The Henry J. Kaiser Family Foundation

The Henry J. Kaiser Family Foundation

In Philadelphia, Malpractice Awards have ‘Gone Haywire’

Recent verdicts trouble insurance experts and drive out good doctors, many say.

12/10/2000

By Karl Stark
Reprinted with permission of The Philadelphia Inquirer

The case was heartbreaking. A baby girl born so premature, she could fit in the palm of her mother’s hand. The surgeon, who operated to seal a blood vessel meant to close naturally after birth, could not find the correct vessel to seal. The child, who seemed to thrive at first, developed severe brain damage – in part because a nurse inserted a catheter in the wrong artery. The girl’s left arm later had to be amputated.

The attorneys squabbled mightily over who was at fault in the care of Alys Vlazny, now 5.

Six weeks ago, a Philadelphia jury delivered a malpractice verdict of $100 million against four doctors and two hospitals, St. Luke’s Hospital in Bethlehem, Pa., and St. Christopher’s Hospital for Children in Philadelphia. The award, which comes to $118 million with interest, represents the largest medical malpractice verdict in Pennsylvania history and one of the largest in the country.

Horsham-based Jury Verdict Research, which tracks malpractice cases nationwide, could cite only two larger awards in the last 10 years, both in New York.

The $100 million verdict, which lawyers are still contesting, has become exhibit A in a debate about surging malpractice judgments in Philadelphia. Juries here have returned awards of $55 million and $49.6 million within the last three months. The $100 million verdict on Oct. 20 was about five times larger than the largest malpractice judgment in Philadelphia as recently as a year ago.

“Philadelphia has gone haywire,” said Sarah H. Lawhorne, president of PMSLIC, the state’s largest malpractice insurer.

Thomas Gaudiosi, an executive with that company who oversees management of malpractice risk, said the city’s jurors have the mentality of contestants on the game show Who Wants to Be A Millionaire?

“Juries just are getting to the point of thinking when they give away money, it has no consequence,” said Benjamin Post, a malpractice defense lawyer in Philadelphia.

But there are consequences, insurers and defense lawyers say. They predict that the recent spike in awards here, even when covered by insurance and even when reduced on appeal, will jack up the cost of settling all cases.

“It encourages everyone to aim higher,” malpractice defense attorney Fredric L. Goldfein said.

Doctors say large jury awards could ultimately weaken Philadelphia’s medical institutions, driving out cutting-edge physicians or keeping them from ever coming here. Those who stay will face huge increases in their premiums next year, rate hikes that will exceed 50 percent for some doctors.

The city has long been a malpractice hot spot. Mostly because of Philadelphia, Pennsylvania ranks second in the nation, behind New York, in total malpractice payouts, according to data collected by the National Association of Insurance Commissioners.

Malpractice cases in Philadelphia generated more payout in 1998 than did those in California, where strict rules restrict awards, the association’s data show.

The big verdicts in Philadelphia underscore the need for the state legislature to limit malpractice awards, many in the medical community say.

“We have virtually none of the tort reforms that other states have,” said Andrew Wigglesworth, president of the Delaware Valley Healthcare Council, which represents hospitals. “We need an equitable system that compensates people fairly but doesn’t result in excessive awards that, as a society, we can’t sustain.”

Lawyers representing injured patients say more rules are not needed. Philadelphia generates more malpractice cases than the norm because this area – with its five medical schools and several eminent teaching hospitals – attracts patients from far beyond the Delaware Valley.

Big verdicts are usually corrected. Upon review, judges often reduce awards they think were made based on emotion. “Let the courts do their job,” said Gerald McHugh, a malpractice plaintiff lawyer in Philadelphia who has lobbied the legislature to protect patients’ rights.

Verdicts are increasing along with the cost of medicine, which has risen faster than overall inflation. Severely ill or disabled clients, who win many of the largest judgments, now require upward of $400,000 a year in care and can expect to live 40 years or more.

Some lawyers blame the biggest verdicts on insurers who don’t compromise out of court.

“It’s a crisis of their own creation,” said James E. Beasley Sr., a longtime plaintiff lawyer.

Beasley reached a $7.5 million settlement on Oct. 18 with Children’s Hospital of Philadelphia for a brain-damaged child. The settlement attracted attention because the jury, unaware that the settlement had been reached, returned with a $55 million verdict. Beasley said the $7.5 million agreement was made so late in the jury’s deliberations that he was not able to tell the court before the jury returned.

Beasley said the child’s mother had insisted on settling the case. “The jury questions got her upset” and she feared the jury would rule against her, Beasley said.

Lawyers who bring malpractice suits say the odds are against them, even in Philadelphia. In 1999, malpractice lawyers won 45 percent of the cases that went to trial; hospitals and doctors won the remainder, according to a study conducted by Philadelphia chief Administrative Judge John W. Herron. Philadelphia’s results are in line with the rest of the country, Herron said.

Insurers and opposing lawyers agree on one point. More serious medical mistakes seem to be on the horizon. Doctors have to practice medicine faster, and hospitals have reduced staff to save money. “You don’t pay less and get better as a general concept,” Lawhorne, the insurance company executive, said.

Shanin Specter, a malpractice lawyer in Philadelphia, agreed, saying: “It’s hard not to think that the general pressures of health care have played a significant role” in large verdicts. Specter convinced a jury that doctors at Temple’s Neumann Medical Center in 1997 had incorrectly inserted a tracheal tube to aid the breathing of David Caruso, 23, a record-store clerk from Port Richmond. Caruso suffered brain damage when the tube later became dislodged.

“The defense of the doctors was to blame the hospital,” Specter said. He won a $49.6 million verdict in August that was briefly the state’s largest. The case has been resolved for less than $10 million.

Thomas Kline, Specter’s law partner, said limiting awards would not protect patients. “The capping of liability invites unacceptable negligent conduct,” he said.

Doctors say they are penalized financially just by doing their jobs, especially in Philadelphia and Delaware County. Malpractice rates in this region for high-risk specialties – such as OB-GYN, orthopedics and neurosurgery – are often nearly double what the same doctors pay in Pittsburgh, and are 15 percent to 25 percent above rates in New Jersey, PMSLIC records show.

The big verdicts would command attention at any time. But this year, insurers are starting to pay off the failure of two large malpractice insurers. The spike in large awards has coincided with a double-digit rise in malpractice rates for many caregivers in Pennsylvania. Doctors’ basic malpractice rates for the first $500,000 of coverage will rise by an average of 25 percent to 30 percent in the coming year, said Randy L. Rohrbaugh, acting deputy commissioner of the Pennsylvania Department of Insurance.

The next layer of protection, from $500,000 to $1.2 million, is covered by a state agency, the Medical Professional Liability Catastrophe Loss Fund. The statewide “CAT” fund has seen its payout jump 27 percent over the last two years to $341 million. About 55 percent of that was spent just covering Philadelphia cases.

Now the fund will pass along those increases by raising rates next year an average of 26 percent for all doctors, with charges for oncologists and infectious-disease doctors rising by more than 50 percent.

Malpractice has helped drive some doctors from the field. Ronald J. Bolognese, chairman of Obstetrics and Gynecology at Jefferson Medical College, had been delivering babies one day a week but recently stopped because he said he wasn’t even covering his insurance premiums. Bolognese saved almost $60,000 in premiums, but he regrets losing that personal connection to patients.

Malpractice and other pressures also make it very difficult to attract talented newcomers to Philadelphia, said cardiologist Francis L. “Chip” Uricchio, who heads the 25-doctor Pennsylvania Heart and Vascular Group, based in Northeast Philadelphia. “We haven’t hired anybody since 1995,” he said, citing malpractice rates as one important factor.

The malpractice market is also bleak for hospitals. Gerald Miller, president of the Crozer-Keystone Health System, said he knows of two hospital systems whose malpractice costs doubled despite having no significant claims.

The new costs will put some hospitals in the red, Miller said.

In the $100 million verdict, St. Luke’s Hospital of Bethlehem is liable for $90 million of the judgment and could face bankruptcy if the full judgment stands. But experts say that is unlikely. Judgments are often limited to the hospitals’ insurance coverage because a greater amount can be complex and time-consuming to collect.

The case remains far from over. In a statement, St. Luke’s vowed to appeal and complained that “damage awards that shock the conscience have become common in the Philadelphia jurisdiction.”

John H. Reed, director of the state “CAT” Fund, said he still hoped to find common ground. The child could be compensated without subjecting defendants to the “economic death penalty in Philadelphia,” he wrote to the court.

“Injured parties can be protected through reasonable compensation without bankrupting the health-care system.”