Texas Legislature and Medical Malpractice

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THE TEXAS LEGISLATURE AND MEDICAL MALPRACTICE by *Max Sherman and **Michael L. Pate The "Findings and Purposes" of the Medical Liability and In- surance Improvement Act' set forth in detail the legislative concerns that led to the passage of the 1977 act on malpractice insurance. The legislature found that since 1972 the number of health care liability claims and the amount of claims paid had caused a serious public problem regarding the availability and affordability of adequate medical professional liability insurance. The statute provides an objective statement of the facts and philosophy that necessitated the act.2 However, the statement does not reflect the intensity of the opposing views that are synthesized in the "Findings and Pur- poses."' Because Texas does not have a good method for preserving legislative history, the purpose of this article is to outline the legislative considerations involved in resolving some of the troublesome medical malpractice issues that were affected by the statute. 3 The medical malpractice controversy that confronted the 65th Texas Legislature was not a creature of the 1970's; the seed for the problem was planted in 1945, when the 46th Texas Legislature passed a statute authorizing control by the Board of Insurance Com- missioners over, "the business of casualty, fidelity, surety, and guar- anty insurance for the making and filing and approval or disap- proval of insurance rates."4 In Gibbs v. United States Guarantee Co. ,' the court clarified a grey area of insurance regulation by hold- ing that the State Board of Insurance Commissioners must pre- scribe statewide uniform rates rather than allow different rates for different insurers for the same risk. Because of this decision, insurance companies writing medical malpractice coverage were required to charge the same rate for health care risks. Uniform medical malpractice insurance rates were not satisfac- tory. Consequently, in 1955 the 54th Legislature removed medical

* President, West Texas State University; B.A., Baylor University; LL.B., University of Texas, 1960. He is a former Texas State Senator of the 31st Senatorial District. ** Attorney, Austin, Texas. B.S., University of Texas at El Paso; J.D., University of Texas at Austin, 1976. 1. TEx. REV. CIv. STAT. ANN. art. 4590i (Vernon Supp. 1978-1979). 2. Id. § 1.02(13)(b). "tilt is the purpose of this Act to improve and modify the system by which health care liability claims are determined .... " 3. Many of the comments and observations in this article are based on notes contained in personal Senate files. The footnotes will not reflect this source because it would be unavail- able to the public. 4. 1945 Tax. GEN. LAWS, ch. 160, at 207. 5. 218 S.W.2d 522 (Tex. Civ. App.-Austin 1949, writ refd). TEXAS TECH LAW REVIEW [Vol. 10:339 malpractice insurance rating from the control of the Board of Insur- ance Commissioners.6 Medical malpractice insurance rates were determined in an unregulated market from 1955 until 1975. Because of the unregulated market, medical malpractice insurance rates increased so dramatically that the matter was considered a "problem" by the 64th Legislature.7 Several legislative approaches were offered at the 1975 session: 1. S.B. 635 proposed by Senator Ray Farabee included several modifications in the Texas tort system. This bill was supported by the Texas Medical Association (TMA), and opposed by the Texas Trial Lawyers Association (TTLA). The bill passed the Senate,' but two days before adjournment it failed to pass the House of Repre- sentatives by a one vote margin 2. S.B. 466 proposed by Senators A. R. Schwartz and Don Adams reversed the 1955 deregulation decision by the legislature and provided that medical liability insurance for physicians, podiatrists, and hospitals was subject to Insurance Board regulation. The State Board of Insurance was given authority to establish rates for medical liability coverage and to gather data for statewide rating purposes. This bill passed and became law.'0 3. S.B. 491 proposed by Senator A.R. Schwartz established a Joint Underwriting Association to provide insurance coverage for Texas doctors and hospitals unable to obtain malpractice insurance. This measure created a temporary pool to insure availability of at least $300,000 in coverage to health care providers who could not obtain coverage through the normal voluntary market. The bill also created the eighteen-member Medical Professional Liability Study Commission to investigate the medical malpractice problem and to offer recommendations for permanent solutions by December 1, 1976. This bill passed and became law." S.B. 466 and S.B. 491 contained self-destruct provisions calling for the acts to expire on December 31, 1977. The Medical Professional Liability Study Commission, also known as the "Keeton Commission," was appointed.' 2 W. Page Kee-

6. 1955 TEX. GEN. LAWS, ch. 76, § 1, at 359. 7. See generally Lawsuits: A Growing Nightmare for Doctors and Patients, U.S. NEWS AND WoRLD REPor, Jan. 20, 1975, at 53. 8. Senate Bill 635 passed the Senate May 15, 1975, TEX. S.J. 1467 (1975). 9. Senate Bill 635 was defeated in the House on May 28, 1975. TEX. H.R.J. 4230 (1975). 10. 1975 Tex. GEN. LAWS, ch. 330, § 1, at 864. 11. TEX. INS. CODE ANN. art. 21.49-3 (Vernon 1975). 12. Members of the Medical Professional Liability Study Commission were: Robert G. Bezucha and W. A. Mizell (Texas Joint Underwriting Association appointees); William R. Cotner and David Hitt (Texas Hospital Association appointees); Dr. Milton V. Davis and Dr. 19791 TEXAS LEGISLATURE

ton, former Dean of the University of Texas Law School, was elected Chairman. The Commission met eighteen times, and subcommit- tees of the Commission met an additional twenty-two times across the state to develop recommendations and policy statements. The Final Report was transmitted to the 65th Texas Legislature on De- cember 22, 1976, ' and provided the setting for the medical malpractice battle in the 65th Legislature. Governor Dolph Briscoe, in his address to the legislature on January 12, 1977, identified the medical malpractice insurance crisis as his top priority for legislative action in the health field. Gover- nor Briscoe summarized the problem: Older doctors are encouraged, if not forced, to retire prematurely because of high insurance rates and lack of availability of insurance (to protect doctors against damage claims for medical malpractice). Many doctors in rural areas who occasionally perform surgical procedures as adjuncts to their general practice cannot afford the rates and have ceased the service. Care of indigents and emergency patients is threatened because of the high increase in insurance rates for doctors who traditionally have volunteered much of this service."1 The Governor recognized the strong conflict between the Texas Trial Lawyers Association and the Texas Medical Association, and warned: "It would be a disservice to the people of Texas if this controversy became nothing more than a bitter debate between professional men and women. I believe this legislature has the courage to make the right decision on this critical issue."'"

E. Don Webb (Texas Medical Association appointees); Representative Robert E. Davis and Representative D. R. Uher (Speaker of the House appointees); Senator Kent Hance and Committee Chairman Dean W. Page Keeton (Lieutenant Governor's appointees); Harry Hubbard, Jr. and Charles G. Purnell (Governor's appointees); Mark Martin and George E. Pletcher (State Bar Association appointees); Robert L. Murphy (Texas Association of Insur- ance Agents representative); James K. Presnal (State Farm Insurance representative); Ed- ward A. Stowell (Allstate Insurance representative); and H. Hayes Tucker (Insurance Coun- selors of Texas representative). There were three membership changes on the Commission: Robert Bezucha replaced Landon Alexander; Senator Kent Hance replaced Senator Bob Gammage; and W. A. Mizell replaced George Reed. 13. TEXAS MEDICAL PROFESSIONAL LIABILITY STUDY COMMISSION, FINAL REPORT OF THE TEXAS MEDICAL PROFESSIONAL LIABILITY STUDY COMMISSION TO THE 65TH TEXAS LEGISLATURE (1976) [hereinafter referred to as FINAL REPORT.j 14. TEX. H.R.J. 111 (1977). 15. Id. TEXAS TECH LAW REVIEW [Vol. 10:339

The Governor's concerns were not overstated. Resolution of the conflicting positions was not easily achieved. However, the Gover- nor was also prophetic, because the legislature did reach a consen- sus, although on the last day of the session.

THE 65TH LEGISLATURE The Medical Professional Liability Study Commission submit- ted proposals for eighteen pieces of legislation to the 65th Texas Legislature.'" Its Final Report had been approved by a unanimous vote of those members present at the final meeting on November 23, 1976."1 It was commonly assumed that doctors and the insurance in- dustry were in accord with the major recommendations.'8 However, on December 8, 1976, the TTLA publicly voiced opposition to the report.' Some of the more controversial recommendations which the TTLA opposed were: 1. to limit "pain and suffering" damages to $100,000; 2. to deduct other insurance benefits, such as hospitalization payments, from the amount that could be recovered from a physician found to be liable for negligence; 3. to create medical screening panels to review malpractice claims prior to trial and to allow the expert panel's opinion to become evidence in a subsequent trial; 4. to impose a system of medical-legal arbitration of malpractice claims; and 5. to eliminate lump sum payments of malpractice damage awards exceeding $100,000 to recipients. The heart of the TTLA opposition was that the Commission recommendations "would have the effect of either placing the medical community in a preferential position before the law or to infringe upon a citizen's right to equal protection before the law." 0 The contention was that the recommended changes seriously weakened

16. Ad Damnum Clause Bill, Arbitration Bill, Collateral Source Bill, Hospital Liabil- ity Bill, Insurance Bill, Itemized Damage Bill, J.U.A. Amendment Bill, Medical Examiners Bill, Medical Practices Act Bill, Notice-To-Sue Bill, Oral Warranty-To-Cure Bill, Pain and Suffering Bill, Periodic Payments Bill, Punitive Damages Bill, Screening Panel Bill, Self- Insurance Trust Bill, Standardized Policy Bill, Statute of Limitations Bill. These bills were printed in their entirety in the Legislature Section of the FINAL REPORT, supra note 13, at 2- 80. 17. FINAL REPORT, supra note 13, at ii. 18. File notes of the author and Texas Medical Association News Release, December 10, 1976. 19. Texas Trial Lawyers Association News, December 8, 1976. Texas Trial Lawyers Association News Release, December 8, 1976. 20. Texas Trial Lawyers Association News Release, December 8, 1976. 19791 TEXAS LEGISLATURE

the traditional tort system in two major respects. First, special treatment and immunities would be given to only one class of potential defendants (health care providers). Second, potential plaintiffs in medical malpractice cases would not have an equal opportunity for relief from negligence claims as other plaintiffs in nonmedical malpractice cases. Representative Bob Davis introduced House Bills 722 through 74121 that incorporated all the recommendations of the Commission. Senator Ray Farabee and Representative Pike Powers introduced S.B. 103 and H.B. 370, which covered several of the recommendations in one bill rather than in "single shot" bills such as Represent- ative Davis'. The Farabee-Powers bills, which were actively supported by TMA, proposed modifications in the medical, legal, and insurance systems. Some of the major provisions were: 1. Health care screening panels chosen by presiding judges for reviewing claims in a timely and objective manner; 2. The creation of a Texas Medical Disclosure Panel to ascertain which risks and hazards for treatments and procedures should be told to patients in advance; 3. The strengthening of disciplinary powers of the Texas State Board of Medical Examiners; 4. The creation of review committees to expedite actions against negligent physicians; 5. The elimination of specific dollar amounts (ad damnum clause) for alleged damages in the petitions to reduce sensational publicity; and 22 6. The setting of reasonable limits of liability. Other attempts to legislate medical malpractice crisis relief followed. Senator Carl Parker introduced Senate Joint Resolution 39 (S.J.R. 39) as a proposed constitutional amendment to permit the use of state funds to underwrite the risk of malpractice insurance for health care institutions. This proposal was designed to give the state more flexibility should a cooperative state-underwritten malpractice insurance program for hospitals be established.2': How- ever the bill did not pass.

21. House Bills 722-741 were introduced on January 25, 1977 and referred to the House Committee on State Affairs on January 27, 1977. Message from Governor Briscoe, TEX. H.R.J. 285-87 (1977). 22. Senate Bill 103 was read and referred to Senate Jurisprudence Committee on Janu- ary 11, 1977, TEX. S.J. 49-50 (1977). House Bill 370 was read and referred to House Committee on State Affairs on January 19, 1977. TEX. H.R.J. 212 (1977). 23. Senate Joint Resolution 39 was read and referred to the Senate Jurisprudence Committee on February 2, 1977. TEX. S.J. 187 (1977). TEXAS TECH LAW REVIEW [Vol. 10:339

Another ill-fated bill was S.B. 775 proposed by Senator Jack Ogg, which was designed to allow members of fifteen professional groups to form a mutual insurance association to provide malpractice protection for its members." However, S.B. 391 proposed by Senator Kent Hance authorized a program of self-insurance against malpractice claims for the medical staff and students of the Univer- sity of Texas and Texas A & M University Systems. This bill did pass and become law. 5 Initially, interest focused on the Farabee-Powers bills. These bills incorporated fourteen of the eighteen proposals recommended by the "Keeton Commission." Public hearings were held on both bills on February 9, 1977, by the House State Affairs Committee and the Senate Jurisprudence Committee. Testimony was heard for several hours." On March 8, the Senate Jurisprudence Committee, by a vote of 7-6, voted to delay action on Senator Farabee's S.B. 103. By the same vote, the Committee agreed to ask for an Attorney General's Opinion on the constitutionality of approximately twenty points in the bill.27 The Opinion was requested in a letter from the Committee Chairman dated March 10, 1977, and the Opinion, set forth in Let- ter Advisory No. 135,8 was received on April 4, 1977. The Opinion concluded that S.B. 103 would be constitutional if two provisions were clarified." The Attorney General's Opinion was necessary to answer the constitutional questions. However, the long-range effect of seeking that Opinion was that during the month-long delay the legislature's interest shifted from the Farabee-Powers bills to H.B. 1048 introduced by Representatives Tom Uhur and Don Henderson. The purpose of H.B. 1048 was to reenact the 1975 law pertain- ing to regulation of malpractice insurance by the State Board of Insurance and to reconstitute the Joint Underwriting Association. However, on March 14, 1977, the House State Affairs Committee approved a Committee substitute bill, 3° which provided a compre-

24. Senate Bill 775 was read and referred to the Senate Jurisprudence Committee on March 2, 1977. TEx. S.J. 402-03 (1977). 25. TEX. REv. CIv. STAT. ANN. art. 6252-26a, §§ 1-8 (Vernon Supp. 1978-1979). 26. Committee minutes of February 9, 1977 of House State Affairs Committee and Senate Jurisprudence Committee. 27. Letter from Chairman of Senate Jurisprudence Committee to Attorney General (March 10, 1977). 28. TEx. ATr'v GEN. LA-135 (1977). 29. Id. See note 31 infra. 30. TEx. H.R.J. 855 (1977). 19791 TEXAS LEGISLATURE hensive approach to the malpractice issue. The Uhur-Henderson substitute represented a compromise between trial lawyers, hospitals, podiatrists, pharmacists, and osteopaths.3' The TMA did not support the "compromise" because the bill did not go far enough in the area of tort system reform. 3 Key features of the Committee substitute for H.B. 1048 were the following: 1. A patient would have to give sixty days' notice to the physician before bringing suit. 2. A screening panel of three doctors would review the validity of a claim. Even if the panel found the claim unfounded, the patient could still sue. 3. A ceiling of $500,000 was imposed on malpractice judgments; however, additional amounts could be added for future medical and custodial care services. There was a provision that if the ceiling on damages was subsequently determined unconstitutional, a "contingent" provision would take effect, which imposed a $150,000 ceiling on recoveries for "pain and suffering." 4. Doctors could recover up to $100,000 if a malpractice suit was filed in bad faith. 5. Malpractice suits were required to be filed within two years of treatment. The statute of limitations would be tolled for minors under age of twelve until they reached age fourteen. 6. Malpractice claims would have to be reported to the Texas State Board of Medical Examiners. The medical examiners would have the power to suspend a doctor's license for incompetence or to compel a restraining program for the doctor as a condition of licensure. 7. The malpractice risk sharing pool was continued for another two years. Rates were to be based on either Texas or national experience, whichever was the more favorable. 8. The bill carried an expiration date of August 31, 1993.? Dean Page Keeton contended that the bill was too weak, and he testified that the following provisions recommended by the "Keeton Commission" were needed to give permanent relief from soaring malpractice insurance premium rates: 1. The collateral source rule should be modified or limited. 2. Structured awards should be included. 3. Arbitration panels should be authorized and required. 4. Awards for pain and suffering should be limited.

31. Houston Post, March 15, 1977, at 15A, col. 1. 32. Austin American Statesman, March 16, 1977, at 1A, col. 1. 33. TEX. H.R.J. 855 (1977). 346 TEXAS TECH LAW REVIEW [Vol. 10:339

5. A meaningful statute of limitations should be included. 6. Mandatory screening panels should be required and panel findings should be admissible as evidence in subsequent trials. In spite of Dean Keeton's objections, on March 22, 1977, the House State Affairs Committee substitute for H.B. 1048 passed the House by a vote of 145-1.11 The one amendment to the bill allowed a statewide organization of physicians to create a trust to self-insure its members against medical malpractice claims. The overwhelming support for the substitute indicated the strength of the compromise in the House. On April 5, 1977, the Senate Jurisprudence Subcommittee passed H.B. 1048 to the floor by a vote of 8-0. Also, the two constitutional problems raised in the earlier Attorney General's Advisory Letter on S.B. 103, which were also in H.B. 1048, were corrected in 3 committee. 1 On April 18, 1977, the Senate passed H.B. 1048 to a second reading with several amendments. During seven hours of Senate debate, twenty-six amendments were considered. The following is a summary of the key Senate amendments that were passed:

1. A $100,000 limit on damages for pain and suffering with unlim- ited recovery for actual medical bills, lost future wages, and custodial care was set. 2. Periodic payment of damages where the total award exceeds $100,000 was required. 3. Provision was made for the reduction of the damage judgment by the amount of health insurance benefits available from the patient's own health and accident coverage. 4. The maximum insurance coverage under the Joint Underwrit- ing Association was raised to $750,000 per occurrence of negligence and $1.5 million on the aggregate claims. 5. The House proposal to let doctors and hospitals countersue a plaintiff and his lawyer for bad faith claims was deleted. 6. A definition of "standard of care" for health care liability claims was added."

34. TEX. H.R.J. 1051 (1977), votes recorded TEx. H.R.J. 1064 (1977). 35. TEX. ATT'Y GEN. LA-135 (1977). The Advisory Letter questions the constitutionality of permitting screening panel findings to be introduced as evidence if experts composing the panel are exempted from being called to justify their decisions. No such exemption appears in the bill. The second point for clarification concerned consent forms and their use in trial. 36. Dallas Morning News, April 19, 1977 at 1A, col. 2; Houston Chronicle, April 19, 1977, at 1A, col. 4. 19791 TEXAS LEGISLATURE

As expected, the House refused to concur in the Senate amendments and requested a conference committee to attempt to resolve the differences between the two houses. Conferees were named by both houses, and the battle between the legislative versions of a malpractice bill began.37 Conferees were stalemated through most of the month of May. Initially, the six issues dividing the two bodies were: 1. Non-economic losses, or payments for pain and suffering. The House version of the bill had no limit on payment for this but did have a $500,000 ceiling on overall liability, except for future medical payments. The Senate voted to limit non-economic losses to $100,000. 2. Collateralsources of income. The Senate included a provision that would permit a judge, in setting the damages to be paid in a malpractice case, to consider collateral sources of income, such as health and accident insurance. The provision was excluded from the House version. 3. Structured awards. This provision would have allowed "installment" payments of any damage judgment in excess of $100,000. It was in both versions of the bill, but on a permissive basis in the House version. 4. Screening panels. The Senate version provided for panels to screen malpractice suits before they went into court in an effort to weed out frivolous cases; the provision was excluded by the House. Senate conferees wanted to require a cost bond for plaintiffs who ignored the screening panel's findings and pressed their suits in court. 5. Standards of Care. This provision would have given the courts guidelines by which to gauge negligence in treatment. It was in a restrictive form in the House bill and in a liberalized form in the Senate bill. 6. Bad faith cause of action. This provision, included in the House version but dropped in the Senate, would have allowed health care providers to countersue in cases of frivolous malpractice suits brought against them. Many attempts were made to resolve the differences. None were successful until the last day of the session. By a vote of 5-0 on the House side and 3-2 on the Senate side, a Conference Committee report was recommended to both houses. It finally was approved 141-1 by the House and 19-2 by the Senate.

37. House Conferees were: Representatives Tom Uher (Chairman), Don Henderson, Bob Davis, Pike Powers, and Michael Ezzell. TEX. H.R.J. 2436 (1977). TEXAS TECH LAW REVIEW [Vol. 10:339

H.B. 1048 had difficulty keeping a Senate sponsor. Senator Schwartz originally handled the bill, however, he declined to continue sponsoring the bill after the Senate amendments were adopted. The second sponsor was Senator Ray Farabee, who shep- herded it into the conference committee. Because of Senator Farabee's strong disagreement with the Conference Committee Report, which removed many of the Senate amendments, Senator Farabee withdrew his sponsorship. Final Senate action on the Con- ference Committee Report was handled by Senator Don Adams, one of the conferees who supported the Conference Committee action. This multiple Senate sponsorship indicates the intensity of the legislative struggle over, and the depth of legislative concern for, the fundamental issues raised by the medical malpractice controversy. As finally approved by the conferees, and ultimately by both houses of the legislature, H.B. 1048 resolved the major malpractice issues as follows:

1. It included a $500,000 limit on all damages in malpractice suits, but dropped the $100,000 "inner cap" or ceiling that senators had placed on non-economic losses (pain and suffering).m 2. It included a conditional "bad faith" provision that would allow a health care provider to sue a lawyer who filed a frivolous malpractice suit.39 3. It required a sixty day notice to health care providers before a suit could be filed.4' 4. It did not change the "collateral source" rule. 5. It did not have a provision for structured awards. 6. It omitted screening panels. 7. It eliminated the Senate's definition of standard of care. Earlier in the conference negotiations, several points were agreed upon that became part of the final bill. The State Board of Insurance jurisdiction over malpractice insurance rates was continued and the life of the Joint Underwriting Assocation (JUA) was extended. 4' Also, JUA policy limits were increased from $300,000 to $750,000 per occurrence, not to exceed $1.5 million per year for all occurrences.4 2 Finally, the Texas Medical Association and the Texas Dental Association were allowed to form a self-insurance trust as

38. TEx. REV. CIV. STAT. ANN. art. 4590i, § 11.02 (Vernon Supp. 1978). 39. Id.§ 8.01. 40. Id.§ 4.01. 41. TEx. INS. CODE ANN. art. 21.49-3 (Vernon Supp. 1978). 42. Id.§ 3. 1979] TEXAS LEGISLATURE 349

43 options to regular protection. It is apparent that H.B. 1048 was controversial legislation, and as with most controversial legislation, the result was a legislative compromise. The interested parties knew that the bill did not resolve all of the medical malpractice issues nor did it provide solutions that were widely accepted. As with most controversial legislation, it was a middle position. Most of the members of the legislature hoped that it would serve Texas at least as long as the previous bill passed in 1955, which was not changed until 1975. Although this compromise statute will afford some relief from the malpractice crisis, its solutions will continue to plague the Texas legislature in the future.

43. TEx. INS. CODE ANN. art. 21.49-4 (Vernon Supp. 1978).