MINUTES OF THE

SENATE Committee on Judiciary

 

Seventy-second Session

March 5, 2003

 

 

The Senate Committee on Judiciary was called to order by Chairman Mark E. Amodei, at 8:00 a.m., on Wednesday, March 5, 2003, in Room 4100 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 Mark Amodei, Chairman

Senator Maurice E. Washington, Vice Chairman

Senator Mike McGinness

Senator Dennis Nolan

Senator Dina Titus

Senator Valerie Wiener

Senator Terry Care

 

STAFF MEMBERS PRESENT:

 

Nicolas Anthony, Committee Policy Analyst

Bradley Wilkinson, Committee Counsel

Barbara Moss, Committee Secretary

Lora Nay, Committee Secretary

 

OTHERS PRESENT:

 

Robert W. Shreck, M.D., Lobbyist, President, Nevada State Medical Association

Weldon (Don) Havins, M.D., J.D., Chief Executive Officer and Special Counsel, Clark County Medical Society

Scott M. Craigie, Lobbyist, Nevada State Medical Association, Keep Our Doctors in Nevada

John Bailey, Attorney

Alan Triese

Scott J. Watts, Lobbyist, Nevada Alliance for Retired Americans

Dianne Meyer

Alice A. Molasky-Arman, Commissioner, Division of Insurance, Department of Business and Industry

Amy Dodds

James L. Wadhams, Lobbyist, Nevada Mutual Insurance Company

John Liveratti, Chief, Social Welfare Program, Division of Health Care Financing and Policy, Department of Human Resources

Phil Nowak, Chief of Business Lines, Division of Health Care Financing and Policy, Department of Human Resources

Richard Wallace, M.D.

Danny Thompson, Lobbyist, Nevada State American Federation of Labor and Congress of Industrial Organizations

Bill Bradley, Lobbyist, Citizens for Justice, and Nevada Trial Lawyers Association

Matthew L. Sharp, Lobbyist, Nevada Trial Lawyers Association

Rod Davis, President and Chief Executive Officer, St. Rose Dominican Hospitals

Rafael Juarez, M.D.

Florence Jameson, M.D.

 

Chairman Amodei:

We begin this morning’s meeting with continuing testimony on Senate Bill (S.B.) 97 and Initiative Petition (I.P.) 1. We will convene as a subcommittee as we are one short of a quorum. As I indicated yesterday, because of his schedule he did not get on, Dr. Shreck are you in Las Vegas? Would you please come forward, identify yourself for the record and commence your testimony please.

 

SENATE BILL 97: Makes various changes relating to certain actions against providers of health care. (BDR 1-248)

 

INITIATIVE PETITION 1: Makes various changes relating to certain actions against providers of health care.

 

Robert W. Shreck, M.D., Lobbyist, President, Nevada State Medical Association:

This organization represents 1500 physicians in the State of Nevada. Along with the Clark County Medical Society, we are members of the Keep Our Doctors in Nevada coalition, chaired by Dr. Rudy R. Manthei, representing approximately 20 medical and dental organizations across our State.

 

With me today is Don Havens, M.D., J.D., and chief executive officer (CEO) of the Clark County Medical Society, who will help address any questions you may have at the end of my presentation.

 

The question was asked, in previous testimony before this committee, why do we want to change Assembly Bill (A.B.) No. 1 of the 18th Special Session? Nevada has two choices for medical malpractice reform legislation: A.B. No. 1 of the 18th Special Session or Initiative Petition 1. We know either bill will need 5 to 7 years before there is a State Supreme Court ruling determining its constitutionality. Whichever bill is selected, physicians, patients, taxpayers, and other interested parties have to continue to cope with the high cost of waiting. Insurance rates will not return to reasonable levels until the law is declared constitutional. Speaking for the Nevada State Medical Association, we must make certain the bill we invest time and legal effort in has the best chance of working to hold down insurance costs.

 

The language in I.P. 1 has been in place in other states. It has worked well to control insurance costs and it has been declared constitutional in California. It has passed testing in at least one locale. It has not prevented injured patients from obtaining the compensation they need for their medical care and livelihood. In fact, it has enhanced it. We recommend I.P. 1 be the bill in which Nevada invests its time, legal effort, and taxpayer money.

 

Today I provide you with a brief description of the reasons why we support the language in the initiative petition. Section 1 deals with the limitation of attorney fees. Reasonable limits on attorneys’ fees benefit injured patients by helping to ensure these patients receive their fair share of damages. For example, in a $1,000,000 judgment, an attorney would receive approximately $221,000 instead of the now $600,000. This change will put $378,000 extra in the injured patient’s pocket. In 2001, total jury awards amounted to somewhat over $21 million The proposed limitation on attorney fees would have returned over $5 million to their clients. Without limits, the most seriously injured persons or their beneficiaries will not see this money. The injured party should receive the greater portion of the award. Attorneys will also receive a fair portion of that reward. These are precisely the amounts of revenue allowed to attorneys in California for the past 27 years that California’s Medical Injury Compensation Reform Act of 1975 (MICRA) has been in place. There has been no lack of access to legal representation in California.

 

Moving on to section 3 dealing with professional negligence, Nevada’s initiative petition defines professional negligence as being the “act or omission to act by a provider of health care in the rendering of professional services, which act or omission is the proximate cause of a personal injury or wrongful death.” In other words, in a medical malpractice case the alleged negligent act must have actually contributed to the injury or the death of a patient. This is logical, it seems appropriate, and it works well in other states.

 

Dr. Shreck:

Section 5 is the $350,000 cap on noneconomic damages. First and most important, the $350,000 cap does not apply to awards made to compensate a plaintiff for economic damages. This cap does not affect payments for economic damages required to fund future medical care, lost wages, other economic losses, assisted living care, home care, and skilled-nursing care. Economic awards are not affected by this cap and will be available to plaintiffs including homemakers, children, and elderly.

 

Secondly, current Nevada law applies a $350,000 cap to payments made by each defendant to each of what could be multiple plaintiffs, for a cause of action accruing after October 1, 2002. For example, if there were three defendants and three plaintiffs, there could be as many as nine $350,000 noneconomic damage awards, totaling as much as $3 million. Current law does not provide an actual or hard cap on noneconomic damages and creates incentives for plaintiffs to name as many providers as possible and for attorneys to include as many plaintiffs in their action as possible, inviting lawsuit abuse and worsening our present crisis.

 

Section 6 of the bill concerns joint and several liabilities. The language in section 6 removes joint liability. The abolition of joint liability results in an allocation of damages in proportion to the party’s degree of fault. Joint liability is both unfair and reduces patients’ access to medical care. It creates severe disincentives for physicians to participate in risky medical procedures or become consultants on cases, especially when they may have a minor role in a procedure and could be part of a significant lawsuit. Here is an example using the University Medical Center of Southern Nevada (UMC) $50,000 liability cap. If I am personally involved in a case at UMC, and I am not an employee of UMC and the physician and personnel I use in that case are all employees of UMC I will become the deep pocket. Even though I may have just admitted the patient to UMC and should only be considered 5 percent liable, I may be held liable for 50 or 80 percent of the damages under joint liability.

 

This has happened in Nevada. A physician who was found by a jury to be only 5 percent liable based on his limited involvement in a case was ordered to pay $5 million out of the $6 million judgment by the judge. This lopsided and unfair outcome will not be possible should section 6, which replaces joint liability with several liability, become law. Section 6 would require the physician to pay 5 percent liability consistent with his 5 percent fault attributed to him by the jury.

 

It is important to note the National Conference of Commissioners on Uniform State Laws approved the Uniform Apportionment of Tort Responsibility Act in October 2001, which establishes several liability rather than joint liability as the general rule for allocating responsibility in tort actions.

 

Section 9 contains two elements. The first element concerns collateral sources of income. Nevada juries are required to make decisions on financial payments to be awarded to the plaintiff without knowing what other income or expense reimbursement the plaintiff is already receiving as it relates directly to the injury. Section 9, subsection 1 would permit a defendant to enter into evidence collateral sources of income and reimbursement received by a plaintiff. If the defendant does inform the jury of these sources of revenue, the plaintiff will be allowed to tell the jury about any money paid to secure those sources of revenue. The combination of these two changes will allow juries to be fully informed as they deliberate their options and will prevent double payments for the same injury.

 

Dr. Shreck:

Section 9 also deals with periodic payments. The language of I.P. 1 will allow either side to request the future damages portion of an award be paid in payments. There are cases where a lump sum payment has not been managed in a way that ensures the injured patient can pay for medical and living expenses throughout their lifetime. Such situations compound the harm to the patient and generally increase costs to the State and the taxpayers. One of the concerns the initiative’s authors had regarding periodic payments was to make sure, if the injured patient was the breadwinner of a family, his or her death would not financially harm the family. Therefore, subsection 5 of section 9 assures if the breadwinner dies, the periodic payments awarded for purposes of supporting the family continue to be paid throughout the term to the benefit of the family.

 

In summary, our goal with I.P. 1 was to develop a comprehensive, effective long-term solution to the current health care access crisis. More than 76 percent of the citizens of Nevada have identified access to health care and lawsuit abuse as a major issue. Initiative Petition 1 is the solution. It has a proven track record. According to a United States Department of Health and Human Services report published in September 2002, insurance premiums in California have risen by 167 percent over 25 years, since MICRA has been enacted. The rest of the country has seen 505 percent increases in their premiums. The MICRA has saved California residents millions of dollars in lower health care costs and has saved the federal taxpayer billions of dollars in Medicare and Medicaid programs.

 

Injured patients in California continue to be compensated appropriately and personal injury attorneys continue to make a very livable wage. Further, according to this study, there is a direct relationship between high malpractice insurance rates and patients’ loss of access to quality care. To quote from the report:

 

This directly affects the patient’s ability to get care not only because many doctors find the increased premiums unaffordable, but also because insurance is increasingly difficult for doctors to obtain at any price particularly in those states without tort reform. This forces them to give up their practices or restrict the patients they accept, avoid high-risk procedures or ultimately move out of that state to states that have tort reform.

 

We know, first hand, the truth to this statement. There is no disputing patients’ access to care is becoming significantly compromised, particularly in Clark County.

 

Since the passage of A.B. No. 1 of the 18th Special Session, women in Clark County still cannot find obstetric services. On September 18, 2002, the American College of Obstetrics and Gynecology wrote a letter to Governor Guinn declaring Clark County as a red alert area for pregnant women. It identifies southern Nevada as the worst place in the country to find obstetrical care for women. According to their statistics, only 106 obstetricians in the Las Vegas area will provide services for the approximately 23,000 estimated deliveries in 2003. We believe this number has actually shrunk since the report.

 

In addition, though the Las Vegas trauma center remains open, other Nevada hospitals are forced to decrease and curtail their services, especially emergency room and orthopedic services, mainly because they cannot find doctors to staff those services. Problems of access to medical care are harming the quality of life for all Nevadans and especially those in Clark County.

 

Why is there still a crisis after A.B. No. 1 of the 18th Special Session? All of the evidence points to the continuation of the escalating premium rate environment since September 2002. The Doctors Company, Group, Physicians Insurance Company of Wisconsin, and Continental Casualty Company have requested double- and triple‑digit rate increases. Given dramatic increases in the number of lawsuits filed since the passage of A.B. No. 1 of the 18th Special Session, further rate increases are expected.

 

We are here because the medical community cannot spend years simply waiting for a miracle to occur. We need to pass meaningful tort reform, standing the best chance of passing court challenges. We believe I.P. 1 is that bill.

 

Senator Care:

Let me just go to section 1 of S.B. 97, which is word for word the same as the initiative. I gather it is some sort of consumer measure, the one having the sliding-fee scale for attorneys in medical malpractice cases in the special session. I do not recall this subject coming up on the Senate side. I reviewed the minutes on the Assembly side and I may have missed it, but I do not think it came up then. I am looking for cause and effect between the legislation and a reduction in insurance rates. No jury is going to know about the contents of a retainer agreement between the attorney and the plaintiff. Can you explain to me if section 1 has anything to do with the reduction of insurance rates, other than discouraging some attorneys from taking cases and making it more difficult for potential plaintiffs to find counsel? The way I read section 1 is the doctors want to protect the very people who sued them and won.

 

Dr. Shreck:

I can only relate what has happened in California in which they have had a sliding-fee scale in place for the last 27 years. It has not reduced access as Mr. Bradley indicated yesterday. They still can get into the court system and statistics show the plaintiffs received the greater amount of the award, which we feel is appropriate.

 

Senator Care:

Let me follow up and if you do not know the answer, maybe somebody else might, counsel or somebody. I know there have been repeated cites to California’s MICRA as there were in the special session, but are you aware of any other states having the cap sliding scale for attorneys on a contingency fee basis and medical malpractice (med-mal) cases?

 

Weldon (Don) Havins, M.D., J.D., Chief Executive Officer and Special Counsel, Clark County Medical Society:

I am not aware of any other state having sliding scales. There are states with limitations; Utah’s is 25 percent. Some states having a two-tier system. I can get that information to you. It is available.

 

Senator Care:

I would like it if you could Doctor, thank you.

 

Dr. Havens:

Yes, certainly.

 

Senator Wiener:

Doctor, yesterday Bob Byrd, chairman of the Medical Liability Association of Nevada, said about 20 percent of the southern Nevada market was covered by the State plan. As I recall, 22 doctors were declined coverage because of their bad case histories. He also said, on record, they were competitive with their rates, were not increasing rates anytime soon, and may possibly decrease rates.

 

You stated two insurance companies had doubled and tripled their rates. Can you help us understand why more doctors in the south are not pursuing the State plan?

 

Dr. Shreck:

Initially, the State plan did not have their reinsurance or their secondary insurance, so that was a discouragement. Once they were added, I think they started to increase the volume of physicians who went with them. An annual renewal date is coming up in the next couple of months, this spring and the early summer. The rate increases I mentioned are actually with three companies. You may see more people changing to the MLAN.

 

Senator Care:

Toward the end of your testimony you said words to the effect following the passage of A.B. No. 1 of the 18th Special Session, further rate increases are expected. I am just wondering if somebody has told you that, and if so, who told you, or if it is just speculation by the doctors. I have a related question. Have you had any insurance companies review the initiative petition itself or S.B. 97 and give you any indication if we pass this, rates will stabilize or come down? If this is the case, I would like you to identify those companies.

 

Dr. Shreck:

Let me just say the rates I quoted are a matter of public record for the Doctors Company and Physicians Insurance Company of Wisconsin, which is my insurance company, who announced a 23 percent increase in rates, I believe; I am not sure of the exact percentages. Continental Casualty Company is the third company I mentioned. I believe they have asked for significant rates increases, but I do not know their actual numbers. I can get them for you. Continental Casualty requested a 93 percent increase. Those are significant rate increases. The question is, has any insurer reviewed it? To the best of my knowledge, Senator, they have not. You may recall, in front of the committee this summer, chaired by Assemblywoman Barbara Buckley, insurers were required to participate. The insurers stated they required a MICRA-type legislation, in order to lower rates, one that would be sustainable in the Supreme Court of the State.

 

Scott M. Craigie, Lobbyist, Nevada State Medical Association, and Keep Our Doctors in Nevada:

Just a quick answer to your question Senator Care. Apparently Nevada Mutual Insurance Company has indicated, at least to the leaders of the initiative group, the effect of these changes would be to lower rates. That is all I know. I do not know if it is in the near-term or the long-term. If you would like, and I can tell you probably will, we will ask for a brief communication to us, in writing, which we will transmit to you.

 

Senator Nolan:

Dr. Shreck, yesterday I questioned the representatives from the Nevada Trial Lawyers Association about whether or not attorneys could profit from illicit filing of medical malpractice lawsuits. The answer came back saying attorneys really could not make a profit filing frivolous lawsuits. There is so much involved deliberation it just would not make sense to file unless there was true merit. What we have not received, to this point in our fact-finding processes, is any type of collated data demonstrating the number and the nature of lawsuit requests and the settlement amounts. If there is a particular law firm practicing in this area, can you demonstrate their history of filing frivolous lawsuits? This type of information would be very helpful to us. I know you could probably give us antidotal information right now, but certainly some factual data in writing would be very helpful.

 

Dr. Shreck:

I gave an antidote this morning. The present cap encourages increasing the number of plaintiffs involved in a lawsuit. I am aware of a case in which several plaintiffs are being sued in relationship to a claim of injury to a patient. A new firm, coming to our State after the law was passed, decided to jump into the medical liability market and filed a case without an affidavit. The case obviously was dismissed. The new firm finally came back with an affidavit. They had not even reviewed the chart and they went full steam ahead without all the deliberation, et cetera, I would assume Mr. Bradley and his associates would do when involved in such a case. Since the loss of the medical screening panel and with the new affidavit form, we are finding more of the personal injury attorneys taking a chance, if you will, in filing frivolous lawsuits. Dr. Havins has some more information.

 

Dr. Havins:

Senator Nolan, the Clark County Medical Society staff has accumulated filings against health care providers from January 2001 through last month. We will e‑mail you those. Filings greatly increased in October, November, and December because of the cases coming from the panel. This is understandable although more than half the cases actually remained in the panel. The significant numbers are from January and February, which show more than double the number of filings against health care providers than in the prior 2 years. This is to be expected. If you asked Bob Byrd, he would tell you when the panel was initiated in 1986, there was a 40 percent drop in the frequency of filings. It is not unreasonable, now with the panel eliminated, to expect there would be a doubling of cases, which is what our data will show. I will send the data to you, if you want it faxed, I would fax it, but it is 37 pages long. I will e-mail the data to you and other members of the committee also, if they would like.

Senator Nolan:

Thank you, I would like to see the information to include the nature of the complaint and why the complaint was considered to be frivolous. Since it was settled, there is not going to be a court decision. Also, include those firms who filed the case. It would be great if somebody would do the footwork for us and collate the information. If there is a pattern by particular law firms in filing frivolous lawsuits, we need to know such information and have the factual data to back it up.

 

Mr. Havins:

We have the objective information. Let me show you the difference between A.B. No. 1 of the 18th Special Session and non-A.B. No. 1 of the 18thSpecial Session. A.B. No. 1 of the 18th Special Session here is a filing and here is the affidavit, it is two pages and as I read it, it complies with A.B. No. 1 of the 18th Special Session. A filing to the medical/dental screening panel is a detailed, well thought, well organized reasoning of why there is or is not medical malpractice. It is much easier now. When the panel was in effect it would cost anywhere from $10,000 to $40,000 for a plaintiff to take a case forward. Now the cost is $138 with a two-page affidavit. You can expect cases to increase.

 

As far as frivolous claims, if you research court records, you are not going to find rule Federal Rule 11 violations, because almost always an affidavit is required. Once there is an expert, however controversial in some physicians’ minds, a particular affidavit may be in support of a claim for medical malpractice. Nonetheless, from the attorney’s perspective they have an expert affidavit. It is very difficult to say a case is frivolous from the attorney’s perspective. So you are not seeing Federal Rule 11 violations and I do not expect you will.

 

Chairman Amodei:

Dr. Havins, do you have an opinion on whether or not the medical/legal screening panel ought to be brought back in the State?

 

Dr. Havins:

I think without some short-term solution to the frequency problem, rates inevitably will increase because the costs of defending cases are going to increase. There may be an Assembly bill to reconstitute the panel in a more improved, more efficient form. I think it would be very helpful. I agree, the way the panel was operating before, with patients taking 2 years to get through the panel, was ineffective. Many of the doctors were in favor of removing the panel because they were upset at the number of cases and the percentage of cases of no probable malpractice going forward to district court. There is some misunderstanding among the physician community that this is not a judicial proceeding. The panel was not a judicial preceding; it was a screening proceeding in that people have a right to redress their grievances in the court, even with a no probable malpractice finding. Many physicians appreciated the effect plaintiff lawyers screening the malpractice cases had on reducing frequency. That effect is now gone and we are seeing increased frequency as would be clearly foreseeable. It is going to cost more and rates are going to continue to climb, I predict.

 

Chairman Amodei:

So, is the answer to my question a qualified yes, or a qualified no?

 

Dr. Havins:

Yes, it is a yes.

 

Chairman Amodei:

One other question, and you are probably the appropriate person. Could you just share with us briefly what the analysis was in terms of rates and costs in the decision to remove the gross negligence exception from A.B. No. 1 of the 18th Special Session? Can you share with me any data from other states?

 

Dr. Havins:

Actually, John Bailey, an attorney here in Las Vegas, will answer that question.

 

John Bailey, Attorney:

My name is John Bailey; I am an attorney in southern Nevada. Let me be as concise as possible in respect to your question. The term gross negligence is nothing more than a label placed on conduct characterized as egregious when a provider of medical health care shows a conscious disregard for the safety of the patient. Prior to the enactment of A.B. No. 1 of the 18th Special Session in 2002, there was no statutory reference to gross malpractice. In fact, to my knowledge, no other state has a statutory concept known as gross malpractice. Patients have had and would continue to have a remedy for egregious conduct under Nevada Revised Statutes (NRS) 42.005, which is commonly known as the ”punitive damage statute,” if I.P. 1 or S.B. 97 is enacted. Under a claim for punitive damage, a plaintiff has to demonstrate fraud, oppression, or malice. The Nevada Supreme Court has already interpreted malice to include conscious disregard for safety which is essentially the same language found in paragraphs (a) and (b) of subsection 6 of NRS 41A.031.

 

Chairman Amodei:

I heard you say there is no other state with this exception at this point in time. I would assume underwriting criteria is unavailable on this particular issue.

 

Mr. Bailey:

My understanding is there is no other state having a statutory concept known as gross malpractice.

 

Senator Care:

I would like to ask about the subject of so-called frivolous lawsuits. A frivolous lawsuit is any time you get sued. A good lawsuit from everybody‘s perspective is when you sue the other guy. Have there ever been Federal Rule 11 sanctions, or under NRS 7.085, which we amended last August to say “shall” as opposed to “may,” in the event of a frivolous or any attempts to seek sanctions for a so‑called frivolous lawsuit? If so, have those ever been granted? If you have this information, I would like to see it with the names of the firms and everybody involved. That would be helpful to me.

 

Dr. Havins:

I am not aware of a Federal Rule 11 sanction for a frivolous lawsuit. I do not see how one could go forward in the face of an expert affidavit.

 

Chairman Amodei:

Thank you gentlemen, we appreciate your testimony. We have no further questions from the committee.

 

Sir, would you please identify yourself for the record and proceed.

 

Allan Triese:

My name is Allan Triese. I am a victim of a malpractice incident. I was scheduled and underwent bypass surgery. Before going in, I weighed the pros and cons, and discussed possible outcomes with the doctor. It was never disclosed that I might end up blind. When I had the surgery, somebody in the operating room chose to put an intravenous (IV) drip on me containing a toxic drug known by the Food and Drug Administration (FDA) to cause blindness. I was on this drug for 4 days until I finally went blind. It took me a year and a half to find out what caused my blindness. Nobody wanted to talk to me or tell me. Because I went blind, I was in the hospital for 17 days during which a lot of doctors came and went and I could hear everybody mumbling, something about amiodarone. I had my daughter look up amiodarone on the Internet and she read me an article about the dangers of amiodarone, about how a side effect is blindness in some cases. My life pretty much ended the day I went blind.

 

I spent my 17 days in the hospital. I came home and I recuperated. I went back to work. I worked for 4 months and the company decided they did not have any use for a blind person working for a gaming supply company. I was dismissed. When I lost my job, I went down and tried to file unemployment. The referee at the unemployment hearing told me I could not receive unemployment because I was not qualified for work. Strike two, I lost another right.

 

We decided it was time to do something, so we started to look for attorneys with the big advertisement on the back page of the phone book. After calling about ten attorneys, nobody could handle my case because they were afraid it would cost too much money. Their firms could not take on a risk that big. I finally got the attorney I have now through several references, and they feel I have a very strong case. If there is a cap on what he could make, he probably never could have taken me. It would have been one more of my rights I lost the day they put that toxic bag on me.

 

I lost my life savings, my retirement, and shortly, I am going to lose my house. I am probably going to lose my marriage over this. I feel I have the right when I go to trial to have a jury listen to me, and not have to put a limit on how much I should or should not be awarded.

 

I always hear comparisons to California. I am sorry. I do not like this to be considered in California because I do not live in California. I deal with the Bureau of Services to the Blind and Visually Impaired, a State of Nevada agency. All they have for all of the blind people in southern Nevada comes out to $200 a year they can put toward your case. In California you can get anything. In Nevada you can get nothing. If you can get a job and go back to work, then they can justify giving you stuff.

 

My bottom line is I lost my eyesight. As far as I am concerned I lost everything I have to live for. I do not think it is right for a doctor to pick up stakes and go to another state. I have been in Minnesota, Wisconsin, and Arizona since I went blind. I woke up blind there every day, same as I do here. I got led into this room today and I will get led out. I am just a burden to society from now on, just because a doctor put a toxic bag on me

 

Senator Care:

This is just a comment, Mr. Triese; I cannot imagine what you went through. Unfortunate, but for everybody who is listening or watching and plans to participate in the hearing again, what I am looking for is somebody to convince me if we amend the law we will see rates stabilize or go down. We have had any number of witnesses who have related tragic circumstances and I am sure there are doctors who can testify about how they have left the State due to rising insurance premiums. I am reluctant to ask any questions of anybody in litigation or who potentially will be in litigation, so I am not going to do so. The relevance of the testimony like yours, it seems to me, is the cap on pain and suffering. If I lose my eyesight because of a drunk driver there is no cap on my pain and suffering award, but in medical malpractice, potentially there would be one. Well there already is under what we did last summer. Somebody explain to me why the figure of $350,000 is the correct figure, and number two, give the testimony needed to convince me what we need to do, what we did last summer did not go far enough, and the necessity of doing what is proposed with I.P. 1 and S.B. 97.

 

Scott J. Watts, Lobbyist, Nevada Alliance for Retired Americans:

My name is Scott Watts and I am the president of the Nevada Alliance for Retired Americans. I would like to read into the record our opposition for S.B. 97 (Exhibit C), and add, if S.B. 97 passes it would be a catastrophe for just not all Nevadans, but especially seniors.

 

Dianne Meyer:

My name is Dianne Meyer and I am a resident in Las Vegas. I too am a victim of medical malpractice. Two years ago, actually it was mid-November 2000, I entered the hospital with a pain in my side. I went into the emergency room with no other expectations than to be treated as a patient in front of a doctor who knew far more about me than I knew about myself. He x-rayed me, took tests, and told me I had two tiny kidney stones. I was sent home with a pain medicine and as far as I was concerned, I was fine, I would do just fine, this was a normal, common thing.

 

I did not know the X ray showed I had a very large kidney stone, one single stone which could not be passed by any human body. The tests of my blood and urine showed my body already had beginning stages of sepsis. I was sent home. No one called to let me know I was literally on my way to dying if I did not return. Two days later, my feet were freezing and I was out of my mind with pain. I returned to the hospital. My husband was actually sent to work and told I was fine, but they would keep me this time. By evening I had stopped breathing, I do not remember anything for the next month and a half. However, my family was brought in to say good-bye to me. Within a week’s time my children and my husband had to make the decision to have both my legs taken off in order to save my life. When I came out of the coma, about a month and a half later, I could not get anyone to tell me why I went into the hospital with two tiny kidney stones. I was told right from that day, and for the next month I spent in the hospital, the cause still remained to be those two tiny kidney stones. How could two tiny kidney stones take my legs?

 

When I got out of the hospital, my son and husband wheeled me out. Everybody disappeared; there was not a nurse, doctor, or nobody in sight. I have never been in a hospital, not ever in my life, where a nurse was not available to take you out of the building. I have never heard from the doctors. I have never been told anything. I would have, to this day, believed I had two tiny kidney stones and wondered why this happened.

 

We finally approached an attorney to have help in finding the truth. My case has been over 2 years in the medical review board, and we never have been listened to at this point either. I am asking you, please consider every case as individual and unique. The most seriously injured in Nevada deserve to be heard and deserve to have answers. Doctors or the hospitals need to be held accountable. I am pointing my finger at the insurance companies for stirring up the doctors up and making us feel like we are, in fact, the guilty parties. It is very important you listen to all of us and consider all residents of the State of Nevada.

 

Alice A. Molasky-Arman, Commissioner, Division of Insurance, Department of Business and Industry:

I wanted to talk about the effects of A.B. No. 1 of the 18th Special Session on insurance and on the Division of Insurance. Section 72.5 of A.B. No. 1 of the 18th Special Session charged the Division of Insurance with monitoring, for a 3‑year period from October 1, 2002 to October 1, 2005, the premiums charged for medical malpractice, jury verdicts and settlements for medical malpractice cases. The division was further charged with filing a report to the commissioner on or before October 1st of 2005. The commissioner is then to provide this information to the Legislature.

 

We have not yet identified any reports on verdicts or settlements due to any cause of action in which the alleged malpractice occurred after October 1, 2002. Due to the nature of medical malpractice claims and the time required to settle them, it will be some time before we have statistically valid data. Meanwhile, it has been most frustrating for the division staff and me to hear what I term as one of the media myths, which is A.B. No. 1 of the 18th Special Session is not working. There simply has not been sufficient time to develop any experience to weigh the effects of A.B. No. 1 of the 18th Special Session on jury verdicts, settlements, and the cost of premiums.

 

I have heard estimated the time will involve anywhere from 2 to 5, and even 7 years. In anticipation of the information we must analyze, we have revised closed-claim reports and notified insurers, with a bulletin dated October 1, of their responsibility to submit those reports to us as well as the reports required under A.B. No. 1 of the 18th Special Session to the Board of Medical Examiners. I have provided you with a copy of “Bulletin 02-011” (Exhibit D) with the revised copy of the form which must be submitted by insurers in reporting those claims. We are now also requesting summary information. We will be able to verify closed-claim reports more accurately and timely.

 

Although we do not have the post-A.B. No. 1 of the 18th Special Session claims information, you should have received the Nevada insurance market report, otherwise known as the 401 report this division is responsible for submitting to you on February 1, of every legislative year. The report contains a summary on page 10 of closed claims for the period 1999 to 2001. You will see the costs of reported closed claims increased 77 percent from 1999 to 2000. The number of claims over this period increased by 39 percent. It is unclear whether this increase was due to improved reporting compliance, an actual spike in claims-closing activity, or both. The total cost of reported claims increased 14 percent from 2000 to 2001, but the number of claims remained relatively flat.

 

Ms. Molasky-Arman:

The vast majority of claims activity stems from Clark County. More than half of the claims closed without an indemnity payment. Certainly this does equate to Senator Nolan’s question on the number of frivolous claims. In the report we provided to you earlier, on page 4, between 1999 and 2001, 296 of 552 cases were closed with no indemnity payment, only the cost of claims which was $5.1 million for the 3-year period. The 401 report also contains data on the cases arising before the medical and dental screening panels found on page 47 of the report. If you have the time and opportunity to review this report, you will see a huge spike in the number of claims filed with the division in July 2002, due to the uncertainty of the date A.B. No. 1 of the 18th Special Session reforms would apply even though we believe the bill clearly states the provisions are applicable to those claims arising on or after October 1. On October 1, we had 372 open claims. Of those only 138 cases opted to remain within the panel process.

 

We do attribute the rise in medical malpractice complaints with the courts to the 234 cases that did not remain in the panel process. As of yesterday, there remain 102 cases open before the panel. Currently, there are four medical cases and one dental case ready to set the panel in northern Nevada. There are 70 cases in southern Nevada ready for panel. We tried to set cases 4 nights a week with sometimes 2 cases per night in Las Vegas. Setting cases is a priority, but the panel members are voluntary. They are telling us they are burned out from the number of times we ask them to hear cases each month. While this may be true, we are limited to using those attorneys and doctors who are on the list at the time the case proceeded through the medical and dental screening panels.

 

I am urging the representatives of the Nevada Trial Lawyers Association and the Nevada State Medical Association who are here today to emphasize and persuade to their members the importance of sitting on these panels so that we can complete the cases in the process without more undue delays.

 

Ms. Molasky-Arman:

Yesterday, there were comments on the insurers reports to the commissioner. We did conduct a survey of insurers prior to our hearing last March. Actually, yesterday was the anniversary of that hearing. Most carriers believe the medical/dental screening panel increased the cost of claim settlement. No carrier believed it decreased the cost. The cost to defend a claim before the panel was typically $5000 to $10,000. The carrier’s opinions varied as to whether or not the panel sped up claim settlements with one-third of the carriers responding it did not and two-thirds responding it might. The carriers were also uncertain as to whether the panel discouraged frivolous claims and kept cases out of court.

 

Immediately before the hearing, 1 year ago, I was contacted by a number of insurers and pointedly asked whether our hearing was directed to make other insurers the scapegoats for the availability crisis in Nevada. I assured them it was not our intent. Our goal, as I explained to them, was fact finding, to measure the availability of the marketplace and to determine whether it was necessary to form an essential insurance association. Nearly all insurers then reported, due to the uncertainty of the Nevada environment and the demands of reinsurers who did not look favorably on our State, they were unwilling to accept new policyholders.

 

It was at that point, with the Governor’s tremendous guidance and assistance, the MLAN, the Medical Liability Association of Nevada, was formed. In addition to the Medical Liability Association of Nevada, we have a number of companies who remain active in the marketplace. I have distributed to you a market share report (Exhibit E). It was just put together after the insurers’ reports were submitted on March 1. This shows the market share in Nevada of medical malpractice insurers. It identifies at least 11 insurers other than MLAN who were writing actively in the State of Nevada during 2002. Interestingly, the entrance of St. Paul Companies in Nevada in 1995 acted as an incentive to other insurers. In 1995, prior to the acquisition of the Nevada Medical Liability Insurance Company, we had only insurers who were actively offering medical malpractice in the State. Those were Nevada Medical Liability Insurance Company, the Medical Insurance Exchange of California, and the Doctors Company of California.

 

I believe the active insurers are either cautiously optimistic due to A.B. No. 1 of the 18th Special Session or are taking a wait-and-see posture. I was very encouraged yesterday by Bob Byrd’s report that one of the major reinsurers, who has accepted reinsurance for MLAN, was American International Group, Incorporated (AIG). Just the night before Mr. Byrd spoke, Maurice (Hank) Greenberg, the CEO of AIG, identified medical malpractice as one of the three major medical insurance crises in the United States. He stated the AIG companies would not insure coverages in those states that did not reasonably address the tort reform issues. Additionally, the AIG companies, who are very heavy investors, would not invest in those states, and principally in the public-entity bond offerings.

 

There are some important things to note on the market report. The largest insurer, St. Paul, in 2002 had written premiums about one-half of the amount it wrote in 2001. They started non-renewing policies on May 1, 2002. It takes a full year for business to be run off. The Doctors Company wrote about half as much business compared to their own writings in 1997, but with improved results. Health Care Indemnity Incorporated, which is shown on the report, is a captive insurer writing only for the Columbia hospitals. It also shows CNA Group’s premium remained relatively flat over the 6-year period. Physicians Insurance Company of Wisconsin’s written premium has grown substantially over the past 2 years. The Fireman’s Fund Group includes Chicago Insurance, which withdrew from the State of Nevada last July. This group writes other coverages which are not going to be renewed, such as dental coverage. American Physicians Assurance Corporation, is shown on the list, entered the marketplace in Nevada in 1998 and has experienced steady growth. Nevada Mutual Insurance Company, a newly formed domestic physician-owned insurance company, began operations last June. The TIG Insurance Company is in the process of a management restructuring. Most of their business is written outside of Clark County. The Zurich Group includes Farmers Insurance, Truck Insurance Exchange, and Steadfast Insurance. The latter is a surplus lines insurer. Medical Insurance Exchange of California had relative flat written premiums for this period. Medical Protective, on the other hand, significantly increased their writings in 2002. As Governor Guinn stated to you in his presentation of A.B. No. 1 of the 18th Special Session, these insurers have any number of states in which they may choose to do business. They have already told us we must enhance our environment in order for them to maintain business in this State.

 

Another story we find very frustrating states A.B. No. 1 of the 18th Special Session has not caused premium rates to decrease. They have not. Nor do we expect them to do so. There is a very definite reason. Insurance rating is guided by actuarial principles. Very simply, rates are projected into the future on past experience. As I indicated earlier, insurers have had no experience under A.B. No. 1 of the 18th Special Session.

 

Ms. Molasky-Arman:

I would like to address the cost drivers of the rates of insurance. One of the major cost drivers is reinsurance. An insurer, like any other business firm, obtains insurance for those loss exposures too great for them to retain. When the insurance company purchases such insurance it is called reinsurance. It is important for insurers to buy reinsurance in order to spread their risk and to remain solvent. During our hearing on the availability of medical malpractice insurance on March 4 of last year, reinsurance with increased premiums and/or lack of availability of reinsurance has directly impacted the insurers willingness to write coverage and certainly influences insurers’ pricing.

 

We have heard the industry complain they are not making money writing medical malpractice. Those stories do have some merit. You can see in the market share report the loss ratios experienced by those insurers. We also know two major medical malpractice insurers who have become insolvent and were liquidated in the year 2002. One of those was FICO and that insolvency was in 2002. In 1999 they wrote over a half million dollars in medical malpractice premiums in Nevada and are now gone. Another large insurer of medical malpractice liquidated in 2002 was Frontier Insurance Company. While Frontier did not have much premium in the State of Nevada, their disappearance does impact the Nevada marketplace, as there are a limited number of insurers in the nation who are willing to write this coverage. Many of these insurers are looking into those states that have a favorable environment in which coverage has been lost by insurers such as Frontier.

 

There have been statements about how insurers have raised rates simply because of reduced investment income. While the stock market losses do influence rates, they are not the primary driving force of rate increases. The division reviews rate filings for medical malpractice insurance as well as home owners insurance, private passenger auto insurance, and all other personal lines of coverage. While Nevada law is silent on the requirement to include returns from investment income or invested surplus in the rate-making formulas, recent filings for these kinds of insurance include consideration for a positive return on surplus. I am trying to emphasize the word positive. The fact they assume positive return on surplus reduces rates and largely defeats the assumption that stock market losses, or any other kind of bad investments, are the primary driving force for rates.

 

The division actuaries would recommend disapproval of any filing which included a negative return on surplus. We are guided by subsection 3 of NRS 686B.050 which specifically provides for consideration of investment income. It states, “Rates are inadequate if they are clearly insufficient, together with the income from investments attributable to them, to sustain projected losses and expenses in the class of business to which they apply.” Stated simply, this statute could mean the investment income on loss reserves in unearned premium reserves, which are those investment incomes attributable to rates, are proper components in an actuarial formula. To the extent investment income is lower because interest rates are down, adequate rates may tend to be higher. Policyholders achieve benefit from investment income because investment income normally reduces the calculated rates based purely on losses.

 

I want you to know our actuaries scrutinize each rate filing. We are fortunate to have two very skilled actuaries. They provide analyses and recommendations and they do read and comment on one another’s analyses recommendations. Those recommendations are then submitted to the chief of the property and casualty section for his subsequent analyses and recommendations. Then they are submitted to me.

 

I have provided you also with a history of the medical malpractice rate filings submitted to the division during the past 5 to 6 years. As you can see, the rates requested by the insurers are generally not those the Division of Insurance ultimately approves. In almost all instances, the rates we approve are lower than those requested.

 

I have read stories about how all medical malpractice insurers have raised their rates. As you can see from this exhibit, and compare it with insurers who were actively in the marketplace, those statements are inaccurate. To summarize some of those rate requests, the Doctors Company received a rate request in June 2002 and we do have another one pending for them. CNA Group received a rate increase in September 2001 and has another one pending; however, CNA Group has not requested a rate filing for a number of years. Our principle question to them was why they did not do so in the face of increasing losses. Physicians Insurance Company of Wisconsin had rate increases in January 2002, and then again in December 2002. American Physicians Assurance Corporation received rate increases in May 2002, and recently agreed to change their rating of obstetricians to eliminate the tiering based on the number of obstetrical deliveries. Those changes will be effective in May 2003. Nevada Mutual Insurance Company also agreed to eliminate the rate tiers for obstetricians in January 2003. The only remaining one, Medical Protective, received a rate increase in June 2002. We believe we have seen some stabilization.

 

Senator Care:

You said rates have not come down since A.B. No. 1 of the 18th Special Session and they are not expected to do so. You also explained insurers have had no experience under A.B. No. 1 of the 18th Special Session. If we adopted the petition, or we enacted S.B. 97, would you have the same situation? Insurance will still have no experience. Would you expect rates to come down with either the initiative petition or with S.B. 97?

 

Ms. Molasky-Arman:

Senator Care, you have to realize I am not an actuary so I am going to just give you my view. As I indicated, rates are based on actuarial principles requiring insurers to look at past experience and then project those losses into the future. Could they add a factor for what they believe may occur? Probably so, but I do not know how great a factor it might be. They have not been able to do so under A.B. No. 1 of the 18th Special Session and there is a question whether it is going to pass constitutional muster. Actuarial principles guide insurance and always have done so. We need to make certain rates are not excessive or inadequate.

 

Senator Care:

We had testimony yesterday about St. Paul Companies coming into the market in 1994 to 1995 and ultimately it cornered the market. Your data from January 1997 shows St. Paul Companies had 35.2 percent of the market. In that same year they requested and received a 15 percent rate decrease. In 1999, 2 years later, they asked for and received a 7 percent increase. Then in 2000 they asked for and received a 7.5 percent increase. By the end of 2000, rates for St. Paul Companies were essentially where they were at the beginning of 1997. Perhaps it could be implied St. Paul Companies came to the market with artificially low rates, thus triggering what we saw happen when I first heard of St. Paul Companies in January of last year. I am wondering if you have any thoughts on this. What I am getting to is how did we get here and the role St. Paul Companies might have played?

 

Ms. Molasky-Arman:

We do not have any evidence that St. Paul Companies cut rates. St. Paul Companies came into the State and did make a commitment they would not raise rates for a certain period of time. They also provided certain discounts, for any number of reasons, on risk management, on membership in the Nevada State Medical Association, and several other areas. The rates filed by St. Paul Companies returned them to the rates existing when St. Paul Companies acquired Nevada Medical Liability Association. We just do not have any demonstration there was any undercutting of the marketplace.

 

Senator Care:

Has your office ever looked at the lag time between enactment of legislation such as A.B. No. 1 of the 18th Special Session and the number of years it takes before we actually see the enactment of the new legislation on rates?

 

Ms. Molasky-Arman:

No, we have not done any review. I can try to get the information for you from our network with the other commissioners.

 

Senator Nolan:

Yesterday, one of the representatives with the trial lawyers association testified on a couple of occasions St. Paul Companies when they first approached the State, said they were here to stay in Nevada. I was just curious who they said that to, because the inference was they broke a commitment to us. When they came to you, was there any type of solid commitment they were here to stay?

 

Ms. Molasky-Arman:

There was a commitment and there was a promise made. The promise was verbal. I have reviewed the record, as these kinds of acquisitions do require a hearing, and I did not find anything stated in writing. I did ask St. Paul Companies, when they announced their withdrawal, what happened to their commitment they were here in Nevada for the long run. Was 5 years the long run? As it was explained to me, the entire management, who had made those commitments, no longer existed at St. Paul Companies. An entirely new set of officers and directors were taking another course.

 

Senator Nolan:

You mentioned the American International Group, Incorporated (AIG) statement they would not invest in a state that did not make an effort to address medical malpractice issues. I know insurance companies enter all types of markets without having solid information on a particular piece of legislation. They act on what information they get on a market, profitability factors, and what data is available. In the case of the president of AIG or whoever it was you referenced in the comment, what do they feel is a reasonable effort to address medical malpractice? Did they look at our efforts in A.B. No. 1 of the 18th Special Session and say it was not enough of a reasonable effort to draw them back into the State?

 

Ms. Molasky-Arman:

I did not mean to infer I had actually spoken with Hank Greenberg of AIG; I never have had the opportunity in my entire career. I heard his statements on a public television broadcast.

 

What I do know from our hearing last year is reinsurers did not look at the Nevada marketplace favorably. I have not been advised by any insurance company as to their feelings on this particular bill. We did survey the insurance companies after the enactment of A.B. No. 1 of the 18th Special Session. The results of the survey are in the 401 report. In many respects the insurance companies were noncommittal and they were split. Some were optimistic and expressed some hope from the efforts made in A.B. No. 1 of the 18th Special Session.

 

Senator Titus:

You testified St. Paul Companies reduced rates and gave discounts. It seems to me they offered a really good deal to doctors and a lot of doctors took the deal. When the deal went south, and the rates spiked, doctors got upset and rightly so. Perhaps their anger or the object of why they are upset is misdirected. It should be directed at these insurance companies. The insurance companies seem to be able to hold doctors and the rest of the State hostage. Why are not more doctors either joining the State-supported system or a doctor-owned company? Is there something we are not doing through regulation, we could do better to make it easier for them to join?

 

Ms. Molasky-Arman:

The MLAN is intended to be a temporary measure. As stated in statute, and this is the principle by which all joint-underwriting associations operate, they are not to interfere with the market. In fact, they are there to encourage insurers to return to our market by showing some stability within their own organization.

Senator Titus:

I thought Mr. Byrd said yesterday they wanted to be competitive and they were growing in their business. He was optimistic and I thought it sounded good. It did not sound like he was phasing out.

 

Ms. Molasky-Arman:

No, there is no intent to phase out right now.

 

Senator Titus:

I thought you said it was only supposed to be temporary.

 

Ms. Molasky-Arman:

Well, it is temporary, but maybe I should have said temporal, I do not know. When I say temporary, I am talking a period of years. I was asked months after the creation of MLAN if there was any intent to terminate it. Certainly not, not until we have a better vision of what is going to occur in the State of Nevada. Though it was difficult to implement, we are trying to encourage a number of insurers to underwrite in this State. We believe competition will ultimately result in more reasonable costs of insurance.

 

Senator Titus:

What about the doctors-owned company? The company where they self-insure.

 

Ms. Molasky-Arman:

Are you referring to those mutual insurance companies or reciprocal insurance companies? I think physicians are like any other member of the public who is seeking insurance; they try to find the situation that is right for them.

 

Senator Titus:

I am just wondering if we can do something to make it easier or better for them to self-insure so we do not keep being held hostage by these insurance companies. What worries me, with all due respect, is regulators actually become protectors of the industries they are set up to police. I see that happening here and I just wonder if there is not something else we could do to bring some others, not just insurance companies, into the market and help the State company help the doctors form their own competitive company.

 

Ms. Molasky-Arman:

Actually the Nevada doctors did form their own company, which is Nevada Mutual Insurance Company. It is doctor-owned. All of these companies are not really self-insured. They are corporations and are licensed the same as any other insurer. A number of the insurers on this listing are physician-owned. These companies either have shareholders as stock insurers or they are owned by their policyholders.

 

Senator Titus:

So there is nothing we can do?

 

Ms. Molasky-Arman:

There is another alternative available, and has been available, under a product liability act which allows certain groups to establish what we call risk-retention groups. We do have one risk-retention group existing in the marketplace, Preferred Physicians Medical.

 

Senator Wiener:

I was looking at your rate history handout and for informational purposes I am looking at St. Paul Companies’ 83.6 percent rate request; I am not sure when this was, sometime after March 1, 2002. The approved rate increase was 57 percent. Then on April 28, they began withdrawing from the market. Did they give any indication of their intention to leave unless they got the 83.6 percent increase? How did that play out?

 

Ms. Molasky-Arman:

Their filing was actually submitted to the Division of Insurance in the spring of 2001. September 1 is the date we entered into a stipulated agreement.

 

Senator Wiener:

On March 1, 2002, you determined they would get 57 percent. Is this what you mean?

 

Ms. Molasky-Arman:

No, what this represents is the filing submitted in April or May 2001 for 83.6 percent. The Division of Insurance rejected the request and St. Paul Companies sought a hearing on the rejection. In lieu of a hearing, the case was settled between the Division of Insurance and St. Paul Companies. What was granted were incremental increases every 3 months. The first increment occurred on September 1, 2001, the second one of 12.5 percent occurred in December, and the last one was March 1, 2002.

 

Senator Wiener:

At this point, while the process was working, they knew the increase was going to be 57 percent?

 

Ms. Molasky-Arman:

Yes.

 

Senator Wiener:

Knowing the increase would be incrementally granted to them, did they indicate at any time in the process the 57 percent was not enough and they were leaving?

 

Ms. Molasky-Arman:

When they first submitted the rate filing, they advised me if I did not approve it as submitted they would be withdrawing from the State.

 

Senator Wiener:

So that was in September of what year?

 

Ms. Molasky-Arman:

No, that was in the spring of 2001. Obviously I was not persuaded because we did deny the filing.

 

Senator Washington:

If we adopt the initiative petition, where the gross negligence phrase has been removed, will the change cause a spike or an increase in the rates?

 

Ms. Molasky-Arman:

I do not think I can predict. The best person to ask is a member of the insurance industry.

 

Senator Care:

Here is what troubles me. On September 1, 1999, St. Paul Companies asked for a rate increase of 7 percent. On September 1, 2000 they requested a rate increase of 7.5 percent. Then September 1, 2001, which was before September 11, 2001, they asked for 83.6 percent. What is their justification for these phenomenal rate increases?

 

Ms. Molasky-Arman:

Well, if you go back to the list of insurers in the marketplace and look at their losses, you can see a correlation between their loss history and the rate requests. These cases take a long time to get through the system and they could find their estimates are completely off. If you go back to the premiums actually collected and you compare those to the losses, you can see there were gigantic leaps in the loss ratios experienced not only by St. Paul Companies but by other insurers.

 

Senator Care:

I understand, but this was not confined just to Nevada, most recently to Pennsylvania, New Jersey, and Nebraska, and often St. Paul Companies were involved.

 

I have not seen anything to convince me that, prior to September 11, 2001, juries all of a sudden started compounding awards for pain and suffering. That is difficult for me to believe. To see all of this come together nationwide at the same time is inexplicable.

 

Ms. Molasky-Arman:

One of the reasons the exodus of St. Paul Companies hurt Nevada so badly was it had a major market share. Even though they were doing business internationally, there were very few states that had as significant a presence as Nevada.

 

Amy Dodds:

I have been a nationally certified surgical technician since 1991. I have been in the State of Nevada and working since 1996. I have had the opportunity to work with, and for, some of the doctors mentioned yesterday and today, as well as many others. I currently have filed a medical malpractice case. I knew immediately upon waking from my surgical procedure, major abdominal surgery had been performed on me without my asking for it or signing a consent form.

 

In observing some of the victims of medical malpractice, I can say I am one of the lucky ones. Although I will be scarred for life and may not ever be able to have another child, at least I can enjoy the two I have. As for my quality of life, since filing suit I have been unable to get a job in my chosen field and my family is suffering. We are unable to just pick up and move to another state. As for my court case, even with a signed affidavit from the doctor’s office stating my consent form was altered, I have been unable to get much response from the medical review board.

 

My case was filed with the medical review board in November 2001. The nurse and the doctor involved in my case have not even been reviewed, much less had any disciplinary action taken against them. Also, once I had the signed affidavit in my hand, I went to the police to file a criminal complaint. It is against the law based on NRS 630.3062, to change medical records. The police could not even figure out how to write a report or what to do.

 

To say it is easy to bring a medical malpractice suit is a lie. There were no automated systems calling me and there were no lawyers waiting to help me. I had to call around and speak with a few and explain my case. This is a long process where the victim is made to feel less than human.

 

I have always been told not to complain unless you can come up with a solution. I have two. One, doctors, hospitals, and the medical review board need to police themselves better. They need to weed out the bad doctors and keep only the good doctors in Nevada. Two, we heard of the insurance companies raising their medical malpractice prices on doctors with little or no complaints; I do not understand how that could be possible.

 

I would like to end by saying the state supreme courts of both Ohio and Illinois have already thrown out caps for medical malpractice and I hope you will also. Please do not take away the rights afforded to me in Article 1, subsection 1, of our State constitution, the inalienable right of enjoying or defending life and pursuing and obtaining safety and happiness.

 

James L. Wadhams, Lobbyist, Nevada Mutual Insurance Company:

I am here today on behalf of Nevada Mutual Insurance Company, formed May 3, 2002, by Nevada doctors with the support of southern Nevada hospitals. As of yesterday there were 650 Nevada doctors in this insurance company. It is a doctor-owned insurance company with Nevada doctors only, no outside doctors involved and no stockholders. These physicians have created a fully capitalized, legally licensed, commercial insurance company. This suggests physicians are willing to work together on solutions. It represents some comfort level that Nevada doctors can find solutions so they are not held hostage for entities who have no commitment to stay in the State.

 

Senator Titus:

I think that is good. I think that is what should be happening. As we look at insurance regulation is there something we are missing that makes this work better? What will encourage doctors to do this sort of thing so we are not held hostage? I really did not get this question answered. Maybe there is not anything we can do, but we ought to at least address that.

 

Mr. Wadhams:

I can only speak since my firm actually assisted this company in its formation.

 

Senator Titus:

You have been an insurance commissioner yourself?

 

Mr. Wadhams:

I do have a little experience in the statute.

 

Senator Titus:

This is the revolving door I was talking about, the regulators and the industry.

 

Mr. Wadhams:

This is an important point and although the commissioner did not answer it, her staff put this proposed insurance company through all the appropriate hoops. Recognizing this would be a solution to the crisis, they did expedite the process.

 

The problem is, it is difficult for people to make the kind of commitment as the physicians and hospitals did who started this. To form a fully capitalized insurance company, start-up capital in the range of $5 million or $6 million is required. Cooperation was extraordinary. This company became operational within about 60 days.

 

I do not have a great deal of statistics since Nevada Mutual Insurance Company has only been operational for less than a year. However, the number of participants in the program speaks to the program itself.

 

Chairman Amodei:

One of the tabs in our briefing book on this issue is “Med Mal Rates ‑ Nationwide” (Exhibit F. Original is on file in the Research Library.). There was some comparative data originally prepared for the interim committee. It would be helpful if we could get some similar data from your entity. We want to get an idea what the rates are for those using your insurance.

 

Mr. Wadhams:

We will do that, thank you Senator.

 

Senator Care:

Could you educate this panel on the relationship between the doctor and carrier when litigation is threatened or filed? What is the obligation of the doctor to cooperate with the insurance company and who makes the call whether to refuse a settlement offer or to go forward with trial? Ultimately, what effect do you think these decisions have on insurance rates?

 

Mr. Wadhams:

It might be helpful if we produce a copy of the medical malpractice insurance contract so you can see the specific language. Not having one in front of me, let me suggest to you professional liability is different from something like auto insurance where the insurance company can settle those cases. Professional liability requires the consent of the insured. This is an element in the settlement process different from what normal consumers would find in their auto or home owners policy.

 

Senator Care:

Though I am a lawyer, I do not do medical malpractice cases and never will. If this is a call for the doctor, is there any reason to believe doctors have not been wise in sometimes not settling lawsuits?

 

Mr. Wadhams:

There are anecdotes about circumstances in which the insurance company forced litigation against the wishes of the physician, and vice versa, where the physician refused to settle and went to trial. I have no independent verification of particular circumstances.

 

Senator Washington:

The question we are still trying to grapple with is the stabilization of rates and ultimately the decline in rates. If we enact or pass Initiative Petition 1, can or will you anticipate a stabilization of rates? Will they be tested constitutionally and will there be a decrease in rates?

 

Mr. Wadhams:

Unfortunately the answer is not going to be yes or no. I think A.B. No. 1 of the 18th Special Session was significant tort reform. One of the problems, as outlined by the insurance commissioner, is we have yet to see how the courts or settlements might deal with those provisions. For example, will trauma care rendered in a facility other than the UMC trauma center be challenged? Where there is tort reform nobody is going to be certain how effective it will be until the courts have ruled on its constitutionality. In California, it took almost 10 years for their three-level court system to sort out the constitutionality of what is called MICRA, California’s Medical Injury Compensation Reform Act of 1975.

 

You have heard estimates anywhere from 3, to 5, to 7 years, depending on how quickly cases get through the courts. The Nevada Supreme Court is going to have to give some assurance the limitations on individual rights adopted during the special session are constitutionally sustainable. Otherwise an insurance company is taking a risk and may end up charging insufficient money to pay claims. No matter what, we have not had sufficient experience under A.B. No. 1 of the 18th Special Session to anticipate and have validation by the Nevada Supreme Court. The Initiative Petition 1 or S.B. 97 raises additional complications which will have to work through the system. Changes will have an effect, how much and when will depend upon the legal system.

 

John Liveratti, Chief, Social Welfare Program, Division of Health Care Financing and Policy, Department of Human Resources:

We are here to answer any questions. We are neutral on the bill.

 

Chairman Amodei:

We asked your staff to provide information on availability of obstetrics and gynecology (OB/GYN) in your programs and if there is a fiscal impact from S.B. 97.

 

Phil Nowak, Chief of business Lines, Division of Health Care Financing and Policy, Department of Human Resources:

The division is responsible to provide adequate access to managed care programs including OB/GYN and related services. Beginning in May we performed a weekly survey of the contracted physicians about their continuing acceptance of new Medicaid patients as well as the actual number of physicians or OB/GYNs who are participating in the program. We have learned May was a low point as to the number of practices and individual providers who indicated they were still accepting OB/GYN patients. We did not find any instance of them backing away from existing patients. Since May, a gradual recovery in the numbers, both on a practice level and among individual OB/GYNs, indicates they are again accepting Medicaid patients.

 

We have also conducted a direct survey sampling our Medicaid population to find out if they are experiencing difficulty in obtaining care upon being eligible and learning of their pregnancy status. The recipients did not feel they were having particular difficulties. We intend to continue monitoring.

 

Chairman Amodei:

There is a “Medicaid” tab for reference in the folder having more detailed information (Exhibit F). Do you have any thoughts on the testimony heard yesterday relevant to reimbursement and how the proposal would or would not affect it?

 

Mr. Liveratti:

It will not impact Medicaid. Federal law requires applicants to assign their rights to Medicaid and to Medicaid recovery from third-party liability as part of eligibility. The State law cannot supersede the federal law in our right to recovery. We are required by federal law to recoup any money paid by us going into any lawsuit where there was insurance.

 

Senator Care:

Is there an opportunity for an increased role by midwives?

 

Mr. Liveratti:

I do believe midwives can be Medicaid-eligible providers. We do allow and pay for their services.

 

Richard Wallace M.D.:

I am a physician licensed in Nevada as well as seven other states. I have practiced for over 40 years and I have seen many problems occur in medicine. There are several important things I want to share with you regarding your debates. The malpractice crisis has occurred several times and I do not believe these changes, even the one you have already passed or the one you may, will inevitably stop the whole process. These are patches over the real problems.

 

One problem was addressed earlier. There are physicians doing bad things to patients. This is going to continue to occur unless we get better with our policing and with stopping them from practicing quicker than seems to be now. Also, the whole health care industry has begun to deteriorate so I have a new role; I am helping patients survive our system. Patients do get injured and they are still going to be injured. Caps are just one issue of many problems. The solution does not need to be added as a new bill, we need to stay with the first one you passed.

 

Doctors do tend to stay together. If someone behaves differently, it is very hard for patients to find someone to take their sides. There are not a lot of frivolous lawsuits. This is a wrong term. There are people who are injured and end up suffering. They have been assaulted. You also need to address the issue of the assault.

 

When I started, malpractice coverage was $25 a year. I did not carry it because I did not believe in it. It is not a good procedure and probably never will be. Nobody wants to look at that issue. Coverage might be better handled as an all‑risk type thing, like you do with flood insurances by sharing the costs across the board.

 

Practicing medicine has changed. One of the problems we are dealing with is the downgrading of medical knowledge and ability. As we try to get access, another problem you are trying to address, shifting to people who are less trained and less experienced will create a policing and insuring problem.

 

Danny Thompson, Lobbyist, Nevada State American Federation of Labor and Congress of Industrial Organizations:

I represent the State AFL-CIO (American Federation of Labor and Congress of Industrial Organizations). This is a serious problem. These bills are putting the cart before the horse. Limiting someone’s right to recover goes against our American judicial system and the idea of a trial by a jury of peers. There are no real solutions to the problems in either one of these bills. The Legislature met in special session and took action to deal with a crisis situation. They knew it would be a long-term solution because all insurance is based on experience and risk. Until you are able to identify any experience and risk you are not able to have a good idea of what the insurance is going to cost.

 

I represent all of the unionized nurses in the State of Nevada. Over the years we have lobbied to ensure hospitals in Nevada have adequate nursing standards. To this day they do not. Nurses will tell you privately if you go in a hospital in this State you might want to bring somebody from your family to sit with you. There may not be adequate nursing to ensure your doctor’s prescriptions, or the protocols set down to make you well, are carried out. A doctor puts a patient in the hospital in good faith and believes the protocols are done to make a person whole and there is adequate staff. If not, chances are there is going to be a malpractice suit and the doctor is going to be held responsible for someone else’s actions.

 

Another solution needed is the one in workers’ compensation we are currently talking about in the Assembly involving Employers Insurance Company of Nevada (EICON), who is now the writer of the majority of fully insured workers’ compensation for employers in Nevada. When we privatized workers’ compensation, we did away with all the protections in the law for adequacy of providers. In fact, today the list of providers has been decimated from EICON, who writes the majority of this kind of insurance, to the point they have one MCO (Managed Care Organization). In the original bill, this Legislature required seven MCOs in the south and five in the north. Let me tell you the result. If a man gets his finger cut off in Fallon, he is not treated in Fallon because nobody there is on the panel. He is driven to a doctor in Carson City. He cannot get into the hospital in Carson City so he is driven to Reno. If you happen to be the doctor who finally sees this individual, chances are when treatment is denied or delayed, there is going to be a complication and this person should have the right to recover just like everyone else.

 

We are looking at a solution to this problem in the Assembly in a bill currently on the ropes of the legislative process. There is a solution in the bill that will address the real problem. All lawsuits are frivolous until you are the one who has been wronged, then it is not frivolous. If you are the one who had their legs cut off or if you are the person who is blind, it is not frivolous anymore. The ability to get an attorney cannot be done away with just because somebody does not have the money. I know over the years we have talked about limiting contingency fees for attorneys. It is a crime to consider this action unless you consider these other solutions.

 

Let me tell you how those fees are set historically. The Division of Industrial Relations sets the medical fee schedule as the ceiling of costs that can be charged on workers’ compensation cases. I have sat on the medical fee schedule panel where we set those amounts of money. Employers Insurance Company of Nevada went to doctors on their list and said, “OK you have to take a 25 to 35 percent reduction or we will drop you as a provider.” If you are a doctor and if you are told they can fill your office with a 100 people a day and you give them a discount, that is a good sound business decision because you can make a living and you can provide adequate care. But if you are a doctor who only sees three patients a week and you are asked to reduce your charge by 35 percent, you are going to say no because it is a business decision then and that is what happened. Most of the doctors have fallen off the list and there is nothing in the law today protecting the guy in Fallon who had his finger cut off.

 

There use to be a requirement in the law if you lived 20 miles away from one of these providers, you could go to any doctor. That is gone. All of those protections are gone. This is a solution to a problem because I believe prevention is the thing not being talked about enough. You have to look at prevention. If you look at drunk drivers, we lower the level of alcohol in their blood to prevent accidents. If I have a home with asbestos, I have to disclose it to a buyer. Do I have a right to know if a doctor has committed malpractice or a hospital has a higher incident of reported infections? One solution is to give people the right to know. If a doctor has committed malpractice repeatedly and I go to the doctor in good faith and I am malpracticed, I think it is a crime as well. We should look at solutions and not quick fixes. You did the quick fix. You made an honest effort to solve a problem in crisis. Just the nuts and bolts of insurance tell you there has to be an experience. There has not been time to have an experience on this issue to determine those rates. I would urge you, before we remove someone’s right to recover and before we take away the basic right to undo a wrong, to consider other solutions which may be difficult ones as well. Staffing standards is something never addressed. I urge you to look at all solutions and not another quick fix.

 

Chairman Amodei:

Testimony on S.B. 97 will be heard at a later time in an additional hearing, we will finish testimony on Initiative Petition 1 today.

 

Bill Bradley, Lobbyist, Citizens for Justice, and Nevada Trial Lawyers Association:

I want to keep today’s focus on cause and effect as the committee has asked. It is critically important to realize what the incontrovertible testimony has been in this hearing during the past days. You had Mr. Byrd testifying on behalf of the Governor’s plan saying A.B. No. 1 of the 18th Special Session was a good bill, if it holds, and it is going to reduce premiums. That is powerful. His is the only comment we have had from an insurer and gives us a tremendous amount of hope for the meaningful work you did, with our input, during the summer.

 

I am glad Senator Nolan came back because he asked a very important question of Ms. Molasky-Arman, “Has AIG made a decision on Nevada?” She missed it Senator Nolan, but we did not. Yesterday Mr. Byrd told you another incredible piece of optimistic news. TransAtlantic Insurance has elected to reinsure MLAN. The critical part of Mr. Byrd’s testimony yesterday is TransAtlantic Insurance is a member of the AIG companies. Mr. Greenburg in effect has said A.B. No. 1 of the 18th Special Session, Nevada has passed meaningful tort reform and is in on their bond market and in on their insurance market because the work you did last summer did something. To throw out A.B. No. 1 of the 18th Special Session without giving it the opportunity to work is not a good idea.

 

The cause and effect, Senator Care, is what we are looking for and it has been said without question the cause and effect of A.B. No. 1 of the 18th Special Session has been accomplished. It is going to take time. Senator Washington, you asked about constitutionality and it is an important question; that is why Senator Raggio worked so hard last session establishing the basis for the exceptions we talked about.

 

Senate Bill 97 is loaded with constitutional problems. It goes much further than A.B. No. 1 of the 18th Special Session and it goes further than MICRA. I will tell you unequivocally S.B. 97 and I.P. 1 are absolutely unconstitutional. Assembly Bill No. 1 of the 18th Special Session is a different story. With the exceptions, it is hopeful it will address constitutional issues. With some of the innovative things this committee did, A.B. No. 1 of the 18th Special Session should survive constitutional challenges.

There are problems with A.B. No. 1 of the 18th Special Session. The $50,000 cap on emergency rooms is bad and is the weak link in A.B. No. 1 of the 18th Special Session. Why someone treated in an emergency room is considered differently than someone who is injured in the operating room is a problem. The rest of A.B. No. 1 of the 18th Special Session is good.

 

The exceptions, Senator Washington, are where we got off track; I disagree with John Bailey about the idea of punitive damages. There has never been a case to my knowledge in Nevada where a doctor has been found responsible for punitive damages in the context of medical malpractice. If a doctor or a lawyer engages in horrible conduct such as unlawful sexual activity, they are subject to punitive damages. Punitive damages cannot be insured against. Any punitive conduct falls outside the responsibility of the insurance commissioner and the rest of the State.

 

Mistakes are not the kind of conduct considered for punitive damages in the context of medical malpractice. In 21 years I have never seen a case justifying punitive damages. I have never seen a case that even came close. Gross malpractice does not mean punitive damages.

 

A very good question was asked about joint and several liabilities. The physicians have taken the position they want to be severally liable. Several liability means each actor is responsible for their percentage of fault. This is one of the differences between A.B. No. 1 of the 18th Special Session and S.B. 97. Under A.B. No. 1 of the 18th Special Session there is joint liability for all economic damages. When several liability is imposed, it requires lawyers to name every single person involved, the person who is 1 percent at fault, the person who is 2 percent at fault, the person who is 3 percent at fault. Because if they are not named and a jury starts adding up the percentages of fault and somebody is left out, the number will not add up to 100 percent of fault. If we do not get 100 percent of fault we have not done our job under a several system. Several liability was rejected because it promotes bringing in peripherally involved people. It promotes more lawyers, it promotes increased fees and it promotes increased costs.

 

Assembly Bill No. 1 of the 18th Special Session talks about a per-damage, per-plaintiff, per-doctor exception because of the stories you heard today. If S.B. 97 is allowed to pass, irrespective of the number of errors, all these people could come in and file lawsuits. The only people affected by a lawsuit are the injured victim and where there is a death, then the heirs of that victim. Claiming multiple and multiple and multiple parties just is not accurate. Mr. Triese’s claim would probably fall under the egregious circumstance based on his story that the exception was placed in A.B. No. 1 of the 18th Special Session but if Mr. Triese were to die as a result of malpractice, then his wife would have the claim for $350,000. However, if his claim is worth $350,000, under S.B. 97 if he had a wife and children they would be required to divide the $350,000 for the costs of bringing the lawsuit and the attorneys fees. That is why the per‑plaintiff exception is put in A.B. No. 1 of the 18th Special Session.

 

Senator Nolan:

I was under the impression the $350,000 cap is a cap on pain and suffering. You have clarified punitive damages cannot be insured. The $350,000 really is a pain and suffering assessment provided to the claimant.

 

Mr. Bradley:

The cap is on noneconomic damages. In any case there are three types of damages available if the circumstances justify them. Noneconomic damages for the pain and suffering, economic damages for the wage loss, future medical bills, and all the things that happen to somebody when they are tragically injured, and punitive damages if the actor’s conduct was intentional and malicious.

 

You are correct; the cap on pain and suffering is only on noneconomic damages. Please do not forget, in earlier Legislative Sessions, this Legislature has also imposed caps on punitive damages.

 

Senator Nolan:

The $350,000 noneconomic pain and suffering damages, the insured portion of the assessment, is not completely assumed by the individual who caused the damage. The insurance companies and the entire medical community whom they insure assume it. Instead of the individual who committed the act paying the penalty, it is all of the insured. Then it is passed on to patients in the way of higher costs. Is that a correct assumption?

 

Mr. Bradley:

That is a correct assumption, Senator Nolan. Not only is the pain and suffering covered by insurance, but future economic damages are also covered. Punitive damages are not covered by insurance.

I will provide an example. There happens to be an obstetrician in Las Vegas who had a horrible case against him involving a baby traumatized at birth with long‑term consequences. The parents, despite the fact the future care and costs of the baby were extraordinary, offered to settle for the physician’s million‑dollar policy limit, even though it would not take care of the child’s future needs. The doctor wanted the insurance company to settle. This information is in your binder (Exhibit F). The doctor begged them to settle, but the insurance company decided not to settle. They went forward with a jury trial and the jury awarded the baby over $5 million. The physician, who would have been out of the case, now had a $5 million verdict against him. The insurance company then said “You cannot practice obstetrics anymore.” The insurance company then raised rates on all their partners. The insurance company then refused to pay the family for many years. They put the doctor through a public trial, subjected him to a substantial verdict, took away his right to practice obstetrics, increased his premiums, and then spread that cost through the rest of the obstetricians. This is a problem, it was not the physician’s problem. It was not the lawyer’s problem, it was a poor decision made by an insurer and it had extraordinary ramifications to everybody down the system.

 

Senator Washington:

If the doctor had the right to refuse a settlement, as explained in previous session, then the insurance company could not mandate they proceed, there had to be something else.

 

Mr. Bradley:

Before an insurer can settle they have to obtain the physician’s consent. This is only in medical malpractice and not found in any other professional liability policy. It certainly is not in our automobile policies or our home policies. It is a unique provision specific to medical malpractice. If a physician refuses to consent and the insurer wants to settle, they cannot proceed without the doctor changing their mind.

 

I have been involved in numerous cases. Our chart and the chart introduced in this subcommittee shows the substantial number of verdicts between 1995 and 2002 in Clark County. When I say substantial, I am referring to 21 verdicts. You will see time and time again the physicians had already consented to settle. They asked their insurance company to please settle their claims. Once the physician says, “I want to consent,” that is their only input. From that point on, the decision on how, when, and under what terms to settle is strictly up to the insurer. The physician has no more input.

 

In the case I just referenced to you, the physician realized a horrible error had been made. This does not mean he is a bad physician it means a physician, on a particular day, made a mistake with tragic consequences. The physician asked, “Please insurance company, settle with this family, I have had enough.” Despite his requests the insurer said, “Thank you doctor, we now understand you have consented. You go home and we will decide how to settle.” They did not settle and the result was a substantial verdict and tremendous emotional wear and tear on a physician who wanted to settle.

 

Senator Washington:

I understand consent to mean I have the final say whether to proceed or not to proceed.

 

Mr. Bradley:

No sir, Senator Washington.

 

Senator Washington:

Are you telling me under provisions of the contract, once I give my notice of consent, the provider has the right to override my decision?

 

Mr. Bradley:

Ab-sol-lute-ly.

 

Senator Washington:

What is the use of signing the contract?

 

Mr. Bradley:

Because you have to have insurance, they have you, Senator Washington. This has been our point for the last 2 years.

 

Senator Washington:

We really need to take a look at the contract.

 

Mr. Bradley:

It is very clear and we have been trying to bring this to the attention of policy makers and the public in the State of Nevada for a long time. The civil justice system has been addressed. Now it is time to go to the real problem.

 

Senator Care:

The definition of professional negligence, as I read in S.B. 97, is written almost as a jury instruction. I am concerned it might establish a higher burden for a plaintiff.

 

Mr. Bradley:

I share your concern for a number of reasons. First of all, at the bottom where it says, “is the proximate cause” that means under our current law it typically is “a proximate cause.” There is some dispute as to whether the act was the cause or a cause. As you have heard today from various witnesses, there can be multiple causes on what happened, a bad drug, a nurse who was not paying attention, a physician who was not paying attention. There is a reason why this definition is being changed. I believe it is to increase the standard and the burden placed on a plaintiff. I believe it is to throw away 50 years of existing law in the State of Nevada defining medical negligence. It is an attempt to give lawyers the next 10 years redefining what medical negligence means in our State. That is a terrible injustice to the hard work our supreme court has done over the last 50 years making clear the definition. I share your concerns completely.

 

Senator Care:

According to how the bill and petition are written, how do you read the phrase “upon petition of any party in interest?” I do not know if it means family members or if it means the physician or maybe the carrier.

 

Mr. Bradley:

It means the physician and the carrier and it is a bad change. The physician and the insurance company get to advise the judge, “This is how we think the person should be paid.” It is an insidious provision both in S.B. 97 and in I.P. 1. You can hurt somebody and then you get to decide how they get paid.

 

Senator Care:

I want to ask you about juries. Often jury awards are inconsistent. I would like you to talk about runaway juries, because I do think they happen.

Mr. Bradley:

We have provided you with a list for each member and there was a more comprehensive list developed for the subcommittee this past summer. This list shows the 22 verdicts in Clark County between 1995 and 2002. There has not been one piece of evidence submitted over the last year and a half of an excessive verdict in the State of Nevada. For each one of the verdicts listed, based on the facts and circumstances of each case, there is a reason why the jury decided what it did.

 

You keep hearing the mantra of frivolous lawsuits and excessive verdicts, yet we have not seen an example of even one. We ask these be brought forward so this committee can hear them

 

Certainly, we trust juries. As attorneys, we are told the right to a jury trial shall remain inviolate. A jury can be influenced by anger, by passion, by prejudice, or by something that just went wrong in the courtroom one day. This does not happen very often. There are 8 people with 30 to 40 years of experience totaling 240 to 250 years of experience.

 

By the way, in every malpractice case I have ever filed, the defense has requested a jury trial. The insurance industry’s perspective on juries is they are great when they return a defense verdict, but they are out of control when they return a plaintiff verdict. In every case it is the insurance carriers who demand a jury.

 

Juries do make mistakes like everybody else. What is great about our system is we have a judge sitting there the entire time. The judge, like you, was elected and the judge has to hear the testimony. Once the jury returns its verdict the judge has to review it. This is the first check and balance in our legal system. If something went wrong unduly influencing the jury, the judge has the right to remedy. Another check and balance is the Nevada Supreme Court. If an appellate court is ever created in Nevada, the appellate court will also be a check and balance. This is the best system in the world and many countries are trying to imitate our system. It is not perfect, but it is the best system in the world.

 

Now proceeding with the theme of cause and effect, Mr. Sharp will present a good, meaningful reform.

 

Matthew L. Sharp, Lobbyist, Nevada Trial Lawyer Association:

I will address the insurance aspect of this debate. There is malpractice and interrelated is how the insurance industry addresses malpractice. We have heard some points from Senator Care today asking how, suddenly, 1 year, St. Paul Companies wake up and decide they need an 83 percent rate increase. Obviously this was a problem brewing over time and did not occur overnight.

 

Also interrelated is the manner in which insurance industries were conducting business. They need to be held accountable. Nevada will solve this problem because of people like Mr. Byrd who understand the process of insurance. Mr. Byrd talked about not only the adequacy of the pricing and figuring out what the premium needs to be, he talked about underwriting, the process by which the insurance company decides whether or not this doctor is going to be insured. These three things are interrelated. We cannot have a good insurance company without them having good premiums, without them having good underwriting, and without them handling claims appropriately. The overriding principle is insurance exists to protect their doctors. The insurance industry is endowed with a public trust because it is important to our economy and to our victims and to our doctors.

 

Much has been made about what happened in California. There were two events in California. From 1972 to 1988 medical malpractice premiums increased. With the passage of California’s Proposition 103 in 1988, rollbacks in premiums of 20 percent were created as mandated with $135 million returning to doctors. We tied in with their insurance reform though I am not here to advocate a Proposition 103-type solution for Nevada.

 

The only insurance companies who came before you in person were from Nevada. All of the companies we are hearing problems about are from out of State. They are not here to express why problems exist and they are not here to give you solutions.

 

We have talked about adequate rates. Another thing we need to talk about are sound underwriting practices. I have before you a quote from the Business Insurance journal, The Wall Street Journal type of publication the insurance industry reads. This quote is elementary to what we need to talk about. If we have doctors who are not performing, we do not need to insure them. The insurance company needs to be accountable, not just to the doctors and the insurer, but to the public at large. They too are responsible for their business practices just as Mr. Bradley and I are responsible for our business practices and just as the doctors are responsible for their business practices. Until we do that, we are going to keep having these cyclical problems.

 

Punitive damages are a means to punish wrongdoers like St. Paul Companies who come in, practice abusive trade practices, leave the State, leave our community with a problem, and leave the doctors they insured with problems. Punitive damages are available as a means of punishing them. It is just not accurate for somebody to tell you there is a correlation between punitive and compensatory damages. Juries are instructed in these cases. Punitive damages are to punish and deter, and this is what we are talking about in terms of what we need to do with these insurance companies out of State, unaccountable to us, and unaccountable to this Legislature. The way to hold them accountable is to stop those practices.

 

I encourage each of you to read the attorney general’s complaint. Many of the questions from this committee are addressed in the allegations of the complaint. The complaint explains how this insurance company cornered this market, misled their consumers, and created the problems we now have. We have also testified about the effect an insurance company has by not settling a case. Senator Washington made a great point. It does not seem logical, if the doctor consents why does the insurance company not have to honor their consent?

 

We have come to expect an insurance company is going to cheat us even though the law says an insurance company is a confidential entity, fiduciary, and trusted. For paid premiums that are paid, we expect peace of mind in return. An insurance company is given the duty of good faith and fair dealing to protect our interests. When these companies say the reason juries are out of control is because those juries awarded more than what a doctor wanted to settle for, is just not credible and it is disingenuous. The insurance companies can stop this problem by protecting their insured. That is their responsibility.

 

One of the proposals this committee should address is whether a patient should have a direct action against the insurance company.

 

Mr. Craigie:

This panel includes Mr. Rod Davis, who is president and CEO of St. Rose Dominican Hospitals, who is with Dr. Rafael Juarez, an OB/GYN who does work at the two hospital sites, and Dr. Florence Jameson, also an OB/GYN.

Rod Davis, President and Chief Executive Officer, St. Rose Dominican Hospitals:

The purpose of my comments today is not to pass judgment on any group and is not to talk about A.B. No. 1 of the 18th Special Session. I am here to share with you some disturbing trends and serious challenges to St. Rose Dominican Hospitals. As an organization we try to continue providing access to quality health care services for the communities we serve.

 

In health care planning we use a model called the GMENAC model, from the Graduate Medical Education National Advisory Committee. It is the recognized source for developing physician manpower-planning models based on population rates in any given location. It is the standard used by planners throughout the hospital industry across the nation and is also recognized by the federal government, which regulates the ability of not-for-profit hospitals to recruit physicians based on community need. The gold standards used to establish community needs are these GMENAC numbers. We applied the GMENAC model recognizing it is an imperfect guideline with variables such as demographic issues, age of family-rearing members of the population, and size of families. Nevertheless it is an appropriate guideline we found through our studies.

 

Beginning at the calendar year of last year, our calculations show we serve approximately 400,000 individuals. By applying the GMENAC methodology to those numbers, we should have 40.6 OB/GYNs to serve this population area. At the beginning of calendar year 2002 we had 31 OB/GYNs serving our population. I am sure you are familiar with the population growth in southern Nevada. We have struggled over the last decade with an intensive physician recruitment program to continue to bring in new physicians to meet population growth demands. We felt we were approaching a reasonable number

 

In the past 9 months, from the original number of 31 physicians, 6 OB/GYN physicians have left, thus leaving our staff with 25 OB/GYN physicians. In the zip code area 89015, GMENAC recommendations are we have 6.25 OB/GYN physicians. Currently we have three in a group under the name of Deseret Women’s Care. In the past this group consisted of five physicians who had been in the community for over 20 years with over 50,000 patient charts and over 30,000 active charts. They were the primary OB/GYN physician group serving the original St. Rose de Lima Hospital in Henderson for many years. Last week this group announced they were closing their practice within 2 weeks. Two physicians are planning to leave the State. The third will continue to deliver the remainder of those patients who are expecting, will not accept new patients, and plans to practice only gynecology services.

 

The decrease in physicians from 31 to 25 and then to an expected 22 with a recommended level of 40.6 is indeed a serious problem.

 

There are a number of additional disturbing trends. In spite of our intensive recruitment program, we have been unable to keep up with the overall physician needs because of rapid population growth. We are ranked 47th in terms of physicians based on population. Every month for the past 11 years I have received somewhere between two to five inquiries from out-of-state OB/GYN physicians looking for practice opportunities. Over the past 6 months I have not received one inquiry. For the first time we have hired outside recruiters at a cost of anywhere from $30,000 to $40,000 per physician in addition to the actual recruiting package we offer. We are hearing from the recruiters Nevada is not a climate where we are getting a lot of interest from physicians.

 

You may be aware of a report in the Las Vegas Review-Journal last week about our efforts to recruit a highly respected and superbly qualified neurosurgeon who met with us along with his physician wife who practices OB/GYN at the Mayo Clinic. They subsequently made a decision not to come to Nevada. For the first time in 28 years as a health care administrator, I have been asked on three occasions during the last 6 months by physicians to assist them in finding OB/GYN coverage for a member of their family.

 

Our cesarean section (C-section) rates increased 38 percent in 2 years, another disturbing trend. In the year 2000 our C-section rates were 21 percent. In 2003 the rate went up to 29 percent. Privately, physicians will say they are not going to take a chance in a difficult delivery and will opt for a C-section. We have had 7 OB/GYN physicians resign in the past year and we have had 13 resign in other specialties. They do not always resign privileges for they may take a leave of absence. Many physicians have licenses to practice in multiple states and the majority of those physicians will retain their license to practice in Nevada. What typically happens is they will take a leave of absence, hoping to return to our State at a later date if the malpractice situation stabilizes. We have found once a physician leaves and starts to build a practice somewhere else, the likelihood of them coming back is almost zero.

 

With the closing of Deseret Women’s Care we are expecting about 20,000 to 25,000 women will be looking for OB/GYN coverage. Since their announcement to close, our phones have been ringing off the wall asking for help finding additional OB/GYN physicians.

 

Dr. Juarez has practiced in our community for 9 years. He never had a malpractice claim until a year ago. In the year 2000, his premium costs were approximately $32,000. In 2001, they were approximately $34,000 and in 2002 they were $87,500. For 2003, he has received two quotes, one is $165,000 and the second one is $243,000. Dr. Juarez is one of the most respected physicians on our medical staff. He has been on our credentials committee for a number of years and he has been on our pharmacy and therapeutics committee. Many of our nurses have delivered their own babies at the hands of Dr. Juarez. He also has delivered many babies for physicians on our staff. He is a member of the governing board of St. Rose Dominican Hospitals. If this problem is not rectified, we expect Dr. Juarez to leave the community as well as many other good, quality physicians.

 

In conclusion, we are in a worse situation as a hospital. There are other physician groups whose premiums will be renewing in a May time frame and a late summer time frame. In 28 years of running hospitals, I have never seen the anxiety and the stress levels when talking to physicians about their future ability to practice. Our community cannot wait 3 to 5 to 10 years. I urge you to apply any efforts you can with this bill or other bills to help relieve the situation and provide more stability for our physicians and more access to care for our residents.

 

Rafael Juarez, M.D.:

I am here to answer questions. I have been practicing in Henderson for 9 years. People expect physicians to be altruistic, sympathetic, compassionate, and perfect, which we are not. Errors are created sometimes by misjudgment, sometimes by equipment failures, and sometimes just bad anatomy or patient outcomes. We as physicians are made to suffer. Patients have a right to have their maladies addressed and they have a right to compensation. The dilemma is between the balance of patients’ rights, their access to medical care and how we remedy it.

 

The A.B. No. 1 of the 18th Special Session is a great bill and it may make some great changes. Unfortunately for me it is far too late. Is there a way we can make it better? Will I.P. 1 be judged an improvement? Many of us tend to think so. We find truth and justice are a perception of the individual at the receiving end. I would love to be able to stay in Nevada. I have a great care for the people I deal with and the people I treat. At a cost of $250,000 a year for malpractice premiums I cannot make a living. I have 12 to 15,000 patients who are now going to have to look for a new physician.

 

Florence Jameson, M.D.:

On behalf of the obstetricians and gynecologists and other surgeons in Nevada, I would like to thank you, Chairman Amodei and the rest of the committee, for this important meeting. I would also like to thank the Governor, Kenny Guinn, and the Senate and Assembly for their diligent and incredible work on these issues to try to find truth and a solution to this very difficult problem.

 

I am here today to urge you, the Legislators, to pass meaningful reform that may help curtail the frivolous lawsuits and the escalating malpractice premiums perpetuating this crisis. My name is Florence Jameson and I have been an obstetrician and gynecologist in Las Vegas, for 18 years. I originally came from San Diego. I went to University of California, San Diego Medical School, graduated, went on to University of California, Los Angeles School of Medicine and did my residency at Cedars-Sinai Medical Center in Los Angeles, California.

 

Like most people in their lifetimes I had a lot of obstacles growing up, challenges in my childhood and throughout my life. I will tell you what I am facing in Nevada this last year, compared to anything in my life I have had, is the hardest struggle I have ever encountered. My father was in prison, my mother was a single mom, my brothers and sisters were into drugs. I was the only one of five siblings who graduated from high school. My sister was in teen pregnancy; the other kids were born premature.

 

Some of the issues in my childhood have led me to be committed to be an OB/GYN. The premature birth of all my brothers and sisters, I know, led to their learning disabilities. I know it led them to be slow, to fall into the wrong groups and gangs. I know it led to my brother’s death from IV heroine overdose. I have dedicated my life here, in this State, to patient education for good prenatal care. I have tried my best to provide a safe delivery for a woman and a child, a well mother and a well child. I know it does not just make a difference in their human life, not just on this planet, but their spirit beings forever. I believe it truly.

I always had hope and I always felt things would work out, and they did. But now, right now, for the first time in my entire life, I am losing hope I can make it here. The patients have been fabulous and it has been the most rewarding and blessed life a person can have. Medicine is important to me and it does take up the lion’s share of my time. My priority is my family. I have a beloved husband and wonderful children. They have seen me pounding that treadmill. I am doing twice the deliveries I did when I came in 1985. I am seeing twice the number of patients on a daily basis. We have other usual activities we have to do, rounding, hospital charts, emergency room call, and honestly I do not see how, as I approach 50 next year, I can push it any harder.

 

How can I possibly afford these new premiums? I am not the only one. Every physician I speak to in my field is also wondering how. When I spoke last time I shared the stress of a few individuals. I talked to you about Stacey Rivers not being able to make it and closing, and of Dr. Maloney’s struggles and having to quit. Almost all of them were borrowing their last year to stay in practice. I spoke to you of Cheryl Edwards and now, since that time, there has been a list of them. People quote numbers and say they are just numbers, but there has been an infinite number of doctors who were my colleagues, and who are no longer around to give me support. I have additional written testimony (Exhibit G).

 

Dr. Jameson:

What are the issues when you say there is not a mass exodus? One of the issues I find is when I am on call now. I am on the labor and delivery floor and I have to go to the emergency room call, which we are required for staff privileges. I frequently find, as I flip through the Rolodex for an assistant, there is nobody to call. There is nobody available. There certainly is no one standing around the labor and delivery floor like there used to be, ready to help in an emergency. The last few times I have had to rush in. The patient I had last weekend on call, a typical patient, was high risk and I did not know her. She comes in, she is on drugs, the baby has decelerations. I have got to run in there. I have got to do an emergency section. I have got to save her. There is nobody there who wants to come or is around to come to me to help me at all hours. I am doing it by myself. There is not the available care any longer on the floor.

 

Paul Child, who is currently an associate and friend, and chairman of the OB/GYN department at Sunrise Hospital and Medical Center, and officer of the Clark County OB/GYN Society, is right now planning to leave. His rates are $43,000, he anticipates $70,000, but that was before the recent increase in some of the new quotes we have all been hearing.

 

I have not been able to recruit an associate and I lost my new partner after a year investment in her last year due to crisis. She left and nobody else wants to come, I cannot find anyone. Paul Child said everyone he speaks to wants and is looking to leave Nevada. All they are doing is trying to find a way out of here. I will tell you none of us know how we can carry on if we just simply do not have some hope there may be a change in the climate around here about the frivolous lawsuits and hopefully arrest the escalating premiums we are all facing. In 18 years I had one claim which was immediately dropped. In the last few months I had three claims and if I could share the details with you I would tell you they are absolutely frivolous. I followed all the guidelines and as Dr. Juarez said, sometimes there are poor outcomes; does that mean a doctor committed malpractice?

 

I am now up for my insurance renewal. My company who has been insuring me for years says, “Florence, we agree with you, there is no merit to these cases, but we do not really want to write in Nevada anymore and we are really sorry, but we do not think we can renew this year.”

 

Yes, I can go with the Governor’s plan. Did you hear the quotes on the Governor’s plan? I can go with Nevada plan. Do I seriously think I will probably get insurance? I might at a rate of $160,000 or $250,000.

 

Here is the last part. As I sit here it is impossible for me to tell you the depth of pain I am going through or what my colleagues have been experiencing. I am proud of my profession and truly love the work, my patients, and the years I have served the people in Nevada. I do not think any of you can understand the stress we have been forced to deal with and the kind of depression my colleagues and I have been dealing with over frivolous lawsuits.

 

I have experienced negative times in my life, but this last year in Nevada is the most negative year of my life. All I can do this morning is to implore you to improve conditions in the health care system in Nevada. You did great with A.B. No. 1 of the 18th Special Session, but we have to take it a step further if you are going to give any of us hope we can stay.

 

If something better does pass, I promise you I do not care what my malpractice premium is. I will stay here and ride it out if I know there is something better. I do not know anyone else who will stay here and ride it out. You will witness a continuing exodus of Nevada’s health care professionals. In large measure you will bear the responsibility of that exodus if we do not get a bill, and hope, for those of us who are here.

 

Chairman Amodei:

I want to thank everybody who testified today, I appreciate your patience with trying to get multiple views on this. We will leave the record open for purposes of I.P. 1. We will reschedule additional hearings on S.B. 97, but because of the timeliness of I.P. 1, this will be the last hearing we conduct on it. With that we are adjourned at 11:13 a.m.

 

 

RESPECTFULLY SUBMITTED:

 

 

 

                                                           

Lora Nay,

Committee Secretary

 

 

APPROVED BY:

 

 

 

                                                                                         

Senator Mark E. Amodei, Chairman

 

 

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