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Trial Lawyers Inc.

   Trial Lawyers Inc.: Health Care
    The Lawsuit Industry's Effect on American Health, 2005


The Lawsuit Industry's Effect on American Health: Condition Critical?
Trial Lawyers Inc. Health Care
A Message from the Director

Focus: Lines of Business
Drugs and Medical Devices
Special Focus: Vaccines
Medical Malpractice
Special Focus: Hospitals
Health Maintenance Organizations

Government Relations/Public Relations
Outlook and Conclusion

Other Resources
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The Manhattan Insitute's Center for Legal Policy.
Walter Olson's OverLawyered.com.



Doctors continue to flee states with out-of-control medical-injury verdicts.

Over the last two years, many state legislatures have responded to the crisis in medical-malpractice insurance rates by trying to rein in out-of-control medical-liability lawsuits.[138] While several states have been successful in enacting substantial reforms, the American Medical Association continues to list 20 states "in crisis" over malpractice litigation.[139] Overall, then, these efforts have yet to derail the med-mal gravy train that has been one of Trial Lawyers, Inc.'s longest-running and most lucrative business lines.

Trial Lawyers, Inc.'s medical-malpractice lawsuits are legion: of the 46,000 members of the American College of Obstetricians and Gynecologists, 76 percent have been sued at least once, 57 percent at least twice, and 41.5 percent three times or more.[140] And the litigation industry tends to file far more cases than actually have merit: nearly half of malpractice suits—49.5 percent—are dropped, dismissed, or settled without payment.[141] Indeed, in a study of medical-malpractice cases filed against New York hospitals, the Harvard Medical Practice Group found that in the majority of medical-malpractice claims, the plaintiff exhibited no medical injury whatsoever; the plaintiff was injured by doctor negligence only 17 percent of the time.[142]

The High Costs of Malpractice Liability

So if Trial Lawyers, Inc.'s suits against doctors are wide-ranging, and often meritless, just how much do they cost? By 2003, medical-malpractice liability costs in the United States had reached an astounding $26 billion annually.[143] That staggering sum represents a 2,000 percent increase over costs in 1975.[144] At 12 percent per year, the growth rate in medical malpractice costs since 1975 is four times the rate of inflation and twice the rate of medical-care inflation.[145]

In jury trials, million-dollar verdicts are now the norm. Fifty-two percent of all awards exceed $1 million while the average award now weighs in at $4.7 million.[146] In crisis states, jury verdicts can be truly astronomical. For example, in 2002 in New York State, where juries delivered five of the top ten malpractice awards,[147] insurers incurred losses of over $1 billion and paid out $747 million in claims.[148] Though such outsize verdicts are often reduced by pretrial agreements and constitute only 4 percent of all med-mal case resolutions,[149] they establish a benchmark for future settlements. Between 1997 and 2003, the average settlement climbed 93 percent, to $1.9 million.[150]

An Insurance Crisis

These legal-defense and settlement costs are driving doctors' insurance premiums into the stratosphere. Trial Lawyers, Inc.'s carpet-bombing tactics helped drive average premiums up 18 percent in 2003 alone[151]—more than twice the rate of growth of total health-care spending per person.[152] Doctors in plaintiff-friendly states and those in high-risk specialties like obstetrics, orthopedics, surgery, and neurology have borne the brunt of the assault. In plaintiff-friendly Cook County, Illinois, obstetricians paid $230,428 for coverage in 2004, up 67 percent from 2003 and nearly 12 times what they would pay in nearby Minnesota.[153] In St. Clair County, Illinois, where 1,100 defendants were named in more than 400 lawsuits between 2001 and 2003, neurosurgeons last year paid an average of $228,396, five times the going rate in Wisconsin.[154]

Even so, these sky-high premiums have not kept pace with payouts and with the costs of defending the 70 percent of suits that are spurious.[155] In 2003, insurers paid out $1.38 for every premium dollar they took in.[156] Little wonder that many of them are running for the exits. SCPIE Indemnity Company stopped selling medical-liability insurance in every state but California in 2003.[157] American Physicians Assurance pulled out of Nevada early last year even after the state legislature passed reforms.[158] In 2002, MIIX Insurance in New Jersey declined to renew 7,000 policies because it had lost over $200 million in 2000 and 2001.[159] In Maryland, where cowed legislators prefer to tax HMOs to pay for doctors’ insurance rather than take on the plaintiffs' bar, there are only four medical-liability insurers left, down from 14 in 1995.[160]

As the AMA journal has recently observed, "It has never been safer to have a baby and never more dangerous to be an obstetrician."

The exodus of viable insurers has left doctors scrounging for coverage. Facing the huge increases, some doctors are forgoing insurance, taking their chances against being sued. Others, loath to put everything they own at risk, are retiring, moving out of plaintiff-friendly jurisdictions, or abandoning procedures—including delivering babies—that are the favorite targets of the plaintiffs' bar. In Illinois, three Park Ridge obstetricians recently decamped for Wisconsin after their 2004 premiums jumped 48 percent, to more than $500,000 a year.[161] In Kenosha, which then had caps on pain-and-suffering awards (see p. 18), they would pay only $50,000.[162] Kentucky, another AMA crisis state, lost a third of its obstetri- cians between 1999 and 2003.[163] Pennsylvania—with total malpractice payouts at twice the national average—lost 36 percent of its general surgeons and 16 percent of its neurosurgeons between 1995 and 2002.[164]

The Human Costs of Malpractice-Liability Excess

As doctors have abandoned lawsuit-prone states and given up procedures most likely to land them in court, those most vulnerable—pregnant women and accident victims requiring specialists' care—have been left in the lurch. The human costs of Trial Lawyers, Inc.'s excesses are tragic, even deadly.

An Ohio jury awarded $3.5 million to the family of a heart-attack victim whose doctor failed to help the man lose weight and quit smoking.

For example, Palm Beach County, Florida, is one of those tortfriendly locations where doctors increasingly shun risky cases. In five of the county's 13 hospitals, there are no neurologists working in the emergency room, and accident victims and stroke and seizure patients must be transferred to hospitals in Gainesville and Tampa for treatment, over 100 miles away.[165] Last year, 53-year-old Barbara Masterson died of a stroke while a hospital searched desperately for an out-of-county doctor to treat her; no local neurosurgeon would do it.[166] Similarly, maternity patients in some parts of the country have to travel long distances because many obstetricians have stopped delivering babies. In upstate New York, seven counties have no OB/GYNs at all.[167] The Journal of the American Medical Association recently observed in an article entitled "Who Will Deliver Our Grandchildren?" that "It has never been safer to have a baby and never more dangerous to be an obstetrician."[168]

The gaps in coverage are not just in sparsely populated rural areas, as trial lawyers like to contend. When Methodist Hospital stopped delivering babies in 2002 because of the rising cost of liability insurance, South Philadelphia lost its only maternity ward.[169] In Manhattan, Elizabeth Seton Childbearing Center—30 percent of whose patients were on Medicaid—shut down in 2003 when its liability premiums soared to $2 million a year.[170]


Doctor and lawyer Harvey F. Wachsman is one of the most prominent leaders of Trial Lawyers, Inc.'s medical-malpractice division, along with erstwhile partners Steven Pegalis and Stephen Erickson.[180] Their firm shocked the legal community in 1998 and 2001 by pulling out two jury verdicts of over $100 million for birth-defect cases, the two largest medical-malpractice verdicts in New York State history.[181] In the public debate over the medical-malpractice crisis, Wachsman regularly delivers Trial Lawyers, Inc.'s favorite (and falsifiable: see below) sound bite, one well-honed by the litigation industry’s coterie of "consumer group" surrogates (see box, p. 19): "Blame insurance companies."[182]

The Push for Reform

Recently, pressure from doctors and hospitals and consumer uproar over doctor shortages have emboldened some lawmakers to enact reforms. Since 2002, 15 states have made at least some progress against runaway lawsuits.[171] The benefits are starting to show. In Texas, where new statutes cap painand- suffering damages at $250,000, Texas Medical Liability Trust lowered its premiums 12 percent the first year and another 5 percent the second.[172] In Los Angeles (where 30 years ago lawmakers limited noneconomic damages to $250,000), 2004 OB/GYN premiums were half as large as those in Texas and less than a third of those in Dade County, Florida.[173]

Even at that, it's an uphill battle. Many of the new laws are riddled with loopholes that allow payouts to exceed the new statutory limits. Trial lawyers have already taken Florida, West Virginia, and Ohio to court over new caps on noneconomic damages.[174] Similarly, federal efforts to rewrite the rules of medical-liability practice have foundered; reform measures have died multiple times in the Senate, and it's far from clear that the Bush administration can secure the necessary votes to win passage.[175]

Trial Lawyers, Inc. Fights Back

All the while, the plaintiffs' bar is busy conjuring up new causes of action. Last April, trial lawyers successfully overturned 20 years of case law when the New York Court of Appeals held that a patient could be compensated for the emotional distress of a miscarriage or stillbirth if it was caused by malpractice.[176] With 19,000 miscarriages and stillbirths a year in New York, beleaguered obstetricians are bracing for a new flood of lawsuits.[177]

Ever resourceful, lawyers also are coming up with new categories of medical negligence. In 2003, a jury in Ohio awarded $3.5 million to the family of a man who died of a heart attack, claiming that the man's doctor failed to help the man lose weight and quit smoking.[178] Such outcomes promise to inflate the already staggering cost of defensive medicine, the $60 billion to $108 billion spent annually on costly and unnecessary tests that doctors order to forestall lawsuits.[179] If such verdicts become a trend, expect doctors to refuse to treat overweight smokers—for anything.


Trial Lawyers, Inc.'s medical-malpractice operations today include suits against not only individual doctors but also health-care facilities such as hospitals, nursing homes, and clinics. Juries tend to have less sympathy for what they perceive to be impersonal, faceless institutions. Accordingly, hospitals lose over half of malpractice cases—doctors lose only one-third—and the average compensation in suits against hospitals is over $6 million, a healthy 225 percent more than the average verdict against doctors.[183]

As a result of the litigation industry's relentless assault, hospitals are seeing their medical-liability premiums soar as payouts escalate. In 2002, 44 percent of the hospitals in the country saw premium increases in excess of 50 percent—without any corresponding increase in coverage.[184] Hardest hit were places like New York, which is now deemed one of the "medical liability crisis states" by the American Medical Association. [185] In New York, premiums rose 51 percent in 2004 on top of a 23 percent increase in 2003.[186] In crisis states, hospitals pay an average of $11,435 in malpractice-insurance costs per staffed bed, compared with $4,228 in states that have instituted medical-liability reforms.[187]

Hospitals' soaring costs and their inability to attract or retain willing physicians have caused many of them to shut down high-risk services (see, e.g., the idle West Virginia heart-surgery operating room, below) or shelve plans for new ones. In Philadelphia and its suburbs, eight maternity units have closed their doors in the past three years.[188] One of them, at Darby Mercy Fitzgerald Hospital, closed in June 2003 after the 17-bed unit had lost $2 million in each of the previous two years.[189] In 2003, Florida Hospital in Orlando abandoned plans to build a $55 million, 60-bed full-service satellite facility 20 miles from its main campus in Orlando because it couldn't find the doctors to staff it.[190] At Winter Park Memorial Hospital near Orlando, the number of surgeons willing to do emergency appendectomies and gall-bladder removals dropped from 14 in 2000 to zero in 2003, forcing the hospital to transfer to other facilities patients who required immediate treatment.[191]

Nursing homes, too, are staggering under medical liability costs, as lawsuits against them have become one of the fastest-growing markets for the plaintiffs' bar. Nationally, long-term-care facilities saw malpractice costs per bed increase 700 percent between 1992 and 2003.[192] If such trends continue, it will become increasingly dif- ficult to care for our aging population.

As if targeting care for the elderly were not enough, tobacco mastermind Dickie Scruggs has put the poor in his crosshairs in a series of class-action suits that he has led against nonprofit hospitals.[193] Notwithstanding that nonprofit hospitals delivered $23 billion in free care in 2003 alone, Scruggs alleges that they have abused their tax-exempt status by overcharging the poor while discounting the cost of care to other patients.[194]

Thus far, federal judges hearing these cases have given them the treatment that they justly deserved, throwing out suits in Alabama, Michigan, and New York.[195] New York judge Loretta Preska went so far as to rebuke Scruggs for his "orchestrated assault on scores of nonprofit hospitals, necessitating the expenditure of those hospitals’ scarce resources to beat back meritless legal claims," which she characterized as "part of the litigation explosion that has been so well documented in the media."[196] Nevertheless, some hospitals have been sufficiently intimidated that they have capitulated; one six-hospital system in Mississippi and Alabama, North Mississippi Health Services, has already agreed to refund money to poor, uninsured patients.[197]

Finally, even as new reforms capping noneconomic damages have put a damper on some suits, they've also generated creative new causes of action against hospitals. In Ohio, lawyers now sue hospitals for corporate negligence—claiming, for example, that a doctor should not have been permitted to perform a certain surgery.[198] Similarly, in Texas, lawyers have alleged that patients are being harmed because in its drive to make money, a hospital neglected safety.[199] By casting run-of-the-mill malpractice claims as claims against corporate malfeasance—which lie outside the statutory limits that several states have placed on malpractice damages—the litigation industry is performing an end run around those states' democratically instituted tort reforms. When it comes to protecting its bottom line, Trial Lawyers, Inc. can be downright inhospitable.

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138. See National Conference of State Legislatures, Medical Malpractice Tort Reform, Aug. 31, 2005, at http://www.ncsl.org/standcomm/sclaw/medmaloverview.htm.
139. See American Medical Association, Medical Liability Crisis Map, available at http://www.ama-assn.org/ama/noindex/category/11871.html.
140. American College of Obstetricians and Gynecologists, Medical Liability Survey (2004).
141. See id.
142. See Brennan et al., supra note 11.
143. See U.S. Tort Costs: 2004 Update, supra note 4, at 18.
144. See id.
145. See id. at 13, 18.
146. See Jury Verdict Research: Verdicts, Settlements and Statistical Aanalysis 5, 8 (Brooke J. Doran, ed., 2005).
147. See 100 Largest Verdicts of 2002, Nat'l L.J., available at http://www.verdictsearch.com/news/specials/020303verdicts_chart.jsp.
148. Greater New York Hospital Association, MedicaL Malpractice Insurance Costs and Coverage 29 (2005) (citing National Association of Insurance Commissioners, Medical Malpractice Insurance Report: A Study of Market Conditions and Potential Solutions to the Recent Crisis, draft report (July 14, 2002)).
149. See Thomas H. Cohen, Medical Malpractice Trials and Verdicts in Large Counties, 2001, Bureaus of Justice Statistics Civil Justice Data Brief 1 (Apr. 2004), available at http://www.ojp.usdoj.gov/bjs/pub/pdf/mmtvlc01.pdf.
150. See Jury Verdict Research, supra note 146, at 21.
151. See Insurance Information Institute, Medical Malpractice (Jan. 2005) (on file with Manhattan Institute) ("Losses and loss adjustment expenses rose slightly in 2003 from the previous year but premiums rose 18 percent for the period.").
152. According to the Centers for Medicare and Medicaid Services, per-capita health expenditures rose between 6 and 7 percent in 2003. See National Health Expenditures Aggregate and per Capita Amounts, Percent Distribution, and Average Annual Percent Growth, by Source of Funds: Selected Calendar Years 1980-2003, available at http://www.cms.hhs.gov/statistics/nhe/historical/t1.asp.
153. Tanya Albert, Liability Premium Increase Slowing, Yet Rates Remain at Record Highs, Am. Med. News, Nov. 15, 2004, available at http://amednews.com (citing Medical Liability Rate Monitor, 2004 rate survey (2004)).
154. See American Tort Reform Association, JudiciaL Hellholes 2004 19-20, available at http://www.atra.org/reports/hellholes/report.pdf.
155. Cf. Jury Verdict Research, supra note 146, at 15.
156. See Insurance Information Institute, Medical Malpractice (Sept. 2005), at http://www.iii.org/media/hottopics/insurance/medicalmal.
157. See U.S. GeneraL Accounting Office, Medical Malpractice Insurance: Multiple Factors have Contributed to Increased Rates 31 (2003), available at http://www.gao.gov/new.items/d03702.pdf.
158. See Physcian L. Wkly., Feb. 18, 2004, at 158.
159. See Will Siss, Waiting for Tort Reform: U.S. Medical Malpractice Industry Battles Loss Severity Strain, Standard & Poor’s: CreditWeek, June 6, 2003, at 34.
160. See Medical Malpractice: Doctors, Victims in Maryland Gather as Debate Heats Up, Med. Verdicts & L. Wk., Feb. 12, 2004, at 110.
161. See Gayle Worland, Doctors Flee Insurance Costs, State, Chi. Trib., Mar. 12, 2004, at C1.
162. See id.
163. See Laura Ungar, Rising Insurance Costs Forcing Out Baby Doctors; Pregnant Women Scramble for Care, Courier-J., Louisville, Ky., Oct. 17, 2004, at A1.
164. See Randall R. Bovbjerg & Anna Bartow, Project on MedicaL Liability In Pennsylvania, Understanding Pennsylvania's MedicaL Malpractice Crisis (2003).
165. See Neurologists Scarce or Absent in Many ERs, Palm Beach Post, June 28, 2004, at A1.
166. See Patients Die as Doctors Fear Malpractice, Foxnews.Com, Apr. 25, 2004, at http://www.foxnews.com/story/0,2933,118049,00.html.
167. See American College of Obstetricians and Gynecologists, Counties With Inadequate Access to Maternity Care, Jan. 2003, at http://www.acog.org/acog_districts/download/Dist2AccessMap1.pdf.
168. Alastair MacLennan et al., Who Will Deliver Our Grandchildren?, 294 JAMA 1688, 1688-90 (Oct. 5, 2005).
169. See Marie McCullough, No Deliveries Due at Mercy Fitzgerald, Phila. Inquirer, June 3, 2003, at B1.
170. See Dan Mangan, Contractions – 2nd Midwife Birth Center to Close, N.Y. Post, Aug. 12, 2003, at 5.
171. We list Alaska, Colorado, Florida, Georgia, Illinois, Mississippi, Missouri, Nevada, New York, Ohio, Oklahoma, South Carolina, Texas, West Virginia, and Wyoming—though whether each of these should be included, and whether others might deserve to be on the list, is a matter of opinion. For full accountings of the most recent state-level reforms, visit the website of the American Tort Reform Association, http://www.atra.org, and the organization's Tort Reform Record, http:// www.atra.org/files.cgi/7927_Record7-05.pdf.
172. See Albert, supra note 153.
173. See id.
174. See also infra pp. 18–19 and notes 239–42.
175. See infra pp. 20–21 and notes 277–78.
176. See Marc Santora, Albany Court Reverses Rule on Stillbirths, N.Y. Times, Apr. 2, 2004, at B1.
177. See id.
178. See Tanya Albert, Lawyers Try New Tacks in Malpractice Suits, Am. Med. News, Feb. 9, 2004, at 17.
179. See Department of Health and Human Services, Addressing the New Health Care Crisis: Rreforming the MedicaL Litigation System to Improve the Quality of Care (2003).
180. See Business Wire, Leading Medical Malpractice, Personal Injury Attorneys Join Forces to Create New Firm, Oct. 5, 2004.
181. See the homepage of the now-Pegalis and Erickson firm, http://www.pegalisanderickson.com/en/verdicts.asp.
182. Lara Jakes Jordan, Associated Press, Trial Lawyer-Surgeon Targets Insurers in Medical Malpractice Crisis, Feb. 20, 2003.
183. See Jury Verdict Research, supra note 146, at 6, 18.
184. Greater New York Hospital Association, MedicaL Malpractice Insurance Costs and Coverage 3 (2005) [hereinafter GNYHA].
185. See American Medical Association, supra note 139.
186. See GNYHA, supra note 184, at 5 fig.2.
187. See American Hospital Association, Professional Liability Insurance: A Growing Crisis, Results of the AHA Survey of Hospitals on Professional Liability Experience 5 (Mar. 2003), available at http://www.hcla.org/studies/AHALiability030428.pdf.
188. See McCullough, supra note 169.
189. See id.
190. See Michael Romano, Shelving the Plan, Mod. HealthCare, Mar. 31, 2003, at 26.
191. See Barry Flynn, ER Surgeries Will Return, Hospital Says, Orlando Sentinel, Aug. 30, 2003, at C1.
192. See GNYHA, supra note 184, at 2.
193. See Julie Appleby, Hospital Suits Fall Flat, but Debate Rages, USA Today, Apr. 24, 2005, available at http://www.usatoday.com/news/health/2005-04-24-hospital_x.htm.
194. See Brown Rudnick Berlack Israels, Client Alert, Class Action Lawsuits Target Nonprofit Hospitals (Sept. 2004), available at http://www.brownrudnick.com/nr/pdf/alerts/Class_Action_9-04.pdf.
195. See Burton v. William Beaumont Hosp., No. 04-72735, slip op. at 31-32 (E.D. Mich. June 20, 2005), available at http://www.mied.uscourts.gov/_opinions/Cohnpdf/04-72735AC-01.pdf; Kolari v. N.Y. Presbyterian Hosp., No. 04 Civ. 5506 (LAP), slip op. at 35 (S.D.N.Y. Mar. 2005), available at http://www.nysd.uscourts.gov/courtweb/pdf/D02NYSC/05-01919.PDF; Michael DeBow, Nonprofit Hospital Suit Tossed Out, PointofLaw.com, Oct. 25, 2004, at http://www.pointoflaw.com/archives/000620.php.
196. No. 04 Civ. 5506 (LAP), slip op. at 4.
197. See Mississippi Nonprofit Hospital System Agrees to Settle Uninsured Patients' Claims, 13 BNA Health L. Rep. (Aug. 12, 2004), available at http://www.bna.com.
198. See Albert, supra note 178.
199. See id.





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