Medical Malpractice Insurance Companies Making A Killing

Brent Adams
Attorney
(866) 735-1102 Ext 645
Posted by Brent AdamsFebruary 01, 2009 8:59 PM

The next time you hear someone talking about a “malpractice crisis” think about American Physicians Capital.

In a glowing feature article in the January 12, 2009 edition of Barron’s Business and Financial Weekly stock analysts had high praise for the malpractice insurance company and noted that: “it’s difficult to find any company more insulated from economic weakness than this one”.

In a time when most stocks have fallen by at least 50 percent, the stock in American Physicians Capital keeps rising.

From a $10.00 per share price in 2004, stock has risen to nearly $50.00 a share.

The article contained some interesting statistics which belies the claims of the insurance companies that there is a “malpractice crisis”.

The article notes that the company has cut claims in half compared with five years ago.

In interviews with the management of American Physicians Capital it was revealed that the company pays out on only 20 percent of the lawsuits filed. This is in keeping with the national statistics which show that patients only win one out of every five cases that actually go to court.

More significantly, the company noted that the size of the settlements has been trending significantly lower.

The company explains that part of the reasons that settlements are significantly lower is: “the new hard-line way we fight cases, and part of it is reform that has set damage caps”.

The chief executive of American Physicians Capital, Kevin Clinton, also claimed that the significantly lower settlements: “is also due to the way juries have stopped giving ridiculous billion dollar awards”.

The truth is, no insurance company has ever had to pay a billion dollar award in a medical malpractice case. Nevertheless, this type of rhetoric has given rise to what many of the public feel is a “malpractice crisis”.

Interestingly, the article notes that the company two years ago told its lawyers to stop accepting “court-house-step” settlement offers. The company felt that the settlements encouraged more claims from certain attorneys and that the new practice is one of the reasons that the claims have been cut in half compared with five years ago.

The company also has instituted formal training for doctors on how to improve communication with patients.

The company charges annual premiums depending upon the specialty involved between $200,000.00 and less than $20,000.00 per year.

The article did not indicate whether premiums have gone down since claims have been cut in half five years ago. There is a mention, however, of “what looks to be a temporary round of price cutting among local competitors”.

Before you shed crocodile tears for malpractice insurance companies who claim they are in the middle of a “malpractice crisis”, you should note that American Physicians Capital earns 16 percent on its total investment equity. Wouldn’t it be nice if we could go down to the bank and earn 16 percent on our savings account?

The article noted that the insurance company makes this high rate of return in part by handling claims strictly to minimize the payouts.

10 Comments

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Steve Lombardi
Posted by Steve Lombardi
February 01, 2009 10:30 PM

Mike I have only one thing to say: Look at the statistics; Americans are so easily fooled by the Blue-Suits running the medical industry. Fooling the general public and making money is what they do best, patient safety is not the objective.

“The Institute of Medicine estimates that each year in the United States our healthcare system wastes up to 98,000 lives, 2.4 million extra hospital days and $9.3 billion in excess charges due to “serious reportable events”; put plainly, errors/mistakes that were easily preventable.”

Serious Reportable Events
Surgical Events
• Surgery performed on the wrong body part
• Surgery performed on the wrong patient
• Wrong surgical procedure performed on a patient
• Unintended retention of a foreign object in a patient after surgery or other procedure
• Intraoperative or immediately postoperative death in an ASA Class I patient

Product of Device Events
• Patient death or serious disability associated with the use of contaminated drugs, devices or biologics provided by the healthcare facility
• Patient death or serious disability associated with the use or function of a device in patient care in which the device is used or functions other than as intended
• Patient death or serious disability associated with intravascular air embolism that occurs while being cared for in a healthcare facility

Patient Protection Events
• Infant discharged to the wrong person
• Patient death or serious disability associated with patient leaving the facility without permission
• Patient suicide, or attempted suicide, resulting in serious disability while being cared for in a healthcare facility

Care Management Events
• Patient death or serious disability associated with a medication error (e.g. errors involving the wrong drug, wrong dose, wrong patient, wrong time, wrong rate, wrong preparation or wrong route of administration)
• Patient death or serious disability associated with a hemolytic reaction (abnormal breakdown of red blood cells) due to the administration of ABO/HLA – incompatible blood or blood products
• Maternal death or serious disability associated with labor or delivery in a low-risk pregnancy while being cared for in a healthcare facility
• Patient death or serious disability associated with hypoglycemia, the onset of which occurs while the patient is being cared for in a healthcare facility
• Death or serious disability associated with failure to identify and treat hyperbilirubinemia (condition where there is a high amount of bilirubin in the blood) in newborns
• Stage 3 or 4 pressure ulcers acquired after admission to a healthcare facility
• Patient death or serious disability due to spinal manipulative therapy
• Artificial insemination with the wrong donor sperm or wrong egg

Environmental Events
• Patient death or serious disability associated with an electric shock while being cared for in a healthcare facility
• Any incident in which a line designated for oxygen or other gas to be delivered to a patient contains the wrong gas or is contaminated by toxic substances
• Patient death or serious disability associated with a burn incurred from any source while being cared for in a healthcare facility
• Patient death or serious disability associated with a fall while being cared for in a healthcare facility
• Patient death or serious disability associated with the use of restraints or bedrails while being cared for in a healthcare facility

Criminal Events
• Any instance of care ordered by or provided by someone impersonating a physician, nurse, pharmacist, or other licensed healthcare provider
• Abduction of a patient of any age
• Sexual assault on a patient within or on the grounds of a healthcare facility
• Death or significant injury of a patient or staff member resulting form a physical assault (i.e., battery) that occurs within or on the grounds of a healthcare facility.

Pete L
Posted by Pete L
February 02, 2009 9:01 AM

Thanks for my morning laugh.............
When asked about lawyers in the aggregate, the public views them less favorably. Lawyers' ethical standards and practices are thought to be middling by most people, with a much larger contingent regarding them as poor (21%) than as excellent (3%).20

Those who thought lawyers less honest than most people rose from 17% in 1986, to 31% in 1993.21 The ABA poll reports that " [h]alf the public thinks that about one-third or more of lawyers are dishonest, including one in four Americans who believe that a majority of lawyers are dishonest."22 Over the past decades, general estimations of lawyers have fallen.23 In the 1993 NLJ survey, 36% of the respondents said their image of lawyers had "gotten worse" and only 8% said it had "improved."24
When, in 1991, a national sample was asked to volunteer "what profession or type of worker do you trust the least," lawyers were far and away the most frequent response. Almost as many (23%) spontaneously volunteered lawyers as the next two categories (car salesman, 13%; politicians, 11%) combined.25

Darren Wilson
Posted by Darren Wilson
February 02, 2009 11:23 AM

That's a very good point, Pete L.

The reputations of attorneys have been tarnished indeed, by people like Roy Pearson, and by groups like the National Chamber of Commerce, who puts together absurd attack campaigns based on deceit and financed by hundreds of millions of dollars of insurance and pharmaceutical industry profits.

Certainly some lawyers have added fuel to their own PR fire. But how much money is spent in a concerted effort to attack the reputation of physicians each year? It is a profitable thing to put lawyers out of business and discourage people from associating with them. Imagine how safe our highways, drugs, and products would be if companies didn't have to worry about liability, and how much more that AIG executives would be able to pocket if it never had to pay claims again.

Watch this video and let me know if you think the mud-slinging campaign run by the Chamber and their corporate allies has had anything to do with the decline in the reputation of trial lawyers:





It's true that lawyers are suffering from a bad reputation, particularly personal injury lawyers. Not all of them are bad, greedy, or unethical, and we want to highlight the good ones so the public can tell the difference. You seem to have a good handle on the problem - how do you suggest we counter this type of propaganda and begin to repair the image of trial lawyers.

Peter L
Posted by Peter L
February 02, 2009 2:25 PM

Transparency...also remove language barrier, admit to poor image, stop obfuscating and relying on theatrics, some simple good old fashioned honesty .

This injury board is nothing more than an advertisement for personal injury lawyers guised in topical assistance. Sure the other side is guily of many sins, but don't ever believe law suits fix the problem only unencumbered peer review and root cause analysis will do that. The legal system shuts docs up and the policy of insurance simply reinforces.

Darren Wilson
Posted by Darren Wilson
February 02, 2009 3:15 PM

@ Peter L:

Those are all good ideas which I can agree with, but after years at InjuryBoard working on these issues with our members, I can assure you InjuryBoard is a lot more than "an advertisement for personal lawyers guised as topical assistance," and that the vast majority of InjuryBoard members are interested in much more than "advertising" their services.

If you spend some time on the site, interacting with (and debating/discussing) issues like the one above with our members, I think you will have the opportunity to see that there's more to InjuryBoard. There's no guile as to what we are about.

And I know from personal experience that it sometimes takes a lawsuit to resolve a problem - that's the point of the court system - usually because it provides the opportunity for an open "root cause analysis" which normally includes peer reviews (though you'd hope those come as unencumbered as possible).

If you don't mind my asking, what is your profession; can you shed light on how you came to your views? I am sure our readers who agree or disagree with you would be interested to have a better understanding for your perspective.

Peter L
Posted by Peter L
February 02, 2009 3:48 PM

I grew up a "street kid" from Newark NJ so I like to think my street smarts offer more to the debate though some may disagree.
I spent 30 years handling medical malpractice cases...while difficult to imagine I handled over 50,000 cases and have spoken to or presented to thousands of physicians.
I have been featured in Money Magazine, Medical Economics and often contribute to local physician publications. I have also served on several state government med mal task forces.
I am hardly a shill for the insurance community and recognize they are equally culpable and surprisingly I do not favor caps although everything I have read says they do work. My biggest issue is bad faith and how it works against the physician and favors the plaintiff's attorney and the insurance carrier.

I do apologize if I miss labeled the Injury Board I just find a certain bias since most of the articles end with a commercial

Peter L
Posted by Peter L
February 02, 2009 3:48 PM

I grew up a "street kid" from Newark NJ so I like to think my street smarts offer more to the debate though some may disagree.
I spent 30 years handling medical malpractice cases...while difficult to imagine I handled over 50,000 cases and have spoken to or presented to thousands of physicians.
I have been featured in Money Magazine, Medical Economics and often contribute to local physician publications. I have also served on several state government med mal task forces.
I am hardly a shill for the insurance community and recognize they are equally culpable and surprisingly I do not favor caps although everything I have read says they do work. My biggest issue is bad faith and how it works against the physician and favors the plaintiff's attorney and the insurance carrier.

I do apologize if I miss labeled the Injury Board I just find a certain bias since most of the articles end with a commercial

Darren Wilson
Posted by Darren Wilson
February 03, 2009 6:36 PM

Peter, thanks for your candor and your comments. It sounds like you have a lot of experience in this area. Have you ever taken part in a med mal as an expert for plaintiffs or defendants? People should be exposed to, and have access to the expertise and understanding you've gained from decades of firsthand experience in this area.

Yes, InjuryBoard is made possible in part by its member attorneys and law firms. They are here to offer their expertise, experience and services (which is why they are featured here) to the public, and there's nothing to be gained by hiding or denying that fact.

Let's not forget who pays for the "free" media and advertising pumped into our living rooms every night - drug companies rank at the top of all buyers for all kinds of media (for example). Conflicts of truth and motivation abound wherever there is media and you are willing to look for them.

There is, however, an honest and ethical way to provide a forum for information, commentary, and opinion on topics like medical malpractice, safe driving, pharmaceutical safety, etc. (you should see the debate on "home birthing with midwives" raging on our Roanke blog right now - you may have something to add there too). That is the ideal role of journalists the media, IMO.

We are working hard to deliver a forum which offers this open discussion, and we are succeeding. Heck, if you think about it, you and I have had as much say here as the attorney above has, and have made the blog post and resulting discussion more informative and interesting as a result.

We welcome your learned input and commentary on this site. By leveraging the tools which have advanced Internet technologies to improve social discourse, we can we make this world safer, fairer and smarter together.

Peter L
Posted by Peter L
February 04, 2009 11:33 AM

Darren thanks for the kind words, having spent an entire lifetime in the medical malpractice industry and having over 70 law firms under my purview I guess I have grown a little cynical. To me the problem is awareness, we simply need to educate and then the solutions become clear.

Like so many other industries too much money is made for so few when the good of so many are at risk. Health care is not the lottery industry, and should be a right. The United States should not rank below all other industrialized nations. This is a problem for all of us and as health care costs approach 3 trillion solutions are necessary or we will all suffer under it's sheer weight!

Darren Wilson
Posted by Darren Wilson
February 04, 2009 2:23 PM

@ Peter L - I appreciate your comments and can understand your cynicism. It is hard not to develop it in this field. I hope cynicism and optimism in equal measures give us the means and motivation to create positive change.

I agree with you about the US healthcare system's costs. On the one hand, you have movies like Sicko, which help get people thinking about the issue (in spite of the polarizing effect Michael Moore's approach has on people), but we also have the McKinsey Report publishing articles that point out that we may be spending too much on healthcare for what we receive in return:

More ...

They aren't exactly known as leftist consumer advocates. But even big corporations struggling under the weight of providing healthcare benefits (we are small but average several hundred dollars per employee) are starting to ask more questions along the lines of "why does this cost so much more than it used to?"

If the number and size of healthcare related verdicts and settlements have been falling (which I've read) for many years, it's hard to place the blame on "our litigous society" or "greedy trial lawyers," which seems to be a knee-jerk reaction encouraged by industry propaganda.

I've heard that Merck claimed to be spending $650 million defending Vioxx, which was ultimately withdrawn (and should have been). I hope that in the future, more money and energy will be spent on prevention, education, safety research, and best practices rather than on misinformation, direct to consumer marketing, and litigation.

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