Five years after the implementation of extensive medical liability reforms, Texas hospitals report major reductions in liability costs and reinvestment of savings in new patient-oriented programs.
These findings come from a July 2008 survey by the Texas Hospital Association designed to measure the impact of medical liability reform. Responses came from 10 healthcare systems and 10 independent hospitals, representing 176 facilities and more than 31,000 licensed beds - approximately 55 percent of the private medical-surgical hospitals in Texas.
"Patients are the ultimate beneficiaries of the tort reform measures passed in 2003," said Dan Stultz, MD, president and CEO of the Texas Hospital Association. "It's clear that hospitals are able to attract more specialty physicians and offer new or expanded services that have enhanced patients' access to care and saved lives."
The survey found that 85 percent of hospitals are finding it easier to recruit medical specialists and subspecialists, and 69 percent of respondents had maintained or expanded services because of declining hospital liability costs.
The THA survey discovered numerous examples of how hospitals in the state have reinvested the money saved from liability cost reductions:
- A hospital in Victoria was able to enhance its emergency room coverage and maintain its designation as a Level III trauma center.
- A children's hospital in Houston implemented a new high-risk obstetrics program, recruiting several key specialists from out-of-state. This facility invested millions of dollars from its liability premium savings to expand patient safety programs and quality improvement initiatives.
- In College Station, a hospital opened the first neonatal intensive care unit within 100 miles. Newborns in this region once had to travel to Houston to receive such care. The hospital also recruited several pulmonologists to the community.
- A major referral center in Abilene recruited a neurosurgeon.
- A health system in central Texas expanded its children's hospital, adding a number of specialists and enhancing the capacity of its emergency room and clinics that serve the uninsured.
On average, hospital professional liability insurance premiums and reserves have dropped significantly in Texas - especially for those facilities affiliated with a larger hospital system.
The 109 hospitals that provided premium information for THA's survey cited a total decrease in annual hospital liability premiums of more than $100 million between 2003 and the most recent year reported (2008-2009). In several instances, these savings were realized at the same time coverage limits doubled or even tripled.
According to the THA survey, hospitals are using the savings for a variety of initiatives:
- 58 percent have used their reduced liability insurance coverage costs to expand patient safety programs;
- 51 percent have used the savings to maintain or expand coverage or services for uninsured/underinsured patients;
- 46 percent have used the savings to subsidize various governmental payment shortfalls (e.g., Medicaid);
- 41 percent have used their reduced liability insurance coverage costs to meet monthly obligations, improve salaries for nursing personnel, maintain or increase nurse staffing levels or maintain or expand staff educational opportunities;
- 39 percent have used their savings to maintain, update or add new medical equipment in radiology, the laboratory or pharmacy;
- and 37 percent have used their reduced liability coverage costs to establish or increase payments to on-call physicians or expand or update the facility's physical plant.
"The 2003 reforms passed by the Texas Legislature were in response to an increasingly litigious environment that caused hospital and physician professional liability premiums to skyrocket," said Stultz. "Many doctors were leaving the state or cutting back on services, and hospitals had difficulty recruiting specialists and providing adequate coverage in emergency rooms."
The Legislature imposed a $750,000 cap ($250,000 for physicians, $250,000 for the first hospital or healthcare facility and $250,000 for any additional facilities) on judgments for non-economic damages - such as emotional distress - in healthcare liability cases. There is no cap on actual damages, such as loss of income or medical expenses.
The cap was effective Sept. 1, 2003, and Texas voters approved Proposition 12 in a statewide Constitutional election held September 13 of that year, ratifying the Texas Legislature's authority to adopt the caps.
"The current caps place a reasonable limit on the amount of non-economic or subjective damages that can be awarded in healthcare lawsuits, while still ensuring that plaintiffs can be fully compensated for their economic losses and medical care," said Stultz. "THA's survey results prove that medical liability reform is working."