of risk management are not open to the public and the records of meetings are confidential and exempt from public disclosure. Although section 395.0197, Florida Statutes, requires hospitals and ambulatory surgical centers to annually report to ACHA serious medical injuries and patient deaths that are the result of medical injuries, these reports are confidential and not available to the public. There are three medical injury reports: (1) the annual report which includes all adverse incidents (patient injuries); (2) the Code 15 Report which reports serious patient injuries; and (3) the 24 Hour Report which is a preliminary report on certain serious injuries: death, brain or spinal damage, wrong patient surgery, wrong site surgery, and wrong surgical procedure. In addition, hospitals and ambulatory surgical centers also report new malpractice claims. AHCA publishes aggregated data for all hospitals and ambulatory surgical centers combined. Under current law, hospitals and ambulatory surgical centers are not required to report near misses or to develop strategies to minimize these types of errors. The current system 583 See also Tanya Williams, testimony, Nov. 4, 2002, pgs. 38-46. 584 Sections 400.071(11), section 400.147, Florida Statutes. 151

also does not assist healthcare providers by using experts to identify ways to prevent errors. Section 395.0197, Florida Statutes, requires hospitals, ambulatory surgery centers, and nursing homes to have risk management programs to reduce risk to patients. However, there is no requirement that specific committees be created to foster improvements in patient safety, nor that members of the public be included in the process. Subsection (2) of this section simply states that the internal risk management program is the responsibility of the governing board. The statutes are silent with regard to how risk management is to be conducted in facilities. In addition, subsection (2) states that a risk manager may be responsible for up to four risk management programs in separately licensed facilities, or more than four separate facilities if the facilities are under the same corporate ownership or are in rural hospitals. A large multi-hospital corporation could, under Florida law, have one risk manager for all of its hospitals The following table was prepared by AHCA and reports the most recent data available. The table appears on their website. It is important to note that the Legislature changed the definition of adverse incident for annual reports and Code 15 reports. Beginning in 1999, adverse incidents resulting from surgical procedures that were described in patient consent forms ceased to be reported. It is also important to note that this chart reflects gross numbers, only, and makes no attempt to analyze these numbers or to relate them to patient days, number of surgical procedures, or any other indicator of volume that could explain fluctuations or provide a relative measure of the rate of occurrence. Table 17 Annual Report 1996 1997 1998 1999 2000 Annual Report (all adverse incidents) (New) Malpractice Claims 5,140 5,517 5,113 3,808 4,541 733 718 783 916 949 Code 15 Reports 856 1,102 994 720 920 24 Hour Reports **Though the number of facilities continually fluctuates, as of January 2001, agency records indicate there were 273 licensed hospitals and 263 licensed ambulatory surgical centers. As of January 6, 2003, data for 2001 were not available. Source: Agency for Health Care Administration http: //www.fdhc.state.fl.us/mchq/health_facility_regulation/index.shtml. The quality of healthcare has received considerable attention since the publication of the Institute of Medicine s (IOM) To Err is Human report in 152

2000. 585 The report estimated that medical errors in hospitals result in 44,000 to 98,000 patient deaths per year. Although these figures are controversial, there is no doubt that many persons are injured, some of them seriously, by medical errors that could have been prevented. 586 A recent New England Journal of Medicine article reported that large percentages of both physicians and members of the public are aware of medical errors made on members of their own families. 587 To reduce medical errors, the authors of the IOM study wrote, Healthcare organizations must develop a culture of safety such that an organization s care processes and workforce are focused on improving the reliability and safety of care for patients. Safety should be an explicit organizational goal that is demonstrated by the strong direction and involvement of governance, management and clinical leadership. In addition, a meaningful patient safety program should include defined program objectives, personnel, and budget and should be monitored by regular progress reports to governance. 588 To achieve a culture of safety, the authors recommended that healthcare organizations establish patient safety programs that include non-punitive systems for reporting and analyzing medical errors made within their organizations. The IOM also recommended that standardized mandatory reporting systems of serious medical errors be established. 589 The mandatory reporting systems would be linked to systems of accountability, such as professional licensure regulation; the information would be made available to the public and states would have flexibility regarding their implementation. A recent article in the New England Journal of Medicine reported on the findings of parallel national surveys of 831 practicing physicians and 1,207 members of the public regarding perceptions of medical errors. 590 The findings of these surveys indicate that sizeable proportions of both 585 Institute of Medicine, National Academy of Sciences, To Err is Human: Building A Safer Health System (2000). 586 See Thomas H. Lee, A Broader Concept of Medical Errors, 347(24) New England Journal of Medicine 1965-1966 (Dec. 12, 2002). 587 Robert J. Blendon et al., Views of Practicing Physicians and the Public on Medical Errors, 347(24) New England Journal of Medicine 1933-1940 (2002). 588 See Institute of Medicine, To Err is Human: Building A Safer Health System 12. 589 Id. at 88-89. 590 See Robert J. Blendon et al., Views of Practicing Physicians and the Public on Medical Errors, 347(24) New England Journal of Medicine 1933-1940 (2002). 153

physicians (35 percent) and the public (42 percent) report medical errors in either their own care or a family member s care. The findings also indicate that a large proportion of physicians believe that most medical errors can be prevented; that the understaffing of nurses and the overwork, stress, or fatigue of health professionals are very important causes of preventable medical errors; and that effective recommendations for reducing medical errors that would be very effective include requiring hospitals to develop systems for preventing medical errors and increasing the number of nurses in hospitals. The following tables excerpt key findings from the surveys. Table 18 Preventable Medical Errors (Responses in Percentages) All Respondents Physicians (N=831) Public (N=1207) Error made in own or family member s care 35 42 Health consequences serious 18 24 Serious consequences Severe pain 11 16 Substantial loss of time at work or school 12 17 or other important activities Temporary disability 8 12 Long-term disability 6 11 Death 7 10 Respondents reporting an error* Parties who had a lot of responsibility for error Doctors 70 81 Nurses 25 25 Health professional involved Told respondent that error had been made 31 30 Apologized to respondent or family member 34 33 Respondent or family member sued health professional 2 6 *290 physicians (35% of 831) and 507 (42% of 1207) members of the public reported an error either in their own care or in the care of a family member. Source: Robert J. Blendon et al., Views of Practicing Physicians and the Public on Medical Errors, 347(24) New England Journal of Medicine 1935 (2002). As the above table indicates, 35 percent of practicing physicians and 42 percent of the general public reported they or someone in their family had experienced a medical error; roughly half of the errors were reported as serious. Seven percent of physicians and 10 percent of the general public stated someone in their families died as a result of medical errors. Although these survey findings have significant policy implications for improving medical care, only 5 percent of physicians and 6 percent of the 154

public said medical errors were among the most serious problems in healthcare. Much larger problems reported by physicians were the cost of malpractice insurance and lawsuits (29 percent of physicians), and insurance company and health plan problems (27 percent). The public cited the cost of healthcare as the greatest problem (38 percent), followed by the cost of prescription drugs (31 percent). It is important to note most physicians believed that medical errors occur infrequently. Only 1 percent indicated preventable medical errors occurred very often and 19 percent indicated they occurred somewhat often. In contrast, 10 percent of the members of the public believed medical errors occurred very often and 39 percent believed they occurred somewhat often. Table 19 Beliefs About the Frequencies of Medical Errors and Preventable Deaths (Responses in Percentages) Question and Response Physicians (N=831) How often are preventable medical errors made? Very often 1 Somewhat often 19 Not very often 59 Not often at all 21 No response 0 What proportion of (deaths due to medical errors) could realistically have been prevented? All of them 8 Three-quarters of them 27 Half of them 41 One-quarter of them 21 None of them 2 No response 1 Source: Robert J. Blendon et al., Views of Practicing Physicians and the Public on Medical Errors, 347 New Eng. J. Med, 24, 1936 (2002). 155

Table 20 Causes of Preventable Medical Errors (Responses In Percentages) Response Physicians (N=831) Very important causes Understaffing of nurses in hospitals 53 Overwork, stress, or fatigue of health professionals 50 Failure of health professionals to work together or 39 communicate as a team Influence of HMOs and other managed care plans on 39 treatment decisions Complexity of medical care 38 Insufficient time spent by doctors with patients 37 Poor training of health professionals 28 The more important reason for errors Mistakes made by individual health professionals 55 Mistakes made by institutions 43 Volume of procedures An error is more likely at a low-volume hospital 71 Volume does not make a difference 24 Source: Robert J. Blendon et al., Views of Practicing Physicians and the Public on Medical Errors, 347 New Eng. J. Med, 24, 1937 (2002). 156

Table 21 Possible Solutions to the Problem of Medical Errors (Responses in Percentages) Solution Very effective Requiring medical error prevention systems in hospitals Physicians (N=831) Public (N=1207) 55 74 Increasing the number of nurses in hospitals 51 69 Giving physicians more time to spend with 46 78 patients Limiting certain high-risk procedures to hospitals that perform many of these procedures 40 45 Improving the training of health professionals 36 73 Hospital reports of serious medical errors Should be confidential (used only to learn how to prevent future medical errors) 86 34 Should be released to public 14 62 Source: Robert J. Blendon et al., Views of Practicing Physicians and the Public on Medical Errors, 347 New Eng. J. Med, 24, 1938 (2002). Most physicians surveyed believed the majority of deaths due to medical errors could have realistically been prevented. A total of 41 percent stated half of the deaths could have been prevented, 27 percent stating three-fourths, and 8 percent stated all. Summing these responses, 76 percent stated half or more of deaths were preventable. Surprisingly, the views of the members of the public were very similar to the views of physicians with regard to the feasibility of preventing errors. Physicians believed the most important cause of preventable medical error was the understaffing of nurses in hospitals (53 percent of physicians). Nearly as many (50 percent) believed overwork, stress, or fatigue on the part of health professionals was a very important cause of preventable medical errors. Physicians believed other very important causes included the failure of health professionals to work together or communicate as a team (39 percent); the influence of HMOs and other managed-care plans on treatment decisions (also 39 percent); the complexity of medical care (38 percent); and insufficient time spent by doctors with patients (37 percent). When asked about possible solutions to the problem of medical errors, the strategy physicians believed would be most effective was to require hospitals to develop systems for preventing medical errors, with 55 percent of physicians stating this would be a very effective strategy. Increasing the number of nurses in hospitals was believed to be a very effective strategy by 51 percent of physicians, followed by giving physicians more time to spend with patients (46 percent), and limiting 157

certain high-risk procedures to hospitals that perform many of these procedures (40 percent). The following table shows responses to a hypothetical situation in a hospital. An antibiotic is ordered by a surgeon to be given to a patient by a nurse despite a notation in the patient s medical record that the patient has an allergy to antibiotic drugs. In one case, the patient has a rash that disappears when the antibiotic is stopped. In the other case the patient dies because of the drug. Table 22 Response Responses to Hypothetical Situation Where Patient is Given a Drug Inappropriately (Responses in Percentages) Outcome without harm (rash) Physicians (N=404) Public (N=603) Outcome with harm (patient dies) Physicians (N=427) Public (N=604) Party with a lot of responsibility for error Surgeon 90 89 95 92 Nurse 81 52 82 48 Hospital 42 55 48 57 Should be sued for malpractice Surgeon 4 30 55 69 Nurse 3 12 44 21 Hospital 2 22 33 44 Should be fined by a government agency Surgeon 5 51 21 65 Nurse 6 26 18 29 Hospital 9 39 21 50 Should have license suspended Surgeon 0 23 8 50 Nurse 1 11 8 25 Should be required to report error to patient or family Surgeon 85 95 90 95 Nurse 74 67 70 57 Hospital 60 78 71 84 Should be required to undergo training in the prevention of this type of error Surgeon 66 80 78 80 Nurse 71 67 81 72 The hospital should be required to develop systems for preventing similar errors 74 79 84 84 Source: Robert J. Blendon et al., Views of Practicing Physicians and the Public on Medical Errors, 347(24) New England Journal of Medicine 1938 (2002). 158

Finally, the survey found large proportions of both physicians and members of the public believed medical errors should be reported to the patient or family and hospitals should be required to develop systems for preventing errors. In addition, sizeable percentages of both physicians and the public believed physicians and nurses who commit preventable medical errors that do not harm patients but cause a medical problem should be fined or otherwise disciplined. It is also important to point out that the study reflects perceptions from two classes of individuals: those in the medical profession and consumers of medical services. The study does not attempt to prove or disprove the truth of those perceptions. Information Presented to the Task Force Ms. Jacqueline Imbertson, representing Floridians for Patient Protection, stated at the October 21 meeting of the Task Force that hospital report cards that contain information pertaining to staffing, services, infection rates, and medical errors by type should be available on the Internet to aid consumers in choosing a hospital. 591 The Task Force heard testimony from Dr. Robert Muscalas, Physician General, State of Pennsylvania, at the November 4 meeting in Miami, and again at the December 3 meeting in Tallahassee. Dr. Muscalas spoke regarding the establishment of a Patient Safety Authority, based on the aviation model (which analyzes near misses ), to reduce medical errors and improve the quality of care in hospitals, ambulatory surgical centers, and birth centers. 592 The State of Pennsylvania has adopted legislation creating a Patient Safety Authority that is an independent, advisory, nonregulatory agency. The legislation requires mandatory confidential reporting of serious events and near misses. Serious events and near misses are analyzed and recommendations are made directly to medical facilities to improve care. Information is not subject to discovery in lawsuits. In addition, the legislation requires all hospitals to have patient safety plans, patient safety committees, and patient safety officers and there is a process for hospitals to receive malpractice insurance discounts if they implement certified patient safety programs. Finally, patients who experience serious events must be provided written notice. The Task Force invited nationally recognized experts to present at the November 4 task force meeting in Miami. Professor Eleanor Kinney, J.D., who has authored numerous articles on medical malpractice in major peerreviewed journals, stated the development of systems for ensuring patient 591 See Jacqueline Imbertson, testimony, Oct. 21, 2002, pgs. 165-166. 592 See Robert Muscalas, D.O., testimony, Nov. 4, 2002, pgs. 121-126, 135. 159

safety and improving the quality of care in different patient venues was a third-generation medical malpractice reform that would be part of the concept of enterprise liability. 593 Professor Kinney, in discussing reducing errors in hospitals, went on to state: It s a good thing. And the fewer errors, the fewer frequency of well, supposedly, you would have fewer malpractice claims. But I think if you really respect the patient safety effort and do it in the right way, I think there is an effort to identify problems and I would imagine opportunities for heading off claims where damage has been done. Ideally, that would be what I would like to see from a really strong patient safety program in a hospital. 594 In a previous commentary, Ms. Kinney has noted: A political basis for second-generation reform in either states or Congress does not exist. Clearly the political power of the medical profession and liability insurers is great as well as focused. On the other hand, the organized power of consumers is diffuse and not focused on malpractice. The only focused advocate for the consumer in the malpractice debate is the trial bar, and it has much at stake in maintaining the common law tort system without reforms. Finally, the third constituency of third-party payers, which cuts across party lines is interested in the issue only as it affects health system costs. There is simply too much focused opposition to and no political constituency for second-generation reforms in the current debate over health system reform. 595 Robert G. Brooks, M.D., stated at the November 4 meeting that the Florida Commission on Excellence in Healthcare recommended that a center on patient safety be established to collect, analyze, and distribute information related to adverse incidents and near misses that was similar to recommendations by the Institute of Medicine. Dr. Brooks also stated that legislation (HB 1219 and CS/SB 2294) was introduced in the Florida Legislature in the 2002 session to establish a center on patient safety, based on voluntary reporting, but the legislation was not passed. 596 593 See Eleanor Kinney, J.D., testimony, Nov. 4, 2002, pg. 181. The concept of enterprise liability is included in the design of no fault compensation programs, a third-generation reform, which are discussed later in this chapter. 594 Id. at 187-188. 595 Eleanor D. Kinney, Learning from Experience, Malpractice Reforms in the 1990s: Past Disappoinments, Future Success? 20 Journal of Health Politics, Policy, and Law 99, 124-125 (1995). 596 See Robert G. Brooks, M.D., testimony, Nov. 4, 2002, pg. 198; Eleanor Kinney, J.D., testimony, Nov. 4, 2002, pgs. 187-188. 160

Robert Berenson, M.D., who was co-chair of the malpractice reform working group on the Clinton Health Reform Task Force in 1993 and who worked to administer a demonstration grant program in medical malpractice reform for the Robert Wood Johnson Foundation between 1994 to 1998, stated at the November 4 meeting that healthcare quality is a very important component of medical malpractice reform. Dr. Berenson stated: we now have a new opportunity and, indeed, a new imperative to deal with a malpractice crisis with more than standard tort reform. The Institute of Medicine s two reports on safety and on quality correctly point to the impediment of the current tort system with or without caps on damages places on efforts to actually do something systematically to improve quality and reduce the frequency and magnitude of errors. I agree with those who assert that threat of suit has a chilling effect on creating an environment conducive to efforts to improve patient safety. Further, protecting patient safety activities from discovery is something Congress is now considering, while desirable, misses a unique opportunity we now have of recasting the malpractice liability system into one that itself is a major contributor for improved patient safety. The legal system should be more than permissive to patient safety activities. Properly designed, it can positively promote patient safety. 597 Randall Bovbjerg, J.D., who has published extensively on the subject of medical malpractice reform, particularly with regard to no-fault compensation models, stated at the November 4 meeting the big problems in medical malpractice are legal performance and patient safety. 598 Finally, Michelle Mello, J.D., Ph.D., who has also published extensively in peer-reviewed journals on the subject of medical malpractice, stated that the public is very concerned about medical errors and testified: my own view is that it s imperative that any liability limiting reform in Florida or elsewhere be paired with some accompanying measures to address problems with patient safety, and most importantly, accountability in medicine. 599 597 See Robert Berenson, M.D., testimony, Nov. 4, 2002, pgs. 213-215. 598 See Randall Bovbjerg, J.D., testimony, Nov. 4, 2002, pg. 267; see also Randall Bovbjerg, J.D., testimony, Nov. 4, 2002, pgs. 273-276. 599 See Michelle Mello, J.D., Ph.D., testimony, Nov. 4, 2002, pg. 305. 161

At the December 20 meeting of the Task Force in Tallahassee, Donald Berwick, M.D., M.P.P., Clinical Professor of Pediatrics and Healthcare Policy at the Harvard Medical School, gave a presentation regarding the quality of healthcare. Dr. Berwick has been a member of numerous advisory committees, including the Committee on Quality of Healthcare in America that produced the To Err is Human report by the Institute of Medicine. Dr. Berwick began his testimony by stating patient safety is a serious problem and the burden on public health is substantial. He stated he believed that the estimates of patient deaths in hospitals due to medical errors reported by the Institute of Medicine (the estimate ranges from 44,000 to 98,000 deaths annually) were sound. 600 Dr. Berwick went on to say the problem does not result from a deficient work force. He said incompetence and carelessness might explain 1 or 2 percent of patient injuries. The remaining 98 or 99 percent result from mistakes made by normal people who try quite hard to do well but have complex jobs in work systems which are fragile. Sometimes there are too many things going on at the same time in very complicated processes. He next stated there are process failures or system failures due to needed information not being transferred from one part of the system to another. For example, he stated 7 of every 100 people hospitalized experience a major medication error. 601 To improve patient safety, Dr. Berwick stated four types of changes were needed: (1) a change in awareness and will to address patient safety; (2) technical changes to modernize healthcare such as computerized medication ordering systems which have software to check for drug interactions and that dosages are within proper range; (3) cultural changes to promote effective communication, including communication against the authority gradient ; training for safety, and the open discussion of mistake; and (4) environmental changes such as changes in the professional education system to include training for teamwork, safety awareness, and communication in medical student and nurse educational programs, elimination of the fear of lawsuits to promote patient safety communication, and increasing the availability of capital to permit hospitals to invest in patient safety efforts such as computerized medication ordering systems. Dr. Berwick stated one of four patient 600 See Dr. Donald Berwick, M.D. M.P.P., testimony, Dec. 20, 2002, pg. 5. 601 Id. at 7-9. 162

injuries is a medication injury and 80 percent of medication injuries can be eliminated with computerized medication ordering systems. 602 Dr. Berwick s presentation to the Task Force included six recommendations: (1) Implement a safety reporting system, based on the aviation model, which uses the best people to analyze medical mistakes. 603 This recommendation is similar to the Patient Safety Authority model in Pennsylvania that is based on the Institute of Medicine s recommended model described, in part, in the To Err is Human and Fostering Rapid Advances in Healthcare reports. (2) Develop a strategy to generate capital to provide all hospitals with a computerized physician order medication system. 604 (3) Develop, at the state level, a single inexpensive electronic medical record that contains essential information including problem list, registry functions, drug medication lists and a few other things. 605 The electronic medical record would be used in both the inpatient and outpatient environments so all physicians, hospitals and other facilities could have access to the record. The November 2002 IOM report states the key components of a computer-based patient record also include laboratory, imaging, and prescription drugs. 606 (4) Conduct a four-year no-fault medical malpractice demonstration project that would use the Workers Compensation method of compensation for injuries. The system would have five elements: a. all patients are told when they are injured; b. an apology to the patient is made; c. injured patients are compensated just as in the Workers Compensation system; d. the entity would be responsible for liability, not the individual; and e. the demonstration project should have a study component to study injuries to continually reduce risk. 607 602 Id. at 9-17. 603 Id. at 19-20. 604 Id. at 20. 605 Id. at 21. 606 Id. at 63. 607 Id. at 23-24; see also Albert W. Wu, Handling Hospital Errors: Is Disclosure the Best Defense?, 131(12) Annals of Internal Medicine 970-972 (Dec. 21, 1999) for a discussion of the relationship between informing patients of injuries and malpractice lawsuits. 163

(5) Include in medical schools and nursing schools curricula courses on patient safety and safety improvement. 608 (6) Establish a simulation center for high technology intervention surgery and intensive care for use by all hospitals. 609 In November 2002, the IOM published a study that made recommendations to improve quality in several areas of healthcare. These areas include: (1) information and communications technology (ICT) that includes physician medication order entry and computer-based patient records with clinical information; and (2) demonstration projects that provide for non-judicial ( no-fault ) compensation for medical injuries. 610 The study recommended the enactment of paperless healthcare system demonstration projects, administered by public-private partnerships. These demonstration projects should use computer-based patient records to be available in time for use by clinicians and patients on a right- and need-toknow basis. Improvements in patient safety and quality would be expected due to enhanced communications, access to patient information, knowledge management, and decision support. 611 The study stated computer-based patient records should include a summary of current problems, medications, and allergies and also should include results, notes, and disease management guidelines. 612 In addition, clinicians should have access to computer-based clinical information including laboratory and radiology results. 613 Other features would include appointment and billing and performance measurement data for ongoing assessment of quality and safety improvements. 614 Over time, the system would include functions for disease surveillance, telemedicine, and a public health rapid alert component. 615 The study concluded: Properly structured ICT also has great potential to reduce some administrative costs and burden. 616 The study described a web-based patient data system used by twenty-five healthcare organizations, which account for the majority of care provided in Santa Barbara County in California, as the best-known example of a data exchange platform for patient information. 617 608 Dr. Donald Berwick, M.D. M.P.P., testimony, Dec. 20, 2002, pg. 25. 609 Id. at 26. 610 Institute of Medicine, National Academy of Sciences, Fostering Rapid Advances in Healthcare (Nov. 2002). 611 Id. at 58-59. 612 Id. at 60-61. 613 Id. at 7. 614 Id. at 59. 615 Id. at 63. 616 Id. at 23-24. 617 Id. at 62. 164

According to the IOM report, the Santa Barbara system has the following features: Users (such as clinicians, hospitals and laboratories) need an Internet connection and web browser to access data. Patient data resides at original locations (such as a hospital system, imaging center system, etc). Only authorized users can view the data. Protocols govern who can have access to patient data. When patient information is requested, the requestor s digital credentials are verified by the data exchange. Patients do not have unique identifiers; rather, the data exchange maintains a file with patient demographic data and correlates these data with those maintained by the provider organization to produce a validated patient search. The locations of the patient records are then stored with the patient s demographic data as pointers or locators. Data is exchanged peer-to-peer through a secure portal in the data exchange. An audit log is maintained by the data exchange that includes who requested the data, what data was requested, and when the request was made. Another recommendation made in the November 2002 IOM report was the implementation of systems for computer-based order entry and prescription writing, with dosage and interaction checking. 618 As discussed earlier, Dr. Berwick also made this recommendation in his presentation to the Task Force at its December 3, 2002 meeting. Dr. Berwick s recommendation to establish a four-year no-fault nonjudicial compensation program for avoidable medical injuries parallels recommendations made by the IOM in its November 2002 report. In addition, several of the national experts who gave presentations at the November 4 meeting of the Task Force referenced no-fault approaches to improve patient safety and ameliorate many of the problems in the tort system. 619 Two countries, Sweden and New Zealand, have no-fault 618 Id. at 61. 619 See Eleanor Kinney, J.D., testimony, Nov. 4, 2002, pgs. 180-181; Robert Berenson, M.D., testimony, Nov. 4, 2002, pgs. 213, 218-225 (esp. 223); Randall Bovbjerg, J.D., testimony, Nov. 4, 2002, pgs. 285-288; Michelle Mello, J.D. testimony, Nov. 4, 2002, pgs. 307-316. Michelle Mello discussed no-fault in considerable detail. For a discussion of the potential for quality improvement in a no-fault program see 165

compensation systems for medical injuries. Florida and Virginia have nofault compensation systems for newborns with neurological impairments. No-fault compensation for medical injuries has been the subject of considerable academic interest and numerous articles have been published in medical and legal journals on this subject since the early 1990s. In a 1998 University of Cincinnati law review article, Randall Bovbjerg and Frank Sloan, both of who presented at meetings of the Task Force, discuss no-fault compensation for medical injuries at length, with particular reference to the Florida and Virginia programs. 620 According to Bovbjerg and Sloan, there are theoretical advantages and disadvantages of no-fault compensation programs for medical injuries. With respect to advantages, Bovbjerg and Sloan predict in a no-fault program: compensation is improved as more people should be compensated because negligence need not be proved; costs associated with claims will be lower because adversarial tension is reduced; the payment of benefits should be faster than in the tort process; more benefits should be paid relative to premiums because the administrative share of spending will decline without a highly formalized and adversarial litigation process [and] as a result claimants will not be forced to compromise on the amount paid in order to get a certain and rapid settlement ; payments will better meet individual needs because payments are made when needed; payments should be better managed because a unified large-scale program can develop expertise in particular medical services, as well as negotiate for efficacious and cost-effective services from providers ; and periodic payments of benefits will improve compensation because there is protection against changes in needs that are not anticipated. In addition, reduced injuries and improved quality are anticipated because there is motivation to investigate the causes of injury and take cost-effective precautions and because more information will be available regarding injuries and their causes that will improve quality. 621 David M. Studdert and Troyen A. Brennan, No-Fault Compensation for Medical Injuries The Prospect for Error Prevention, 286(2) Journal of the American Medical Association 217-223 (July 11, 2001). 620 Randall R. Bovbjerg & Frank A. Sloan, No-fault for Medical Injury: Theory and Evidence, 67 University of Cincinnati Law Review 1 (Fall 1998); see also Randall R. Bovbjerg et al., Obstetrics and Malpractice Evidence on the Performance of a Selective No-Fault System, 265(21) Journal of the American Medical Association 2836-2843 (June 5, 1991). 621 Randall R. Bovbjerg & Frank A. Sloan, No-fault for Medical Injury: Theory and Evidence, 67 University of Cincinnati Law Review 70-71 (Fall 1998). 166

Potential disadvantages, according to Bovbjerg and Sloan, include: non-economic damages are normally limited, thus reducing compensation to injured persons; wage losses (economic damages) would likely not be compensated to the same extent as in the tort system; there may be lower quality of representation because attorney s fees may be lower than in the tort system; the options of claimants are reduced because of periodic payments are received rather than a lump-sum; and no-fault may succeed too well, by compensating more cases [and this] increased coverage will make it un-affordably more expensive than liability coverage. 622 The IOM s November 2002 report recommends that Patient-Centered and Safety-Focused, Non-judicial Compensation demonstration projects be established by the U.S. Department of Health and Human Services. These demonstration projects would be established as an alternative to the current tort system of compensation for avoidable medical injuries. According to the IOM report, the current liability system, hampers efforts to identify and learn from errors, and likely encourages defensive medicine. In addition, the report cited research that has found that: many legal claims do not relate to negligent care ; judgments are sometimes inconsistent with the medical evidence base ; compensation is highly variable ; legal fees and administrative expenses consume upwards of half the cost of liability insurance premiums; and volatility in liability insurance markets has led to escalating malpractice premiums in certain geographic areas, precipitating closure of practices and shortages of certain types of specialists and services. 623 622 Id. at 72-73. For a discussion of the potential cost-effectiveness of a no-fault compensation system in the United States see David M. Studdert et al., Can the United States Afford a No Fault System of Compensation for Medical Injury?, 60(2) Law and Contemporary Problems 1-34 (Spring 1997): We conclude that adoption of a Swedish-style approach could lead to a system that is both affordable and positioned to compensate a considerably larger proportion of medically injured patients than the current malpractice system manages or even allows. However, the authors believe the Swedish system is not neatly transplantable. Id. at 33. 623 See Institute of Medicine, National Academy of Sciences, Fostering Rapid Advances in Healthcare 10, 81-83 (Nov. 2002). For discussions of no-fault compensation, see also Michelle M. Mello & Troyen A. Brennan, Deterrence of Medical Errors: Theory and Evidence for Malpractice Reform, 80 Texas Law Review 1595-1637 (June 2002); Randall R. Bovbjerg et al., Administrative Performance of No-Fault Compensation for Medical Injury, 60(2) Law and Contemporary Problems 71-115 (Spring 1997). 167

According to the IOM report, these demonstration projects would: create injury compensation systems outside of the courtroom that would provide timely, fair compensation to injured patients and promote apologies and non-adversarial discussions between patients and clinicians ; be intended to create an environment that encourages providers to report and analyze medical errors and to involve patients in safety improvement activities ; limit financial exposure of providers, thus contributing to the stabilization of malpractice insurance premiums ; replace the existing tort system with an alternative system for compensating patients who have experienced avoidable injuries, allow quicker payments to be made to many more injured patients, and reward providers who put effective programs in place to reduce medical injuries. 624 The IOM recommends that the Department of Health and Human Services issue a Request for Proposals to states. Four or five states would be selected to receive modest start-up funds. States would need to enact appropriate implementing legislation. The IOM projects that within one to two years, benefits should be realized with regard to administrative efficiency. Improvements in patient safety and in stabilizing the medical malpractice insurance premiums would accrue over the longer term. The two types of projects are: Provider-Based Early Payments : This model offers predetermined limits on non-economic damages including pain and suffering, and federally-subsidized reinsurance to self-insured provider groups that promptly identify and compensate patients for avoidable injuries. 625 The IOM report states that the Provider-based Early Payment model creates incentives for, physicians and hospitals to join together to form well-managed clinical entities that bear primary financial responsibility for avoidable errors and have the medical know-how to minimize patient injury. 626 624 Id. 625 Id. at 10. 626 Id. at 84. 168

Statewide Administrative Resolution : This model grants all healthcare professionals and facilities, however organized, immunity from tort liability under most circumstances in exchange for mandatory participation in a state-sponsored, administrative system for compensating avoidable injuries. 627 According to the IOM, the Statewide Administrative Resolution model gives all healthcare providers equal, immediate access relief from the current liability crisis and does not depend upon particular organizational forms (e.g., integrated group practice) that may not be well developed in many jurisdictions. 628 The IOM states that both models are compatible with reforms that cap non-economic damages and both support the concept of early offers. The report states that: the time is now ripe for successful implementation of [both models] because of two contributions by the emerging science of patient safety. First, human factors engineers have shown that nonpunitive approaches encourage the detection of avoidable injuries and foster systems for continuous improvement, which suggests that resolving malpractice cases without a determination of fault will help rather than harm quality. Second, as more healthcare providers accept their responsibility to disclose errors to patients, capping liability at defined amounts an essential attribute of any affordable non-judicial system will likely result in more rather than fewer patients receiving compensation. 629 The IOM states that both the Provider-Based Early Payments and Statewide Administrative Resolution models will require four actions by states. 1. Infrastructure: States will need to determine which injuries result from avoidable errors that patients would be compensated for and also determine schedules for calculating economic and noneconomic damages. 627 Id. at 10. 628 Id. at 84. 629 Id. at 85-86. 169

2. Legal Environment: Tort law would need to be revised to permit either or both models and create clear, narrow exceptions to the malpractice reform (e.g., intentional harm). Individuals and organizations who implement a demonstration model in good faith would need protection from legal exposure. Health insurers and others who pay the costs incurred by patients suffering compensable injuries would need protection from lawsuits. In addition, [s]tates will need to ensure that all apologies and other systematic communications, such as mediated discussions between providers and patients following the occurrence of an avoidable injury, do not increase provider s financial liability or legal exposure. 3. Patient Safety Reporting Systems Oversight mechanisms to ensure that avoidable injuries are detected and disclosed would need to be developed. Mechanisms that collect data on avoidable injuries, and provide for the voluntary confidential reporting of near misses, would need to be established. Patient safety data would need to reside in computer-based reporting systems. 4. Education The IOM recommends that states implement public education programs to explain the benefits and costs of liability reform and work with principal stakeholders to build trust. Findings and Recommendations After reviewing studies published by the Institute of Medicine and others, including the New England Journal of Medicine, and after hearing the testimony of nationally-recognized experts in the area of medical malpractice, the Task Force finds that improving the quality of healthcare is an important and integral component of medical malpractice reform. The Task Force further finds that the analysis of medical errors and the creation of a statewide automated infrastructure to support the delivery of healthcare services by Florida s healthcare providers has the potential to improve quality and reduce the incidence of adverse events and medical errors. Recommendation 1. The Legislature should establish a Patient Safety Authority, or an entity similar in concept, as both a short-term and longterm strategy to improve patient safety. There are two options that should be considered. The first option, which is recommended by the Institute of Medicine, is to have two systems, one for the mandatory reporting of adverse events and another for the voluntary reporting of near misses. The second option is to have a single entity, similar to the Patient Safety Authority in Pennsylvania, that would analyze all adverse events and near misses. Experts would analyze these data and make recommendations to 170

facilities about how to reduce these events and near misses. Information would not be subject to discovery in lawsuits. Recommendation 2. The Legislature should timely develop or adopt a statewide electronic medical record and physician medication ordering system. The system should be developed in partnership with hospitals, physicians, and other health providers. The physician medication ordering system should be implemented first. The system could then be implemented in stages with a possible approach of beginning with a webbased data exchange platform that establishes interconnectivity between providers. Another possibility is to begin with business functions, which provide an early return on investment, and then include clinical functions. Recommendation 3. The Legislature should consider creating a statutory public-private non-profit entity that would administer the Patient Safety Authority, statewide electronic medical record, and build an Information Technology infrastructure to support the delivery of healthcare that would include a statewide physician medication ordering system. Funding could possibly come from a $1 per year surcharge on all health professional licenses; all hospital, ambulatory care surgery center, nursing home, home health agency, and birth center discharges; and all individuals in managed care plans and insurance plans licensed under chapters 627 and 640, Florida Statutes. Health providers, insurers, businesses, and government would be represented on the governing board of directors. Options for implementation include: Affiliating with a university for the analysis of voluntarily reported adverse events and near misses. Contracting with an Information Technology firm(s) for a statewide physician medication ordering system, web-based platform for health provider interconnectivity, and electronic patient record. Developing a business plan and future financing strategy to supplement the $1 annual surcharge, which will likely be necessary to achieve full implementation. Including in the business plan a strategy to begin with computerizing business functions, for providers to quickly achieve cost-savings due to automation efficiencies, and then include clinical functions. Recommendation 4. The Legislature should be encouraged to authorize the two no fault medical malpractice demonstration projects recommended in the November 2002 report, Fostering Rapid Advances in Healthcare, by the IOM at a university healthcare system or statutory teaching hospital. This project would be governed by criteria compatible with that proposed by the IOM. 171

Recommendation 5. If Recommendation 4 is implemented, contingency fees for attorneys should be eliminated from the claims bill process in the no-fault demonstration project. Recommendation 6. The Legislature should require each hospital and ambulatory surgery center to have a patient safety plan, a patient safety committee, and a patient safety officer. Members of the public should have representation on patient safety committees. Recommendation 7. The Legislature should require healthcare providers to notify patients who experience serious medical injuries to be notified of the injury in person. Recommendation 8. The Legislature should examine the feasibility of using Medicaid funding to create a pilot project for an electronic medical record and a physician medication ordering system for Medicaid patients. Recommendation 9. The Legislature should examine the feasibility of developing a process in the Insurance Code for hospitals and other healthcare facilities to receive malpractice insurance discounts if they implement certified patient safety programs. Recommendation 10. The Legislature should establish a high-technology simulation center for use by all health providers. Florida should encourage use of this center by practitioners in other states to help offset the costs for the center. Recommendation 11. The Legislature should require all medical schools, nursing schools, and allied health schools to include in their curricula courses on patient safety and patient safety improvement. Recommendation 12. The Legislature should require the Agency for Health Care Administration (AHCA) to conduct a study to determine if it is feasible to provide information to the public to help them make better healthcare decisions regarding the choice of a hospital. The information would not be presented in a report card format. AHCA should be provided with sufficient resources to conduct the study in cooperation with hospitals, physicians, and other healthcare providers and provide the Governor and Legislature with a report. 172

Chapter 7 Physician Discipline Much of the medical profession s resistance to regulatory accountability can be traced to the sense of betrayal and persecution most physicians feel when accused of malpractice. William M. Sage, Principle, Pragmatism, and Medical Injury, 286(2) Journal of the American Medical Association 226 (June 11, 2001) Issue The Task Force voted on December 20, 2002, by a vote of 5-0, to examine the following issues with respect to physician discipline in the context of medical malpractice cases: Should the law be clarified to ensure that the Board of Medicine, rather than a Division of Administrative Hearings (DOAH) administrative law judge (ALJ), establishes when a physician has complied with the community standard of care? Should the law be clarified to require the Board of Medicine to determine the community standard of care in any given case and a DOAH ALJ to determine whether facts substantiate the physician s compliance or failure to comply with the community standard of care? Should the law be clarified to strengthen the state s ability to discipline physicians? Should the law be clarified to strengthen the healthcare provider s ability to perform peer review? Current Situation Discipline of the medical professions has historically been the purview of regulatory boards in Florida. 630 These legislatively-created boards are 630 Chapter 458, Florida Statutes, is the Medical Practice Act, which grants authority to the Board of Medicine to regulate the physicians in the State of Florida. section 458.301, Florida Statutes, specifically states, The primary legislative purpose in enacting this chapter is to ensure that every physician practicing 173

comprised primarily of licensed practitioners in the same healthcare field, 631 and have two major responsibilities, licensure in the profession 632 and discipline of those licensed practitioners who are found to be practicing outside the standards for the profession. 633 A major component of the two responsibilities of the boards concerns the promulgation of rules regarding standards of care for the practice of the profession. 634 In developing the rules as to standard of care, the board has adopted specific requirements to address what would be the standard of care in a particular area of practice. 635 This standard provides the basis upon which the board carries out its disciplinary responsibilities. 636 Complaints alleging that a physician has failed to provide services within the standard of care are initially investigated by the Department of Health and all reports are then transmitted to a probable cause panel of the Board of Medicine for further investigation, administrative action, or closure. 637 With the exception of closing the matter, further investigation and possible disciplinary action requires the complaint to be processed through specific administrative procedures which may ultimately lead to final board disciplinary action. Specifically, following the completion of an investigation of a complaint against a physician, an investigative report is provided to a probable cause panel of the Board of Medicine for a determination of probable cause. Assuming probable cause is found, the matter becomes a case and an administrative complaint is served on the physician. 638 At that point the in this state meets minimum requirements for safe practice. It is the legislative intent that physicians who fall below minimum competency or who otherwise present a danger to the public shall be prohibited from practicing in this state. 631 Section 458.307(2), Florida Statutes. 632 Sections 458.311, 458.313, Florida Statutes. 633 Section 458.331, Florida Statutes. 634 Section 458.309(1), Florida Statutes, provides that the Board has authority to adopt rules pursuant to ss. 120.536(1) and 120.54 to implement the provisions of this chapter conferring duties upon it. 635 Rule 64B8-9, Florida Administrative Code, is the rule adopted by the Board of Medicine regarding the standards of practice for medical doctors. For example, see Rules 64B8-9.003, Standards for Adequacy of Medical Records; 64B8-9.009, Standard of Care for Office Surgery; and 64B8-9.013, Standards for the Use of Controlled Substances for Treatment of Pain. 636 Section 458.331(1)(nn), Florida Statutes, provides as grounds for discipline, violating any provision of this chapter or chapter 456, or any rules adopted pursuant thereto. 637 Section 456.073, Florida Statutes, provides that all legally-sufficient matters shall be investigated and referred to the probable cause panel for consideration as to whether the complaint should be prosecuted or closed. 638 Section 456.073(2), Florida Statutes, states If the probable cause panel finds that probable cause exists, it shall direct the department to file a formal complaint against the licensee. The department shall follow the directions of the probable cause panel regarding the filing of a formal complaint. If directed to do so, the department shall file a formal complaint against the subject of the investigation and prosecute the complaint pursuant to chapter 120. 174

physician can elect to resolve the case by settlement or proceed to administrative hearings. 639 Should a settlement be agreed upon by the parties, the settlement document is presented to the board for acceptance or rejection. Assuming the board accepts the settlement document, the matter is resolved in accordance with the agreement and a Final Order issued reflecting the terms of the discipline. 640 Should the physician elect to proceed to an administrative hearing, two possible procedures exist. In those circumstances where the physician is not disputing the material facts of the case, but rather seeks to demonstrate mitigation as to those facts, an informal hearing, or specifically a hearing where there is no material facts in dispute, is held before the Board of Medicine. 641 In those circumstances where the physician disputes the material facts, a formal hearing before the DOAH is held. 642 In the circumstances where the physician has not disputed the material facts in the case, the hearing before the Board of Medicine will be conducted and at such time the physician will be given an opportunity to present mitigation as to his/her specific situation, argue applicable law, and discuss appropriate penalties. Once the hearing is completed, the board will resolve the matter and issue a Final Order, including the assessment of an appropriate penalty. 643 If the physician does not agree with the board s decision, an appeal may be taken to an appellate court. 644 In the circumstances where the physician disputes the material facts in the case, the matter will be handled by DOAH in a formal non-jury trial proceeding. These hearings are similar to trials in a court of law with the exception that specific administrative rules apply. 645 For example, all discovery and evidentiary rules are applicable and the process parallels the proceedings found in civil non-jury trials. 646 Following the evidentiary 639 Sections 120.57(1), Florida Statutes, (procedures applicable to hearings involving disputed issues of material fact); 120.57(2), Florida Statutes, (procedures applicable to hearings not involving disputed issues of material fact); 120.57(4), Florida Statutes, (informal disposition by stipulation, agreed settlement, or consent order). 640 Section 120.569(2)(l), Florida Statutes. 641 Section 120.57(2), Florida Statutes. 642 Section 120.57(1), Florida Statutes. 643 Section 120.569(2)(l), Florida Statutes. 644 Section 120.68, Florida Statutes. 645 Chapter 28-101 - 110, Florida Administrative Code, provides the procedural rules for administrative causes of action. 646 Section 28-106.206, Florida Administrative Code, provides After commencement of a proceeding, parties may obtain discovery through the means and in the manner provided in Rules 1.280 through 1.400, Florida Rules of Civil Procedure; section 28-106.213, Florida Administrative Code, outlines some of the evidentiary guidelines to be followed in administrative cases. 175

portion of these proceedings, the ALJ will render a recommended order. That order will include the findings of fact, conclusions of law, and the disposition of the matter. 647 Upon receipt of the recommended order from the ALJ, the board is statutorily authorized to accept, reject, or modify the recommended order. 648 If the board accepts the recommended order, then the matter will be disposed of in accordance with the ALJ s order. The physician may take an appeal to the appropriate appellate court for further review. If the board rejects or modifies the recommended order, then the board must review the record in its entirety and cite with particularity the basis supporting the board s conclusion that there is no competent and substantial evidence to support the specific recommended order. 649 Upon a finding that the recommended order is unsupported by the record, the board may reach different findings of fact, conclusions of law, and/or assess culpability as to guilt and determine the degree of penalty. The board will issue a final order following the rejection or modification of the recommended order. The physician may appeal to the appropriate appellate courts the final order of the board. 650 On June 28, 2002, the Fifth District Court of Appeal issued an opinion in Gross v. Department of Health, 651 wherein the court reversed a final Order of the board regarding the discipline of Dr. Gross. This case provides the latest example of why reforms in the manner in which the board is authorized to dispose of physician disciplinary cases are needed. The facts of the Gross case may be found in Judge Orfinger s concurrence when he succinctly provides: the tragic events that lead up to the demise of Dr. Gross s patient are not in substantial dispute. In preparation for a diagnostic ventriculogram, a nurse employed by Orlando Regional Medical Center s cardiac catherization lab was responsible for loading an injector with dye. The injector was to be utilized to inject dye into the patient s heart to opacify the flow of blood. Apparently, the nurse was called 647 Section 120.57(1)(k), Florida Statutes. 648 Section 120.57(1)(l), Florida Statutes; in the case of Lusskin v. Department of Health, Board of Medicine, 820 So. 2d 424, 426 (Fla. 4th DCA 2002), the court stated The Board is imbued with the authority to accept or reject the hearing officer s penalty recommendations When it does so, it must conduct a review of the complete record, and state with particularity its reasons therefore in the order, by citing to the record in justifying the action 120.57(1)(l), Fla. Stat. (2001). Simply referring to the record in general is insufficient to comply with this subsection. 649 Section 120.57(1)(l), Florida Statutes; see also Greseth v. Department of Health and Rehabilitative Servs., 573 So. 2d 1004 (Fla. 4th DCA 1991). 650 Section 120.58, Florida Statutes. 651 819 So. 2d 997 (Fla. 5th DCA 2002). 176

away while preparing the injector for use and inadvertently left the plunger in a position so that it appeared that the injector had been loaded with dye as required. In fact, it had not been, and when the injector was wheeled to the patient s side, Dr. Gross connected it to the catheter that had been inserted into the patient s heart and then injected a large volume of air, rather than dye, into his patient, causing the patient s sudden death. 652 In August 2000, the DOH filed an administrative complaint against Dr. Gross in light of the foregoing facts. The Department alleged that the air injection was a failure on the part of Dr. Gross to practice medicine with the level of care, skill, and treatment required by section 458.331(1)(t). 653 Dr. Gross elected to proceed to formal hearing before the DOAH. At the hearing both parties presented evidence concerning the circumstances leading up to the patient s death and presented expert testimony as to the applicable standard of care. The ALJ issued its recommended order finding substantial competent evidence that Dr. Gross did not violate section 458.331(1)(t), Florida Statutes. The matter was then submitted to the board for adoption of the recommendation. 654 At the board s meeting, a number of board members took issue with the recommended order s findings that Dr. Gross did not fall below the appropriate standard of care. The board then issued its final order substituting its finding that Dr. Gross s performance was below the applicable standard of care and that he did violate section 458.331(1)(t), Florida Statutes. 655 Dr. Gross later appealed the board s action. In deciding Gross, the court observed, the courts have encountered difficulties when the administrative law judge s findings are supported by substantial competent evidence which are rejected or modified by the agency s adoption of its own findings which are also supported by substantial competent evidence. 656 The court concluded that where the above circumstances exist, that is, when there is substantial competent evidence to support both the administrative law judge s findings and the agency s own findings, the agency s order must be reversed. 657 Specifically the court rejected the board s argument that the deference rule required that policy considerations left to the discretion of an agency 652 Gross v. Department of Health, 819 So. 2d 997, 1006 (Fla. 5th DCA 2002). 653 Id. at 1000. 654 Id. 655 Id. 656 Id. at 1002. 657 See City of Umatilla v. Public Employees Relations Comm n, 422 So. 2d 905, 907 (Fla. 5th DCA 1982). 177

take precedence over findings of fact by an ALJ. 658 The court rejected the board s argument that whether Dr. Gross failed to comply with the applicable standard of care is a matter infused with overriding policy considerations and it may, therefore, give less deference of the finding of fact by the administrative law judge. 659 The court held: We reject the argument by the Board that the deference rule applies to the instant case because, as will be discussed... the courts have generally held that the issue of whether an individual violated a statute by breaching the applicable standard of care is a factual issue that is susceptible to ordinary proof and is an issue that is not infused with policy considerations. 660 In his concurrence with the special opinion, Judge Orfinger observed that: Common sense notwithstanding, the ALJ was presented with conflicting evidence regarding Dr. Gross s obligation to ensure that the injector was properly loaded with dye prior to utilizing it. Although the conclusion that Dr. Gross had no responsibility defies common sense, legally, the ALJ was free to accept the testimony of Dr. Gross and that of his expert witnesses, that the standard of care did not require Dr. Gross to ensure that the injector was properly loaded with dye before utilizing it. Apparently, the ALJ did not consider Hippocrates s prescription to do no harm as establishing a reasonable standard of care to be followed by medical practitioners in Florida or standards found in section 458.331(1)(t).... Because the law does not allow this court or the Board of Medicine to reweigh the conflicting evidence, I concur, albeit reluctantly, with the courts opinion. 661 Judge Orfinger further lamented: The requirement that we use reasonable care in our daily endeavors is not unique to medicine. Indeed, the standard of care that society requires of us increases in direct proportion to the risk inherent in the activity being performed. Everyday life gives us many analogous situations. The pilot of a commercial airliner is not obliged 658 Baptist Hosp., Inc. v. Department of Health and Rehabilitative Services, 500 So. 2d 620, 623 (Fla. 1st DCA 1996). 659 Gross v. Department of Health, 819 So. 2d 997, 1002 (Fla. 5th DCA 2002). 660 Id. at 1003. 661 Id. at 1006-1007. 178

to personally fill the fuel tanks of the airplane; however, the traveling public reasonably expects the pilot to check the fuel gauges prior to takeoff to ensure that the plane has adequate fuel. Similarly, prudence dictates that someone holding a gun check to make sure it is not loaded, before pointing it toward someone and pulling the trigger. Likewise, I believe the standard of care should require Dr. Gross, and other physicians performing similar procedures, to ensure that the injector is properly filled with dye so that air is not injected into the patient, particularly given the significant adverse consequences of doing so. Such a standard seems to be no more than common sense. However, at least as it relates to the protocols for injecting dye into patients, the medical profession appears not to have set the bar very high. 662 The issue that remains to be resolved is whether the resolution of the Gross case based on the law as it existed in 2002 mandates reform which would allow the Board of Medicine to assess the appropriate standard of care. Information Presented to the Task Force Testimony regarding physician discipline and its impact on medical malpractice cases was heard on two separate occasions, December 3, 2002, and December 20, 2002. Generally, each stakeholder opined that improvements in physician discipline were warranted. Each, however, proffered a variety of solutions to the concerns relating to physician discipline. During the December 3 meeting, two speakers addressed the issue of physician discipline. Gary Winchester, M.D., a Board of Medicine member, stated that Florida was known to be one of the toughest states in which to obtain a medical license because of its comprehensive screening process and extensive criminal background checks. 663 Currently, 44,000 physicians are licensed to practice medicine in the State of Florida. 664 Proactively, the Board of Medicine has taken the initiative to address many standard of care issues within some specific areas of practice through its rulemaking process. Areas addressed by the board such as the Internet, 665 office surgery, 666 pain management, 667 and telehealth 668 have 662 Id. (emphasis added). 663 Gary Winchester, M.D., testimony, Dec. 3, 2002, pg. 243. 664 Id. 665 Id. at 244. 179

been codified in rules or continue to be the subject of task force discussions. Specifically, Dr. Winchester reported that the purpose of at least one of these rules, pain management, was to: try to make sure that physicians get the pain management they need. That is, to get the medications they deserve to have. A lot of times they don t. In fact, the AMA survey not too long ago showed that pain management was the absolute worst thing that patients felt that the healthcare system did. The second part of that rule was to make doctors feel comfortable, that if they do the following things, they won t be in trouble with the Board of Medicine for doing prescribing. 669 Criticisms relating to the physician disciplinary process were presented. Specifically, it was noted One of the problems we find is with some of the DOAH cases Occasionally, we will have a case come back to us from DOAH, and the board will look at it and look at the facts and just have a gut-wrenching feeling that the [ALJ] was wrong, period, wrong. They missed the standard of care. 670 Part of the reason, it was believed, was due to having young attorneys with a high turnover rate and a lot of cases to handle. 671 Another reason offered was that the [ALJs], of course, write their final orders in such a way that it is essentially impossible for us to get them overturned. We try every now and then, but the DCA always tells us no. 672 Recommendations offered regarding the DOAH cases included working it out so that the Board of Medicine decides the standard of care. And then when that standard of care is decided, then the DOAH officer looks at the conclusion of law and the penalty. 673 Another suggestion was to allow the Board of Medicine to decide what the costs are in a case since part of the board s mandate is to recover all costs. 674 A third proposal was to allow the board greater flexibility in fine assessments in situations that are really bad situations. 675 For example, it was suggested, where a doctor caused permanent scarring of three ladies faces, to charge him $10,000 is really kind of silly. 676 Finally, it was recommended that 666 Id. at 245. 667 Id. at 246. 668 Id. at 247. 669 Id. at 246. 670 Id. at 248. 671 Id. 672 Id. at 249. 673 Id. at 252. 674 Id. 675 Id. 676 Id. 180

mediation be explored, especially at the probable cause level, before either side has to spend a lot of money on experts and to bring the matter to rapid conclusion. 677 Former First District Court of Appeal Judge Robert Smith concurred with Dr. Winchester s comments 678 and further stressed the role of DOAH in physician discipline. Specifically, Mr. Smith took exception to the Legislature s passage of amendments to chapter 120, the Administrative Procedures Act, which withdrew from the Board of Medicine and all other medical care boards the power to hold these disputed fact hearings themselves or to designate one member of their collegial board to hold the hearings. 679 Mr. Smith opined that the Legislature has stripped away from the executive branch, and transferred to quasi-judges, the power that is in substantive statutes committed to the substantive agencies, such as this medical board and that section 120.80(15) which prohibits the Board of Medicine from holding hearings where a fact is in disputes is unconstitutional. 680 Repeal of section 120.80(15), Florida Statutes, is recommended to make tort reform effective. 681 Mr. Smith affirmed the need to give back to the board the option of holding these disputed fact hearings themselves and avoiding such things as occurred in those cases. 682 In all three cases, it was judged that the rulings by the DOAH judges were in error and in the Gross case especially, the Board of Medicine was weeping at the prospect of having to let this doctor go without even an admonition. 683 Mr. Smith further concluded that without strengthening the regulation of medical care providers, the Supreme Court might once again find unconstitutional any approved tort reform. Specifically, Mr. Smith reasoned that unless you do this simple thing, the Supreme Court is going to look back at [previous rulings] and say this tort reform is unconstitutional because you have not recommended, and the Legislature has not addressed the strength and regulation of negligent medical care providers, which is the source of medical malpractice litigation. 684 During the December 20, 2002 meeting, three speakers addressed the issue of physician discipline with diverse solutions. First, Amy Jones, Director of Medical Quality Assurance, offered legislative proposals to help 677 Id. 678 Robert Smith, testimony, Dec. 3, 2002, pg. 256. 679 Id. at 260. 680 Id. at 259, 263. 681 Id. at 261. 682 Id. at 266. 683 Id. at 265. 684 Id. at 258. 181

strengthen the disciplinary process. One proposal was to enhance the existing subpoena authority of the DOH. 685 It was explained that the DOH had no subpoena authority over the physician, a nursing home, or an assisted living facility. 686 Instead, patient records could only be obtained from hospitals and therefore if a patient refused to cooperate in giving their consent to release patient records, the Department would not be able to prove the case and the matter would be over. 687 Thus, Even though we suspect and think that malpractice occurred, we can t get the records to prove it and that case is over. 688 Another recommendation was to allow a physician one bite at the apple for minor violations by making citations not reportable to the national database. 689 The incentive for this proposal is that physicians will settle those cases more quickly, and they will be out of the system sooner thus allowing limited resources to be concentrated on the more serious violations. 690 A third suggestion was to extend, from fifteen days to forty-five days, the statutory timeframe for the referral of cases to the DOAH. 691 This recommendation was based on the belief that since 95 percent of the cases settle, the additional time would allow better resolutions that get through the process more quickly. 692 Finally, Ms. Jones suggested that mediation be used to assist in the resolution of matters. 693 A second speaker, Deborah Zappi, representing the Florida Academy of Trial Lawyers, focused most of her testimony regarding physician discipline in the area of improving the patient s access to physician information. Although the Department website provides doctor information in its physician profiles, it was suggested that there was missing critical information and the website was not as user friendly as it should be. 694 Ms. Zappi stated that patients are entitled to know what their odds are when they gamble on their choice of healthcare provider. Very simply, patients must have access to more information. They need to avoid physicians and hospitals with bad track records and, therefore, they can avoid malpractice and malpractice suits. 695 The following suggestions were made regarding the physician profiles: physicians should not be allowed to practice or renew their license until the profile is complete and on the air for the public ; 696 for initial 685 Amy Jones, J.D., testimony, Dec. 20, 2002, pg. 140. 686 Id. 687 Id. 688 Id. 689 Id. 690 Id. 691 Id. at 142. 692 Id. 693 Id. at 143. 694 Deborah Zappi, J.D., testimony, Dec. 20, 2002, pgs. 150-151. 695 Id. at 151. 696 Now, a physician can practice over a year before the profile is put on the web. Id. at 151-152. 182

profiles, physicians should be given no longer than thirty days to verify the information and fifteen days for updates on disciplinary actions for closed claims; 697 the Department should be required to fill in the blanks in the doctor s profile when he/she fails to provide the mandatory information, such as disciplinary action by a state agency; 698 the Department should be required to verify criminal information rather than state the criminal offense information provided by the practitioner has not been verified at this time ; 699 the physician profile, at a minimum, should state, what the physician was disciplined [for] and what section of the law the physician has been found violated ; 700 hospital disciplinary actions should be included in the physician profile; 701 information regarding bankruptcies and closed claim data should be included and verified; 702 and, finally, the Department should know how many physicians are closing their practices or entering/leaving the state. 703 A third speaker, Gary Blankenship, believed that at least a major cause of your high rates of medical malpractice is the state s ineffective regulation of the medical profession. 704 Mr. Blankenship s criticisms of the disciplinary process focused on the secrecy of the proceedings, and its effect on the number of physicians disciplined and the effectiveness of the volume of cases reviewed and processed through the system. His first proposal was to mandate the opening of the grievance filings in the State of Florida, except for patient names or any information that would identify the patients. 705 Mr. Blankenship reported that the staff or the probable cause panels close 98 percent of the filings. Those files cannot be reviewed are secret and nobody can go back and challenge the reasons for closure. Thus, this causes a big problem and a lot of bad doctors are getting through.... 706 Therefore, a second suggestion was to conduct a thorough performance audit of the way medical complaints are handled. 707 Specifically, this might require that a panel of academic experts, and not a Florida doctor, be able to conduct the audit. 708 The third 697 Currently, there is no time frame as to how soon a profile must be updated. Id. at 152. 698 Id. at 153. 699 Id. 700 Currently, there is not description in the profiles of the disciplinary action taken against a physician. Id. 701 Disciplinary actions by HMOs, am-surgical centers and nursing homes are included, but not disciplinary action by hospitals. Id. at 155. 702 Id. 703 Id. at 157. 704 Gary Blankenship, testimony, Dec. 20, 2002, pg. 162. 705 Id. at 161. 706 Id. at 163-164. 707 Id. at 161. 708 Id. 183

proposition was to have a commission go over the past year s complaint files in detail. 709 A small number of physicians, approximately 0.32 percent, are actually disciplined in the State of Florida. 710 Review as to why so few physicians are disciplined is unavailable because the closed cases are sealed. 711 Finally, Mr. Blankenship was troubled by the volume of cases processed through the disciplinary system. It was reported that [t]he probable cause statistics in 1999-2000 report from the Agency for Health Care Administration... talked that they prepared over 800,000 pages of documents for the two probable cause panels with three on each, that s six people who got over 800,000 pages of documents. I did the math. It was a wonderful symmetry there. If you broke that down, each one of the six people had to read 365 pages a day, 365 days of the year, to keep up with the paperwork. There is no way six people can exercise effective oversight. Yet you have no oversight and what they do is closed. 712 Mr. Blankenship believes that insurance companies look at that lax regulation, and they look at nothing happened to those doctors and they adjust their rates accordingly, and it s not downward. 713 As part and parcel of physician discipline, the Task Force also voted to strengthen methods of peer review. Many healthcare providers widely view peer review as essential to encourage high quality medical care. 714 Peer review is the process by which members of a hospital s medical staff review the qualifications, medical mal-occurrences, and professional conduct of other physicians on the hospital staff. 715 The purpose of peer review is to critically examine the medical care rendered by a physician, and if deficiencies exist, to prevent a physician with quality problems from continuing to practice. 716 For example, a peer review panel may find that a general surgeon is qualified to perform an open cholecystotomy, but, based upon previous quality concerns, that he is unqualified to perform a laparoscopic cholecystotomy. The American Medical Association has come out strongly in favor of peer review, stating it: (1) strongly reaffirms its continuing commitment to the development and maintenance of voluntary, professional directed peer 709 Id. 710 Id. at 165. 711 Id. 712 Id. 713 Id. at 171. 714 Susan O. Scheutzow, State Medical Peer Review: High Cost But No Benefit Is it Time for a Change?, 25 American Journal of Law and Medicine 7 (1999). 715 Id. 716 Id. at 13. 184

review of medical care; and (2) encourages physicians to expand their efforts to ensure that such care is of high quality, appropriate duration and reasonable cost. 717 Seeing the wisdom of peer review, almost all states have granted some type of immunity to physicians who participate in peer review. 718 These laws are meant to protect medical peer review participants from liability for their participation in the peer review process. 719 Forty-seven states and the District of Columbia have peer review immunity statutes. 720 The federal government has also addressed the merits of peer review through statutory protections when Congress enacted the Health Care Quality Improvement Act of 1986 (HCQIA). 721 The HCQIA grants broad immunity, subject to certain limitations, to professional review bodies, individual members of professional review bodies, persons under contract or other formal agreement with professional review bodies, and any persons who assist professional review bodies with respect to actions. 722 In addition, the HCQIA preempts state laws that provide less immunity that that offered under federal law. 723 Even with the HCQIA s immunity provisions, many cases are still filed against peer review committees that linger for years. The American Hospital Association s Senior Vice- President has noted: Early resolution in these cases is impossible, even where there is no objective evidence of improper peer review activity. 724 Florida has adopted statutes which are meant to protect medical review committees members, records, and information committees. 725 Florida laws grant protection in one of three ways: (1) providing physicians that participate in peer review immunity from lawsuits based upon their actions; (2) making peer review information privileged from discovery; and (3) requiring that physicians that participate in the process keep its findings confidential. 726 However, the Task Force has heard strong evidence that these protections are ineffective in accomplishing their public policy objects; as such, these laws should be reformed. 717 American Medical Association, policy compendium, H-375.996 (1998). 718 Susan O. Scheutzow, State Medical Peer Review: High Cost But no Benefit Is it Time for a Change?, 25 American Journal of Law and Medicine 8 (1999). 719 Id. 720 Id. at 29. 721 See 42 U.S.C.sections 11101-11152. 722 Susan O. Scheutzow, State Medical Peer Review: High Cost But No Benefit Is it Time for a Change?, 25 American Journal of Law and Medicine 30 (1999). 723 Id. at 31. 724 Id. at 32. 725 Karen O. Emmanuel, The Peer Review Privilege in Florida, 69 August Florida Bar Journal 61 (July/August 1994). 726 Section 766.101, Florida Statutes; section 395.0191, Florida Statutes; section 395.0193, Florida Statutes. 185

Hospitals and physicians have become reluctant to engage in peer review. Serving on a hospital [peer review] committee was once a privilege. The privilege has now become a hazard. 727 A review of Florida s case law reveals that almost anytime a peer review committee denies a physician staff privileges or revokes a physician s hospital privileges, litigation ensues. 728 Physicians who have been disciplined by peer review committees for medical malpractice at a particular hospital usually retaliate by filing a civil suit against the hospital and other physicians on a variety of grounds, including: (1) defamation; (2) illegal discrimination; (3) tortuous interference with business relationship; (4) breach of contract; and (5) conspiracy to prevent them from practicing at the hospital in violation of federal antitrust laws. 729 Thus, there exist powerful disincentives to perform peer review. The damages awarded in these legal actions can be substantial. 730 These suits can be much more daunting to a physician than a medical malpractice suit. For starters, these actions are usually not covered by liability policies since antitrust suits have nothing to do with the practice of medicine in a negligent manner. 731 Additionally, successful plaintiffs can obtain three times their earning power losses resulting from the hospital privileges denial. 732 For peer review to succeed, statutes must be strengthened to protect physicians and hospitals from costly liability and costly lawsuits. The current peer review protections have been ineffective in protecting those healthcare providers that engage in good faith peer review. The legislature must reassess the peer review statutes and develop methods to ensure that physicians and hospitals engage in constructive peer review. Findings and Recommendations To resolve this situation so as to authorize the regulatory boards to better maintain the standard of care for the practitioners, the Task Force recommends the following legislative changes: 727 F. M. Langley, Does Medical Peer Review Immunity Exist After Patrick v. Burget? A Review of the Legal Fundamentals, 2 University of Florida Journal of Law and Public Policy 137 (1988/89). 728 Id. at 8.; see e.g., Palm Beach Gardens Community Hospital, Inc. v. Shaw, 446 So. 2d 1090 (Fla. 4th DCA 1984); Jacksonville Medical Center, Inc. v. Akers, 560 So. 2d 1313 (Fla. 1st DCA 1990); All Children s Hospital v. Davis, 590 So. 2d 546 (Fla. 2d DCA 1991); Cruger v. Love, 599 So. 2d 111 (Fla. 1992); Bolt v. Halifax Hosp. Medical Center, 980 F.2d 1381 (11th Cir. 1993); Bryan v. Holmes Regional Med. Ctr., 33 F.3rd 1318 (11th Cir. 1994); Noble v. Martin Memorial Hospital, 710 So. 2d 567 (Fla. 4th DCA 1997). 729 Karen O. Emmanuel, The Peer Review Privilege in Florida, 69 August Florida Bar Journal 63 (July/August 1994). 730 F. M. Langley, Does Medical Peer Review Immunity Exist After Patrick v. Burget? A Review of the Legal Fundamentals, 2 University of Florida Journal of Law and Public Policy 138 (1988/89). 731 Id. 732 Id. 186

Recommendation 1. The Legislature should allow the healthcare provider regulatory boards to appoint administrative law judges with expertise in the profession to hear standard of care cases. Recommendation 2. The Legislature should statutorily provide that standard of care decisions are, as a matter of law, infused with overriding policy considerations best left to the healthcare provider regulatory boards. Recommendation 3. The Legislature should authorize the healthcare provider regulatory boards to reassess and resolve conflicting evidence in standard of care cases based on the record in the case. Recommendation 4. The Legislature should require physician profiles to provide professional qualifications information regarding physicians to consumers. Recommendation 5. The Legislature should provide for an audit of the Department of Health s disciplinary process and closed claims files. Recommendation 6. The Florida Legislature should strengthen Florida s peer review requirements so they can lead to earlier dismissal of meritless claims brought against hospitals by aggrieved physicians and protect physicians and hospitals from costly lawsuits and liability. Recommendation 7. The Legislature should expand the DOH s subpoena authority to include the retrieval of patient records when the patient refuses to cooperate, is unavailable, or fails to execute a patient release. Records obtained under these circumstances would be confidential. Recommendation 8. The Legislature should require that all first offense citations be non-disciplinary and non-reportable to the national data banks. Recommendation 9. The Legislature should expand the timeframe for forwarding cases to the Division of Administrative Hearing from fifteen days to forty-five days when a demand for a formal hearing, pursuant to section 120.57(1), Florida Statutes, is received. Recommendation 10. The Legislature should require all healthcare provider regulatory boards to designate those violations that may be handled in a one-time, non-reportable, and confidential mediation proceeding. Appropriate standard of care cases shall be included. Recommendation 11. The Legislature should modify upward the dollar amount threshold for closed claims cases to be reported and investigated by the Department. 187

Recommendation 12. The Legislature should grant exclusive authority to the healthcare provider regulatory boards to determine the amount of administrative costs to be recovered when final action occurs and a respondent is disciplined. Recommendation 13. The Legislature should change the burden of proof in disciplinary actions from the clear and convincing evidence standard, to the greater weight of the evidence standard, which is the same burden of proof for a medical malpractice case. Recommendation 14. The Legislature should expand the healthcare provider regulatory board s rulemaking authority in the areas of Internet prescribing and sexual misconduct cases so as to better address critical areas of discipline. 188

Chapter 8 Tort Reform Present-day malpractice litigation misses [its] targets by a considerable margin. Most of the claims dollar goes toward legal fees, pain and suffering, and items that have already been compensated by varying sources of primary loss insurance, rather than being spent on the critical financial needs of the most severely injured patients. This acknowledged flaw of tort law as a mode of compensation might be acceptable if the system were living up to its promise as an effective incentive for injury prevention. Unfortunately, the little empirical evidence that we have, as well as systematic analyses of characteristic features of the tort process, lead to the conclusion that even though the threat of tort suits induces expensive reactions from doctors, there has been only a modest payoff in reducing injuries to patients. Paul C. Weiler, Medical Malpractice on Trial 7 (1991) Cap On Non-Economic Damages Issue During its December 20, 2002 meeting, the Task Force voted, by a 5-0 vote, to examine the following issues with respect to non-economic damages in medical malpractice cases: Should the Task Force recommend that the amount of non-economic damages potentially recoverable in a medical malpractice action be capped? If a cap is to be recommended, at what amount? If a cap is to be recommended, is there a finding of a commensurate benefit for an individual claimant? If a cap is to be recommended, is there a finding that there exists an overwhelming public necessity to impose a cap on non-economic damages? 189

If a cap is to be recommended, is there a finding that there exists no alternative remedy to address this crises? Current Situation The term economic damages, as used in this report, consists of: Medical expenses (i.e., the reasonable value or expense of hospitalization, medical and nursing care, and treatment necessarily or reasonably obtained by the claimant in the past, or to be so obtained in the future). 733 Lost earnings in the past. 734 Lost working time in the past. 735 Loss of ability (capacity) to earn money in the future. 736 Loss of a spouse s services in the past and in the future. 737 Other pecuniary losses. 738 The term non-economic damages includes past and future: Pain and suffering. 739 Disability or physical impairment. 740 Disfigurement. 741 Mental anguish. 742 Inconvenience. 743 733 Fla. Std. Jury Instr. (Civ.) 6.2(c). See also section 766.202(3), Florida Statutes (defining economic damages for purposes of the medical malpractice arbitration statute as financial losses which would not have occurred but for the injury giving rise to the cause of action, including, but not limited to, past and future medical expenses and 80 percent of wage loss and loss of earning capacity). 734 Fla. Std. Jury Instr. (Civ.) 6.2(d). 735 Id. 736 Id. 737 Fla. Std. Jury Instr. (Civ.) 6.2(e). 738 See also H.R. 4600, 107th Cong., 2d Sess. (2002), which defines economic damages as: objectively-verifiable monetary losses incurred as a result of the provision of, use of, or payment for (or failure to provide, use, or pay for) health care services or medical products, such as past and future medical expenses, loss of past and future earnings, cost of obtaining domestic services, loss of employment, and loss of business or employment opportunities. 739 Fla. Std. Jury Instr. (Civ.) 6.2(a). See also section 766. 202(7), Florida Statutes (defining non-economic damages for purposes of medical malpractice arbitration statute as non-financial losses which would not have occurred but for the injury giving rise to the cause of action, including pain and suffering, inconvenience, physical impairment, mental anguish, disfigurement, loss of capacity for enjoyment of life, and other non-financial losses). 740 Fla. Std. Jury Instr. (Civ.) 6.2(a). 741 Id. 742 Id. 743 Id. 190

Loss of capacity for the enjoyment of life. 744 Aggravation of an existing disease or physical defect. 745 Loss of a spouse s comfort, society, and attentions. 746 Humiliation. 747 Injury to reputation. 748 Shame. 749 Hurt feelings. 750 Other non-pecuniary losses. 751 The Florida Standard Jury Instructions recognize that there is no exact standard for measuring such damages. Under current Florida law, there is no limit on the amount of money a jury may award plaintiffs as past or future non-economic damages in a medical malpractice case. 752 This point is illustrated by the March 13, 2002, jury award against Sand Lake Hospital (part of Orlando Regional Healthcare System Inc.) in the amount of $78.5 million. 753 The economic damages awarded by that jury were $8.5 million; the non-economic damages were $70 million. The amount the jury may be swayed to award as non-economic damages is the most unpredictable part of a Florida medical malpractice claim. The U.S. Department of Health and Human Services has concluded: Unless a state has adopted limitations on non-economic damages, the system gives juries a blank check to award huge damages based on sympathy, attractiveness of the plaintiff, and the plaintiff s socio-economic status 744 Id. 745 Fla. Std. Jury Instr. (Civ.) 6.2(b). 746 Fla. Std. Jury Instr. (Civ.) 6.2(e). 747 Fla. Std. Jury Insrt. (civ.) MI 4.4(a). 748 Id. 749 Id. 750 Id. 751 Fla. Std. Jury Instr. (Civ.) 6.2(a). 752 After the jury has returned its verdict, the court may, upon proper motion, order remittitur or additur where the jury has found the medical malpractice defendant liable but the jury s award of money damages is excessive or inadequate in light of the fats and circumstances which were presented to the trier of fact. Section 768.74(1), Florida Statutes. 753 Brain-Injured Patient Awarded $78 Million, Orlando Sentinel, Mar. 14, 2002. The case was was Henalori Shellow-McGee, by and through her legal guardian, Darrell McGee v. Orlando Regional Healthcare System d/b/a Sand Lake Hospital, No. CI-000-4009. 191

(educated, attractive patients recover more than others). 754 Non-economic damages are inherently subjective; there are no objective standards by which they can be quantified. One article explains: Whatever pain and suffering damages encompass in a given jurisdiction, the law does not provide an objective formula for valuing them. It is difficult to assess another person s pain and suffering and then translate that into its financial equivalent. In fact, courts have usually been content to say that pain and suffering damages should amount to fair compensation or a reasonable amount, without any more definite guide. As a result, jurors can be improperly influenced by the presentation of guilt evidence. The amount of pain and suffering awards can, and does, fluctuate markedly. 755 The U.S. Department of Health and Human Services has further observed: The cost of these awards for non-economic damages is paid by all other Americans through higher health care costs, higher health insurance premiums, higher taxes, reduced access to quality care, and threats to quality of care. The system permits a few plaintiffs and their lawyers to impose what is in effect a tax on the rest of the country to reward a very small number of patients who happen to win the litigation lottery. It is not a democratic process. 756 As discussed below, the risk of excessive jury awards of non-economic damages has a profound effect upon the way plaintiffs, defendants, and their respective attorneys view medical malpractice claims. Among other things, plaintiffs may overvalue their claims and refuse reasonable offers to settle. Defendants insurers may pay more to settle than a claim is really worth simply to avoid the possibility of a large verdict of noneconomic damages. 754 U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, Confronting the New Health Care Crisis: Improving Health Care Quality and Lowering Costs by Fixing Our Medical Liability System 9 (July 24, 2002) (Vol.1, Tab 1) (footnote omitted). 755 Victor E. Schwartz & Leah Lorber, Twisting the Purpose of Pain and Suffering Awards: Turning Compensation Into Punishment, 54 South Carolina Law Review, 47, 59-60 (Fall 2002) (footnotes omitted). 756 U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, Confronting the New Health Care Crisis: Improving Health Care Quality and Lowering Costs by Fixing Our Medical Liability System 9 (July 24, 2002) (Vol.1, Tab 1). 192

In addressing their own crises of access to healthcare resulting from medical malpractice insurance unavailability and un-affordability, several state legislatures have imposed caps on awards of non-economic damages. 757 The Task Force finds that California has succeeded where Florida has failed at holding down medical malpractice insurance premium rates. California thus has enhanced access to healthcare for its residents. California implemented its cap as a component of a system of reforms through its Medical Injury Compensation Reform Act of 1975 (MICRA). Although there is some disagreement among the stakeholders over whether the cap is a cause of California s success, 758 there is substantial evidence, which the Task Force finds persuasive, that California has been successful. Furthermore, based upon California s experience, the Task Force finds and concludes that, without the inclusion of a cap on potential awards of non-economic damages in the package, no legislative reform plan can be successful in achieving a goal of controlling increases in healthcare costs, and thereby promoting improved access to healthcare. 759 In the 1970s, California, like Florida, was facing a crisis in the availability of medical malpractice insurance. In response, California s legislature enacted MICRA. MICRA was the vehicle for several reforms. Among other things, it imposed a $250,000 cap on medical malpractice awards for non-economic losses; allowed evidence of payments from collateral sources; shortened the statute of limitations; and imposed a sliding contingency fee schedule for plaintiffs attorneys. The full benefits of MICRA were not achieved until after 1985, when the final court challenges to the validity of the statute were concluded. 760 MICRA s core statutory language governing awards of non-economic damages is as follows: In any action for injury against a healthcare provider based on professional negligence, the injured plaintiff shall be 757 See American Medical Association, chart, State Laws Chart: Liability Reforms (April 2002) (Vol. 1). 758 See, e.g., Center for Justice & Democracy, California Restrictions on Malpractice Victims Have Not Affected Malpractice Premiums (May 29, 2002); see also Jay Angoff, testimony, Oct. 21, 2002, pgs. 220-229. 759 See Richard S. Biondi et al., Milliman USA, Inc., Florida Hospital Association, Medical Malpractice Analysis 1 (Nov. 7, 2002) (It is widely viewed that caps on non-economic damages are the most effective reform measure to help control escalating medical malpractice costs); American Academy of Actuaries, Issue Brief: Medical Malpractice Tort Reform: Lessons from the States (Fall 1996). 760 See William G. Hamm, Californians Allied for Patient Protection, An Analysis of Harvey Rosenfield s Report: California s MICRA 1 (May 6, 1997). The full effect of MICRA on healthcare costs was not felt until the mid-1980s, when the law s constitutionality was finally upheld by the courts; see Fein v. Permanente Medical Group, 695 P.2d 665 (Cal. 1985), appeal dismissed, 474 U.S. 892 (1985) (upholding constitutionality of MICRA s cap on non-economic damages). 193

entitled to recover non-economic losses to compensate for pain, suffering, inconvenience, physical impairment, disfigurement and other non-pecuniary damage. In no action shall the amount of damages for non-economic losses exceed two hundred fifty thousand dollars ($250,000). 761 Economist William G. Hamm, Ph.D., of LECG, Inc., prepared two studies 762 documenting California s success in reducing medical malpractice insurance premiums through MICRA. Dr. Hamm concluded that the most significant of these reforms was a $250,000 cap on the amount of non-economic damages that may be awarded to plaintiffs in medical malpractice lawsuits. 763 Dr. Hamm further concluded that the cap on non-economic damages has lowered medical malpractice premiums, which, in turn, has lowered healthcare costs and increased access to healthcare for all Californians. 764 Dr. Hamm s other important observations and conclusions about MICRA s success in keeping medical malpractice insurance premiums relatively low included the following: 761 MICRA s provisions governing caps are codified at section 3333.2, California Civil Code, which provides in full: (a) In any action for injury against a health care provider based on professional negligence the injured plaintiff shall be entitled to recover non-economic losses to compensate for pain, suffering, inconvenience, physical impairment, disfigurement and other non-pecuniary damage. (b) In no action shall the amount of damages for non-economic losses exceed two hundred fifty thousand dollars ($250,000). (c) For the purposes of this section: (1) Health care provider means any person licensed or certified pursuant to division 2 (commencing with section 500) of the Business and Professions Code, or licensed pursuant to the Osteopathic Initiative Act, or the Chiropractic Initiative Act, or licensed pursuant to chapter 2.5 (commencing with section 1440) of division 2 of the Health and Safety Code; and any clinic, health dispensary, or health facility, licensed pursuant to division 2 (commencing with section 1200) of the Health and Safety Code. Health care provider includes the legal representatives of a health care provider; (2) Professional negligence means a negligent act or omission to act by a health care provider in the rendering of professional services, which act or omission is the proximate cause of a personal injury or wrongful death, provided that such services are within the scope of services for which the provider is licensed and which are not within any restriction imposed by the licensing agency or licensed hospital. Cal.Civ.Code section 3333.2 (West 2003). The constitutional validity of this language was upheld in Fein v. Permanente Medical Group, 695 P.2d 665 (Cal. 1985), appeal dismissed, 474 U.S. 892 (1985). 762 William G. Hamm, Californians Allied for Patient Protection, An Analysis of Harvey Rosenfield s Report: California s MICRA (May 6, 1997); William G. Hamm, Californians Allied for Patient Protection, How the MICRA Cap Influences Health Care Costs for Safety Net Providers and Medi-Cal (July 1999). 763 William G. Hamm, Californians Allied for Patient Protection, How the MICRA Cap Influences Health Care Costs for Safety Net Providers and Medi-Cal 1 (July 1999). 764 Id. 194

MICRA has significantly reduced both malpractice claims payments and incurred losses. 765 The reduction in claims and losses has led to a reduction in medical malpractice premiums. 766 Practitioners premiums are lower in California than in states without MICRA-type reforms. 767 MICRA has played a critical role in promoting access to healthcare for high-cost and low-income groups. 768 Medical malpractice premiums in California have declined sharply since the California Supreme Court dismissed the final appeal challenging the validity of MICRA. 769 The empirical evidence indicates MICRA has reduced medical malpractice premiums in California. 770 MICRA has reduced California s healthcare expenditures. 771 The best available evidence suggests that tort reforms such as MICRA could lead to dramatic reductions in defensive medicine. 772 Reductions in medical expenses due to MICRA are being passed on to consumers in California. 773 Medical malpractice insurance losses have increased more slowly since the MICRA reforms have taken effect, and are now below the national average per physician. 774 Reduced loss rates have enabled malpractice insurers to reduce the premiums that physicians and hospitals are required to pay. 775 765 William G. Hamm, Californians Allied for Patient Protection, An Analysis of Harvey Rosenfield s Report: California s MICRA 10 (May 6, 1997). 766 Id. at 11. 767 Id. at 12. 768 Id. 769 Id. at 13. 770 Id. at 15. 771 Id. 772 Id. at 18. 773 Id. 774 Id. 775 Id. at 19. 195

Together, MICRA s favorable impact on losses and malpractice insurance premiums have reduced the cost of healthcare in California. 776 Cost-savings are reflected in health insurance premiums, making health insurance benefit programs more affordable to businesses, particularly small businesses. 777 Lower premiums will increase employee participation in health insurance programs offered by their employers. 778 Reduced malpractice pressure will increase the supply of physicians in California, especially obstetricians and other impacted specialists. 779 Lower malpractice insurance premiums contribute to the viability of community hospitals. 780 Lower malpractice insurance rates increase the willingness of physicians and hospitals to provide treatments that carry a relatively high risk of failure, but offer the only real prospect of success for seriously-ill patients. 781 Reduced malpractice pressure is likely to free-up funds in the operating budgets of self-insured hospitals, allowing the hospital to treat more patients. 782 By reducing and stabilizing malpractice insurance premiums, MICRA reduced or eliminated the incentive for physicians to go without insurance. 783 By reforming the malpractice system, MICRA has significantly reduced the time required for plaintiffs to obtain awards. 784 MICRA has brought about significant improvements in access to healthcare within California. 785 776 Id. 777 Id. at 23. 778 Id. 779 Id. 780 Id. at 24. 781 Id. 782 Id. at 25. 783 Id. 784 Id. 785 Id. 196

In 1999, Dr. Hamm published a study that analyzed the effect that lifting the MICRA cap would have on the cost of healthcare provided to underserved and low-income groups. Dr. Hamm concluded: We find that eliminating the MICRA cap would increase costs to teaching and safety net hospitals as well as nonprofit community clinics.... Raising the cap to a higher dollar level, rather than eliminating it,... would be most strongly felt by healthcare facilities that self-insure, which would face dollar-for-dollar increases in their risk exposure with any increase in the MICRA cap. These higher costs would be borne by public and private healthcare insurers and out-of-pocket payments by patients. 786 In particular, Dr. Hamm noted in particular that Medi-Cal (which is California s counterpart to Florida s Medicaid program) could face large cost increases, if the cap were eliminated or raised. 787 Others, similarly, have concluded that removing the MICRA cap would substantially increase the amount of total defense payments. 788 MICRA s reforms, including its cap on non-economic damages, have reduced California medical liability premium rates by 40 percent (in constant dollars) over 1976 levels. 789 The average premium in 1976 was $23,698 (inflation-adjusted to 2001 dollars). 790 The average premium in 2001 was $14,107. Furthermore, for the past twenty-seven years in California, malpractice premiums have increased at a rate of less than 3 percent per year. 791 MICRA s reforms, including its cap on non-economic damages, also have led to faster settlements of claims in California. According to claims data 786 Id. at 1. 787 Id. 788 See J. Clark Kelso & Kari C. Kelso, Jury Verdicts in Medical Malpractice Cases and the MICRA Cap 29 (Aug. 5, 1999): Based on the jury verdict data, entirely removing the MICRA cap would result in at least a 30 percent increase in the amount of damages paid by defendants in medical malpractice actions (the increase might ultimately be larger because the absence of any cap might encourage plaintiff s counsel to spend more resources developing a basis for a higher non-economic award). 789 Richard E. Anderson, M.D., F.A.C.P., testimony, Nov. 4, 2002, pg. 51. 790 Actual 1976 average premium of $7,614 adjusted to 2001 dollars on the Annual Urban CPI Index for a $1million/$3 million claims-made policy. Richard E. Anderson, M.D., F.A.C.P., PowerPoint presentation, Nov. 4, 2002. 791 Richard S. Biondi et al., Milliman USA, Inc., Florida Hospital Association, Medical Malpractice Analysis 1 (Nov. 7, 2002). 197

gathered as part of a Physician Insurers Association of America (PIAA) Data Sharing Project, the average time to settlement of a claim in states that do not have caps on non-economic damages was 2.4 years, which is 33 percent longer than the 1.8-year period in California. 792 In addition to California, the wisdom of a cap on non-economic damages has also been recognized by the federal government. At the federal level, Congress, the Congressional Budget Office, 793 the Government Accounting Office, 794 and the Department of Health and Human Services, 795 have recognized the crisis of medical malpractice availability and affordability, evaluated possible options, and proposed reform. Limiting potential awards of non-economic damages in medical malpractice cases has been at the forefront of the proposed reform measures. This past year, members of the House of Representatives, and the Senate, again sponsored bills that would implement tort reforms, including caps on non-economic damages. The United States Congress has recognized the excessive burden the liability system places on the healthcare delivery system in H.R. 4600, a bill that passed in the House of Representatives on September 26, 2002. 796 If enacted, H.R. 4600 will create the Help Efficient, Accessible, Low-cost, Timely HealthCare (HEALTH) Act of 2002. The bill includes the following findings: EFFECT ON HEALTH CARE ACCESS AND COSTS: Congress finds that our current civil justice system is adversely affecting patient access to healthcare services, better patient care, and cost-efficient health care, in that the healthcare liability system is a costly and ineffective mechanism for resolving claims of healthcare liability and compensating injured patients, and is a deterrent to the sharing of information among healthcare professionals which impedes efforts to improve patient safety and quality of care. 797 The purpose of H.R. 4600 is as follows: 792 Richard E. Anderson, M.D., F.A.C.P., testimony before the Subcommittee on Health of the U.S. House Committee on Energy and Commerce (July 17, 2002). 793 See Congressional Budget Office Cost Estimate, H.R. 4600, 107th Cong., 2d Sess. (Sept. 24, 2002). 794 U.S. General Accounting Office, Medical Malpractice: A Framework for Action (May 1987) (Vol. 1, Tab 10). 795 U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, Confronting the New Health Care Crisis: Improving Health Care Quality and Lowering Costs by Fixing Our Medical Liability System (July 24, 2002) (Vol.1, Tab 1). 796 H.R. 4600, 107 th Cong. 2d Sess. (April 25, 2002). 797 Id. at 2(a)(1). 198

PURPOSE: It is the purpose of this Act to implement reasonable, comprehensive, and effective health care liability reforms designed to: 1) Improve the availability of healthcare services in cases in which healthcare liability actions have been shown to be a factor in the decreased availability of services; 2) Reduce the incidence of defensive medicine and lower the cost of healthcare liability insurance, all of which contribute to the escalation of healthcare costs; 3) Ensure that persons with meritorious healthcare injury claims receive fair and adequate compensation, including reasonable non-economic damages; 4) Improve the fairness and cost-effectiveness of our current healthcare liability system to resolve disputes over, and provide compensation for, healthcare liability by reducing uncertainty in the amount of compensation provided to injured individuals; and 5) Provide an increased sharing of information in the healthcare system, which will reduce unintended injury and improve patient care. 798 H.R. 4600 would accomplish these purposes through a combination of complementary measures. It would impose limits on medical malpractice litigation in state and federal courts by capping awards and attorney fees, reducing the statute of limitations, eliminating joint and several liability, and changing the way collateral-source benefits are treated. 799 One of the features of the bill is a cap on non-economic damages. (The bill makes clear that economic damages are not capped.) 800 The bill provides: ADDITIONAL NON-ECONOMIC DAMAGES: In any health care lawsuit, the amount of non-economic damages recovered may be as much as $250,000, regardless of the number of parties against whom the action is brought or the 798 Id. at 2(b). 799 Congressional Budget Office Cost Estimate, H.R. 4600, 107th Cong., 2d Sess. 1 (Sept. 24, 2002). 800 H.R. 4600 provides: UNLIMITED AMOUNT OF DAMAGES FOR ACTUAL ECONOMIC LOSSES IN HEALTH CARE LAWSUITS: In any health care lawsuit, the full amount of a claimant s economic loss may be fully recovered without limitation. H.R. 4600, 107th Cong., 2d Sess. 4(a) (2002). 199

number of separate claims or actions brought with respect to the same occurrence. 801 The Congressional Budget Office (CBO) evaluated the impact of H.R. 4600 on medical malpractice premiums. Its conclusions included the following: CBO s analysis indicated that certain tort limitations, primarily caps on awards and rules governing offsets from collateral-source benefits, effectively reduce average premiums for medical malpractice insurance. Consequently, CBO estimates that, in states that currently do not have controls on malpractice torts, H.R. 4600 would significantly lower premiums for medical malpractice insurance from what they would otherwise be under current law. 802 Senate Bill 2793 803 is a companion to H.R. 4600. Like the House bill, S.B. 2793 states its purpose as follows: To improve patient access to healthcare services, and provide improved medical care by reducing the excessive burden the liability system places on the healthcare delivery system. The Senate bill uses the same language as the House bill in capping noneconomic damages at $250,000. 804 Chapters 1 through 4 of this report extensively discuss the current medical malpractice problems and its effects on Florida s citizens and visitors. The Task Force was particularly moved by the testimony, letters and e- mails in chapter 4 from physicians who are bearing the burden of this current medical malpractice crisis. This evidence led the Task Force to make its findings contained in chapter 5. The Task Force found that, in Florida, both medical malpractice insurance premium rates and rate 801 Id. at 4(b). 802 Congressional Budget Office Cost Estimate, H.R. 4600, 107th Cong., 2d Sess. 4 (Sept. 24, 2002). 803 S. 2793, 107th Cong., 2d Sess. (July 25, 2002). 804 The language is as follows: In any health care lawsuit, the amount of non-economic damages recovered may be as much as $250,000, regardless of the number of parties against whom the action is brought or the number of separate claims or actions brought with respect to the same occurrence. S. 2793, 107th Cong., 2d Sess 4(b) (2002). 200

increase trends are substantially above countrywide levels. 805 Physicians are curtailing or abandoning their practices, and hospitals are reducing or eliminating services, particularly with respect to patients and procedures that pose higher risks of bad outcomes. 806 As a result, the access of Florida residents, and visitors to healthcare is being threatened. The causes of the problem is analyzed in chapter 4, and the potential partial (but indispensable) solution of imposing a cap on awards of noneconomic damages in medical malpractice cases, is discussed below. However, any contemplated legislative solution must be evaluated under applicable constitutional standards. 807 That analysis follows. The Task Force recognizes that any legislative imposition of a cap on awards of non-economic damages in medical malpractice cases must be consistent with the protections afforded by the Florida and Federal constitutions. Because the imposition of such a cap would modify a recognized common law right, 808 the Task Force has carefully considered, in particular, the constitutional right of access to courts in formulating its recommendation. 809 805 Richard S. Biondi et al., Milliman USA, Inc., Florida Hospital Association, Medical Malpractice Analysis 4 (Nov. 7, 2002). 806 See generally Robert Cline, M.D., testimony, Dec. 20, 2002, pgs. 109-115; Jeff Scott, J.D., testimony, Dec. 20, 2002, pgs. 115-135; Florida Medical Association, Florida Hospital Association, PowerPoint presentation, Professional Liability Insurance Crisis: Access to Care Survey, Dec. 20, 2002. 807 The Task Force also heard, and has considered, the testimony of others about the constitutionality of caps on non-economic damages in medical malpractice cases, including former First District Court of Appeal Judge Robert B. Smith (testimony, Nov. 4, 2002, pgs. 336-349); law professor Patrick Gudridge (testimony, Nov. 4, 2002, pgs. 349-366); former Florida Supreme Court Chief Justice Stephen Grimes (testimony, Dec. 3, 2002, pgs. 44-51); attorney Barry Richard (testimony, Dec. 3, 2002, pgs. 52-57); and attorney Joel Perwin (testimony, Dec. 3, 2002, pgs. 57-67). That testimony generally was consistent with this summary and discussion. 808 Smith v. Department of Insurance, 507 So. 2d 1080, 1087 (Fla. 1987). 809 The access to courts provision of the Florida Constitution is not the only limitation on the Legislature s power to limit awards of non-economic damages in medical malpractice cases. Opponents of tort reform raise all conceivable grounds in attacking reform legislation. The grounds frequently asserted include access to courts, equal protection, due process, right to jury trial, and separation of powers. See generally Daryl L. Jones, Fein v. Permanente Medical Group: The Supreme Court Uncaps the Constitutionality of Statutory Limitations on Medical Malpractice Recoveries, 40 University of Miami Law Review 1075 (1986) (discussing equal protection); St. Mary s Hospital v. Phillipe, 769 So. 2d 961, 971 (Fla. 2000) (as construed, cap on non-economic damages in medical malpractice arbitration proceedings did not violate equal protection); Zdrojewski v. Murhpy, 2002 WL 31546169 (Mich. Ct. App. Nov. 15, 2002) (Michigan s cap on non-economic damages did not violate equal protection); Kirkland v. Blaine County Medical Center, 4 P.3d 1115 (Idaho 2000) (Idaho s cap on non-economic damages did not violate right to jury trial or separation of powers doctrine); Victor E. Schwartz & Leah Lorber, Twisting the Purpose of Pain and Suffering Awards: Turning Compensation Into Punishment, 54 South Carolina Law Review 47 (Fall 2002); Carol A Crocca, Annotation, Validity, Construction, and Application of State Statutory Provisions Limiting Amount of Recovery in Medical Malpractice Claims, 26 A.L.R. 5th 245 (1995); Note, Who s the Boss?: Statutory Damage Caps, Courts, and State Constitutional Law, 58 Washington & Lee Law Review 315 (Winter 2001). 201

810 507 So. 2d 1080 (Fla. 1987). 811 Id. at 1089. Article I, section 21, of the Florida Constitution, guarantees access to courts, providing as follows: The courts shall be open to every person for redress of any injury, and justice shall be administered without sale, denial or delay. The Florida Supreme Court has consistently held that the Legislature may not impose a monetary cap on non-economic damages unless it provides a commensurate benefit, or it shows: An overpowering public necessity for the abolishment of the right to such damages exists; and There is no alternative method of meeting that public necessity. The court has considered the constitutionality of statutes creating monetary caps on non-economic damages on two occasions. In Smith v. Dept. of Insurance, 810 the court held that a section of the Tort Reform and Insurance Act of 1986, chapter 86-160, Laws of Florida, which placed a $450,000 cap on damages that a tort victim could recover for noneconomic losses, violated a victim's constitutional right-to-access to the courts because: The legislature has provided nothing in the way of an alternative remedy or commensurate benefit and one can only speculate, in an act of faith, that somehow the legislative scheme will benefit the tort victim. 811 In arriving at its holding in Smith, the court noted that: The 1986 Tort Reform and Insurance Act is the legislative solution to a commercial insurance liability crisis that the legislature found existed. For various reasons, both the insurance industry and the trial lawyers' bar challenged the act's constitutionality. The legislature, to ensure that the public and reviewing courts fully understood the reasons and purpose for enacting this legislation, set forth, in the preamble of the act, detailed legislative findings.... The Smith court concluded: It is un-controverted that there currently exists a right to sue on and recover non-economic damages of any amount and 202

that this right existed at the time the current Florida Constitution was adopted. The right to redress of any injury does not draw any distinction between economic and noneconomic damages nor does article 1, section 21 contain any language which would support the proposition that the right is limited, or may be limited, to suits above or below any given figure. The Court noted the seminal case on the right of access to the courts is Kluger v. White. In Kluger, we addressed the question of whether the Legislature could restrict the right by establishing a minimum threshold of $550 for economic damages below which the injured plaintiff would have no right to sue. Our answer was no and our holding there is directly controlling here. [W]here a right of access to the courts for redress for a particular injury has been provided by statutory law predating the adoption of the Declaration of Rights of the Constitution of the State of Florida, or where such right has become a part of the common law of the state pursuant to [section 2.01, Florida Statutes], the Legislature is without power to abolish such a right without providing a reasonable alternative to protect the rights of the people of the state to redress for injuries, unless the Legislature can show an overpowering public necessity for the abolishment of such right, and no alternative method of meeting such public necessity can be shown... There is no relevant distinction between the issue in Kluger and the issue here. 812 The Smith court distinguished its prior decision in Lasky v. State Farm Ins. Co., 813 in which it upheld a statutory provision which denied recovery for pain and suffering, and similar intangible items of damages unless the plaintiff was able to meet a $1,000 medical expense threshold, noting that the court did so there because the Legislature had provided plaintiffs with an alternative remedy, and a commensurate benefit. 814 The alternative remedy, and a commensurate benefit provided in the legislation addressed in Lasky, the court noted, consisted of: 812 Id. at 1087-1088 (emphasis added). 813 296 So. 2d 9 (Fla. 1974). 814 507 So. 2d 1080, 1088 (Fla. 1987). 203

The vehicular no-fault insurance statute requiring that all motor vehicle owners obtain insurance or other security to provide injured persons with minimum benefits, and that, if the defendant vehicle owner failed to purchase the required insurance, the defendant s immunity was nullified, and the plaintiff retained the right to sue below the threshold. Under the statute, any given vehicle owner was as likely to be sued as to sue, and giving up the right to sue was compensated for by obtaining the right not to be sued. 815 Based on these points, the Smith court concluded that, unlike the statute then before it, the legislation upheld in Lasky provided a reasonable tradeoff of the right to sue for the right to recover uncontested benefits under the statutory no-fault insurance scheme and the right not to be sued. The court then noted that the benefits of the $450,000 cap on non-economic damages in the case, then before it, ran in only one direction, because the potential plaintiffs and defendants stand on different footing, observing that, by way of example, a medical patient or the client of a lawyer obtained no compensatory benefit from a cap placed on non-economic damages because of the unlikeliness of negligence by a patient or client. 816 In Smith, Justice Overton dissented, on the ground that the Legislature s major purpose in capping non-economic damages was to assure available and affordable insurance coverage for all citizens and that this furnished a rational basis for the cap. 817 The Smith majority rejected this argument, observing: [W]e are dealing with a constitutional right which may not be restricted simply because the legislature deems it rational to do so. Rationality only becomes relevant if the legislature provides an alternative remedy or abrogates or restricts the right based on a showing of overpowering public necessity and that no alternative method of meeting that necessity exists. Here, however, the legislature has provided nothing in the way of an alternative remedy or commensurate benefit and one can only speculate, in an act of faith, that somehow the legislative scheme will benefit the tort victim. We cannot embrace such nebulous reasoning when a constitutional right is involved. Further, the trial judge below did not rely on nor have appellees urged before this Court that the cap is based on a legislative showing of an overpowering public necessity for 815 Id. 816 Id. 817 Id. at 1089. 204

the abolishment of such right, and no alternative method of meeting such public necessity can be shown. 818 In University of Miami v. Echarte, 819 the court held that two statutes providing a monetary cap on non-economic damages in medical malpractice claims when the parties agreed to binding arbitration were not unconstitutional. The court reasoned that because the statutes under consideration provided a commensurate benefit to a plaintiff in exchange for the monetary cap, the Legislature showed that an overpowering public necessity existed with regard to control of medical malpractice insurance premiums, and no alternative or less onerous method of meeting the crisis had been shown. Applying the Kluger test to these voluntary binding arbitration statutes, the Echarte court found, first, that they provided claimants with a commensurate benefit for the loss of the right to fully recover noneconomic damages. This commensurate benefit consisted of: The statutes only limited a claimant s right to recover non-economic damages after a defendant agrees to submit the claimant s action to arbitration. The defendant s offer to have damages determined by an arbitration panel provides the claimant with the opportunity to receive prompt recovery without the risk and uncertainty of litigation, or having to prove fault in a civil trial. A defendant, or the defendant s insurer, is required to conduct an investigation to determine the defendant s liability within 90 days of receiving the claimant s notice to initiate a malpractice claim. Before the defendant may deny the claimant s reasonable grounds for finding medical negligence, the defendant must provide a verified written medical expert opinion corroborating a lack of reasonable grounds to show a negligent injury. The claimant benefits from the requirement that a defendant quickly determine the merit of any defenses and the extent of its liability; and, the claimant also saves the cost of attorney and expert witness fees, which would be required to prove liability. A claimant who accepts a defendant s offer to have damages determined by an arbitration panel receives the additional benefits of: 818 Id. (emphasis added) (citation omitted). 819 618 So. 2d 189 (Fla. 1993). 205

o The relaxed evidentiary standard for arbitration proceedings. o Joint and several liability of multiple defendants in arbitration. o Prompt payment of damages after the determination by the arbitration panel. o Interest penalties against the defendant for failure to promptly pay the arbitration award. o Limited appellate review of the arbitration award requiring a showing of manifest injustice. The Echarte court went on to hold that, even if these statutes did not provide a commensurate benefit, it would find that they satisfied the second prong of Kluger, which requires a legislative finding that an overpowering public necessity exists, and further that no alternative method of meeting such public necessity can be shown. On this point, the court found the following elements sufficient to satisfy the second prong of Kluger: The preamble to the statutes clearly stated the Legislature s conclusion that the current medical malpractice insurance crisis constituted an overpowering public necessity; The Legislature made a specific factual finding that medical malpractice liability insurance premiums have increased dramatically in recent years, resulting in increased unavailability of malpractice insurance for some physicians; and The Legislature s factual and policy findings were supported by findings made in the report of a Task Force, established in the legislation, including findings that: o A family physician who performed no surgery, and practiced outside Dade and Broward counties, saw a 229 percent increase in medical malpractice insurance premiums for the period of 1983 to July 1, 1987. o A family physician who performed no surgery, and practiced in Dade or Broward counties, saw a 300 percent increase in medical malpractice insurance premiums for the same period. o Rates for specialties had also increased sharply, giving, by way of example, the fact that rates for obstetricians had increased by 444 percent in Dade and Broward counties, as compared to 304 percent in the rest of the state. 820 820 Id. at 196. 206

The court found that these facts supported the Legislature s conclusion that increased costs in medical malpractice insurance premiums have resulted in increased healthcare costs and made liability insurance functionally unavailable for some physicians. 821 Finally, the Echarte court found that the record supported the conclusion that no alternative or less onerous method exists to correct the difficulty at issue. On this point, the court relied on the following points: The Legislature acted to adopt the Task Force s recommendations both to enact the arbitration statutes and to strengthen regulation of the medical profession. The contrary conclusion that professional discipline alone was an alternative method to meet the public necessity of controlling medical malpractice insurance premiums was erroneous, as shown by the statement of the Task Force that, even though a small percentage of the physicians were responsible for 42.2 percent of the total claims paid out, the facts did not support the conclusion that these doctors were incompetent. The Task Force specifically found that strengthened regulation of medical care providers was not a substitute for tort and insurance reform. It was clear that both the arbitration statute, with its conditional limits on recovery of non-economic damages, and the strengthened regulation of the medical profession were necessary to meet the medical malpractice insurance crisis. No alternative or less onerous method of meeting the crisis had been shown in the analysis of the Task Force. 822 It might be noted that the Echarte court observed that the Task Force stated in its report that it based its findings on: Seven public meetings, and hearings in Tampa and Miami, to receive presentations, recommendations, and comments from experts and interested citizens. A comprehensive literature search and review. 821 Id. 822 Id. 207

Eight research projects conducted in Florida, which surveyed medical malpractice claims, closed claims, loss payments, profitability, and other aspects of insurance companies; studied data from the Insurance Services Office, a non-profit organization which collects data, and files rate applications for liability carriers nationwide; examined a survey of 1,500 randomly selected physicians as well as a survey of 1,500 attorneys who regularly handle tort cases; conducted a computer analysis of the financial situation of commercial liability insurance carriers; and conducted an analysis of Florida s civil litigation rates. The court also noted that the Task Force then conducted a six-hour hearing in Gainesville to preview the preliminary findings from the eight research projects. 823 The specific findings of the Legislature on which the court relied in Echarte are set forth in a footnote to the opinion. 824 In a dissenting opinion in Echarte, Justice Shaw disagreed with the majority opinion on both prongs of the Kluger test. With regard to the first prong, he found that the statutes provided neither a reasonable alternative remedy nor a commensurate benefit to claimants in exchange for their common-law right to full redress for injuries because: While the statutes placed a burden on claimants to conduct an investigation to ascertain that there are reasonable grounds to believe that any named defendant in the litigation was negligent, and that such negligence resulted in injury to the claimant, together with the mandate that corroboration of reasonable grounds to initiate medical negligence litigation shall be provided by the claimant s submission of a verified written medical expert from a medical expert, there was no quid pro quo, such as requiring the defendant to secure compulsory insurance to assure the claimant a recovery in the event that medical negligence is proved. Since a "relaxed evidentiary standard" does not alter the fact that conclusions must be supported by competent, substantial evidence, this standard was of no benefit to a claimant, and consequently was irrelevant to the quid pro quo evaluation. The fact that the negligent party could unilaterally limit the claimant's non-economic damages, whether the claimant accepts arbitration or goes to trial, demonstrated that the benefits of the statutes were not balanced between the patient-claimant and tortfeasor because a medical patient obtained no particular benefit from a cap placed on 823 Id. 824 University of Miami v. Echarte, 618 So. 2d 189, 192 n.12 (Fla. 1993) (quoting entire preamble to chapter 88-1, Laws of Florida). 208

non-economic damages, and the benefit of the damage cap adhered only to the negligent defendant. 825 Justice Shaw also found that the second, alternative, prong of the Kluger test had not been satisfied because: This prong requires a finding that the Legislature had shown an overpowering public necessity for the abolishment of such right, and no alternative method of meeting such a public necessity, and the word shown means shown by competent, substantial evidence, which had not been presented by the Legislature. The final report of the Task Force did not recommend a cap on noneconomic damages as the sole solution to the crisis in the medical insurance industry. To the contrary, it expressly cautioned against unwarranted conclusions. The fact that the Legislature recited the reasons why it chose the method it did was not an adequate substitute for the required Kluger findings. The Task Force pointed to other methods of meeting the alleged public necessity, i.e., diligent management of medical malpractice, and the fact that the Legislature considered and rejected other methods was additional proof that the Kluger test had not been met. The majority had engrafted a no less onerous method test onto the established no alternative method test, which was a departure from the Kluger test, with no authority supporting that departure. The majority opinion departed from the court's previous opinion in Psychiatric Associates v. Siegel, 826 where the court held a statute unconstitutional because, although an overpowering public necessity was shown, the record failed to show that the solution adopted by the Legislature was the only method meeting the medical malpractice crisis and encouraging peer review, and the majority offered no authority for that departure. 825 Id. at 199-200. 826 610 So. 2d 419 (Fla. 1992). 209

The majority erroneously implied that it was the claimant's burden to show that no alternative method of meeting a public necessity existed, whereas, under Smith, supra, the Legislature bears that burden. 827 In addition to the above objections, Justice Shaw concluded that the statutes not only violated the right of access to the courts, but also the right to trial by jury, equal protection guarantees, substantive or procedural due process rights, the single subject requirement, the takings clause, and constituted an improper delegation of power. Specifically, Justice Shaw noted that the law requires that, when a statutory benefit is being given in lieu of a constitutionally-protected right, the statutory benefit must accrue to the particular claimant, not to the public at large, and that a general assertion of benefit will not pass constitutional muster. He then concluded that a benefit enjoyed by the general public at the expense of a particular claimant is a taking of the claimant's property without compensation, in violation of both the state and Federal constitutions. Finally, Justice Shaw was of the opinion that the statutes denied equal protection, and drew an arbitrary line between recovery and non-recovery without regard to the actual damages caused by a defendant's malpractice. On this point, he noted that, by allowing the less-seriously injured to recover full damages, while denying full compensation to the more-seriously injured, the statutes operated with increasing capriciousness as the severity of the injury increases the greater the injury the greater the deprivation of recovery. 828 In Psychiatric Associates v. Siegel, referred to by Justice Shaw in his dissent in Echarte, the court held that sections 395.011(10)(b), 395.0115(5)(b), and 776.101(6)(b), Florida Statutes, which required a person who brought an action against someone who participated in a medical review board process to post a bond sufficient to cover the defendant's costs and attorney s fees before an action could be prosecuted, violated the constitutional right of access to the courts and due process. Siegel, like Echarte, is instructive of the court's view of Kluger, vis-a-vis medical malpractice concerns. With regard to the first Kluger element, i.e., whether the legislation provided a reasonable alternative remedy or commensurate benefit, the Siegel court found that, because a plaintiff under these statutes was only heard after posting a bond, and received no benefit from posting the bond, together with the fact that the statutes lacked reciprocity since they did not require defendants to pay a plaintiff s costs and attorney s fees if the claim proved meritorious, they did not provide a plaintiff with an alternative remedy or commensurate benefit. On the first alternative Kluger prong, the Siegel court found that: 827 University of Miami v. Echarte, 618 So. 2d 189, 201 (Fla. 1993). 828 Id. at 201-202. 210

... The record shows that the legislature enacted the bond requirement statutes pursuant to an overpowering public purpose. The Task Force's report and the legislature's preamble to enacting the bond requirements clearly outline the existence of a medical malpractice crisis in the state. The legislature acted within its police powers to protect the health and welfare of its citizens by enactment of the statutes. Thus, we find that the bond requirement statute passes the first prong of Kluger. 829 As to the second prong of Kluger, however, the Siegel court concluded that the statutes:... do not satisfy Kluger's second prong because the record in the case does not show that the bond requirement is the only method of meeting the medical malpractice crisis and encouraging peer review. Consequently, we hold that the statutes are an unconstitutional restriction on a plaintiff s right of access to the courts. 830 After a review of Florida case law, the Task Force is confident that its recommendations take into consideration the relevant constitutional hurdles that a cap on non-economic damages would entail. Information Presented to the Task Force The Task Force received testimony and numerous submissions dealing with the issue of caps on non-economic damages in medical malpractice actions. The testimony and submissions upon which the Task Force relies in making its findings, conclusions, and recommendations include those cited in the discussions below. Likewise, the Task Force relies on the testimony and submissions documented in chapters 3 and 4 of this report. Florida healthcare providers fear a bleak picture for Florida, but the Task Force believes it could get worse in the coming years if no corrective action is taken. We know that in 2002, medical malpractice awards were increasing in severity to record levels throughout the U.S. Claim frequency also appears to be increasing, and medical malpractice insurance premiums continue to rise throughout the U.S. Many insurers and re-insurers have left, or are leaving the medical malpractice insurance market, creating several availability problems in many states. Medical malpractice insurance premiums may become unaffordable, and/or 829 Id. at 424 (emphasis added). 830 Id. at 424-425. 211

831 Id. at 4-5 (emphasis added). coverage may become unavailable at any price to many physicians and hospitals. In Florida, the Task Force understands that some physicians and hospitals have reduced their limits of medical malpractice insurance coverage, and some have become uninsured, due to the high cost of such coverage. Some hospitals choose self-insurance, or other market mechanisms in an effort to save premiums at the risk of under-funding their exposure. The Task Force finds that one of the primary drivers of the current medical malpractice crisis is that a large percentage of medical malpractice losses (77 percent in Florida) apply to non-economic damages (i.e., pain and suffering). Further, a review of the FDOI database reveals that if non-economic damages had been capped at $250,000 in 1992 through 2001, $400 million, or 21.1 percent of the $1.9 billion paid, could have been retained in the healthcare community. A cap of $500,000 would have generated a 9 percent savings and a $1,000,000 cap would have resulted in a 2 percent savings. Pain and suffering is subjective in nature, in that it cannot be tied to actual costs incurred by injured patients. Every new record award sets a new higher value on pain and suffering, and precedents keep getting established for higher valuations on all future awards and settlements. The Task Force believes that caps on non-economic damages are particularly effective, because they limit the escalation of awards for pain and suffering, which fuels large increases for all awards and settlements. The impact of a cap on non-economic damages would be an immediate savings, and a tempering of one of the primary components of future loss trends. Non-economic damage caps seem to have worked extremely well in California, where medical malpractice costs are about 50 percent of the countrywide average. The Task Force feels that this is the strongest evidence that caps on non-economic damages (if there are no large loopholes and exceptions) are the most effective tort reform. 831 The record shows, and the Task Force concludes, that access to healthcare by Florida residents and visitors is being restricted by the unavailability and unaffordability of medical malpractice insurance, which in turn is the result of Florida s existing system of tort laws. One presenter summed up the relationship between premium rates and access as follows: If society wishes to have unlimited judgments, then insurance companies will be required to charge unlimited premiums. Unlimited medical malpractice premiums means unlimited increases in the cost of healthcare. Unlimited increases in the cost of healthcare means 212

decreased access to healthcare. Limitations of access inevitably affect the most vulnerable members of our society. 832 In response to proposals presented to the Task Force on January 16, 2003, Michelle M. Mello, J.D., Ph.D, M.Phil., Troyen A Brennan, M.D., J.D., M.P.H., William M. Sage, M.D., J.D., and David M. Studdert, L.K.B., Sc.D., M.P.H. submitted a response in favor of cap, but against a flat cap. These academics noted: Many of the arguments made by the Task Force for imposing some limitation on non-economic damages are persuasive, but in our view the choice of a flat cap of $250,000 has not been adequately justified. We urge the Task Force to consider recommending a sliding schedule for non-economic damages. Such a schedule would permit award levels to vary by severity of injury and, if desired, the age of the injured individual. The maximum award in each severity bracket would be capped, but at a level more commensurate with the severity of injury. 833 Although the Task Force finds the recommendations of these academics compelling, they offer no evidence that a sliding scale cap will or has worked. Findings and Recommendations As presented in chapter 4, the Task Force finds that there is a crisis in the availability and affordability of medical malpractice insurance in Florida, and a resulting crisis in the access of Florida residents and visitors to healthcare. The Task Force has carefully considered the potential effectiveness of the stakeholders proposed legislative imposition of caps on awards of non-economic damages in medical malpractice cases. Based upon the record as a whole and for the reasons specified below, the Task Force concludes that such a cap is essential to the success of any reform plan that might be adopted toward reducing the exposure of healthcare providers to the risk of severe jury awards. The Task Force finds the crisis exists because, under current Florida law, there is no limit on the amount of money a jury may award the plaintiffs as non-economic damages in a medical malpractice case. 834 832 Richard E. Anderson, M.D., F.A.C.P., testimony, Nov. 4, 2002, pgs. 36-37. 833 Letter from Michelle M. Mello, J.D., Ph.D., M.Phil., Troyen A. Brennan, M.D., J.D., M.P.H., William M. Sage, M.D., J.D., and David Studdert, L.K.B., Sc.D., M.P.H., (Jan. 16, 2003) 834 After the jury has returned its verdict, the court may, upon proper motion, order remittitur or additur where the jury has found the medical malpractice defendant liable but the jury s award of money damages 213

Non-economic damages are inherently subjective; there are no objective standards by which they can be quantified. One article explains: Whatever pain and suffering damages encompass in a given jurisdiction, the law does not provide an objective formula for valuing them. It is difficult to assess another person s pain and suffering and then translate that into its financial equivalent. In fact, courts have usually been content to say that pain and suffering damages should amount to fair compensation or a reasonable amount, without any more definite guide. As a result, jurors can be improperly influenced by the presentation of guilt evidence. The amount of pain and suffering awards can, and does, fluctuate markedly. 835 The risk of excessive jury awards of non-economic damages has a profound effect upon the way plaintiffs, defendants, and their respective attorneys view medical malpractice claims. Among other things, plaintiffs may overvalue their claims and refuse reasonable offers to settle. Defendants insurers may pay more to settle than a claim is really worth simply to avoid a jackpot verdict on non-economic damages. These unfortunate dynamics are the result of the unpredictability engendered by a system of virtually unbridled jury discretion. One of the author s of California s MICRA likewise observed that the intangible (subjective) aspect of medical malpractice claims leads to very widely varying jury awards and to very, very difficult settlement negotiations. 836 He further noted that quantification of pain and suffering, whether it be $250,000 or some other figure, leads to easier and earlier claims settlement. 837 Increased predictability through a reduction in potential liability and resulting stability will encourage more malpractice insurers to participate in the Florida market. One actuary testified: Making losses more predictable is a key to attracting companies to provide coverage, and it is also a key to getting more stable pricing in the marketplace. 838 is excessive or inadequate in light of the facts and circumstances which were presented to the trier of fact. Section 768.74(1), Florida Statutes. 835 Victor E. Schwartz & Leah Lorber, Twisting the Purpose of Pain and Suffering Awards: Turning Compensation Into Punishment, 54 South Carolina Law Review, 47, 59-60 (Fall 2002) (footnotes omitted). 836 Charles Bond, testimony, Nov. 4, 2002, pg. 67. 837 Id. at 68. 838 Jim Hurley, testimony, Nov. 4, 2002, pgs. 25-26. 214

Under current Florida law, there is no predictability when it comes to potential jury awards of non-economic damages. As a result, medical malpractice insurance premiums are higher here than in most other states. 839 The testimony of witnesses before the Task Force and written submissions of stakeholders show the current depth of the crisis and its effect upon Florida residents and visitors as patients and consumers. The reform measures recommended in this report, coupled with existing regulation of healthcare access and delivery, provide a commensurate benefit for the loss of the right to recover unlimited non-economic damages. Commensurate benefit The Task Force respectfully finds and concludes that the proposed reform plan as a whole, 840 including existing quality assurance measures that will remain in force, provides a commensurate benefit for the loss of the right to fully recover non-economic damages, 841 as required by the first prong of the Kluger test for validity under the access to courts provision of the Florida Constitution. Every time a Florida resident or visitor seeks healthcare here, he or she will benefit from the combination of the proposed cap, the other proposed reform measures, and the current agency oversight of healthcare delivery that will be continued. It is the plan as a whole that will provide the commensurate benefit. This is so because, if the cap had been implemented as part of a single, comprehensive reform plan, all elements of the plan would have been considered in evaluating commensurate benefit. The plan as a whole will provide many benefits to claimants, including the following: Physicians and hospitals will not be compelled to reduce or eliminate services, particularly those involving high risk. High-cost and lowincome groups in particular will benefit. Lower malpractice insurance rates increase the willingness of physicians and hospitals to provide treatments that carry a relatively high risk of failure but offer the only real prospect of success for seriously-ill patients. 839 Richard S. Biondi et al., Milliman USA, Inc., Florida Hospital Association, Medical Malpractice Analysis 4 (Nov. 7, 2002) (Florida medical malpractice insurance premiums are over 50 percent above the countrywide average). 840 University of Miami v. Echarte, 618 So. 2d 189, 197 (Fla. 1993). 841 University of Miami v. Echarte, 618 So. 2d 189, 194 (Fla. 1993). 215

The plan as a whole will include laws and agency rules designed to assure quality. Malpractice insurance premiums are a significant part of overall healthcare cost. Cost-savings will be reflected in health insurance premiums, making health insurance benefit programs more affordable to businesses, particularly small businesses. Lower premiums will increase employee participation in health insurance programs offered by their employers. Fewer tests, procedures, and visits will reduce the direct financial cost to the patient, and will also reduce time, travel, and other indirect costs. Malpractice insurance is a component of the overhead costs that providers must take into account in negotiating reimbursement rates with commercial insurers. Employers that pay all or portions of the premiums for their employees will save money. This may make the difference in whether an employer can afford to maintain current health insurance benefits for its employees. The time required for plaintiffs to obtain awards will be reduced. Reduced malpractice pressure will increase the supply of physicians, especially obstetricians and other impacted specialists. Lower malpractice insurance premiums will contribute to the viability of community hospitals. Reduced malpractice pressure is likely to free-up funds in the operating budgets of self-insured hospitals, allowing the hospital to treat more patients. The incentive for physicians to go without insurance will be reduced or eliminated. Costs for teaching and safety-net hospitals, as well as non-profit community clinics will be lower. Costs for healthcare facilities that self-insure will decrease. The Florida Medicaid Program will save resources, which can be used to provide additional healthcare goods and services. 216

The Task Force respectfully finds that these and the other benefits that will flow from the recommended plan as a whole are commensurate benefits for the loss of the right to fully recover non-economic damages. Overwhelming public necessity and no alternative means There is an overpowering public necessity for the reform measures recommended in this report, and no alternative method of meeting such public necessity can be shown. The Task Force finds and concludes that, even if the reform measures recommended in this Report were deemed not to include a reasonable alternative to protect the rights of the people of the state to redress for injuries 842 or, stated another way, a commensurate benefit for the loss of the right to fully recover non-economic damages, 843 the record nevertheless shows that: there is an overpowering public necessity 844 for the reform measures recommended in this report, including the cap on awards of noneconomic damages; and no alternative method of meeting such public necessity can be shown. 845 Thus, in light of the record made by this Task Force, the findings of previous task forces (discussed above in this report) the specific findings enumerated below, and the Legislature s previous findings and declarations of public policy in the area of healthcare, 846 and considering the proposed reform plan as a whole, 847 including existing quality assurance measures that will remain in force, the Task Force respectfully finds and concludes that the second prong of Kluger is satisfied. Overwhelming public necessity There is an overpowering public necessity for the reform measures recommended in this report, including the cap on awards of non-economic damages. The Task Force finds and concludes from the record before it that there is an overpowering public necessity for the reform measures recommended 842 Kluger v. White, 281 So. 2d 1, 4 (Fla. 1973). 843 University of Miami v. Echarte, 618 So. 2d 189, 194 (Fla. 1993). 844 Kluger v. White, 281 So. 2d 1, 4 (Fla. 1973). 845 Id. 846 See, e.g., chapter 88-1, Laws of Florida. 847 University of Miami v. Echarte, 618 So. 2d 189, 197 (Fla. 1993). 217

in this Report, including the cap on awards of non-economic damages. The cap will ease the problems of unavailable and unaffordable healthcare professional liability insurance and turn back the looming crisis of a lack of access to medical care. The primary cause of increased medical malpractice premiums has been the substantial increase in loss payments to claimants caused by increases in both the severity of judgments and the frequency of claims. The Task Force finds that the lack of predictability in the market, combined with a trend toward increased damage judgments, has caused instability in the market which, in turn, has led to insurance carriers either increasing their premiums (often to a level above what independent doctors can afford) or withdrawing from the marketplace. The result of these actions has created a profound shortage of medical services available throughout the state. The Task Force has received thousands of correspondence in the form of letters or survey responses from concerned physicians, nurses, and administrators of healthcare facilities, urging the Governor and Legislature to take steps to avert this crisis. Of these, most express doubt that it will be possible to continue in the healthcare business if immediate action is not taken. Failure to stabilize the market will result in additional, increased withdrawals from the market of companies incapable of remaining competitive in the industry. Therefore, it is imperative to stabilize the market in order to prevent a deepening of the current crisis of unavailability facing the state today. Based upon the foregoing and the other information in the record before it, the Task Force finds and concludes that there is an overpowering public necessity for the reform measures recommended in this report, including the cap on awards of non-economic damages. No alternative or less onerous method As the legislative history in chapter 4 indicates, Florida s 27-year experiment has not solved the problem. Additional, complementary, measures are needed. The Task Force finds and concludes that, without the inclusion of a cap on potential awards of non-economic damages in the package, no legislative reform plan can be successful in achieving a goal of controlling increases in healthcare costs and thereby promoting improved access to healthcare. The Task Force has heard testimony, and received written submissions, proclaiming the potential benefits of other conceivable but untested 218

measures the proponents insist the Florida Legislature try before resorting to a cap on non-economic damages. Florida can no longer afford to continue to rely on measures that have not worked. Nor can it delay action based upon speculation about the viability of any number of conceivable other approaches that opponents of tort reform may dream up to stall the resolution of the crisis. California solved its crisis by enacting MICRA. The most important component of MICRA s approach to reform was the cap on non-economic damages. The evidence before the Task Force shows that a cap of $250,000 per incident will lead to significantly lower malpractice premiums, which are an important factor in healthcare costs. Therefore, the Task Force recommends that, in medical malpractice cases, non-economic damages be capped at $250,000 per incident. Since 1975, Florida has implemented (or attempted to implement) numerous alternatives to the cap on non-economic damages and the other reforms recommended in this Report. None, alone or together with the others, has solved the crisis of medical malpractice insurance availability and affordability. Instead, Florida s numerous attempts to solve this problem are nothing more than a failed litany of alternatives. In spite of all these and other potential alternatives to a cap on noneconomic damages with which it has experimented over the past 27 years, Florida has not succeeded in solving its crisis of medical malpractice insurance availability or affordability, and the corresponding crisis of access to healthcare. Many very creative minds have been put to the test to come up with a silver bullet that would resolve this problem with finality. Their past efforts have met with, at best, temporary success. The Task Force finds that a cap on non-economic damages of $250,000 per incident limited only to healthcare professional liability cases is the only available remedy that can produce a necessary level of predictability. A cap on non-economic damages must be part of a package of reforms. The Task Force finds and concludes that, without the inclusion of a cap on potential awards of non-economic damages in the package, no legislative reform plan can be successful in achieving a goal of making medical malpractice insurance affordable and available, and thereby controlling increases in healthcare costs and promoting improved access to healthcare. The Task Force finds the above-mentioned studies and experiences persuasive, and concludes that, without the inclusion of a cap on potential awards of non-economic damages in the package, no legislative reform plan can be successful in achieving a goal of controlling increases in healthcare costs and thereby promoting improved access to healthcare. No 219

alternative or less onerous method for meeting the public necessity can be shown. No alternative or less onerous method for meeting the public necessity would be successful. The amount of the cap In an Issue Brief on federal medical malpractice tort reform, the American Academy of Actuaries recommended that Congress look to California s successful experience with a cap on non-economic damages. 848 The Academy concluded: For reform to be effective in reducing costs, the cap on non-economic awards should be established on a permedical-injury basis at a level low enough to have an impact (e.g., $250,000). 849 In light of this recommendation of the Academy of Actuaries and California s successful experience at the $250,000 level, the Task Force finds that a cap at the level of $250,000 on a per incident basis will be effective. 850 The Task Force finds that actual and potential jury awards of noneconomic damages (such as pain and suffering) are a key factor (perhaps the most important factor) behind the unavailability and un-affordability of medical malpractice insurance in Florida. The Task Force further finds that malpractice insurance premiums are a large component of the cost and availability of healthcare in Florida. Based upon the evidence before it, including evidence of Florida s unsuccessful previous efforts to eliminate the ongoing medical malpractice crises, and the successful experiences of other states that have imposed caps on potential jury awards of non-economic damages, the Task Force finds that imposing caps on non-economic damages in medical malpractice cases will significantly reduce the exposure of Florida healthcare providers to risk of loss from jury awards of inherently subjective damages. Such a reduction of risk will make malpractice losses much more predictable, and thereby lead to stability in malpractice insurance premium rates. 848 American Academy of Actuaries, Issue Brief: Medical Malpractice Tort Reform: Lessons from the States (Fall 1996). 849 Id. 850 See also Richard E. Anderson, M.D., F.A.C.P., testimony, Nov. 4, 2002, pgs. 53-54 (twenty-seven years of California data show that there is no need to index the cap for inflation, as the average cost of indemnity in California is rising at two and one-half times the rate of inflation, despite MICRA, because plaintiffs attorneys have become skilled at arguing for larger economic damages, such as wage loss). 220

A reduction in potential liability and resulting stability will encourage more malpractice insurers to participate in the Florida market. This, along with the reduced exposure to risk, will permit insurers to charge lower premiums on a sound financial basis. Lower premiums will encourage providers (particularly those in high-risk specialties) to offer healthcare services to Floridians, and persons visiting this state, and to do so at lower prices. Recommendation 1. The Legislature should, in medical malpractice cases, cap non-economic damages at $250,000 per incident. The Task Force believes that a cap on non-economic damages will bring relief to this current crisis. Without the inclusion of a cap on potential awards of non-economic damages in a legislative package, no legislative reform plan can be successful in achieving the goal of controlling increases in healthcare costs, and thereby promoting improved access to healthcare. Although the Task Force was offered other solutions, there is no other alternative remedy that will immediately alleviate Florida s crisis of availability and affordability of healthcare. The evidence before the Task Force indicates that a cap of $250,000 per incident will lead to significantly lower malpractice premiums. The Legislature should commission and fund a study of the impact of the $250,000 cap on non-economic damages. An interim report should be submitted to the legislature five years after date of enactment. 221

Communications with Subsequent Treating Physicians Issue The Task Force voted on December 20, 2002, by a 3-2 vote, to examine the following issue with respect to communications with subsequent treating physicians in the context of medical malpractice cases: Should defendants have the ability to interview subsequent treating physicians without formal discovery or notice to the plaintiff? Current Situation The current law barring a defendant in a medical malpractice action from ex parte communication with a plaintiff s treating physicians places the defendant medical service provider in an institutional disadvantage in the litigation process, causing needless expenditures in both money and time, a condition which ultimately drives up the cost of healthcare. The Legislature has created a statutory privilege prohibiting disclosure of information relayed to, or discovered by, a physician in the course of treating a patient. 851 This statute reads in pertinent part as follows: Ownership and control of patient records; report or copies of records to be furnished... (5)(a) Except as otherwise provided in this section and in s. 440.13(4)(c), such records may not be furnished to, and the medical condition of a patient may not be discussed with, any person other than the patient or the patient's legal representative or other healthcare practitioners and providers involved in the care or treatment of the patient, except upon written authorization of the patient. However, such records may be furnished without written authorization under the following circumstances: 851 This statute was initially codified as section 455.241, Florida Statutes, and later renumbered as section 455.667, Florida Statutes. The law exists in its current form as section 456.057, Florida Statutes. 222

1. To any person, firm, or corporation that has procured or furnished such examination or treatment with the patient's consent. 2. When compulsory physical examination is made pursuant to Rule 1.360, Florida Rules of Civil Procedure, in which case copies of the medical records shall be furnished to both the defendant and the plaintiff. 3. In any civil or criminal action, unless otherwise prohibited by law, upon the issuance of a subpoena from a court of competent jurisdiction and proper notice to the patient or the patient's legal representative by the party seeking such records. 852 Notably, subpart (6) of the statute also provides for limited waiver of this privilege where the plaintiff places his or her physical condition at issue by instituting a malpractice action against a medical services provider that has treated the plaintiff: (6) Except in a medical negligence action or administrative proceeding when a healthcare practitioner or provider is or reasonably expects to be named as a defendant, information disclosed to a healthcare practitioner by a patient in the course of the care and treatment of such patient is confidential and may be disclosed only to other healthcare practitioners and providers involved in the care or treatment of the patient, or if permitted by written authorization from the patient or compelled by subpoena at a deposition, evidentiary hearing, or trial for which proper notice has been given. 853 Therefore, the statute itself recognizes the need to balance the privacy interests of a patient with the need of a defendant to prepare a defense to charges levied against him or her. This statute, however, fails to provide an expeditious method for disseminating relevant information from a currently treating healthcare provider to a defendant conducting an investigation into the merits of a claim pursuant to an offer to settle. This physician-patient privilege has been created by statute. 854 The Florida Supreme Court has stated that there was no reason in law or 852 Section 456.057, Florida Statutes. 853 Section 456.057(6), Florida Statutes. 854 J.B. Harris, The Limits of Ex parte Communications with a Plaintiff s Treating Physician Under Florida Law, 70 Florida Bar Journal 57 (Nov. 1996); see also Morrison v. Malmquist, 62 So. 2d 415 (Fla. 1953) (noting that the doctor-patient privilege was not recognized in Florida). 223

equity prohibiting a defendant from holding an ex parte conversation with a patient s treating physicians. 855 In addition, the Supreme Court has held that there existed no common law or statutory privilege of confidentiality as to physician-patient communications in Florida and, therefore, no legal impediment to ex parte conversations between a patient s treating doctors and the defendants existed. 856 The Legislature created this privilege with the passage of section 455.241, Florida Statutes, (the precursor to the current statute, section 456.057, Florida Statutes). The legislative history reflects that the Legislature intended to limit the disclosure of patient information to a potential defendant. Courts interpreting the provisions of this statute have held that only a very limited exception to the physician-patient privilege exists, and the information sought can be obtained only through the specific methods provided for in the statute. In 1990, the First District Court interpreted the 1988 amendments, holding that in all cases other than those where the healthcare provider is a defendant, unless a plaintiff voluntarily provides a written authorization, the defendant s discovery of the privileged matter can be compelled only through subpoena power of the court with proper notice under the discovery provisions of the rules of civil procedure. 857 A three-pronged test emerged, which allowed a waiver of confidentiality in the following circumstances: In a medical negligence action, when a healthcare provider is or reasonably expects to be named as a defendant. By written authorization of the patient. When compelled by subpoena at a deposition, evidentiary hearing, or trial for which proper notice has been given. 858 The First District Court further noted that the reference to proper notice in the amendments was unquestionably included to preclude unilateral ex parte interrogation of a physician. 859 The Florida Supreme Court has held that section 455.241, Florida Statutes (1993), precluded defense counsel from holding ex parte conversations with a claimant s current treating physicians during pre-trial discovery. 860 855 Coralluzo v. Fass, 450 So. 2d 858, 859 (Fla. 1984). 856 See Id.; see also Acosta v. Richter, 671 So. 2d 149, 150 (Fla. 1996). 857 Franklin v. Nationwide Mutual Fire Ins. Co., 566 So. 2d. 529, 532 (Fla. 1st DCA 1990). 858 Id. 859 Id. 860 Acosta v. Richter, 671 So. 2d 149, 150 (Fla. 1996). 224

Furthermore, the court held that the primary purpose of the 1988 amendment [to section 455.241, Florida Statutes] was to create a physician-patient privilege where none existed before, and to provide an explicit but limited scheme for the disclosure of personal medical information. 861 Although the court acknowledged that since the passing of the statute, Florida courts had split on the issue of the scope of the patient/plaintiff s waiver of privilege, the court commented: Considering our conclusion that the major purpose of section 455.241(2) is to restrict a physician from disclosing patient information, we believe this medical negligence exception permits disclosure of patient information only by a physician who is or reasonably expects to be named as a defendant in a medical malpractice action. We do not believe that the legislature, having created a broad physician-patient privilege earlier in the statute and a strict scheme for limited disclosure, would use such awkward language if its intent was simply to do away with the privilege entirely in medical negligence cases. 862 The Supreme Court s justification for holding that the statute barred ex parte communication between defense counsel and subsequent treating physicians was if unsupervised ex parte interviews [were] allowed, medical malpractice plaintiffs could not object and act to protect against inadvertent disclosure of privileged communication, nor could they effectively prove that improper disclosure actually took place. 863 This, despite the fact that the strict scheme of limited disclosure referred to by the court authorizes the release of this otherwise privileged information to the defendant doctor. 864 Since Acosta, other appellate courts have followed the principles set forth therein. Recently, the Second District held that the statutory physicianpatient privilege did not prohibit the clinic, a doctor, and counsel from communicating with a second doctor, who had been a former employee of the clinic and involved in the patient s treatment, but was not a defendant in the malpractice litigation nor was likely to be a litigant. 865 The statutory physician-patient privilege did not attach to prevent communications between the healthcare providers involved in the lawsuit 861 Id. at 154. 862 Id. at 156. 863 Id. at 155. 864 Of course, were the information disclosed not pertinent to the instant suit, this information would be excluded as not relevant. 865 Royal, M.D. v. Harnage, 826 So. 2d 332 (Fla. 2d DCA 2002). 225

as defendants and a second, unnamed physician who had participated in the treatment of the patient. 866 Specifically, the court observed that the defendants and the second doctor had been involved in treatment of a patient and the filing of the lawsuit could not create a privilege where none had previously existed. 867 Relying on the Acosta decision, the Third District Court refused to allow the defendant, HRS, to inquire into the mental condition of a plaintiff who alleged that she had suffered psychological damage due in part to the negligent psychological care she received while a ward of the agency. 868 The Third District Court explicitly held, HRS also claims that both the parties already are in possession of the medical records of Melody s healthcare providers. This, however, does not mean that she has in any manner waived the right to object to ex parte communications between them and defense counsel. 869 Therefore, under the existing case law, the statute in its current form prevents defense counsel even from requesting clarification of written information already released without engaging further disclosure proceedings. Therefore, since the Acosta decision, the rule in Florida has been that counsel for a defendant doctor in a medical malpractice suit may not engage in any ex parte communication with the plaintiff s current treating physician, even for the limited purpose of gaining or clarifying information which would be used solely to assess the strength of the plaintiff s claim or to decide whether or not settlement of the claim is warranted. Instead, the defendant must engage in time-consuming and expensive pre-trial discovery proceedings in order to get to the information already recognized as available to the plaintiff. 870 The constitutionality of statutes limiting the confidentiality of doctorpatient communications has been challenged at various times in the Florida courts. While no cases directly on point articulate how the instant proposed reform must be worded in order to pass constitutional scrutiny, the judicial reasoning applied in other contexts provides guidance. In Jackson v. State, 871 the appellant challenged an order of involuntary commitment pursuant to the Jimmy Ryce Act on the grounds that, by requiring the appellant s treating psychotherapist to reveal medical records and to disclose opinions relating to the appellant s mental condition, the statute violated the appellant's constitutional right to privacy. In 866 Id. 867 Id. 868 Melody v. Department of Health and Rehabilitative Services, 706 So. 2d 115 (Fla. 3d DCA 1998). 869 Id. at 118. 870 Tommy Dukes, J.D., testimony, Nov. 22, 2002, pg. 294. 871 Jackson v. State, 2002 WL 31870170 (Fla. 4th DCA 2002). 226

upholding the statute, the Fourth District Court of Appeal stated, The right of privacy does not confer a complete immunity from governmental regulation and will yield to compelling governmental interests. 872 Additionally, the court relied on its previous reasoning 873 that [a]lthough a person s subjective expectation of privacy is one consideration in deciding whether a constitutional right attaches, the final determination of an expectation s legitimacy takes a more global view, placing the individual in the context of a society and the values that the society seeks to foster. 874 Thus, the statute was found to be a reasonable limit on the right to privacy, in light of the fact that the statute imposes a duty to safeguard the confidential nature of information received and used by the government in determining whether a person is or continues to be a sexually violent predator. 875 Similarly, in State v. Johnson, 876 the Florida Supreme Court upheld the state s right to subpoena medical records, with proper notice, in a criminal D.U.I. manslaughter prosecution. The court reasoned: A patient's medical records enjoy a confidential status by virtue of the right to privacy contained in the Florida Constitution, and any attempt on the part of the government to obtain such records must first meet constitutional muster. The right to privacy is not absolute and will yield to compelling governmental interests. Therefore, in reviewing a claim of unconstitutional governmental intrusion, the compelling state interest standard is the appropriate standard of review. 877 The court easily found that the necessity to prosecute criminal activity qualified as a compelling state interest, justifying the state s intrusion into the personal, private medical records of the suspected criminal. Similarly, the Legislature is properly acting within its power to restructure the method of discovery in civil malpractice cases in order to avert an impending crisis in the healthcare industry. This regulation protects the health and general welfare of the citizens of the state by preserving the availability of adequate healthcare; clearly this is a compelling state interest. 872 Id. at 1 (quoting Winfield v. Division of Pari-Mutual Wagering, Department of Business Regulation, 477 So. 2d 544 (Fla. 1985). 873 Board of County Commissioners of Palm Beach County v. D.B., 784 So. 2d 585, 590 (Fla. 4th DCA 2001). 874 Id. 875 Id. at 2. 876 State v. Johnson, 814 So. 2d 390 (Fla. 2002). 877 Id. at 393. 227

Illinois experience with reform is illustrative of the difficulty in drafting legislation that properly balances the competing needs of the parties with the constitutional right to privacy. The 1995 Illinois statute provided that, in all claims of medical negligence against a healthcare provider, the filing of a lawsuit would act as a waiver of any privilege the patient/plaintiff had regarding the patient s medical care or physical condition, and thus allowed ex parte communications between a defendant and the plaintiff s treating physicians. In addition, the legislation required every plaintiff seeking damages on a claim of personal injury, death, emotional injury, or pain and suffering to execute a consent form allowing disclosure of information from all healthcare providers. This consent was to be given within twenty-eight days of a request by a defendant and covered any and all treatment received by the plaintiff. The statute, however, allowed for in camera review of the underlying records prior to disclosure, in order to insure that the information sought was relevant to the defense. 878 This statute was found to be unconstitutional by the Illinois Supreme Court in 1997. 879 There, the court found that the statute not only infringed upon the Illinois Constitution s separation of powers provisions, but that it violated the right to privacy, as explicitly provided in the Illinois Constitution (a provision similar to that of the Florida Constitution). 880 In reaching its conclusion, the court reasoned: The confidentiality of personal medical information is, without question, at the core of what society regards as a fundamental component of individual privacy. Physicians are privy to the most intimate details of their patients' lives, touching on diverse subjects like mental health, sexual health and reproductive choice. Moreover, some medical conditions are poorly understood by the public, and their disclosure may cause those afflicted to be unfairly stigmatized. Respect for the privacy of medical information is a central feature of the physician-patient relationship. Under the Hippocratic Oath, and modern principles of medical ethics derived from it, physicians are ethically bound to maintain patient confidences. 881 878 Michael J. Gallagher et al., Illinois Tort Reform: The Judges Perspective, 84 Illinois Bar Journal 124 (March 1996). 879 Kunkel v. Walton, 689 N.E. 2d 1047 (Ill. 1997). 880 Ill. Const. 1970, art I, section 6, reads, in pertinent part: [T]he people shall have the right to be secure in their persons, houses, papers, and other possessions against unreasonable searches, seizures, invasions of privacy or interceptions of communications by eavesdropping devices or other means (emphasis added); Fla. Const. art I, section 23 reads, in pertinent part, Every natural person has the right to be let alone and free from governmental intrusion into the person s life (emphasis added). 881 Id. at 357. 228

However, the court further held that [t]he text of our constitution does not accord absolute protection against invasions of privacy. Rather, it is unreasonable invasions of privacy that are forbidden. In the context of civil discovery, reasonableness is a function of relevance. 882 The court further observed: There is no language in this provision in any manner restricting the consent requirement to the injury that is the subject of the lawsuit or to related medical conditions. Under section 2-1003(a), as a condition of proceeding with his or her lawsuit, an injured party must consent to the disclosure of medical information wholly unrelated to the injury for which recovery is sought. Indeed, under the unqualified language of section 2-1003(a), the injured party may have to consent to the release of complete medical records held by healthcare providers who have never treated the injured party for any condition even remotely related to the subject matter of the lawsuit. The consent procedure set forth in section 2-1003(a) goes well beyond the legitimate objectives of discovery as reflected in this court's rules. Instead, section 2-1003(a) seems to be designed to discourage tort victims from pursuing valid claims by subjecting them to the threat of harassment and embarrassment through unreasonable and oppressive disclosure requirements. 883 Thus, the Illinois Supreme Court ruled that the statute violated the state constitution s right to privacy provision by failing to require that the intrusion into the plaintiff s medical condition and treatment be limited to those areas legitimately relevant to the plaintiff s alleged injuries arising from the alleged negligent conduct of the defendant. Federal legislation and regulations have recently been enacted that could preempt a legislative attempt to allow ex parte communication between a defendant and a treating physician in a medical malpractice case. As an alternative, the Legislature could make the execution of a medical information release a precondition to the filing of a medical malpractice action. This could avoid a potential concern with federal regulations. Other jurisdictions currently allow disclosure of medical negligence plaintiffs' relevant medical information through the use of informal, ex parte communications between defense counsel and physicians who have treated or are currently treating the plaintiff. 882 Id. 883 Id. at 533 (emphasis added). 229

For example, the California Supreme Court found that California law allows third-party treating physicians to disclose information relating to the treatments, care, and physical condition of a medical malpractice plaintiff to the defendant physician s insurer. 884 The California law specifically states that medical information be disclosed to persons or organizations which insure or are responsible for defending professional liability. 885 In Heller v. Norcal Mutual Ins. Co., the defendant s insurance company conducted an ex parte interview with the plaintiff s expert witness, in which the expert disclosed the plaintiff s medical records to defense counsel. The court found that the law was unambiguous and specifically allowed for the unauthorized disclosure of such information when the plaintiff proceeded on a medical malpractice theory. Similarly, the New Jersey Supreme Court held that defense counsel has the right to interview treating physicians during the discovery process. 886 In Stempler v. Speidell, a woman died shortly after being admitted into a hospital for abdominal pains. During the discovery process of the ensuing lawsuit, the defendant learned that the decedent had been treated by a significant number of doctors and other healthcare providers prior to her arrival at the hospital. Defense counsel sought to have the plaintiff sign releases authorizing the decedent's prior healthcare providers to release medical records and discuss the decedent s prior health and treatments. The plaintiff, however, agreed only to the release of the medical records, and refused to authorize the defendant to speak with the healthcare providers on the grounds of physician-patient confidentiality. Thereafter, the defendants sought a motion to compel unrestricted authorization to speak with these physicians. The defendant claimed that requiring the formality of depositions would impose unnecessarily cumbersome restrictions on his right to prepare for trial due to the cost and delay of the process. Instead, the defendant argued that informal interviews were a more appropriate way to ascertain whether any of the plaintiff s physicians possessed unprivileged information that could be relevant to the defense s case. Finally, the defendant argued that requiring formal depositions of these physicians was unfairly burdensome because no similar restrictions were imposed upon the plaintiff s counsel. 887 In its decision, the New Jersey Supreme Court initially observed that instituting a lawsuit grounded in medical negligence extinguishes the privilege to the extent that decedent s medical condition will be a factor in 884 Heller v. Norcal Mutual Ins. Co., 876 P.2d 999 (Cal. 1994). 885 California Civil Code section 56.10(c)(4). 886 Stempler v. Speidell, 495 A. 2d 857 (N.J. 1985). 887 Id. at 862. 230

the litigation. 888 After a lengthy discussion of the competing interests of the parties, (i.e., the patient s interest in ensuring open communication with his healthcare provider by requiring that these discussions remain confidential, versus the defendant s right to present a defense to a claim brought against him), the New Jersey Supreme Court stated: In our view, these competing interests can be respected adequately without requiring the formality of depositions in every case. The Rules regulating pretrial discovery do not purport to set forth the only methods by which information pertinent to the litigation may be obtained. Personal interviews, although not expressly referred to in our Rules, are an accepted, informal method of assembling facts and documents in preparation for trial. Their use should be encouraged as should other informal means of discovery that reduce the cost and time of trial preparation... Plaintiff may also seek and obtain a protective order if under the circumstances a proposed ex parte interview with a specific physician threatens to cause such substantial prejudice to plaintiff as to warrant the supervision of the trial court. Such supervision could take the form of an order requiring the presence of plaintiff s counsel during the interview or, in extreme cases, requiring defendant s counsel to proceed by deposition. 889 Clearly, Stempler exemplifies the situation frequently facing defendants in medical malpractice actions throughout Florida. When the malpractice action is brought, the defendant is frequently in the position of having to investigate the plaintiff s medical history or current condition in order to discover other possible causes of the plaintiff s injury that could be used in defending the action. In addition, this information is often useful in determining the strength of the plaintiff s case, which the defendant could use to decide whether to settle the claim or proceed to trial. It is often necessary to interview several of the plaintiff s treating healthcare providers in order to acquire this information. But, because formal discovery is an expensive and time consuming process, defendants are often unable to adequately gather this information in preparation of their defense. Streamlining this process would not only expedite the litigation process, but also reduce the process' cost, thus limiting the insurer s expense and slowing subsequent increases in insurance premiums. Further, as pointed out by the Stempler court, this reform creates no legitimate hardship for 888 Id. at 859. 889 Id. at 864. 231

the plaintiff because the plaintiff may still seek protection from the court in the event that the defendant attempts to abuse this less formal process. Information Presented to the Task Force Concerns about whether defendants may communicate extra-judicially with prior and subsequent treating physicians were expressed from opposite points of view. In one respect, the playing field was said to be one-sided, making more difficult a party s ability to quickly and fairly assess the merits of the case. On the other hand, the accessibility to treating physicians was believed to be adequate and available by use of the pre-suit and discovery procedures governing medical malpractice cases. A practical impediment to the fair adjudication of medical malpractice claims is the issue of communications with subsequent treating physicians. 890 The issue arises at the onset of a medical malpractice suit and continues throughout. Prior to the 1988 amendments to section 455.241, Florida Statutes, the common law allowed for equal access to non-party treating physicians by both the plaintiffs and the defendants. However, the Legislature, in creating a privilege to protect the confidentiality of medical records, inadvertently caused a great advantage to the plaintiffs and a great disadvantage to the defendants once there was notice of litigation or the litigation actually commenced. 891 The disadvantage is seen as soon as a plaintiff injects [the plaintiff s] medical condition in the sense of the public domain by pursuing or electing to pursue medical malpractice action, because the non-party treating physicians remain off-limits to the defendant healthcare provider. 892 The defendant s lawyer must take the deposition of the non-party treating physician to discover the facts of the case. This is after the plaintiff s attorney has had the opportunity to sit down with the non-party physician and, in confidence, share with the non-party physician the plaintiff s theory of the case. 893 This unfair and unbalanced privilege, as it currently exists, also drives up the cost of litigation. 894 For example, if a problem arises in the legibility of medical records for a particular treating physician, rather than simply picking up a phone and calling the physician for clarification, the defendant s attorney must arrange a deposition involving court reporters, lawyers, and the involved doctor. 895 A more fair and cost-efficient 890 Tommy Dukes, J.D., testimony, Nov. 22, 2002, pg. 294. 891 Id. at 295. 892 Id. at 296. 893 Id. at 297-298. 894 Id. at 298. 895 Id. 232

situation would be where each side, not only the plaintiff, is given access to the treating physicians in an informal fashion. 896 Suggestions for proposed legislative language to change the existing situation to allow fair and equal access to non-party treating physicians by both entities were tendered. The proposal also included maintaining the privacy of the plaintiff by limiting its use to the context of the litigation proceedings. 897 An alternative perspective opined there is no other group of individuals or businesses in our state who have the ability to get more information about a case before it ever is filed in the circuit court. 898 Before a case commences, pre-suit notice is required, and a detailed affidavit must be provided. 899 The Legislature thought long and hard about a problem that was clearly demonstrated at the time during the 1980s, when they enacted the statute, which was a compromise between the rights of the injured party s and the insurance issues existing at the time. 900 The problem the Legislature corrected was the private, closed-door meetings between insurance adjusters, defense lawyers, and the person being sued. 901 Typically, the person being sued would speak with his or her colleagues and say I need your help here. I m getting sued. I need you to help me out on either the causation issue or the liability issue or the damage issue. 902 In effect, the Legislature said that to have access to this information, the rules of evidence and the rules of discovery must be followed including giving the patient s representative notice and an opportunity to be present when any questioning takes place. 903 The present system is not broken. 904 Crafting language to go back prior to 1988, to allow unfettered access, is not appropriate. 905 To allow a situation where a defense lawyer or an insurance adjuster and the doctor go to see a patient s treating physician on an informal basis would further drive a wedge between that physician and the patient. That should not be permitted. 906 896 Id. at 300. 897 Id. at 300-301. 898 Neal Roth, J.D., testimony, Nov. 22, 2002, pg. 302. 899 Id. 900 Id. 901 Id. at 303. 902 Id. 903 Id. at 303-304. 904 Id. at 306. 905 Id. at 304. 906 Id. at 306. 233

The defendants do have access to information through duly-noticed depositions and discovery and there is no reason to change the current system. 907 Findings and Recommendations The Task Force finds that prohibiting ex parte communication by defense counsel increases the defendant/insurer s administrative costs by requiring formal depositions of all treating physicians. In many cases, an informal interview would reveal a particular treating physician has little or no information relevant to the plaintiff s claim. Under such circumstances, the expense of a formal deposition could be avoided. Accordingly, the prohibition on ex parte contact reduces the chances of an early settlement. In addition, because the statute does not prohibit ex parte contact between the plaintiff s counsel and the treating physician, the defendant is at an unfair disadvantage. At an early stage of the litigation, the plaintiff has the opportunity to present to the treating physician his or her theory of the case. Such one-sided advocacy has the potential to tilt the treating physician s opinion in favor of the plaintiff. Should the treating physician s deposition testimony prove favorable to the defense, however, the present scheme prohibits the defendant from preparing the treating physician for his or her direct examination. The plaintiff would face no such obstacle if the treating physician s testimony supported his or her theory of the case. Recommendation 1. The Legislature should amend the Florida Statutes to allow ex parte communication between defense counsel for a defendant in a medical malpractice lawsuit and the plaintiff s treating physicians. Recommendation 2. As an alternative, the Legislature may consider requiring the plaintiff to execute a medical information release when filing a lawsuit that would allow for the defendant to conduct ex parte interviews with the plaintiff s treating physicians only in areas potentially relevant to the plaintiff s alleged injury or illness. 907 Id. 234

Expert Witness Qualifications Issue The Task Force voted on December 20, 2002, by a 5-0 vote, to examine the following issue with respect to expert witness qualifications in the context of medical malpractice cases: Should the qualifications for a medical expert testifying in a medical malpractice action be amended to require the expert testifying to be of the same specialty as the physician being sued? Current Situation The most critical issue regarding expert witness qualifications questions the need for that expert to be of the same specialty, or be a similar healthcare provider pursuant to section 766.102, Florida Statutes, regarding the nature of the healthcare services provided. Section 766.102(2), Florida Statutes, provides definitions of inclusion for experts who may testify and further provides that courts have the authority to interpret the section s provisions broadly. As a result, a specialist may testify against a general practitioner or a specialist in one field and may be permitted to testify against a specialist in another field. The statute provides that the prevailing professional standard of care for a given health care provider shall be the level of care, skill and treatment which, in light of all relevant circumstances is recognized as acceptable and appropriate by reasonably prudent similar health care providers. 908 Historically, case law has reflected a case-by-case fact-based determination as to whether a tendered expert should be permitted to testify regarding qualifications and opinions as to the standard of care given. As summarized in Stewart v. Price, 909 under the circumstances of the instant case, exclusion of the appellant s primary expert constitutes harmless error especially since this case, as many medical malpractice cases, was necessarily a battle of the experts 910 908 Section 766. 102(1), Florida Statutes. 909 718 So. 2d 205, 209 (Fla. 1st DCA 1998). 910 See Cenatus v. Naples Community Hosp., Inc., 689 So. 2d 302 (Fla. 2d DCA 1997); see also Barrio v. Wilson, 779 So. 2d 413 (Fla. DCA 2000) (specialist who frequently consulted on emergency room cases 235

With the exception of changes made by chapter 85-175, Laws of Florida (1985), regarding the prevailing professional standard for accepted standard of care in subsections (3)(a) and (4) and adding subsection (5), no significant modifications have been made to this provision. The issue to be reviewed by the Task Force is whether a more stringent standard for determining expert witness qualifications is mandated based on prevailing practices and perceived problems with accountability under the current statute. Section 766.102, Florida Statutes, partially regulates the prevailing professional standard of care for a given healthcare provider and the degree of expertise necessary for a similar healthcare provider to be qualified to testify against another in a court of law. If an individual is not certified by an appropriate American board as being a specialist, is not trained or experienced in a medical specialty, or does not hold himself or herself out as a specialist, then a similar healthcare provider is one who: 1. Is licensed by the appropriate regulatory agency of this state. 2. Is trained and experienced in the same discipline or school of practice; and 3. Practices in the same or similar medical community. 911 For those individuals who are certified by the appropriate American board as a specialist, and trained and experienced in a medical specialty, or hold themselves out as specialists, a similar care provider is one who: 1. Is trained and experienced in the same specialty; and and saw patients in that setting was not qualified to testify on standard of care for emergency room physicians because he was not an emergency room physician and had not served on the staff in an emergency room department for at least fifteen years); Fuentes v. Spirer, 766 So. 2d 1081 (Fla. 3rd DCA 2000) (critical care and trauma specialist qualified as a standard of care expert witness case against allegedly negligent emergency room physician even where expert was not an emergency room physician, given the expert s experience over the past five years in having been intimately involved in care of emergency room trauma patients and coordinating with emergency medical faculty and having written triage policies followed by emergency room personnel); Myron v. South Broward Hosp. Dist., 703 So. 2d 527 (Fla. 4th DCA 1997) (pediatrician was qualified to give opinion as to negligence of neurosurgeon in failing to perform procedure on infant because a pediatrician is well qualified to provide an opinion on necessary procedures such as a spinal tap even by a neurosurgeon); Fort Walton Beach Medical Center, Inc. v. Dingler, 697 So. 2d 575 (Fla. 1st DCA 1997) (requirement for qualifications as medical expert under pre-suit notification statutes of engagement of practice of medicine is satisfied so long as expert s active involvement in practice occurred within five-year period before incident giving rise to claim). 911 Section 766.102(2)(a)1-3, Florida Statutes. 236

2. Is certified by the appropriate American board in the same specialty. 912 The statute further provides that if any healthcare provider is providing treatment or diagnosis for a condition which is not within his or her specialty, a specialist trained in the treatment or diagnosis of that condition shall be considered a similar healthcare provider and shall be permitted to testify as an expert in any action if he or she is: 1. A similar healthcare provider pursuant to paragraph (a) or paragraph (b); or 2. Is not a similar healthcare provider pursuant to paragraph (a) or paragraph (b) but, to the satisfaction of the court, possesses sufficient training, experience, and knowledge as a result of practice or teaching in the specialty of the defendant or practice or teaching in a related field of medicine, so as to be able to provide such expert testimony as to the prevailing professional standard of care in a given field of medicine. Such training, experience, or knowledge must be as a result of the active involvement in the practice or teaching of medicine within the five-year period before the incident giving rise to the claim. 913 As previously noted, the determination as to whether an expert witness qualifies to testify against another healthcare professional depends upon case-specific facts and whether a trial court is convinced that the expert is qualified to testify. Information Presented to the Task Force In the early 1960s, the Frye standard was applied in ascertaining whether a potential expert witness qualified to testify regarding medical malpractice practices. 914 In moving away from the Frye standard and the court appointment of non-advocate experts, concerns have grown regarding whether experts hired by various parties in fact testify truthfully and reflect accurately the standard of care provided in cases under litigation. 915 Today, doctors are sought out for their medical opinions. When a doctor who can provide favorable testimony is located, more times than not, that doctor is hired and is told to provide an opinion but not to provide a report. 916 Under the current statute, judges have the authority to qualify experts based on the information provided from the potential expert 912 Section 766.102(2)(b)1-2, Florida Statutes. 913 Section 766.102(2)(c)1-2, Florida Statutes. 914 Dennis Agliano, M.D., testimony, Nov. 22, 2002, pg. 334. 915 Id. at 333-334. 916 Id. at 334. 237

witness. For example, a family practitioner can be called as an expert against a neurosurgeon regarding a case involving brain surgery and the jury hearing the case will not appreciate that there is a quantitative and qualitative difference between hearing from a family practitioner versus an expert neurosurgeon as to whether the neurosurgeon rendered professional care. 917 Some stakeholders believe that having a qualified, in-kind specialist testify, rather than allow a judge decide who is a specialist, will satisfy what is perceived to be a fairness issue. 918 Moreover, under current practices, medical practitioners not licensed within Florida are routinely hired to testify as experts in Florida courts. In these circumstances, there is no accountability in regulating the level of expertise of these experts, nor can Florida sanction them for any false testimony that may be provided. 919 The fairness issue requires that expert witnesses be healthcare providers who have the same or equal qualifications beginning with the pre-suit affidavit level up to and including any trial. These experts not only must have similar or the same expertise but must also be in the active practice of medicine for five years and possess a Florida medical license. 920 One stakeholder observed that the problem might not be as great as first perceived. In 80 percent of the cases where a healthcare provider was specializing as a cardiologist, a cardiologist would be hired to testify. 921 Further statements suggested that, since 1975, the courts have been doing a pretty good job of being gatekeepers regarding the admission of expert witnesses in medical malpractice cases. The case law reflects that suits have been decided on a case-by-case basis and that there are restrictions in place pursuant to the statutes regarding qualifying overlapping specialists as expert witnesses. 922 It was observed that the medical associations routinely deal with these kinds of issues and have successfully disciplined their own by expelling identified bad actors from their membership. 923 Regarding out-of-state experts and the need for certification to testify, some stakeholders were opposed to any changes. Further, those same stakeholders were opposed to any changes in evidentiary rules on expert witnesses, concluding that it would have no impact on the cost of insurance. 924 917 Id. at 335. 918 Id. at 335-336. 919 Id. at 336-337. 920 Id. at 337. 921 Neal Roth, J.D., testimony, Nov. 22, 2002, pg. 349. 922 Id. at 339-340. 923 Id. at 341. 924 Id. at 343. 238

However, other anecdotal reports revealed that there are cases where doctors who had never performed the procedure under scrutiny or never reviewed the records provided for review signed pre-suit affidavits. It was reported that for a few thousand dollars, an expert witness would put their name on a signed affidavit. 925 Additionally, evidence reflected that 70 percent of the lawsuits are dropped because they are frivolous, and so it was concluded that 70 percent of the doctors signing these affidavits are doing so inappropriately. These kinds of statistics not only impact the physicians under scrutiny but the medical profession as a whole. 926 Still additional evidence revealed that requiring in-kind specialists for presuit proceedings would cause the cost of litigation to escalate. For example, it was suggested that just to get started in a pre-suit case without an in-kind specialist, the cost ranged from $5000 to $7000 dollars per case. In a situation where a specialist is required, it could cost as much as $25,000 to just start the case with a mail out notice letter. 927 Ultimately, because these cases take a lot of money to do correctly, care must be taken in crafting an outcome to the expert witness qualification issue. 928 Findings and Recommendation The Task Force finds, based on the testimony presented and the litigation to date, that in-kind specialists provide the greatest likelihood of satisfying the fairness issue regarding medical malpractice lawsuits. While trial judges traditionally determine qualifications of expert witnesses, the proliferation of expert witnesses in all disciplines has greatly diminished the ability of the courts to accurately assess the pertinent credentials of potential expert witnesses in a medical malpractice case. Recommendation 1. The Legislature should examine ways to improve the use of in-kind experts at trial. 925 Dennis Agliano, M.D., testimony, Nov. 22, 2002, pg. 350. 926 Id. at 350-351. 927 Neal Roth, J.D., testimony, Nov. 22, 2002, pgs. 352-353. 928 Id. at 353. 239

Limitation on Liability Related to Emergency Services Issue The Task Force voted on December 20, 2002, by a 5-0 vote, to examine the issue of a limitation of liability related to emergency services in the context of medical malpractice cases: Should the definition of reckless disregard, as applied to emergency care in section 768.12(2)(b)3, Florida Statutes, be clarified to make it a more stringent standard than that currently applied by the courts? Current Situation One of the main issues relating to limitations on liability to emergency services is whether the definition of "reckless disregard" should be clarified. Specifically at issue is whether the definition as found in section 768.13(2)(b), Florida Statutes, and as applied in emergency care should be amended to provide a more stringent standard. A second issue which has also emerged is whether the "stabilization standard" found in section 768.13(2)(b)2a, Florida Statutes, should be deleted. Such a deletion would allow immunity to any hospital, hospital employee, or any person practicing medicine to be extended beyond the stabilization of the patient at the non-emergency level. Although the Good Samaritan Act has existed since 1965, it was not until the mid 1980's that the act underwent modifications in reaction to a growing medical malpractice crisis. This crisis was more evident in the area of emergency room and trauma care than in any other area of medical practice. 929 In fact, from 1983 to 1987, emergency medical physicians experienced greater liability premium increases than any other medical specialty. 930 929 Thomas R. Tedcastle & Marvin A. Dewar, Medical Malpractice: A New Treatment for An Old Illness, 16 Florida State University Law Review 535, 591 (Fall 1988). 930 This fact was confirmed by the 1987 Academic Task Force for Review of the Insurance and Tort Systems in its report dated August 14, 1987, when it found that emergency room physicians experienced a 49 percent annual increase in premiums during the period of 1983 to 1987. Academic Task Force for Review of the Insurance and Tort Systems, Preliminary Fact-Finding Report on Medical Malpractice 29-30. Consequently, some emergency rooms in South Florida closed and others curtailed their services. Thomas R. Tedcastle & Marvin A. Dewar, Medical Malpractice: A New Treatment for An Old Illness, 16 Florida State University Law Review 535, 591 (Fall 1988). 240

In 1986, the Legislature, through chapter 86-160, section 62, Laws of Florida, added a subsection to the Good Samaritan Act. Subsection 768.13(2)(b), Florida Statutes, created a provision that a licensed physician who rendered emergency care or treatment in response to a "code blue" emergency within a hospital or trauma center would be eligible for immunity. 931 Immunity would be granted if the physician acted as would a reasonably prudent person licensed to practice medicine under the same or similar circumstances. 932 In response to the medical malpractice crisis in 1987, former Governor Martinez organized the Governor's Task Force on Emergency Room and Trauma Care. 933 This Task Force recommended specific reform proposals such as changing the standard of care in medical malpractice cases involving emergency care to gross negligence; requiring physicians to provide emergency room coverage as a condition of staff membership; establishing qualification criteria for expert witnesses in emergency care malpractice cases; and expanding funding for indigent emergency care. 934 Former Governor Martinez also created the 1987 Academic Task Force for Review of the Insurance and Tort Systems, which was tasked to evaluate the state's tort and insurance laws in light of the growing malpractice crisis. Although Governor Martinez did not endorse all the proposals from the task forces, the 1988 Legislature did enact legislation that addressed a number of these proposals. 935 In 1988, the Florida Legislature reformed the Good Samaritan Act's standard of care requirements for cases arising from injuries received in emergency rooms and trauma centers. Due to amendments to section 768.13(2)(b), Florida Statutes, the standard of care for emergency and non-emergency situations by physicians in offices or hospitals would no longer be indistinguishable. 936 Instead, the standard of care now required a change in the degree of culpability on the part of physicians and hospitals rendering care in emergency rooms and trauma centers. 931 "Code Blue" emergencies generally are those involving cardiopulmonary arrest that require immediate application of cardiopulmonary resuscitation (CPR). Id. at 535. 932 Chapter 86-160, section 62, Laws of Florida. 933 Thomas R. Tedcastle & Marvin A. Dewar, Medical Malpractice: A New Treatment for An Old Illness, 16 Florida State University Law Review 535, 591 (Fall 1988). 934 Id. at 591-592. 935 Id. at 592. 936 A claimant in an action for medical malpractice had the burden of proof by the greater weight of the evidence to show that the healthcare practitioner breached the standard of care as measured by a reasonably prudent person licensed to practice medicine under the same or similar circumstances. Thomas R. Tedcastle & Marvin A. Dewar, Medical Malpractice: A New Treatment for An Old Illness, 16 Florida State University Law Review 535 (Fall 1988). 241

Section 768.13(2)(b), Florida Statutes, granted civil immunity to hospitals, hospital employees working within the facility, and persons licensed to practice medicine for injuries occurring as a result of medical care or treatment if the actions occurred in good faith and treatment was necessitated by a sudden, unexpected situation or occurrence resulting in a serious medical condition which demanded immediate medical attention. 937 The patient receiving the care must have entered the hospital through the emergency room or trauma center. 938 Actionable malpractice occurring after February 8, 1988, would necessitate a demonstration of "reckless disregard" for the life or health of the patient. 939 Therefore, a hospital and its covered personnel would not be protected from civil liability if the injuries were a result of care, or lack of care or treatment, under circumstances that demonstrated a reckless disregard for the consequences of the life or health of a patient. The Legislature chose to define "reckless disregard" as conduct which, at the time of the services were rendered, the healthcare provider knew or should have known would likely result in injury to the patient so as to affect the life or health of that patient. 940 The definition delineated five elements that addressed circumstances to be considered when determining if a person "knew or should have known" that injury was likely to occur. As codified, section 768.13(2)(b)3, Florida Statutes (1988), delineates these elements as follows: the extent or serious nature of the circumstances prevailing; the lack of time or ability to obtain appropriate consultation; the lack of a prior patient physician relationship; the ability to obtain an appropriate medical history of the patient; the time constraints imposed by coexisting emergencies. 941 Significant changes to the Good Samaritan Act relative to emergency rooms and trauma centers have not occurred since 1988. Moreover, appellate review has been de minis with few issues surfacing in the area of the "reckless disregard" standard. In the case of Garcia v. Randle-Eastern Ambulance Service, the Third District Court of Appeals determined that the issue of whether the facility acted with reckless disregard to the victim was a jury question based on the competent substantial evidence presented. 942 The court further stated it would apply the legislativelycreated statutory definition of reckless disregard and would not rely on any common law definition of recklessness to determine liability under the Good Samaritan Act. 943 937 Section 768.13(2)(b), Florida Statutes. 938 Id. 939 Thomas R. Tedcastle & Marvin A. Dewar, Medical Malpractice: A New Treatment for An Old Illness, 16 Florida State University Law Review 535, 593 (Fall 1988). 940 Section 768.13(2)(b)3, Florida Statutes. 941 Id. 942 Garcia v. Randle-Eastern Ambulance Service, 710 So. 2d. 74, 75 (Fla. 3d DCA 1998). 943 Id. 242

Two subsections of section 768.13, Florida Statutes, are controlling in reference to liability limitations related to emergency services. One is section 768.13(2)(b)1, Florida Statutes, which sets forth the criteria for those who may be considered a covered party and what circumstances the covered party must be under before the immunity delineated in the Good Samaritan Act can be imposed. Specifically, section 768.13(2)(b)1, Florida Statutes, applies to hospitals licensed under chapter 395, Florida Statutes; employees of the hospitals working in the clinical area within the facility and rendering patient care; and any person licensed to practice medicine. 944 The second part of the statutory section lists certain elements that must be met before application of this immunity provision can be asserted. Those statutory elements are a good faith rendering of medical care or treatment of a sudden, unexpected situation or occurrence that results in a serious medical condition demanding immediate medical attention. Additionally, the patient must have entered the hospital through the emergency room or trauma center. 945 However, the immunity granted by this statutory section has a caveat clause. Section 768.13(2)(b)1, Florida Statutes, states that a covered entity shall not be held liable for any civil damages as a result of such medical care or treatment unless such damages result from providing, or failing to provide, medical care or treatment under circumstances demonstrating a reckless disregard for the consequences so as to affect the life or health of another. Section 768.13(2)(b)2, Florida Statutes, is the second controlling subsection that impacts the practical application of this statutory immunity law for emergency room and trauma center events. The immunity does not apply to causes of action under two different settings. The first is when the injury is a result of any act or omission in providing medical care or treatment occurring after the patient is stabilized and is capable of receiving medical treatment as a non-emergency patient, unless surgery is required as a result of the emergency within a reasonable time after the patient is stabilized. 946 As such, an actionable malpractice case for injuries occurring in emergency rooms or trauma centers is governed by the simple negligence standard unless all the criteria of the Good Samaritan Act are met. 947 While this subsection was enacted in an effort 944 Section 768.13(2)(b)1, Florida Statutes. 945 Id. 946 Section 768.13(2)(b)2, Florida Statutes. 947 In Standard Jury Instructions Civil Cases- Nos. 95-1, 95-2, 658 So. 2d 97 (Fla. 1995), the Florida Supreme Court adopted the jury instructions and commentary regarding the application of the degree of negligence standard submitted to the court by the Florida Supreme Court Committee on Standard Jury Instruction in Civil Cases. Standard Jury Instruction MI 9 was drafted to address amendments to s. 768.13(2)(b), Florida Statutes. It applies only to cases described in that statute. MI 9 does not apply to cases 243

to clarify the circumstances in which immunity does not apply, unintended consequences have resulted. A line of demarcation as to when immunity may or may not apply has been drawn. This line of demarcation is predicated on patient stabilization which unwittingly creates an opportunity for prolific, protracted litigation. For example, questions such as what constitutes stabilization, at what point stabilization occurred and what is considered non-emergency care, may make ripe the opportunity for litigation that was not the intent of the legislation. Consequently, the stabilization element of this subsection brings into question, and may make meaningless, the Legislature s intent to provide immunity, thus requiring a case-by-case assessment in the granting of the immunity. Second, immunity does not apply if the act or omission of providing medical care or treatment is unrelated to the original medical emergency. 948 Based on the afore-noted discussion, it would appear that possible modifications are needed to conform current limitations as to any issue of stabilization to the applicability of any immunity. Information Presented to the Task Force Most of the testimony obtained pertaining to the reckless disregard standard and its application to emergency service events was presented to the Task Force at its December 3, 2002 meeting in Tallahassee. The testimony was derived from a point, counterpoint perspective. Two reasons were outlined as to why the reckless disregard standard was not beneficial to emergency room doctors, the hospitals, and others. 949 First, the offered evidence noted that an emergency room doctor in Williston, Florida, was desperately searching and could not find malpractice insurance for his emergency services. The second reason was based on fairness and common sense. 950 The reckless disregard standard has not changed the situation for emergency room doctors since its establishment 12 or 14 years ago. 951 It was involving patients capable of receiving treatment as nonemergency patients, even if treated in the emergency room. No reported decision construes the legislative intent behind the amendments. Based upon the definition of reckless disregard in subpart (2)(b)3, the Committee has concluded that the intent was to limit liability in civil actions for damages arising out of fact situations to which the statute applies to cases where something more than simple negligence is established. Therefore, the standard instructions dealing with simple negligence are not appropriate for civil damage actions to which the statute applies. 948 Section 768.13(2)(b)2, Florida Statutes. 949 George Meros, J.D., testimony, Dec. 3, 2002, pgs. 124-125. 950 Id. at 99. 951 Id. at 100. 244

judged to be a band-aid to try and calm down doctors who were having problems. It has not done that because an expert is still going to come in and testify that [O]h yes, that rises to the level of reckless disregard. In essence, notwithstanding the reckless disregard language, emergency room doctors and emergency care still have a problem. 952 One suggestion proffered was to change the language to require the plaintiff to prove that the emergency provider committed a willful disregard for the rights of the patient. This would be consistent with the common law standard. 953 Modifying the statute to add willful conduct to the reckless disregard standard is not supported by all stakeholders. It was suggested that adding the term willful to the standard would be tantamount to intentional acts and would literally wipe out the law of medical negligence and the right for injured people in the state to bring medical negligence actions. 954 Findings and Recommendations Two related issues have come before the Task Force: (1) clarification of the reckless disregard standard, and (2) whether the stabilization standard should be redefined or abandoned. The Task Force finds, based on the consideration of current law, the testimony provided during the meetings and the practical impact and application of the Good Samaritan Act to date, the definition of reckless disregard as defined by statute is sufficient and needs no further modification. The Task Force further finds that as to the issue of patient stabilization as set forth in section 768.13(2)(b)2a, Florida Statutes, all references to patient stabilization should be repealed. The Task Force finds that because of the uncertainty of when patient stabilization occurs, undue and unintended litigation may result which dilutes the intent of this limited liability statute. By eliminating the patient s stability factor, the statute becomes more meaningful and more purposeful and greater immunity coverage is provided. As a result, the Task Force believes the limitation of liability in civil actions for damages arising out of emergency services provided to a standard of reckless disregard for life or health of another, satisfactorily protects patient s care in these identified circumstances and provides the necessary requirements for meeting liability immunity for covered parties. 952 Id. 953 Id. at 101. 954 Lance Block, J.D., testimony, Dec. 3, 2002, pg. 104. 245

Recommendation 1. The Legislature should retain the definition of reckless disregard, as that term is currently defined by statute, as it is sufficient. Recommendation 2. The Legislature should repeal references to patient stabilization in section 768.13(2)(b)2a, Florida Statutes. 246

Sovereign Immunity Issue The Task Force voted on December 20, 2002, by a 5-0 vote, to examine the following issues of sovereign immunity for emergency room physicians in the context of medical malpractice cases: When emergency medical providers are performing medical services pursuant to the mandate imposed upon them in sections 395.1041 and 401.45, Florida Statutes, is there a reasonable basis to define the providers as agents of the state under section 768.28, Florida Statutes, due to the state-imposed mandate to implement the public policy goals underlying sections 395.1041 and 401.45, Florida Statutes? If so, should section 768.28, Florida Statutes, be amended to define emergency medical providers as agents of the state entitled to sovereign immunity for damages beyond the allowable caps, with the state to consider paying any clams exceeding the caps pursuant to the legislative claims bill process? Current Situation A proposal was made to apply sovereign immunity limits to emergency room physicians and hospital staff working within the hospital emergency room. Sovereign immunity is derived from a medieval English doctrine that one could not sue the king in his own courts; hence the phrase the king can do no wrong. 955 Justice Holmes explained the basis for the doctrine in 1907: 956 A sovereign is exempt from suit, not because of any formal conception or obsolete theory, but on the logical and practical ground that there can be no legal right as against the authority that makes the law on which the right depends. 957 The doctrine of sovereign immunity as applied by the Florida courts was based on two public policy considerations: the protection of the public against profligate 955 Cauley v. City of Jacksonville, 403 So. 2d 379 (Fla. 1981). 956 Kawananakoa v. Polyblank, 205 U.S. 349, as cited in Cauley v. City of Jacksonville, 403 So. 2d 379 (Fla. 1981). 957 Cauley v. City of Jacksonville, 403 So. 2d 379 (Fla. 1981). 247

encroachments on the public treasury 958 and the need for the orderly administration of government, which, in the absence of immunity, would be disrupted if the state could be sued at the instance of every citizen. 959 Sovereign immunity is constitutionally absolute, subject only to the Legislature s right to waive immunity. 960 The state, its agencies, and counties have always been fully covered by sovereign immunity. Municipalities and quasi-governmental entities have been found by the courts to have limited immunity depending on whether the activity performed was considered a governmental function covered by sovereign immunity or a proprietary function for which the entity could be held liable. For instance, where a special taxing district operated a hospital that provided services to both paying and indigent clients, the court found the hospital was covered by sovereign immunity as to the indigent patients but not as to the paying patients. 961 More recently, the Legislature, through specific enactment, or the courts through application of the law, have applied sovereign immunity to public institutions created, owned, and controlled by the state or its subdivisions, 962 and public corporations or public quasi-corporations created by the Legislature to perform state-wide functions. 963 The authority to grant relief from sovereign immunity was vested in the Legislature by the Constitution in 1896. 964 However, the Legislature did not exercise that authority until the passage of section 768.28, Florida Statutes, in 1973. 965 Prior to the passage of that section, any person wronged by actions of a governmental entity could only seek relief through payment from the Legislature via a claims bill. With the passage of section 768.28, Florida Statutes, the Legislature established a specific process for filing claims against governmental entities and the statute more clearly defined those entities the Legislature considered governmental entities. Additionally, after the passage of section 768.28, Florida Statutes, the Supreme Court receded from the analysis of sovereign immunity based on governmental and proprietary functions and deferred to the statutory scheme. 966 958 Spangler v. Florida State Turnpike Authority, 106 So. 2d 421 (Fla. 1958). 959 State Road Department v. Tharp, 146 Fla. 745, 1 So. 2d 868 (Fla. 1941). 960 See Fla. Const. art. X, section 13. 961 Suwannee County Hospital Corp. v. Golden, 56 So. 2d 911 (Fla. 1952). 962 Smith v. Duval County Welfare Bd., 118 So. 2d 98 (Fla. 1st DCA 1960). 963 Rabin v. Lake Worth Drainage Dist., 82 So. 2d 353 (Fla. 1955). 964 See Fla. Const. art. IV, section 19 (1868) (now art. X, section 13). 965 Prior to 1979 and passage of 768.28, Florida Statutes, a party suffering injury by the state could file a claims bill with the Legislature seeking relief. 966 Commercial Carrier Corp. v. Indian River County, 371 So. 2d 1010 (Fla. 1979), Cauley v. City of Jacksonville, 403 So. 2d 379 (Fla. 1981), and Eldred v. North Broward Hospital District, 498 So. 2d 911 (Fla. 1986) (found the special taxing district to be covered by sovereign immunity on the basis of three actions: first, the passage of 768.28, second the specific recognition of special taxing districts as 248

The primary function of section 768.28, Florida Statutes, was the waiver of sovereign immunity for the state, its agencies or subdivisions. Additionally, the statute provides some limitations on suits against individuals and corporations who are not the sovereign but who pursue public or quasi-public objectives. Thus, the statute provides protection to the state, an agency, or subdivision, and to officers, employees, or agents of those governmental entities. The section defines state agencies or subdivisions to include executive departments, the Legislature, the judicial branch (including public defenders), and the independent establishments of the state, including state university boards of trustees; counties and municipalities; and corporations primarily acting as instrumentalities or agencies of the state, counties, or municipalities, including the Florida Space Authority. In 1979, the Legislature clarified section 768.28, Florida Statutes, to provide that an officer, employee, or agent of a covered entity was not personally liable when acting within the scope of his or her employment or function. The section defines [o]fficer, employee, or agent to include all officers, employees, or agents of any covered entity and in paragraphs (9)(b) and (c), specifically includes, but is not limited to, any healthcare provider when providing services pursuant to section 766.1115, Florida Statutes; 967 any member of the Florida Health Services Corps, who provides uncompensated care to medically indigent persons referred by the Department of Health; and any public defender or his or her employee or agent; volunteer firefighters; and members of the national guard except as specifically provided. The section has been amended over the years to specify others to be included as employees or agents of a governmental entity within the provisions of section 768.28, Florida Statutes. Certain entities are to be considered agents of the state for purposes of the application of the waiver of sovereign immunity in the section. These include: Contractual agents of the Department of Corrections who provide healthcare services to inmates of the state correctional system. 968 Regional poison control centers created in accordance with law and coordinated and supervised under the Division of Children s Medial Services Prevention and Intervention of the Department of Health. 969 governmental entities in the constitution, and finally, the court s elimination of the governmental proprietary analysis). 967 Section 766.1115, Florida Statutes. 968 Section 768.28(10)(a), Florida Statutes. 969 Section 768.28(10)(c), Florida Statutes. 249

Contractors of the Tri-Rail Authority or the Department of Transportation providing security and/or rail facility maintenance in the South Florida Rail Corridor. 970 Contractors with the Department of Juvenile Justice providing services to children in need of services, families in need of services, or juvenile offenders. 971 Other provisions of law provide for the application of section 768.28, Florida Statutes, to specified entities such as: The Hazardous Materials Emergency Response Commission and local committees established pursuant to section 252.89, Florida Statutes. The Federal Emergency Planning and Community Right to Know Act of 1986, requires the Governor to create a state commission and local committees to provide public information on the presence and release of toxic chemicals and to develop response plans for local communities and the state. The Governor appoints the commission members and the commission then appoints and supervises the local committees. Section 252.89, Florida Statutes, specifically provides that the commission and the local committees are state agencies and that the members of the commission and the local committees are officers, employees, or agents of the state for purposes of liability under section 768.28, Florida Statutes. Contractors with the Department of Business and Professional Regulations providing legal or investigative services to the Department or regulatory boards are provided sovereign immunity as to the investigations, conduct, and testimony provided to the various regulatory boards. 972 Persons or entities who allow governmental entities to use property for emergency shelters without compensation are immune from liability for any injury or death occurring during a real emergency or any practice or mock emergency. 973 If the individual or entity is compensated for the use of the property, the person or entity is deemed an instrumentality of the state or its applicable agency or subdivision for purposes of the limitations on liability provided by section 768.28, Florida Statutes. Charter schools are defined in section 1002.33, Florida Statutes, as public schools and part of the state s program of public education. 970 Section 768.28(10)(d), Florida Statutes. 971 Section 768.28(n), Florida Statutes. 972 Section 252.89, Florida Statutes. 973 Section 252.51, Florida Statutes. 250

Each school receives an approved charter from the district school board that sets out the operations of the charter school in accordance with the terms and conditions set out in law. 974 The approved charter schools receive state and local funding from the district school board based on the same funding standards as other public schools. Approved charter schools are eligible for state capital outlay funds in the same manner as other public schools. 975 Thus, approved charter schools are covered by the same sovereign immunity provisions as any other public school. Family foster homes are licensed and regulated by the state pursuant to section 409.175, Florida Statutes. Each home that accepts only children referred by the Department of Families and Children or its agencies enters into a contract with the Department regulating the services to be provided. These family foster homes are provided sovereign immunity as agents of the state. 976 In reviewing the application of sovereign immunity and the provisions of section 768.28, Florida Statutes, the courts have examined the application to specific entities and types of actions. In these cases, it has been argued that by applying sovereign immunity, the Legislature has violated article I, section 21 of the Florida Constitution by denying access to the courts. In analyzing this issue the courts have applied the test set forth in Kluger v. White. 977 That test provides that where a right of access to the courts for redress of a particular injury has been provided by statutory law predating the adoption of the Declaration of Rights of the Constitution of the state of Florida, or where such right has become a part of the common law of the state pursuant to section 2.01, Florida Statutes, the Legislature is without power to abolish such a right without providing a reasonable alternative to protect the rights of the people of the state to redress for injuries, unless the Legislature can show an overpowering public necessity for the abolishment of such right, and no alternative method of meeting such public necessity can be shown. The court, in evaluating the application of section 768.28, Florida Statutes, to municipalities, applied this analysis. In Cauley v. City of Jacksonville, 978 the Florida Supreme Court reversed prior applications of the limitation of sovereign immunity to municipalities and instead applied the provisions of section 768.28, Florida Statutes. The court applied the Kluger test in analyzing the application of sovereign immunity and section 768.28, Florida Statutes, to municipalities and found [t]here was no 974 Sections 1002.33(6)(a), 1002.33(6)(g), Florida Statutes. 975 Section 1002.33, Florida Statutes. 976 Section 409.175, Florida Statutes. 977 281 So. 2d 1 (Fla. 1973). 978 403 So. 2d 379 (Fla. 1981). 251

statutory right to recover for a municipality s negligence predating the adoption of the declaration of rights contained in the Florida constitution nor was there a cause of action at common law as of July 4, 1776, adopted under section 2.01, Florida Statutes. The Kluger 979 analysis was again argued in White v. Hillsborough County Hospital Authority, 980 regarding the elimination of suit against a government employee. The court stated: [s]trong policy reasons support the legislative immunization of state employees from personal liability. 981 Here the right of an injured party to seek redress has not been abolished. Rather, the legislature has merely substituted the state and its agencies, which previously could not be sued because of sovereign immunity, for the individuals who could have been sued. 982 Thus, appellant s cause of action has not been destroyed but has been converted to an action against a state agency. 983 Subsequently, in interpreting the provisions of section 768.28, Florida Statutes, the courts have covered contractors and agents of the state similarly to employees. Finally, the courts examined who qualifies as an agent, employee, or contractor of the state within the definitions of section 768.28, Florida Statutes. In Skoblow v. Ameri-Manage, Inc., 984 the district court of appeals found a state contractor who operated a state mental institution was operating as an agency of the state at the time of the plaintiff s alleged wrongful discharge. This determination was based on the court s examination of the contractual relationship between Ameri-Manage, Inc. and the state. In the case of Stoll v. Noel, 985 the Florida Supreme Court found that physician consultants with Children s Medical Services (CMS) were acting as agents of the state within the provisions of section 768.28(9), Florida Statutes, and thus were immune from suit individually. Here again, the court carefully examined the relationship between the doctors and CMS. The court stated that the determination turns on the degree of control retained... by CMS. In making that determination the court examined the terms of the employment contract. 986 The court found the contract demonstrated that CMS had final authority over all care and 979 Kluger v. White, 281 So. 2d 1 (Fla. 1973). 980 448 So. 2d 2 (Fla. 1st DCA 1983). 981 State Department of Transportation v. Knowles, 402 So. 2d 1155 (Fla. 1981). 982 Id. 983 White v. Hillsborough County Hospital Authority, 448 So. 2d 2 (Fla. 1st DCA 1983). 984 483 So. 2d 809 (Fla. 3rd DCA 1986). 985 694 So. 2d 701 (Fla. 1997). 986 Stoll v. Noel, 694 So. 2d 701, 703 (Fla. 1997). 252

treatment provided to CMS patients, and it could refuse to allow a physician consultant s recommended source of treatment of any CMS patient for either medical or budgetary reasons. 987 Hospitals and physicians providing emergency medical care in designated trauma units and hospital emergency rooms are also directed by the state and the Federal governments to provide such care. The federal Emergency Medical Treatment and Active Labor Act (EMTALA) requires that all persons coming into an emergency department must be provided a screening exam to determine whether there is an emergency, and when an emergency is found, the person must be treated to the extent of the emergency room s capability without regard to ability to pay or the type of injury or illness. 988 Each hospital providing emergency services is required to provide the Agency for Health Care Administration (AHCA) with a list of all emergency services within the service capability of the hospital. 989 Those services are to be listed on the hospital license. 990 The listed services are to be provided by the hospital upon the request of the patient, an emergency medical services provider, or another hospital. 991 Where the hospital is at capacity or does not provide the requested emergency service, the hospital may transfer the patient to the nearest facility with appropriate available services. 992 Each hospital must ensure the services listed on the hospital license can be provided at all times either directly or through another hospital. 993 Through these sections, the state directs and controls the actions and activities of hospitals and physicians providing designated trauma services and emergency services in a designated trauma center or hospital emergency room. State regulation of designated trauma centers is even more intensive than for emergency rooms. Part II of chapter 395, Florida Statutes, provides for the designation and regulation of designated trauma centers and the filing of trauma center plans to be approved by ACHA. 994 To qualify as a designated trauma center, a hospital must meet the requirements of part II of chapter 395, Florida Statutes, and services must be provided in accordance with that part and rules adopted by ACHA. 995 Section 395.1041, Florida Statutes, requires every hospital with an emergency room to provide services or arrange for services in accordance with the 987 Id. at 703. 988 Emergency Medical Treatment and Active Labor Act (EMTALA), 42 U.S.C. section 1395dd. 989 Section 395.1041(2), Florida Statutes. 990 Id. 991 Section 395.1041(3), Florida Statutes. 992 Id. 993 Section 395.1041(3), Florida Statutes. 994 Section 395.401, Florida Statutes. 995 Sections 395.401, 395.405, Florida Statutes. 253

needs of the patient for any patient requesting services. In enacting section 395.1041, Florida Statutes, the Legislature stated its intent as follows: It is the intent of the Legislature that the agency vigorously enforce the ability of persons to receive all necessary and appropriate emergency services and care and that the agency act in a thorough and timely manner against hospitals and physicians which deny persons emergency services and care. It is further the intent of the Legislature that hospitals, emergency medical services providers, and other healthcare providers work together in their local communities to enter into agreements or arrangements to ensure access to emergency services and care. 996 The Emergency Medical Transportation Services Act in chapter 401, Florida Statutes, similarly regulates the services provided by emergency medical technicians, paramedics, and ambulances. This chapter requires that services be provided to all persons requesting transportation to the capacity of the service without regard to ability to pay. 997 Clearly those facilities and the staff s facilities providing emergency transportation, emergency care, and designated trauma services are providing a necessary and critical public function of care for the most seriously ill or injured. Once a facility and the doctors practicing within the facility agree to provide emergency or trauma care, they must provide that care within the parameters and requirements of state and federal law. In fact, the hospital license granted by the state sets forth the services the hospital has committed to provide and thus must provide on demand. This does not appear to be significantly different from the charter school that has its charter approved by the district school board or the family foster homes granted coverage under section 768.28, Florida Statutes. While the courts have applied the Kluger test in cases evaluating the application of sovereign immunity to governmental agents, the courts have generally found that there was not an abrogation of a remedy but a substitution of a governmental entity for the agent or employee of that entity. The application of section 768.28, Florida Statutes, to providers of emergency services would be no different. In sum, the courts have extended sovereign immunity on numerous occasions to governmental and quasi-governmental entities. There appears to be a rational basis to extend the protections of section 768.28, Florida Statutes, to those who have the burden of implementing critical state objectives. 996 Section 395.1041(1), Florida Statutes. 997 Section 401.45, Florida Statutes. 254

Information Presented to the Task Force At the November 22, 2002, meeting of the Task Force, Mr. George Meros, on behalf of the Florida College of Emergency Physicians, presented the need and rationale for providing limited sovereign immunity to physicians providing services in any state-licensed emergency room. 998 Mr. Meros stated that emergency care personnel, which includes emergency physicians,... hospitals, on-call physicians and others attending emergencies pursuant to the state mandate in chapters 395 and 401, have the burdens of implementing state policy without the benefit of all others who act as arms of the state in implementing state policy. 999 As an example, Mr. Meros discussed the situation where county or state health personnel worked alongside private doctors in addressing a medical emergency such as Anthrax or a hurricane. The medical staffs employed by the state or local governments would have the benefit of sovereign immunity while the private doctors would be subject to full personal liability. 1000 Mr. Meros argued that an extension of sovereign immunity to emergency room physicians would be constitutional, and would not be subject to the Kluger test, because the plaintiff s cause of action is not abolished but the defendant is changed from the healthcare provider to the state. 1001 This is the same position excepted by the court in White. 1002 In the summary of testimony provided to the Task Force, the emergency physicians also stated, Florida courts have held that the extension of sovereign immunity to persons pursuing state objectives is constitutional. 1003 Further, he stated damages were not capped because the claims bill process would be available to the plaintiff. 1004 In information provided to the Task Force, Mr. Meros has set forth the following benefits to the public and Florida s emergency care system that could be expected: Encouraging specialists to maintain hospital privileges or to provide needed services in a hospital environment, thus making such services available for emergency department patients. 1005 998 George Meros, transcript, Nov. 22, 2002, pgs. 209-211. 999 Id. at 209. 1000 Id. at 209-210. 1001 Id. at 211. 1002 White v. Hillsborough County Hospital Authority, 448 So. 2d 2 (Fla. 2d DCA 1983). 1003 Summary of Testimony of the Florida College of Emergency Physicians Before the Select Task Force on Healthcare Professional Liability Insurance (Nov. 22, 2002), citing White v. Hillsborough County Hospital Authority, 448 So. 2d 2 (Fla. 2d DCA 1983) and Campbell v. City of Coral Springs, 538 So. 2d 1373 (Fla. 4th DCA 1989). 1004 Id. 1005 Id. 255

Enhancing recruitment of physicians to hospitals in Florida, thereby enhancing the availability of such emergency and specialist physicians to serve in Florida s emergency departments. 1006 Enabling smoother operation of Florida s EMS system through availability and stabilization of emergency physicians and specialists available to hospital emergency departments. 1007 Enhancing the trauma system by encouraging physicians who serve at trauma centers to remain available to the system and by encouraging other physicians to agree to serve at trauma centers. 1008 Reducing wait-time for patients needing emergency or specialist physician care through improving the availability of physicians at hospitals. Such improved availability of physicians will also reduce the number of medically-necessary transfers between hospitals and will reduce diversion of ambulances due to lack of specialty availability. The increased availability of prompt medical care will benefit patient care. 1009 Ensuring that our first responders (i.e., emergency medicine professionals in and out of the hospital setting) are available in the event of a weapons-of-mass-destruction event. 1010 Mr. Joel Perwin presented the task force with his reasons why sovereign immunity should not be extended to emergency room physicians or other emergency room healthcare providers. 1011 Mr. Perwin stated that extending the provisions of section 768.28, Florida Statutes, to emergency room physicians created a cap that would be unconstitutional under the case of Smith v. Department of Insurance. 1012 The Smith case found $250,000 caps on non-economic damages in medical malpractice unconstitutional unless the Kluger test, which only allowed a preexisting right of access to the courts to be eliminated when the Legislature can show an overpowering public necessity for the abolishment of such right, and can show no alternative method of meeting such public necessity. 1013 Mr. Perwin stated that for sovereign immunity to apply either you re an 1006 Id. 1007 Id. 1008 Id. 1009 Id. 1010 George Meros, Florida College of Emergency Physicians, Protecting Access to Emergency Care 7-8 (Dec. 27, 2002). 1011 Joel Perwin, transcript, Nov. 22, 2002, pgs. 211-217. 1012 Smith v. Department of Insurance, 507 So. 2d 1080 (Fla. 1987), reh g denied. 1013 Kluger v. White, 281 So. 2d 1 (Fla. 1973). 256

employee of the state in which case you re protected, or an agency, or you are subject to the control of the state in performing a public function. 1014 Findings and Recommendation The Task Force finds that to further the public purpose of providing emergency healthcare to citizens and visitors to Florida, healthcare professionals providing services in emergency rooms or trauma centers should be defined as agents of the state. Recommendation 1. The Legislature should amend section 768.28, Florida Statutes, to define healthcare professionals providing services in emergency rooms or trauma centers as agents of the state for purposes of sovereign immunity. 1014 Joel Perwin, transcript, Nov. 22, 2002, pg. 212. 257

Periodic Payment of Damages Issue The Task Force voted at its December 20, 2002, meeting by a 4-1 vote, to examine the following issue with respect to periodic payment of damage awards in the context of medical malpractice cases: Should the provisions of section 768.78(2) Florida Statutes, and other Florida laws be amended to require the periodic payment of economic and non-economic damages? Current Situation The definition of periodic payments for purposes of medical malpractice claims is set out in section 766.202, Florida Statutes. The section authorizes the payment of an award of future economic damages through structured payments over a period of time. The statute is specifically limited to future economic damages and does not address non-economic damages in any manner. The total amount of the payments made through the use of periodic payments must equal the amount of the judgment for future economic damages before it is reduced to present value but after collateral sources are deducted. The order or other agreement related to periodic payments must specify who is to receive the payments, the dollar amount of each periodic payment, the interval between payments, and the number of payments or the period of time over which payments must be made. 1015 For the court to approve periodic payment of future economic damages, the defendant must post a bond or security or must otherwise assure full payment of the damage awards. The bond must be written by a company authorized to do business in Florida and must be from a company rated as an A+ by Best s. When all periodic payments have been made, the amount of the security remaining may be returned to the defendant. The company issuing the bond may not cancel the bond prior to the completion of all payments without 60 days notice to the court and to the claimant. In implementing the provisions of this statute, the courts have examined whether limitations are placed on the fact finder when establishing the payment schedule and whether the defendant remains liable for the 1015 Section 766.292(8)(c), Florida Statutes. 258

payments to the plaintiff when an annuity is purchased to make the future payments. In St. Mary s Hospital, Inc. v. Phillipe, 1016 the district court of appeals held that, based on the provisions of the statute authorizing periodic payments and rules applicable to the arbitration process, the arbitrator (fact finder) had discretion to establish the appropriate period for payment of the economic damages 1017 In Tallahassee Memorial Regional Medical Center, Inc. v. Kinsey, 1018 the court examined whether the defendant could purchase an annuity to cover future payments and have a final judgment entered and no further obligation to the plaintiff. The defendants argued that when the defendant purchased an annuity with an annuitant qualifying under the statute, that the plaintiff could be required to accept that annuity as discharging the obligation of the defendant and the defendant would be relieved of any further liability for damages. 1019 The court determined there was no expression in the law of the Legislature s intent to relieve the defendant of a future obligation to the plaintiff and had the Legislature wanted such a result, it could have written the law to provide for the relief requested. 1020 Research does not reveal any court that has taken a contrary position to the First District Court of Appeal. The use of periodic payment of damages varies across states. Ten states have some form of mandatory periodic payment of all damages or just future damages with various thresholds for implementing the provision. Five states mandate periodic payment of some or all of the claimant s economic damages. Thirteen states provide a party may request periodic payment of some or all of the damages or provide for damages to be paid periodically at the discretion of the court. 1021 For those states including a periodic payment of damages provision, the specifics vary greatly from state to state. In Arkansas, 1022 Delaware, 1023 and Colorado, 1024 some or all of the future payments are terminated at the death of the plaintiff. In California, at the death of the plaintiff, the future payments must be continued only to those to whom the plaintiff owed a duty of care. 1025 The amount of the judgment that triggers periodic 1016 699 So. 2d 1017 (Fla. 1st DCA 1997), reh g denied (Oct. 22, 1997). 1017 Id. at 1025 1018 655 So. 2d 1191 (Fla. 1st DCA 1995), reh g denied (June 21, 1995), review denied, 622 So. 2d 344 (Fla. 1995). 1019 Id. at 1197 1020 Id. at 1198. 1021 See National Conference of State Legislatures, State Medical Liability Laws Table. 1022 See National Conference of State Legislatures, State Medical Liability Laws Table. 1023 See National Conference of State Legislatures, State Medical Liability Laws Table. 1024 Section 13-64-306, Colorado Revised Statutes Annotated (West). 1025 See National Conference of State Legislatures, State Medical Liability Laws Table. 259

payments can be a judgment of any amount qualifying for periodic payments, to a requirement that the judgment exceed $500,000. 1026 The method of securing the periodic payments also varies among the states. Some states, such as Florida, require the defendant to remain liable for the periodic payments until the obligation is paid in full. 1027 In other states, such as Colorado, the defendant can be discharged upon complying with requirements to secure funding of the periodic payments through an annuity. 1028 By providing for an annuity, the determination of the present value of an award is shifted from the jury to the market. 1029 Information Presented to the Task Force Two speakers presented arguments regarding whether the periodic payment provisions should be expanded to include future non-economic damages. Mr. William Fuller presented the proposal on behalf of the defense bar 1030 and Mr. Neal Roth argued on behalf of the Florida Trial Lawyers Association and plaintiffs. 1031 Mr. Fuller argued that there should not be a distinction between future economic and future non-economic damages for purposes of allowing periodic payments. He argued that both compensate the plaintiff for damages in the future and should be treated the same. Mr. Fuller raised concerns and made recommendations from the defense bar regarding the current system of periodic payments for economic damages: The plaintiff may live longer than the number of years determined by the jury to be used in awarding periodic damages and may not have sufficient funds. 1032 Mr. Fuller recommended this be addressed by having the court determine the life expectancy of the plaintiff and an annuity be purchased to provide payment to the plaintiff for future non-economic and economic damages for as long as the plaintiff lives. 1033 When an annuity was purchased by the defendant and approved by the court, the defendant would be discharged from the case and no additional bond would be required. 1034 1026 See National Conference of State Legislatures, State Medical Liability Laws Table. 1027 Section 766.202, Florida Statutes; Tallahassee Memorial Regional Medical Center, Inc. v. Kinsey, 655 So. 2d 1191 (Fla. 1st DCA 1995), reh g denied (June 21, 1995). 1028 Section 13-64-312, Colorado Revised Statutes Annotated (West). 1029 Patricia M. Danzon, Medical Malpractice: Theory, Evidence, and Public Policy 165 (1985). 1030 William Fuller, J.D., testimony, Dec. 3, 2002, pgs. 28-35. 1031 Neal Roth, J.D., testimony, Dec. 3, 2002, pgs. 38-43. 1032 William Fuller, J.D., testimony, Dec. 3, 2002, pg. 29. 1033 Id. at 30-34. 1034 Id. 260

The plaintiff may die before the term of the periodic damages for medical care and pain and suffering expires, giving the estate a windfall for damages that were not incurred. 1035 With payment of periodic damages, the case remains open until the end of the term of the periodic payments or the plaintiff dies and a lump sum payment is made to the estate. 1036 Mr. Roth did not support periodic payment of non-economic damages. He argued the plaintiff has a right to the money once the judgment is entered and it should be the plaintiff s decision as to whether the money is expended immediately or invested in an annuity or some other investment providing periodic payments. Mr. Roth also questioned how this proposal would further the Task Force goals of reducing insurance rates or providing better access to healthcare. He argued that non-economic damages are supposed to make an injured medical malpractice victim whole, restore some dignity to their lives, allow them to do some things perhaps that either they can t do because of their disability, disfigurement, inability to lead a normal life, and it really should be up to the injured victim as to what they do, when they do it, how much money they care to spend. 1037 Mr. Roth argued that providing for periodic payment of noneconomic damages would be telling the injured victim what to do with their money by legislative fiat, and they should have the right to make those decisions themselves and for their families. 1038 Mr. Marshall Criser questioned why a plaintiff should not be protected from bad advice or bad counsel by providing for periodic payment of all damages. 1039 Mr. Roth disagreed and reiterated his belief that the plaintiff should have the right to make the decision on how to spend non-economic damages since the economic damages were protected through periodic payments. 1040 Findings and Recommendations The Task Force finds that there is no basic distinction between payments for future economic damages and future non-economic damages. Both awards are intended to compensate the victim for damages that have not accrued as of the date the judgment is entered and are based on the jury s determination of what those future injuries will be. There does not appear to be any policy reason for distinguishing between these two types of future damages for purposes of periodic payments. Further, the use of 1035 Id. at 29. 1036 Id. 1037 Neal Roth, J.D., testimony, Dec. 3, 2002, pg. 40. 1038 Id. at 41. 1039 Marshall Criser, J.D., testimony, Dec. 3, 2002, pgs. 41-42. 1040 Neal Roth, J.D., testimony, Dec. 3, 2002, pg. 42. 261

periodic payment of damages for the payment of future non-economic damages may reduce the impact of large non-economic damages on the current assets of an insurance company. When the defendant insurance company makes the future payments it mitigates the impact of large verdicts by smoothing the cash needed to cover those verdicts over the years of the periodic payments. The Task Force finds that termination of periodic payments of future damages related to medical expenditures and future pain and suffering upon the death of the defendant is appropriate. Recommendation 1. The Legislature should amend the Florida Statutes to allow the periodic payment of future non-economic damages. Recommendation 2. The Legislature should amend the Florida Statutes to terminate the payment of future economic and non-economic damages upon the death of the plaintiff. 262

Pre-Suit Reform Issue The Task Force voted at its December 20, 2002 meeting, by a 5-0 vote, to examine the following issue with respect to pre-suit reform in the context of medical malpractice cases: Should the pre-suit screening process be strengthened to: o Improve the quality of information exchanged? o Require that the qualifications of the physician providing the affidavit more closely equate with the qualifications of the defendant physician? o Require the physician to review all the medical records to the extent available prior to providing an affidavit and to certify that the records have been reviewed? o Require an attorney to sign all doctor affidavits prepared for the defendant and the patient? Current Situation In 1975, an intensive lobbying effort commenced addressing the medical malpractice crisis that had emerged due to the spiraling increases in insurance premiums, and which threatened to curtail the availability of healthcare services. 1041 The Legislature, in response to this crisis, created the Florida Comprehensive Medical Malpractice Act in 1975, which changed the procedural and substantive aspects of medical malpractice claims. 1042 One significant modification was the requirement that claimants submit their claims to an appropriate medical liability mediation panel before filing a cause of action in court. 1043 This requirement was challenged almost immediately, and in Carter v. Sparkman, 1044 the Florida Supreme Court determined that the mediation panel was not unconstitutionally violative of a plaintiff s rights. 1045 However, in 1980, 1041 Jessica Fonseca-Nader, Florida s Comprehensive Medical Malpractice Reform Act: Is it Time for a Change?, 8 St. Thomas Law Review 553 (Spring 1996). 1042 Id. at 553-554. 1043 Id. at 554. 1044 335 So. 2d 802 (Fla. 1976). 1045 Jessica Fonseca-Nader, Florida s Comprehensive Medical Malpractice Reform Act: Is it Time for a Change?, 8 St. Thomas Law Review 555 (Spring 1996). 263

in Aldana v. Holub, 1046 the Florida Supreme Court revisited the issue of mediation panels and overturned the Carter ruling, declaring the statute unconstitutional. The Court found that the application of the statute and its rigid jurisdictional periods... [h]as proven intrinsically unfair and arbitrary and capricious, under the United States and Florida Constitutions. 1047 In 1985, amendments to the act substituted mediation panels with a presuit screening process. 1048 This pre-suit screening process was created to require both the claimant and the defendant, prior to filing a claim or denying liability, to ensure that the potential suit was not a frivolous action. 1049 Specifically, the Legislature required claimants to certify in their complaints that they had conducted a reasonable investigation resulting in a good faith belief that sufficient grounds existed to support the filing of the action. 1050 In 1988, the Legislature expanded the pre-suit screening statute in response to criticism that the statutory requirements were not alleviating the medical malpractice litigation crisis. 1051 Amendments were necessary to address the Legislature s conclusion that the high cost of medical malpractice claims in the state can be substantially alleviated by requiring early determination of the merit of claims... thereby reducing delay and attorney s fees... while preserving the right of either party to have its case heard by a jury. 1052 Sections 766.201 through 766.206, Florida Statutes, enacted in chapter 88-1, Laws of Florida, established criteria to conduct pre-suit investigations of medical negligence claims and defenses of prospective defendants. Chapter 88-277, section 48, Laws of Florida, creating section 766.106, Florida Statutes, 1053 provides that a prospective plaintiff alleging medical malpractice must wait ninety days before filing a lawsuit against any named defendants. And, during the ninety-day period, informal discovery, including obtaining un-sworn statements from parties and witnesses may occur. 1054 Because these designations exist today side 1046 381 So. 2d 231 (Fla. 1980). 1047 Jessica Fonseca-Nader, Florida s Comprehensive Medical Malpractice Reform Act: Is it Time for a Change?, 8 St. Thomas Law Review 556 (Spring 1996). 1048 Id. 1049 Id.; section 768.495(1), Florida Statutes (1985) ( [N]o action shall be filed for personal injury or wrongful death arising out of medical negligence unless the attorney filing the action has made a reasonable investigation as permitted by the circumstances to determine that there are grounds for a good faith belief that there has been negligence in the care or treatment of the claimant ). 1050 Cohen v. Dauphinee, 739 So. 2d 68, 70 (Fla. 1999). 1051 Id. 1052 Section 766.201(1)(d), Florida Statutes. 1053 Chapter 88-277, section 48, Laws of Florida (renumbered sections 768.57-776.106, Florida Statutes); see also Cohen v. Dauphinee, 739 So. 2d 68, 71 (Fla. 1999). 1054 Edward L. Holloran, III, Medical Malpractice Litigation in Florida: Discussion of Problems and Recommendations, 26 Nova Law Review 333 (Fall 2001). 264

by side, it is apparent that the Legislature intended to distinguish between pre-suit screening, covering the period up to the serving of the notice of intent, and pre-suit investigation, covering the period between the serving of the notice of intent and the filing of the suit. 1055 Since 1988, the pre-suit statutes have not been significantly modified. In 1996, the Florida Supreme Court observed: [W]e agree with the proposition that the medical malpractice statutory scheme must be interpreted liberally so as not to unduly restrict a Florida citizen s constitutionally guaranteed access to the courts, while at the same time carrying out the legislative policy of screening out frivolous lawsuits and defenses. 1056 The Court in Cohen v. Dauphinee 1057 reaffirmed that the Legislature enacted the pre-suit process to promote the settlement of meritorious claims at an early stage without the necessity of a full adversarial proceeding. The purpose for having a pre-suit statute is to reduce the overall number of lawsuits either by preventing the filing of frivolous claims or by providing opportunities to settle meritorious cases. 1058 In adopting chapter 766, Florida Statutes, the Legislature attempted to abate the medical malpractice crisis by requiring pre-suit screenings and investigations. The notice of intent to initiate litigation is a condition precedent to filing a suit. The medical malpractice claimant must first conduct a reasonable investigation to determine there are grounds for a good faith belief that there has been malpractice. 1059 This burden to investigate is set forth in section 766.203(2), Florida Statutes, which specifically requires that prior to taking any actions, the claimant and his or her attorney shall conduct an investigation into the reasonable grounds to believe that negligence and resulting injury have occurred. 1060 This investigation must be supported by a verified written expert opinion that shall corroborate reasonable grounds to support the claim of medical negligence. 1061 When the claimant s investigation is complete, and the corroborating affidavit is done, section 766.106(2), Florida Statutes, requires the claimant to serve all potential defendants with a notice of intent to initiate litigation. 1062 In Duffy v. Brooker, 1063 the court stated that [T]he notice 1055 Cohen v. Dauphinee, 739 So. 2d 68, 71 (Fla. 1999). 1056 Kukral v. Mekras, 679 So. 2d 278, 284 (Fla. 1996). 1057 739 So. 2d. 68, 70 (Fla. 1999). 1058 Edward L. Holloran, III, Medical Malpractice Litigation in Florida: Discussion of Problems and Recommendations, 26 Nova Law Review 334 (Fall 2001). 1059 John A. Grant, Florida s Pre-suit Requirements for Medical Malpractice Actions, Florida Bar Journal 13-14 (Feb. 1994). 1060 Id. at 14. 1061 Id. 1062 Id. 265

of intent to initiate litigation and the corroborating medical expert opinion, taken together, must sufficiently indicate the manner in which the defendant doctor allegedly deviated from the standard of care, and must provide adequate information for the defendants to evaluate the merits of the claim. 1064 The defendant, upon the mailing of the notice of intent to litigate, has ninety days to investigate the claim and provide an appropriate response. 1065 Section 766.106(3)(a), Florida Statutes, applies a good faith standard to the defendant to investigate and respond to the claim. 1066 The defendant 1067 is required, pursuant to the statute, to initially undertake a review of the notice and comply with one or more of the four procedures set forth: (1) an internal review by a duly qualified claims adjuster; (2) creation of a panel comprised of an attorney, a healthcare provider, and a duly qualified claims adjuster; (3) a contractual agreement with a state or local professional society which maintains a peer review committee; and/or, (4) any other similar procedure which fairly and promptly evaluates a pending claim. 1068 This review mechanism is only part of the investigation process and is by no means sufficient to satisfy the investigation requirements of chapter 766, Florida Statutes. 1069 Section 766.106(7), Florida Statutes, provides for a number of informal discovery options available during the ninety-day investigation period, which have sanctions for failure to comply. 1070 For example, the defendant may take un-sworn statements from experts or witnesses that are not discoverable or admissible in any proceeding, propound interrogatories and requests to produce documents, and require the claimant to undergo physical and mental examination. 1071 Failure by the claimant to comply could result in dismissal of the action or waive the requirement of a corroborating medical opinion for the opposing party. 1072 1063 614 So. 2d 539 (Fla. 1st DCA 1993). 1064 John A. Grant, Florida s Pre-suit Requirements for Medical Malpractice Actions, Florida Bar Journal 14 (Feb. 1994). 1065 Id. 1066 Id. 1067 The statute contemplates that the defendant s insurer or a self-insurer will comply with the pre-suit process. 1068 Section 766.106(3)(a)1-4, Florida Statutes. 1069 John A. Grant, Florida s Pre-suit Requirements for Medical Malpractice Actions, Florida Bar Journal 14 (Feb. 1994). 1070 Section 766.205, Florida Statutes provides grounds for dismissal of an applicable claim or defense asserted in those circumstances where reasonable access to information has not been provided to another party. 1071 John A. Grant, Florida s Pre-suit Requirements for Medical Malpractice Actions, Florida Bar Journal 15 (Feb. 1994). 1072 See also section 766.205(3), Florida Statutes. 266

At or before the conclusion of the ninety-day period, the defendant has four alternatives in response to the complaint. Section 766.106 (3)(b), Florida Statutes, provides that the defendant shall reject the claim; make a settlement offer; make an offer of admission of liability and arbitrate; or do nothing which shall be considered a final rejection of the claim. 1073 Four identified areas of concern have evolved with the creation of the presuit process. Initially, the pre-suit investigations were very informal. Some commentators have indicated that the informal exchange of information does not work because after sharing expert affidavits, un-sworn statements and other discovery tools as set forth in the statutes, none of this information is discoverable or admissible at future proceedings. Time and money is spent pre-filing discovery without yielding any resolution or potential for resolution. In essence, the parties to the lawsuit undergo two discoveries if the matter goes to litigation. 1074 Second, as a consequence of the pre-suit investigation, the parties will add an additional eight months to the case because the statute of limitation is tolled during this period. 1075 Third, the statute as written has failed to provide reliability and has failed to satisfy the intent of the pre-suit investigative process. The statute does not require any expert witness to certify that all the medical records have been reviewed prior to rendering an opinion. Moreover, the statute does not obligate an attorney representing the claimant or defendant to sign the doctor affidavits to verify compliance with the statutes. And, section 766.202(5), Florida Statutes, defines the expert witness merely to be a person duly and regularly engaged in the practice of his or her profession who holds a health care professional degree... thus not requiring that similarly-situated experts are reviewing and rendering decisions about the claim. 1076 A family general practitioner could give a medical expert opinion about a surgical care event, merely because he or she holds a healthcare professional degree. Finally, the purpose of the pre-suit investigation was to review potential claims, to verify evidence, presented and to provide an opportunity to settle or pursue litigation. What has occurred, however, is that routinely a claimant has two years (the time period for the statute of limitations) to 1073 Sections 766.106(3)(b)3, 766.106(3)(c), Florida Statutes. 1074 Jessica Fonseca-Nader, Florida s Comprehensive Medical Malpractice Reform Act: Is it Time for a Change?, 8 St. Thomas Law Review 558 (Spring 1996). 1075 Section 766.104, Florida Statutes. 1076 Section 766.202(5), Florida Statutes. 267

prepare the pre-suit investigation while the defendant has only ninety days to investigate and respond. 1077 Information Presented to the Task Force The stakeholders that testified concurred that strengthening the pre-suit process would improve the quality of the information exchanged. Testimony from the Task Force s November 22, 2002 meeting in Orlando, Florida, concluded that the current pre-suit process was not useful, but could be beneficial with suggested improvements for the early resolution of these type of cases. First, the expert affidavits that are filed by both the claimant and defendant in the pre-suit process need to be more specific. The intent of the claimant s affidavit is to attest to the fact that there are reasonable grounds to bring a malpractice action against the defendant. 1078 While the content of most affidavits is not very detailed, is very conclusory and does not tell specifically what malpractice event occurred, it is clear that a more detailed affidavit, that sets forth the specifics of the malpractice event would address some of the problems that occur. 1079 Generally, the affidavit is a bare bones document that does not tell anything in terms of what the physician or hospital did that was inappropriate or what the care was that brought about the harm. 1080 Second, the expert affidavit should be filed by an expert whom the plaintiff is actually going to use at trial. 1081 During the pre-suit process, the plaintiff can use an affidavit of somebody... they pay a few hundred dollars to and you hardly ever see that particular expert witness when it comes to testifying before a jury. 1082 And, that expert, even if used at trial, cannot be cross-examined or impeached with the affidavit that they prepared during the pre-suit process. 1083 Therefore, the proposal is to make the expert real by allowing him or her to be called as a witness at trial, which would force the claimants to make a decision about the merits of the case at an earlier stage. 1084 However, an opposing position suggested that the quality of the expert affidavit may not be the real issue. At the time of the pre-suit evaluation, 1077 John A. Grant, Florida s Pre-suit Requirements for Medical Malpractice Actions, Florida Bar Journal 18 (Feb. 1994). 1078 Bucky Hurt, J.D., testimony, Nov. 22, 2002, pg. 318. 1079 1080 1081 1082 Id. 1083 1084 Id. at 318-319. Id. at 319. Id. at 320. Id. Id. at 321. 268

all the facts of the case may not be known to the expert. Generally, it was agreed that the parties want credible experts. However, it was believed that a credible expert is not going to give you a final opinion under oath without all the facts. And, when a pre-suit affidavit is filed, all the facts are not available yet. For example, we haven t taken the deposition of the defendant doctor to find out what his defense is going to be. My experts want to know that before they go under oath and say a doctor did something wrong. 1085 Moreover, the ninety-day period is simply not enough time for the defendants to figure out whether they have done something wrong. Sometimes you are limited by the medical records that you receive from the plaintiff attorneys. Sometimes he doesn t have all the medical records. You ve got to get those medical records off to independent experts and 90 days is not enough time. 1086 Concerns regarding the ninety-day period in which the parties are suppose to resolve the differences between them, in reality, does not resolve their differences, 1087 because what anecdotally happens is that settlement almost always [occurs] on the courthouse steps. 1088 One offered proposal was to allow the defendant a minimum of six months from the date the lawsuit is filed to undergo their investigation. 1089 The informal exchange of information does not bring forth the intended end result. 1090 Every pre-suit involves much work on both sides at a tremendous expense and the vast majority of the information is privileged and cannot be used. 1091 To the extent that there are other procedures that might be used to accomplish a similar result, the practical affect would be to either shore up the pre-suit procedures or investigate the use of alternative dispute options. 1092 Findings and Recommendations The Task Force finds the expert affidavits filed in pre-suit proceedings are not sufficient for the parties to make informed decisions regarding the claim. 1085 Lake Lytal, J.D., testimony, Nov. 22, 2002, pg. 322. 1086 Bucky Hurt, J.D., testimony, Nov. 22, 2002, pg. 321. 1087 Id. at 319. 1088 Lake Lytal, J.D., testimony, Nov. 22, 2002, pg. 324. 1089 Bucky Hurt, J.D., testimony, Nov. 22, 2002, pg. 321. 1090 Id. at 322. 1091 Id. 1092 Lake Lytal, J.D., testimony, Nov. 22, 2002, pgs. 326-327. 269

Further, the Task Force finds there is not sufficient incentive for the parties to provide the most complete expert affidavit when the expert completing the affidavit is generally not called as a witness at trial and, even if called at trial, may not be cross-examined regarding the pre-suit affidavit. The Task Force has reviewed the pre-suit procedures set forth in sections 766.106 and 766.201-206, Florida Statutes, for the purpose of determining what modifications, if any, are needed to improve the quality of information exchanged. Recommendation 1. The Legislature should require experts reviewing pre-suit claims and defenses and rendering opinions be qualified, in that they possess similar, if not identical, credentials and expertise in the field of healthcare services of the defendant s particular specialty. Recommendation 2. The Legislature should require the expert who reviews pre-suit claims and defenses and renders opinions be subject to discovery and his or her testimony be admissible in any future proceeding. 270

Joint and Several Liability Issue The Task Force voted at its December 20, 2002 meeting, by a 5-0 vote, to examine the following issues with respect to joint and several liability in the context of medical malpractice cases: Should the Fabre 1093 decision be legislatively overturned? Should awards in medical malpractice suits be based solely on proportion of fault and not on Florida s structured joint and several liability provisions in section 768.81, Florida Statutes? Current Situation Florida is a state that equates fault with liability. 1094 Common sense 1095 dictates that tortfeasors are liable only to the extent of their fault. 1096 Such a conclusion has taken a long time to articulate 1097 and is still incomplete. 1098 Florida is a state that recognizes the comparative fault of those tortfeasors who caused an injury, 1099 including the plaintiff himself or herself. 1100 Before 1973, Florida adhered to the rule of contributory negligence, which, when present, completely barred relief for a plaintiff found to be 1093 Fabre v. Marin, 623 So. 2d 1182 (Fla. 1993). 1094 See Hoffman v. Jones, 280 So. 2d 431, 436 (Fla. 1973). 1095 It is a "common sense notion" that liability should be equated with fault and that a defendant should not have to pay more than his fair share of the liability." Chanta G. Hundley & George N. Meros, Jr., Florida's Tort Reform Act: Keeping Faith with the Promise of Hoffman v. Jones, 27 Florida State University Law Review 461 (Winter 2000). 1096 "The rule of contributory negligence as a complete bar to recovery was imported into the law by judges. Whatever may have been the historical justification for it, today it is almost universally regarded as unjust and inequitable to vest an entire accidental loss on one of the parties whose negligent conduct combined with the negligence of the other party to produce the loss." Hoffman v. Jones, 280 So. 2d 431, 436 (Fla. 1973). 1097 See Lousiville & Nashville Railroad Co. v. Yniestra, 21 Fla. 700 (1886); see also Smith v. Department of Insurance, 507 So. 2d 1080 (Fla. 1987) (tracing the history of contributory and comparative negligence). 1098 See Jennings Hurt, Apportionment of Fault, Set-Off and Empty Chair Argument (Oct. 24, 2002); see also Jennings Hurt, testimony, Nov. 22, 2002, pgs. 259-267. 1099 See Hoffman v. Jones, 280 So. 2d 431, 436 (Fla. 1973). 1100 See Id. 271

partly responsible for causing the accident. 1101 By way of contrast, the comparative fault theory is that a plaintiff is only prevented from recovering that portion of the damages that is equal to his or her share of responsibility for the injury. 1102 Once the amount of fault of the defendant tortfeasors is established, the exercise becomes one of allocating the liability for the damages among the tortfeasors. Florida has a hybrid system of allocating the liability. 1103 The doctrine of joint and several liability has been a part of that system since at least 1914. 1104 Under joint and several liability, all defendant tortfeasors are responsible for the total of the plaintiff's damages, without respect to the extent of each defendant's fault in causing the harm. 1105 For example, in 1987, the Supreme Court of Florida heard a case in which the plaintiff sustained injuries following a bumper car collision at Walt Disney World. 1106 The plaintiff was found to be 14 percent at fault, the other bumper car driver, 85 percent at fault and Disney 1 percent at fault. 1107 Because of joint and several liability, the court entered judgment against Disney for 86 percent of the damages, while Disney was only 1 percent at fault. 1108 In 1986, the Florida Legislature enacted several changes to the joint and several liability doctrine as part of the Tort Reform and Insurance Act of 1986. 1109 The changes included the following: Abolished joint and several liability for non-economic 1110 damages over $25,000. Abolished joint and several liability for economic 1111 damages except when a defendant's fault equals or exceeds that of the plaintiff. 1101 Id. 1102 Id. "[T]he jury should apportion the negligence of the plaintiff and the negligence of the defendant; then, in reaching the amount due the plaintiff, the jury should give the plaintiff only such an amount proportioned with his negligence and the negligence of the defendant." Id. at 438. 1103 Walt Disney World Co. v. Wood, 515 So. 2d 198, 201 (Fla. 1987). 1104 Louisville & Nashville R.R. v. Allen, 67 Fla. 257, 65 So. 8 (1914). 1105 Fabre v. Marin, 623 So. 2d 1182 (Fla. 1993). 1106 Walt Disney World Co. v. Wood, 515 So. 2d 198 (Fla. 1987). 1107 Id. at 199. 1108 Id. 1109 See chapter 86-160, section 60, Laws of Florida (codified at section 768.81(3), Florida Statutes). In enacting these provisions, the Florida Legislature found that "there is in Florida a financial crisis in the liability insurance industry" and "that the current tort system has significantly contributed to the insurance availability and affordability crisis." Fabre v. Marin, 623 So. 2d 1182, 1185 (Fla. 1993) (quoting chapter 86-160, Laws of Florida). 1110 See Issue on Caps for Non-Economic Damages, infra, for definitions of economic and non-economic damages. 1111 Id. 272

Following these legislative changes was the Supreme Court of Florida's decision in the Fabre case, which held that, in determining non-economic damages, fault is apportioned among all the responsible entities who contribute to an accident, whether or not they are officially joined as defendants in the lawsuit. 1112 In 1999, the Florida Legislature further limited joint and several liability by creating a series of damages caps and fault thresholds. 1113 The doctrine of joint and several liability to a particular defendant whose fault equals or exceeds that of a particular plaintiff is determined as follows: A defendant whose fault is up to 10 percent is not subject to joint and several liability. 1114 With a defendant whose fault is between 10 and 25 percent, there is no joint and several liability for economic damages over $200,000 1115 unless the plaintiff is without fault, then there is no joint and several liability for economic damages over $500,000. 1116 With a defendant whose fault is between 25 and 50 percent, there is no joint and several liability for economic damages over $500,000 1117 unless the plaintiff is without fault, then there is no joint and several liability for economic damages over $1,000,000. 1118 With a defendant whose fault is over 50 percent, there is no joint and several liability for economic damages over $1,000,000 1119 unless the plaintiff is without fault, then there is no joint and several liability for economic damages over $2,000,000. 1120 The legislative changes in 1999 also codified the Supreme Court's holding in Fabre. 1121 Accordingly, section 768.81, Florida Statutes, now contains a procedure 1122 and burden of proof 1123 for requesting that a nonparty tortfeasor be placed on the jury verdict form for purposes of allocating 1112 Fabre v. Marin, 623 So. 2d 1182 (Fla. 1993); Nash v. Wells Fargo Guard Services, Inc., 678 So. 2d 1262 (Fla. 1996). 1113 Chapter 99-225, section 27, Laws of Florida (codified at section 768.81, Florida Statutes). 1114 Sections 768.81(3)(a)(1), (3)(b)(1), Florida Statutes. 1115 Section 768.81(3)(a)(2), Florida Statutes. 1116 Section 768.81(3)(b)(2), Florida Statutes. 1117 Section 768.81(3)(a)(3), Florida Statutes. 1118 Section 768.81(3)(b)(3), Florida Statutes. 1119 Section 768.81(3)(a)(4), Florida Statutes. 1120 Section 768.81(3)(b)(4), Florida Statutes. 1121 Chapter 99-225, section 27, Laws of Florida. 1122 Section 768.81(3)(d), Florida Statutes. 1123 Section 768.81(3)(e), Florida Statutes. 273

fault among the totality of those who caused the injury, whether party defendants or not. Based on these most recent legislative changes, a defendant can no longer be held jointly liable for a plaintiff's non-economic damages. Joint and several liability still exists under certain circumstances for economic damages, as outlined above. However, a defendant who is less than 10 percent at fault cannot be held jointly and severally liable for all the damages. Finally, there is no longer joint and several liability against a defendant who is found to be less at fault than the plaintiff. The seminal case for the issue of whether a party pays its fair share is the Fabre case itself. 1124 In the Fabre case, the plaintiff, Mrs. Marin, was injured in an accident as a passenger in a car that was driven by her husband. 1125 Mrs. Marin sued the Fabres, claiming that their negligent driving caused the accident in which she was injured. During discovery, Mrs. Marin learned that the Fabres' insurance had liability limits of $10,000. 1126 Accordingly, she then also sued State Farm, her uninsured motorist carrier, as a defendant. 1127 When the case was presented to the jury, the defendants requested that the verdict form be drafted so as to allow the jury to apportion fault for the accident between Mr. Marin, the driver but an unnamed defendant, and Mrs. Fabre. The court denied the request. But Mrs. Marin agreed to have the issue of Mr. Marin's negligence submitted to the jury subject to a posttrial determination of whether any affirmative finding on that issue would result in a reduction of her recovery. The jury returned a verdict finding Mrs. Fabre and Mr. Marin each 50 percent at fault and awarded Mrs. Marin $12,750 in economic damages and $350,000 in non-economic damages. The judge reduced the economic damages by $5000 but refused to reduce the non-economic damages. 1128 The issue before the Supreme Court was "whether the liability for noneconomic damages should be apportioned to the Fabres on the basis of the percentage of fault attributed to them." 1129 The court answered this question affirmatively. In analyzing this issue, the Supreme Court examined the 1988 version of section 768.81(3), Florida Statutes, which stated as follows: 1124 Fabre v. Marin, 623 So. 2d 1182 (Fla. 1993). 1125 Id. at 1183. 1126 Id. 1127 Id. At the time of this lawsuit, Florida did not allow interspousal claims so Mrs. Marin could not also sue Mr. Marin as the driver of the car. 1128 Id. 1129 Id. 274

(3) APPORTIONMENT OF DAMAGES In cases to which this section applies, the court shall enter judgment against each party liable on the basis of such party's percentage of fault and not on the basis of the doctrine of joint and several liability; provided that with respect to any party whose percentage of fault equals or exceeds that of a particular claimant, the court shall enter judgment with respect to economic damages against that party on the basis of the doctrine of joint and several liability. 1130 In construing this statutory language, the Third District Court of Appeal, the lower appellate court in Fabre, concluded that Mrs. Marin could not recover damages from her husband because of the doctrine of interspousal tort immunity. 1131 Accordingly, the Third District Court concluded that in discarding joint and several liability in section 768.81, Florida Statutes, the Florida Legislature did not intend to thwart a faultfree plaintiff's ability to recover her total damages. 1132 Rather, according to the Third District, the Legislature intended only to apportion liability among the tortfeasors who were defendants in the lawsuit. 1133 Based on this case law history and the legislative intent 1134 of section 768.81, Florida Statutes, the Supreme Court in Fabre concluded that "[b]y [the] clear terms [of the statute], judgment should be entered against each party liable on the basis of that party's percentage of fault." 1135 The court reasoned that "[t]he 'fault' which gives rise to the accident is the 'whole' from which the fact-finder determines the party-defendant's percentage of liability. Clearly, the only means of determining a party's percentage of fault is to compare that party's percentage to all of the other entities who contributed to the accident, regardless of whether they have been or could have been joined as defendants." 1136 Furthermore, the court declared that "[l]iability is to be determined on the basis of the percentage of fault of each participant to the accident and not on the basis of solvency or amenability to suit of other potential defendants." 1137 1130 Section 768.81(3), Florida Statutes (Supp. 1988). The constitutionality of this statue was upheld by the Supreme Court. See Smith v. Department of Insurance, 507 So. 2d 1080, 1091 (Fla. 1987) (noting that the right of access to courts "does not include the right to recover for injuries beyond those caused by the particular defendant"). 1131 Fabre v. Marin, 623 So. 2d 1182, 1186 (Fla. 1993). 1132 Id. 1133 Id. at 1184. 1134 The term "party" was not defined by the statute. At the time the Supreme Court decided the Fabre case, there were three judicial theories as to what was meant by "party." The term could refer to: 1) persons involved in the injury; 2) defendants in the lawsuit; or 3) all litigants in the lawsuit. See 6 Fla. Prac., Personal Injury & Wrongful Death Actions, section 5.5 (2002-03 ed.). 1135 Id. 1136 Id. 1137 Id. at 1186. 275

The result, then, in Fabre was that the court reduced Mrs. Marin's judgment by half of her non-economic damages. There was no reduction in the economic damages because under section 768.81(3), Florida Statutes (Supp. 1988), joint and several liability continued to apply when a defendant's fault equaled or exceeded that of the plaintiff. 1138 Following the Fabre case, the Supreme Court in Nash v. Wells Fargo Guard Services, Inc., 1139 outlined the pleading and proof requirements with which a defendant must comply to submit the issue of a nonparty's negligence to the jury. 1140 In order to include a nonparty on the verdict form under Fabre, the party defendant must plead, as an affirmative defense, the negligence of the nonparty and specifically identify the nonparty. 1141 The party defendant can move to amend the pleading to assert the negligence of a nonparty, subject to the requirements of Florida Rule of Civil Procedure 1.190. However, because the argument that noneconomic damages should be apportioned against a nonparty affects both the presentation of the case and the trial court's rulings on evidence, notice before trial is necessary. 1142 In addition to these pleadings requirements, the party defendant also has the burden of proving that the nonparty's fault contributed to the injury in order to include the nonparty's name on the jury verdict form. 1143 The rule adopted by the Supreme Court in Fabre is premised on an application of the comparative fault statute of section 768.81, Florida Statutes. If this statute does not apply, then Fabre does not apply. Accordingly, Fabre does not apply to actions in which the doctrine of joint and several liability applies. 1144 Information Presented to the Task Force The problem, as presented to the Task Force, is with deep pocket defendants, like hospitals or physicians with significant amounts of insurance coverage who are minimally liable for the harm to the plaintiff. An example might be if a plaintiff with significant long-term care issues sues the doctor, nurse, and the hospital. The hospital is often the least liable (assume 1 percent) but provides the deepest pocket for the payment of damages. Under the current state of the law, the hospital is still jointly 1138 Id. at 1187. 1139 Nash v. Wells Fargo Guard Services, Inc., 678 So. 2d 1262 (Fla. 1996). 1140 See 6 Fla. Prac., Personal Injury & Wrongful Death Actions, section 5.5 (2002-03 ed.). 1141 Nash v. Wells Fargo Guard Services, Inc., 678 So. 2d 1262, 1264. 1142 Id. 1143 Id. 1144 See 6 Fla. Prac., Personal Injury & Wrongful Death Actions, section 5.5 (2002-03 ed.). 276

and severally liable for all the economic damages to the plaintiff. 1145 Those damages can, in a long-term care situation, amount to $15,000,000. The hospital, while only 1 percent responsible for the injury is jointly liable for $15,000,000. 1146 The recommended solution is to repeal joint and several liability for economic and non-economic damages for all medical malpractice suits. The Task Force heard testimony in response to the claim that joint liability has been sufficiently limited in Florida. 1147 It also heard testimony regarding the claim that tort law favors a plaintiff receiving compensation for the injury caused, so that in the event one of the defendants is insolvent the plaintiff should be able to collect the entire amount of damages from a solvent defendant. 1148 Findings and Recommendations The Task Force finds that there is a problem with joint liability in the State of Florida and that modern times and fundamental fairness dictate the apportionment of fault among all parties who caused the harm to the plaintiff for both economic and non-economic damages. The fact that one defendant may be insolvent or for other reasons immune from payment of damages should not shift the burden to another defendant to fund the total amount of damages, beyond the degree of fault for that defendant. Recommendation 1. Joint liability has a negative impact on a medical malpractice insurer's ability to forecast future losses and contributes to the insurer's paid losses. Accordingly, the Legislature should amend section 768.81, Florida Statutes, to provide that a defendant's liability for both economic and non-economic damages be several only. 1145 This is the law pre-1999 passage of chapter 99-225, Laws of Florida. 1146 See Gail Parenti, testimony, Nov. 22, 2002, pgs. 267-68. 1147 See Joel Perwin, testimony, Nov. 22, 2002, pg. 276. 1148 Fabre v. Marin, 623 So. 2d 1182, 1186 (Fla. 1993). 277

Set Off of Settlement Proceeds Issue The Task Force voted at its December 20, 2002 meeting, by a 5-0 vote, to examine the following issues with respect to set off of settlement proceeds in the context of medical malpractice cases: Should the collateral source rule be re-examined to ensure that payments received by the plaintiff that are not required to be repaid from a settlement or judgment are deducted from the award or are considered by the jury? Current Situation Under certain conditions, money received by a plaintiff under a settlement agreement with another defendant may be set off from the total damages awarded by a jury. The purpose of these set off laws is to prevent the plaintiff from receiving a windfall by recovering damages in excess of those awarded by the jury. However, these statutes predate Florida's partial abrogation of joint liability. Current case law interpreting these statutes forbids the setting off of the settlement dollars to non-economic damages in any tort action. Florida law provides that settlement proceeds received by a plaintiff may, in certain circumstances, be credited toward or "set off" from the total damages awarded by a jury at trial. 1149 However, such set off allowances only apply to economic damages in a tort action, including a medical malpractice case; they do not apply to non-economic damages. 1150 Florida's jurisprudence contains two cases that directly impact the issue of set offs. The first was decided by the Supreme Court in 1995. 1151 In Wells v. Tallahassee Memorial Regional Medical Center, Mrs. Wells sued TMRMC, Dr. Alford, and Anesthesiology Associates and its employees Raymond Johns and Dr. Sell, for the wrongful death of her husband. 1152 Before trial, Mrs. Wells settled with Dr. Alford for $250,000, $50,000 of 1149 See sections 46.015(2), 768.041(2), 768.31(5), Florida Statutes. 1150 See Wells v. Tallahassee Memorial Regional Medical Center, Inc., 659 So. 2d 249 (Fla. 1995); Gouty v. Schnepel, 795 So. 2d 959 (Fla. 2001). 1151 Wells v. Tallahassee Memorial Regional Medical Center, Inc., 659 So. 2d 249 (Fla. 1995). 1152 Id. at 250. 278

which were economic damages and $200,000 of which were noneconomic damages. Mrs. Wells also settled with Anesthesiology Associates and its employees for $50,000, without apportionment between economic and non-economic damages. Accordingly, TMRMC was the sole defendant at trial. 1153 The trial court instructed the jury to apportion fault, if any, among all the defendants, including those that had settled before trial. The jury returned the following verdict: TMRMC 90 percent at fault, Dr. Alford 5 percent at fault, and Anesthesiology Associates 5 percent at fault. The jury assessed the damages at $575,853: $202,853 in economic damages, and $371,000 in non-economic damages. The court awarded Mrs. Wells $508,467.70 in damages; 90 percent of $573,852, plus $9,000 in costs, less $17,000 social security benefits. 1154 After the award was announced, TMRMC asked the court to reduce the judgment. TMRMC argued that the judgment should be reduced by $300,000. This was the total amount paid by the settling defendants to Mrs. Wells before trial. The court denied the request. 1155 One question that was presented to the Supreme Court was whether a nonsettling defendant, in a case tried under section 768.81(3), Florida Statutes, is entitled to a set off of his or her apportioned share of the damages based on amounts paid by settling defendants in excess of their apportioned liability as determined by the jury. The Supreme Court was also asked to determine whether the rule of set off applied equally to economic and noneconomic damages. 1156 Mrs. Wells argued to the court that with respect to non-economic damages, "the notion that each party is only responsible for his or her share of the damages dictates that payment by one tortfeasor should only extinguish that tortfeasor's liability and have no effect on another tortfeasor's liability." 1157 She further argued that the set off statutes 1158 apply only when there is common (i.e., joint) liability, like with economic damages. 1159 Therefore, Mrs. Wells argued, when a jury determined liability is a percentage of fault, section 768.81(3), Florida Statutes, the comparative fault statute, applied and there is no set off. 1160 In response, TMRMC argued that the purpose of set off is to "prevent duplicate or 1153 Id. 1154 Id. 1155 Id. 1156 Id. 1157 Id. at 251. 1158 See sections 768.041(2), 46.015(2), 768.31(5)(a), Florida Statutes. 1159 Wells v. Tallahassee Memorial Regional Medical Center, Inc., 659 So. 2d 249, 251 (Fla. 1995). 1160 Id. 279

overlapping compensation for identical damages." 1161 Without set off, Mrs. Wells would recover a monetary amount in excess of her damages, as determined by the jury. 1162 The Supreme Court was persuaded by other states that had abolished joint and several liability but had not legislatively extended set off requirements to the proportional liability setting. 1163 The court also examined the statutory language of sections 768.81(3), 46.015, and 768.041, Florida Statutes (1989), and concluded that the set off statutes did not apply to non-economic damages. 1164 However, the court held that the set off statutes do apply to economic damages for which parties continue to be subject to joint and several liability. 1165 Once the Supreme Court determined set off did not apply to noneconomic damages, the court had to determine how to divide the settlement proceeds between economic and non-economic damages. 1166 The court decided to divide the damages in the same proportion as the jury award. 1167 Accordingly, the economic damages were 35.349 percent of the total award. Applying this percentage to the total of the settlement resulted in $106,047 of the $300,000 in settlement proceeds being designated as economic damages. Thus, $106,047 was set off against the $202,953 award of economic damages. Because of collateral sources related to economic damages, the hospital received an additional set off of $17,000. This made the resulting award for economic damages to be $79,806. In addition, Mrs. Wells was entitled to recover the full noneconomic damages, less 10 percent, for her comparative fault, which amounted to $333,900, as well at $9,000 in costs. Therefore, the total judgment entered in favor of the plaintiff was $422,706. 1168 This formula for determining the non-settling defendant's right to a set off allows for a double recovery by the plaintiff. Both the settlement and the damages awarded by the jury were for the same harm (i.e., the wrongful death of Mrs. Wells' husband). The jury determined that the full value of damages for the wrongful death was $573,853. However, because the court only allowed that portion of the settlement attributable to economic damages to be used as a set off, Mrs. Wells' total recovery (settlement plus jury award) was $722,706 ($422,706 + $300,000). This amount was 1161 Id. 1162 Id. 1163 Id. at 252. 1164 Id. at 252-253. 1165 Id. at 253. 1166 Id. 1167 Id. at 254. 1168 Id. 280

$180,892 more than the full value of the wrongful death as determined by the jury. 1169 After this decision was issued, the question remained as to whether a defendant would be entitled to a set off against both economic and noneconomic damages if that defendant essentially waived section 768.81, Florida Statutes, and did not ask the jury to apportion fault among nonparties. The reason for this question was that if there was no apportionment of fault to the settling defendant, then section 768.81, Florida Statutes, and the set off formula in Wells arguably would not apply. 1170 Instead, the set off statutes (sections 46.105(2), 768.31(5)(a), and 768.041(2), Florida Statutes) would control. These statutes authorized a dollar-for-dollar set off for settlements entered into before the enactment of section 768.81, Florida Statutes. The Fourth District Court of Appeal hinted that such an outcome might be possible. 1171 However, in September 2001, the Supreme Court issued its opinion in Gouty v. Schnepel, 1172 which had the effect of requiring a defendant to place all settling defendants on the jury verdict form and request an apportionment of fault by the jury before any set off for economic damages would be allowed based on an earlier settlement. 1173 In Gouty v. Schnepel, the plaintiff, Gouty, was shot and injured by a gun owned and operated by Schnepel and manufactured by Glock, Inc. 1174 Gouty sued both Schnepel and Glock. Before trial, Glock settled Gouty's claim, paying Gouty $137,500 in exchange for a release and dismissal of its claim. However, Glock was listed on the jury verdict form for the purpose of apportioning fault among the parties. The jury returned a verdict, finding Schnepel 100 percent liable, exonerating Glock altogether. The jury awarded damages of $250,000 total, $125,000 economic damages, $125,000 non-economic damages. Schnepel asked the court to reduce the verdict by the settlement amount, but the request was denied. 1175 On appeal to the Supreme Court, the question was whether the set off statutes can be used in circumstances when a jury finds a non-settling defendant liable for economic damages but finds that the settling defendant is not liable. 1176 The court decided that without joint and several liability, the set off statutes do not apply to reduce a non-settling 1169 Jennings Hurt, Apportionment of Fault, Set-Off and Empty Chair Argument (Oct. 24, 2002). 1170 Id. 1171 Id.; see also Anderson v. Ewing, 768 So. 2d 1161 (Fla. 4th DCA 2000). 1172 Gouty v. Schnepel, 795 So. 2d 959 (Fla. 2001). 1173 See Jennings Hurt, Apportionment of Fault, Set-Off and Empty Chair Argument (Oct. 24, 2002). 1174 Id. at 960. 1175 Id. 1176 Id. at 961. 281

defendant's payment for liability. 1177 In so concluding, the court noted "as long as a defendant does not pay more than his or her percent of fault, that defendant is not entitled to contribution from another tortfeasor or entitled to a set off from a settling defendant." 1178 "However, if the defendant is required to pay damages on the basis of joint and several liability, that defendant's rights of contribution and set off remain unchanged." 1179 The court essentially viewed this issue of set off vis-a-vis joint and several liability as an issue to be decided by the Florida Legislature. The court reasoned "the applicability of the set off statutes is predicated on the existence of other tortfeasors who are liable for the same injury as the settling party." 1180 The court recognized that the Legislature amended section 768.81(3), Florida Statutes, in 1999, but that the Legislature enacted the set off statutes before it enacted the comparative fault statute and the language of the set off statutes has not changed since Wells. 1181 In conclusion, then, the court confirmed that Schnepel was 100 percent liable for Gouty's injuries and the jury expressly found that Glock was not liable at all (i.e., it was not a joint tortfeasor). Thus, the judgment against Schnepel for both economic and non-economic damages was not based upon joint and several liability, but on Schnepel's percentage of fault, which was found to be 100 percent. Accordingly, Schnepel was not entitled to the benefit of a set off from the award of economic damages. 1182 As a result of the statutory scheme on set off, the partial legislative abrogation of joint and several liability in section 768.81, Florida Statutes, and the pronouncements of the Supreme Court of no set offs where there is no joint liability, plaintiffs are in the position to receive a double recovery for the same injury. 1183 Most medical malpractice cases involve plaintiffs suing multiple healthcare providers. 1184 At least some of the defendants in that suit will settle with the plaintiffs prior to trial. 1185 Assuming for example that $2,000,000 is paid in settlement dollars to the plaintiffs by other defendant doctors and the least culpable defendant doctor proceeds to trial, loses, and the plaintiff is awarded $2,000,000 for the same injury, for which he has already received $2,000,000, the plaintiff has received a double recovery. 1186 According to testimony 1177 Id. 1178 Id. at 964. 1179 Id. 1180 Id. at 965. 1181 Id. at 965-966. 1182 Id. at 966. 1183 See Jennings Hurt, Apportionment of Fault, Set-Off and Empty Chair Argument (Oct. 24, 2002); see also Jennings Hurt, testimony, Nov. 22, 2002, pgs. 259-267. 1184 Id. 1185 Id. 1186 See Jennings Hurt, testimony, Nov. 22, 2002, pgs. 259-267. 282

provided to the Task Force, the only way to avoid that result is to place the settling defendants on the jury verdict form. The remaining, non-settling defendant does not get to tell the jury that the others have settled but that defendant must prove that the settling defendants were negligent. 1187 Essentially, the defense is turned into a plaintiff at this point: the doctor in the courtroom is forced to prove that the injury was caused by a nurse who is not there to defend himself or herself. 1188 Information Presented to the Task Force The Task Force heard testimony that plaintiffs are currently in a position to receive a double recovery for a single injury when a defendant settles prior to trial and no set off is allowed by the court to the ultimate jury award of damages for the previous settlement amount paid. 1189 Other testimony to the Task Force also highlighted practical defense problems because of the set off law in Florida. A remaining, non-settling defendant can often find himself or herself on the eve of trial having to "blame" another defendant who is no longer part of the litigation and not present in the courtroom because of a last minute settlement. 1190 The recommended solutions were legislative changes to the current set off statutes to allow set off of settlement proceeds from a jury verdict of damages for both economic and non-economic damages. 1191 According to testimony provided to the Task Force, under the evolving hybrid system of apportionment of fault in the State of Florida, a defendant more closely pays according to his or her fault than was the case years ago. The plaintiffs' bar testified that when joint and several liability was in full force, set offs were allowed because each defendant, regardless of fault, was jointly liable for all other defendants' harm as well. Therefore, any payment received by the plaintiff from a defendant was set off against the ultimate award of damages because the damages were not assigned to any particular defendant. When joint liability is removed, each defendant is, in theory, paying only for his or her own fault. The payment, by another defendant, does not lessen the damages that should be paid by a remaining defendant. 1192 1187 Id. 1188 Id. 1189 See Jennings Hurt, Apportionment of Fault, Set-Off and Empty Chair Argument (Oct. 24, 2002); see also Jennings Hurt, testimony, Nov. 22, 2002, pgs. 259-267, 286-291; see also Gail Parenti, testimony, Nov. 22, 2002, pgs. 267-269. 1190 See Jennings Hurt, Apportionment of Fault, Set-Off and Empty Chair Argument (Oct. 24, 2002); see also Jennings Hurt, testimony, Nov. 22, 2002, pgs. 266-67. 1191 See Jennings Hurt, Apportionment of Fault, Set-Off and Empty Chair Argument (Oct. 24, 2002); see also Jennings Hurt, testimony, Nov. 22, 2002, pgs. 259-267, 286-291; see also Gail Parenti, testimony, Nov. 22, 2002, pgs. 269-70. 1192 See Joel Perwin, testimony, Nov. 22, 2002, pgs. 274-282. 283

Findings and Recommendation The Task Force finds that there is fundamental unfairness in a system that allows the possibility of a double recovery to a plaintiff for the same harm when there has to be a good faith belief on the part of the plaintiff that all named defendants participated in causing the harm. The Task Force further finds that it is not inconsistent to have a system that allows for several liability only and permits set off for settlement moneys received for the same harm that is also compensated by a jury. Chief Justice Anstead has even recognized the Legislature's role on this issue. "It would be far better, however, since this is an area in which the legislature has broad discretion and authority, and has been very active, for the legislature to expressly indicate the limitations on the continuing use of the contribution scheme, including the set off provisions of sections 46.015(2), 768.31(5)(a), and 768.041(2)," he stated. 1193 Recommendation 1. The Legislature should amend the set off statutes, sections 46.015 and 768.041, Florida Statutes, to clarify that set off amounts should be applied to jury damage awards, including both economic and non-economic damages, even when fault is several only. 1193 Wells v. Tallahassee Memorial Regional Medical Center, Inc., 659 So. 2d 249, 256 (Fla. 1995) (Anstead, J., specially concurring). 284

Chapter 9 Alternative Dispute Resolution [C]hange is difficult. Even with the most enlightened leadership, creating a non-punitive atmosphere is a major challenge. The urge to punish is deeply entrenched.... If there is any lesson to be learned, it is that fear of reprisal and punishment produce not safety but defensiveness, secrecy and personal anguish. Lucien L. Leape, M.D., Can We Make Health Care Safe?, (2000) Mandatory Mediation Issue The Task Force voted at its December 20, 2002 meeting, by a 5-0 vote, to examine the following issues with respect to mandatory mediation in the context of medical malpractice cases: Should medical mediation panels be established to divert medical malpractice cases to either mediation or arbitration? Should the mediation panel be in addition to the current pre-suit process, or in lieu of the current process? If created, should the panel consist of one attorney and three physicians? Current Situation Medical malpractice litigants have several options set out in law for settling the law suit prior to litigation. Section 766.108, Florida Statutes, establishes a mandatory pre-trial settlement conference for medical malpractice cases and section 768.79, Florida Statutes, sets out the process for offers of judgment available in any civil action for damages. Section 766.108, Florida Statutes, provides the court must require a settlement conference at least three weeks before the date set for trial in all medical malpractice cases. The attorneys who will conduct the trial, the parties and any person having the authority to settle the case must attend 285

this conference and must be excused by the court, for good cause shown, if they will not attend. Section 768.79, Florida Statutes, sets out the procedures for either party to make an offer of judgment to settle the litigation. Either party may make an offer of settlement to the opposing party, which if not accepted within thirty days can result in the party not accepting the offer paying the offering parties attorney fees and costs from the date of the offer. If the plaintiff makes the offer that is not accepted then the defendant will owe the plaintiff s attorney fees and costs from the date of the offer if the final judgment obtained by the plaintiff is 25 percent higher than the offer. If the defendant makes the offer and the plaintiff rejects it then the defendant will be entitled to attorney fees and costs from the date of the offer if the judgment is one of no liability or is at least 25 percent lower than the offer. The amount of the offer is not admissible at trial but may be admitted for purposes of enforcing this section within thirty days after the entry of the judgment or voluntary or involuntary dismissal of the case. In making the determination as to the amount of the attorney fees and costs to be awarded, the statute provides specific criteria to be considered by the court, in addition to the standards generally considered by the court in awarding fees and costs. These criteria include: The apparent merit or lack of merit in the claim. The number and nature of offers made by the parties. The closeness of questions of fact and law at issue. Whether the person making the offer had unreasonably refused to furnish information necessary to evaluate the reasonableness of such offer. Whether the suit was in the nature of a test case presenting questions of far-reaching importance affecting nonparties. The amount of the additional delay cost and expense that the person making the offer reasonably would be expected to incur if the litigation should be prolonged. Evidence of an offer is admissible only in proceedings to enforce an accepted offer or to determine the imposition of sanctions under this section. 1194 Information Provided to the Task Force Mr. Perry Odom 1195 testified to the Task Force regarding his experience with mediation and its use early in the litigation process. He testified that the advantage of mediation over other dispute resolution processes is that 1194 Section 768.79 (7)(b), Florida Statutes. 1195 Perry Odom, J.D., North Florida Mediation and Arbitration Services. 286

the decision rests with the parties not with a third party. 1196 The purpose of the mediator is to assist the parties in narrowing the issues and understanding the strengths and weaknesses of the case. 1197 Early mediation can serve to substantially reduce the cost of the case and can allow the parties to meet and discuss settlement before acrimony between the parties has built. 1198 While some object to early mediation because of a lack of information about the case, Mr. Odom stated even at an early point, the plaintiff has a lot of information about the case and the insurance companies have a lot of experience on which to base an early assessment of the worth of the case. 1199 Mr. Odom proposed a pre-suit mediation process as follows: 1200 At the conclusion of the pre-suit screening period and any pre-suit informal discovery, but before the claimant files suit, the parties shall submit the matter to pre-suit mediation as follows: A certified circuit court mediator to be selected by mutual agreement of the parties shall conduct the pre-suit mediation. If the parties are unable to agree on a mediator within fifteen days after the claimant requests pre-suit mediation, a mediator shall be appointed by the general counsel of the Department of Health from the list of certified circuit court mediators maintained by the chief judge of the circuit in which the suit may be filed. Within thirty days after the mediator is selected, the mediation conference shall be scheduled by the mediator after conferring with the parties or their attorneys to determine a mutually acceptable date, time, and place, whereupon the mediator shall promptly give written notice to all parties of the date, time, and place of the mediation conference at least fifteen days prior to the scheduled mediation conference. Unless otherwise agreed by all of the parties, the pre-suit mediation shall be concluded within sixty days after the mediator is selected. The personal attendance of all parties at the pre-suit mediation conference is essential and required, unless excused by mutual agreement of all of the parties. Parties shall have absolute authority to settle the matter. If a party is a corporation, the corporate representative shall be either an officer of the corporation or a delegated representative, either of whom must have authority to bind the corporation to a settlement agreement. In the case of an insurance 1196 Perry Odom, J.D., testimony, Dec. 3, 2002, pg. 234. 1197 Id. 1198 Id. at 235. 1199 Id. at 236. 1200 Language provided to Task Force by Perry Odom, J.D. 287

carrier or self-insurer, the representative of the insurance carrier or self-insurer shall be empowered to resolve the matter for the lower of the demand of the claimant or the limits of coverage. Section 44.107, Florida Statutes, regarding judicial immunity for the mediator and Rule 1.700, et seq., Florida Rules of Civil Procedure shall apply to the pre-suit mediation. Each party involved in the pre-suit mediation process has a privilege to refuse to disclose, and to prevent any person present at the pre-suit mediation conference from disclosing, communications made during the pre-suit mediation conference. All oral or written communications in the pre-suit mediation proceedings, other than an executed settlement agreement, shall be exempt from the requirements of chapter 119 and shall be confidential and inadmissible in any subsequent legal proceedings, unless all parties agree otherwise. The statute of limitations is tolled as to all possible defendants until conclusion of the pre-suit mediation proceedings. Unless all parties agree otherwise, the parties shall share the fee or other costs charged by the mediator equally. If pre-suit mediation terminates in an impasse declared by the mediator, and the claimant thereafter files suit, nothing contained herein shall prevent the court from ordering the parties to submit to court-ordered mediation pursuant to chapter 44, Florida Statutes. The Academy of Florida Trail Lawyers, in response to the discussion at the December 3, 2002 Task Force meeting, proposed the following language to provide for early mandatory mediation with sanctions but not pre-suit mediation. 1201 Within 120 days of suit being filed, the parties shall conduct mandatory mediation in accordance with section 44.102, Florida Statutes, if binding arbitration under sections 766.106 or 766.207, Florida Statutes, has not been agreed to by the parties. The Florida Rules of Civil Procedure shall apply to mediation held pursuant to this section. During the mediation, each party shall make a demand for judgment or an offer of settlement. At the conclusion of the mediation, the mediator shall record the final demand and final offer to provide to the court upon the rendering of a judgment. 1201 Id. 288

If a claimant rejecting the final offer of settlement made during the mediation does not obtain a judgment more favorable than the offer, the court shall assess the mediation costs and reasonable costs, expenses, and attorneys fees which were incurred after the date of mediation. The assessment shall attach to the proceeds of the claimant and attributable to any defendant whose final offer was more favorable than the judgment. If the judgment obtained at trial is not more favorable to a defendant than the final demand for judgment made by the claimant to the defendant during mediation, the court shall assess the mediation costs, and reasonable costs, expenses, and attorneys fees that were incurred after the date of mediation. Prejudgment interest at the rate established in section 55.03, Florida Statutes, from the date of the final demand shall also be assessed. The defendant and the insurer of the defendant, if any, shall be liable for the costs, fees, and interest awardable under this section. The final offer and final demand made during the mediation required in this section shall be the only offer and demand considered by the court in assessing costs, expenses, attorneys fees, and prejudgment interest under this section. No subsequent offer or demand by either party shall apply in the determination of whether sanctions will be assessed by the court under this section. Notwithstanding any law to the contrary, sections 45.061 and 768.79, Florida Statutes, shall not be applicable to medial negligence or to wrongful death cases arising out of medial negligence causes of action. Findings and Recommendations The Task Force finds encouraging the parties to seriously provide for early case evaluation and to mediate the case as soon as possible in the litigation process will reduce the litigation costs related to medical malpractice suits, thus reducing some of the medical malpractice litigation costs. The Task Force finds the parties are currently free to mediate a case at any point but the confidentiality provisions currently available in chapter 44, Florida Statutes, do not cover any pre-suit mediation. The Task Force finds mandatory mediation does not occur early enough in the litigation process to significantly reduce litigation costs and without sanctions for failure to mediate in good faith early mediation can be useless if the parties appear but are not ready or willing to work toward a settlement of the case. 289

Recommendation 1. The Legislature should encourage pre-suit mediation by providing for confidentiality of any pre-suit mediation in a medical malpractice case in the same manner as is provided for mediation occurring after suit is filed. Recommendation 2. The Legislature should amend the mandatory mediation provisions of section 766.108, Florida Statutes, to require mediation within 120 days of filing suit and to provide sanctions if a good faith offer of settlement is refused. Recommendation 3. The Legislature should not make admissible at trial the fact that mandatory mediation occurred or that offers of settlement were made, but should make this fact admissible for purposes of enforcing the attorney fees and costs. The mediator should maintain a report of the issues and facts presented at the mediation and the final settlement offers of each party at the mandatory mediation. Recommendation 4. The Legislature should enact specific criteria similar to those in the offer of judgment statute to be considered by the court in making the determination as to how close in amount the judgment must be to the offer and the criteria to be used in evaluating the amount of the attorney fees and costs to be awarded in addition to the standards generally considered in awarding fees and costs. Recommendation 5. The Legislature should require the court to consider, in addition to all other criteria, whether the issues and facts presented at mediation were significantly the same issues presented at trial. 290

Voluntary Binding Arbitration Issue The Task Force voted at its January 8, 2003 meeting, by a 5-0 vote, to examine the following issues with respect to voluntary binding arbitration in the context of medical malpractice cases: Should the optional arbitration program be eliminated? Should the definition of the caps established in the voluntary arbitration process be clarified to apply a cap of $250,000 per incident regardless of the number of survivors (claimants)? Current Situation Chapter 766, contains two separate arbitration provisions: (1) section 766.106, Florida Statutes, and (2) sections 766.207-766.212, Florida Statutes. While both section 766.106, Florida Statutes, and sections 766.207 through 766.212, Florida Statutes, concern arbitration, they are two separate and distinct arbitration procedures. Parties cannot employ some of the provisions of section 766.106, Florida Statutes, and some of the provisions of section 766.207, Florida Statutes, to create a hybrid of arbitration. 1202 Section 766.106, Florida Statutes Section 766.106, Florida Statutes, was enacted as part of the Medical Malpractice Reform Act of 1985. 1203 Under this statute, the defendant may make an offer to arbitrate and the statute expressly contemplates an admission of liability with arbitration being conducted on the damages issue. More specifically, its provisions permit an offer of admission of liability and for arbitration on the issue of damages in response to a notice of intent to initiate medical malpractice litigation. 1204 According to Gail Parenti, whose Coral Gables firm primarily represents hospitals, I have never seen an arbitration proceed under 766.106 because there, frankly, is no reason to. It has done nothing but generate confusion 1202 Platman v. Holmes Regional Medical Center, Inc., 683 So. 2d. 671 (Fla. 5th DCA 1996), rev. denied, 687 So. 2d. 1305 (Fla. 1997); see also Tallahassee Memorial Regional Medical Center, Inc. v. Kinsey, 655 So. 2d 1191 (Fla. 1st DCA 1995), rev. denied, 662 So. 2d. 344 (Fla. 1995). 1203 Chapter 85-175, section 14, at 1199-1202, Laws of Florida. 1204 See section 766.106(3)(b)3, Florida Statutes. 291

because it gives rise to arguments that an attempt to make an offer under 766.207 is somehow invalid because it s confusing. 1205 Sections 766.207 through 766.212, Florida Statutes In 1988, the Legislature was again asked to turn its attention to medical malpractice, enacting what is now chapter 766, Florida Statutes. 1206 While amendments changed some of what is now section 766.106, Florida Statutes, and added additional subsections, the substance of the provisions relating to admission of liability and voluntary binding arbitration of damages remained unchanged. Instead, the Legislature adopted a completely separate set of procedures for admission of liability and binding arbitration of damages. 1207 Those provisions were subsequently codified as sections 766.207 through 766.212, Florida Statutes. While the motivation for enactment of those provisions is explained in section 766.201(2)(b), Florida Statutes, no reference is made to the provisions regarding admission of liability and voluntary binding arbitration of damages already set forth in section 766.106, Florida Statutes, or to the intended interplay between section 766.106, Florida Statutes, and sections 766.207 through 766.212, Florida Statutes. Section 766.201(1), Florida Statutes, expressly sets forth the Legislature s intent to provide a mechanism for the prompt resolution of medical malpractice claims through mandatory pre-suit investigation and voluntary binding arbitration of damages. Sections 766.203 through 766.206, Florida Statutes, set out the pre-suit investigation procedure that both the claimant and defendant must follow before a medical negligence case may be filed in circuit court. The first step in the pre-suit investigation is for the claimant to determine whether reasonable grounds exist to believe that a defendant acted negligently in the claimant s care or treatment, and to determine whether this negligence caused the claimant s injury. 1208 This section also requires that the medical negligence claim be corroborated by a verified written medical expert opinion from a medical expert as defined in section 766.202(5), Florida Statutes. Copies of any medical records relevant to the litigation must be provided to the claimant or defendant. 1209 From there, each party shall provide to the other party reasonable access to information within its 1205 Gail Parenti, J.D., testimony, Nov. 22, 2002, pg. 206; but see Neal Roth, J.D., testimony, Nov. 22, 2002, pg. 207 (recalling an offer, later revoked, to arbitrate under section 766.106, Florida Statutes). 1206 Chapter 88-1, sections 48-87, at 164-186, Laws of Florida; chapter 88-277, sections 26-49, at 1473-1495, Laws of Florida. 1207 Chapter 88-1, sections 54-59, at 169-173, Laws of Florida; chapter 88-277, sections 30-35, at 1476-1482, Laws of Florida. 1208 Section 766.203(2), Florida Statutes. 1209 Section 766.204(1), Florida Statutes. 292

possession or control in order to facilitate evaluation of the claim 1210 before giving notice to a defendant. After the completion of the pre-suit investigation by the parties pursuant to sections 766.203 through 205, Florida Statutes, with preliminary reasonable grounds for a medical negligence claim intact, the parties may elect to have damages determined by arbitration. This arbitration mechanism is found in sections 766.207 through 766.212, Florida Statutes. If the claimant s reasonable grounds for the medical negligence claim are intact at the completion of the pre-suit investigation, either party may request that a medical arbitration panel determine the amount of damages. 1211 The 1988 Legislature initially contemplated that these provisions would provide benefits to both a claimant and a defendant, the logic being that the claimant benefits from the requirement that a defendant quickly determine the merit of any defenses and the extent of its liability. The claimant also saves the costs of attorney and expert witness fees, which would be required to prevail in a civil trial. Moreover, a claimant who accepts a defendant s offer of voluntary binding arbitration receives the following additional benefits: (1) a relaxed evidentiary standard for arbitration proceedings; (2) joint and several liability of multiple defendants in arbitration; (3) prompt payment of damages after the determination by the arbitration panel; (4) interest penalties against the defendant for failure to promptly pay the arbitration award; and (5) limited appellate review of the arbitration award. Likewise, a defendant benefits in that he or she is relieved of punitive damages and is assured that there will not be an award greater than $250,000 in non-economic damages. This limitation was intended to provide liability insurers with the ability to improve the predictability of the outcome of claims for the purpose of loss planning in risk assessment of medical malpractice premiums. At the same time, the arbitration mechanism forces parties to settle their disputes. During the course of testimony, this Task Force heard from Gail Leverett Parenti. Ms. Parenti noted that at the time of the Echarte decision (to be discussed below), the Division of Administrative Hearings (DOAH) reported a total of 132 medical arbitration cases had been filed in the fourteen years since the enactment of the voluntary binding arbitration provisions. Of these cases, 106 had been resolved without a hearing. 1212 In other words, they had been settled. Ms. Parenti explained that voluntary binding arbitration was a highly-effective means of achieving the 1210 Section 766.205(1), Florida Statutes. 1211 Section 766.207, Florida Statutes. 1212 Gail Parenti, J.D., testimony, Nov. 22, 2002, pg. 184. 293

Legislature s stated goal of early settlement of medical malpractice cases. However, Ms. Parenti went on to further note that these statistics cannot capture the number of cases in which an offer to arbitrate has resulted in a settlement before the parties actually initiated arbitration proceedings, or those in which a credible threat to offer to arbitrate resulted in a settlement before the conclusion of the pre-suit period. 1213 The Task Force heard conflicting testimony from defense and plaintiff s attorneys regarding the extent to which arbitration under sections 766.207 through 766. 212, Florida Statutes, is actually used. Ms. Parenti, citing the above-mentioned figures, stated that although settlements are actually taking place, the number of these settlements is lower than it should be because too few parties are taking advantage of the offer to arbitrate. 1214 Tommy Dukes, who is with the Florida Defense Lawyers Association, stated that, of the hundreds of malpractice cases he has handled, he has recommended arbitration in just two instances. Mr. Dukes explained that because the statute has been interpreted as allowing $250,000 per claimant (rather than per claim), and because the defendant must, in essence, admit liability to participate, arbitration under this section is simply not a viable option. 1215 However, Neal Roth, representing the Academy of Florida Trial Lawyers, countered the above testimony, stating he and his colleagues were seeing more and more offers to arbitrate. 1216 He also cited a recent survey of his group, which indicates that, in fact, arbitration was offered in at least fifty cases in the last two years. 1217 University of Miami v. Echarte The constitutionality of the voluntary binding arbitration provisions was ruled on in the seminal case of University of Miami v. Echarte. 1218 In Echarte, the claimants argued the voluntary binding arbitration provision had the effect of limiting the amount of non-economic damages they may recover for the defendant s neglect. The claimants argued the arbitration provision replaced their common law remedy of all damages proximately flowing from the neglect of the defendant. After reviewing the legislative history as well as the findings of the 1988 task force, the Florida Supreme Court expressly upheld the statutory scheme against an attack that the arbitration provision was an insufficient substitute for the common law right of an ordinary damages action. In so doing, the Florida Supreme Court explained: 1213 Id. at 184-185. 1214 Id. at 184. 1215 Tommy Dukes, J.D., testimony, Oct. 21, 2002, pgs. 240-242. 1216 Neal Roth, J.D., testimony, Nov. 22, 2002, pg. 195. 1217 Neal Roth, J.D., testimony, Oct. 21, 2002, pg. 272. 1218 618 So. 2d 189, 196 (Fla. 1993), cert. denied, 510 U.S. 915, 114 Sup. Ct. 304 (1993). 294

The initial question in the instant case is whether the arbitration statutes, which include the non-economic damage caps found in sections 766.207 and 766.209, provide claimants with a commensurate benefit for the loss of the right to fully recover non-economic damages. Sections 766.207 and 766.209 only limit a claimant s right to recover non-economic damages after a defendant agrees to submit the claimant s action to arbitration. The defendant s offer to have damages determined by an arbitration panel provides the claimant with the opportunity to receive prompt recovery without the risk and uncertainty of litigation or having to prove fault in a civil trial. A defendant or the defendant s insurer is required to conduct an investigation to determine the defendant s liability within ninety days of receiving the claimant s notice to initiate a malpractice claim. Before the defendant may deny the claimant s reasonable grounds for finding medical negligence, the defendant must provide a verified written medical expert opinion corroborating a lack of reasonable grounds to show a negligent injury. 766.203(3)(b). The claimant benefits from the requirement that a defendant quickly determine the merit of any defenses and the extent of its liability. The claimant also saves the costs of attorney and expert witness fees which would be required to prove liability. Further, a claimant who accepts a defendant s offer to have damages determined by an arbitration panel receives the additional benefits of: the relaxed evidentiary standard for arbitration proceedings as set out by section 120.58, Florida Statutes (1989); joint and several liability of multiple defendants in arbitration; prompt payment of damages after the determination by the arbitration panel; interest penalties against the defendant for failure to promptly pay the arbitration award; and limited appellate review of the arbitration award requiring a showing of manifest injustice. 1219 The court went on to reject the claimant s assertion that the medical malpractice arbitration statute did not provide the claimant with a 1219 University of Miami v. Echarte, 618 So. 2d 189, 194 (Fla. 1993). 295

commensurate benefit. 1220 After the holding in Echarte, it appeared the intent of the voluntary binding arbitration statute would be implemented. However, after the Florida Supreme Court s decision in St. Mary s Hospital, Inc. v. Phillipe, 1221 it appears there is no future for voluntary binding arbitration. The Task Force heard testimony that most defendants will not consider voluntary binding arbitration in light of the St. Mary s decision. 1222 As Ms. Parenti noted, Because I ve been talking to defense lawyers for the last seven years about arbitration and they come to me and say, Gail, after [the Supreme Court rulings], I just can t do it. I cannot recommend to my client that they go to a forum where there s that risk. 1223 St. Mary s Hospital, Inc. v. Phillipe The St. Mary s decision was actually two separate cases that were consolidated for review: (1) St. Mary s Hospital, Inc. v. Phillipe, 1224 and (2) Frazen v. Mogler. 1225 Both were medical malpractice wrongful death cases in which the defendants conceded liability. The facts of St. Mary s Hospital v. Phillipe were as follows: Juslin Phillipe died while giving birth to her daughter, Ecclesianne. Ecclesianne was born severely brain damaged. Charles Phillipe, Juslin s husband and the personal representative of her estate, brought a medical malpractice wrongful death action against St. Mary s Hospital on behalf of himself and the decedent s four surviving children. 1226 St. Mary s conceded liability and the case proceeded under that arbitration process on the issue of damages. The independent personal injury action of the brain-damaged child, Ecclesianne, was not part of the arbitration process. 1227 After a hearing, the arbitrators awarded the following damages: $250,000 in non-economic damages to both Charles, the husband, and Ecclesianne, the daughter; $175,000 in non-economic damages to each of the remaining children; $2,284,804 to the family in economic damages for loss of services; $943,000 in economic damages for loss of special services to Ecclesianne; $3,398 in funeral expenses; and $510,632 in 1220 Id. at 197. 1221 769 So. 2d 961 (Fla. 2000). 1222 Gail Parenti, J.D., testimony, Nov. 22, 2002, pg. 184. 1223 Id. 1224 699 So. 2d 1017 (Fla. 4th DCA 1997). 1225 699 So. 2d 1026 (Fla. 4th DCA 1997). 1226 St. Mary s Hospital v. Phillipe, 769 So. 2d 961, 963 (Fla. 2000). 1227 Id. 296

attorneys fees. $4,766,834. 1228 The total amount of the arbitration award was St. Mary s argued that the arbitrators total award of non-economic damages in the amount of $1,025,000 exceeded the $250,000 cap. That provision provides that [n]on-economic damages shall be limited to a maximum of $250,000 per incident. St. Mary s asserted that the term per incident reflected that the limit applies in the aggregate to all claimants, rather than separately to each wrongful death beneficiary. 1229 The district court agreed with St. Mary s. The court concluded the plain language of the statute indicates there can be no more than $250,000 in non-economic damages awarded by the arbitrators under section 766.207, Florida Statutes, no matter how many different people may have a direct benefit in the award, or the source of their entitlement to share in the award. 1230 The district court reversed the arbitration award of noneconomic damages, and remanded for the reduction of such damages to $250,000. 1231 St. Mary s also argued that the award of economic damages for the decedent s loss of earning capacity was improper because such damages are not available under the Wrongful Death Act. The district court disagreed, however, holding that the elements of economic damages available in a voluntary binding arbitration of a medical malpractice claim are controlled by the voluntary binding arbitration statute. 1232 The facts of Franzen v. Mogler were as follows: Michael Mogler, a minor, died following treatment from Dr. Dirk Franzen. The parents of Michael Mogler brought a medical malpractice wrongful death claim on behalf of themselves and their son s estate against Dr. Franzen. 1233 As in Phillipe, the parties voluntarily chose to proceed under the voluntary statutory arbitration process. Dr. Franzen conceded liability, and the issue of damages proceeded to arbitration. After a hearing, the arbitrators awarded the following damages to Henry Mogler: $250,000 in past and future noneconomic damages; $9,125 for past medical expenses; $29,750 for future medical expenses; and $7,950 for past and future loss of services. 1234 The arbitrators awarded the following damages to Donna Mogler: $250,000 in past and future non-economic damages; $46,593 for past medical expenses; $46,000 for future medical expenses; $57,636 for past wage loss; $304,189 for future wage loss; and $7,950 for past and future loss of 1228 Id. 1229 Id. at 964. 1230 Id. 1231 Id. 1232 Id. 1233 Id. 1234 Id. 297

services. 1235 The Estate of Michael Mogler was awarded the following damages: $3,078 for funeral expenses; $5,084 for medical expenses; and $388,272 for lost wages. 1236 The arbitrators also awarded attorneys fees and costs in the amount of $210,844. 1237 The total amount of the arbitration award was $1,616,471. 1238 Following its decision in Phillipe, the district court reversed the award of noneconomic damages and affirmed the award of economic damages. 1239 In the consolidated appeal, the Florida Supreme Court framed the controversy in terms of three separate issues: ISSUE I: Stay pending review of medical malpractice arbitration award. 1240 The court disposed of this issue by rejecting the claim of unconstitutionality, and reasoned that both parties agreed to participate in voluntary binding arbitration. The court noted: When a party voluntarily agrees to enter binding arbitration under this statutory alternative process, the party has bound itself to the statutory terms of that process. 1241 The Task Force does not take issue with this particular finding. Instead, this Task Force is of the opinion that the results of the next two issues were much more troubling. ISSUE II: Meaning of the clause non-economic damages shall be limited to a maximum of $250,000 per incident. The second issue involved whether the $250,000 per incident limitation of non-economic damages in the arbitration provision limits the total recovery of all claimants in the aggregate to $250,000 or limits the recovery of each claimant individually to $250,000. 1242 The court reasoned that the legislative intent behind the statute should be gathered from consideration of the statute as a whole rather than from any one section. 1243 The court noted that for purposes of the statute, claimant was clearly defined as any person who has a cause of action arising from medical negligence. 1244 The court further noted that the statute was perfectly clear when it referred to multiple parties. 1245 Likewise, the court noted that the Legislature had previously been clear when it intended to limit claimants damages in the aggregate in other 1235 Id. 1236 Id. 1237 Id. 1238 Id. 1239 Id. 1240 Id. at 964. 1241 Id. at 967. 1242 Id. at 965. 1243 Id. at 967-968. 1244 Id. at 968. 1245 Id. at 969. 298

contexts. 1246 For example, The court reasoned that in the Wrongful Death Act, the limitation read as follows: Neither the state nor its agencies or subdivisions shall be liable to pay a claim or a judgment by any one person which exceeds the sum of $100,000 or any claim or judgment, or portions thereof, which, when totaled with all other claims or judgments paid by the state or its agencies... 1247 Thus, the court concluded section 766.207(b), Florida Statutes, was neither unclear nor unambiguous. 1248 The court concluded, that each claimant s non-economic damages must be independently determined. 1249 Differentiating between a single claimant and multiple claimants bears no rational relationship to the Legislature s stated goal of alleviating the financial crisis in the medical liability insurance industry. 1250 As a final caveat, the court concluded that were it to interpret the non-economic damages cap to apply to all claimants in the aggregate, such an interpretation would create an equal protection problem. 1251 ISSUE III: Economic Damages. The final issue involved the question of whether the elements of economic damages awardable in the voluntary binding arbitration or a medical malpractice wrongful death claim are controlled by the Wrongful Death Act. 1252 Unlike the voluntary binding arbitration statute, the Wrongful Death Act does not provide claimants with a full range of economic damages. 1253 The court ruled that the arbitration provisions of the voluntary binding arbitration statute expressly specify the elements of all the damages available when the parties agree to binding arbitration, regardless of whether the medical malpractice action involves a wrongful death. 1254 The court reasoned that the legislative intent of the voluntary binding arbitration statute was to enact reforms to prevent soaring non-economic damage awards, rather than the more predictable economic damage awards. 1255 The court concluded: If the Legislature intended for the Wrongful Death Act to control the elements of damages available in a medical malpractice arbitration, it could have specifically provided for the application of the provisions of the Act in the [voluntary binding arbitration statute]. It has not done so. 1256 1246 Id. 1247 Id. 1248 Id. 1249 Id. at 971. 1250 Id. 1251 Id. 1252 Id. 1253 Id. at 973. 1254 Id. 1255 Id. 1256 Id. 299

Findings and Recommendations As a result of the St. Mary s decision, the Task Force has found that defendants are no longer using arbitration as a means of resolving claims. 1257 In sum, the St. Mary s opinion has made it impossible for defendants to offer to arbitrate in wrongful death cases. 1258 Those defendants that agree to arbitrate now find themselves at risk of arbitrators awarding damages that are not compensable under Florida law. One speaker to the Task Force cogently noted: As a result of the St. Mary s decision, the universe of claims in which an offer to arbitrate can reasonably be considered will be limited to these cases with a single claimant, or a decedent with no statutory survivors; with little or no economic damages; ironically, the cases which should not need the assistance of the arbitration mechanism to settle. 1259 The Task Force finds that voluntary binding arbitration in Florida is effectively dead as a result of the St. Mary s case. Recommendation 1. The Legislature should amend the definitions of economic damages and non-economic damages as provided in sections 766.202 and 766.207, Florida Statutes, to provide that such damages are recoverable in voluntary binding arbitration only if the claimant has the right to recover such damages under general law, including the Wrongful Death Act. Recommendation 2. The Legislature should provide for an aggregate cap on non-economic damages in arbitrated cases of multiple defendants. 1257 Gail Parenti, J.D., testimony, Nov. 22, 2002, pg. 191. 1258 Gail Parenti, The Bells of St. Mary: Tolling the End of Voluntary Binding Arbitration of Medical Malpractice Claims, 19(4) Trial Advocate Quarterly 11 (Fall 2000). 1259 Id. 300

Chapter 10 - Insurance Reform Malpractice fears and high premiums can contribute to excessive service (such as unnecessary cesarean sections and diagnostic tests) or insufficient service (such as physicians no longer assisting in the birth of babies, especially to mothers who are uninsured or have only Medicaid coverage). Randall R. Bovbjerg et al., Obstetrics and Malpractice: Evidence on the Performance of a Selective No-Fault System, 265(21) Journal of the American Medical Association 2836 Florida Birth-Related Neurological Injury Compensation Act Issue The Task Force voted at its January 8, 2003 meeting, by a 5-0 vote, to examine the following issues with respect to the Florida Birth-Related Neurological Injury Compensation Act (NICA) in the context of medical malpractice cases: Should the criteria for a claim to qualify for referral to NICA be expanded to include lower birth weights? Should the criteria for a claim to qualify for referral to NICA be expanded to allow claims for mental and physical impairment rather than requiring both? Current Situation Two issues arise from the historical operation of the Florida No-Fault Compensation Plan created by the Florida Legislature in sections 766.301-316, Florida Statutes. First, whether the act has met its original purpose and continues to have value for that purpose. Second, whether the operation of the act is satisfactory, or whether changes are needed to enhance the purpose of the act. 301

Throughout the 1980s, a serious and highly-publicized crisis evolved regarding the costs of medical malpractice insurance for physicians. In 1987, the problem was specifically determined to be most serious for obstetricians, who were experiencing some of the highest insurance premium rates in the country. 1260 Newspapers reported rising costs for malpractice insurance and the devastating effects these costs were having on physicians in their daily practices and on the patients who were unable to secure adequate medical attention. For example, a sample of the antidotal evidence reported clearly illustrates the scope of this crisis. One article appearing in the Sun- Sentinel written by the United Press International, stated that most doctors are paying 81 percent more for medical malpractice insurance between 1982 and 1985, but that obstetrics and gynecologists paid as much as 113 percent more. 1261 A reporter for the St. Petersburg Times, noted that in Broward and Dade County obstetricians premiums will jump from $113,631 to $166,355 as of July 1. 1262 Another article in the St. Petersburg Times declared that the only one in 55 obstetricians in Palm Beach County was still accepting new patients. 1263 And, in Florida, two maternity wards were closed, one in Collier County and the other in Lake County. 1264 In the State of Florida alone, the malpractice premium rates for obstetrics and gynecology rose 395 percent from 1980 to 1986. 1265 Florida experienced the effects of the problem more severely than most other states. In an effort to address the mounting malpractice crisis, the Tort and Insurance Act of 1986 created the 1987 Academic Task Force for Review of the Insurance and Tort Systems, a task force to evaluate the state s tort and insurance laws. 1266 This task force was asked to examine the emergent problems facing the healthcare delivery systems, including 1260 House of Representatives, Council for Healthy Communities, Committee on Health Promotion, A Review of the Legislative History and Financial Status of the Florida Birth-Related Neurological Injury Compensation Association (NICA) 2 (Apr. 2001). 1261 Malpractice Rates Still Skyrocketing: Insurance Premiums Up 81% for Most Doctors, Sun-Sentinel, Aug. 1987. 1262 Mark Journey, Malpractice Insurer Raises Rates, St. Petersburg Times, June 27, 1987, at 3B. 1263 Patients Get Left Behind as Costs Push Doctors Out of the Delivery Rooms, St. Petersburg Times, June 9, 1987, at 4B. 1264 Elizabeth Wasserman, Lake County Obstetrics Crisis Reaches Critical Condition, Orlando Sentinel, Dec. 23, 1987, at 3. 1265 House of Representatives, Council for Healthy Communities, Committee on Health Promotion, A Review of the Legislative History and Financial Status of the Florida Birth-Related Neurological Injury Compensation Association (NICA) app. 1 (Apr. 2001). 1266 Academic Task Force for Review of the Insurance and Tort Systems, Preliminary Fact-Finding Report on Medical Malpractice 1 (Aug. 6, 1987). 302

physicians, hospitals, and other medical personnel and to make recommendations for reforms, where appropriate. The task force noted that the impact of the medical malpractice problems varied considerably among medical specialties. 1267 As a case in point, the task force found that: Obstetricians were more likely than other physicians to have claims filed against them; Obstetricians malpractice premiums were among the highest; and The recent increases in malpractice premiums for obstetricians were much greater than for other physicians. 1268 The task force noted that a generation ago abnormal births were regarded as an inherent risk of childbirth. They observed in 1986, most childbirth injuries resulted in increased claims against the obstetrician. 1269 Thus, the task force determined that, for birth related neurological injuries, distinctive treatment was warranted. 1270 That 1987 task force was the first to propose the Florida Birth-Related Neurological Injury Compensation Act. Its November 6, 1987 report recommended the adoption of a no-fault compensation plan for birthrelated neurological injuries. 1271 Accordingly, in 1988, the Legislature enacted section 766.301, Florida Statutes, 1272 (entitled Legislative Findings and Intent), and determined that physicians practicing obstetrics were high-risk medical specialists for whom malpractice insurance premiums were escalating. 1273 These medical specialists were found to be the most-severely affected group in the medical malpractice arena. 1274 Moreover, the costs of birth-related neurological injury claims for custodial care and rehabilitation were determined to be particularly high, thus warranting the establishment of a limited system of compensation that was irrespective of fault. 1275 The Florida Birth-Related Neurological Injury Compensation Plan was instituted with the intent to provide compensation to a limited class of catastrophically-injured infants on a nofault basis to help alleviate the malpractice insurance crisis facing 1267 Id. at 12. 1268 Id. 1269 Id. 1270 Id. 1271 Academic Task Force for Review of the Insurance and Tort Systems, Medical Malpractice Recommendations (Nov. 6, 1987); see Galen of Florida, Inc. v. Braniff, 696 So. 2d 308, 310 (Fla. 1997). 1272 Chapter 88-1, section 60, Laws of Florida. 1273 Section 766.301(1)(a), Florida Statutes. 1274 Section 766.301(1)(b), Florida Statutes. 1275 Section 766.301(1)(d), Florida Statutes. 303

physicians practicing obstetrics. This no-fault compensation plan also provided participating physicians finite liability. 1276 Sections 766.301 through 766.316, Florida Statutes, outline the components necessary to implement the no-fault compensation structure for participating physicians and eligible claimants. 1277 The terms that are applicable to sections 766.301 through 766.316, Florida Statutes, are defined in section 766.302, Florida Statutes. The terms define the limitations expressed in this narrow compensation plan. The critical definition as to eligibility for participation in the act is provided in section 766.302(2), Florida Statutes. This section defines birth-related neurological injury as an injury to the brain or spinal cord of a live infant weighing at least 2500 grams for a single gestation or, in a multiple gestation, a live infant weighing at least 2000 grams at birth caused by oxygen deprivation or mechanical injury occurring in the course of labor, delivery, or resuscitation in the immediate post-delivery period in a hospital, which renders the infant permanently and substantially mentally and physically impaired. 1278 Section 766.302(3), Florida Statutes, identifies the persons who are authorized to file a claim on behalf of the infant. The claimant is a person who files a claim pursuant to section 766.305, Florida Statutes, for compensation for a birth-related neurological injury to an infant. Such a claim may be filed by any legal representative on behalf of an injured infant; and, in the case of a deceased infant, the claim may be filed by an administrator or personal representative, or legal representative. 1279 A participating physician is a Florida physician who practices obstetrics or performs obstetrical services and who had paid or was exempted from payment at the time of the injury the assessment required for participation in the birth related neurological injury compensation plan for the year in which the injury occurred. 1280 This definition is found in section 766.302(7), Florida Statutes. 1276 Historically, since the establishment of NICA, some medical malpractice insurers have offered discounts on premiums for obstetricians who participated in the program. House of Representatives, Council for Healthy Communities, Committee on Health Promotion, A Review of the Legislative History and Financial Status of the Florida Birth-Related Neurological Injury Compensation Association (NICA) (Apr. 2001). 1277 Several revisions to the 1988 statute have been made since the inception of NICA. For a historical evolutionary discussion on the changes, see House of Representatives, Council for Healthy Communities, Committee on Health Promotion, A Review of the Legislative History and Financial Status of the Florida Birth-Related Neurological Injury Compensation Association (NICA) (Apr. 2001). 1278 Section 766.302(2), Florida Statutes. 1279 Section 766.302(3), Florida Statutes. 1280 Section 766.302(7), Florida Statutes. 304

Section 766.303, Florida Statutes, provides for the exclusiveness of remedies for the eligible claimants through administrative procedures except where there is evidence of bad faith, malicious purpose, or a willful and wanton disregard. 1281 Exclusive jurisdiction vests with an administrative law judge. Section 766.304, Florida Statutes, provides that a claimant can no longer bring a civil action against a participating physician unless an administrative law judge from the Division of Administrative Hearings determines that the birth-related injury does not fall within the no-fault compensation plan. 1282 Determination of the claims and the nature of the findings that may result are set forth in section 766.309, Florida Statutes. Subsections (1)(a), (b), and (c) provide the findings that shall be made as to: (a) whether the injury is birth-related neurological injury; (b) the obstetrical service is delivered by a participating physician in the course of labor; and (c) how much compensation, if any, is awardable. 1283 For a determination that the infant has been found to have sustained a birth-related neurological injury, such an award to the parents or legal guardian shall not exceed $100,000; funeral expenses shall not exceed $1,500; and attorney fees shall be assessed per the criteria set forth in section 766.309(1)(c), Florida Statutes. Section 766.31(1)(b), Florida Statutes, set forth the maximum awards. 1284 No claim may be filed more than five years after the birth of the injured infant, under section 766.313, Florida Statutes. Terminally, section 766.316, Florida Statutes, requires that each hospital with a participating physician and all participating physicians must provide notice on the forms, furnished by the Association, to the obstetrical patients as to the limited no-fault alternative for birth-related neurological injuries. 1285 The Florida Legislature, in creating an assessment formula, has set forth requirements that initial assessments into the program and yearly 1281 Barden v. Haddox, 695 So. 2d 1271 (5th DCA 1997) (right to receive compensation under NICA, exclusive relief available to victims, is a substitute for common law rights which are otherwise available and as a result forecloses civil lawsuit against a doctor in the plan). 1282 Since O Leary v. Florida Birth-Related Neurological Injury Compensation Association, 757 So. 2d 624 (Fla. 5th DCA 2000), following the Florida Legislature amendment of section 766.304, Florida Statutes, correcting any confusion resulting from the decision in Florida Birth-Related Neurological Injury Compensation Association v. McKaughan, 668 So. 2d 974 (Fla. 1996), as to where jurisdiction reposed. 1283 Section 766.309(1)(a-c), Florida Statutes. 1284 Section 766.31(1)(b), Florida Statutes. 1285 Galen of Florida V. Braniff, 696 So. 2d 308 (Fla. 1997). 305

assessments to remain in the program be made. Section 766.314, Florida Statutes, sets out monetary obligations for such assessments and provides for additional assessments when, under subsection (7)(b), the Department of Insurance finds that the plan cannot be maintained on an actuarially sound basis. 1286 Information Presented to the Task Force Complaints about insurance costs are not new, however, increases since 1999 have shown that the availability of a million or more dollar of coverage has escalated premium costs so high that the dollar insurance amounts are beyond the reach of many physicians. 1287 The Professional Medical Insurance Services, Inc., underwriters for Florida physicians, estimates that, in 2003, for OB/GYNs who presently have coverage, costs for $1 million dollar of coverage will average between $70,000 and $110,000 per year; $250,000 of coverage will cost between $50,000 and $60,000 per year. For OB/GYNs seeking new insurance in 2003, estimates show that $1 million dollars in coverage will cost $150,000 per years and $250,000 in coverage will cost between $90,000 and $107,000 per year. 1288 As a result of these escalating costs, physicians are simply either under insuring or becoming uninsured with regard to their practices. 1289 Indeed, some experts suggest that Florida has reached a crisis status and some obstetricians and surgeons will be paying over $200,000 annually for premiums. 1290 Evidence shows for example that OB/GYN physicians in areas such as Jacksonville are either retiring early, becoming college faculty members to obtaining sovereign immunity, or operating without insurance instead of meeting high premiums for adequate coverage. In Orlando, 20-25 percent of the OB/GYNs will operate without insurance and similar numbers exist in Tampa. In Miami, evidence reflects that 80 percent of the OB/GYNs carry no insurance and those who do are paying over $207,000 per year for $1 million dollars worth of coverage. Tallahassee s Neonatology 1286 Section 766.314 (5)(b), Florida Statutes, authorizes the transfer of no more than $20 million from the Department of Insurance, Insurance Commissioner s Regulatory Trust Fund if the assessments collected are insufficient to maintain the plan on an actuarially-sound basis. In 1988, The Florida Legislature appropriated $40 million of the Insurance Commissioner s Regulatory Trust Fund in the Department of Insurance for NICA. Twenty million dollars of this appropriation has been set aside in case of actuarial need and the other twenty million dollars funded NICA s establishment. See House of Representatives, Council for Healthy Communities, Committee on Health Promotion, A Review of the Legislative History and Financial Status of the Florida Birth-Related Neurological Injury Compensation Association (NICA) 5 (Apr. 2001). 1287 Robert W. Yelverton, M.D., testimony, Oct. 21, 2002, pgs. 55-56. 1288 Robert W. Yelverton, M.D., PowerPoint presentation, Oct. 21,2002. 1289 C. Howard Hunter, testimony, Nov. 22, 2002, pg. 139. 1290 Eleanor Kinney, J.D., testimony, Nov. 4, 2002; Eleanor Kinney, J.D, written statement, Legal Reforms Addressing Affordability and Availability of Medical Liability Insurance: Past Experience and Future Directions, Nov. 4, 2002. 306

Group at the local hospital has been unable to find insurance and is considering closing the neonatal intensive care unit. 1291 Experts acknowledge that NICA, a second-generation level reform of the insurance liability issue, functions as intended according to empirical evidence. It was, however, never intended to be a cure to insurance rates, but rather, was intended to maintain lower insurance premiums. 1292 Based upon its intended purpose, NICA has been a success, however, adoption of no-fault returns has been limited to Florida and Virginia and other countries like Sweden and New Zealand where it has been more fully developed. 1293 Because the exposure of these no-fault compensation plans is limited to a very few states, any empirical data may be skewed and therefore the total success of a no-fault compensation plan has not been embraced. 1294 Clearly, attempts to reduce or maintain reasonable liability insurance costs may not stop doctor-flight without global reform or adoption of uniform insurance policies from state to state. The insurance liability crisis is not unique to Florida and the causes as well as solutions will likewise not be unique to Florida. Unavailable and unaffordable insurance will result in under-insured or uninsured practitioners and those who are injured will seek deeper pockets, because when liability is without restraints, it becomes unpredictable and can result in excessive payouts. 1295 NICA provides for no-fault compensation that results in most stakeholders gaining some benefit. 1296 Instead of almost half of a settlement award going to attorney s fees, reports reflect that, under NICA, less than 1 percent is distributed to plaintiff s attorneys. As a result, a greater percentage of resources are distributed to the child in need of care. 1297 In the fourteen years NICA has been in place, 161 cases have been accepted and there are presently eighty-seven current open cases. Reports reflect an average of $3 million dollars per case is set aside based on actuarial data evaluating the lifetime care of the child, the medical fragility of a child, and the premise that as the child ages, care becomes more expensive. 1298 1291 Robert W. Yelverton, M.D., PowerPoint presentation, Oct. 21, 2002. 1292 Eleanor Kinney, J.D., testimony, Nov. 4, 2002, pg. 180. 1293 Robert Berenson, M.D., testimony, Nov. 4, 2002, pg. 219. 1294 Eleanor Kinney, J.D., testimony, Nov. 4, 2002, pg. 180. 1295 C. Howard Hunter, PowerPoint presentation, Nov. 22, 2002. 1296 Kenney Shipley, testimony, Nov. 22, 2002, pgs. 20-21. 1297 Id. 1298 Id. at 21. 307

Findings and Recommendation To suggest that the current structure of the NICA program should remain unchanged 1299 is not uniformly embraced by all stakeholders. 1300 Indeed, modifications as to eligibility requirements, including birth weight and changes to proof of mental and physical impairment to mental or physical impairment, 1301 may quiet many of the concerns expressed with regard to the willingness to participate. 1302 The broadening of the definition of eligible claimants 1303 may provide a reasonable alternative and likewise create a stopgap to the insurance crisis facing physicians providing obstetrical services. As a potential consequence of any changes made to NICA, financial assessments of hospitals and all physicians may need to be evaluated. 1304 However, at some time in the future, it is reasonable to assume that escalation of costs may level off for obstetricians as well as all physicians because of this no-fault system and the fact that other medical disciplines may be encouraged to urge passage of other no-fault compensation plans. The Task Force, after hearing extensive input from a variety of experts, believes that the issues relating to the NICA program warrants further consideration and study. Additional hearings and testimony from experts are necessary for this worthy program. Recommendation 1. The Legislature should maintain the NICA program because of its success and should further consider and study the issues for broadening the NICA program, as discussed in this report. 1299 William Brewster, testimony, Dec. 3, 2002, pgs. 134-136. 1300 Theodore Babbitt, J.D., testimony, Dec. 3, 2002, pgs. 120-125. 1301 Only when the infant meets the definitional criteria established by this section, will the exclusive remedies provided for by this limited no-fault compensation plan be available. The Florida Supreme Court in Florida Birth-Related Neurological Injury Compensation Association v. Florida Division of Administrative Hearings, 686 So. 2d 1349, 1355 (Fla. 1997), stated that because the NICA plan is a statutory substitute for common law right and liabilities, it should be strictly construed to include only those subjects that clearly embrace in its terms. Additionally, the court further narrowed the application of this statute by affirming the well-settled rules of statutory construction concluding that the word and in the phrase permanently and substantially mental and physically impaired should be read in the conjunctive. To do so does not lead to either an absurd result nor does it undermine the legislative policy of limiting the class. Therefore, an eligible infant to avail themselves of the no-fault compensation system must be at least 2500 grams weight and permanently and substantially mentally and physically impaired. 1302 Tommy Dukes, J.D., testimony, Dec. 3, 2002, pgs. 108-113. 1303 Mr. Dukes proposal that modification to the definition of the birth-related neurological injury to allow the birth weight to be lowered to some number other than 2500 grams, would increase the number of infants eligible for NICA. Id. at 108-110. 1304 William Brewster, J.D., testimony, Dec. 3, 2002, pgs. 139-143. 308

Bad Faith Issue The Task Force voted at its December 20, 2002 meeting, by a vote of 5-0, to examine the following issues with respect to bad faith claims in the context of medical malpractice cases: Should a bad faith cause of action be limited to a right of the insured and not extend to third-party claimants? Should criteria or standards be established for insurer conduct that constitutes bad faith and the duty of good faith when dealing with an insured and limited to protect the assets of the insured from judgment? Current Situation In Florida, there are two causes of action for bad faith claims by third parties to the insured/insurer relationship (e.g., injured plaintiffs). One of these causes of action arises out of common law and is therefore a creation of judicial case law. The other cause of action arises out of judicial interpretation of statute. At its fundamental core, the bad faith cause of action is intended to promote the following purposes: 1305 To economically protect the defendant insured from an excess judgment when the insurer has control of the defense and settlement; To make available to injured persons specified dollar limits that are available as compensation; and To encourage insurers to behave responsibly by making them liable for the financial damage that is caused by their breach of good faith duties. By judicial interpretation of both the common law bad faith cause of action and the statutory law bad faith cause of action, "any person aggrieved" may sue an insurer for the insurer's alleged improper conduct in medical malpractice cases. Accordingly, in Florida, an insurer can be held liable to pay an entire judgment against its insured even when the 1305 See Vincent Rio, J.D., testimony, Nov. 22, 2002, pgs., 116-117. 309

judgment exceeds the limits of the insurance for which the insured has contracted. In Thompson v. Commercial Union Ins. Co. of New York, the Supreme Court of Florida declared: It is established in Florida that an insured has the right to sue and recover damages against his own insurer for an excess judgment on the basis of fraud or bad faith in the conduct of the insured s defense by the insurer. 1306 The Thompson court also extended the thirdparty beneficiary doctrine to allow injured plaintiffs to directly sue a defendant s insurer for recovery of the judgment in excess of the policy limits, based upon the alleged fraud or bad faith of the insurer in the conduct or handling of the suit. 1307 This extension had the effect of enlarging the limits of liability of the insurer beyond those in the stated insurance policy at issue. 1308 Since Thompson, the law in Florida has placed very few limits on that liability. In 1980, the Supreme Court of Florida decided the case of Boston Old Colony Ins. Co. v. Gutierrez. 1309 That case explains many of the principles on which the cause of action by a third party against an insurer for bad faith exists and outlines the Court s understanding of the problems raised thereby. In Boston Old Colony, the plaintiff and defendant were involved in a head-on collision. Both men claimed that the accident was the other's fault. Brown, the defendant in the original case, had a liability policy that covered him up to a limit of $10,000 in damages. However, because of Brown's recollection of the accident and some corroborating evidence, Boston Old Colony hired an accident reconstruction expert to further investigate the cause of the accident. That expert determined that Gutierrez, the plaintiff in the original suit, was on the wrong side of the road at the time of accident impact. Despite this evidence, Boston Old Colony's adjuster knew that there was still a question of Brown s liability and that Gutierrez's injuries were extensive. Therefore, there was a possibility of an excess judgment in the case. The adjuster warned Brown of these matters and suggested that an offer to settle the case be made. Brown refused. He had counterclaimed against Gutierrez for his own injuries and did not want to make the admission of fault that is implied in an offer to settle. Boston Old Colony then had Brown execute a "hold harmless" agreement, in which Brown assumed responsibility for any excess judgment. 1310 1306 Thompson v. Commercial Union Ins. Co. of New York, 250 So. 2d 259, 260 (Fla. 1971); see also Auto Mutual Indemnity Co. v. Shaw, 184 So. 2d 713 (Fla. 1969). 1307 Id. at 264. 1308 Id. at 260 (quoting Shingleton v. Bussey, 223 So. 2d 713 (Fla. 1969)). 1309 Boston Old Colony Ins. Co. v. Gutierrez, 386 So. 2d 783 (Fla. 1980). 1310 Id. at 784. 310

Before the trial, Gutierrez offered to take the policy limits of $10,000 in settlement of his claim against Brown. Boston Old Colony responded by denying liability. Then, Brown settled his counterclaim against Gutierrez and his insurer. Boston Old Colony offered Gutierrez the policy limits as settlement of the claim. Gutierrez refused. The trial resulted in a judgment against Brown for $1,400,000. Gutierrez then sued Boston Old Colony, alleging bad faith on its part because of its failure to settle the claim for policy limits when it had the opportunity. Gutierrez prevailed and obtained a judgment against Boston Old Colony for $1,400,000. 1311 The question before the Supreme Court was whether the common law in Florida 1312 authorized "a bad faith action against an insurance company when that company [had] refused to settle a claim at the express direction of its own insured who obtains a settlement of his claim and the insurance company thereafter offers to settle for its policy limits before trial?" 1313 The court answered "no." In analyzing this issue, the court noted that "[a]n insurer, in handling the defense of claims against its insured, has a duty to use the same degree of care and diligence as a person of ordinary care and prudence should exercise in the management of his own business." 1314 The insurer assumes a duty to exercise "such control and made such decisions in good faith and with due regard for the interests of the insured" when the insured surrenders all control over the handling of the claim, including all decisions in the litigation and settlement to the insurer. 1315 This good faith duty obligates the insurer to advise the insured of settlement opportunities, of the probable outcome of the litigation, of the possibility of an excess judgment, and of any steps the insured might take to avoid such a judgment. The insurer "must investigate the facts, give fair consideration to a settlement offer that is not unreasonable under the facts, and settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so." 1316 Justice Alderman wrote specially to voice his opinion on the issues of the bad faith cause of action in the Boston Old Colony case. He opined that an injured plaintiff should not be allowed to sue the defendant's insurer for bad faith failure to settle a claim. According to Justice Alderman, the good faith duty to settle is between the insurer and insured. "In the Alicein-Wonderland' world created by the [common law] rule, it is to the 1311 Id. at 784-785. 1312 See Thompson v. Commercial Union Ins. Co. of New York, 250 So. 2d 259 (Fla. 1971). 1313 Boston Old Colony Ins. Co. v. Gutierrez, 386 So. 2d 783, 784 (Fla. 1980). 1314 Id. at 785. 1315 Id. 1316 Id. 311

injured party's benefit if the insurer breaches its duty to its insured and to his detriment if there is no breach." 1317 This result exists because "if the insurer settles, the plaintiff will receive no more than the policy limits, but if it does not, the plaintiff may end up with both the policy limits and an excess judgment." 1318 Accordingly, the common law rule induces a plaintiff not to settle. 1319 While in Boston Old Colony, the Supreme Court found that the third party (Gutierrez) had failed to prove bad faith on the part of the insurer (Boston Old Colony), the Court continued to extend the common law cause of action itself to persons beyond the insured/insurer contract relationship. Furthermore, the same result has been reached by the courts with respect to the statutory cause of action for bad faith by an insurer. 1320 Section 624.155, Florida Statutes, describes who may bring a civil action for bad faith and outlines the Insurance Code violations that subject the insurer to such suits. This section states that "[a]ny person may bring a civil action against an insurer when such person is damaged [by the enumerated provisions of the Insurance Code]." 1321 In 1995, the Supreme Court had the opportunity to interpret the phrase, "any person" in the context of a third-party bad faith claim against an insurer. 1322 The court concluded that these words were "precise and their meaning unequivocal. By choosing this wording the legislature has evidenced its desire that all persons be allowed to bring civil suit when they have been damaged by [statutorily] enumerated acts of the insurer." 1323 Even though the Supreme Court interpreted "any person" to include those people beyond the insured/insurer contractual relationship, the court recognized the premonition of other courts that such an interpretation of this phrase would achieve an unreasonable result. Permitting a third party such a cause of action against the insurer any time the insurer allegedly 1317 Id. at 786 (Alderman, J., concurring specially). 1318 Id. 1319 Id.; see also Judge Carroll, in Canal Insurance Company of Greenville, South Carolina v. Sturgis, 114 So. 2d 469 (Fla. 1st DCA 1959), aff d, 122 So. 2d 313 (Fla. 1960): No one can today question the legal right of the insured to sue the insurer for negligence or bad faith in failing to settle a claim within the policy limits for, if he has had to pay a part of the judgment, he had indeed suffered damages because of such failure of the insurer; but, when the judgment creditor directly so sues the insurer for an amount above such limits, a vastly different situation exists in the eyes of the law. The judgment creditor has not suffered because of the insurer s failure, but has, if anything, gained thereby. The judgment creditor would be in an anomalous position, for typically he would be claiming damages for the insurer s failure to settle the case for much less than the verdict he himself actually won. 1320 See, e.g., Auto-Owners Ins. Co. v. Conquest, 658 So. 2d 928 (Fla. 1995), State Farm Fire & Casualty Co. v. Zebrowski, 706 So. 2d 275 (Fla. 1997). 1321 Section 624.155(1)(a)(1), Florida Statutes. 1322 See Auto-Owners Ins. Co. v. Conquest, 658 So. 2d 928 (Fla. 1995). 1323 Id. at 929. 312

failed to settle in good faith could result in undesirable social and economic effects (such as multiple litigation, unwarranted bad faith claims, coercive settlements, excessive jury awards, and escalating insurance, legal, and other transaction costs). 1324 In addition to a cause of action under section 624.155(1)(a), Florida Statutes, as interpreted in Auto-Owners Ins. Co. v. Conquest, 1325 a bad faith cause of action also exists under section 624.155(1)(b), Florida Statutes. This provision states, in pertinent part, as follows: (1) Any person may bring a civil action against an insurer when such person is damaged: (b) By the commission of any of the following acts by the insurer: 1) Not attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests; 2) Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which payments are being made; or 3) Except as to liability coverages, failing to promptly settle claims, when the obligation to settle a claim has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage. In 1997, the Supreme Court interpreted this additional cause of action in section 624.155(1)(b), Florida Statutes, and reasoned as follows: In subsection (1)(a) there are no specified limitations upon claims for violation of any of the enumerated statutes. However, in subsection (b), the cause of action is predicated on the failure of the insurer to act "fairly and honestly toward its insured and with due regard for his interest." The duty runs only to the insured. Therefore, in the absence of any excess judgment, a third-party plaintiff cannot demonstrate that the insurer breached a duty toward its insured. 1326 1324 Id. at 930 (quoting Cardenas v. Miami-Dade Yellow Cab Co., 538 So. 2d 491, 496 (Fla. 3d DCA 1989)). 1325 Auto-Owners Ins. Co. v. Conquest, 658 So. 2d 928 (Fla. 1995). 1326 State Farm Fire & Casualty Co. v. Zbrowski, 706 So. 2d 275, 277 (Fla. 1997). 313

Accordingly, section 624,155(1)(b), Florida Statues, allows a third party to sue a liability insurer for bad faith, without an assignment by the insured when the third party obtains a judgment in excess of the insured's policy limits. This result provides the basis for alleging a breach of duty to the insured. While the Boston Old Colony case discussed above was decided in favor of the defendant insurer, the case demonstrates various issues facing insurers in fulfilling their obligations to defend their insureds. First, insurers must remember that, despite their best efforts on behalf of their insured, they are still subject to a bad faith claim brought by the injured third party. Because the claim is brought after the jury returns a verdict in excess of policy limits against the insured, and given the inherent sympathy afforded to the injured plaintiff in a medical malpractice suit, the insurer faces a rather daunting obstacle in defending a bad faith action. Such a defense can require the insurer to maintain that, despite the plaintiff s serious injuries, and with the hindsight knowledge that the underlying suit resulted in a large jury award that exceeded the insured s policy limits, the insurer not only acted reasonably in not settling the underlying medical malpractice suit, but continues to act appropriately in refusing to pay the jury s award. Second, the insurer has a duty to try to settle the case where a reasonably prudent person facing the prospect of paying the total judgment would do so. This is the simple negligence standard and makes the insurer s position more untenable. At least two standard jury instructions used by Florida judges 1327 charge the jury with the task of determining whether, under the totality of the circumstances, the insurer was reasonable in deciding to proceed to trial, rather than settle the claim. This standard, combined with the statutory reasonable person standard, seems to guarantee the success of a bad faith claim 1328 submitted to a jury, given its hindsight regarding the outcome of the already-decided underlying case. The third issue from Boston Old Colony comes from language at the close of the Supreme Court s opinion there: By way of caveat, we point out that the hold harmless agreement in this case was not a determining factor in our 1327 See Fla. Std. Jury Instr. MI 3.1, 3.2. 1328 Originally in Florida, bad faith cases fell within the same category of wrongs as frauds. See, e.g., Thompson v. Commercial Union Ins. Co. of New York, 250 So. 2d 259, 264 (Fla. 1971) (holding that a third-party plaintiff could directly sue an insurer for alleged fraud or bad faith of the insurer in the conduct or handling of the suit ). By way of contrast, reasonable person standards are those that govern innocent (without malice) mistakes (i.e., basic negligence). 314

decision. An insurer with control over defense and settlement must at all times act in good faith, and it may not insulate itself from a bad faith excess judgment by simply obtaining a hold harmless agreement from its insured. 1329 Accordingly, even when an insurer acts at the insistence of the insured in refusing to settle the claim, an insurer is still susceptible to a bad faith judgment against it. An insurer must operate as a fiduciary in the insured s best interest but the insurer cannot defer to the insured s wishes regarding settlement of the case. 1330 An insurer can also be liable in bad faith for delays in offering policy limits, failing to disclose policy limits, and failing to inform the insured of settlement overtures. Liability still attaches for these omissions when the third-party plaintiff refuses settlement offers so long as there was an opportunity to settle the case at some point in the claim process. 1331 For example, the Third District Court of Appeal decided a case in which an insured s daughter seriously injured a pedestrian in a car accident. The pedestrian s attorney contacted the insurer and requested disclosure of the insured s policy limit. But, the attorney never made a specific monetary demand. Ultimately, the insurer tendered an offer of policy limits, despite the injured pedestrian s lack of demand. The offer was rejected. At trial, the jury returned a verdict against the insured for $250,000. The insured filed suit against his insurer, alleging bad faith. 1332 The Third District Court found bad faith and noted: Any question about the possible outcome of a settlement effort should be resolved in favor of the insured; the insurer has the burden to show not only that there was no realistic possibility of settlement within policy limits, but also that the insured was without the ability to contribute to whatever settlement figure that the parties could have reached. [citations omitted]. Whether the insurer s delay in disclosing the policy limits foreclosed settlement negotiations and prevented an offer to settle is a relevant and material fact. 1333 Thus, there is an affirmative duty on the part of the insurer to seek settlement of a claim against the insured within the policy limits. When 1329 Boston Old Colony Ins. Co. v. Gutierrez, 386 So. 2d 783, 786 (Fla. 1980). 1330 See Vincent Rio, J.D., testimony, Nov. 22, 2002, pgs. 120-121. 1331 See Powell v. Prudential Property & Casualty Ins. Co., 584 So. 2d 12 (Fla. 3d DCA 1991), rev. denied, 598 So. 2d 77 (Fla. 1992). 1332 While the Powell v. Prudential Property & Casualty Ins. Co. case arose in a general tort context, the same result would have existed in the medical malpractice context, substituting in the fact pattern a doctor for the car driver and an injured patient for the pedestrian. 1333 Id. at 14-15. 315

the insurer fails to obtain a settlement, it then has the burden of demonstrating that the plaintiff would not have accepted a settlement offer within policy limits at any time. Furthermore, under section 627.4147, Florida Statutes, all medical malpractice insurance policies must contain a clause authorizing the insurer to determine, to make, and to conclude, without the permission of the insured, any... settlement offer... if the offer is within the policy limits. 1334 This statute further proclaims that it is against public policy for any insurance... policy to contain a clause giving the insured the exclusive right to veto any... settlement offer... when such offer is within the policy limits. 1335 The result of this provision is that the insurance carrier is expected to make an independent evaluation of the claim and to act accordingly, including settling the case, regardless of the insured s position as to whether settlement is appropriate. These statutory provisions place pressure on the insurer to settle claims filed against their insureds, at the risk of being liable to either the insured or a third-party plaintiff for the entire judgment rendered against the insured, and irrespective of the coverage limits of the insured s policy. Despite this pressure to settle claims, however, the statutes also place a constraint on the insurer s ability to settle when the insured objects to the settlement. Section 627.4147(1)(b), Florida Statutes, also contains the following language: any offer of admission of liability, settlement offer, or offer of judgment made by an insurer or self-insurer shall be made in good faith and in the best interest of the insured. This standard is open to many interpretations, including the insured s out-of-pocket expense, financial position, and the impact settlement may have on future employment possibilities or the insured s professional reputation. The damages recoverable in bad faith actions under present law in Florida, as well as the other standards discussed above, have little relationship to the public purposes of asset protection, making specified coverage available, or encouraging reasonable behavior. 1336 When a $5,000,000 judgment is entered against an insured because of the insurer s failure to settle, the implication is that the real amount of the insured s damages is $5,000,000, when the insured may never have such an amount of reachable assets. Accordingly, the insurer is required to pay beyond the combination of its policy limits and the accumulated and future assets of the insured, with no rational basis. The conclusion is that the plaintiff is financially better off if the insurer behaves badly than if the insurer behaves properly. 1334 Section 627.4147(1)(b), Florida Statutes. This mandate does not apply to all liability insurance contracts but almost all contracts give the insurer the exclusive right to settle. 1335 Section 627.4147(1)(b)1, Florida Statutes. 1336 See Vincent Rio, J.D., Summary of Comments to Medical Malpractice Task Force 1. 316

Like Florida, California allows bad faith causes of action when an insurer breaches its duty to attempt to settle meritorious claims. 1337 However, California does not require that the insured contract away his right to trial when the insurer feels that the case should be settled. Thus, when an insured refuses to consent to settle and the insurance contract allows the insured to veto settlement, the insurer cannot be held liable in fad faith for refusing to settle the plaintiff s claim against the insured s consent. 1338 Other states also expressly articulate the standards that constitute bad faith acts. For example, Illinois law provides that seven factors should be considered in determining whether the insurer has failed to act in the good faith interests of the insured. These factors include: whether the insurer has considered the advice of the insurer s own adjuster; whether the insurer refuses to negotiate a settlement; what advice the insurer receives from its defense counsel; whether the insurer keeps the insured fully aware of the claimant s willingness to settle; whether the insurer conducts an adequate investigation into the claim; whether there exists a substantial prospect of an adverse verdict; and the potential for damages that exceed the policy limits. 1339 Finally, Michigan is instructive as to an example in limiting damages in bad faith cases. In Michigan, the relationship with the insured is not a fiduciary relationship. 1340 On the other hand, the duty is greater than that of a buyer and seller of products and services. The duty of using good faith in settlement negotiations is a duty to protect the insured it is of a fiduciary nature. 1341 The insurer must fulfill its policy-contracted obligation with the utmost loyalty to its insured. 1342 Michigan law provides that bad faith may exist if the defense attorney advises the insurer that defense of the case is hopeless, recommends settlement, the insurer refuses to settle, and the jury returns a judgment in excess of policy limits. 1343 Arbitrary, reckless, indifferent, or intentional disregard of the interest of the insured amounts to bad faith. 1344 1337 See section 790.03, California Statutes. 1338 See Carlile v. Farmers Ins. Exchange, 219 Cal. Rptr. 773 (Cal 3d DCA 1985). 1339 See O Neill v. Gallant Ins. Co., 769 N.E.2d 100 (Ill. 5th DCA 2002). 1340 Drouillard V. Metropolitan Life Ins. Co., 107 Mich. App. 608, 621 (1981). 1341 Lisiewski v. Countrywide Ins. Co., 75 Mich. App. 631, 637 (1977). 1342 Meirthew v. Last, 376 Mich. 33, 38 (1965). 1343 City of Wakefield v. Globe Indemnity Co., 246 Mich. 645 (1929). 1344 Commercial Union Ins. Co. v. Liberty Mutual Ins. Co., 426 Mich. 127 (1986). This case outlines twelve factors that the factfinder may take into account... in deciding whether or not the defendant 317

The most unique principle of Michigan s bad faith law is the insurer s liability for bad faith in the case of excess judgments. Michigan law limits the bad faith exposure of an insurer by precluding collection on the judgment from the insurer beyond what is or would actually be collectable from the insured. 1345 In Frankenmuth Mutual Ins. Co. v. Keeley, Charles Keeley, the son of the insured, shot the plaintiff, Boone, rendering Boone a quadriplegic. 1346 The plaintiff demanded policy limits of $50,000, but the insurer initially offered to settle for $20,000 on the basis that the policy excluded intentional acts. Within the month and after the plaintiff filed his lawsuit, the insurer offered to settle for $25,000. Two and one-half years later, after much litigation over the claim and the coverage, the insurer tendered policy limits. Boone rejected this offer. The case proceeded to trial and the jury determined the damages to be $500,000, but found that the plaintiff, Boone, was 50 percent at fault. Judgment was entered against Keeley for $250,000. Boone agreed to forbear any action against Keeley for the excess judgment, and Keeley agreed to pursue action against the insurer for the excess judgment and to pay any sums recovered from the insurer to the plaintiff. 1347 On first hearing, the majority of the Michigan Supreme Court held that the insurer is liable for the excess without regard to whether the insured has the capacity to pay. 1348 On rehearing, the Michigan Supreme Court essentially reversed itself and limited the bad faith liability of the insurer to the amount that can actually be collected from the insured. 1349 The reasoning behind the Michigan rule on bad faith liability rests on the issue of causal relationship to damages. The question was whether... there was a causal relationship between the bad-faith conduct that the [judge] found in the handling of the claim and the loss claimed by Keeley resulting from the entry of the judgment in the amount of $250,000." 1350 Accordingly, the question should be whether the insurer caused damage to [insurer] acted in bad faith... Id. at 137-139. The Florida Legislature may want to consider adopting some or all of these factors. 1345 Frankenmuth Mutual Ins. Co. v. Keeley, 433 Mich. 525, 565 (1989). The quoted language is from the dissenting opinion of Justice Levin; however, Justice Levin s dissent was adopted by the majority in Frankenmuth Mutual Ins. Co. v. Keeley (on rehearing), 436 Mich. 372, 376 (1990). 1346 Id. at 547. 1347 See id. at 547-549. 1348 Id. at 528. The court also adopted what is known as the judgment rule, as contrasted with the prepayment rule. The prepayment rule requires that the insured make some payment on the judgment before pursuing an action for bad faith against the insurer, while the judgment rule simply requires the entry of a judgment. Id. at 553. This portion of the majority opinion was adopted by the dissent on first hearing and then by the majority on rehearing. See Frankenmuth Mutual Ins. Co. v. Keeley (on rehearing), 436 Mich. 372 (1990). 1349 Id. at 565. 1350 Id. at 551. 318

the insured, and if so, what actual damage the insurer sustained. In reaching the decision that the Michigan law should be that the insurer is not required to pay more than the insured is able to pay on the judgment, the Michigan Supreme Court quoted extensively from a New York Court of Appeals case and from Judge Keeton: I do not suggest although there are a number of decisions so holding that an insured must pay the judgment before he, or another on his behalf, is able to proceed against a bad faith insurer. However, there must be some showing that he has been damaged. In the case before us, there is not the slightest evidence, or even intimation, that the insured was harmed by the judgment, that he had any assets which were imperiled or that either his reputation or credit was impaired. In short, the complaint in this case should be dismissed not only because there is no evidence that the insurer acted in bad faith but also because there is no evidence that the insured suffered any damaged. 1351 Judge Keeton has expressed the following view: When it seems almost certain the insured will never pay anything at all on the excess judgment if the claim against the insurer is denied, arguments that the insured has been damaged by the increase in debts are rather weak support for any cause of action at all, much less for a measure of damages equal to the amount of the increase in the insured s debts. However, other courts have concluded that the entry of judgment against a person constitutes a loss and that the insured s loss does not turn on whether the judgment has been satisfied. Since, absent a discharge of the obligation through a bankruptcy proceeding, the third party s judgment can remain as an outstanding obligation for extended periods of time, in many circumstances there is considerable uncertainty in regard to predicting whether the insured may ultimately have resources or assets that may be taken to satisfy some portion of the judgment. Third party claimants are not in a position to assert that they were harmed as a result of the insurer s conduct in regard to having not settled the tort claim. The insurer s duty was to the insured, not to the claimant. Furthermore, 1351 Gordon v. Nationwide Mutual Ins. Co., 30 N.Y. 2d 427, 441, 285 N.E 2d 849 (1972). 319

in one sense, a third party benefits from the insurer s refusal to settle because the insurer s refusal to settle resulted in the claimant s obtaining a judgment in excess of the amount the claimant had offered to accept in settlement. Thus, although the third party claimant deserves further compensation, the theoretical justification for imposing liability on the insurer does not warrant a recovery by such a claimant any more than the innocent victims of an under-insured tortfeasor would be entitled to indemnification beyond the amount of the applicable coverage from a liability insurer who had not refused a settlement. 1352 The Task Force finds that the Michigan law that precludes the collection on the judgment from the insurer beyond what is or would actually be collected from the insured is sound in principle, public policy, and reasoning. Information Presented to the Task Force The Task Force heard testimony that certain aspects of bad faith law have resulted in costing consumers more than it benefits them. 1353 According to testimony, one of the most frequent complaints of defendant medical providers is that they are not responsible for the plaintiff s injury and that they do not want to settle the case because they want to prove their innocence in court. 1354 However, insureds with low policy limits, as compared to the possible amount of a jury verdict, are often required by the law of bad faith to accept settlement offers that otherwise would be rejected. 1355 For example, a physician is sued for $5,000,000 by a plaintiff who alleges medical malpractice on the part of the physician. The physician has $300,000 in liability coverage and $100,000 of reachable assets. The physician, based on evaluation of the case, appears to be innocent and when this insurer refuses to settle based on such an evaluation, he or she prevails 90 percent of the time. Under current law, if this case is lost at trial, the insurer would be liable for the $5,000,000 verdict. The difference of $4,600,000 was not caused by the insurer s bad faith but the plaintiff is the recipient of the windfall anyway. 1356 This scenario is the environment in which cases are litigated and it forces insurers to settle 1352 Frankenmuth Mutual Ins. Co. v. Keeley, 433 Mich. 525, 554-556 (1989). 1353 See Vincent Rio, J.D., Summary of Comments to Medical Malpractice Task Force 2. 1354 See Tommy Dukes, J.D., testimony, Oct. 21, 2002, pg. 239. 1355 See Vincent Rio, J.D., testimony, Nov. 22, 2002, pg. 121. 1356 See Vincent Rio, J.D., Summary of Comments to Medical Malpractice Task Force 1-2. 320

cases at, near, or even somewhat above policy limits to avoid bad-faith claims. 1357 The following solutions were provided to the Task Force: Restore the insured as the owner of the bad faith cause of action. 1358 The common law cause of action, as outlined by the Supreme Court in 1980 1359 should be preempted by the Florida Legislature so that only insureds, not third-party plaintiffs, can bring a bad faith cause of action against its insurer. 1360 In addition, section 624.155, Florida Statutes, should be amended to limit the proper party in a bad faith cause of action to the insured only. Legislatively identify common sense standards of what constitutes bad faith. 1361 The current law is vague as to what defines bad faith. Examples of some standards that were presented to the Task Force, include: (1) the insurer s proper investigation of a claim, providing an insurer with a reasonable period in which to investigate all aspects of potential liability of the insured and of the plaintiff s potential damages without being in bad faith; (2) no bad faith if the insurer tenders its policy limits sixty days before trial; (3) the insurer s willingness to negotiate, allowing the insurer to consider the interest of all its insureds in defending claims that it believes to be overstated; (4) clarify that an insurer has no affirmative duty to initiate settlement negotiations when it believes such an action would be detrimental to the ultimate settlement; (5) disallow bad faith claims when an insured refuses to consent to a proposed settlement and/or when the insurer agrees to indemnify the insured for excess judgments collectible from the insured s reachable assets; (6) the insurer s consideration of the advice of its defense counsel; and (7) whether the insurer informed the insured of the offer to settle within the limits of coverage, the right to retain personal counsel and the risks of litigation. 1362 1357 Id. at 2. 1358 See Vincent Rio, J.D., testimony, Nov. 22, 2002, pgs. 117-118. 1359 See Boston Old Colony Ins. Co. v. Gutierrez, 386 So. 2d 783 (Fla. 1980). 1360 Section 624.155(7), Florida Statutes, currently provides that [t]he civil remedy specified in this section does not preempt any other remedy or cause of action provided for pursuant to any other statute or pursuant to the common law of this state. Id. 1361 See Vincent Rio, J.D., testimony, Nov. 22, 2002, pgs. 117-118. 1362 See Vincent Rio, J.D., Summary of Comments to Medical Malpractice Task Force 3. 321

Calculate the maximum liability for bad faith as the amount of damages that were actually caused by the acts of bad faith, limited by the amount of the reachable assets of the insured. 1363 The bad faith claimant should be required to prove that he has sustained actual financial damage as a result of the bad faith of the insurer and the claim of bad faith should be limited to such actual damage. In addition, the insured should be entitled to retain his assets while the insurer pays any excess judgment, up to the amount of the reachable assets of the insured. If the financial circumstances of the insured improved over the life of the judgment, the insurer should be responsible for such excess payments. 1364 In response, the Task Force heard testimony that the current state of the law in Florida adequately protects insured and ensures that insurers protect insureds assets. 1365 Insurers control the defense of the case and decide when and if to settle. 1366 The plaintiffs bar testified that because judgments in Florida are effective for twenty years, a proposal to limit the bad faith exposure of an insurer to the reachable assets of the insured at the time of judgment may expose the insured s future assets. 1367 Findings and Recommendations The Task Force finds that there is a problem with the state of the law in Florida on the issue of bad faith. The problem is that the cost of settlement made under the veil of the bad faith law in Florida is a major factor in raising loss costs that insurers must pay and, in turn, in raising malpractice insurance premiums. The problem stems from the fact that third parties can sue the insurer for bad faith, when the good-faith duty is owed by the insurer to the insured. There is no corresponding good faith duty that extends from the insurer to injured plaintiffs who are not part of the insured/insurer contractual relationship. The law on bad faith is lacking in logical standards that constitute (or at least evidence) bad faith on the part of an insurer. Finally, a limitation on the amount of damages for which an insurer would be liable would promote consistency and predictability in the market. The Task Force finds calculating the damages recoverable in an action for bad faith based on the actual damages caused by the insurer would have several beneficial effects. First, this calculation would allow insurers to 1363 See Vincent Rio, J.D., testimony, Nov. 22, 2002, pgs. 123-124. 1364 Id. at 121. 1365 See Lake Lytal, J.D., testimony, Nov. 22, 2002, pgs. 123-124. 1366 Id. at 124. 1367 Id. at 126. 322

honor requests from well-informed insureds who prefer that actions be defended rather than settled because of the threat now posed by Florida bad faith standards and calculations of damages. Second, this calculation would enable insurers to more effectively resist the coercive effect of these standards and measurements of damage, which raise the costs of settlements and premiums. The assets of insureds would remain fully protected. The protection of assets that are replaced by insurance may logically be expected to encourage the purchase of insurance. The Task Force recommends the following legislative solutions: Recommendation 1. The Legislature should restore the insured as the owner of the bad faith cause of action. The common law cause of action, as outlined by the Supreme Court in 1980 1368 should be legislatively cured so that the Florida Legislature preempts that rule and only insureds, not third-party plaintiffs, can bring a bad faith cause of action against its insurer. 1369 In addition, section 624.155, Florida Statutes, should be amended to also limit the proper party in a bad faith cause of action to the insured only. Recommendation 2. The Legislature should articulate standards of what constitutes bad faith on the part of an insurer. Recommendation 3. The Legislature should require that the maximum liability for bad faith be calculated as the amount of damages that were actually caused by the acts of bad faith, limited by the amount of the reachable assets of the insured. Recommendation 4. The Legislature should require that, if an insurer is found to be in bad faith or settles a case for bad faith, the Department of Insurance be notified of such finding. Recommendation 5. The Department of Insurance should conduct an investigation into the specific allegations of the insurer and into the insurer s general practices and should take necessary action against the insurer to punish and prevent future bad faith practices. 1368 See Boston Old Colony Ins. Co. v. Gutierrez, 386 So. 2d 783 (Fla. 1980). 1369 Section 624.155(7), Florida Statutes, currently provides that [t]he civil remedy specified in this section does not preempt any other remedy or cause of action provided for pursuant to any other statute or pursuant to the common law of this state. Id. 323

Alternative Insurance Products Issue The Task Force voted at its January 8, 2003 meeting, by a 5-0 vote, to examine the following issues with respect to alternative insurance products in the context of medical malpractice cases: Should the Department of Insurance be directed to work with physicians and hospitals to expand self-insurance options? Should the Legislature create tax and other regulatory incentives for the creation of mutual, trust, and other physicianowned insurance companies to provide coverage? Should the patient compensation fund be reactivated? o Should there be mandatory participation by physicians and hospitals? o Should there be caps on payments? Current Situation The Florida Insurance Code provides several alternative insurance products that can be used by healthcare providers to provide medical malpractice insurance coverage. These include commercial Self-Insurance Funds in section 624.462, Florida Statutes, Risk Retention Groups in section 627.942, Florida Statutes, and Medical Malpractice Risk Management Trust Funds in section 627.357, Florida Statutes. Only the Medical Malpractice Risk Management Trust Fund statute is a specific alternative for commercial medical malpractice insurance; the other forms of self-insurance are available to any group providing selfinsurance. A Medical Malpractice Risk Management Trust Fund is authorized to purchase insurance, specific excess insurance, and aggregate excess insurance. The fund is authorized to hire consultants for loss prevention and claims management coordination, and pay claims; the prudent investment of trust funds is also authorized. The Department of Insurance is directed to adopt rules to implement the section including ensuring the funds meet a requirement that a trust fund created pursuant to the act maintain sufficient reserve to cover contingent liabilities in the event of a dissolution. The funding of a trust fund created pursuant to the section is provided by premiums paid by members. Additionally, each member has a contingent 324

assessment liability to pay actual losses when there is a deficiency due to claims or liquidation. A member s share of any deficiency is to be computed by applying against the member s premium the ratio of the total deficiency to the total premiums earned. If a member fails to pay the assessment, the other members are proportionately liable for that amount. This assessment must be made if assets of the trust fund are insufficient to discharge the funds liabilities and meet the requirements of law or if a judgment remains unpaid for thirty days. The Department of Insurance must review and approve all expense factors related to rates before a new rate can be implemented. For the Department to approve rates and the associated expense factors, the rates must be justified and reasonable for the benefits and services provided. The statute provides that the premiums, contributions, and assessments are subject to taxation at 1.6 percent instead of the 1.75 percent provided in section 624.509(1) and (2), Florida Statutes, for insurance premiums and assessments generally. In 1992, the statute was amended to provide that no Medical Malpractice Risk Management Trust Fund could be formed after October 1, 1992. Currently there are only two trust funds in existence: the South Pinellas Medical Malpractice Risk Management Trust Fund, and the Central Dade Medical Malpractice Risk Management Trust Fund. Information Presented to the Task Force Speakers on both sides of the medical malpractice issue discussed the need to reactivate the provisions of section 627.357, Florida Statutes, to again allow physicians and hospitals to create self-insurance funds. Speakers agreed that making this alternative form of insurance available would provide a viable insurance option to healthcare providers. Mr. Neal Roth indicated physicians and hospitals needed the authority to create the self-insurance trust funds. 1370 To encourage the creation of these trust funds, Mr. Roth suggested the Legislature should provide tax incentives such as exemption from the tax on premiums and exemption of the companies from payment to the guarantee fund. He also suggested the Department of Insurance should be given additional authority to review the capitalization requirements for these trust funds. Mr. Bruce Hill, an Orlando attorney who represents hospitals, also recommended removing the prohibition on creation of self-insured trust 1370 Neal Roth, J.D., testimony, Nov. 22, 2002, pgs. 129-130. 325

funds. 1371 Mr. Hill was general counsel and chief trial counsel for the Florida Hospital Trust Fund created in the 1970s in response to that medical malpractice insurance crisis. Mr. Hill testified that the fund worked well until 1995, when the insurance companies under-cut the rates to the point it was more cost effective for the hospitals to purchase commercial insurance. 1372 At that point, the trust fund stopped selling insurance. Currently, all of the claims against the fund have been paid and an excess $30 million is to be refunded to the member hospitals. 1373 Mr. Hill testified that the fund was heavily regulated by the Department of Insurance to ensure the rates were actuarially sound and the investments were secure. He explained that the reason the fund worked was a low expense ratio resulting from no advertising and no agents. Additionally, the members who ran the trust fund had an interest in ensuring that the fund operated cost effectively because they had to pay part of the bill if assessments became necessary. Finally, the member-run trust fund encouraged the participating hospitals to maintain better risk management programs to reduce claims. 1374 David McKinney, an executive with Pro National Assurance Company, pointed out some of the concerns with newly-formed alternative risk groups. 1375 First, they face the same uncertainty in claims experience that the insurance companies are facing and the managers often do not have the experience to assess those risks. This allows mistakes in underwriting and claims evaluation. 1376 Because of the significant lag time for claims to be made these problems can be long term in nature. Additionally, the physician-run operations are subject to losing members when the insurance market softens and commercial insurance rates decrease. 1377 His last major point was the fact that under these funds, the members are jointly and severally liable for all claims. He stated the key to a strong fund was having good people running the insurance program who know what they are doing. 1378 Mr. Steve Roddenberry 1379 discussed the regulation of risk retention groups with the Task Force. After an extensive discussion of commercial insurance, Mr. Roddenberry brought up concerns regarding the regulation of risk retention groups. 1380 The rates and forms of risk retention groups domiciled outside of Florida are not subject to review by the Department 1371 Bruce Hill, J.D., testimony, Nov. 22, 2002, pgs. 143, 146-150. 1372 Id. 1373 Id. 1374 Id. 1375 David McKinney, testimony, Nov. 22, 2002, pgs. 151-155. 1376 Id. 1377 Id. 1378 Id. 1379 Steve Roddenberry, Director, Department of Insurance. 1380 Steve Roddenberry, testimony, Nov. 4, 2002, pg. 401. 326

of Insurance. 1381 Further, they do not have the same minimum capital or surplus requirements as insurance companies and they are not eligible for the guarantee fund if a failure should occur. 1382 Findings and Recommendations The Task Force finds the healthcare community has an option to address medical malpractice self-insurance programs. Further, the Task Force finds that the Department of Insurance does not have sufficient rulemaking authority to provide protection to the healthcare professionals and the victims of medical malpractice utilizing or making claims against selfinsurance funds. The Task Force recommends the Legislature encourage the use of selfinsurance funds by healthcare providers and expand the rulemaking authority of the Department of Insurance to adopt rules providing for better regulation of the self-insurance programs to ensure they remain solvent and provide the insurance coverage purchased by participants. The Task Force finds that removing the limitation on the creation of Medical Malpractice Risk Management Trust Funds would provide an additional opportunity for medical facilities and providers to have insurance rather than go bare, quit practicing medicine, or reduce services provided. Additionally, the creation of these funds would increase the opportunities to ensure that injured parties are compensated. Recommendation 1. The Legislature should repeal the prohibition against creating Medical Malpractice Risk Management Trust Funds in section 627.357, Florida Statutes. Recommendation 2. The Legislature should encourage the creation of self-insured options for healthcare providers. Recommendation 3. The Legislature should expand the rulemaking authority of the Department of Insurance for self-insurance programs to ensure they remain solvent and provide the insurance coverage purchased by participants. 1381 Id. 1382 Id. 327

Insurance Code Reform Issue The Task Force voted at its January 16, 2003 meeting, by a 5-0 vote, to examine the following issues with respect to insurance code reform: Should the Department of Insurance be authorized to require insurers to provide: How much insurers pay for the different categories of damages; How much claimants actually received in settlements or verdicts that are reduced post trial; and, How much insurers pay in cases involving multiple defendants? Should the Department of Insurance prohibit punitive damages or bad faith judgments from being included in the rate base? Current Situation Section 627.912, Florida Statutes, requires all insurance companies, selfinsurers, and joint underwriting associations providing professional liability insurance to a healthcare practitioner 1383 to report any claim or action for damages for personal injuries claimed to have been caused by error, omission, or negligence in the performance of the insured s professional services, or based on a claim the services were performed without consent. These reports must be made only if the claim resulted in a final judgment or a settlement in any amount. 1384 The reports must contain the following specific information: (2) The reports required by subsection (1) shall contain: (a) The name, address, and specialty coverage of the insured. (b) The insured s policy number. (c) The date of the occurrence with created the claim. (d) The date the claim was reported to the insurer or self-insurer. (e) The name and address of the injured person. This information is confidential and exempt from the provisions 1383 Section 627.912 (1), Florida Statutes, provides the reports must be made for any practitioner of medicine licensed under chapter 458, any practitioner of osteopathic medicine licensed under chapter 459, any podiatric physician licensed under chapter 461, any dentist licensed under chapter 466, any hospital licensed under chapter 395, any crisis stabilization unit licensed under part IV of chapter 394, any health maintenance organization certificated under part 1 of chapter 641, any clinics included in chapter 390, any ambulatory surgical center defined in section 395.002, and any member of the Florida Bar. 1384 Section 627.912(1), Florida Statutes. 328

of s. 119.07(1), and must not be disclosed by the department without the injured person s consent, except for disclosure by the department to the Department of Health. This information may be used by the department for purposes of identifying multiple or duplicate claims arising out of the same occurrence. (f) The date of suit, if filed. (g) The injured person s age and sex. (h) The total number and names of all defendants involved in the claim. (i) The date and amount of judgment or settlement, if any, including the itemization of the verdict, together with a copy of the settlement or judgment. (j) In the case of a settlement, such information as the department may require with regard to the injured person s incurred and anticipated medical expense, wage loss, and other expenses. (k) The loss adjustment expense paid to defense counsel, and all other allocated loss adjustment expense paid. (l) The date and reason for final disposition, if no judgment or settlement. (m) A summary of the occurrence which created the claim, which shall include: 1. The name of the institution, if any, and the location within the institution at which the injury occurred. 2. The final diagnosis for which treatment was sought or rendered, including the patient s actual condition. 3. A description of the misdiagnosis made, if any, of the patient s actual condition. 4. The operation, diagnostic, or treatment procedure causing the injury. 5. A description of the principal injury giving rise to the claim. 6. The safety management steps that have been taken by the insured to make similar occurrences or injuries less likely in the future. (n) Any other information required by the department to analyze and evaluate the nature, causes, location, costs, and damages involved in professional liability cases. Subsection (4) 1385 provides that the entity making the report is not liable for any action taken in reporting to the Department of Insurance. However, the department may impose a fine of $250 per day per case, up 1385 Section 627.912, Florida Statutes. 329

to $1,000 per case for violations of the requirements of the section. The subsection related to fines only applies to claims accruing on or after October 1, 1997. 1386 According to the Department of Insurance, some insurers may not report as required and others, such as self-insurers, off-shore captive companies, risk retention groups, and surplus lines companies do not report at all. 1387 Section 456.049, Florida Statutes, requires medical professionals to report any claim or action for damages for personal injury if the claim was not covered by an insurer required to report under section 627.912, Florida Statutes, where the claim resulted in a final judgment or settlement in any amount or a final disposition with no payment on behalf of the licensee. 1388 The report is to be filed with the Department of Health no later than sixty days after the occurrence of the judgment, settlement, or determination of no payment. The report must contain the following: (a) The name and address of the licensee. (b) The date of the occurrence which created the claim. (c) The date the claim was reported to the licensee. (d) The name and address of the injured person. This information is confidential and exempt from s. 119.07(1) and shall not be disclosed by the department without the injured person s consent. This information may be used by the department for purposes of identifying multiple or duplicate claims arising out of the same occurrence. (e) The date of suit, if filed. (f) The injured person s age and sex. (g) The total number and names of all defendants involved in the claim. (h) The date and amount of judgment or settlement, if any, including the itemization of the verdict, together with a copy of the settlement or judgment. (i) In the case of a settlement, such information as the department may required with regard to the injured person s incurred and anticipated medical expense, wage loss, and other expenses. 1386 Section 627.912(4), Florida Statutes. 1387 Steve Roddenberry, Deputy Director of the Division of Insurer Services at the Florida Department of Insurance. 1388 This includes injuries alleged to have been caused by error, omission, or negligence in the performance of the licensee s professional services or based on a claimed performance of professional services without consent. 330

(j) The loss adjustment expense paid to defense counsel, and all other allocated loss adjustment expense paid. (k) The date and reason for final disposition, if no judgment or settlement. (l) A summary of the occurrence which created the claim, which shall include: 1. The name of the institution, if any, and the location within such institution, at which the injury occurred. 2. The final diagnosis for which treatment was sought or rendered, including the patient s actual condition. 3. A description of the misdiagnosis made, if any, of the patient s actual condition. 4. The operation or the diagnostic or treatment procedure causing the injury. 5. A description of the principal injury giving rise to the claim. 6. The safety management steps that have been taken by the licensee to make similar occurrences or injuries less likely in the future. (m) Any other information required by the department to analyze and evaluate the nature, causes, location, cost and damages involved in professional liability cases. On a national level, each entity making a medical malpractice payment under a policy of insurance, self-insurance, or otherwise in settlement of or to satisfy a judgment related to medical malpractice on behalf of a healthcare provider must, report to the National Practitioner Data Bank. 1389 The information to be reported includes: (1) the name of any physician or licensed health care practitioner for whose benefit the payment is made, (2) the amount of the payment, (3) the name (if known) of any hospital with which the physician or practitioner is affiliated or associated, (4) a description of the acts or omissions and injuries or illnesses upon which the action or claim was based, and (5) such other information as the Secretary determines is required for appropriate interpretation of information reported under this section. 1389 42 U.S.C. section 11131. 331

If an entity that is required to report to the data bank fails to report, it is subject to a civil penalty of not more than $10,000 for each payment not reported. 1390 Section 627.062, Florida Statutes, provides the requirements to be met by medical malpractice insurance companies in establishing rates and to be used by the Department of Insurance in reviewing the rates filed. The rates filed are not to be excessive, inadequate, or unfairly discriminatory. 1391 The Department is required to review all rate filings to determine if the rate is excessive, inadequate, or unfairly discriminatory. 1392 In making that determination, the statute requires the Department to consider a series of criteria, including the past and prospective loss experience within and without Florida. 1393 The statute does not provide guidance regarding what losses should be included in determining the loss experience. Further, there is no provision in the statute prohibiting insurance companies providing medical malpractice insurance from considering bad faith awards or punitive damage awards in determining rates. Section 627.651, Florida Statutes, provides for the calculation of rates for automobile insurance. Subsection (12) of that section prohibits motor vehicle insurers from including any portion of a judgment or settlement resulting from a bad faith action or punitive damages award or settlement against the insurer in the insurers rate base or to justify a rate or a rate change. Further, the insurer may not include any attorney fees or costs related to defending a bad faith or punitive damages claim in establishing rates or justifying a rate change. Information Presented to the Task Force According to Mr. Steve Roddenberry, 1394 the Department of Insurance does not warrant the accuracy of the data contained in the closed claim database. The database was established only to allow consumers to look up whether a doctor had a claim filed against him or her. 1395 It was never intended to be a barometer of the medical malpractice insurance market. 1396 1390 Id. 1391 Section 627.062(1), Florida Statutes. 1392 Section 627.62(2)(b), Florida Statutes. 1393 Section 627.062(2)(b)1, Florida Statutes. 1394 Steve Roddenberry, Deputy Director of the Division of Insurer Services at the Florida Department of Insurance. 1395 Steve Roddenberry, testimony, Nov. 4, 2002, pg. 398. 1396 Id. at 399. 332

Mr. Roddenberry also discussed the issue of whether punitive damages and bad faith claims should be included in the determination of rates. He stated that while Florida law does not specifically prohibit the inclusion of those losses in rate determinations for medical malpractice insurance policies, the Department of Insurance tries to exclude those losses now. 1397 He testified the Department does all it can to ensure that bad faith losses are either immaterial or backed out of claim losses prior to considering a rate increase. 1398 Findings and Recommendations The Task Force finds that section 627.912, Florida Statutes, does not require the covered insurers to provide information related to the amount paid in settlement or verdict for the categories of damages, the amount claimants actually received in settlements or verdicts reduced after a trial, or how much insurers pay in cases involving multiple defendants. Further, the information collected by the Department of Health pursuant to section 456.049, Florida Statutes, is not forwarded to the Department of Insurance for inclusion in the closed claims database. The information reported to the National Practitioner Data Bank is more comprehensive than the information reported to the Florida Department of Insurance. Further, the Task Force finds there is nothing in law that prohibits a medical malpractice insurer from including judgments or settlements of punitive damages or bad faith claims in establishing insurance rates or in the justification of a rate change. Recommendation 1. The Legislature should authorize the Department of Insurance to require insurers to provide additional information on closed claims and to penalize the insurers for failure to provide the required data. Recommendation 2. The Department of Health should forward the information collected pursuant to section 456.049, Florida Statutes, to the Department of Insurance Recommendation 3. The Legislature should require every entity reporting to the National Practitioner Data Bank to report the same information to the Department of Insurance for inclusion in the closed claim data files. 1397 Steve Roddenberry, testimony, Jan. 16, 2003, pg. 47. 1398 Id. at 48. 333

Recommendation 4. The Legislature should require the Department of Insurance to compile and review the collected data and fine those entities failing to fully comply with the requirements of law. Recommendation 5. The Legislature should include in section 627.062, Florida Statutes, related to the setting of rates for most insurers, the provisions of section 627.0651(12), Florida Statutes, prohibiting the inclusion of payments made by insurers for bad faith or punitive damages claims. 334

Chapter 11 - Conclusion Our Harvard medical practice study found both the medical and legal systems in urgent need of change. We discovered that in New York s hospitals more than 100,000 patients were injured annually because of medical management practices, more than one-quarter from negligence. (More recently we have found a similar picture in Utah and Colorado.) Fewer than 7 percent of New York s injured patients received compensation through the courts, however, of those, fewer than 20 percent were injured because of negligence. So the legal system is even more prone to error than the medical system it attempts to judge. Howard Hiatt & Paul Weiler, No Fault Medical Coverage Would Cure Many Ills, The Boston Globe A27 (Nov. 5, 1999) This Task Force has received extensive testimony and written information related to the current healthcare provider liability insurance crisis. Information was presented to the Task Force on the extent of the crisis, the impact of the crisis on the provision of healthcare in Florida and the nation, and the causes of the crisis. The suggested causes included the medical malpractice insurance underwriting cycle, insurance company investment losses, and the significant increases in medical malpractice insurance company claims losses resulting from the increased frequency and severity of claims. Based on the Task Force s analysis of the information presented, the Task Force set out findings in chapter 5 of this report related to the extent and causes of the crisis. The Task Force also received extensive testimony and documentation related to proposed solutions to the healthcare provider liability insurance crisis. The Task Force examined an extensive list of proposals from various persons or entities meant to address the crisis in whole or in part. Chapters 6 through 10 of this report examine the law and related testimony as well as documentary information received by the Task Force regarding those proposed legislative changes the Task Force determined would have some impact in addressing this crisis and in minimizing or removing the possibility this problem will arise again in the future. In chapters 6 through 10, the Task Force proposes a comprehensive package of reforms including changes to improve the quality of care provided in our medical institutions, improved healthcare provider discipline, tort reforms, reforms to the alternative dispute resolution process, and insurance reforms. The Task Force is of the opinion that, 335

while these comprehensive reforms are important, the centerpiece and the recommendation that will have the greatest long-term impact on healthcare provider liability insurance rates, and thus on the availability and affordability of healthcare in Florida, is a $250,000 cap on noneconomic damages. In summary, the last few years have resulted in a marked decrease in profitability for professional healthcare liability insurance in the State of Florida. With an industry combined ratio of 184.2 percent, the viability of this market may be threatened if conditions continue to deteriorate. The recommendations are listed below and are also listed, along with the discussions regarding each proposed recommendation, in chapters 6 through 10 of this report. Recommendations Healthcare Quality Recommendation 1. The Legislature should establish a Patient Safety Authority, or an entity similar in concept, as both a short-term and longterm strategy to improve patient safety. There are two options that should be considered. The first option, which is recommended by the Institute of Medicine, is to have two systems, one for the mandatory reporting of adverse events and another for the voluntary reporting of near misses. The second option is to have a single entity, similar to the Patient Safety Authority in Pennsylvania, that would analyze all adverse events and near misses. Experts would analyze these data and make recommendations to facilities about how to reduce these events and near misses. Information would not be subject to discovery in lawsuits. Recommendation 2. The Legislature should timely develop or adopt a statewide electronic medical record and physician medication ordering system. The system should be developed in partnership with hospitals, physicians, and other healthcare providers. The physician medication ordering system should be implemented first. The system could then be implemented in stages with a possible approach of beginning with a webbased data exchange platform that establishes interconnectivity between providers. Another possibility is to begin with business functions, which provide an early return on investment, and then include clinical functions. Recommendation 3. The Legislature should consider creating a statutory public-private non-profit entity that would administer the Patient Safety Authority, statewide electronic medical record, and build an information technology infrastructure to support the delivery of healthcare that would include a statewide physician medication ordering system. Funding could 336

possibly come from a $1 per year surcharge on all health professional licenses; all hospital, ambulatory care surgery center, nursing home, home health agency, and birth center discharges; and all individuals in managed care plans and insurance plans licensed under chapters 627 and 640, Florida Statutes. Health providers, insurers, businesses, and government would be represented on the governing board of directors. Options for implementation include: Affiliating with a university for the analysis of voluntarilyreported adverse events and near misses. Contracting with an information technology firm(s) for a statewide physician medication ordering system, web-based platform for health provider interconnectivity, and electronic patient record. Developing a business plan and future financing strategy to supplement the $1 annual surcharge, which will likely be necessary to achieve full implementation. Including in the business plan a strategy to begin with computerizing business functions, for providers to quickly achieve cost-savings due to automation efficiencies, and then include clinical functions. Recommendation 4. The Legislature should be encouraged to authorize the two no fault medical malpractice demonstration projects recommended in the IOM November 2002 report, Fostering Rapid Advances in Healthcare, at a university healthcare system or statutory teaching hospital. This project would be governed by criteria compatible with that proposed by the IOM. Recommendation 5. If Recommendation 4 is implemented, contingency fees for attorneys should be eliminated from the claims bill process in the no-fault demonstration project. Recommendation 6. The Legislature should require each hospital and ambulatory surgery center to have a patient safety plan, a patient safety committee, and a patient safety officer. Members of the public should have representation on patient safety committees. Recommendation 7. The Legislature should require healthcare providers to notify patients who experience serious medical injuries to be notified of the injury in person. Recommendation 8. The Legislature should examine the feasibility of using Medicaid funding to create a pilot project for an electronic medical record and a physician medication ordering system for Medicaid patients. 337

Recommendation 9. The Legislature should examine the feasibility of developing a process in the Insurance Code for hospitals and other healthcare facilities to receive malpractice insurance discounts if they implement certified patient safety programs. Recommendation 10. The Legislature should establish a high-technology simulation center for use by all health providers. Florida should encourage use of this center by practitioners in other states to help offset the costs for the center. Recommendation 11. The Legislature should require all medical schools, nursing schools, and allied health schools to include in their curricula courses on patient safety and patient safety improvement. Recommendation 12. The Legislature should require the Agency for Health Care Administration (AHCA) to conduct a study to determine if it is feasible to provide information to the public to help them make better healthcare decisions regarding the choice of a hospital. The information would not be presented in a report card format. AHCA should be provided with sufficient resources to conduct the study in cooperation with hospitals, physicians, and other healthcare providers and provide the Governor and Legislature with a report. Physician Discipline Recommendation 13. The Legislature should allow the healthcare provider regulatory boards to appoint administrative law judges with expertise in the profession to hear standard of care cases. Recommendation 14. The Legislature should statutorily provide that standard of care decisions are, as a matter of law, infused with overriding policy considerations best left to the healthcare provider regulatory boards. Recommendation 15. The Legislature should authorize the healthcare provider regulatory boards to reassess and resolve conflicting evidence in standard of care cases based on the record in the case. Recommendation 16. The Legislature should require physician profiles to provide professional qualifications information regarding physicians to consumers. Recommendation 17. The Legislature should provide for an audit of the Department of Health s disciplinary process and closed claims files. 338

Recommendation 18. The Florida Legislature should strengthen Florida s peer review requirements so they can lead to earlier dismissal of meritless claims brought against hospitals by aggrieved physicians and protect physicians and hospitals from costly lawsuits and liability. Recommendation 19. The Legislature should expand the DOH s subpoena authority to include the retrieval of patient records when the patient refuses to cooperate, is unavailable, or fails to execute a patient release. Records obtained under these circumstances would be confidential. Recommendation 20. The Legislature should require that all first offense citations be non-disciplinary and non-reportable to the national data banks. Recommendation 21. The Legislature should expand the timeframe for forwarding cases to the Division of Administrative Hearing from fifteen days to forty-five days when a demand for a formal hearing, pursuant to section 120.57(1), Florida Statutes, is received. Recommendation 22. The Legislature should require all healthcare provider regulatory boards to designate those violations that may be handled in a one-time, non-reportable, and confidential mediation proceeding. Appropriate standard of care cases shall be included. Recommendation 23. The Legislature should modify upward the dollar amount threshold for closed claims cases to be reported and investigated by the Department. Recommendation 24. The Legislature should grant exclusive authority to the healthcare provider regulatory boards to determine the amount of administrative costs to be recovered when final action occurs and a respondent is disciplined. Recommendation 25. The Legislature should change the burden of proof in disciplinary actions from the clear and convincing evidence standard, to the greater weight of the evidence standard, which is the same burden of proof for a medical malpractice case. Recommendation 26. The Legislature should expand the healthcare provider regulatory board s rulemaking authority in the areas of Internet prescribing and sexual misconduct cases so as to better address critical areas of discipline. 339

Tort Reform Cap on Non-Economic Damages Recommendation 27. The Legislature should, in medical malpractice cases, cap non-economic damages at $250,000 per incident. The Task Force believes that a cap on non-economic damages will bring relief to this current crisis. Without the inclusion of a cap on potential awards of non-economic damages in a legislative package, no legislative reform plan can be successful in achieving the goal of controlling increases in healthcare costs, and thereby promoting improved access to healthcare. Although the Task Force was offered other solutions, there is no other alternative remedy that will immediately alleviate Florida s crisis of availability and affordability of healthcare. The evidence before the Task Force indicates that a cap of $250,000 per incident will lead to significantly lower malpractice premiums. The Legislature should commission and fund a study of the impact of the $250,000 cap on non-economic damages. An interim report should be submitted to the Legislature five years after date of enactment. Communications with Subsequent Treating Physicians Recommendation 28. The Legislature should amend the Florida Statutes to allow ex parte communication between defense counsel for a defendant in a medical malpractice lawsuit and the plaintiff s treating physicians. Recommendation 29. As an alternative, the Legislature may consider requiring the plaintiff to execute a medical information release when filing a lawsuit that would allow for the defendant to conduct ex parte interviews with the plaintiff s treating physicians only in areas potentially relevant to the plaintiff s alleged injury or illness. Expert Witness Qualifications Recommendation 30. The Legislature should examine ways to improve the use of in-kind experts at trial. 340

Limitation on Liability Related to Emergency Services Recommendation 31. The Legislature should retain the definition of reckless disregard, as that term is currently defined by statute, as it is sufficient. Recommendation 32. The Legislature should repeal references to patient stabilization in section 768.13(2)(b)2a, Florida Statutes. Sovereign Immunity Recommendation 33. The Legislature should amend section 768.28, Florida Statutes, to define healthcare professionals providing services in emergency rooms or trauma centers as agents of the state for purposes of sovereign immunity. Periodic Payment of Damages Recommendation 34. The Legislature should amend the Florida Statutes to allow the periodic payment of future non-economic damages. Recommendation 35. The Legislature should amend the Florida Statutes to terminate the payment of future economic and non-economic damages on the death of the plaintiff. Pre-Suit Reform Recommendation 36. The Legislature should require experts reviewing pre-suit claims and defenses and rendering opinions be qualified, in that they possess similar if not identical credentials and expertise in the field of healthcare services of the defendant s particular specialty. Recommendation 37. The Legislature should require the expert who reviews pre-suit claims and defenses and renders opinions be subject to discovery and his or her testimony be admissible in any future proceeding. 341

Joint and Several Liability Recommendation 38. Joint liability has a negative impact on a medical malpractice insurer's ability to forecast future losses and contributes to the insurer's paid losses. Accordingly, the Legislature should amend section 768.81, Florida Statutes, to provide that a defendant's liability for both economic and non-economic damages be several only. Set Off of Settlement Proceeds Recommendation 39. The Legislature should amend the set off statutes, sections 46.015 and 768.041, Florida Statutes, to clarify that set off amounts should be applied to jury damage awards, including both economic and non-economic damages, even when fault is several only. Alternative Dispute Resolution Mandatory Mediation Recommendation 40. The Legislature should encourage pre-suit mediation by providing for confidentiality of any pre-suit mediation in a medical malpractice case in the same manner as is provided for mediation occurring after suit is filed. Recommendation 41. The Legislature should amend the mandatory mediation provisions of section 766.108, Florida Statutes, to require mediation within 120 days of filing suit and to provide sanctions if a goodfaith offer of settlement is refused. Recommendation 42. The Legislature should not make admissible at trial the fact that mandatory mediation occurred or that offers of settlement were made, but should make this fact admissible for purposes of enforcing the attorney fees and costs. The mediator should maintain a report of the issues and facts presented at the mediation and the final settlement offers of each party at the mandatory mediation. Recommendation 43. The Legislature should enact specific criteria similar to those in the offer of judgment statute to be considered by the court in making the determination as to how close in amount to the offer the judgment must be and the criteria to be used in evaluating the amount of the attorney fees and costs to be awarded in addition to the standards generally considered in awarding fees and costs. 342

Recommendation 44. The Legislature should require the court to consider, in addition to all other criteria, whether the issues and facts presented at mediation were significantly the same issues presented at trial. Voluntary Binding Arbitration Recommendation 45. The Legislature should amend the definitions of economic damages and non-economic damages as provided in sections 766.202 and 766.207, Florida Statutes, to provide that such damages are recoverable in voluntary binding arbitration only if the claimant has the right to recover such damages under general law, including the Wrongful Death Act. Recommendation 46. The Legislature should provide for an aggregate cap on non-economic damages in arbitrated cases of multiple defendants. Insurance Reform NICA Recommendation 47. The Legislature should maintain the NICA program because of its success and should further consider and study the issues for broadening the NICA program, as discussed in this report. Bad Faith Recommendation 48. The Legislature should restore the insured as the owner of the bad faith cause of action. The common law cause of action, as outlined by the Supreme Court in 1980 should be legislatively cured so that the Florida Legislature preempts that rule and only insureds, not third party plaintiffs, can bring a bad faith cause of action against its insurer. In addition, section 624.155, Florida Statutes, should be amended to also limit the proper party in a bad faith cause of action to the insured only. Recommendation 49. The Legislature should articulate standards of what constitutes bad faith on the part of an insurer. Recommendation 50. The Legislature should require that the maximum liability for bad faith be calculated as the amount of damages that were 343

actually caused by the acts of bad faith, limited by the amount of the reachable assets of the insured. Recommendation 51. The Legislature should require that, if an insurer is found to be in bad faith or settles a case for bad faith, the Department of Insurance is to be notified of such finding. Recommendation 52. The Department of Insurance should conduct an investigation into the specific allegations of the insurer and into the insurer s general practices and should take necessary action against the insurer to punish and prevent future bad faith practices. Alternative Insurance Products Recommendation 53. The Legislature should repeal the prohibition against creating Medical Malpractice Risk Management Trust Funds in section 627.357, Florida Statutes. Recommendation 54. The Legislature should encourage the creation of self-insured options for healthcare providers. Recommendation 55. The Legislature should expand the rulemaking authority of the Department of Insurance for self-insurance programs to ensure they remain solvent and provide the insurance coverage purchased by participants. Insurance Company Regulation Recommendation 56. The Legislature should authorize the Department of Insurance to require insurers to provide additional information on closed claims and to penalize the insurers for failure to provide the required data. Recommendation 57. The Department of Health should forward the information collected pursuant to section 456.049, Florida Statutes, to the Department of Insurance. Recommendation 58. The Legislature should require every entity reporting to the National Practitioner Data Bank to report the same information to the Department of Insurance for inclusion in the closed claim data files. 344

Recommendation 59. The Legislature should require the Department of Insurance to compile and review the collected data and fine those entities failing to fully comply with the requirements of law. Recommendation 60. The Legislature should include in section 627.062, Florida Statutes, related to the setting of rates for most insurers, the provisions of section 627.0651(12), Florida Statutes, prohibiting the inclusion of payments made by insurers for bad faith or punitive damages claims. 345