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In 2000, R. Ray Pate Jr., then the president and chief executive of medical malpractice insurer NCRIC Inc., threatened a “train wreck” if Columbia Hospital for Women Medical Center didn’t pay up during a $3 million dispute over policy payments.Not only did the train wreck, it veered completely off the rails. Columbia, which opened in 1866 to treat wives and widows of Civil War soldiers, closed its doors in 2002. Hospital administrators blamed the malpractice-insurance debacle for the demise of the 86-bed nonprofit hospital, where more than 275,000 babies were delivered over 136 years of continuous operation. When NCRIC sued to collect the disputed payments, a D.C. Superior Court jury delivered a stunning verdict in 2004. The jury rejected NCRIC’s claim entirely and awarded an $18.2 million judgment to Columbia on counterclaims NCRIC had interfered in the hospital’s business dealings and drove its doctors to other NCRIC-insured hospitals. On Oct. 5, the D.C. Court of Appeals heard oral arguments in an appeal from NCRIC seeking to reverse the jury’s verdict. In its appeal briefs, NCRIC claims that the case reflects “Columbia’s search for a scapegoat with a deep pocket” and that the niche hospital was in a “death spiral” because of its failure to compete in the District’s overcrowded hospital market. The case highlights the escalating costs of medical malpractice insurance in the District, which the American Medical Association says is nearing a crisis. “Certainly, Columbia Hospital is part of the collateral damage of the high cost of malpractice premiums in the District,” says Edward Shanbacker, executive vice president of the Medical Society of the District of Columbia. “It’s unclear if anyone on the D.C. Council is going to prioritize liability reform and the ongoing exodus of physicians out of the District.” Three D.C. Council bills introduced last year on medical-liability reform or malpractice-insurance regulation appear likely to die with the end of the session in December, due to inaction or blocking tactics at the committee level. Medical-liability reform has been nonexistent in the District, causing many D.C. doctors to retire early, reduce high-risk procedures, lay off staff, drop out of Medicaid or other low-reimbursing medical plans, or relocate to the suburbs. Both Maryland and Virginia have lower malpractice-insurance rates and have enacted caps on noneconomic or total damages in malpractice awards. In a comparison of the 50 states and the District of Columbia, the District has the highest average medical-liability award�$584,338�while Maryland ranks 16th and Virginia 33rd, according to the MSDC. NCRIC increased malpractice rates in the District by 21 percent in 2003, 14.8 percent in 2004, and 15.3 percent in 2005. Doctors received a reprieve this year when no increase was requested. Based on malpractice risks associated with each specialty, NCRIC now charges $23,101 a year for a family practitioner, compared with $69,270 for general surgeons and $139,528 for obstetricians. Dr. Howard Smith, a D.C. gynecologist who abandoned his obstetrics practice a decade ago because of rising malpractice premiums, says some District obstetricians have mortgaged their homes or taken out loans to cover their malpractice premiums, while others have fled to the suburbs. Smith says he fears malpractice premiums “are going to continue to skyrocket.” “I see no foreseeable change. I don’t think there is any incentive to change,” he says. “It is woefully, woefully an issue that is not being addressed.” DEATH OF A HOSPITAL Before it liquidated its assets in 2002, Columbia was a pioneer in innovative obstetric and gynecological techniques, specializing in high-risk births, laser surgery, and in vitro fertilization.Despite its reputation for excellence, Columbia struggled to compete in the District’s crowded hospital market and filed for bankruptcy in 1998. The hospital emerged from bankruptcy a year later with new management, and it branched out from a maternity hospital into a women’s medical center, with a new wing of luxury patient suites and units devoted to obesity, cosmetic surgery, and endoscopy. After years of financial losses, Columbia turned a profit for two months before NCRIC terminated the hospital’s malpractice-insurance policy in September 2000. The hospital lost more than 30 doctors�almost half its medical staff�that year, and it never recovered, closing in 2002. After a two-week trial in 2004, a jury found NCRIC liable for $18 million in damages for tortious interference with business relations and $220,000 in damages for breach of contract. NCRIC had overcharged Columbia, intimidated its doctors, and then lured them to other NCRIC-insured hospitals when Columbia contested the policy payments and negotiated with another insurer for coverage, according to Columbia’s appeal brief from lawyers at Kellogg, Huber, Hansen, Todd, Evans & Figel. NCRIC’s appeal hinges on whether former D.C. Superior Court Judge Anna Blackburne-Rigsby erred in not instructing the jury that NCRIC’s actions needed to be wrongful, not just intentional, for the jury to award damages on the tortious-interference claim. NCRIC’s attorney, Douglas Baruch of Fried, Frank, Harris, Shriver & Jacobson, also argued that the hospital’s claims for damages were highly speculative and erroneous because a failing business cannot claim lost profits. Founded in 1980 by D.C. physicians as the National Capital Reciprocal Insurance Co., NCRIC identifies itself now by only the acronym. The company was sold last year for $69 million in stock to Alabama-based ProAssurance Corp. NCRIC, which writes more than 55 percent of the malpractice policies in the District, posted a net loss of $7.1 million in 2004 and had its financial rating downgraded from A-minus to B-plus-plus. The company has secured a $19.5 million appellate bond and associated letter of credit to cover the $18.2 million judgment if it is upheld. The company has already spent almost $1 million on legal expenses from the case, according to a U.S. Securities and Exchange Commission filing. WAITING FOR REFORM Columbia Hospital might have survived if the D.C. Council had embraced medical-liability reform to stem rising malpractice premiums. Yet three bills on the issue have a slim chance of approval this year. Last year Mayor Anthony Williams introduced the Health Care Reform Act of 2005, which would cap noneconomic damages in malpractice suits at $250,000 per doctor and $500,000 per hospital. The bill would also require a certificate of merit in malpractice suits and set limits on contingent fees. As Congress has not acted on the issue, 30 states have passed laws limiting damages in medical-liability suits. Courts have overturned caps as unconstitutional in 11 states, prompting at least four of those states to enact new laws. Maryland has a $650,000 cap on noneconomic damages, and Virginia has a $1.7 million cap on total damages. Williams’ bill, which was supported by the MSDC but opposed by trial lawyers, has foundered before the D.C. Council and appears to be dead. “We think we made a pretty compelling case for reform,” says mayoral spokesman Vince Morris. “Runaway juries help trial lawyers but do little for average people.” Melissa Rhea, president of the Trial Lawyers Association of Metropolitan Washington, D.C., says the mayor’s bill was unjust and anti-consumer because jurors are more fair than an arbitrary cap. At-large D.C. Council member David Catania, chairman of the Council’s Committee on Health, developed his Medical Malpractice Reform Act of 2005 with recommendations from a committee including legal and medical representatives. The bill, which does not include caps, would require early mediation in malpractice suits, a 90-day notice of intent to sue, and the inadmissibility of expressions of sympathy or apology made by doctors or hospitals to malpractice victims. All three provisions are supported by doctors and the local Trial Lawyers Association. Catania says, however, that his bill is blocked from a Council vote by Ward 1 Council member Jim Graham, chair of the Committee on Consumer and Regulatory Affairs, who will not schedule the bill for a committee hearing. “Stalling this bill is really putting people’s health in peril,” Catania says. “The provisions in my bill are not a panacea but are an incredible first start. [Graham] said the trial lawyers were opposed to it, but that isn’t true.” Graham was on vacation in Ecuador and couldn’t be reached for comment. Catania’s bill would also require biannual reporting of adverse medical events by medical facilities and more public disclosure of information filed regarding malpractice-rate changes. Insurers also would have to disclose the amounts of malpractice settlements and judgments. “We have an insurance industry that is just run amok,” says Catania. “Right now we don’t know how much is collected in the District, and we don’t know how much is paid out.” An independent seeking re-election in November, Catania says he will reintroduce his bill next year if it dies in Graham’s committee. Council Chairman Linda Cropp, along with four other Council members, also introduced a bill last year on medical malpractice insurance regulation. The bill would require prior D.C. government approval of rate increases exceeding 7 percent, authorize refunds to physicians who paid excessive rates, and allow public challenges of rate increases. The bill was introduced or co-sponsored by 11 of the 13 Council members, but it is opposed by the insurance industry. At a public hearing in March, William Burgess, NCRIC’s vice president for claims and risk management, said the bill “could create a new rate-making environment” and “will have a very chilling effect on the regulated insurers currently in the District, as well as those who might otherwise enter in the future.” The MSDC and some doctors fear increased regulation of NCRIC might cause parent company ProAssurance to pull out of the District altogether. By the end of the year, NCRIC will be writing malpractice policies in the District only. Policies formerly written in four neighboring states are being farmed out to other ProAssurance subsidiaries. NCRIC will remain in the District as long as it can still make a profit, says ProAssurance Senior Vice President Frank O’Neil. As for Columbia, its former location at 2425 L St. N.W. is now the site of construction cranes and hard-hatted crews building the Columbia Residences of Washington, D.C., luxury condominiums priced from the mid-$700,000s to more than $3 million.
Brendan Smith can be contacted at [email protected].

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