Looking for a Cure

The soft-spoken doctor performed thousands of deliveries during her career, most devoid of even minor complications. But one day last June, as she sat in her sun-filled office sorting through the mail, her smile vanished as she examined her malpractice insurance premium. “I was surcharged 100 percent,” she says, and it was due September 1. “That premium would exceed my salary by quite a bit. So as of September 1, I’ll no longer be practicing.” She says that while she has had to defend occasional obstetrics malpractice complaints during her career, none ever resulted in a trial. The only blemish on her record has been a settlement of a gynecology claim several years ago that she says was baseless, paid to avoid a lengthy and costly court case.

She doesn’t want her name in print because she says she doesn’t want her woes to make her a poster child for New Jersey’s latest healthcare controversy. But after tearfully discussing what she may do with her life—sell her practice and move her family to another state, shift to practicing only gynecology, or maybe train in a new, lower-risk specialty—she says, “I have to keep my game face on.”

Malpractice crises are not new to New Jersey. They have erupted sporadically since 1976. Although this ob-gyn’s experience illustrates the ramifications of the latest controversy, not every physician in every specialty is similarly affected. But the latest crisis, now four years old, is one that threatens the well-being of patients and the doctors who treat them, and the prognosis of healthcare in the Garden State.

Some relief has come to doctors, the ob-gyn included, from hospitals, which occasionally dispense subsidies and low-interest loans for liability insurance premiums in exchange for a doctor’s services. But this practice is observed to retain high-risk specialists such as emergency room doctors and surgeons, and “has not been across-the-board,” says Nicole Dempsey, a legislation and policy associate of the New Jersey Hospital Association in Princeton. About 22 percent of the state’s 120 acute-care and specialty hospitals directly insure their staff physicians, Dempsey says. In general, though, New Jersey’s hospitals, which themselves have been seriously hit by the malpractice crisis, are limited in the help they provide individual doctors with their premiums.

Under former governor James E. McGreevey, the Legislature last year enacted the Medical Care Access and Responsibility and Patients First Act, the state’s most recent attempt to reform healthcare and malpractice. The new law is helping, doctors say, but it excludes a key provision that would have placed a cap on the pain-and-suffering portion of awards, which can represent nearly two-thirds of a malpractice settlement. Robert J. Conroy, general counsel for the Medical Society of New Jersey, which vehemently fought for a $300,000 cap, says that compensating a victim for harm is justifiable, but “an award shouldn’t include enriching a family. In seeking damages to make you whole again, there is no amount of money that’s going to do that, and it’s especially wrong to ask juries to do it.”

Ten years ago New Jersey enacted a law requiring an independent physician to sign a certificate verifying the factual basis of every malpractice claim. As a result, claims dipped from 2,200 a year in the 1990s to about 1,600 a year today, according to John Shaffer, a Medical Society spokesman. Why then do the challenges facing doctors seem so amplified in New Jersey?

Perhaps it’s because in recent years the Medical Society has turned up the volume, organizing physicians to march on the Statehouse in its “white-coat” rallies. Or maybe it’s because the American Medical Association and the American College of Gynecology and Obstetrics have declared New Jersey a “malpractice crisis” and “red alert” state. Maybe, too, it’s a reverberation from the collapse of the Lawrenceville-headquartered insurance carrier MIIX Group. Three years ago MIIX failed suddenly and stopped writing policies, sending almost half the state’s roughly 19,000 patient-care physicians scrambling to find new insurance in a hostile market. “You know,” says Shaffer, “it usually takes several years after an alleged malpractice incident before a claim is filed. The important number here is the 9,000 doctors who still have liability under MIIX, although they may be currently insured by another company.”

In December MIIX filed for bankruptcy, and it remains under the scrutiny of the state Department of Banking and Insurance. On July 1, the department approved a plan, awaiting further approval by a Superior Court judge, in which MIIX would settle most of its outstanding claims and avoid liquidation. A nonprofit company formed in the 1970s and owned by New Jersey physicians who were its policyholders, MIIX changed focus in the 1990s and entered markets outside the state. In 1999 it went public, and physicians who had been insured by MIIX for at least three years received stock. But following its subsequent expansion into 25 other states, the company faced financial difficulties, and by last October MIIX showed a debt of about $306 million, with assets of about $550 million and estimated liabilities of $856 million.

Since then, many doctors who fell victim to MIIX and the failures of other companies over the years, especially doctors in high-risk specialties, haven’t been able to obtain standard coverage. They’ve settled instead for small but expensive policies. High-risk doctors with tarnished claim histories may carry a mere $300,000 in coverage, provided by the banking department’s medical malpractice guarantee fund, which is similar to the uninsured motorist fund. Some doctors and hospitals, now required to carry a $1-million-per-incident/ $3-million-per-year minimum policy, are forming their own insurance pools. New insurance companies and pools don’t spring up overnight though, particularly in a hostile market, and progress in monitoring the crisis may be sluggish; a seventeen-member task force established by the new law was given two years—until next summer—to produce a first report on the status of the malpractice crisis.

Meanwhile, Shaffer acknowledges that another major carrier, Princeton Insurance, started looking a little shaky more than a year ago. “Given financial reports, the state Department of Banking and Insurance is keeping an extremely close eye on Princeton and will step in at the earliest sign of trouble,” Shaffer says. Princeton Insurance now insures 47 percent of New Jersey doctors, almost as many as the 9,000 once covered by MIIX.

Against the backdrop of the national healthcare crisis, it all makes you wonder what on earth New Jersey is doing to help the healers we trust to hold our hearts in their hands, preside over our children’s first breaths, and make lame baby boomers and professional athletes get active again with new hips and knees.

On march 31 doctors received yet another jolt. A state appeals court ruled in Johnson v. Braddy that those policyholders insured for the $300,000 maximum under the state guarantee fund are personally liable for damages exceeding that amount, even if the policyholder originally bought $1 million in coverage from an insurer that later became insolvent. The decision means that when the insurer fails, the doctor could lose everything.

The crisis is taking an emotional toll. As vice president of New Jersey Physicians United Reciprocal Exchange, a Princeton-based insurance carrier with 550 physician clients, Eric Poe says he’s met with about 300 doctors in the last two years. “You can see that some of them are wiped out. They’re depressed, and the wind has been taken out of their sails. I’ve had physicians literally cry in my office because we couldn’t give them insurance,” says Poe, whose company reduces its own risk by insuring mostly doctors with pristine claim histories. Poe’s precaution is understandable. You could buy a new Lexus or send a kid to Princeton with the annual premiums paid by some high-risk physicians such as surgeons, ob-gyns, radiologists, anesthesiologists, and cardiologists. Their potentially life-threatening treatments and surgeries are frequently hospital-based. A specialist with one or two pending, or “open,” malpractice complaints may pay $50,000 to $250,000 a year for a premium.

As Tony Soprano might be heard telling his therapist, Jersey’s a tough place, Doc! Paradoxically, it’s also a place that physicians love, possessing the demographics, enclaves of wealth, and proximity to cultural opportunities that they statistically prefer. Add to this the state’s reputation for nationally ranked hospitals and other healthcare and research institutions—Robert Wood Johnson University Hospital and Hackensack University Medical Center are just two—and the paradox becomes apparent.

Dr. Chris Sciales, a dermatologist in Livingston and Warren, loves practicing in the state but hates its litigious atmosphere. His concern seems odd, considering that dermatology is traditionally office-based and low-risk. But Sciales says that new technology allows dermatologists to perform higher-risk cosmetic procedures, such as laser-assisted treatments and injections of collagen and Botox. “It creates a greater liability,” he says. “We’re like sitting ducks.”

If Sciales sometimes feels like the hunted, then the biggest gun around the malpractice pond must belong to John M. Blume. A lawyer with eighteen associates and offices in Chatham, Jersey City, and North Bergen, his firm reportedly won $250 million in verdicts and settlements in the last five years, half of which, Blume says, were malpractice cases.

To get the job done, Blume employs 1 full-time doctor, 3 registered nurses, and a support staff of 80. “I am told by people within the insurance industry that we get a lot of attention from other firms,” Blume says, laughing off the suggestion that the mere mention of his name makes some doctors nervous. Pain-and-suffering caps have done nothing to lower premiums or the number of malpractice cases in states that have enacted them, Blume says. The claims he files involve “tragic outcomes” and are wholly justified, he says. Cases that he and his team pursue cost $50,000 to $100,000 each to take through trial, so the firm weighs its choices carefully.

By definition, medical malpractice is “the failure of an attending physician or an assistant to adhere to an accepted standard of care,” says Scott Arnette, a Red Bank lawyer who regularly handles medical malpractice matters. “Malpractice can occur when the doctor…deviates from a standard of care. The medical experts identify what the standard of care in the industry should be and if the doctor’s action fell below it.”

Among Arnett’s settlements is one last year for $3 million for a negligent birth at a hospital in Monmouth County. It resulted in severe brain damage, cerebral palsy, and quadriplegia for the infant. Alyson Shannon, then sixteen, says her baby, Corialle, who was delivered by a nurse-midwife, was near death but resuscitated twice during birth. Today, Shannon says, Corialle, seven, can’t talk or take care of herself. With the settlement money, Shannon says, she set up a trust fund that has enabled her to buy a small house for the two of them and a handicapped-equipped van. She has also been able to send Corialle to a special school. “I’ll never give up on her,” Shannon says, “and I keep on praying.”

Shannon’s payment was ten times New Jersey’s average of $322,392 per claim, reported by the Kaiser Family Foundation in a 2003 national survey, which placed the state seventeenth in average individual malpractice settlements; Hawaii paid the most, $501,161 per claim. The state total of $189 million in payouts that year placed it eighth nationally, but amounts vary year-to-year among states, fluctuating within a legal process that can take three to seven years for a claim to be resolved. The new malpractice reform package gives medical professionals in New Jersey greater protection under the “Good Samaritan” law, and it has lowered the statute-of-limitations age for birth injuries from twenty to thirteen—provisions that likely will reduce the state’s number of annual claims.

But the bind in which many doctors find themselves is more complicated than malpractice alone, according to Dr. Eugene Cheslock of Little Silver, a retired oncologist and former chairman of the Department of Medicine at Riverview Medical Center in Red Bank. “In a state with more lawyers per capita than any other, it’s the overall litigious environment as well as the inhibiting nature of HMOs that are resulting in premature retirement of physicians,” Cheslock says. “HMOs are discouraging more and more doctors from coming to New Jersey because of their declining reimbursements and how they’ve limited the types of things they’ll cover.” The chilling effect of too many lawyers and too much real or threatened litigation also has discouraged volunteerism among doctors, says Cheslock, who is director of the Parker Family Health Center in Red Bank, a volunteer-staffed free clinic for Monmouth County’s poor and uninsured.

What is the cumulative effect so far of the malpractice crisis on the Garden State’s medical practices and patients? Legislative testimony presented by the Medical Society of New Jersey states that about 45 percent of practices in the state “have adjusted their operations in ways that may negatively affect the quality of patient care—change in patient hours, ceasing to provide certain services, deferring the purchase of medically necessary equipment.” New Jersey Hospital Association officials testified that nearly 27 percent of hospitals “have been forced to increase payments to find physicians willing to cover the emergency department. Physicians are increasingly reluctant to take on such assignments because of the greater liability exposure.”

Despite the malpractice and healthcare crisis afflicting New Jersey, many doctors are surviving, even thriving. Dr. Andrew Levy, an orthopedic surgeon specializing in sports medicine, has a clean claim history that costs him only $30,000 a year in malpractice coverage. Levy says that he found a way to deal with managed care at his offices in Summit, Montville, and Harrison: He stopped participating in HMOs but still honors other insurance plans. Today he practices on a fee-for-service basis and no longer jousts daily with managed-care gatekeepers. “Imagine if you told a plumber who just came to your house to make a repair how you wanted him to make that repair. Then you told him that you’d pay him half his bill but that he would have to wait until you decided to pay it,” Levy says. “That’s managed care.”

Another doctor who derives satisfaction from his calling is Andrew L. Pecora of Ridgewood, a hematologist-oncologist and chairman and executive administrative director of the Cancer Center at Hackensack University Medical Center. Having received part of his training at New York’s Memorial Sloan-Kettering Cancer Center, Pecora has been involved in stem-cell research since 1987. “I’m doing what I want to do and I’m doing it all here, where I want to do it,” Pecora says. “And I get tremendous support here besides.”

Andrew Mintz is the administrator and executive director of the Summit Medical Group in Summit, a multi-specialty practice that will soon move into a new 250,000-square-foot building in Berkeley Heights. Mintz says that Summit Medical’s 110 doctors—80 of them full-time—“offer the one-stop approach, with a variety of specialists and primary-care doctors and contracts with many managed-care payers.”

Summit grew weary of dealing with failing insurance carriers, he says, so in 2003 it established it own association, called a captive, which is backed by a re-insurer.

Malpractice coverage for all 110 doctors and staff costs a fairly reasonable $4
million a year.

“We have bigger and more substantial issues to address, such as our vision and patient services,” Mintz says. “Medical malpractice is not an overriding issue that drives this practice.”

Writer Leo Carney lives in Middletown.