Colorado avoids malpractice crisis

OB/GYN News, Nov 1, 2004 by Timothy F. Kirn

In places like Maryland, Pennsylvania, and Florida, some ob.gyns, are getting out of the practice of delivering babies or they are moving out of their states because of the current professional liability crisis.

Colorado, on the other hand, has no such problem. In fact, medical malpractice insurance rates in Colorado may be attracting physicians.

Why? Many say it is because Colorado has a cap of $1 million on malpractice awards, including $300,000 allowed for noneconomic damages such as disfigurement and physical disability.

In 1988, the year Colorado passed its legislation limiting malpractice awards, the average obstetrician paid $61,904 in malpractice insurance premiums, according to George Dikeou, a legislative consultant in Denver for COPIC, the nonprofit, physician-run insurer that covers malpractice for about 80% of all physicians in Colorado. Adjusted for inflation, that would equal more than $100,000 today, but last year, the average obstetrician paid $37,206 for COPIC coverage.

The cap is not a hard limit--juries can award more than $1 million, but then the award must be reviewed by the judge--but it has limited awards and that has contributed to the low premiums. The largest verdict ever in Colorado was for $3.2 million. Mr. Dikeou said.

Some evidence suggests that the low rates may be attracting physicians to Colorado, and at the very least they may be keeping them there and practicing obstetrics. According to figures from Peregrine Management Corp., a practice consulting firm in Lakewood, there were 2,178 physicians who relocated to Colorado last year. Of those, 50% came from the 19 states that the American Medical Association has identified as "crisis" states, where escalating premiums are threatening practices and perhaps compromising the availability of physicians.

Peregrine Management said that another 40% of those physicians came from states that aren't crisis states but have been hard hit by recent premium increases.

The Colorado Medical Society and others said they have not seen a flood tide of new physicians flocking to its borders, but neither are doctors abandoning practice or fleeing.

"We've got a part of the puzzle but we aren't the golden goose," said Dean Holzkamp, a spokesperson for the medical society, who noted that in Colorado reimbursement is considered very low. "I haven't heard of any mass influx of doctors. But we aren't seeing an exodus either. We don't have any shortage of being able to deliver babies. We're growing, but our state is growing," he said.

Colorado is a unique state in that one nonprofit company insures such a large number of physicians, but according to a recent study, caps do make a difference. That study, conducted by Kenneth E. Thorpe, Ph.D., of Emory University, Atlanta, found that in states with caps premiums are on average 17% lower than in states without caps.

Another recent study, from the federal Agency for Healthcare Research and Quality, found that states with limits on malpractice awards have about 12% more doctors per capita than states without limits.

Plaintiffs' lawyers in Colorado do complain that the cap makes it economically unfeasible for some individuals to bring legitimate suits, said Dayna Bowen Matthew, a malpractice expert at the University of Colorado at Boulder. But there is no hard evidence that this is the case.

On the other hand, what has been shown in many places is that caps do discourage frivolous lawsuits, and that saves insurance companies money, she said.

"I think we have done a good job here in terms of keeping doctors and limiting frivolous lawsuits," Ms. Bowen Matthew said. "It is something that other states should be aware of."

Ms. Bowen Matthew recently relocated to Colorado with her husband, a cardiovascular surgeon; his malpractice rate was one of the things that factored into the decision to choose Colorado.

Rates in Colorado have not been stagnant during the recent run-up elsewhere, as critics of the state cap--such as Sen. Diana DeGette (D-Colo.)--are quick to point out. In the last 3 years, rates have increased 13%-15% each year.

But supporters of the cap attribute those increases to two state Supreme Court decisions, rendered in 2001 and 2002, that appeared to undermine the cap. One decision said that in cases where there was disfigurement, the limit on noneconomic damages did not apply. The other held that corporations that employed a physician could also be sued.

As a result of those rulings, COPIC saw an increase in the number of cases it had to defend that alleged disfigurement, Mr. Dikeou said. In 2003, the cases forced the legislature to sit down with cap supporters, and they forged a compromise that amended the law to overturn those decisions. The compromise was that the cap on noneconomic damages was raised from $250,000 to the present $300,000.

The compromise means that Colorado's double-digit increases should be over, said Dr. Alethia Morgan, president of the Colorado Medical Society and a member of the board of directors of COPIC.