By Sarah L. Smith

            Creating a crisis is essential to the tort reform battle cry. If there’s no problem, there’s nothing to fix, leaving malpractice insurance carriers and corporate hospital systems responsible for their negligence just as the civil justice system was designed to do. In an effort to avoid responsibility, malpractice insurance carriers and corporate hospital systems create, distort and exploit “crises” in order to claim there is only one solution: tort reform. These purported crises include rising malpractice insurance premiums, doctors leaving Maryland for states with more aggressive tort reform statutes, the rising cost of healthcare, and runaway juries to name a few.

“Tort reform” by any other name is legislation aimed at limiting tort plaintiffs’ access to the courts. These limits come in different forms, including damages caps, pre-suit filing requirements for medical malpractice cases, and charitable immunity, for example.  All tort reform initiatives have the same result of preventing lawsuits from being filed and driving down recoveries on the ones that are. According to tort reform advocates, each of these supposed solutions is essential to allowing doctors and hospitals to continue to practice in the State of Maryland. The reality is that none of these “solutions” actually improve patient safety.  

 

Is there a malpractice insurance crisis?

Malpractice insurance serves as the primary source of payments for settlements and judgments for providers sued for medical negligence—very rarely do physicians or other providers pay for a settlement or judgment out of pocket. As a result, rising malpractice insurance premiums are cited as evidence of a malpractice insurance crisis caused by large jury verdicts and settlements that force premiums higher and higher until the only solution is to limit plaintiffs’ recoveries. The reality is, however, that malpractice insurance premiums are influenced by local and national insurance markets, not just the cost of settlements and judgments, which are just one piece of the puzzle.

The United States insurance market is regulated by state and federal governments to protect consumers, in part by ensuring that premiums reflect future costs. In other words, regulations help to ensure that insurance companies charge enough in premiums to maintain sufficient funds to pay claims that are made by their insureds. In an effort to keep prices low and entice customers to purchase coverage from their company and not a competitor, a carrier can make a low estimate on losses they expect to pay, which allows the company to charge lower premiums.[1] When losses (money paid to, or on behalf of, insureds) exceed the amount reserved (premiums charged), the company must raise premiums to account for the deficit. Sometimes called the “insurance cycle theory,” these fluctuations in price are due to insurance companies’ desires to remain competitive in pricing, while simultaneously creating a circumstance in which they may need to replenish their funds with higher premiums in the future. The insurance cycle theory depends as much on the claims paid as it does on the carrier’s willingness to charge premiums that truly reflect their expected payments.

Another explanation for rising insurance premiums considers the reinsurance market, which allows a malpractice carrier to cede some of their risk to a reinsurance company, essentially purchasing insurance for themselves. The reinsurance market, which takes on risk from all kinds of carriers, not just malpractice carriers, is affected by natural disasters and catastrophes which deplete reinsurers’ capital, and directly impact the cost of reinsurance for malpractice carriers in the future. For example, in 2001, TAISEI Fire and Marine Insurance, a Japanese reinsurance company, went bankrupt two months after the September 11 terrorist attacks due to massive reinsurance claims, which had a ripple effect on insurance carriers who had purchased reinsurance coverage from TAISEI Fire and Marine Insurance.[2]  

While malpractice premiums do indeed fluctuate, the cause for rising premiums is multifactorial and due, in part, to natural changes in the insurance market. Verdicts and settlements are just one part of the calculus.  For that reason, one must be skeptical of the claim that verdicts and settlements are the sole cause of rising premiums and that the only solution is to limit malpractice claims. Indeed, most corporate hospital systems and other large health care provider organizations are “self-insured”, meaning they retain their own funds to pay for claims made against them. Only when claims exceed levels of self-insurance are claims paid by traditional insurance policies. Insisting that malpractice damage caps or other limitations on recovery by tort plaintiffs would prevent rising insurance premiums requires a gross simplification of the insurance market.

 

Are doctors leaving Maryland?

While it’s difficult to determine why individual physicians leave a state at a given time, statistics show that Maryland currently has a good supply of physicians compared to the national average. In the United States, there are approximately 278 physicians in patient care per 100,000 people. Maryland ranks 6th in the nation, with 363 physicians per 100,000. Compare this with Idaho coming in 50th, with just 188 physicians per 100,000.[3] From 1975 to 2019, the number of physicians in patient care in the State of Maryland has steadily increased, from 16.5 per 10,000 to 36.9 per 10,000.[4] Given that there is statistically no shortage of physicians in Maryland as compared to the national average, it is worthwhile to examine whether tort reform could attract new physicians, as opposed to preventing their departure. A case study of the State of Texas offers valuable insight.

In 2003, Texas adopted significant tort reforms in response to a perceived medical malpractice crisis, allowing researchers to study the impact of these reforms in a number of areas—including physician supply. In collaboration with the Cato Institute (a nonprofit public policy research foundation), a group of law professors, physicians and economists examined the effects of tort reform on medical malpractice litigation in Texas using publicly available data and statistics.[5] The researchers found:

...no evidence that medical malpractice reform resulted in more physicians choosing to practice in Texas. This is true whether we examine total physicians, high risk specialties, primary care physicians or rural physicians...Physician supply appears to be primarily driven by factors other than liability risk, including population trends, location of the physicians’ residency job, opportunities within the physician’s specialty, lifestyle choices and demand for medical services, including the extent to which the population is insured.[6]

In recent months, mass exodus of providers from states has been evident, but the one thing they have in common is not malpractice insurance premiums, or the risk of being of sued—it’s anti-abortion laws. Recall that even in 2019 Idaho ranked 50th for the number of physicians per 100,000 residents; in 2022, Idaho’s trigger law went into effect after the Supreme Court overturned Roe v. Wade resulting in one of the strictest abortion bans in the country. Since then, two hospitals have completely shuttered their labor and delivery units.[7]   

 

Do malpractice suits increase the cost of healthcare?

Like insurance premiums, the drivers behind the cost of healthcare are complex. Tort reform advocates claim that malpractice premiums are factored into the price of healthcare and passed on to the patient, and that fear of liability leads to physicians practicing “defensive medicine” and ordering unnecessary tests or avoiding high risk patients and procedures altogether.

Actual facts and data show, once again, that the effect of malpractice premiums on the cost of healthcare is minimal. In 2004, the Congressional Budget Office (“CBO”) examined healthcare spending throughout the United States and found that in 2002, healthcare spending totaled approximately $1.4 trillion, with malpractice costs accounting for less than two (2) percent of overall spending.[8]

The extent to which physicians practice defensive medicine is difficult to measure, as the only way to quantify this behavior is through surveys and self-reporting. The best available method is to examine behavior and spending before and after tort reform statutes are passed—which the researchers in collaboration with the Cato Institute did in Texas after the 2003 tort reform statutes were passed. As with physician supply, tort reform had little to no effect on healthcare spending in Texas after 2003 tort reforms based on the data available.[9] The CBO made a similar finding, concluding that any cost savings from reducing defensive medicine would likely be small.[10] Furthermore, the United States healthcare system is, at its core, a fee for service model, meaning that physicians and providers charge for services they provide to their patients. This makes it even more difficult to determine whether services are provided out of concern for potential tort liability or to generate revenue.

 

What tort reforms already exist in Maryland?

Significant barriers to litigation and limitations on jury verdicts already exist in the State of Maryland that protect providers and corporate hospital systems. Typically, a three-year statute of limitations acts as a complete bar to patients who suspect they may have been harmed due to their provider’s negligence but fail to seek redress in time. The more complex the case, the more time is necessary to investigate, and those who seek representation too close to the statute of limitations will be unable to find an attorney who will even agree to investigate their case. Minor children seemingly have more protection, given that their statutes do not expire until the day before their 21st birthday (three years after they reach the age of majority). In reality, however, they must be willing to forego any claim for medical expenses they incur before adulthood, unless they satisfy the Pepper exception, and prove that their families were unable to cover the cost of their care.[11] This is particularly problematic in cases with young children whose injuries and damages may not be fully realized in early childhood.

If a potential plaintiff is successful in getting representation, their attorneys have their own hurdles to overcome.  Every medical malpractice case filed in the State of Maryland (unless the sole issue is lack of informed consent) must be supported by an expert witness who satisfies specific criteria defined by statute.[12] An expert witness offering testimony regarding the standard of care in a medical malpractice case must be in the same or a related specialty as the defendant, and if the defendant is board certified the expert witness must also be board certified in the same or a related specialty.[13] Experts testifying regarding the standard of care also “may not have devoted more than 25% of the expert’s professional activities to activities that directly involve testimony in personal injury claims during the 12 months immediately before the date when the claim was first filed.”[14] This requirement necessitates plaintiffs’ attorneys who work on contingency to invest thousands of dollars to retain an expert before a complaint is ever filed, thereby reducing the number of attorneys willing to investigate medical malpractice cases.

Once their case is filed, the plaintiff’s recovery is limited by statutes that are already in effect. First, any award for future care must be reduced to present value, meaning that the jury may only award “...an amount which, if prudently invested at an appropriate rate of interest over the applicable number of years, will return an amount equal to the total anticipated future economic loss.”[15] In other words, Maryland law requires that plaintiffs who obtain a judgment assume the risk of investing their recovery to ensure they have enough funds to meet their future care needs. Maryland also has a cap on noneconomic damages for all personal injury plaintiffs, as well as one that is specially set for medical malpractice claims. As of the date of this publication, the cap for non-economic damages in non-wrongful death medical malpractice claims occurring after January 1, 2023 is $875,000 whereas the cap in non-medical malpractice cases is $935,000.[16]  In wrongful death claims, the special medical malpractice cap offers even more striking protection to healthcare providers and corporate hospital systems that are not offered to any other negligent actor in Maryland.  As of the date of this publication the cap on non-economic damages for medical malpractice wrongful death claims with two or more beneficiaries is $1,093,750.  In non-medical malpractice cases, the cap is more than doubled at $2,300,000.    

If a jury makes an award for future medical care that is reduced to present value, the defendant can reduce the verdict even further by requesting that the court issue an order requiring that all or part of the future economic damages award be paid by an annuity or some other financial instrument.[17] Annuities are an insurance product designed to guarantee future payments up to a set amount, for a set number of months or years, or for the lifetime of a given individual. Simply put, annuities allow defendants to pay less than the judgment awarded by the jury.    

The noneconomic damages cap, present value calculation and annuities are real limits that reduce the dollar amount owed by the defendant to the plaintiff, but another functional cap exists as well: the insurance policy limit. As stated above, very rarely do physicians or other providers pay for settlements or judgments out of pocket without insurance—in nearly every case, the defendant’s insurance carrier will indemnify the defendant, up to the limits of insurance. Knowing that any award beyond the policy limits is essentially uncollectible, some plaintiffs can only recover up to $1,000,000 from an individual physician, the typical policy limit for a single provider, depending on the facts of their case. Essentially, insurance policy limits act as a secondary cap on a plaintiff’s recovery.  

In Maryland, each and every nonprofit corporate hospital system enjoys this secondary cap as a real layer of protection. Corporate hospital systems are often self-insured and purchase supplemental insurance to cover losses above their self-insured limits, protecting their assets from liability like other providers do. Section 19-103 of the Insurance Code prevents insurance companies that insure nonprofit corporate hospital systems from avoiding tort liability for those hospitals it insures on the grounds that a nonprofit organization enjoys “charitable immunity” from tort liability.[18] The tradeoff, however, is that nonprofit corporate hospital systems in the State of Maryland are only liable for judgments to the extent they have insurance coverage, regardless of the size of the verdict.

In 2019, Johns Hopkins Bayview Medical Center (“Johns Hopkins Bayview”), a nonprofit organization, was facing a judgment of $205,380,000 following a jury verdict in Byrom v. Johns Hopkins Bayview Medical Center. In order to stay enforcement of the judgment during the appeal, Johns Hopkins Bayview was required to either file a supersedeas bond under Maryland Rule 8-423 or an affidavit from their insurer under Rule 8-424 confirming the amount of insurance coverage.[19] Johns Hopkins Bayview elected to file an Affidavit with the Circuit Court of Baltimore City which stated, in pertinent part that “The Johns Hopkins Bayview Medical Center has medical professional liability insurance coverage...in an amount in excess of the judgment of $205,380,000 plus anticipated post-judgment interest...”[20] Even facing a judgment of more than $200,000,000, the assets of Johns Hopkins Bayview were never at risk—they had sufficient insurance to cover the judgment plus post-judgment interest, and charitable immunity prevented the plaintiff from collecting anything else.

Besides real and functional limits on damages, the cost of litigation can deter many attorneys from pursuing a medical malpractice case. Take a single defendant with a $1,000,000 insurance policy limit, for example. The cost of obtaining medical records, deposition transcripts, expert witness fees and liens all must be deducted from the $1,000,000 recovery (assuming that the defendant’s insurance carrier agreed to pay its full policy to resolve the claim), and it may simply not be worthwhile for the plaintiff to pursue a case given the costs associated with litigation.

 

Torts don’t need reforming—healthcare does.

A 2023 study published in BMJ Quality and Safety, an international peer reviewed journal, found that diagnostic errors in the United States cause nearly 800,000 serious injuries or deaths each year.[21] Just 15 diseases account for more than 50% of these harms, while just five (5) account for nearly 40% (stroke, sepsis, pneumonia, venous thromboembolism and lung cancer).[22] The maternal mortality rate in the United States has risen from 20.1 deaths per 100,000 live births in 2019, to 23.8 in 2020 and 32.9 in 2021.[23] When race is considered, the maternal mortality rate for Black women was 69.9 per 100,000, more than 2.5 times the rate for White women.[24]

Tort reform statutes are not intended to keep patients safe, prevent harm or improve the quality of care. Tort reform statutes are intended to keep injured people and their families out of court and to fix problems that either don’t exist or have a multifactorial cause. Rather than trying to understand why medical negligence occurs and looking for meaningful solutions, tort reforms sweep injured patients under the rug. They block access to the courts with pre-suit filing requirements that require investments from attorneys working on contingency who may never recoup the money spent, making it too risky for attorneys to investigate and pursue some of these cases, and leaving injured patients with no redress.

Some states have taken the paternalistic approach of limiting attorneys’ fees, making it even more difficult for attorneys working on contingency to take on the risk of a medical malpractice case. Yet again, the reality is that attorneys cannot afford to invest significant time and money on cases if the attorney cannot charge a fee commensurate with the work required. Other states place significant limits on who can testify as an expert witness. Tennessee requires that any expert testifying on the standard of care be in a contiguous state, while Florida requires experts to register with the state in order to testify. In cases involving minor children, some states require extensive briefing and examination of the plaintiff’s attorney’s fee and costs before approving a settlement or distribution of funds further discouraging attorneys from pursuing medical malpractice cases due to the risk of significant cuts to their fee or expenses, after investing hundreds of hours and tens of thousands of dollars.

Corporate hospital systems and malpractice insurance carriers wield a great deal of power with opacity and obfuscation. By the time a case gets to settlement, defendants and their insurers demand complete confidentiality of all terms, specifically including the amount of the settlement. Confidentiality allows corporate hospital systems and malpractice insurance carriers to prevent the public from meaningfully assessing the amount of money spent on negligence claims. Corporate hospital systems claim that soaring insurance premiums may force them to close facilities or limit care when, in reality, charitable immunity protects the assets that aren’t covered by more than $200,000,000 in insurance (in at least one instance). They claim that doctors are fleeing states with high rates of malpractice claims when the supply of physicians in Maryland has steadily increased and is above the national average. They claim that medical malpractice claims are driving the cost of the healthcare ever higher, while the available data shows that medical malpractice claims account for approximately 2% of total healthcare spending in the United States. They claim that juries are out of control, when in reality, statutes already exist to weed out frivolous cases and significantly reduce jury awards.

The tort reform playbook must ignore reality. The reality of the insurance market and what actually drives insurance premiums. The reality of the number of physicians in the State of Maryland. The reality of the cost of healthcare. The reality that statutes already exist to protect doctors and corporate hospital systems from excessive jury verdicts. Despite already having robust protections under Maryland law, tort reform advocates want even more special rules for special parties that will do nothing to improve patient care, and everything to deprive Marylanders of their rights.

 

Biography

Sarah L. Smith is an associate at Wais, Vogelstein, Forman, Koch & Norman LLC where she has worked since 2017 representing children and their families in cases involving birth injuries. Ms. Smith, along with Keith Forman and Mary Koch, represented Erica and Zubida Byrom in the landmark case of Byrom, et al. v. Johns Hopkins Bayview Medical Center, Inc., where the jury awarded Zubida Byrom $229,640,000 for injuries she sustained during labor and delivery. Ms. Smith was named to the Daily Record Power List for Personal Injury and Medical Malpractice in 2023 and is a recipient of the 2020 Maryland Association for Justice President’s Award.