Fitch Says Too Early to Determine Impact of Doctor Walkouts

January 30, 2003

Recent and planned walkouts by surgeons protesting escalating malpractice insurance costs is gaining attention, however Fitch Ratings reports it is too early to tell what, if any, impact these walkouts may have on hospitals and whether walkouts will be more pervasive.

According to Fitch, a surgeon walkout that lasts weeks or months would certainly become a significant credit concern to an affected hospital. The walkouts pose a serious risk to hospital’s most lucrative revenue streams, highly profitable surgery cases. Many of the walkout surgeons are cardiac and orthopedic surgeons, two of the most profitable service lines of a hospital. In addition, the walkouts by the surgeons will create a burden for emergency room department, many of which are already running over capacity, further delaying the wait time for patients. Most hospitals tend to be unprofitable in the emergency room setting.

After four surgeons walked off the job at four West Virginia hospitals earlier this month, larger walkouts are occurring in other areas around the nation. A dozen physicians walked off the job at four hospitals in eastern Mississippi. One of the hospitals affected is Memorial Hospital at Gulfport, rated ‘A’ by Fitch. The walkout occurred Monday and is expected to last for a month.

More than 800 physicians completed a two-day walkout in the Palm Beach County area yesterday, and many surgeons in New Jersey are expected to stage an open-ended walkout next Monday, Feb. 4. A protest march in the state capital of Trenton is planned on Feb. 4. Surgeons in Pennsylvania have delayed work stoppages after Governor-elect Ed Rendell appointed a task force to look into the issue. The task force’s report is due on April 1.

Many physicians in these walkout states are arguing for punitive damages and pain-and -suffering awards in medical malpractice cases to be capped at $250,000. California passed malpractice award caps in 1975, and since then its physicians’ professional liability insurance rates have increased 167%. By comparison, physician professional liability insurance rates have increased fivefold across the nation during the same period. In addition, juries in Philadelphia have awarded more in malpractice damages than the entire state of California over the past three years.

Although President Bush is pushing for national reform for malpractice rewards, Fitch believes that tort reform and malpractice award caps will most likely be addressed at the state level.

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