Legislature(2005 - 2006)BUTROVICH 205

03/08/2005 08:30 AM JUDICIARY

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08:37:23 AM Start
08:38:10 AM Confirmation Hearing – Select Committee on Legislative Ethics
09:17:48 AM SB67
10:30:45 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Select Committee on Legislative Ethics TELECONFERENCED
Confirmation Hearing: Dennis "Skip" Cook
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
           SB 67-CLAIMS AGAINST HEALTH CARE PROVIDERS                                                                       
9:17:48 AM                                                                                                                    
MR. BRIAN HOVE, staff to  Senator Seekins, presented SB 67, which                                                               
amends AS  09.55 by adding  a new  section. The section  places a                                                               
$250,000  limit  on  non-economic damage  awards  for  healthcare                                                               
providers  who render  services.  SB 67  intends  to alleviate  a                                                               
growing   crisis  in   Alaska's   healthcare  industry.   Medical                                                               
malpractice insurance  companies find Alaska uneconomic  and have                                                               
left the market. This has  created higher rates across the board.                                                               
Every Alaskan  needing medical  care pays  added costs.  There is                                                               
also a  critical shortage of  physicians in Alaska. Over  half of                                                               
Alaska's  physicians exceed  the age  of 50.  It is  difficult to                                                               
recruit  doctors  when  other  states  have  capped  non-economic                                                               
damages at or near $250,000.                                                                                                    
Bottom  line,  Alaska  is  viewed as  an  undesirable  place  for                                                               
medical insurance  carriers to  do business.  As a  result, fewer                                                               
physicians  open  clinics  here. Other  states  have  effectively                                                               
placed  an upper  limit on  non-economic  damage awards,  thereby                                                               
providing a  stable, predictable,  insurable climate. SB  67 does                                                               
not alter  awards for  quantifiable damages,  such as  lost wages                                                               
and  medical  expenses, and  does  not  affect awards  for  gross                                                               
negligence or reckless behavior.                                                                                                
9:21:19 AM                                                                                                                    
SENATOR  FRENCH stated  that current  law differentiates  between                                                               
pain and  suffering losses for  some injuries that  are inflicted                                                               
through  negligence and  there is  a  differentiation for  severe                                                               
physical impairment.  He asked Mr.  Hove if SB  67 differentiates                                                               
in the same manner.                                                                                                             
MR. HOVE believed SB 67 did not differentiate.                                                                                  
SENATOR FRENCH  asked Mr. Hove why  the decision was made  to not                                                               
address the differentiation.                                                                                                    
MR. HOVE  stated the intent  of SB 67  was to make  the insurance                                                               
market more attractive.                                                                                                         
9:22:49 AM                                                                                                                    
SENATOR FRENCH  asked Mr. Hove the  number of states that  have a                                                               
$250,000 cap.                                                                                                                   
MR. HOVE answered 10.                                                                                                           
SENATOR  FRENCH  pointed to  page  3,  lines 11-14,  which  lists                                                               
instances that qualify for  compensation for non-economic losses.                                                               
He asked if  those would still be recoverable under  SB 67 but be                                                               
limited to $250,000.                                                                                                            
9:24:27 AM                                                                                                                    
MR. HOVE agreed.                                                                                                                
SENATOR  FRENCH stated  under  SB  67 one  can  sue  for loss  of                                                               
enjoyment  of life  (page  3, line  13) but  one  cannot sue  for                                                               
hedonic damages. He asked Mr. Hove to explain the difference.                                                                   
MR. HOVE deferred the question.                                                                                                 
9:25:36 AM                                                                                                                    
SENATOR  GUESS  asked  Mr.  Hove   how  the  sponsor  decided  on                                                               
MR. HOVE replied the current limit  is $400,000. The intent is to                                                               
provide relief and encourage competition in the marketplace.                                                                    
SENATOR   GUESS  asked   Mr.   Hove  which   states  have   lower                                                               
doctor/patient ratios than Alaska.                                                                                              
MR. HOVE did not know.                                                                                                          
9:30:18 AM                                                                                                                    
CHAIR  SEEKINS provided  a  list of  states that  have  a cap  of                                                               
$250,000 to  committee members. They include  California, Kansas,                                                               
Montana, Ohio, Texas, and West  Virginia. SB 67 is not suggesting                                                               
to short fund proper medical care.                                                                                              
9:32:44 AM                                                                                                                    
DR. ROLAND GOWER, surgeon, a member  of the board of directors of                                                               
Alaska  Physicians and  Surgeons  and chief  of  staff at  Alaska                                                               
Regional Hospital,  testified in support  of SB 67.  He expressed                                                               
concern with  the lack  of medical access  and stated  it affects                                                               
all Alaskans. Lack of malpractice  insurance will cause a crisis.                                                               
Alaska  has   two  insurance   companies  that   offer  liability                                                               
insurance. They are  both physician run boards  out of California                                                               
and they  are not-for-profit  companies. During  a fee  crisis in                                                               
the late 1980s, premiums rose to $100,000.                                                                                      
DR. GOWER commented  his premium is currently up  12 percent over                                                               
last year  and has  doubled since 2001.  One company  has limited                                                               
the  type and  extent  of the  policies it  is  writing for  some                                                               
practitioners. In the  past, costs were passed on  to the patient                                                               
but today the  preferred provider contracts limit  the ability to                                                               
raise  physicians'  rates.  In  Florida,  neurosurgeons,  cardiac                                                               
surgeons and OBGYN  surgeons are paying over $200,000  a year for                                                               
liability  insurance.  The  trend  in  Alaska  is  toward  higher                                                               
9:38:43 AM                                                                                                                    
DR.  GOWER remarked  half of  the medical  doctors in  Alaska are                                                               
over 50 and  towards the end of their careers.  Many would retire                                                               
tomorrow  if   insurance  availability  ceased.   Recruiting  new                                                               
doctors is  difficult because of  this issue.  California brought                                                               
stability by putting a cap on non-economic damages.                                                                             
9:41:37 AM                                                                                                                    
DR.  GOWER remarked  he does  not  see society  looking at  other                                                               
solutions such as  mandatory arbitration, a review  board to look                                                               
at   suits,  limiting   attorney   fees,  and/or   mal-occurrence                                                               
insurance  where  patients  buy  insurance. SB  67  will  provide                                                               
predictability  and stability  to  the  insurance companies  that                                                               
practice in Alaska.                                                                                                             
9:43:49 AM                                                                                                                    
CHAIR SEEKINS asked Dr. Gower  to comment on whether Alaska needs                                                               
better doctors.                                                                                                                 
DR.  GOWER declared  he is  impressed with  the current  level of                                                               
medical care that Alaskans have access to.                                                                                      
9:45:17 AM                                                                                                                    
SENATOR HUGGINS asked Dr. Gower  if there is a policing mechanism                                                               
within the industry to police questionable practitioners.                                                                       
DR.  GOWER  explained  the   multi-tiered  process  of  achieving                                                               
9:49:20 AM                                                                                                                    
SENATOR HUGGINS asked whether the  Alaska State Medical Board did                                                               
the oversight.                                                                                                                  
DR.  GOWER  explained  a  physician  needs  a  state  license  to                                                               
practice but hospital privileges are not automatic.                                                                             
SENATOR  HUGGINS asked  Dr. Gower  whether the  rise in  rates is                                                               
based on the effectiveness of the doctor or on a pool.                                                                          
DR. GOWER answered  it is based on pooled  risks. Specialists are                                                               
in a higher risk category than non-specialists.                                                                                 
9:51:47 AM                                                                                                                    
SENATOR  HUGGINS  asked if  the  trend  is  toward out  of  court                                                               
DR. GOWER affirmed that  settling malpractice claims out-of-court                                                               
is the best way to save on additional attorney fees.                                                                            
9:54:13 AM                                                                                                                    
SENATOR GUESS asked  Dr. Gower if the legislature  should look at                                                               
the process of removing a physician from practice.                                                                              
DR.  GOWER  stated he  has  never  served  on the  state  medical                                                               
licensing board  but has  served on  the credential  committee of                                                               
both hospitals in  Anchorage. There is a fine  line in attempting                                                               
to  remove a  physician who  is  practicing bad  medicine. It  is                                                               
almost always  implied that  competition is  the main  factor for                                                               
removing  a physician.  The bylaws  are set  up so  that multiple                                                               
hearings  and  multiple  reviews   must  occur  before  taking  a                                                               
physician's  hospital  privileges  away. He  stated  the  process                                                               
9:58:18 AM                                                                                                                    
SENATOR  GUESS asked  Dr.  Gower  to comment  on  why the  public                                                               
doesn't want to consider any other solutions.                                                                                   
DR. GOWER said he did not  mean to imply the public wouldn't want                                                               
to look to other solutions. He  stated the issues are complex and                                                               
the majority of  the public does not comprehend  the various ways                                                               
the problem can  be solved. Solutions are out there  but they are                                                               
not in the  hands of the physicians or the  public. Solutions are                                                               
in  the  hands  of  partisan  legislation  and  various  interest                                                               
groups. He said 40 percent of  insurance premiums end up going to                                                               
the attorneys.                                                                                                                  
10:01:39 AM                                                                                                                   
SENATOR GUESS clarified  Dr. Gower meant 40  percent of premiums,                                                               
not payouts.                                                                                                                    
DR. GOWER agreed.                                                                                                               
SENATOR GUESS  asked Dr.  Gower to comment  on the  percentage of                                                               
his premiums to the overall increase of his other costs.                                                                        
DR. GOWER commented  in 1988, his premium costs were  close to 18                                                               
percent  of   his  total   revenue.  Reimbursement   of  medicine                                                               
nationwide is down significantly.                                                                                               
SENATOR GUESS asked if he was  seeing his other costs increase at                                                               
the same rate.                                                                                                                  
DR. GOWER answered yes.                                                                                                         
10:03:41 AM                                                                                                                   
CHAIR SEEKINS commented that Florida  has a $500,000 cap that can                                                               
be increased to  $1 million under certain  circumstances. He said                                                               
some members  of the Judiciary  Committee are looking  to address                                                               
the  huge  amount  of litigation  costs  of  medical  malpractice                                                               
claims.  He asked  Dr.  Gower  if he  or  any  of his  colleagues                                                               
considered  an arbitration  step  and  speedier resolution  where                                                               
more money goes to the person injured.                                                                                          
DR. GOWER answered it has been  talked about but no one thinks it                                                               
will  ever happen.  He stated  it makes  sense to  have a  review                                                               
process before  a lawsuit is filed.  It only takes $75.  Once the                                                               
lawsuit is filed it costs money  and time. One can file a lawsuit                                                               
without consulting a medical expert to  see if the case is valid.                                                               
He said malpractice cases are a  lot like divorce cases where the                                                               
attorneys make more money the longer the issue stays unresolved.                                                                
10:08:41 AM                                                                                                                   
CHAIR  SEEKINS  pointed out  the  committee  received a  document                                                               
yesterday from the Alaska Action Trust.                                                                                         
10:09:01 AM                                                                                                                   
MR.  PAUL  DILLON,  attorney,  Dillon  &  Findley,  testified  in                                                               
opposition to SB 67. He  primarily represents insurance companies                                                               
and also physicians. SB 67  attempts to create a market conducive                                                               
to  insurers.  He  referenced the  66   annual  report  from  the                                                               
Division of Insurance  (DOI), and compared it  with past reports.                                                               
The  DOI produced  a  report  on the  annual  effects of  medical                                                               
malpractice legislation. He said  his testimony would be balanced                                                               
on various journals and press releases.                                                                                         
10:11:53 AM                                                                                                                   
MR. DILLON  said SB  67 is based  on the premise  of a  crisis in                                                               
Alaska. The  circumstances of  the crisis are  not born  from bad                                                               
medical care. Alaska  has a tiny insurance  market. NORCAL Mutual                                                               
Insurance  Company and  Medical Indemnity  Corporation of  Alaska                                                               
(MICA) control 80 percent of  the insurance market. Everyone else                                                               
is  small time.  Within the  insurance market,  a series  of tort                                                               
reform  efforts  began  in  the   '70s.  The  last  one  in  1997                                                               
culminated  in a  $400,000 cap.  Under AS  09.55.530, a  panel of                                                               
physicians was set up to  review malpractice claims. The panel is                                                               
designed to  review medical malpractice  claims prior to  a court                                                               
process. The purpose of the panel  is to review and analyze cases                                                               
quickly  and   to  avoid  unnecessary  lawsuits.   The  panel  is                                                               
routinely waived by  the defense. The insurance  defense bar does                                                               
not use the panel. He does not know why.                                                                                        
10:15:57 AM                                                                                                                   
SENATOR HUGGINS asked Mr. Dillon  to describe the function of the                                                               
panel and the authority level.                                                                                                  
MR.  DILLON recalled  its  function  is to  review  the issue  of                                                               
medical  negligence and  causation  of damages  and  to render  a                                                               
report based on  the two issues. It  is designed to be  a tool to                                                               
weed  out  the  frivolous  cases   and  to  provide  a  level  of                                                               
protection to  the medical field by  preventing unnecessary cases                                                               
going to court.                                                                                                                 
SENATOR  HUGGINS  thought  if  the panel  ruled  the  lawsuit  is                                                               
unnecessary, it would stop the process.                                                                                         
MR. DILLON replied it was ultimately the plaintiff's call.                                                                      
10:17:30 AM                                                                                                                   
SENATOR HUGGINS remarked the panel seemed to have no authority.                                                                 
MR.  DILLON offered  the panel  carries great  weight due  to the                                                               
evidentiary value. A medical malpractice  case is one of the most                                                               
expensive cases a plaintiff's lawyer  has. They are expensive and                                                               
time  consuming. In  his office  the  malpractice lawyers  screen                                                               
hundreds of  cases each  year and  take less  than 10  percent of                                                               
them on. Cases  are screened based on doctor's  reviews. The case                                                               
has to have the support of the medical profession behind it.                                                                    
10:19:14 AM                                                                                                                   
MR. DILLON declared  the availability of insurance  and the costs                                                               
of premiums  are presently  acceptable. Data  from the  DOI shows                                                               
medical  premiums  have  declined  over the  last  13  years.  He                                                               
alleged  the DOI  is not  aware of  any crisis  in the  insurance                                                               
CHAIR SEEKINS asked Mr. Dillon if  he is familiar with the nature                                                               
of the insurance companies he referred to.                                                                                      
MR. DILLON alluded Dr. Gower described them correctly.                                                                          
CHAIR SEEKINS clarified they were  described as mutual companies.                                                               
He commented  if they had  increased losses they would  pass that                                                               
on to their members.                                                                                                            
MR. DILLON agreed.                                                                                                              
CHAIR SEEKINS asserted  a crisis might be  indicated in increased                                                               
MR. DILLON agreed but said there haven't been any.                                                                              
CHAIR  SEEKINS commented  Dr. Gower  testified his  premiums have                                                               
increased 12 percent.                                                                                                           
MR.  DILLON stated  anyone could  play  with numbers  to get  the                                                               
results they want.                                                                                                              
10:23:33 AM                                                                                                                   
CHAIR SEEKINS  said everyone  has a  different definition  of the                                                               
word "crisis."                                                                                                                  
MR. DILLON  disagreed and  maintained there is  no crisis  in the                                                               
insurance industry. Medical schools  are predicting huge national                                                               
shortfalls of physicians by 2020.                                                                                               
CHAIR SEEKINS agreed, but stated  that physicians who are high in                                                               
demand can  choose to practice  in states where the  liability is                                                               
MR. DILLON said  Alaska's insurance issues are  no different than                                                               
any place in the Lower 48.                                                                                                      
10:25:51 AM                                                                                                                   
CHAIR  SEEKINS referred  to the  Alaska Action  Trust information                                                               
and  said deterring  malpractice is  the best  way to  bring down                                                               
costs and protect families.                                                                                                     
MR. DILLON agreed  deterring malpractice lawsuits is  in the best                                                               
interest of everyone.                                                                                                           
CHAIR SEEKINS  indicated there was  more room for  improvement in                                                               
terms of rising costs of insurance.                                                                                             
10:27:15 AM                                                                                                                   
MR. DILLON  disagreed. He stated  the rise in  insurance premiums                                                               
is an internal situation with the doctors.                                                                                      
10:28:58 AM                                                                                                                   
CHAIR  SEEKINS said  everyone benefits  if meritorious  cases are                                                               
settled in the proper manner.                                                                                                   
10:30:22 AM                                                                                                                   
CHAIR  SEEKINS announced  SB  67  would carry  over  to the  next                                                               
committee meeting.                                                                                                              

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