MINUTES OF THE
SENATE Committee on Commerce and Labor
Seventy-second Session
March 14, 2003
The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 7:06 a.m., on Friday, March 14, 2003, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4412, 555 East Washington Avenue, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Senator Randolph J. Townsend, Chairman
Senator Warren B. Hardy II, Vice Chairman
Senator Ann O'Connell
Senator Raymond C. Shaffer
Senator Joseph Neal
Senator Michael Schneider
Senator Maggie Carlton
GUEST LEGISLATORS PRESENT:
Senator Bernice Mathews, Washoe County Senatorial District No. 1
Alice Costandina (Dina) Titus, Clark County Senatorial District No. 7
STAFF MEMBERS PRESENT:
Scott Young, Committee Policy Analyst
Courtney Wise, Committee Policy Analyst
Kevin Powers, Committee Counsel
Lynn Hendrick, Committee Secretary
Laura Adler, Committee Secretary
OTHERS PRESENT:
Robert M. McCormick, Deputy District Attorney, Douglas County
Terry Taylor, Captain, East Fork Fire and Paramedic Districts
Jack Kim, Lobbyist, Sierra Health Services, Incorporated, and Nevada Association of Health Plans
Buffy Gail Martin, Lobbyist, American Cancer Society – Reno
Dave Noble, Assistant General Counsel, Public Utilities Commission of Nevada
Roger Bremner, Administrator, Division of Industrial Relations, Department of Business and Industry
Ivan R. “Renny” Ashleman, Lobbyist, University Medical Center of Southern Nevada
Terry Graves, Lobbyist, Basic Management Incorporated
Cliff King, Chief Insurance Examiner, Division of Insurance, Department of Business and Industry
Bill Bradley, Lobbyist, Nevada Trial Lawyers Association
William T. Montei, President and Chief Executive Officer, Physicians Insurance Company of Wisconsin
James L. Wadhams, Lobbyist, Nevada Mutual Insurance Company
Robin L. Keith, Lobbyist, Nevada Rural Hospital Partners Foundation
Scott M. Cragie, Lobbyist, Nevada State Medical Association, and Keep Our Doctors in Nevada
Keith L. Lee, Lobbyist, State Board of Medical Examiners
Lawrence P. Matheis, Lobbyist, Nevada State Medical Association
Chairman Townsend:
We will open the hearing on Senate Bill (S.B.) 9.
SENATE BILL 9: Revises provisions governing exclusivity of certain rights and remedies under industrial insurance. (BDR 53-632)
Robert M. McCormick, Deputy District Attorney, Douglas County:
I was the prosecutor of the only industrial explosion case in Nevada. Records were searched for information on any similar cases for criminal prosecution, although there have been several other industrial explosions within the State. I made copies of the actual charging document (Exhibit C) in which Nevada Revised Statutes (NRS) 202.595 was used to prosecute. That section of NRS is commonly referred to as the “fan man bill.” It refers to the man who had a parachute and a fan attached to his back, and flew into the outside boxing match at Caesars Palace in Las Vegas. There was no law at the time under which he could be prosecuted; one was later passed. The “fan man bill” is the one used to prosecute this case. A lot of prosecutors have usually deferred to Occupational Safety and Health Administration (OSHA) rules to prosecute similar cases. As a prosecutor, I was uncomfortable when things graduated from a misdemeanor with a $50,000 fine to increasing fine amounts. It would be better for a prosecutor if it were set as resulting in death or substantial bodily harm as a category C felony. That is what NRS 202.595 does and I would support that type of legislation in this bill. I was uncomfortable with section 2 of the proposed amendment (Exhibit D) tab A that says, “a prosecuting attorney shall not dismiss a charge ¼ .” There are only two other instances in statutes where such a restriction is placed on prosecutors. The first one is driving under the influence (DUI), and the second is domestic violence. There have not been many instances for prosecutors to come forth under those restrictions.
Senator Carlton:
Mr. Gonzalez could have been charged under NRS 618, and that led to this bill. It concerned me greatly when I realized a death could be charged as a misdemeanor. That was the genesis of this discussion about graduated penalties. We are working S.B. 9 in the same vein as S.B. 8, with the graduated penalties for consistency. Also the concerns about driving under the influence had been discussed and were modeled after that. One death was enough, and death should never be considered a misdemeanor. Paragraph 2 of the bill gives a backdoor hard look at a case to make the decision you would like to make. I feel the families who have lost a loved one or had them seriously injured deserve to have a statute whereby this State will not recognize the death of an employee as a misdemeanor.
SENATE BILL 8: Increases penalty for certain punishable conduct by employer leading to death of employee. (BDR 53-298)
Chairman Townsend:
I would like to know if you prosecuted under NRS 618, or NRS 202, or OSHA?
Mr. McCormick:
It was under NRS 202. Both were looked at carefully, and NRS 202 seemed more of a criminal statute than an OSHA hybrid statute, and therefore more appropriate. The NRS 202.595 provides prosecutors with a tool in which to proceed on an industrial explosion. That is why “a failure to do a duty,” was put in the charging documents (Exhibit C), i.e., he failed to comply with the building code to reduce the explosive gases; therefore, resulting in the death or substantial bodily harm to an individual.
Chairman Townsend:
The NRS 618.685 speaks to an employer who “willfully violates any requirement of this chapter, or any standard, rule, regulation, or order promulgated or prescribed pursuant to this chapter where the violation causes the death of an employee, shall be punished:” For a “first offense, by a fine of not more than $20,000 or by imprisonment in the county jail ¼ .” My concern was expressed by members of the employer community that the category D felony might float straight up to board members, CEOs, or whomever, who were not directly involved in the violation. I want to know if you see it that way?
Mr. McCormick:
I agree with that assessment. At the time the explosion occurred, Walter E. Gonzalez, President of Depressurized Technologies International, Inc., defendant in Case No. 02-CR-0051, Douglas County, was in California. We believed we had enough to go after him, and at the time also considered going after his wife, Dora Gonzalez, as one of the owners of the company.
Senator Carlton:
Regarding the discussions over this, it has been the rungs of the ladder that would have to be climbed in order to prosecute someone at the top. He knew about the violation, he ignored the violation, he proceeded to put the employee in harm’s way and a death occurred. I will be making the legislative intent on the Floor of the Senate to give the business community some level of comfort that the person at the very top would not be involved. Since he did not receive the violation, he did not ignore it because he did know about it, he could not proceed because he never crossed the first one. Because that would be the legislative intent and the guidance from the Legislature, would that change your opinion on how you would look at it?
Mr. McCormick:
It would depend on the facts of the case. There would also be the excuse of, “I did not know about it, I just told them to produce as much as possible.” That was one of the defenses Walter Gonzalez presented in this case. In many of the discussions with him, he contended these were run-away employees. He was trying to put the blame back on the employees, and that was ludicrous. When Douglas County received the report from Captain Terry Taylor, East Fork Fire and Paramedic Districts, several weeks were spent reviewing the report because there had never been a prosecution based on this in trying to find the most appropriate vehicle. That is when we came across the “failure to do a duty” standard.
Chairman Townsend:
If you, as a generic prosecutor representing prosecutors across the State, are not comfortable with the restrictive nature of this, given what you know and the tragedy and consequences your community experienced, is it possible now that you know the concerns of the Legislative Commission’s Subcommittee on Industrial Explosions, find some strengthening of the language and some coordination between the OSHA violations, the NRS 202 violations, and help us through this. Would that be possible?
Mr. McCormick:
Anything I can do to help clarify and make the laws more clear would be better for prosecutors from the sense of them knowing what they have when going into court.
Senator O’Connell:
When faced with this language and the words “willfully violates,” is this a situation where you go to the letter of the law or to the intent of the law? There were numerous situations that came up during testimony about what willful would actually be. For example, while repairing a road, one of the employees was struck by a car, would the employer have put that employee in a willful situation? And how would the law be applied in those situations?
Mr. McCormick:
I wrestled with those questions for several days when charging this particular incident. I think a definition of willful needs to be put into the language. I looked at uniform jury instructions as to what “willful” means. You do need to have that willful component, have it defined, and spelled out. That would help protect manufacturers by alleviating some concerns about being broad blanketed. Had this gone to trial, the question would have been: was it a willful violation?
Senator Neal:
My focus is on the employer involving a chain of command; for example, at the fourth level where a decision is made relative to an employee who is put into danger. This situation would not permit going to the top unless the investigation was such that the top person did give the direction to put that person in harm’s way. I also see another problem where individuals who are part of the chain of command are making decisions that do not go to the top. In part it would now fall on the employee to make a judgment about safety. I think the decision rests with the person who made it, unless there is a direct connection to the top. The way the statute is written, there would first have to be an investigation to determine who made the decision, when, where, and how it affected the person being harmed. Then the charge would focus on the decision creating the harm. Would that get you there?
Mr. McCormick:
It certainly would help get you there. Frankly, when there is a proposal like this that says, if you violate any provision that results in the death, that is a fairly good case to take forward as long as that connection is in there. In this particular case, Walter Gonzalez used that as his defense. He said he gave them instructions as did his right-hand man, but the employees were a run-away crew. We felt, had we gone to trial, we could have shown that in fact, Walter Gonzalez was aware the employees were using the equipment without the hood. In fact, when visitors came to the plant on one of his public relations tours, he would have them shut the doors to the cargo container box in which they were working, and tell the employees either to stay inside or go outside and clean around the building. These are very complicated cases. They are not easy ones, but when there is a case like the one we had in Douglas County, the district attorney, Scott Doyle, said we have to prosecute this case because the occurrence was so egregious. Just for the committee’s information, we believe Mr. Gonzalez is in the process of selling his building in Douglas County, and relocating his business to Mineral County.
Chairman Townsend:
Mineral County is Senator McGinness’ area, so we had better notify him. My frustration is about the years this committee has spent trying to create a safe work environment. Then there is this severely tragic incident that gets to you personally.
Senator Neal:
If you had this language at the time, could you have prosecuted under it?
Mr. McCormick:
Yes.
Chairman Townsend:
We should not lose sight of the fact people lost their lives, and others were maimed in this Douglas County case. In southern Nevada, where a life was lost in the Aerotech explosion, that business was in close proximity to a residential area, greatly increasing the potential for greater loss of life. The Pepcon explosion may have been the largest industrial explosion in the history of this State, but was not located in close proximity to residences.
Terry Taylor, Captain, East Fork Fire and Paramedic Districts:
Coincidentally, two days after the Aerotech explosion, I was in Las Vegas with the Federal Bureau of Investigation regarding bombs and explosions. I met with their case investigator and a case supervisor to discuss our circumstances in Douglas County. We discussed what was being done to investigate, how we were approaching it, and how we were attempting to grapple with it as an incident. We provided them with copies of my investigation report to serve as a guideline to use in southern Nevada.
I am also a board member of the State Arson Investigators Association giving us a line of communication when a major incident occurs. We bring criminal charges of arson or manufacture of Molotov cocktails, et cetera, to district attorneys, and we attend law enforcement training.
We are also involved in a regulatory capacity in fire prevention, and use of fire codes in our relationship with district attorneys, so we tend to look at that body of law, such as the arson and explosive statutes. In October 2003, 40 investigators from around the State will attend a training seminar, and one of the training situations will be this case. We will be training ourselves to be better investigators in order to bring good cases to our prosecutors.
Chairman Townsend:
I am glad to see you and your group are staying proactive. The key person for employers to lead their group in conversations with you should be Mr. Ray Bacon. Mr. Bacon represents the Nevada Manufacturers Association, and has members most likely to be impacted by what we are doing. To make sure this works in reality, find language that could strengthen these bills on behalf of prosecutors against willful violators.
I now call on Ms. Wise to give us some background on S.B. 183.
SENATE BILL 183: Requires certain policies of health insurance and health care plans to include coverage for screening examinations and tests for colorectal cancer. (BDR 57-726)
Courtney Wise, Committee Policy Analyst:
The amendment presented by Senator Mathews (Exhibit D) is tab B under 183. This morning additional language was added for clarity. Sections 1 through 5 of the amended S.B. 183 now reads, “Colorectal cancer screening in accordance with the American Cancer Society Colorectal Cancer Screening Guidelines and guidelines published by nationally recognized professional organizations that includes supporting scientific data.” This combines both amendments, so we added, “and reports and guidelines published by nationally recognized professional organizations that includes supporting scientific data.”
Senator Bernice Mathews, Washoe County Senatorial District No. 1:
Would the word “or” change the meaning?
Ms. Wise:
Yes, it will.
Jack Kim, Lobbyist, Sierra Health Services, Incorporated, and Nevada Association of Health Plans:
I think the more appropriate word would be “or.” To use “or” gives a choice. To use “and” indicates both have to be used.
Buffy Gail Martin, Lobbyist, American Cancer Society – Reno:
My concern is “or” allows organizations too much wiggle room. The American Cancer Society Colorectal Cancer Guidelines are the most comprehensive on colorectal cancer screening. My concern by using “or” is other organizations may possibly say they do not cover colonoscopies, and only cover the other cancer screening.
Mr. Kim:
The “or” language and the language following says, “in accordance with reports and guidelines published by nationally recognized professional organizations that include supporting scientific data.” That language was pulled out of the pending external review bills, sponsored by Senators Neal and O’Connell, and Assemblywoman Barbara E. Buckley.
Senator Hardy:
I am uncomfortable with specifying a particular guideline, although I know the American Cancer Society is the group to specify. But not to specify one particular group when there are others that do this. If the other language needs to be tightened regarding other professional organizations that include supporting scientific data, then that is what we need to do. I am more comfortable with that language because it does include others.
Senator Mathews:
Part of the problem is professional organizations that have not updated the test inasmuch as 20 years, and we are beyond that. The American Cancer Society stays on top of the latest data and that is the reason to make sure it is in the bill. If scientific data is requested, I can get that for you.
Senator Hardy:
I think it can be addressed. It needs to be an organization that keeps its testing updated.
Senator Mathews:
The patient would not know that. I am willing to go with the word “or.”
Chairman Townsend:
No need to rush this decision because it is too important. I understand there are practicing physicians who, under their current relationship with their insurer or practice, use other guidelines. Since this language is in other bills, with all due respect to our legal counsel, it does not say anything about the most current or within 5 years. The goal is to have organizations that use the most recent and current methods.
Mr. Kim:
I agree. That is why “other organizations” was suggested. In looking at the organizations’ guidelines, they are almost identical in all the tests required, time frames, and even high risk.
Chairman Townsend:
I would like an amendment drafted to include this new language of “or” with reference to the “most recent” or “current” or the legal standard.
Ms. Wise:
It may read something like, “colorectal cancer screening in accordance with the American Cancer Society colorectal cancer screening guidelines or reports and guidelines published by nationally recognized professional organizations that include current or prevailing supporting scientific data.”
SENATOR NEAL MOVED TO AMEND AND DO PASS AS AMENDED S.B. 183.
SENATOR CARLTON SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR SCHNEIDER WAS ABSENT FOR THE VOTE.)
*****
Chairman Townsend:
In researching this subject, I noticed there are more people who will lose their lives to colorectal cancer per year than we lost in the Viet Nam War. This should give everyone a balance on the seriousness concerning disease.
We will now move on to S.B. 125.
SENATE BILL 125: Revises provisions relating to certain final orders and permits for public utilities. (BDR 58-488)
Dave Noble, Assistant General Counsel, Public Utilities Commission of Nevada (PUC):
The commission has set a meeting for next Tuesday with interested parties to discuss technical amendments to this bill. There will be discussion on amending the extension of time requested. There have been proposals about softening the 180-day deadline for leaving the system if eligible customers have complied with all the commission requests in their order to leave the system early. Also dealing with applications of new providers where an eligible customer has already left the system and asked to obtain service from an alternative new provider, and the process of commission review of that application will be a topic of discussion.
Chairman Townsend:
Do you want us to hold the bill until you can get your language back to us?
Mr. Noble:
Yes.
Chairman Townsend:
We will reschedule the bill for next Friday. Those who are choosing to exit the system under NRS 661 and its regulatory authority given to the PUC has concern for many of us. When an application is made and filed, and a fee is associated with it, that fee is a result of the cost for the utility relative to what they have purchased in the past to provide service to that customer who leaves. It is then allocated on the basis of protecting the remaining customers and their shareholders, so that the company is not at risk and anybody who remains is not at risk. There are those who made application, and then chose not to exit. They applied to come back in because prices were down that reduced costs; this committee struggled with that bill.
Everyone may never lose sight of one thing in this bill. Wherever your regulatory process lands, and the ability of the users of the guideline of 1 megawatt and above who can leave, do not manipulate the system in any way that would harm any remaining customer. That is not the intent of the law. That is not what it says. I would hope when the chairman is available he would come back and talk about exit fees, the rule promulgated under NRS 661.
Mr. Noble:
I will have staff members attend. Since there are open cases dealing with that, they would be the most appropriate. I will discuss dealing with the open cases, ex parte, et cetera, with the chairman.
Chairman Townsend:
Remember the vast majority of applications come from southern Nevada. The situation in the north is more clearly defined because there are only two companies. This is a serious issue and we want to make sure all the regulations follow the intentions of this committee.
Committee, we are ready for S.B. 126.
SENATE BILL 126: Exempts retail customers who purchase energy from certain municipal utilities from payment of universal energy charge. (BDR 58‑344)
Cooperatives and general improvement districts were exempt from the universal energy charge. I understand Fallon, Boulder City, and Caliente are not exempt from the energy charge.
Scott Young, Committee Policy Analyst:
If the proposed amendment (Exhibit D. Original is on file in the Research Library.) tab A, were to be adopted, it would include Fallon, Boulder City, and Caliente. Each municipality has their own program.
Chairman Townsend:
Would we have to add “or local government” to the bill in order to bring in all three entities?
Mr. Young:
I believe it was drafted with the intention of capturing all of them. The original language would only have picked up the City of Fallon.
Chairman Townsend:
Did the draft pick up the intent of the testimony?
Kevin Powers, Committee Counsel:
“The proposed amendment is included in the materials; that is correct. It was intended to cover every local governmental entity that provides electricity or natural gas.”
Senator Neal:
Assuming Southern Nevada Water Authority (SNWA) is successful in purchasing Nevada Power Company, would this language hamper them?
Mr. Powers:
“Under this language, the Southern Nevada Water Authority would fall into the category of a municipal or local governmental entity, so their customers would be exempt from the energy charge.”
SENATOR HARDY MOVED TO AMEND AND DO PASS AS AMENDED S.B. 126.
SENATOR NEAL SECONDED THE MOTION.
THE MOTION CARRIED. (SENATORS O’CONNELL AND CARLTON VOTED NO. SENATOR SCHNEIDER WAS ABSENT FOR THE VOTE.)
*****
Chairman Townsend:
Is there an agreement on S.B. 168 between Mr. Wiles and Mr. Ashleman?
SENATE BILL 168: Revises provisions governing industrial insurance. (BDR 53‑466)
Roger Bremner, Administrator, Division of Industrial Relations, Department of Business and Industry:
The last time the bill was discussed, we were unable to obtain a consensus on language. Since that time, I believe we have consensus on an amendment that will do what we both want.
Chairman Townsend:
Mr. Ashleman, we will work from the handout (Exhibit E).
Ivan R. “Renny” Ashleman, Lobbyist, University Medical Center of Southern Nevada:
The only substantive change is item 3. We had the issue of whether or not we were going to put a standard on the administration fine into the law. The change does say, “may.” We have agreed to omit putting a standard in because the division has indicated they intend to pursue a regulatory process, and deem it appropriate to adopt a regulation. We are satisfied with that issue. The rest of the changes are cleanup of language.
Chairman Townsend:
The goal is for the employer and employee to get what each needs. This is to be done in the most expeditious time given what a hospital faces gathering all the necessary paperwork.
Senator Neal:
Is this change sufficient for Mr. Bremner to carry out his duties in relationship to this issue?
Mr. Bremner:
Yes, it is.
SENATOR NEAL MOVED TO AMEND AND DO PASS AS AMENDED S.B. 168.
SENATOR SHAFFER SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR SCHNEIDER WAS ABSENT FOR THE VOTE.)
*****
Chairman Townsend:
Next is Assembly Bill (A.B.) 22.
ASSEMBLY BILL 22: Revises requirements for licensure of nurses. (BDR 54‑240)
SENATOR CARLTON MOVED TO DO PASS A.B. 22.
SENATOR SHAFFER SECONDED THE MOTION.
Senator Neal:
I was not present when this bill was heard.
Chairman Townsend:
This bill came as a direct response regarding nurses who wanted to sit for the exam that were from schools going through accreditation, but had not yet received it. The nurses could sit for the exam, and when the school received its accreditation, the nurses would receive their licenses. They were not allowed to sit for the exam even though the school was going through accreditation.
THE MOTION CARRIED. (SENATOR SCHNEIDER WAS ABSENT FOR THE VOTE.)
*****
Chairman Townsend:
We will open the hearing on S.B. 169. The issue is the hearing aid specialists are increasing the cap on their fees so they do not have to come back again.
SENATE BILL 169: Revises certain fees related to licensure of hearing aid specialists. (BDR 54-497)
SENATOR O’CONNELL MOVED TO DO PASS S.B. 169.
SENATOR HARDY SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR CARLTON VOTED NO. SENATOR SCHNEIDER WAS ABSENT FOR THE VOTE.)
*****
Chairman Townsend:
We will now hear S.B. 121.
SENATE BILL 121: Eliminates exemption to payment of universal energy charge for electricity used in electrolytic-manufacturing processes. (BDR 58-38)
Alice Costandina (Dina) Titus, Clark County Senatorial District No. 7:
I am still in support of removing the exemption for just three companies at Basic Management Incorporated (BMI). These companies already get cheaper power through the Colorado River Commission of Nevada (CRC) compared to those who buy it through Nevada Power. I think it is an unfair exemption. If their employees and small businesses can pay it, if a single mother in a mobile home park can pay it, then they can pay it. I feel better after talking to Mr. Graves who said they do pay some on other energy they use, but not that which goes directly into the electrolytic manufacturing process.
Terry Graves, Lobbyist, Basic Management Incorporated:
A senator requested information contained in the first part of this (Exhibit F) as to the uses of chlorine. It addresses the pyramiding effect from a tax of this type on manufacturing goods.
Senator Titus:
I do not want to get into a debate on the merits of the universal energy charge. I just want to talk about the exemption for this particular electrolytic manufacturing. I am going to change my mind if we are going to change that debate.
Mr. Graves:
Electrolytic power is exempt. In fact, it is considered a raw material even under the federal tax code. In the 16 to 18 months since this tax was implemented, my client has paid nearly $40,000 in universal energy charges (UEC) for non‑electrolytic power usage. Another of the BMI industries paid over $60,000, and a third, the smallest manufacturing facility, paid $10,000 in the past year. When talking about an issue of fairness, this particular entity is one-twentieth the size of some major casino and mining operations, and they are paying 10 percent of the cap. I suggest these entities are paying a fair share of the UEC charge. Implementing S.B. 121 would actually cause unfairness for those industries.
Senator Neal:
I was not present when S.B. 121 was heard. Does BMI generate this electricity?
Mr. Graves:
Basic Management Incorporated does not generate electricity. They buy electricity on the open market. As pointed out, they have had some hydropower contracts for years, but that is only a small portion of their total power needs.
Senator Neal:
I am asking the question to understand how the exemption in the law came about in the first place.
Senator O’Connell:
Senator Titus had mentioned they buy power cheaper from the Colorado River Commission of Nevada. I thought the commission bought extremely high power, especially during the same sequence that Nevada Power did. In fact, their power was so high they were almost at a bankruptcy stage, and Southern Nevada Water Authority had to bail them out.
Mr. Graves:
It was true. Now Pioneer Chlor Alkali no longer has any hydropower contracts. They will be buying all their power on the open market. They forfeited those contracts to Southern Nevada Water Authority, because of the high cost of some of the contracts entered into by the CRC.
Senator Titus:
I have some information that they had a long-term contract where they were receiving a percentage of their power at 1 cent per kilowatt-hour compared to 6 cents adjusted. The contract puts them at 5 cents under the 6 cents from Nevada Power.
Senator O’Connell:
Mr. Graves, could you explain further? Is that a correct statement that their power was cheaper?
Mr. Graves:
The BMI industries, because of their history, did have access to hydropower contracts that cost less. However, those industries use more power than the hydropower. Since Pioneer Chlor Alkali went into bankruptcy, the supplemental power contracts, not hydropower contracts, were purchased on their behalf by the CRC. In order to settle those out-of-market contracts, Pioneer Chlor Alkali gave up their hydropower contracts, and is buying power just like the casinos, mining companies, and everyone else.
Senator Neal:
Did Southern Nevada Water Authority’s problems start after buying Pioneer Chlor Alkali’s hydropower contracts?
Mr. Graves:
Southern Nevada Water Authority alleviated the liability for Pioneer Chlor Alkali on these out-of-market contracts; in return SNWA took Pioneer Chlor Alkali’s hydropower contracts.
Senator Neal:
Is the Colorado River Commission of Nevada in jeopardy for having to pay high costs for power?
Mr. Graves:
No. The Southern Nevada Water Authority took that liability.
Senator O’Connell:
Did the ratepayers for Southern Nevada Water Authority bail out the CRC?
Mr. Graves:
In a sense, they did. The State agency purchased the power contracts. The power contracts were with the CRC on behalf of Pioneer Chlor Alkali. The energy companies that sold the power to the CRC only recognized the commission, but Pioneer Chlor Alkali was behind CRC.
Senator Neal:
The CRC was able to buy power between $30 and $40 a megawatt hour when prices were going up to $95, $100, $150, and $200. They got into the rolling affect of long-term contracts. Are you suggesting they did not?
Mr. Graves:
I do not know the details of the contracts that were entered into. I only know they were above market, and produced a liability similar to what Nevada Power had.
Senator O’Connell:
Could you tell me approximately how much that was?
Mr. Graves:
In the settlement agreement Southern Nevada Water Authority paid at least $53 million for the liability. I do not know if that covered the entire liability or not.
Senator Carlton:
This is a blended rate. There is some very cheap power and there is more expensive power. As a blended rate it comes out to be less expenses than what others are paying. Because of the buyout and other things, you were committed to these contracts and now you are not. So you did derive some benefit from the contract buyout and blended rates on the power?
Mr. Graves:
No. They lost their hydropower contracts.
Senator Carlton:
Are they responsible for paying for that now because you had a contract?
Mr. Graves:
They did benefit from that liability, but going forward with their operations they will be paying comparable power rates.
Senator Carlton:
That was their choice.
Mr. Graves:
Yes, but that was a settlement. They will not benefit from any hydropower contracts in the future.
Senator Carlton:
They did benefit from the fact they are not liable for those high power contracts right now. That was one of the arguments from 2 years ago of the expense of power when you asked for that exemption, and now that no longer exists.
Senator O’Connell:
As I remember, it was because they are a raw material, not a finished product.
Mr. Graves:
Electricity in an electrolytic process is considered a raw material. It is considered raw material by the federal tax code and other jurisdictions where this type of energy tax has been implemented, raw materials have been accepted.
Senator Carlton:
The cost of that raw material was part of the debate. There has been a change in cost of that raw material.
Mr. Graves:
The costs have gone higher.
SENATOR O’CONNELL MOVED TO INDEFINITELY POSTPONE S.B. 121.
SENATOR HARDY SECONDED THE MOTION.
THE MOTION CARRIED. (SENATORS CARLTON AND NEAL VOTED NO. SENATOR SCHNEIDER WAS ABSENT FOR THE VOTE.)
*****
Chairman Townsend:
There are three bills on the Senate side regarding medical insurance reform. The Senate Committee on Judiciary is debating the initiative petitions dealing with civil justice reform, and a number of other issues because of their expertise. This committee has S.B. 122 and S.B. 250. Both bills deal with insurance reform issues on which Senator Titus has a concept to be worked on later. Today we will address the issues in S.B. 250 regarding their validity and applicability as to context. The first issue is long-term public policy to hold accountable all parties to any type of health care issue in question regardless of who it is. The second portion deals with the context of access to health care, particularly obstetricts and gynecology, and trauma in southern Nevada. As a result, we have tried to look at concepts as they relate to context. Where did the 7 percent come from?
SENATE BILL 122: Makes various changes regarding malpractice insurance and actions. (BDR 57-165)
SENATE BILL 250: Revises various provisions relating to regulated businesses and professions. (BDR 57-835)
Cliff King, Chief Insurance Examiner, Appeals Panel for Industrial Insurance, Division of Insurance, Department of Business and Industry:
The 7 percent number came from a bill of 4 years ago, and from a bill from last year.
Chairman Townsend:
What do you think is valid between premium payers and those who make claims against insurance?
Mr. King:
Whenever a ban of 7 percent is used, the Statewide average can be reached by having negative numbers on one side and very large numbers on the other side to arrive at a plus or minus 7 percent. I am not sure I have an opinion.
Chairman Townsend:
At an appropriate time, Mr. King, would you check with the commissioner to see if there is an opinion?
Senator Neal:
The 7 percent in section 1 is referred to as flex-rating. Is that the same as deregulation?
Mr. King:
It is not the same. The same supporting data would be required. If a filing were made today, we would have 60 days to act on it to either approve or disapprove. A carrier could file rates and immediately begin using those rates under this flex-rating plan, as long as the Statewide average is not greater than 7 percent. However, they would still have to provide the same actuarial supporting data; therefore, we would have the opportunity to review the supporting data. The carrier would be able to implement it immediately instead of waiting for our approval.
Chairman Townsend:
Again, I repeat, it is a timing issue and not a change in policy issue or lowering the criteria for rate review. Is that correct?
Mr. King:
That is correct.
Bill Bradley, Lobbyist, Nevada Trial Lawyers Association:
I had asked before why we are redefining this term of medical malpractice or professional negligence in section 7 of the bill. It has been defined in our law for over 70 years. I hate to see a new definition come about that will take another 70 years to get us in the position of where we are now.
Chairman Townsend:
You are recommending omitting this section, or, if it has to be put in, then it is just a restatement of NRS 41A.085 that is already in the law. How does this differ from section 7?
Mr. Bradley:
In the second sentence the term “does not include services,” lines 17 to 21, and professional negligence means a negligent act, and NRS 41A.085 describes a negligent act as, “failure to do what a reasonable physician would do under the same or similar circumstances or doing something that a reasonable physician would not do.”
Senator O’Connell:
If there were a set of protocols of any kind, would that be the determining factor on negligence?
Mr. Bradley:
I do not think protocols can be drafted for every occasion a physician or health care provider would encounter. There are certain protocols that already exist. To make things that are sometimes in judgment black and white, in my opinion, it would be the end of the story.
Chairman Townsend:
Page 5, lines 17 to 21, is not in NRS 41A?
Mr. Bradley:
No, it is not. Not only is there a definition within our medical malpractice portion of the NRS, but there are numerous cases that explore the definition and define it in case law. It is not only defined in statute, but it has also been defined and refined by our court in numerous cases, so there is both common law and statutory law. That is why I think it would be a mistake to change and redefine it. It would start the debate all over again, and I think you would see a tremendous amount of litigation about what every word means. I do not think that is necessary.
This is not my issue, but, yesterday, in the Senate Committee on Judiciary hearing, the nursing homes had a concern with the definition in section 8 that is the same definition in S.B. 97, because the nurses think a licensed hospital did not include them.
SENATE BILL 97: Makes various changes relating to certain actions against providers of health care. (BDR 1-248)
Chairman Townsend:
There was a debate in the Senate Committee on Judiciary on whether a licensed hospital and its employees cover nursing homes.
Mr. Ashleman:
The licensed hospital does not include the nursing home. They have their own special definition.
Chairman Townsend:
Is the Senate Committee on Judiciary working through whether that should or should not be included in the bill?
Mr. Bradley:
That is correct, since the language crosses both bills.
Chairman Townsend:
At one time there was debate regarding section 9 when a person buys a policy for medical malpractice, there may not be tail coverage, but it would be offered when they pull out of the market. Are we still debating the issue of when tail coverage is offered and how it is defined?
William T. Montei, President and Chief Executive Officer, Physicians Insurance Company of Wisconsin (PIC Wisconsin):
The issue is with S.B. 122 with respect to the assurance of tail coverage being offered upon termination for whatever reason. I am not opposed to what the statute says about tail coverage, but we would be opposed to that regulation requiring under claims made policy, an extended reporting endorsement must be offered upon termination, either voluntary or involuntary.
Mr. King:
We do not have a problem with that.
Chairman Townsend:
Regarding section 10, PIC Wisconsin has tried to define risk management systems that help physicians do the right thing on behalf of patients. That way, in case there is a question, it can be brought up. It forces the issue because it gives a reduction in premium.
Mr. Montei:
We do not have a problem with the 5 percent reduction in premium if there is risk management that can substantiate the 5 percent. The $10,000 is a problem because in some circumstances for a first-year claim made, the premium may be less than $10,000. We would want to revise that down to a number where we would not have to give a refund.
Chairman Townsend:
Is it possible that if we do not put in 5 percent or $10,000 that the division would go to a hearing to create a regulation that would come up with the appropriate number depending on what the premium would be?
Mr. King:
That is correct. We could do that by regulation. There are instances where the mature rate is less than $10,000; therefore, the credit would be greater than the premium.
Chairman Townsend:
We would ask some very pointed questions about your ability to give a 15 percent reduction to an association.
Mr. King:
It would be under the individual premium modification plan that is approved and in regulation for more than 20 years. I believe a carrier would be able to recognize the risk management program now.
Chairman Townsend:
Mr. Wadhams, as a former commissioner and an expert in your field, do you think with the statutory makeup and appropriately drafted regulations currently in place, they could do that with this language?
James L. Wadhams, Lobbyist, Nevada Mutual Insurance Company:
Yes. The legislative intent would give them some direction as to what is expected.
Chairman Townsend:
I specifically put into this draft, “a risk management system must include a system to capture electronically the interaction between the provider and the patient at the point of care.” In my service on the President’s commission, a number of these, for lack of a better term, Palm Pilot issues came up. They are very sophisticated, and seem to be part of a growing ability of a doctor to capture information at the point of care where they do not have to spend hours dictating into a machine, or typing, or getting a secretary. When the physician finishes at the end of the day, the information is downloaded into a software program. If it is a clinic with partners, that information can readily be shared. It seems to have value; that is why it is in the bill. Perhaps add the words, “including but not limited to,” then have the commissioner draft the appropriate regulations. Perhaps remove the 5 percent and $10,000 and simply allow a reduction to occur based on actuarial numbers.
Robin L. Keith, Lobbyist, Nevada Rural Hospital Partners Foundation:
The requirement or the standard being set for electronic capturing of information at the point of care is a goal for Nevada’s rural hospitals. It is something that is worth the investment, but something we could not comply with any time soon because it is a costly process. I would ask for flexibility in how we could qualify for discounts.
Chairman Townsend:
I have seen some of these, and somebody is handing you a line if you think they are expensive.
Ms. Keith:
The Palm Pilot itself is not the problem. The problem is the system on the other end that is receiving the information, and how it gets integrated.
Chairman Townsend:
I did not think it was that expensive based on interviews with a few vendors. We just had a bill that would allow the governments to tie into the State’s ability to purchase. That should help fix the problem.
Mr. Montei:
As I read the inclusion of the electronic systems, I find I agree with Ms. Keith. It is an excellent goal and health care is moving in that direction. Affordability by rural hospitals and solo practitioners is an issue. There are things from a risk management standpoint that hospitals and practitioners can do.
Chairman Townsend:
That is why I wanted it to say, “including but not limited to.”
Mr. Montei:
I have a list of other things that could be included, such as the Joint Commission on Accreditation for Health Care Organizations, accreditation for hospitals, ambulatory surgery centers, and office-based practices. I will make sure the committee gets copies of the list.
Chairman Townsend:
Section 11 of Senator Titus’ bill, S.B. 122, specifically addresses getting an independent attorney to represent the doctor. The two bills are trying to get to the same issue of when a plaintiff makes an offer to the doctor who then decides that offer is reasonable and wants to accept. If that offer is denied by the insurer, then the doctor is at risk relative to their ultimate actuarial risk apportioned to them. Now litigation may ensue, the case gets dragged out, and may go to court.
Mr. King:
Our attorneys have expressed concerns the sections dealing with the benefits penalties extend authority to the executive branch. In particular with the insurance commissioner being responsible for determining the benefit penalty in section 11, subsection 2 of the bill.
Scott M. Cragie, Lobbyist, Nevada State Medical Association, and Keep Our Doctors in Nevada:
Mr. King is correct regarding the insurance commissioner. The issue of benefit penalty is an important issue for physicians when working with insurance companies. It is not that unusual a relationship between an insured person and an insurance company when there is a dispute that goes to court, and there is an issue of whether a negotiated agreement might be acceptable versus going through a court case that could have extremely high stakes.
Our group likes the language in the bill. Some areas contain language where the insurance company assumes all of the risk. We believe the benefit penalty in the bill does create a balance of control between the insured, the physicians, and the insurance companies. We also believe the prescribed formula in section 5 lays a clear indication of what the risk and the cap on the risk would be.
Senator O’Connell:
Regarding the case Mr. Bradley brought before us the other day of Dr. Kramer. As I understand the case, the woman had not received prenatal care. She was extremely heavy, and did not take the advice of the doctor who wanted to do a Caesarian section. As a result of natural delivery, the baby’s shoulder was impaired. At what point was the doctor at risk? Did the doctor show bad judgment? Who would this section of the bill benefit in such a situation?
Mr. Cragie:
It would not be appropriate for me to relate to any case. We heard that particular case many times. The defendant is usually two groups, the physician and the insurance company. The insurance can make a decision to tough it out. Where it becomes especially difficult for physicians is in many cases the eventual awards can go well beyond the policy limits carried by the physician. At some level the physician wants to settle to make sure they do not get caught for an amount above what they may be carrying in insurance. We are not suggesting that any one group have 100 percent control. This would balance that discussion, and we think this creates an incentive for the insurance company to listen and help the defendant avoid the risk of the gamble.
Senator O’Connell:
In this case the risk would fall on the insurance company, not the doctor.
Mr. Cragie:
Yes, to the limits as defined in that section of the bill. It would not be 100 percent because what is in section 5 would cap it at $150,000, plus reasonable attorney’s fees, costs, et cetera.
Mr. Bradley:
In section 11, line 27, it is not going to be automatic. There would have to be a demonstration that the insurer unreasonably acted. That is the way it should be.
Senator O’Connell:
If the action is on the part of the insurance company, then is there any guarantee the doctor’s malpractice insurance could not be raised? For example, in the Dr. Kramer case, the doctor did not do anything he should not have done. He tried to convince the patient of certain circumstances, and the patient made the decision that led to the problem. In that case where the doctor is following the procedure he would normally follow, and the insurance company makes the decision to continue with the case, then the risk should not be on the doctor, it should be on the insurance company. Is that a correct assessment?
Mr. Bradley:
No. We can debate the facts, but Mr. Cragie and I agree we do not need to talk about the facts of a case. The screening panel reached a different conclusion than you did in that specific case and found Dr. Kramer negligent. However, in the context of where a physician has consented, it is still strictly up to the insurer to decide on the offer they will make. If the insurer has in good faith looked at the case, done an adequate investigation, and done everything else that good faith and fair dealing requires of them, and they proceed forward and an excess verdict is obtained, the doctor is going to be on the hook for that. Under that circumstance, because the insurance company lived up to their obligation within the policy, they are going to argue they did exactly what they should have done. The insurer is sorry, but the burden of responsibility falls on the doctor’s shoulders. There would be a lot of discussion about whether the insurer did or did not do everything they should have done. In a perfect world, if they meet that obligation of good faith and fair dealing, they have discharged their duty to the physician.
Mr. Wadhams:
Nevada Mutual Insurance Company is owned, controlled, formed, and operated by 650 physicians in southern Nevada. We have to be careful when we talk about the relationship between the insured doctor and the insurance company as being a separate relationship. In this case these doctors are legally self‑insuring themselves, thus a direct relationship with the insurance enterprise. This is a well-developed aspect of the law in Nevada, and it is the responsibility of insurers to act in good faith in fair dealing with their insureds.
We have a fairly instructive case of ours where there is a fiduciary relationship between the insurer and insured. In the case of my client, it is not only an insured by an owner of the company, and that is a strong relationship. I am concerned this language might upset well-developed case law in this State, plus may create a constitutional issue on improper delegation of judicial authority to an administrative agency.
Senator O’Connell:
Is this setting up a situation where you are suing yourself?
Mr. Wadhams:
It could be. The question is what are the circumstances of the offer. A situation could arise where the plaintiff makes an offer to settle for $1 million, which is a standard policy limit. The case was fairly reviewed by an independent party and considered to be a $300,000 to $400,000 case. This statute would obligate that insurer to accept the $1 million offer that with clear and convincing evidence might be described as one in which the fair settlement offer was less than $1 million. As this committee well know, from the special session and the current session, 65 percent to 70 percent of cases are adjudicated in favor of the defendant. We need to be careful about tipping the balance to running up more money adding to the physicians’ problems that caused this situation in the first place.
Chairman Townsend:
I am confused. I understood everything until you said we are going to drive up costs if everything is to be settled at a million dollars. We heard the biggest problem is the high awards. The goal is to make sure the public has access to health care. One way to do that is to make sure the best doctors can come to Nevada and practice under the best conditions, and reduce the costs. Let us say you do not agree with this approach because you are a mutual insurance company. The doctor wants out for half the policy limit that was offered, but the insurer goes forward and loses; and the judgment is $6.5 million. Actuarially, why should the doctor be responsible for the additional $6 million that a jury awarded, when the plaintiff was willing to settle for half a million?
Mr. Wadhams:
Senator, I think the point you have raised is really important. It was not designed to confuse you, but to raise exactly the question in your mind, that is, when we legislate that which is currently decisional law in our State, we have to be careful we do not shift the balance that is there. The answer to your question is not a black and white answer to whose responsibility is it. The point raised is a good one. That is why this language is crafted to create presumptions in the ability to counter those presumptions, because even the legislation recognizes that there are circumstances in which a settlement at $1 million has been fairly looked at that point in time, might be reasonably disputable. The suggestion I would give is if it is fair with clear and convincing evidence, or even ordinary evidence, to suggest the case is worth $500,000; the plaintiff would certainly accept $1 million. The doctor may very well say, “I’ll take that $1 million offer.” If the case is fairly worth $500,000, why should the burden be put on the insurer to settle at $1 million, when in Nevada courts the defendant will prevail 65 percent of the time? To shift that balance by the statutory presumption, and require clear and convincing evidence, will tend to drive up the settlement value towards $1 million in far more cases. I am suggesting, while your thought process is excellent, the courts have systems that are decisional law that address this, and I am just suggesting that while you are on the right track, be careful you don’t change the balance of how it works, and inadvertently change the settlement value that would otherwise be fairly determined.
Mr. Cragie:
I want to give the position physicians are taking with this. I think Mr. Wadhams has made some strong points. Obviously, for physicians, the worst thing to happen is we take a step in one of these bills with the end results of driving up the total dollar amount in these decisions, and thus driving up premiums. Physicians feel they do not have adequate influence on when a decision is agreed to on the settlement side. They are looking for something that creates a level of accountability for the insurance company. Mr. Bradley correctly pointed out the language in section 1, subsection (c), lines 26 to 28, of the bill. It is not just a “take it or leave it,” when there is a standard that they really should have settled. We are trying to find something that is balanced that creates a certain level of accountability. I do not have the area or body of experience that my colleagues have, but bottom line is that is what we are looking for. We might need a little extra time on this, because I do not want to make a mistake in either direction with this bill.
Chairman Townsend:
I agree with you and with what has been said so far. Every time we legislators put something in a bill, we have tried to wear the patient’s shoes. That does not mean a doctor, lawyer, or insurance company. That language was offered in the spirit of resolution. The theory is if it goes to a filing, that patient has legal counsel. When legal counsel recommends to the patient to make an offer amount, the patient has to determine if that is good for him or her. If the offer is accepted, it could extinguish other things that may go along with it. Now maybe this shifts the burden to where offers are not going to come in, but who knows? We are trying to figure out a way for quicker resolution in the patient’s interest that could be defined by a company to be predictable, and still have the patient’s rights protected.
Mr. Bradley:
By this language the committee is sending out the message that when someone decides to do business in Nevada in the area of malpractice, because of our limited resources, limited number of physicians, and desire to protect our citizens in every aspect of this system, you had better be doing a superb job in evaluating these risks for our physicians that ultimately benefits our consumers.
Senator Hardy:
I have learned, for the purposes of insurance, that competition is not really competition. For the purposes of insurance, partnerships are not really partnerships when it comes to self-insured doctors. Why would an insurance company unreasonably reject a settlement, especially if the doctor and the insurer are partners? Is not the purpose of self-insured to keep costs down?
Mr. Wadhams:
I think that is exactly the point. When 650 physicians come together to deal with the problem, they are obviously not setting up a mechanism to hurt themselves. I think the point I am suggesting to you is be careful about our case law in this State is very well developed. In that respect, the fiduciary-like duty that an insurer has to its policyholders has to be adhered to. Tinkering with that, you have to decide if that is going to be helpful or harmful ultimately to the cost borne by the policy holder through their premiums, and ultimately in access to help care for the entire public.
Senator Hardy:
For purposes of insurance, partnerships are not really partnerships, just like competition is not really competition.
Mr. Montei:
From a macro standpoint, I agree with quite a bit of what has been said. Mostly in being careful not to do harm to what already exists. The problem that has occurred in Nevada over the last 18 months is a problem of not just affordability but availability. If you interpose issues of bad faith into a process that nobody really knows if it is working well or not, you may not have as many carriers willing to offer insurance in Nevada as you would hope. Bad faith is one of the principle reasons why Florida and Cook County, Illinois are in a critical stage right now, because bad faith is put into every claim. It is not legislated, it is not put into any regulatory mandate, it is simply part of case law.
That same case law exists in Nevada, but I would be very careful to put those same pressures into a regulatory process or similarly S.B. 122. My understanding from 22 years in the industry is very few physicians have ever paid a dime on an excess verdict. Typically, with the composite of defendants between a hospital and the physicians, a settlement is reached. They are disposed of and the physician is protected. I think over time the committee, the Legislature, the insurance department, and the State can understand what the problem and that has to do with collecting data central to that so you know the extent of the problem. I can tell you from PIC Wisconsin’s standpoint many times the initial demand is well in excess of what the ultimate damages will be when they are settled or by verdict. Also, many times in the course of litigation up to the point of trial, a settlement offer will be made of limits. It does not necessarily mean that settlement offer is reasonable. I am aware in my company where the settlement demand on policy limits is well in excess of whatever has been paid for a particular claim. It is simply a way of setting up bad faith. It is a tool used to apply pressure to settle.
Finally, the unknown question is the claim is ultimately dispensed? How many instances does the physician actually pay? What is the ultimate value of the claim? Was it really $6 million or was it settled for $2.8 million, and who paid that? If you gather that information over a period of time, then you will really know the extent of the problem. If that data is collected by the Division of Insurance, that department can see where various companies, over time, are in terms of the manner in which they settle cases, how many excess verdicts they have, and can take regulatory action to have that company justify what they are doing, and look at the unreasonableness of it. I would prefer that before a decision is made to put bad faith into a regulatory process.
Mr. Cragie:
To the extent the expectation is, we need to vote on amend and do pass today. I would yield to the positions put on the table by Mr. Wadhams and others. If it is going to go past here, I would like the opportunity to talk to some of the defense counsel, and others that work directly with our physicians and get their perspective.
Senator Hardy:
This fits into the category of Senator Mathews’ bill where it is more important to get it right than to do it fast.
Mr. Cragie:
I feel comfortable we have gotten good input from everyone today, and I would be leaning in that direction.
Senator O’Connell:
I understand the commissioner does not collect that evidence. Who would have it?
Mr. Bradley:
This is part of that attrition. It will be contained in the plaintiff lawyer’s file and in the defense lawyer’s file. Typically on a settlement there is a requirement of confidentiality. There is a case on the list I handed out a couple of days ago where a physician pays personally because of an excess verdict. That is subject to the tightest confidentiality order I have ever seen.
Senator O’Connell:
If that type of data is collected, is it collected by the Board of Medical Examiners in Wisconsin, or by the insurance commissioner?
Mr. Montei:
We submit our data to the Patient’s Compensation Fund. I believe it is the commissioner of insurance in Wisconsin. I believe even settlements on behalf of the physician have to be reported to the National Practitioner Data Bank. While there are tight confidentiality issues, I think some of those confidentiality issues could be protected by the Legislature so that the information is used for its proper purpose.
Senator Hardy:
I think it is critical to know the extent it is collected in other states. I would like staff to look into it to find out what is done in other states.
Mr. Bradley:
A portion of that winds up in the lost column of the insurer’s profitability statement every year, but it is buried. It is very important in a small state. That is why all of these verdicts have been brought to the Legislature’s attention. It is important for this body to have an understanding of whether there was any bad faith action that followed it. What was the resolution of that bad faith action? Right now that is not retrievable, but with legislative direction it could be.
Senator O’Connell:
I would think that information would be important to the board of medical examiners if they are going to continue licensing physicians.
Keith L. Lee, Lobbyist, State Board of Medical Examiners (SBME):
I will give you a brief perspective of how the State Board of Medical Examiners deals with malpractice claims filed against a physician. When the board learns, from whatever source, there is a potential malpractice, and that source could be the doctor himself or herself, the insurance company, the plaintiff’s lawyer, a colleague, or someone else, a file is immediately opened at the staff level. Whatever information is available at that time and can be obtained by the staff is gathered, and an on-staff physician reviews it and makes an overall analysis. Regardless of the physician’s analysis, the information and the review goes on to an investigating board made up of three members of the State Board of Medical Examiners, one of whom must be a lay person. That board does their own independent investigation. Depending on the outcome of their investigation, it is then referred to the full board for a disciplinary hearing if that is the investigating board’s recommendation. At some point in time that information comes into the public domain. From the board’s perspective, that information does not come to the public domain until the investigative staff makes a decision for disciplinary action.
Senator O’Connell:
What concerns me is earlier testimony about a doctor who now lives in California and had a patient who died, and there were 44 claims against the doctor. How did that happen if the board was taking disciplinary action?
Mr. Lee:
That particular physician surrendered his license while under investigation. That is a reportable event to the National Practitioner Data Bank, and is a triggering factor to other states. It is my understanding that even before that doctor surrendered his license, while subject to investigation, he was already being investigated in California where he was practicing.
Senator O’Connell:
That does not answer at what point that happened, which is our concern.
Mr. Lee:
Information is being compiled on when the first investigation began, and what were the investigations regarding that physician. I can only speculate at this point that of the 40 or so malpractice claims that may be pending, the actions resulting in those may have arisen at or prior to the time the physician was under investigation.
Mr. Bradley:
Going back to the root question. Mr. Matheis reports all settlements and awards are reported to the SBME, so that database exists there.
Mr. Lee:
That information is posted on the SBME Website. It can also be accessed by telephoning the SBME.
Chairman Townsend:
Can we get a copy off the Website or is there a copy?
Mr. Bradley:
Yesterday, we produced for the Senate Committee on Judiciary the Website postings for what we call the six repeat offenders. I will make that an exhibit (Exhibit G. Original is on file in the Research Library.) for this committee as well. Unfortunately, when you go to that particular physician on the board of medical examiners Website, the information is not as complete as what is going on with that physician. Since A.B. 1 of the 18th Special Session, I know the BME is aggressively obtaining that information.
Chairman Townsend:
As an insurance carrier, do you pull up that information, or is it reported to you?
Mr. Montei:
Most information we have we get from the physician in terms of losses and lawsuits. Any continuing claims still open are followed up on an annual basis. We do not use the SBME information. We get it directly from the physician.
Mr. Wadhams:
Because Nevada Mutual is a local group with local physicians, they have an underwriting committee made up of local physicians and consider all that information. I cannot speak to whether they actually obtain it from the SBME Website or not, but both community knowledge as well as public record information would be critical to an underwriting decision.
Chairman Townsend:
Mr. Cragie and Mr. Matheis, when did your organization start to identify a rising cost and therefore, a crisis coming?
Lawrence P. Matheis, Lobbyist, Nevada State Medical Association:
It was early summer of 2001 when a number of emergency medical groups in hospitals began reporting a doubling of their rates.
Chairman Townsend:
Mr. Lee, can you supply the committee with all the minutes of your board meeting beginning with that time frame?
Mr. Lee:
Yes. We first started talking about it in March 2001. One question asked of me on Tuesday was to provide information to the committee regarding reporting responsibilities of the SBME. I have copies of a letter (Exhibit H) dated January 31, 2003 to Director Lorne Malkiewich. I checked with Mr. Young at the conclusion of the hearing and he indicated this is indeed a public record, and addressed to Mr. Malkiewich. The letter shows the disciplinary actions taken against physicians with respect to malpractice or negligence beginning during the period of July 1, 2000.
Mr. Bradley:
The physician Senator O’Connell inquired about has 12 claims under the medical board of examiners totaling approximately $9 million.
Mr. King:
I would like to go back to sections 1 and 2 of S.B. 250 regarding flex-rating and prior approval. In section 1, subsection 5 there are rates for title insurance, surety insurance, and liability insurance for medical malpractice. You had indicated you wanted to pull medical malpractice out of there.
Chairman Townsend:
They are to be included in flex-rate.
Mr. King:
“But must be approved by the commissioner pursuant before the insurer may use the rates.” You would want to pull medical malpractice out of there so they would have flex-rating. This would prevent them from having flex-rating the way we look at it. We would suggest also pulling out surety and adding “individual health insurance contracts” in section 1, subsection 5. Title insurance, individual health insurance, and surety would not be subject to flex‑rating.
Chairman Townsend:
Putting in health insurance opens up a whole discussion.
Mr. King:
The way it reads, the rates for title insurance, surety insurance, and liability insurance for the commissioner pursuant to NRS 686B.110 must approve medical malpractice before the insurer may use the rates. By taking out medical malpractice, that would allow it to be subject to flex-rating, but we do not recommend the individual health contracts be subject to flex-rating, so we would plug that in for medical malpractice.
Chairman Townsend:
You are asking for a major policy decision by simply plugging something in.
Mr. King:
We recommend it continue to be strictly prior approval for individual health contracts. According to our attorneys, the way the bill is currently drafted, if this is left out then individual health contracts would be subject to flex-rating as well. During earlier discussion I believe it was not your intent to have health insurance subject to flex rating.
Chairman Townsend:
We never mentioned health insurance; we only mentioned medical malpractice. If you want to keep control of health insurance policies, then why would you want to do what you propose given the fact we are trying to create a vibrant market?
Mr. King:
The change would be due to the nature of the individual health policy contract.
Chairman Townsend:
Since the risk and criteria are not changing, only the time is changing, why would you want to do that?
Mr. King:
I would have to get back to you on that.
Chairman Townsend:
I understand and respect your concern, but it better be a really good reason. I remind you we are trying to create a vibrant market and this is one of the tools.
Senator Hardy:
Did we resolve the issue regarding the separation of powers?
Mr. Young:
I do not believe we addressed it.
Mr. Powers:
Section 11 of the bill regulates the relationship between the insurance company and the insured doctor. That kind of relationship is subject to regulation typically by the insurance commissioner under the insurance title of NRS. Additionally, although the insurance commissioner would be adjudicating these types of benefit penalty issues, that adjudication, like all decisions of the insurance commissioner, would be subject to judicial review under the Administrative Procedure act. This is not a final binding decision of the insurance commissioner in which it is a final judicial determination. Instead it is an administrative adjudication that is subject to review under the administrative procedure act. It is typical in any sort of administrative adjudication to deal with these types of matters in this way and still have judicial review preserved under administrative procedure act. I believe this satisfies any concerns of separation of powers.
Mr. Wadhams:
I also echo that concern.
Chairman Townsend:
Does everyone understand the goal? If we never lose sight of the goal, I think we can find resolution. Section 12 of the bill regarding malpractice insurance references chapters 630 and 633 where the insurer shall report to the commissioner. It begs the question of facilities that provide health care such as hospital, clinics, out-patient facilities, and nursing homes. How do we capture that information?
Mr. Wadhams:
I think we specifically identified those obligations to report, particularly on behalf of hospitals during the special session on A.B. 1. I would ask that we review what the status is in existing law.
Mr. Cragie:
In the initiative and in S.B. 97, providers of health care are defined to include hospitals and their employees. During yesterday’s hearing I am not sure they were asking to be included in that area. The nursing home industry is interested in seeking protection under the type of protection S.B. 97 proposes. Whether that is how they did it or not, I did not look.
Chairman Townsend:
That debate is for the other committee. I brought up the issue about facilities for reasons that are obvious.
Mr. Bradley:
Section 12 says it is confined to a physician licensed under NRS 630 or NRS 633. It should be expanded to include dentists and all those facilities. I think A.B. 1 just involved the reporting of a sentinel event. That is totally different than the claims experience at these other facilities. This is important information about infection rates, and all the things we should know about our hospitals.
Mr. Powers:
This is a situation in which this section of NRS 690B.050 was included in the bill just because terms were changing for this particular area of NRS. We wanted drafting to make this section consistent with the proceeding sections. However, the duty to report claims for medical malpractice or action for medical malpractice is in the law already for many other practitioners, it is just in a different section of NRS.
Senator O’Connell:
Are we going to depend on A.B. 1 if it is before the patient dies?
Mr. Powers:
“Just so the record is clear. We are talking about the duty for a practitioner to report claims of medical malpractice. Apparently, Mr. Bradley disagrees and I would like to give him the opportunity to respond.”
Mr. Bradley:
I think we are confining too strictly to providers of health care. As long as there is a way that stand-alone surgical centers, hospitals, urgent care clinics, all of those stand-alone centers are reporting, I think it is a good idea, although nursing homes do under different statutes. We need a comprehensive reporting system in the area of medical malpractice.
Chairman Townsend:
I believe, Mr. Bradley, you will be providing a list of data-gathering information that is important for purposes of the public as well as your ability to figure out ratings based on experiences?
Mr. Montei:
I think the list we have addresses both issues of excess verdicts, and tries to get a handle on that issue. It also addresses the issue we touched on Tuesday with respect to the 15 percent rate reduction for St. Paul, and the viability of an insurance carrier who is willing to lose money over time because of that. It also calls for information that I believe has not been collected with respect to plaintiff’s attorneys and their expenses, as well as detail expenses that we spend on a particular case. From a public policy standpoint, if you really want to understand how malpractice works and who is doing a good job and who is not, some of the information we are asking could be important.
Chairman Townsend:
We will recess the hearing on S.B. 250 and S.B. 122 and resume Friday; and open the hearing on S.B 163.
SENATE BILL 163: Revises provisions governing certain contracts with providers of health care. (BDR 57-683)
Mr. Matheis:
For each provider only part of the common procedural terminology (CPT) codes are used in most practices. The issue was to limit them, and also make that available to the physician and provider at the time of the contract. They may also want additional supplemental codes at any time, so the language would go into sections 2 through 9 of the bill. It would simply change the end of those sections with the language provided.
Mr. Kim:
The language provided covers all of our concerns and the concerns of the physicians.
Senator O’Connell:
Do we need additional language to bring in the other third party providers so there is no misunderstanding about their panels as well?
Chairman Townsend:
I believe the bill was crafted in an appropriate manner to capture the companies that are called organizations the Division of Insurance was reluctant to regulate under that provision.
Mr. Matheis:
I think the language in the first section is clear and states the intent, which is organizations that provide panels to insured bodies are covered.
Senator O’Connell:
“For the record, I would like it known this is understood.”
Mr. Matheis:
The proposed amendment only deals with the other part of it, which is the part on the provider being able to obtain the actual payment schedule. We are not offering any amendments on the part clearly covering the networks as being banned.
Senator O’Connell:
“For the record, we want to make sure the commissioner understands everybody is included in having a physician paid to sit on the panel.”
Mr. Matheis:
We are not making any amendments to section 1 of the bill that brings those entities in as well as all the insured groups.
Senator Neal:
Rather than eliminate doctors having to pay to sit on the panel, are we going to bring in everybody?
Mr. Matheis:
We have already prohibited all other entities from doing it.
Chairman Townsend:
Mr. King, your division took a course of action based on legal interpretation that you did not have jurisdiction over these people to prevent that from happening. This bill is a result of that. For the record, we want everybody who does panels to be prohibited from doing this.
Mr. King:
I have not studied the bill nor discussed it with the commissioner. Is there a question I can take to her and bring back the answer?
Senator O’Connell:
We want to make sure that it is understood with the language provided in the bill for the commissioner to have jurisdiction over the fact that no person, whether a third party provider or anyone else, has to pay to be on the panel.
Ms. Wise:
As the bill is written, it does not cause the Division of Insurance to have jurisdiction over these people. It is an attempt to include them based on their contracts with entities that are regulated by the Division of Insurance.
Senator O’Connell:
Somebody needs to have the authority to take an action if indeed this is not taking place.
Mr. Matheis:
The bill deals with this in two ways. One is it provides individual right of action for the provider of these entities to charge them. The other is it directly requires the Division of Insurance to take action against the insured entities that contract with those entities. Between the two sets of potential punitive steps, we hope everybody gets the message and would not do it.
Chairman Townsend:
Who is your deputy attorney general?
Mr. King:
We have two, Bob Auer and Janet Hess.
Chairman Townsend:
Is there a chance they may come here so we do not go through the “I am not an attorney” thing? We would like to have your attorneys here and prepared.
Ms. Wise:
I would like to alert the committee there is a letter for S.B. 163 from the insurance commission to Mr. Matheis from January 2002 that explains the rationale behind the fact that the Division of Insurance does not have jurisdiction.
Chairman Townsend:
We have in front of us S.B. 163 with proposed language from Mr. Matheis and Mr. Kim dealing with fee schedule copies and when they are to be paid, provided, et cetera.
SENATOR NEAL MOVED TO AMEND AND DO PASS S.B 163.
SENATOR O’CONNELL SECONDED THE MOTION.
Senator Hardy:
To the degree I understand the issue about panel fees, I am not sure I disagree. The opportunity ought to be there in order to pay those fees. However, I do understand this is simply bringing everybody else in line with something that has already been done by this body.
THE MOTION CARRIED. (SENATOR CARLTON VOTED NO.)
*****
Chairman Townsend:
Seeing no further business, the meeting is adjourned at 10:15 a.m.
RESPECTFULLY SUBMITTED:
Laura Adler,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE: