OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 _ (860) 240-0200

http: //www. cga. state. ct. us/ofa

sSB-141

AN ACT IMPLEMENTING THE RECOMMENDATIONS OF THE PROGRAM REVIEW AND INVESTIGATIONS COMMITTEE CONCERNING MEDICAL MALPRACTICE INSURANCE RATES.

OFA Fiscal Note

State Impact:

Note: IF=Insurance Fund; GF=General Fund

Municipal Impact: None

Explanation

This bill makes various changes related to medical malpractice reform. Fiscal impacts are as follows:

Section 1 changes the rate of interest applied to offers of judgment made by plaintiffs after the effective date of the bill. ¹ Specifically, it pegs the interest rate applicable to offers of judgment at two percentage points above the weekly, average five-year constant maturity yield of United States Treasury Securities. This would effectively reduce the rate of interest on offers of judgment from 12 per cent under current law, to 5 per cent, although that difference would diminish as US Treasury Securities yields and interest rates rise. This change is not expected to significantly lengthen the period of time it takes to dispose of civil cases on a system wide basis such that additional appropriations would be required. Consequently, there is no fiscal impact to the Judicial Department.

Section 2 requires a plaintiff or plaintiff's attorney to file a written opinion by a similar health care provider in order to initiate a medical malpractice action. This additional requirement could reduce the number of medical malpractice cases brought before the Superior Court, and thereby decrease the workload of the Civil Division. Any such change would be small relative to the overall caseload since medical malpractice cases comprise less than one per cent of total civil cases added each year. ² Consequently, there is no fiscal impact.

Section 3 requires a claimant to send a written notice to the health care provider alleged to have caused injury through negligence at least thirty days prior to filing a civil action. It also permits either a claimant or health care provider to request non-binding, pre-suit mediation lasting up to 120 days. An average of 375 medical malpractice cases have been filed with the Superior Court in each of the last five (complete) fiscal years. Although the number of civil cases filed could decrease as a result of pre-suit mediation, it is anticipated that the changes in this section will result in a net workload increase to the Judicial Department by expanding its formal involvement in these civil matters. Such an increase could be accommodated without additional appropriations.

Section 4 prohibits claimants from waiving the contingency fee limits in place under current law. This change is not expected to substantially alter the number of civil cases filed and, thus, there is no related fiscal impact to the Judicial Department.

Section 5 establishes a Task Force on Medical Malpractice Litigation Alternatives and requires it to report its findings no later than January 5, 2005. It is anticipated that representatives of the Departments of Insurance and Public Health and the Judicial Branch will be able to participate within their respective agency's anticipated budgetary resources. It is anticipated that members of the Task Force will not be entitled to reimbursement for expenses.

Section 6 requires medical malpractice insurers to gain rate approval from the commissioner before the effective date of the rate change under certain circumstances. This does not result in a fiscal impact.

Section 7 requires the Insurance Commissioner to create and maintain an information database. The department already collects much of the information that the bill requires. This does not result in a fiscal impact.

Sections 8 & 9 require that captive insurers submit an application and a nonrefundable fee of $175 to the Insurance Commissioner in order to obtain a certificate of authority. Furthermore, the captive insurer must pay all expenses incurred as a result of filing the application. Currently, it is unknown how many captive insurers are in the state, as it is not a regulated industry. The bill also authorizes the commissioner, upon determination, to impose a civil penalty, with a maximum fine of $10,000. This will result in a minimal revenue gain.

Sections 10 & 12 require the DPH to adopt regulations, by December 31, 2004, setting forth (1) guidelines for screening complaints to determine which will be investigated, (2) a prioritization system for the conduct of investigations, (3) guidelines for determining when an investigation should be broadened beyond the initial complaint, and (4) a list of factors that may be used to identify doctors who may not be performing effectively and require further investigation. On and after December 31, 2004, the agency must conduct any review of a malpractice award or settlement in accordance with the adopted guidelines. An annual average of 496 complaints and malpractice payment notices were received by the Department over the 1999 - 2002 time period. As stated in the December 18, 2003 Findings and Recommendations of the Legislative Program Review and Investigation's Committee's report on Medical Malpractice Insurance Rates, the agency's "Practitioner Investigations Unit has nine investigators to review and investigate about 400 cases and complaints at any given point in time. "

Section 11 requires the department to present to the Connecticut Medical Examining Board (CMEB) findings of no probable cause and allows the CMEB to review each such recommended closure and request further information or a reconsideration of such finding. This is anticipated to result in additional investigations being conducted by DPH staff. The agency dismisses about 240 cases each year concerning physicians following an investigation.

The DPH will incur FY 05 costs of $489,430 to comply with provisions in Sections 10 - 12. This reflects the full-year salaries of: one Physician (at $142,000 annually), one Supervising Nurse Consultant (at $77,400 annually), one Health Program Associate (at $55,280 annually), one Nurse Consultant (at $66,640 annually), one half-time Office Assistant (at an annual salary of $17,435), and one half-time Systems Developer (at $31,320 annually). Also included is three-quarter year support for one Health Program Associate and one Nurse Consultant and one-time equipment costs of $8,000. In FY 06 this cost will increase to $511,910 as the positions are annualized. DPH costs will be supplemented by fringe benefit costs of $97,400 in FY 05 and $234,560 in FY 06. The additional positions will be required to develop regulations, conduct additional investigations as well as investigations of a broader scope than currently performed.

The CMEB is comprised of volunteers who are not compensated for their time. Therefore, no state cost will result from their increased workload due to implementation of Section 11.

Section 13 requires the DPH to include additional information related to medical malpractice investigations in its annual report to the General Assembly. The department will incur FY 05 costs of $92,940 to support the salary of one half-time Office Assistant (at an annual salary of $17,435) needed to enter data not presently collected and/or entered into the agency's database, one-time associated equipment costs of $3,000, and costs of one-time data processing services (approximately $72,500) needed to revise the agency's computer database and develop reporting tools. In FY 06 this cost will fall to $17,440, as the consultant services will no longer be required. DPH costs will be supplemented by fringe benefit costs of $3,530 in FY 05 and $8,000 in FY 06.

Section 14 establishes a Task Force to assist the Medical Examining Board in developing disciplinary guidelines and requires it to report its findings no later than January 5, 2005. It is anticipated that representatives of the Department Public Health will be able to participate within the agency's anticipated budgetary resources. It is anticipated that members of the Task Force will not be entitled to reimbursement for expenses.

Section 15 requires DPH to notify parties who have filed a petition questioning a physician's ability to practice, or the person's legal representative, when the Medical Examining Board has accepted the DPH's recommendation of a finding of no probable cause. The department would also be responsible for providing this same party with the reason for such finding and, if available, a consultant's review. The DPH would incur minimal costs, which can be accommodated within the agency's anticipated budgetary resources to comply with this requirement.

Section 16 requires each physician, podiatrist, chiropractor and naturopathic physician to report the name of the insurance company providing his or her professional liability insurance, the policy number, his or her area of specialization and whether he or she is actively involved in patient care. Section 17 requires the DPH to report, by January 1, 2005 and annually thereafter, on the number of physicians by specialty, those who are actively providing patient care, projections for physician employment, identification of insufficient supply of certain specialists, and identification of barriers to meeting needs for certain specialists. It also requires the agency to compile an assessment of the inventory of practicing physicians by January 1, 2007 and update this report every three years thereafter.

The DPH will incur FY 05 costs of $126,880 to support the salaries of one Health Associate (at an annual salary of $55,280), one Office Assistant (at an annual salary of $34,870), and one half-time Systems Developer (at an annual salary of $31,320) needed to revise the agency's existing licensure database, enter information, follow-up with physicians who fail to supply the required data, and perform analysis needed to compile the annual report. Also included in this sum are one-time costs for equipment ($4,000), and reprinting the physician renewal card ($1,500). In FY 06 this cost will fall to $121,380 as one-time equipment and printing costs will not recur. DPH costs will be supplemented by fringe benefit costs of $24,560 in FY 05 and $55,620 in FY 06.

Section 18 requires the clerk of the superior court to mail a copy of any medical malpractice complaint filed with the court against a physician, osteopathic physician, chiropractor, naturopathic physician, dentist, or psychologist to the DPH within thirty days after filing. Presently claims that do not result in settlements and judgments do not factor into the investigatory function of DPH. However, per Section 12, they would be included in the list of factors the department may use to identify physicians for further investigation.

The Judicial Department would incur a minimal cost, less than $1,000 annually, associated with copying and postage.

Section 19 requires DPH to collect information (for purposes of its Physician Profile Database) reflecting disciplinary actions, criminal convictions and malpractice judgments and awards that occurred outside Connecticut. It also requires the agency to regularly compare data in the physician profile database with information contained in the National Practitioner Data Bank.

The DPH will incur FY 05 costs of $118,730 to support the salary of one Health Associate (at an annual salary of $55,280) needed to compile the required information, one-time associated equipment costs of $2,000, and $61,450 in charges for obtaining an annual report from the National Practitioner Data Bank (at a cost of $4. 25 each) for an estimated 14,459 physicians. In FY 06 this cost will fall to $116,730 as one-time equipment costs will not recur. DPH costs will be supplemented by fringe benefit costs of $11,190 in FY 05 and $25,330 in FY 06.

Section 20 establishes continuing education requirements for certain physicians. The DPH will incur minimal costs, which can be accommodated within its anticipated budgetary resources, to approve continuing education courses and grant waivers as authorized in the bill.

Section 21 establishes a Task Force to examine the feasibility of developing a physician re-licensing examination and requires it to report its findings no later than January 5, 2005. It is anticipated that representatives of the Department Public Health will be able to participate within the agency's anticipated budgetary resources. It is anticipated that members of the Task Force will not be entitled to reimbursement for expenses.

Section 22 repeals the authorizing statute for the Medical Malpractice Screening Panel. No fiscal impact is associated with this change.