Special Article
Refer to: Butler LM: Malpractice insurance-A crisis in medicine. West J Med 123:328-336, Oct 1975
Malpractice Insurance -A Crisis in Medicine LEONA M. BUTLER, San Francisco
EDITOR'S NOTE: The following is probably as good an account as there is, or is likely to be, of the San Francisco experience with the anesthesiologists' "walk out" in May of this year. It is adapted from an article that appeared in the Fall issue of Spirit, a publication of the Pacific Medical Center, issued for the friends, volunteers and staffs of that hospital. It is written with sympathy for physicians but brings home the prompt and very serious effects of a physicians' strike upon hospitals and hospital personnel as well as upon patients. -MSMW
THIS IS A REPORT on the medical malpractice crisis in San Francisco, a crisis in which Presbyterian Hospital of Pacific Medical Center (PMc) was critically affected. During the crisis, the employees of the hospital worked harder than ever, in fewer hours and for smaller pay checks, to successfully maintain high standards of patient care.
What Went Wrong? Since 1968 when premiums for a general surgeon's professional liability, or malpractice, insurance jumped from $756 to $1,688 a year, there has been a growing concern among physicians, insurance companies, legislators and others about the rising cost of medical malpractice insurance. Despite continuing hearings, sporadic brainstorming sessions and lengthy investigations, particularly the Department of Health, Education, and Welfare's $2 million study published in 1972 by its Special Commission on Medical Malpractice, the issue failed to be resolved, until, by December 1974, it appeared that a crisis of far greater proportions than ever imagined would soon be at hand. The author is Director of Public Relations at Pacific Medical Center, San Francisco. Reprint requests to: Leona M. Butler, Director of Public Relations, Pacific Medical Center, P.O. Box 7999, San Francisco, CA 94120.
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In late 1974 hospitals, too, were facing rate increases of an average 75 percent for their institutions' malpractice insurance. At Presbyterian annual premium rates jumped from $196,000 to over $450,000. Complex reasons for the impending crisis began to emerge-reasons which pointed to problems far deeper than administration of insurance: Increase in the size of awards made against physicians and hospitals. In 1974, for example, there were 32 malpractice awards of more than $300,000 compared with three such awards in 1969. Of the 1974 awards, 17 amounted to more than $1 million with one settlement of $4.25 million. Increase in the number of claims filed as malpractice suits. Where such claims had once been uncommon, as Newsweek reported: "More than 20,000 malpractice claims are now brought against doctors each year and the number is rising steadily." Approximately 45 percent of the country's malpractice suits are dismissed as frivolous and a mere three percent of those tried in court are actually won by the plaintiffs. While the dollar amount of malpractice judgments had quadrupled between 1969 and 1974, the actual number of verdicts had been reduced. Growth of consumerist-oriented society which
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demands compensation for any injury, ranging from the purchase of a faulty toaster to the results of sophisticated surgical procedures. As a California insurance representative put it, "People now want to be compensated even if an honest mistake has been made, not only when there has been demonstrable negligence." Decrease in long-term physician/patient relationships. In a mobile society, particularly in urban areas, these relationships of mutual trust do not have the opportunity to develop and an increased tendency to sue is one consequence. No definable limit on the statute of limitations in medical malpractice. According to insurance company testimony, "Many of our cases are still active as much as five to ten years after expiration of the policy." Increase in the amount of coverage required for the protection of patients and physicians. Whereas in 1966 a physician needed between $100,000 and $300,000 in malpractice coverage, by 1974 his insurance needs ranged from $1 million to $3 million. Premiums for such policies naturally rose: the general surgeon who paid $1,688 in 1968 for his insurance paid over $3,588 in 1974. Inability to inform juries of a patient-plaintiff's collateral sources of income. Such income might include disability insurance and payment of medical costs by a group health plan. Furthermore, the jury is not permitted to know that its verdict is not subject to federal and state income taxes. Loss of capital reserves by major malpractice insurance companies. High jury awards and a severe drop in the stock market had left many companies desperately short of reserves§necessary to write malpractice insurance. While dozens of companies had once provided this coverage, by January 1975, there were five. Major insurance companies throughout the country were indicating they could no longer afford to write malpractice insurance.
How Did It Happen? Late in 1974 the stage was set for action. One of the largest companies still providing malpractice insurance was the Argonaut Insurance Company of Palo Alto. It too was in serious financial difficulty by the end of 1974. The company's group policy held by 4,000 physicians in San Francisco and seven other Northern California counties was up for renewal on May 1. With Argonaut discontinuing its coverage of physicians elsewhere in the country, the fear arose that phy-
sicians were facing a possible loss of available insurance. In mid-December State Insurance Commissioner Gleason L. Payne-in an attempt to keep physicians in practice-called upon California Governor Edmund G. Brown, Jr., to create a "no-fault" malpractice pool among the state's 1,000 casualty indemnity companies. Commissioner Payne also proposed laws to take most malpractice cases out of the courtroom, pointing out that under the present system, which provides for lawyer contingency fees, some $40 million goes annually to the attorneys trying malpractice cases. Noting that the patient-plaintiff often receives less than one-third of the larger court settlements since most of the money is absorbed by the judicial process, Payne recommended a sliding scale for attorney fees which would remove the incentive for reaching such huge settlements. The possibility of federal intervention arose. According to Roger 0. Egeberg, MD, Special Assistant to HEW Secretary Caspar Weinberger, the malpractice insurance problem had cost the government nearly $6 billion in 1974. Of that amount between $1 billion and $2 billion was paid in bills which reflected the rising cost of insurance to hospitals and physicians. The balance of $4 billion was paid, Dr. Egeberg reported, "because the continual threat of suit has caused physicians to practice 'defensive' medicine to protect themselves against malpractice allegations." According to Dr. Egeberg, one of the saddest aspects of the situation is that only 17 cents of every malpractice insurance dollar ever gets paid to an injured patient. The other 83 cents goes to prosecuting and defending attorneys, investigation costs, witness fees, salesmen's commissions and insurance company costs. The government today is the nation's biggest payer of medical bills. Fifty million Americans have part of their health care costs paid from Medicare, Medicaid (in California, Medi-Cal) and maternal and child health programs. Insurance Policies Cancelled for Northem Califomia Physicians As feared, on January 31 physicians were notified that, effective May 1, Argonaut would cancel the group plan it held with the San Francisco Medical Society and seven other Northern California counties. Spokesmen for Argonaut indicated individual insurance would be available for THE WESTERN JOURNAL OF MEDICINE
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certain physicians who qualified. But for those who did qualify premiums would be increased as much as 384 percent. It appeared that many San Francisco doctors would not be able to buy insurance by May 1 and those who could faced enormous rate increases which would ultimately be passed on to patients. Physicians already were charging 15 percent of their patient bills to the costs of malpractice insurance and were reluctant to increase this amount. Once again, State Insurance Commissioner Payne warned Governor Brown that without a solution a major health care crisis could occur. Indeed, many physicians had begun seriously to consider shutting down their offices, while younger doctors indicated they could be forced either to quit the profession, become employees of prepaid health care plans such as Kaiser Permanente, or move to another state. Daily, there were accounts of older doctors deciding on early retirement rather than attempt to pay the insurance increases. By late March, although a number of malpractice bills had been introduced, none of the proposed legislation would 'affect insurance rates. No immediate solution was in sight. It was clear that legislation which could solve the intricacies of the imminent crisis would take far longer to enact than the rapidly approaching May 1 Argonaut deadline. Doctors, particularly anesthesiologists, started to talk of discontinuing services. Hospitals, meanwhile, were informed by their carrier, Farmers Insurance Company, that any hospital which allowed a physician to practice without malpractice insurance coverage would lose its own malpractice insurance. The risk to a hospital would be too great: lawsuits brought against an uncovered physician would become the responsibility of the hospital where the incident occurred. By March 31, statements signed by staff physicians began to appear on hospital bulletin boards saying the doctors would be unable to afford insurance under announced rates. Many doctors informed hospitals-and patients-that they would be forced to suspend practice as of May 1 unless a reasonable solution were found. Emergency plans were designed for patients to be directed to one of the city's six public hospitals, where staff physicians are considered employees and therefore covered by the hospital's own insurance. (Ironically, these hospitals were not un-
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affected by the crisis: for example, insurance for the University of California hospitals jumped in early 1975 from $4,000,000 to $10,000,000.) A month from the May cancellation date, Argonaut, which in January had agreed to grant temporary coverage to some physicians, now mailed notices to all physicians covered under its group plan offering them coverage at rates three to four times higher than 1974 rates. Physicians are charged varying rates for insurance depending on their medical specialty. Anesthesiologists, orthopedic surgeons, neurosurgeons and others in the high risk groups now received bills of over $18,000 for a year's malpractice coverage. For the year ending April 30, 1975, they had paid $5,377. The question shifted from whether insurance would be available to whether all doctors could afford such insurance, and attention was focused on physicians in the high risk specialties.
Solutions to Crisis Sought in Sacramento as Doctors Threaten Walk-out Alarmed that no solution was in sight, PMC administration had joined physicians in urging hospital trustees, employees, patients and support groups to write the Governor and state legislators for enactment of short- and long-term solutions. Interestingly, it was not until these letters and telegrams from the public started to arrive that the majority of northern California Assemblymen and Senators began to express their concerns about the crisis. Meanwhile, the San Francisco Medical Society worked at establishing their own insurance company; individual physicians and several county medical societies brought suit against Argonaut for breach of contract; legislators attempted a bill that would temporarily freeze insurance rates at 1975 levels, and the California Hospital Association attempted to get the Governor or State Insurance Commissioner to use emergency powers to hold back rates. Bay Area anesthesiologists began meeting together in mid-April as an ad hoc committee to consider available options. Faced with the most significant increases, they were outraged at the lack of solutions forthcoming from Sacramento. The possibility of the majority of San Francisco anesthesiologists "going on vacation" became very real. There are approximately 70 anesthesiologists
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in San Francisco. Most surgical operations cannot be carried out without one of them. In April, San Francisco hospital administrators, among them PMC president Clifford F. Schw#iberg, Jr., had begun the first of many trips to Sacramento to meet with legislators, Governor Brown, the insurance commissioner and other state officials. Their purpose was to alert those who could influence the Legislature to the jeopardy in which hospitals were being placed and to assist them in the formulation of realistic and workable solutions. In addition to Schwarberg, the San Francisco Hospital Conference's ad hoc Committee on Malpractice included Jay Okun Yedvab, executive director, Mount Zion Hospital and Medical Center; Joseph L. Zem, administrator, Saint Luke's Hospital; Robert Densmore, administrator, Children's Hospital of San Francisco; and A. Dale Morgan, administrator, Marshall Hale Medical Center. These men represented the hospitals which were to be the most affected by an anesthesiologist work stoppage. These are the major community hospitals in San Francisco which conduct the majority of health-sciences teaching programs, free and partial pay clinics, medical research and on-going community programs. They consequently bear the largest cost burdens, employ the most people, and have the heaviest commitments to patients, students and the public. A legislative package encompassing needed reform was introduced on April 18 by Assemblyman Howard L. Berman, chairman of the Assembly Select Committee on Medical Malpractice. However, in no way could these bills be enacted by May 1.
Hospitals Gear Up for Walk-out In mid-April PMC announced to employees that preparations were being made for the eventuality that on May I a significant number of physicians would choose not to practice under the severe rate increases. Presbyterian Hospital is a 311-bed acute care hospital (exclusive of psychiatry which is located in a separate building). The administration estimated that if routine surgical operations could not be done, there would be a reduction of patient census to an average of between 120 and 140 patients. (This proved to be an extremely accurate forecast.) Work force would, of course, have to experience an equivalent reduction. Before and throughout the crisis, employees
were kept as inforned as possible of contingency plans and of possible lay-offs. In mid-April, where possible, employees were given, on a unit by unit or department by department basis, the opportunity to have a voice in how potential work-force reductions would be handled. All possible alternatives to actual lay-offs (such as reduction in work weeks, early vacations and the like) were developed for personnel. On April 27, Presbyterian and all other San Francisco nonprofit community hospitals were informed by their anesthesiologists that most of them would no longer carry insurance as of May 1, and would therefore be unable to practice. Presbyterian was told that one anesthesiologist, who had already purchased individual insurance, would be available on-call for emergency surgical procedures only. Any urgent cases, or those cases which could be transported without serious risk, must be sent to one of the public or federal hospitals. Since Presbyterian Hospital is a highly-specialized acute care hospital, approximately 56 percent of its admissions are surgical patients. A large percentage of these patients come from beyond the Bay Area for such specialized surgical care as open heart surgery, total hip replacement, neurosurgery, eye surgery and various types of microsurgery. Some of the surgical cases planned for May could be temporarily postponed without undue risk. Others could not. By April 26, all surgical operations scheduled at PMC for May had either been postponed or referred to an unaffected hospital. And, at approximately 2 p.m., April 30, what was to be the last scheduled operation for over a month began at PMC. No doctor would undertake a surgical procedure later in that day for fear it might last beyond the midnight deadline. Presbyterian Hospital was about to lose more than half of its patients.
The Walk-out Begins May 1 the patient census at PMC dropped drastically. For nearly a week before the deadline doctors had not admitted any patients who might need surgical operation, even if they were being admitted for medical purposes only. In spite of the precaution the first patient to be transferred for an operation was moved to the University of California Hospital shortly after midnight on May 1. An average of five patients daily were to be transferred from PMC during May. THE WESTERN JOURNAL OF MEDICINE
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Guidelines for moving patients were immediately put into effect. No patient was to be transferred without authorization by the president of Pacific Medical Center. The patient's physician must state that in his opinion the patient's condition would in no way be aggravated by the move. There must be assurance that the patient had been authorized for acceptance by a physician at another hospital. If a patient needed an operation and could not be moved from Presbyterian without danger, his physician would present the case to the department head of the surgical service involved and the on-call anesthesiologist. Each morning throughout the walk-out, a PMC management team met to discuss that day's projected census, staffing levels, purchasing plans, legislative action, employee morale and the overall effects which the crisis was having upon the hospital. Of greatest concern to this group was the need to carry on quality health care in spite of all necessary cutbacks. And cutbacks were necessary since PMC's income, it was apparent, would be cut more than half by the walk-out. Even if personnel and purchasing costs could be cut by that amount, fixed costs, such as hospital insurance, maintenance of buildings and equipment, income and principal on the building and security, would remain unchanged. Such fixed costs represent approximately 40 percent of PMC'S $29 million annual
budget. Anxious to avoid lay-offs of personnel, PMC explored other means of cutting the work force. Most personnel were cut to three and four day weeks, and early vacations were offered where possible. Leaves of absence were encouraged. All purchasing was halted except for those supplies needed on a day-to-day basis. Administrative salaries were cut by 20 percent with some taking even larger cuts. Interns and residents voted to accept one day a week less salary. Meanwhile, by the first weekend in May it appeared that with the exception of anesthesiologists and some surgeons, most physicians, particularly internists and others in low risk categories, had obtained insurance for at least three months. The immediate effect of the walk-out, then, was to be almost entirely in the area of surgery. The public, however, did not yet know this and the first weekend in May a curious phenomenon occurred. Emergency rooms throughout the city, including those in unaffected hospitals, had what 332
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may have been the quietest weekend ever experienced. Unaccountably people did not seem to get sick. Oddly, the decrease in activity was not only among persons with minor ailments. Emergency rooms experienced the same cross-section of illnesses and injuries as usual-only fewer of them. Perhaps, being unsure of the availability of care, people stayed well. By Tuesday, May 9, the census at Presbyterian had dropped to 166. There had been a 20 percent reduction in work force and a loss of nearly $19,000 per day. The equivalent of an entire nursing floor-six 18-bed units-had been shut down.
Physicians Go to Sacramento Under the state's constitution the Governor can call a special session of the Legislature to run concurrently with the regular session in order to consider' and act upon a specific problem. Bills enacted in a special session become effective immediately if an urgency clause is attached or, without such a clause, within 91 days after the session adjourns. Bills enacted in a regular session normally do not become law until January 1 of the following year. A bill can be enacted as urgency legislation without a special session and becomes law in 31 days after passage; however, this requires two-thirds majority vote-something extremely difficult in such intricate issues as malpractice reform. Physicians had determined that a special session of the Legislature could help achieve their purposes, and on May 9 anesthesiologists and hundreds of other physicians met in Sacramento where they urged Governor Brown to help obtain speedy legislative relief by calling a special session on malpractice. By that time most physicians had become angry and disappointed that of the 22 bills introduced thus far only one had reached the Governor's desk. The Sacramento meeting revealed a deepening gulf between physicians and legislators. Speaker of the Assembly, Leo T. McCarthy, a Democrat from San Francisco and key leader in getting votes, was one of several legislators who told the doctors to go back to work. At one point he said legislative action would take "at least several months." In the interim, McCarthy said, doctors would have to pay the drastically higher premiums so they could care for their patients. That satisfied no one in his audience.
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The Walk-out Spreads to Other Parts of State In mid-May, San Francisco anesthesiologists traveled throughout California providing information and enlisting the support of others. There was now increasing news of potential disruption of surgery schedules in most sections of California. Physicians had been spurred on by the news that the Travelers Corporation, a major malpractice insurer in other areas of California, intended to raise malpractice rates a staggering 400 to 600 percent. On May 8, anesthesiologists in Santa Clara announced that they would join their colleagues in San Francisco, Marin, Alameda and Contra Costa Counties by administering anesthesia only in lifeor-death situations. In deep concern, the San Francisco Hospital Conference called a news conference on May 8 to urge the Governor to call a special legislative session and to call upon physicians to return to practice if such a session were announced. Speaking for the Hospital Conference, A. Dale Morgan reported a work force reduction of 3,000 employees from a total of 8,500 and an economic loss of about $200,000 per day. At Presbyterian everything not essential to patient care had been eliminated. The Cafe, outpatient pharmacy and cafeteria grill were closed; publications had been suspended; no coffee or meals were served at meetings; minimal cleaning was done in nonpatient areas; personnel was not available to run audiovisual equipment for educational programs; there were no tours, no Auxiliary events.
Employees March on Sacramento Employees, working harder for less pay, had maintained an excellent morale. But they were becoming frustrated. They saw their jobs dissolving and their hospital in serious financial jeopardy. There seemed to be nothing they could do about it for themselves. Friday, May 9, employees asked the PMC administration for help. They wanted to go to Sacramento and talk directly to Governor Brown and the legislators about what the crisis was doing to San Francisco and to their jobs. PMc president Schwarberg promised employees if they could organize it, he would provide assistance. Within two hours all departments were notified. Approximately 75 people arrived for a 5
p.m. meeting to plan the trip to the state capitol. Off-duty employees would go to Sacramento the following Tuesday and invite the employees of the other San Francisco hospitals to go with them. Auxiliary president Nancy Caton got approval for Auxiliary funds to pay for bus rental. Committees were formed for bus monitoring, sign and placard making, telephoning, providing liaison with other hospitals and writing informational materials and petitions. On Tuesday, May 13, over 800 hospital employees from Presbyterian, Mount Zion, St. Luke's, Children's and St. Francis Hospitals arrived at the state capitol bearing signs reading, "Save Your Hospitals-Save Our Jobs," "Our Hospitals Are in Cardiac Arrest," "The Life We Save May Be Yours" and "Special Session Now." Nurses, lab technicians, dishwashers and personnel representing most hospital related occupations were there to listen and be heard. Spokespersons had been elected for each hospital. At a rally on the capitol steps they talked about the hospitals they represented. They pointed out that their hospitals admit 60,000 inpatients each year, half of the nonfederal hospital admissions in San Francisco. Their hospitals, they explained, have 355,000 clinic visits annually, employ 5,500 people and train 12,000 persons each year in medicine, dentistry, psychiatry and other health professions, including minority upgrading programs. They reported if something were not done to solve the crisis, their hospitals would have to consider closing by Memorial Day. On the capitol steps, San Francisco Senators and Assemblymen met with the unemployed employees. The lawmakers were sympathetic about the hospitals, but not about the plight of the doctors. Almost without exception, legislators said, "Tell the doctors to go back to work." And each time a resounding "No" was the response. Employees wanted their jobs but they also wanted the crisis solved. Assembly Speaker McCarthy told the group it would be months before remedial legislation could be passed into law. During a spirited exchange with protesting employees, he admitted, "This is an absurd kind of dilemma that we've allowed ourselves to drift into." He finally promised employees, who would not accept having the blame laid at the feet of the doctors, "Something will be done before the end of the week." Every lawmaker to whom the employees spoke reported it was the Governor alone who could call THE WESTERN JOURNAL OF MEDICINE
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a special session-it was out of their hands. Some promised to contact the Governor to push for the session. Employee spokesmen waited in the Governor's reception room and vowed not to leave until he talked to them. They sent into his office several large petitions calling for the special session. First the Governor sent out his press secretary to talk to them. Then he sent Health and Welfare Secretary Mario Obledo to talk to a quickly assembled group of 150 employees. But when Obledo could not satisfy the employees, who felt that the one person in the state who could do something was the one person who refused to see them, he got the Governor. After hearing from employees, Governor Brown told them he would call a special session when he got agreement on an agenda which would include not only malpractice reform but also a series of measures to further regulate the health care delivery system in California. He felt San Francisco had too many hospital beds and wanted to look into that; he wanted to further regulate hospital rate setting; he wanted t-o look into the basis on which students were admitted to medical school. As McCarthy had told employees, "Before this is all over we're going to take a bite out of three parties; the insurance industry, the attorneys and the physicians." Brown had added a fourth-the hospitals. On May 16, the Governor issued a proclamation calling the session. The employees' action at the state capitol was certainly one of the major factors influencing the Governor's action. For the first time in the crisis he had heard directly from the people. In announcing the special session, Brown said, "The inability of doctors to obtain insurance at reasonable rates is endangering the health of the people of this state and threatens the closing of many hospitals. The longer term consequences of such closings could seriously limit the health care provided to hundreds of thousands of our citizens." The Governor's program for a special session on malpractice included: 1. Reconstituting the Board of Medical Examiners to include a majority of public members; 2. Giving the board full authority to discipline and decertify practitioners for lack of competency; 3. Providing the board with authority to set
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recertification standards including updated training and public service, in order to minimize malpractice and increase the quality of medical care; 4. Providing the board with authority to minimize the present maldistribution of medical care in certain areas of the state; 5. Establishing a Medical Peace Corps to service Californians who lack adequate medical care; 6. Regulation of hospital rates, including authority over excessive hospital bed capacity and unnecessary duplication of expensive and underutilized equipment; 7. Voluntary binding arbitration in order to quickly and fairly resolve malpractice claims while maintaining fair access to the courts; 8. Establishment of reasonable limits on the amount of contingency fees charged by attorneys; 9. Elimination of double payments (collateral sources); institution of periodic payments and reversionary trusts; limitation of compensation for pain and suffering while insuring fully adequate compensation for all medical costs and loss of earnings; and setting new reasonable statute of limitations for the filing of malpractice claims. In addition Governor Brown stated he would: (a) Convene a Special Panel to immediately conduct a complete investigation into all insurance company rates and reserve practices; and (b) support legislation in the regular session to insure adequate public representation on all professional boards, including the Board of Governors of the California State Bar. Indeed, it appeared that this special session would not deal solely with the medical malpractice issue. As one national television commentator remarked about the situation: "The Legislature is studying a complete reform of health care delivery in the state of California."
Walk-out Continues to Have Impact on Hospitals While the trip to Sacramento was being planned by hospital employees, the PMC patient census had dropped down to 106. Eight nursing stations, the coronary care unit and the intensive care unit were now closed. An estimated $35,000 a day was lost one weekend alone. In addition to the effects on employees and on special programs, the crisis had begun to take its toll on teaching programs for young doctors. Without surgical operations, surgical residents had little to do and were gaining little experience.
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Doctors began looking for things for interns and residents to do. In going into the crisis the hospital financial picture in San Francisco was far from healthy. Many of the hospitals had experienced a six-week nurses' strike less than one year before and had not yet recovered from its effects. With one exception the city's hospitals already had huge loans for remodeling and construction of replacement facilities. Drastically rising costs of personnel, supplies, food, malpractice insurance, along,with the inability of hospitals to pass these increases on to Medicare and Medi-Cal patients, had all contributed to the hospitals' financial problems. Added to this was the cost of teaching programs, free and partial pay clinics and other community service programs borne by the major teaching hospitals which,.unlike the University of California Hospitals, are not funded by the state. At PMC, however, cutbacks had been achieved to the point that the Board of Trustees task force on malpractice, which had been investigating the hospital's financial viability, concluded that Presbyterian Hospital could continue to survive while meeting its financial obligations.
Confusion Continues as Physicians Announce Plans to Return to Work Hopes had run high that once Governor Brown called a special session-a so-called "act of good faith"-the anesthesiologists would return to work and allow the Legislature to work on reform measures. People began to realize the special session was far from being a cure-all. While bills passed under this aegis could become effective immediately, there was no guarantee the needed bills would, in fact, be passed. Bills already introduced and on their way through committee would have to be dropped and reintrodvced to come under the time advantages of the special session. However, there was no certainty that anything would go through a special session faster than in an
ordinary session. Meanwhile the anesthesiologists in Southern California who had not yet lost their insurance had begun, hospital by hospital, to discontinue services in support of the San Francisco physicians. It seemed that anesthesiologist leaders who had been traveling through California to enlist support were finally realizing results. Consequently more anesthesiologists than just the San Francisco group were becoming involved in de-
cision making. An organization had been started. Emotions were running high. How could the protest be stopped once it was truly under way? San Francisco anesthesiologists felt they could not return to work now that they were getting others out in their support. The fact that San Francisco hospitals had already suffered through three weeks of drastically lowered census was not a factor they could take into account. As one newspaper said, "The malpractice mess gets even messier." It was Memorial Day weekend. At Presbyterian Hospital a patient had been admitted a week and one-half earlier in severe pulmonary edema. He had been rushed to the hospital from Eureka, over 300 miles north of San Francisco, referred by his physician to doctors at Presbyterian where sophisticated knowledge and equipment would, it was hoped, save his life. He had almost lost the function of his only kidney. Placing him in the hospital's cardiopulmonary intensive care unit and getting him on kidney dialysis, doctors pulled him through the initial crisis. Extensive tests were made and it was discovered that the patient, 58-year-old Rexford Tieg, had a severe blockage of an artery leading to his kidney-to the extent that it had already lost 90 percent of its function. Delicate vascular surgical procedures were needed to save the kidney and prevent Tieg from spending the rest of his life on kidney dialysis, three days a week, four hours a day. Tieg was scheduled for surgery. The chief of anesthesiology, however, refused to allow anesthetic. Tief's operation was, indeed, urgent and his condition life-threatening. However, his condition had improved to the point that he could be considered transportable. Tieg's physician, his surgeon and even PMC's president spent the weekend negotiating with the chief of anesthesiology, trying to get agreement for the operation at Presbyterian. Although he was "transportable," the operation would require him to be at a hospital which had heart-lung and dialysis equipment. (Tieg was already the victim of three heart attacks.) He would require a highly specialized cardiovascular surgeon. This eliminated most of the nonaffected hospitals. In desperation, Mrs. Tieg, herself a registered nurse and very knowledgeable about her husband's condition, called the news media. Tieg's story was publicized locally and nationally. The unaffected hospitals in the San Francisco THE WESTERN JOURNAL OF MEDICINE
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area equipped to handle Tieg's operation were full to overflowing by this time and could not guarantee they would be able to schedule it in time to save his only kidney. Finally, on Tuesday, May 27, El Camino Hospital, over 30 miles from San Francisco and also one of the hospitals affected by the anesthesiologists' walkout, got agreement from their anesthesiologist to do the operation. It was done the following day at El Camino Hospital and, as of this writing, he is recovering well and has regained the use of his kidney. The PMC Medical Staff had an emergency meeting the night of Tuesday, May 27. News stories of the Tiegs had an effect. For the first time, physicians realized the situation was causing a real deterioration in patient care. Representative anesthesiologists were present from all San Francisco and Marin hospitals. It was the first time they heard a call from fellow physicians to return to work. On Wednesday, May 28, the San Francisco Examiner headlined: "Doctors End Their Protest -Agree to Return to Work." It happened in great confusion. Anesthesiologists meeting that morning agreed they would have to get back to work. An afternoon meeting was scheduled in Sacramento with Speaker McCarthy, hospital administrators and other concerned representatives. A few days before this meeting, Assembly Bill 491-the Behr Bill-had been passed and signed into law allowing the State Insurance Commissioner to form a joint underwriting insurance pool composed of all casualty and liability insurance companies in the state. The pool would provide a "claims made" policy at 1974 rates until January 1976, at which time the policy would be convertible to an "occurrence" policy. A "claims made" policy is one which provides insurance for claims made during the year of coverage. Under current statute of limitations on malpractice, doctors would have to continue to carry such insurance indefinitely for claims incurred in one year, which are not made until as much as 20 years later. An "occurrence" policy covers a physician for claims made at any time if the physician carried the insurance the year the injury took place. Before the McCarthy meeting, anesthesiologists started telling reporters they would be reporting to work. 336
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Insiders were confused. The Behr Bill, under which the anesthesiologists said they were returning, had been previously rejected soundly by most physicians. It was feared that the bill could create even higher premiums than the 1975 rates. Now, however, anesthesiologists were saying that they had reached their short-term objectives and would return to work while the Legislature worked on long-term reform. PMC president Schwarberg, who was in Sacramento with the anesthesiologists, was understandably skeptical. He was assured by Laurens Garlington, MD, leader of the group and chief of anesthesiology at PMC, that the hospital could schedule operations for the following Monday. Anesthesiologists would guarantee to be there even if something went wrong; they would work as volunteers. Something did go wrong-the following day. Anesthesiologists suddenly realized the "claims made" policy they were accepting would carry with it a potentially huge "tail payment" possibly for years to come. They felt doublecrossed by the Legislature. It was an extraordinary situationapparently, in accepting the Behr Bill, the anesthesiologists had not read it thoroughly. Hospitals were in turmoil. Were they or were they not going back? Morale sank to a new low. Realizing the chaos they had created, anesthesiologists knew they must now return to work, and decided there was no alternative but to purchase individual insurance at 1975 rates for a three-month period. Thus, the joint underwriting insurance bill was not activated by the insurance commissioner.
The Doctors Return to Work During the week of June 2, the doctors straggled back to work as individually they obtained their malpractice insurance. Hospitals, unable to get firm estimates of how many, and when, anesthesiologists would return, were little better off in their efforts to schedule surgical operations than they were during the strike. This tenuous situation existed into the second week of June. When the news came that the doctors were returning, there could, in fact, be little rejoicing in hospitals where the news came too late, conditions were too grim, too many people had been laid off and too much money lost. It would not be "business as usual" in San Francisco hospitals for some time to come.
Refer to: Butler LM: Malpractice insurance-A crisis in medicine. West J Med 123:328-336, Oct 1975
Malpractice Insurance -A Crisis in Medicine LEONA M. BUTLER, San Francisco
EDITOR'S NOTE: The following is probably as good an account as there is, or is likely to be, of the San Francisco experience with the anesthesiologists' "walk out" in May of this year. It is adapted from an article that appeared in the Fall issue of Spirit, a publication of the Pacific Medical Center, issued for the friends, volunteers and staffs of that hospital. It is written with sympathy for physicians but brings home the prompt and very serious effects of a physicians' strike upon hospitals and hospital personnel as well as upon patients. -MSMW
THIS IS A REPORT on the medical malpractice crisis in San Francisco, a crisis in which Presbyterian Hospital of Pacific Medical Center (PMc) was critically affected. During the crisis, the employees of the hospital worked harder than ever, in fewer hours and for smaller pay checks, to successfully maintain high standards of patient care.
What Went Wrong? Since 1968 when premiums for a general surgeon's professional liability, or malpractice, insurance jumped from $756 to $1,688 a year, there has been a growing concern among physicians, insurance companies, legislators and others about the rising cost of medical malpractice insurance. Despite continuing hearings, sporadic brainstorming sessions and lengthy investigations, particularly the Department of Health, Education, and Welfare's $2 million study published in 1972 by its Special Commission on Medical Malpractice, the issue failed to be resolved, until, by December 1974, it appeared that a crisis of far greater proportions than ever imagined would soon be at hand. The author is Director of Public Relations at Pacific Medical Center, San Francisco. Reprint requests to: Leona M. Butler, Director of Public Relations, Pacific Medical Center, P.O. Box 7999, San Francisco, CA 94120.
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In late 1974 hospitals, too, were facing rate increases of an average 75 percent for their institutions' malpractice insurance. At Presbyterian annual premium rates jumped from $196,000 to over $450,000. Complex reasons for the impending crisis began to emerge-reasons which pointed to problems far deeper than administration of insurance: Increase in the size of awards made against physicians and hospitals. In 1974, for example, there were 32 malpractice awards of more than $300,000 compared with three such awards in 1969. Of the 1974 awards, 17 amounted to more than $1 million with one settlement of $4.25 million. Increase in the number of claims filed as malpractice suits. Where such claims had once been uncommon, as Newsweek reported: "More than 20,000 malpractice claims are now brought against doctors each year and the number is rising steadily." Approximately 45 percent of the country's malpractice suits are dismissed as frivolous and a mere three percent of those tried in court are actually won by the plaintiffs. While the dollar amount of malpractice judgments had quadrupled between 1969 and 1974, the actual number of verdicts had been reduced. Growth of consumerist-oriented society which
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demands compensation for any injury, ranging from the purchase of a faulty toaster to the results of sophisticated surgical procedures. As a California insurance representative put it, "People now want to be compensated even if an honest mistake has been made, not only when there has been demonstrable negligence." Decrease in long-term physician/patient relationships. In a mobile society, particularly in urban areas, these relationships of mutual trust do not have the opportunity to develop and an increased tendency to sue is one consequence. No definable limit on the statute of limitations in medical malpractice. According to insurance company testimony, "Many of our cases are still active as much as five to ten years after expiration of the policy." Increase in the amount of coverage required for the protection of patients and physicians. Whereas in 1966 a physician needed between $100,000 and $300,000 in malpractice coverage, by 1974 his insurance needs ranged from $1 million to $3 million. Premiums for such policies naturally rose: the general surgeon who paid $1,688 in 1968 for his insurance paid over $3,588 in 1974. Inability to inform juries of a patient-plaintiff's collateral sources of income. Such income might include disability insurance and payment of medical costs by a group health plan. Furthermore, the jury is not permitted to know that its verdict is not subject to federal and state income taxes. Loss of capital reserves by major malpractice insurance companies. High jury awards and a severe drop in the stock market had left many companies desperately short of reserves§necessary to write malpractice insurance. While dozens of companies had once provided this coverage, by January 1975, there were five. Major insurance companies throughout the country were indicating they could no longer afford to write malpractice insurance.
How Did It Happen? Late in 1974 the stage was set for action. One of the largest companies still providing malpractice insurance was the Argonaut Insurance Company of Palo Alto. It too was in serious financial difficulty by the end of 1974. The company's group policy held by 4,000 physicians in San Francisco and seven other Northern California counties was up for renewal on May 1. With Argonaut discontinuing its coverage of physicians elsewhere in the country, the fear arose that phy-
sicians were facing a possible loss of available insurance. In mid-December State Insurance Commissioner Gleason L. Payne-in an attempt to keep physicians in practice-called upon California Governor Edmund G. Brown, Jr., to create a "no-fault" malpractice pool among the state's 1,000 casualty indemnity companies. Commissioner Payne also proposed laws to take most malpractice cases out of the courtroom, pointing out that under the present system, which provides for lawyer contingency fees, some $40 million goes annually to the attorneys trying malpractice cases. Noting that the patient-plaintiff often receives less than one-third of the larger court settlements since most of the money is absorbed by the judicial process, Payne recommended a sliding scale for attorney fees which would remove the incentive for reaching such huge settlements. The possibility of federal intervention arose. According to Roger 0. Egeberg, MD, Special Assistant to HEW Secretary Caspar Weinberger, the malpractice insurance problem had cost the government nearly $6 billion in 1974. Of that amount between $1 billion and $2 billion was paid in bills which reflected the rising cost of insurance to hospitals and physicians. The balance of $4 billion was paid, Dr. Egeberg reported, "because the continual threat of suit has caused physicians to practice 'defensive' medicine to protect themselves against malpractice allegations." According to Dr. Egeberg, one of the saddest aspects of the situation is that only 17 cents of every malpractice insurance dollar ever gets paid to an injured patient. The other 83 cents goes to prosecuting and defending attorneys, investigation costs, witness fees, salesmen's commissions and insurance company costs. The government today is the nation's biggest payer of medical bills. Fifty million Americans have part of their health care costs paid from Medicare, Medicaid (in California, Medi-Cal) and maternal and child health programs. Insurance Policies Cancelled for Northem Califomia Physicians As feared, on January 31 physicians were notified that, effective May 1, Argonaut would cancel the group plan it held with the San Francisco Medical Society and seven other Northern California counties. Spokesmen for Argonaut indicated individual insurance would be available for THE WESTERN JOURNAL OF MEDICINE
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certain physicians who qualified. But for those who did qualify premiums would be increased as much as 384 percent. It appeared that many San Francisco doctors would not be able to buy insurance by May 1 and those who could faced enormous rate increases which would ultimately be passed on to patients. Physicians already were charging 15 percent of their patient bills to the costs of malpractice insurance and were reluctant to increase this amount. Once again, State Insurance Commissioner Payne warned Governor Brown that without a solution a major health care crisis could occur. Indeed, many physicians had begun seriously to consider shutting down their offices, while younger doctors indicated they could be forced either to quit the profession, become employees of prepaid health care plans such as Kaiser Permanente, or move to another state. Daily, there were accounts of older doctors deciding on early retirement rather than attempt to pay the insurance increases. By late March, although a number of malpractice bills had been introduced, none of the proposed legislation would 'affect insurance rates. No immediate solution was in sight. It was clear that legislation which could solve the intricacies of the imminent crisis would take far longer to enact than the rapidly approaching May 1 Argonaut deadline. Doctors, particularly anesthesiologists, started to talk of discontinuing services. Hospitals, meanwhile, were informed by their carrier, Farmers Insurance Company, that any hospital which allowed a physician to practice without malpractice insurance coverage would lose its own malpractice insurance. The risk to a hospital would be too great: lawsuits brought against an uncovered physician would become the responsibility of the hospital where the incident occurred. By March 31, statements signed by staff physicians began to appear on hospital bulletin boards saying the doctors would be unable to afford insurance under announced rates. Many doctors informed hospitals-and patients-that they would be forced to suspend practice as of May 1 unless a reasonable solution were found. Emergency plans were designed for patients to be directed to one of the city's six public hospitals, where staff physicians are considered employees and therefore covered by the hospital's own insurance. (Ironically, these hospitals were not un-
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affected by the crisis: for example, insurance for the University of California hospitals jumped in early 1975 from $4,000,000 to $10,000,000.) A month from the May cancellation date, Argonaut, which in January had agreed to grant temporary coverage to some physicians, now mailed notices to all physicians covered under its group plan offering them coverage at rates three to four times higher than 1974 rates. Physicians are charged varying rates for insurance depending on their medical specialty. Anesthesiologists, orthopedic surgeons, neurosurgeons and others in the high risk groups now received bills of over $18,000 for a year's malpractice coverage. For the year ending April 30, 1975, they had paid $5,377. The question shifted from whether insurance would be available to whether all doctors could afford such insurance, and attention was focused on physicians in the high risk specialties.
Solutions to Crisis Sought in Sacramento as Doctors Threaten Walk-out Alarmed that no solution was in sight, PMC administration had joined physicians in urging hospital trustees, employees, patients and support groups to write the Governor and state legislators for enactment of short- and long-term solutions. Interestingly, it was not until these letters and telegrams from the public started to arrive that the majority of northern California Assemblymen and Senators began to express their concerns about the crisis. Meanwhile, the San Francisco Medical Society worked at establishing their own insurance company; individual physicians and several county medical societies brought suit against Argonaut for breach of contract; legislators attempted a bill that would temporarily freeze insurance rates at 1975 levels, and the California Hospital Association attempted to get the Governor or State Insurance Commissioner to use emergency powers to hold back rates. Bay Area anesthesiologists began meeting together in mid-April as an ad hoc committee to consider available options. Faced with the most significant increases, they were outraged at the lack of solutions forthcoming from Sacramento. The possibility of the majority of San Francisco anesthesiologists "going on vacation" became very real. There are approximately 70 anesthesiologists
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in San Francisco. Most surgical operations cannot be carried out without one of them. In April, San Francisco hospital administrators, among them PMC president Clifford F. Schw#iberg, Jr., had begun the first of many trips to Sacramento to meet with legislators, Governor Brown, the insurance commissioner and other state officials. Their purpose was to alert those who could influence the Legislature to the jeopardy in which hospitals were being placed and to assist them in the formulation of realistic and workable solutions. In addition to Schwarberg, the San Francisco Hospital Conference's ad hoc Committee on Malpractice included Jay Okun Yedvab, executive director, Mount Zion Hospital and Medical Center; Joseph L. Zem, administrator, Saint Luke's Hospital; Robert Densmore, administrator, Children's Hospital of San Francisco; and A. Dale Morgan, administrator, Marshall Hale Medical Center. These men represented the hospitals which were to be the most affected by an anesthesiologist work stoppage. These are the major community hospitals in San Francisco which conduct the majority of health-sciences teaching programs, free and partial pay clinics, medical research and on-going community programs. They consequently bear the largest cost burdens, employ the most people, and have the heaviest commitments to patients, students and the public. A legislative package encompassing needed reform was introduced on April 18 by Assemblyman Howard L. Berman, chairman of the Assembly Select Committee on Medical Malpractice. However, in no way could these bills be enacted by May 1.
Hospitals Gear Up for Walk-out In mid-April PMC announced to employees that preparations were being made for the eventuality that on May I a significant number of physicians would choose not to practice under the severe rate increases. Presbyterian Hospital is a 311-bed acute care hospital (exclusive of psychiatry which is located in a separate building). The administration estimated that if routine surgical operations could not be done, there would be a reduction of patient census to an average of between 120 and 140 patients. (This proved to be an extremely accurate forecast.) Work force would, of course, have to experience an equivalent reduction. Before and throughout the crisis, employees
were kept as inforned as possible of contingency plans and of possible lay-offs. In mid-April, where possible, employees were given, on a unit by unit or department by department basis, the opportunity to have a voice in how potential work-force reductions would be handled. All possible alternatives to actual lay-offs (such as reduction in work weeks, early vacations and the like) were developed for personnel. On April 27, Presbyterian and all other San Francisco nonprofit community hospitals were informed by their anesthesiologists that most of them would no longer carry insurance as of May 1, and would therefore be unable to practice. Presbyterian was told that one anesthesiologist, who had already purchased individual insurance, would be available on-call for emergency surgical procedures only. Any urgent cases, or those cases which could be transported without serious risk, must be sent to one of the public or federal hospitals. Since Presbyterian Hospital is a highly-specialized acute care hospital, approximately 56 percent of its admissions are surgical patients. A large percentage of these patients come from beyond the Bay Area for such specialized surgical care as open heart surgery, total hip replacement, neurosurgery, eye surgery and various types of microsurgery. Some of the surgical cases planned for May could be temporarily postponed without undue risk. Others could not. By April 26, all surgical operations scheduled at PMC for May had either been postponed or referred to an unaffected hospital. And, at approximately 2 p.m., April 30, what was to be the last scheduled operation for over a month began at PMC. No doctor would undertake a surgical procedure later in that day for fear it might last beyond the midnight deadline. Presbyterian Hospital was about to lose more than half of its patients.
The Walk-out Begins May 1 the patient census at PMC dropped drastically. For nearly a week before the deadline doctors had not admitted any patients who might need surgical operation, even if they were being admitted for medical purposes only. In spite of the precaution the first patient to be transferred for an operation was moved to the University of California Hospital shortly after midnight on May 1. An average of five patients daily were to be transferred from PMC during May. THE WESTERN JOURNAL OF MEDICINE
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Guidelines for moving patients were immediately put into effect. No patient was to be transferred without authorization by the president of Pacific Medical Center. The patient's physician must state that in his opinion the patient's condition would in no way be aggravated by the move. There must be assurance that the patient had been authorized for acceptance by a physician at another hospital. If a patient needed an operation and could not be moved from Presbyterian without danger, his physician would present the case to the department head of the surgical service involved and the on-call anesthesiologist. Each morning throughout the walk-out, a PMC management team met to discuss that day's projected census, staffing levels, purchasing plans, legislative action, employee morale and the overall effects which the crisis was having upon the hospital. Of greatest concern to this group was the need to carry on quality health care in spite of all necessary cutbacks. And cutbacks were necessary since PMC's income, it was apparent, would be cut more than half by the walk-out. Even if personnel and purchasing costs could be cut by that amount, fixed costs, such as hospital insurance, maintenance of buildings and equipment, income and principal on the building and security, would remain unchanged. Such fixed costs represent approximately 40 percent of PMC'S $29 million annual
budget. Anxious to avoid lay-offs of personnel, PMC explored other means of cutting the work force. Most personnel were cut to three and four day weeks, and early vacations were offered where possible. Leaves of absence were encouraged. All purchasing was halted except for those supplies needed on a day-to-day basis. Administrative salaries were cut by 20 percent with some taking even larger cuts. Interns and residents voted to accept one day a week less salary. Meanwhile, by the first weekend in May it appeared that with the exception of anesthesiologists and some surgeons, most physicians, particularly internists and others in low risk categories, had obtained insurance for at least three months. The immediate effect of the walk-out, then, was to be almost entirely in the area of surgery. The public, however, did not yet know this and the first weekend in May a curious phenomenon occurred. Emergency rooms throughout the city, including those in unaffected hospitals, had what 332
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may have been the quietest weekend ever experienced. Unaccountably people did not seem to get sick. Oddly, the decrease in activity was not only among persons with minor ailments. Emergency rooms experienced the same cross-section of illnesses and injuries as usual-only fewer of them. Perhaps, being unsure of the availability of care, people stayed well. By Tuesday, May 9, the census at Presbyterian had dropped to 166. There had been a 20 percent reduction in work force and a loss of nearly $19,000 per day. The equivalent of an entire nursing floor-six 18-bed units-had been shut down.
Physicians Go to Sacramento Under the state's constitution the Governor can call a special session of the Legislature to run concurrently with the regular session in order to consider' and act upon a specific problem. Bills enacted in a special session become effective immediately if an urgency clause is attached or, without such a clause, within 91 days after the session adjourns. Bills enacted in a regular session normally do not become law until January 1 of the following year. A bill can be enacted as urgency legislation without a special session and becomes law in 31 days after passage; however, this requires two-thirds majority vote-something extremely difficult in such intricate issues as malpractice reform. Physicians had determined that a special session of the Legislature could help achieve their purposes, and on May 9 anesthesiologists and hundreds of other physicians met in Sacramento where they urged Governor Brown to help obtain speedy legislative relief by calling a special session on malpractice. By that time most physicians had become angry and disappointed that of the 22 bills introduced thus far only one had reached the Governor's desk. The Sacramento meeting revealed a deepening gulf between physicians and legislators. Speaker of the Assembly, Leo T. McCarthy, a Democrat from San Francisco and key leader in getting votes, was one of several legislators who told the doctors to go back to work. At one point he said legislative action would take "at least several months." In the interim, McCarthy said, doctors would have to pay the drastically higher premiums so they could care for their patients. That satisfied no one in his audience.
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The Walk-out Spreads to Other Parts of State In mid-May, San Francisco anesthesiologists traveled throughout California providing information and enlisting the support of others. There was now increasing news of potential disruption of surgery schedules in most sections of California. Physicians had been spurred on by the news that the Travelers Corporation, a major malpractice insurer in other areas of California, intended to raise malpractice rates a staggering 400 to 600 percent. On May 8, anesthesiologists in Santa Clara announced that they would join their colleagues in San Francisco, Marin, Alameda and Contra Costa Counties by administering anesthesia only in lifeor-death situations. In deep concern, the San Francisco Hospital Conference called a news conference on May 8 to urge the Governor to call a special legislative session and to call upon physicians to return to practice if such a session were announced. Speaking for the Hospital Conference, A. Dale Morgan reported a work force reduction of 3,000 employees from a total of 8,500 and an economic loss of about $200,000 per day. At Presbyterian everything not essential to patient care had been eliminated. The Cafe, outpatient pharmacy and cafeteria grill were closed; publications had been suspended; no coffee or meals were served at meetings; minimal cleaning was done in nonpatient areas; personnel was not available to run audiovisual equipment for educational programs; there were no tours, no Auxiliary events.
Employees March on Sacramento Employees, working harder for less pay, had maintained an excellent morale. But they were becoming frustrated. They saw their jobs dissolving and their hospital in serious financial jeopardy. There seemed to be nothing they could do about it for themselves. Friday, May 9, employees asked the PMC administration for help. They wanted to go to Sacramento and talk directly to Governor Brown and the legislators about what the crisis was doing to San Francisco and to their jobs. PMc president Schwarberg promised employees if they could organize it, he would provide assistance. Within two hours all departments were notified. Approximately 75 people arrived for a 5
p.m. meeting to plan the trip to the state capitol. Off-duty employees would go to Sacramento the following Tuesday and invite the employees of the other San Francisco hospitals to go with them. Auxiliary president Nancy Caton got approval for Auxiliary funds to pay for bus rental. Committees were formed for bus monitoring, sign and placard making, telephoning, providing liaison with other hospitals and writing informational materials and petitions. On Tuesday, May 13, over 800 hospital employees from Presbyterian, Mount Zion, St. Luke's, Children's and St. Francis Hospitals arrived at the state capitol bearing signs reading, "Save Your Hospitals-Save Our Jobs," "Our Hospitals Are in Cardiac Arrest," "The Life We Save May Be Yours" and "Special Session Now." Nurses, lab technicians, dishwashers and personnel representing most hospital related occupations were there to listen and be heard. Spokespersons had been elected for each hospital. At a rally on the capitol steps they talked about the hospitals they represented. They pointed out that their hospitals admit 60,000 inpatients each year, half of the nonfederal hospital admissions in San Francisco. Their hospitals, they explained, have 355,000 clinic visits annually, employ 5,500 people and train 12,000 persons each year in medicine, dentistry, psychiatry and other health professions, including minority upgrading programs. They reported if something were not done to solve the crisis, their hospitals would have to consider closing by Memorial Day. On the capitol steps, San Francisco Senators and Assemblymen met with the unemployed employees. The lawmakers were sympathetic about the hospitals, but not about the plight of the doctors. Almost without exception, legislators said, "Tell the doctors to go back to work." And each time a resounding "No" was the response. Employees wanted their jobs but they also wanted the crisis solved. Assembly Speaker McCarthy told the group it would be months before remedial legislation could be passed into law. During a spirited exchange with protesting employees, he admitted, "This is an absurd kind of dilemma that we've allowed ourselves to drift into." He finally promised employees, who would not accept having the blame laid at the feet of the doctors, "Something will be done before the end of the week." Every lawmaker to whom the employees spoke reported it was the Governor alone who could call THE WESTERN JOURNAL OF MEDICINE
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a special session-it was out of their hands. Some promised to contact the Governor to push for the session. Employee spokesmen waited in the Governor's reception room and vowed not to leave until he talked to them. They sent into his office several large petitions calling for the special session. First the Governor sent out his press secretary to talk to them. Then he sent Health and Welfare Secretary Mario Obledo to talk to a quickly assembled group of 150 employees. But when Obledo could not satisfy the employees, who felt that the one person in the state who could do something was the one person who refused to see them, he got the Governor. After hearing from employees, Governor Brown told them he would call a special session when he got agreement on an agenda which would include not only malpractice reform but also a series of measures to further regulate the health care delivery system in California. He felt San Francisco had too many hospital beds and wanted to look into that; he wanted to further regulate hospital rate setting; he wanted t-o look into the basis on which students were admitted to medical school. As McCarthy had told employees, "Before this is all over we're going to take a bite out of three parties; the insurance industry, the attorneys and the physicians." Brown had added a fourth-the hospitals. On May 16, the Governor issued a proclamation calling the session. The employees' action at the state capitol was certainly one of the major factors influencing the Governor's action. For the first time in the crisis he had heard directly from the people. In announcing the special session, Brown said, "The inability of doctors to obtain insurance at reasonable rates is endangering the health of the people of this state and threatens the closing of many hospitals. The longer term consequences of such closings could seriously limit the health care provided to hundreds of thousands of our citizens." The Governor's program for a special session on malpractice included: 1. Reconstituting the Board of Medical Examiners to include a majority of public members; 2. Giving the board full authority to discipline and decertify practitioners for lack of competency; 3. Providing the board with authority to set
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recertification standards including updated training and public service, in order to minimize malpractice and increase the quality of medical care; 4. Providing the board with authority to minimize the present maldistribution of medical care in certain areas of the state; 5. Establishing a Medical Peace Corps to service Californians who lack adequate medical care; 6. Regulation of hospital rates, including authority over excessive hospital bed capacity and unnecessary duplication of expensive and underutilized equipment; 7. Voluntary binding arbitration in order to quickly and fairly resolve malpractice claims while maintaining fair access to the courts; 8. Establishment of reasonable limits on the amount of contingency fees charged by attorneys; 9. Elimination of double payments (collateral sources); institution of periodic payments and reversionary trusts; limitation of compensation for pain and suffering while insuring fully adequate compensation for all medical costs and loss of earnings; and setting new reasonable statute of limitations for the filing of malpractice claims. In addition Governor Brown stated he would: (a) Convene a Special Panel to immediately conduct a complete investigation into all insurance company rates and reserve practices; and (b) support legislation in the regular session to insure adequate public representation on all professional boards, including the Board of Governors of the California State Bar. Indeed, it appeared that this special session would not deal solely with the medical malpractice issue. As one national television commentator remarked about the situation: "The Legislature is studying a complete reform of health care delivery in the state of California."
Walk-out Continues to Have Impact on Hospitals While the trip to Sacramento was being planned by hospital employees, the PMC patient census had dropped down to 106. Eight nursing stations, the coronary care unit and the intensive care unit were now closed. An estimated $35,000 a day was lost one weekend alone. In addition to the effects on employees and on special programs, the crisis had begun to take its toll on teaching programs for young doctors. Without surgical operations, surgical residents had little to do and were gaining little experience.
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Doctors began looking for things for interns and residents to do. In going into the crisis the hospital financial picture in San Francisco was far from healthy. Many of the hospitals had experienced a six-week nurses' strike less than one year before and had not yet recovered from its effects. With one exception the city's hospitals already had huge loans for remodeling and construction of replacement facilities. Drastically rising costs of personnel, supplies, food, malpractice insurance, along,with the inability of hospitals to pass these increases on to Medicare and Medi-Cal patients, had all contributed to the hospitals' financial problems. Added to this was the cost of teaching programs, free and partial pay clinics and other community service programs borne by the major teaching hospitals which,.unlike the University of California Hospitals, are not funded by the state. At PMC, however, cutbacks had been achieved to the point that the Board of Trustees task force on malpractice, which had been investigating the hospital's financial viability, concluded that Presbyterian Hospital could continue to survive while meeting its financial obligations.
Confusion Continues as Physicians Announce Plans to Return to Work Hopes had run high that once Governor Brown called a special session-a so-called "act of good faith"-the anesthesiologists would return to work and allow the Legislature to work on reform measures. People began to realize the special session was far from being a cure-all. While bills passed under this aegis could become effective immediately, there was no guarantee the needed bills would, in fact, be passed. Bills already introduced and on their way through committee would have to be dropped and reintrodvced to come under the time advantages of the special session. However, there was no certainty that anything would go through a special session faster than in an
ordinary session. Meanwhile the anesthesiologists in Southern California who had not yet lost their insurance had begun, hospital by hospital, to discontinue services in support of the San Francisco physicians. It seemed that anesthesiologist leaders who had been traveling through California to enlist support were finally realizing results. Consequently more anesthesiologists than just the San Francisco group were becoming involved in de-
cision making. An organization had been started. Emotions were running high. How could the protest be stopped once it was truly under way? San Francisco anesthesiologists felt they could not return to work now that they were getting others out in their support. The fact that San Francisco hospitals had already suffered through three weeks of drastically lowered census was not a factor they could take into account. As one newspaper said, "The malpractice mess gets even messier." It was Memorial Day weekend. At Presbyterian Hospital a patient had been admitted a week and one-half earlier in severe pulmonary edema. He had been rushed to the hospital from Eureka, over 300 miles north of San Francisco, referred by his physician to doctors at Presbyterian where sophisticated knowledge and equipment would, it was hoped, save his life. He had almost lost the function of his only kidney. Placing him in the hospital's cardiopulmonary intensive care unit and getting him on kidney dialysis, doctors pulled him through the initial crisis. Extensive tests were made and it was discovered that the patient, 58-year-old Rexford Tieg, had a severe blockage of an artery leading to his kidney-to the extent that it had already lost 90 percent of its function. Delicate vascular surgical procedures were needed to save the kidney and prevent Tieg from spending the rest of his life on kidney dialysis, three days a week, four hours a day. Tieg was scheduled for surgery. The chief of anesthesiology, however, refused to allow anesthetic. Tief's operation was, indeed, urgent and his condition life-threatening. However, his condition had improved to the point that he could be considered transportable. Tieg's physician, his surgeon and even PMC's president spent the weekend negotiating with the chief of anesthesiology, trying to get agreement for the operation at Presbyterian. Although he was "transportable," the operation would require him to be at a hospital which had heart-lung and dialysis equipment. (Tieg was already the victim of three heart attacks.) He would require a highly specialized cardiovascular surgeon. This eliminated most of the nonaffected hospitals. In desperation, Mrs. Tieg, herself a registered nurse and very knowledgeable about her husband's condition, called the news media. Tieg's story was publicized locally and nationally. The unaffected hospitals in the San Francisco THE WESTERN JOURNAL OF MEDICINE
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area equipped to handle Tieg's operation were full to overflowing by this time and could not guarantee they would be able to schedule it in time to save his only kidney. Finally, on Tuesday, May 27, El Camino Hospital, over 30 miles from San Francisco and also one of the hospitals affected by the anesthesiologists' walkout, got agreement from their anesthesiologist to do the operation. It was done the following day at El Camino Hospital and, as of this writing, he is recovering well and has regained the use of his kidney. The PMC Medical Staff had an emergency meeting the night of Tuesday, May 27. News stories of the Tiegs had an effect. For the first time, physicians realized the situation was causing a real deterioration in patient care. Representative anesthesiologists were present from all San Francisco and Marin hospitals. It was the first time they heard a call from fellow physicians to return to work. On Wednesday, May 28, the San Francisco Examiner headlined: "Doctors End Their Protest -Agree to Return to Work." It happened in great confusion. Anesthesiologists meeting that morning agreed they would have to get back to work. An afternoon meeting was scheduled in Sacramento with Speaker McCarthy, hospital administrators and other concerned representatives. A few days before this meeting, Assembly Bill 491-the Behr Bill-had been passed and signed into law allowing the State Insurance Commissioner to form a joint underwriting insurance pool composed of all casualty and liability insurance companies in the state. The pool would provide a "claims made" policy at 1974 rates until January 1976, at which time the policy would be convertible to an "occurrence" policy. A "claims made" policy is one which provides insurance for claims made during the year of coverage. Under current statute of limitations on malpractice, doctors would have to continue to carry such insurance indefinitely for claims incurred in one year, which are not made until as much as 20 years later. An "occurrence" policy covers a physician for claims made at any time if the physician carried the insurance the year the injury took place. Before the McCarthy meeting, anesthesiologists started telling reporters they would be reporting to work. 336
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Insiders were confused. The Behr Bill, under which the anesthesiologists said they were returning, had been previously rejected soundly by most physicians. It was feared that the bill could create even higher premiums than the 1975 rates. Now, however, anesthesiologists were saying that they had reached their short-term objectives and would return to work while the Legislature worked on long-term reform. PMC president Schwarberg, who was in Sacramento with the anesthesiologists, was understandably skeptical. He was assured by Laurens Garlington, MD, leader of the group and chief of anesthesiology at PMC, that the hospital could schedule operations for the following Monday. Anesthesiologists would guarantee to be there even if something went wrong; they would work as volunteers. Something did go wrong-the following day. Anesthesiologists suddenly realized the "claims made" policy they were accepting would carry with it a potentially huge "tail payment" possibly for years to come. They felt doublecrossed by the Legislature. It was an extraordinary situationapparently, in accepting the Behr Bill, the anesthesiologists had not read it thoroughly. Hospitals were in turmoil. Were they or were they not going back? Morale sank to a new low. Realizing the chaos they had created, anesthesiologists knew they must now return to work, and decided there was no alternative but to purchase individual insurance at 1975 rates for a three-month period. Thus, the joint underwriting insurance bill was not activated by the insurance commissioner.
The Doctors Return to Work During the week of June 2, the doctors straggled back to work as individually they obtained their malpractice insurance. Hospitals, unable to get firm estimates of how many, and when, anesthesiologists would return, were little better off in their efforts to schedule surgical operations than they were during the strike. This tenuous situation existed into the second week of June. When the news came that the doctors were returning, there could, in fact, be little rejoicing in hospitals where the news came too late, conditions were too grim, too many people had been laid off and too much money lost. It would not be "business as usual" in San Francisco hospitals for some time to come.
