Medicolegal Issues

Texas-Sized Tort Reform


Advocates have written open letters to politicians describing it as “the least-expensive and best-known way to lower healthcare costs.” Detractors have blogged that it has saved almost no money and instead “gutted patient rights.” Among the recent templates for whether and how to proceed on the contentious issue of tort reform, Texas has become a prime example of either the wisdom or the folly of capping medical liability payouts, depending on your vantage point.

Tort reform is backed by most doctors and the insurance industry but opposed by lawyers and consumer advocates. The Congressional Budget Office has documented increases in both medical liability premiums and average malpractice claim payments that have significantly outpaced inflation. Congress itself has largely punted on the issue, however, leaving most of the wrangling over specifics to individual states.

Which brings us to Texas. In reaction to the perception that unsustainable medical liability costs were driving away doctors and driving up healthcare costs, state voters in 2003 approved Proposition 12. Among its provisions, the state constitutional amendment capped noneconomic medical liability payouts at $250,000 in nearly all cases.

Much of the ensuing debate over whether Texas did the right thing has focused on cost: For example, will the reduction in malpractice claims translate into significant savings within the healthcare system? Is tort reform relevant in recouping the perceived waste from “defensive medicine,” in which physicians are presumed to order unnecessary tests and procedures out of fear of lawsuits?

More centrally, however, the question boils down to this: Does tort reform improve the ability of doctors to do their jobs, and the opportunity for patients to benefit from that care? So far, statistics, reports, and anecdotal information suggest that Texas has achieved the first goal but not necessarily the latter, highlighting the extreme difficulty in striking the right balance.

At the very least, tort reform appears to have dramatically curbed the number and cost of claims. From 2003 to 2007, malpractice payments to patients dropped by two-thirds. Liability premiums paid by doctors also have fallen, by an average of 27.5%, and more insurers have rejoined the market.

Mission: Predictable

Kirk A. Calhoun, MD, who became president of the University of Texas Health Science Center at Tyler in 2002, points to two principal benefits of the state’s tort reform. First, the package of reforms led to a significant number of physicians migrating to Texas and helping to deal with the state’s chronic doctor shortage. For doctors, part of that attraction was the second big benefit, a significant decrease in liability insurance premiums.

“It has resulted in making Texas a more attractive state in which to practice medicine,” Dr. Calhoun says. “As a result of those expenses going down, we are able to better invest in our primary mission, and on patient care.”

Kenneth McDaniel, a program specialist in professional liability in the Texas Department of Insurance, says the dearth of affordable or available malpractice insurance in the state had spiraled into a crisis. “In Texas, we were staring at the brink of a chasm so deep that we virtually had to do something,” he says. “We were within probably some months or a year of having almost no malpractice insurance industry at all. It had become very dire.”

McDaniel stresses that the new liability cap is only for intangibles or pain and suffering, and it leaves intact the potential for higher economic damages. “But those can be predicted,” he says. “As soon as claims became more predictable, insurers started coming back into the field.” A summary of 17 companies’ rates supplied by McDaniel includes four new arrivals to the medical liability market and the return of a fifth.

At the very least, tort reform appears to have dramatically curbed the number and cost of claims in Texas. From 2003 to 2007, malpractice payments to patients dropped by two-thirds. Liability premiums paid by doctors also have fallen, by an average of 27.5%, and more insurers have rejoined the market. “We are now back to, I would say, a pretty healthy environment,” McDaniel says.

Physician-Friendly Environs

Hospitalist Gregory Johnson, MD, chair of the Texas Medical Association’s Young Physicians Section, moved to Texas in 2002, just before the reforms were approved. “The best part about Prop 12 passing is the fact that Texas is now seen as a very physician-friendly environment,” says Johnson, who now serves as a Houston-based regional chief medical officer for Tacoma, Wash.-based Sound Physicians. The significant drops in malpractice insurance rates and lawsuits have made it far easier for him to recruit out-of-state doctors. “That basically comes off any physician’s radar as a particular concern.”

Most Texas hospitals and healthcare systems do not employ physicians directly. Instead, they contract or affiliate with private or nonprofit physicians groups. Due to that arrangement, Dr. Johnson explains, the cost of insurance premiums “becomes a much more individually based and personal issue because it’s coming out of an individual’s pocket, or a group’s pocket.”

From his own experience, Dr. Johnson says, he believes hospitalists are more willing to go to underserved parts of the state because of tort reform. Three years ago, he helped start Amarillo Hospitalist Services, a program that began with three doctors and has since grown to eight, all affiliated with Northwest Texas Hospital.

Of course, hospitalists appear to be thriving in major metropolitan areas, too. Dr. Johnson’s new employer, Sound Physicians, now operates three HM programs within Houston’s Memorial Hermann Healthcare System and employs about two-dozen physicians in all. More are on the way. “We’re actively hiring,” he says.

Mixed Outcomes

Statistics from the Texas Medical Board and Department of State Health Services confirm the anecdotal evidence that a more doctor-friendly Texas is paying dividends. Even so, they paint a somewhat more complicated picture than some commentators have portrayed in recent editorials. Doctors have indeed flocked to the state—some 11,000 since 2002 alone, an increase of 31%. That rate has far outpaced the state’s overall population growth of 14.2%.

But not all areas of the state have benefited equally from the influx.

Starr County, the third-poorest county in the U.S. based on per capita income, is among those that have fared well since 2002. Overall, its number of doctors increased from 14 to 24, a net increase of 71%, as its population rose by a projected 17%. But the next five poorest counties in Texas, accounting for nearly 86,000 residents in 2002, lost six doctors during the same time period—a 12.5% decline, even as their collective population rose by a projected 10.2%. Contrary to some public pronouncements, tort reform alone has not solved the chronic shortage of doctors in poor rural areas.

A withering report released in December by Washington, D.C.-based Public Citizen, a nonprofit consumer advocacy group, offers a harsher assessment, concluding that Texas’ “experiment with medical liability caps has failed” ( The report suggests that Texas’ dead-last ranking in percentage of uninsured residents (25%) and the doctor shortage in rural areas have actually grown worse since tort reform. Meanwhile, the cost of health insurance has more than doubled, while the cost of healthcare also has increased at nearly double the national average, other metrics that led to the organization’s vote of no confidence.

The impact on quality of care has been harder to assess. But Dr. Johnson and other observers say they haven’t seen any dip within hospitals. “I think that we as physicians and we as hospitalists really want to focus on our patients, and we can help to drive down those costs if we’re given the freedom to do our job,” he says. Tort reform, he adds, has helped doctors do precisely that.

Dr. Calhoun agrees. “No one wants to be sued. Everyone wants to do a good job,” he says. The threat of a lawsuit alone is only one of many factors influencing quality, he adds. But creating a more inviting environment for doctors can make a big difference by encouraging the increased use of hospitalists. “Having a hospitalist in the hospital all the time,” he says, “is an obvious quality improvement.” TH

Bryn Nelson is a freelance medical writer based in Seattle.


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