The Pennsylvania healthcare community has worked hard to publicize the industry’s insurance plight. Seeking to level the playing field in the area of professional liability litigation, physicians and healthcare institutions have engaged legislators in extended discussions to achieve tort reform. Hopes were high as the General Assembly proposed and revised various bills. Finally, on March 20, 2002, Governor Mark Schweiker signed the “Medical Care Availability and Reduction of Error” (MCARE) Act. Now that the dust has settled, however, many healthcare providers are learning that the few positive features of MCARE may be outweighed by the negative implications of the statute. Unlike some of the preliminary House bills, MCARE fails to address several needed areas of reform, and in others, it actually expands the scope of potential liability. While most of the MCARE provisions apply only to causes of action arising after March 20, 2002, doctors and hospitals may not be any better off than before.
Determining and Paying Damages:
Absent MCARE, where a jury finds that a healthcare provider breached the standard of care and that the breach was a substantial factor in causing damages, it renders a single, lump-sum verdict encompassing all potentially recoverable damages.
Under MCARE, however, juries will be asked to separately enumerate a specific dollar amount for six different categories of potential damages (past and future medical expenses, past and future lost earnings, and past and future non-economic damages such as pain and suffering). Also, juries will have to specify future medical expenses for each year. Had the Legislature enacted a cap on damages, this enumeration process might not be so bad, but MCARE carries no such limit. Without that relief, the line item, laundry-list type of verdict form may increase verdict amounts. For jurors, MCARE means that instead of having to reach a general consensus on one number (the total damages), they will have to reach agreement on at least six categories of damages. Moreover, the calculation of future annual medical expenses will be very detailed and difficult, leading to longer trials and the need for more experts in virtually every case.
On a more positive note, MCARE changes the manner in which judgments including future medical expenses will be paid. MCARE injects a limited present value reduction calculus into malpractice awards. Under the statute, future medical expenses will be paid as periodic payments based on the present value of the expenses awarded with adjustments for inflation and the life expectancy of the injured plaintiff. While discounting is good, there are other troubling implications. Expert economists and life care specialists will become fixtures in trials to provide evidence for the determination of the cost of medical care in the future. Additionally, given recent trends in medical costs, a jury’s knowledge of inflationary factors related to medical expenses may enhance the amount of future damages. Finally, plaintiffs can opt out of that reduction mechanism by stipulating that the total future damages claimed do not exceed $100,000.
A more favorable rule will apply to damages for future lost earnings and loss of earning capacity. Under MCARE, these damages are to be reduced to present value based upon the return that the claimant can earn on a reasonably secure fixed income. Expert evidence will still be admissible with regard to the effects of productivity and inflation over time. The jury will then determine the discount rate to be applied based on the evidence presented. The unfavorable part of the statute is that these rules pertaining to future damages only will apply to cases where the plaintiff’s claim or cause of action arose after March 20, 2002. The economic reality and logic that underlies the reform measures in this area can, however, arguably be am plied to pending cases. Even prior to the enactment of this legislation, White and Williams LLP has worked with leading economists and academic experts to address these issues and support the contention that future economic damages should be reduced to present worth, and we will continue to aggressively pursue this argument.
Unfortunately, MCARE makes no changes to the single biggest wild card component in any jury award -- damages for pain and suffering. Damages awarded for non-economic losses will not be reduced to present worth, and there is no limit on such intangible damages.
The Act partially eliminates the prior law that often permitted a double financial recovery by plaintiffs. Under the new law, payments from certain “collateral sources” that qualify as a private or public benefit or gratuity may offset medical expenses and loss of earnings figures presented to the jury. Thus, payment of medical bills under most private health insurance plans will reduce the amount of recoverable medical bills.
There are, however, many kinds of payments that do not reduce recoverable medical bills or earnings. Excluded from the law (and thus subject to a plaintiff’s recovery) are Social Security benefits, life insurance and payments made under an ERISA plan, medical assistance or other public benefits subject to repayment to the Department of Public Welfare or pursuant to Federal law. Significantly, also, the restrictions on double recovery do not apply to future damages, which often represent the major portion of the economic damages claimed by plaintiffs. MCARE allows a plaintiff to tell the jury the amount of past expenses actually incurred even though she cannot recover that amount. As such, the benefit from this part of the legislation may be illusionary because juries will hear the total dollar amount of the past medical billing or lost wages and may well slip those amounts into an award for non-economic losses.
Ostensible Agency: A particularly troubling feature of MCARE for hospitals is the statute’s clear expansion of the doctrine of “ostensible agency”. Under prior case law, plaintiffs were required to prove two factors before they could claim that an independent physician was an “ostensible agent” of a healthcare institution. They had to show that they looked to the institution for care as opposed to an individual physician and that the institution “held out” the physician as its employee. Under MCARE, however, a healthcare provider can be held vicariously liable if the evidence shows either that a “reasonably prudent person in the patient’s position” would justifiably believe that the care was being rendered by the hospital or its agents or that the care in question was “advertised or otherwise represented” as being care rendered by the hospital or its agents.
Institutions wishing to avoid liability for independent staff physicians under these new, relaxed standards will have to reevaluate their advertising and other “representations” being made to the general public (such as statements on Internet web sites). Institutions that allow independent physician practices to use the institution’s trademarks or logos may find that they are judicially deemed to be liable for those physicians’ acts just as if they were employees. Counsel experienced in the realities of discovery and trial can help hospitals take a serious look at how their public image may be inadvertently increasing exposure under ostensible agency.
Expert Testimony: MCARE also attempts to establish minimum qualifications for expert testimony. Under the Act, an expert testifying against a physician must have been in active practice in the last five years, familiar with the applicable standards for the care at issue as of the time rendered, and he or she must practice in the same subspecialty (if any) as the defendant physician. Although stringent in spirit, the provisions of the statute fall short of the needed reform.
Many of the enumerated expert qualifications in the Act may be waived if the Court finds that the expert is otherwise qualified. As has been the case in litigation to the present, the issue of the competence of a particular expert to testify remains largely within the discretion of the trial judge by whom the criteria for qualification may be loosely applied. Also, the Act’s expert threshold focuses only on those who testify against doctors, but not those who would target hospitals, nurses, or other healthcare providers. Similarly, the new qualifications may not be applied to experts testifying on causation, life expectancy and damages, and experience teaches that it is often in these areas that plaintiff’s experts stray outside of their expertise.
Venue: For the many suburban and rural physicians in hospitals who find themselves defending causes of action in the highest verdict venues of Pennsylvania’s cities, hopes were high that MCARE might change the law regarding venue. Unfortunately, the statute sidestepped the issue. Instead, it established an Interbranch Commission on Venue to study jurisdictional issues in medical liability cases and to make recommendations as to appropriate legislative actions or amendments to the rules of court by September 1, 2002. In the meantime, plaintiffs can continue to file lawsuits in a county where they can find any one defendant - a doctor, a hospital, physician’s practice group, a medical equipment manufacturer, etc. The Inter-branch Commission includes members who have a vested interest in preventing any reasonable changes in venue law. Those who would strive for changes in this area need to be aggressive in pressing the Commission for reform. Aside from legislative changes, the climate is ripe for creative attempts to deal with the issue by other means. White and Williams LLP has helped several clients in developing forum selection causes to be incorporated in consent forms to require that any lawsuit that is filed be brought only in the county where the medical services were rendered. Diligent lobbying and creative counsel may be the best hope for venue relief.
Lastly, in challenging a truly exceptional run-away verdict as excessive, MCARE allows the Court to consider evidence of the impact upon the availability of, or access to healthcare in the community if the defendant healthcare provider is required to satisfy the unreduced verdict. A defendant would need a host of financial and administrative information to provide data in support of a request to reduce a verdict on this basis. Experienced counsel can help assemble that evidence and appropriate arguments to establish the impact of such a verdict on the community, and White and Williams LLP is available to our clients to assist in this process when, and if the need arises.
Those who hoped that the MCARE Act would make positive changes and improve the insurance market have been sorely disappointed. Despite popular calls for real reform, the Legislature has at best provided very modest changes in the law. At worst, the new statute may instead have resulted in the potential for increased exposure for healthcare providers.