AP NEWS

Court: New Mexico improperly administered malpractice fund

December 11, 2018 GMT

A state District Court judge has sided with doctors who sued state Superintendent of Insurance John Franchini on claims that his office violated the law by secretly striking deals with New Mexico hospitals and associated outpatient facilities so they could tap into a medical malpractice fund.

The plaintiffs, four physicians from Albuquerque, said Franchini, without conducting a public process, allowed dozens of providers to become eligible to use the state-administered fund to pay malpractice claims. An open process would have included studies to determine the appropriate premiums the providers should have payed to offset potential claims.

As a result of these backdoor deals, the four doctors say, it’s impossible for other members of the Patients Compensation Fund to know how much the high-risk hospitals are paying into the fund “and whether their cumulative risk will overwhelm the fund.”

The state auditor issued a report last year that deemed the fund fiscally unsound. Doctors say a solvent, state-run malpractice fund is critical for New Mexico because it helps attract primary-care providers.

Franchini’s office argued the process it used for admitting the hospitals and other providers wasn’t subject to the Administrative Procedures Act. Franchini said his office was not creating new rules but was simply implementing the Medical Malpractice Act.

But District Judge David Thomson ruled Franchini had violated the Administrative Procedures Act by admitting more than 50 providers — including Christus St. Vincent Regional Medical Center, Presbyterian Santa Fe Medical Center and numerous outpatient facilities under their umbrellas — between 2009 and 2017 without a public process.

Thomson made his decision in September but has yet to issue a written order. He said he did not believe it was sufficient to simply declare that the law had been violated. Instead, he wants his ruling to include a remedy directing the parties how to proceed.

To that end, he has asked the litigants to propose how to cure Franchini’s violations.

The plaintiffs want actions Franchini took without following the law to be voided. This could mean all the providers accepted via the faulty process would be ousted as fund participants, and the superintendent of insurance would have to restart a process for admitting them.

But the state says such an action be “extremely disruptive” to the fund, requiring surcharges to be paid back to providers and possibly forcing patients whose claims have been settled since 2009 to go back to court.

The superintendent of insurance is asking the judge to consider a remedy that would allow past actions to stand unchanged but would require the state to follow a public process to develop rules for determining the appropriate surcharges for the new providers. This would entail new rules to determine the surcharges for the hospitals going forward.

Christus spokesman Arturo Delgado said in a recent email the hospital “will continue to monitor this case and work with its legal counsel to determine its potential impact,” but had no other comment.

Presbyterian Medical Group President David Arredondo said in an email Friday, “While we are not a named party in this case, Presbyterian is a participant in the patient compensation fund and we look forward to a fair resolution of this matter.”

The physicians point to a recently released evaluation of the Patient Compensation Fund as proof that admitting the hospitals destroyed its solvency.

It states the fund has a projected deficit of $55 million. And, the physicians say, the hospitals don’t pay enough into the fund to offset their losses.

Anna Krylova, chief actuary for the superintendent of insurance, said in a recent interview the deficit is “definitely not because of the hospitals, at least not in its entirety.”

Krylova acknowledged she’s been in her position for about a year and doesn’t have historic knowledge of the fund. She said hospitals becoming covered by the fund likely “did contribute to some extent” to the deficit.

But, Krylova said, between 2013 and 2015 the fund also paid out about $22 million to settle claims against just two doctors.

Christus was in the first of three batches of providers who were accepted as fund participants between 2009 and 2017.

Krylova said the fund started showing a deficit of about $1 million in 2011. The deficit jumped to $5.3 million in 2013 and had ballooned to $36.8 million by 2015, a spike she attributed to the payouts on behalf of two doctors.

One of the Albuquerque doctors who sued Franchini’s office is Barbara McAneny, president of the American Medical Association. She said malpractice insurance in states that don’t have a state-administered fund to help offset major claims is so expensive that physicians might work until May of each year to cover the cost of insurance before they see a profit.

She said doctors in New Mexico might have to work even longer, until August or September, to cover malpractice insurance costs if the fund doesn’t not stay solvent.

McAneny said the fund is one of the main incentives — besides the “sunshine factor” — used to attract physicians to New Mexico.

If physicians are required to pay higher and higher surcharges to offset losses incurred by the hospitals, it will deter doctors from coming to New Mexico, she said, exacerbating an existing shortage of primary care providers.

“That’s why it’s so important to us,” she said.