Episode 15 - Scott Buchholz - The Road to California's New Malpractice Law

What can medical professionals expect from California's new medical damages caps?

  • 00:10:11 - 05:10:11

    Jerrod Bailey  00:10

    Welcome to reimagining healthcare a new dialogue with risk and patient safety leaders, presented by Medplace. We're excited to bring you conversations with top risk and patient safety thought leaders from organizations around the country. If you like what you heard, share it, talk about it. We'd love to also invite you if you're interested to come be a speaker, really anybody who's got an opinion on risk and patient safety that we think is interesting, and it can cover a lot of different angles. Just reach out to us at speakers at Medplace.com. So today, I'm excited to unpack a topic with you guys. And really, this is going to be driven by our by our guests. My name is Jared Bailey. I'm the CEO of Medplace. I'll be playing host today. But today, we're joined by Dr. Scott de Buckholtz, the managing partner and senior trial lawyer of Dummett, Buchholz and Trap. Did I get that right by the way,


    Scott Buchholz

    You got it, right, except I'm not a doctor, although I'm a juris doctor, a doctor of law, but I don't have the privilege of having a medical license.


    Jerrod Bailey

    Oh, my gosh, did I say doctor? That's funny. I think I said the deed it threw me off. So Scott, specializes in civil litigation with emphasis in professional liability, commercial and business litigation, as well as arbitration and administrative licensing matters. He regularly consults with healthcare institutions on regulatory and compliance issues. So Scott, welcome.


    Scott Buchholz

    Hey, thank you very much. I appreciate the opportunity to chat today.


    Jerrod Bailey

    Now, of course, so you're going to help us out, you're going to help us understand and unpack this new MICRAlaw. thing that happened in California. Right? So what are we dealing with here? What is this and how did we get here?


    Scott Buchholz  01:52

    Yeah, thank you. Thank you, Jerrod. And just by way of background, I work with hospitals and physician groups in defense of their medical malpractice cases. And so we're very much involved. My firm is very much involved with dealing with MICRA which is a set of laws, the genesis of which came about in the 70s, California always being rather litigious state was, there were no caps on damages. And in the 70s, early 70s, the insurance companies that insure doctors and hospitals, were raising their premiums. In 1975, there was there were going to raise premiums 400%. And so what we saw were doctors leaving the state. And this was, this was a significant issue. And there was bipartisan support. for, let's do something about it, we have to do something to bring premiums in and make sure that our doctors and healthcare providers, anyone that has insurance or can be sued, that has some protection.


    So the legislature came up with what we what was A B one double x, that was signed into law by Jerry Brown in 1975. And what this package of laws and we'll 'll we'll talk about it briefly is it was meant to control costs and decrease Professional Liability premiums. And was a compromise amongst the various parties the plaintiffs bar as well as organizations in debt supported doctors. So that's, that's what we've been tied to, without any significant changes since 1975. And where how we've gotten here now, maybe how we've gotten here now is we jump ahead to 2022. And the centerpiece of the MyCareer legislation was a cap on pain and suffering, which is was cap since 1975 at $250,000. That amount is really has the buying power of about $50,000. Now, so there was a strong push and there has been over the past six or seven years to change that. So let me talk a little bit about what MICRA, what is the medical injury Compensation Reform Act of 1975?


    Jerrod Bailey  04:43

    Okay, well, that's 

    our starting point for all


    Scott Buchholz  04:45

    that is the starting point. That is the law 1975 And really was the bell cow for a lot of legislation around the country. California was at the forefront of this because of these soaring premiums. So the centerpiece as I mentioned, Is this cap on pain and suffering, general damages, there's no cap on economic damages. If someone has wronged by a medical provider, they could still get their loss of income, they could still get their medical bills paid, they could still get other costs. But when it came to general damages, or what we call pain and suffering that was capped at 250. Another aspect of this MICRA law was capping or limiting contingency fees. So, this was a big issue for the plaintiffs Bar, and actually part of the new law that comes in. So plaintiffs attorneys, unlike other agreements, in cases, such as a car accident or slip and fall, they can ask for 33% up to 40%, I've seen even more of attorneys fees out of a settlement or jury verdict or judgment, MICRA limited in from 1975 40% of the first $50,000. And it was a scale based upon the amount of Okay, so what in effect, this limitation, De incentivized many attorneys from getting into the cases, not only because the recovery was capped, but also what they were going to be paid. And believe me, medical cases, medical malpractice cases are fact intensive. They're difficult to work up. They're expensive. And attorneys really shun that area, because of the what they would be paid and what their clients would receive. Okay. Makes sense.


    Yeah. So there are other aspects and other issue was collateral source, which is, if you were in a car accident, you could introduce your medical bills that were paid. In in California, the legislature determined that we are not going to require a medical provider who was sued to pay medical bills of the injured party as a result of it. They wanted to, they felt that that it that the pub for policy reasons sake, they didn't. They felt that they could remove that so that we're able to avoid having to pay most medical bills in medical negligence cases. If we're a defendant and we lose now the only the differences are we cannot that doesn't cover Medicare, or Medicaid. Well, those are federally based programs and state law wouldn't cover that. Another aspect of MICRA and there's like six areas was a shortened statute limitations. If you wanted to sue a doctor or hospital. Yeah, you would have to bring the case within one year. Wow. Yeah, it's two years for general liability, car accident, things like that. Now, one year, it's not a rock solid. It's when you reasonably should have discovered the event.


    Jerrod Bailey  08:26

    Okay. Yeah. So there's a difference there?


    Scott Buchholz  08:28

    Yeah. For example, if you have a surgery, and the doctor and the surgical team happens to leave a sponge, and you don't know about it, and you only find about out about it later. Dysfunctional mutations wouldn't be one year. So that's something and then there was a couple of other aspects. One, you were required, not well, you're required to serve a notice of intent in advance of suing a hospital or doctor to opt give the opportunity or some breathing space with regard to possible settlement. And that would extend the statute limitations from one year to one year in 90 days. Okay. The last aspect and again, I know I've been talking a little bit here, it's a rather involved group of laws is that healthcare providers, if there's economic damages, let's say you have a high earning injured patient who, who is who learned who has damages. A good deal of damages. You can periodic size payments, you don't have to give a lump sum upfront, if the jury it can be periods of periodic sized over time, okay. 50 up to $50,000. If we have more than $50,000 they can periodic size, which can save the defense loss, because you can structure it. So that would be that's, that's, that was the MICRA framework. And that's what we lived with for 45 years, up until now, 47 years actually, up until we AB 35. Past.


    Jerrod Bailey  10:23

    Wow. So I mean, it's got these are some pretty significant structural changes. And many of them that you just mentioned are economically going to drive certain behavior from the plaintiff side from? I mean, this is that's why this is a big deal. Right?


    Scott Buchholz  10:40

    Right. We haven't gotten to the I haven't started on the changes to the law, but that's what we've lived with. Okay, it's the framework that has allowed the state of California when it comes to per capita payouts in damages, to be in the bottom third of states. And that has allowed premiums and for providers to not be enormous, manageable. Because costs have been limited. And in fact, in my area of practice, because they're because we already we have some cap on pain and suffering. There's less risk involved in in lawsuits. Yeah,


    Jerrod Bailey  11:29

    that's right. You know, and I, I know, because I've seen legislation and in various compliance laws from California end up driving decisions and in trends in other states, that I'm sure others are looking at what's going on here? And we'll see models of this, or we'll see echoes of these changes moving into other states over time. But, but so what are these changes? I, you did a good job of establishing the foundation, what are we really looking at?


    Scott Buchholz  12:05

    Well, there are some significant changes. Let me say that one thing that's not included in MICRA that is part of the is assembly, Bill 35 is a broadening of the ability for a frank discussion, with, with a with a patient by a doctor. Under current law. If a doctor talks to a patient and says I'm very sorry that you had to go through this it, it's a very unfortunate feeling statements of benevolence, empathy, can be mentioned. But if that doctor said I'm sorry, that was my fault, I should have removed the sponge, before I closed the body cavity. That would be admissible. And that would be an admission of fault. What this law does includes is now a new section within the health and safety code that will not only allow for expressions of regret, or sympathy, but include statements of fault. So a doctor,


    Jerrod Bailey  13:18

    those statements are now protected, and in some capacity,


    Scott Buchholz  13:21

    they are protected, they will not be admissible into evidence. And that's that will be a significant with the hope, I suppose, is to allow for a more open and frank physician patient communication, which is that the heart of any procedure is the informed consent and discussion about what has occurred. So that that will be interesting to see how it plays out.


    Jerrod Bailey  13:46

    Scott, you're familiar with the CRP programs, communication resolution programs? Yes, this sure sounds like it opens the door, and maybe even necessitates that, that hospitals and providers within California if they haven't adopted it, or don't know how to spell it yet, they might want to start looking into it, because this opens the door to, to that being a potential solution or a potential at least tool in the toolkit to help you know fend off. I mean, that's how it's being used today to really help resolve things earlier. You know, in not lead to some of these larger nuclear verdicts, things like that,


    Scott Buchholz  14:26

    As it should be, I think Stanford and Michigan were really at the forefront of these programs in California up until well, until January one 2023. When this these laws take effect there will now be opportunities, but before that, it was because of admissible admissibility of statements of fault. And again, potential exposure that that that placed a bit of a cap on these things. So but that I that that aspect of a law is something that's nuanced. It's not something that is contained within the old MICRA statute. So let's talk about what is new. Okay. Instead of a flat cap of $250,000, on pain and suffering, we have a built in graduated step process. So what the legislature has done is breakout caps into two, two parts, for your medical negligence without a wrongful death, the cap will increase to $350,000. Year one. For your wrongful death cases, the cap will go to $500,000 in year one. Every year after that, for the non wrongful death cases, it'll increase $40,000 Up until year 10.


    Jerrod Bailey  16:09

    Okay, so is this referring to, like claims that are filed within that these years that that's where the caps will be set to that claim? Is that the idea?


    Scott Buchholz  16:18

    Yes, sir. The lawsuits that are filed after January one. lawsuits. Okay. Great. Yeah. And or it could be an arbitration, a petition for arbitration versus civil action,


    Jerrod Bailey  16:33

    when that event happens will trigger what the cap is going to be on that particular


    Scott Buchholz  16:38

    fed particular case? Correct? Correct.


    Jerrod Bailey  16:41

    So these escalate over the years then?


    Scott Buchholz  16:44

    Exactly, exactly. So the cap on the non wrongful death matters, the sponge case that we spoke about where there wasn't a fatal result. that would that would be $40,000 per year, up to $750,000. In year 10. C, thereafter, it increases 2% per annum. Okay,


    Jerrod Bailey  17:11

    so it's going to start considering inflation, I mean, I think inflation is a little bit higher than 2% These days, but at least that components in there now, so we don't have the same situation where decades later, we're still providing the same counts.


    Scott Buchholz  17:28

    Exactly. I see. And for wrongful death, it'll be $50,000, up to a million dollars in year 10. And again, same 2% boost each year after that. So another new aspect, as it relates to MICRA is something called stalking. So what the law says is that, well, let me just let me go back a moment. If a case went to trial, and it was a doctor, a hospital, and say, a physical therapists that were sued, and there was a jury verdict against all three, the most the plaintiff could get would be $250,000, in general damages because of the cap. Okay, yeah. The new law creates a stacking opportunity for an injured patient. You know, if he sued the doctor, the hospital, and let's say, downstream after, after the event at the hospital, the patient saw a physical therapist who did something wrong, that he could stack, or she could stack all three will have the opportunity to sue the doctor and the hospital and the downstream provider who's unaffiliated with the doctor or the hospital for a separate cap. So potentially, a plaintiff in a sponge case or something like that, where there isn't a wrongful death, you could have three caps.


    Jerrod Bailey  19:07

    So for pain and suffering, wow. So the caps that you just walked me through, it would be those caps, potentially 234 times in three times as much three times on this particular case. Right. So


    Scott Buchholz  19:22

    what used to be on December 31, the case was filed, but prior to that, the potential for three defendants will be $250,000. In general damages. That same claim filed on January one could be three times $350,000, which could be 1,000,050. So that's a that's a 400% increase in potential losses, or strike that potential damage claim. So that's a that's a significant addition to, to what the exposure is,


    Jerrod Bailey  20:06

    this is going to require that carriers and captives completely, they're going to have to completely recalculate how they're how they're looking at all of their risk. Obviously, this was a significant math change to that, that calculus.


    Scott Buchholz  20:23

    Huge, huge. And, and I think it's going to it will have ripple effects. Premium certainly will go up hospitals. I mean, the issue that hospitals often have is they are a new California law often held as the principle of doctors, that is the agents we call it a sensible agency. It's really a judicial creation, that if a patient comes to a hospital, they just see a big building, they don't know who's an employee, they don't know who's independent contractor. And hospitals are having to deal with hospital based practices, emergency room, radiology, pathology, anesthesiology, and distancing themselves from those providers, make making sure that the conditions of admission say that doctors are independent contractors doing anything they can because they could be held responsible for the actions under California law if they don't make an affirmative representation as to the contract or status of the doctor. But it is something that this is going to send ripple effects. And I think that hospitals, medical staffs, or hospitals are going to require more coverage, instead of the 1 million, 3 million.


    Jerrod Bailey  21:57

    Yep. And it's creating a lot of economic incentive to get more attorneys to enter the space and to get them to take on more cases. I mean you're, it's really changing the calculus for them also. So I imagine we're just going to see a volume increase in general as a result of this, too. So I think in a lot of ways, this I understand why this is such a big deal, and why this is a big deal for others in the country. Because if there are states that start to follow suit, then this isn't just going to be a California thing.


    Scott Buchholz  22:31

    Yeah. And interestingly, it's there haven't been a lot of states that have adopted similar laws to MICRA, in fact, many states have found caps on damages to be unconstitutional, invading the legislature and raiding the judicial duties under their constitution, as far as limiting damages. And so but we'll see. I mean, there's a lot that is covered in the in the new law. There are things that are not covered. Evidence of Collateral source, we still get to avoid having to pay medical bills unless Medicare, the statute of limitations has not changed. What has changed is the contingency fees. Instead of looking at the steps along the way, how much is recovered? What the legislature has done is said that plaintiffs attorneys can collect 25% of cases that are settled before litigation. And then 33% of recovery after judgment strike that after a judgment or a lawsuit is filed. Okay. If matters are tried taken to trial and arbitration trials can be very expensive. Well, yeah, the plaintiff's attorney can petition the court for additional monies beyond the 33%. So the combination of the ability to obtain additional damages the higher return for the plaintiffs bar, I think is going to bring back to the fold successful general liability plaintiff attorneys and other personal injury attorneys back to medical malpractice cases. So that indeed, yeah, there is a change regarding the periodic sizing of patients payments for damages from 50,000 to 250. But that I don't think that's going to be a major issue here for Mike, where it's going to create any ripples anywhere. Well,


    Jerrod Bailey  25:01

    Scott, somebody if there's anything else new with the law that we should cover, but I'm, I'm interested, if we get our crystal ball out what you know what kind of what could we expect from you know, in terms of like creative pleadings from plaintiff's counsel or you know, what tactics might be used to sort of maximize? Or to just take advantage of this higher recovery potential, like what, what is your crystal ball show you? What do you think I should be at least have on our radar and kind of looking forward?


    Scott Buchholz  25:33

    Well, it really isn't much. I mean, it's sort of a turnkey operation for the plaintiffs. I mean, they're going to be making similar claims. There's nothing. We'll talk briefly about the ballot measure that was to be on the November ballot that included a requirement of a certificate of merit, before plaintiff's counsel filed a lawsuit that did this is not part of this new law. But I think what we're going to see is naming of additional defendants. Because to create stalking, yeah. And 100%. Yep, we're going to see that. We're obviously going to see delays in filing of lawsuits assuming the statute limitation allows. I have already seen in a couple of cases that we have where we have minors, whose statute limitations are longer, considering the plaintiff's attorney is considering dismissing the claims and then refiling them after January one. Interesting, and to allow for the greater payoff at the end.


    Plaintiffs bar has been very creative thus far in trying to get around the MICRA cap they've been utilizing a law, the Elder Abuse and Dependent adults Civil Protection Act. And this isn't a decision act that really is there to protect elders and those who are dependent from cases of neglect, okay, that is not covered under MICRA. But the access or ability to utilize that law, anyone who has been in the hospital for more than 24 hours, can actually be considered a dependent adult. And so we see that law often utilized whether or not there's greater use or less use of that law with the new MICRA caps. You know, we'll see how that goes.


    Jerrod Bailey  27:49

    Yeah, I can imagine that that might change, it might not. So how, how does this sort of change medical malpractice cases like for patients or physicians, for small practices, large systems, like? How are these different stakeholders affected? Potentially?


    Scott Buchholz  28:08

    Well, with reimbursement, not increasing with increased regulation, I mean, healthcare is the most regulated industry there is, I mean, you've got the federal state, each hospital ambulatory care centers often also are credited, in order to be part of the Medicare program, you have licensing boards, physician, there's so much going on in this area, from the standpoint of oversight, the cost to maintain that, I think is going to be a significant concern for small medical practices, I think you're going to see greater consolidation in the industry, because you've got to create some economies of scale. As far as cost, I think you're going to see less, I think you're going to see more health systems taking on medical groups, because they just won't be able to afford these premiums which are going to which are going to go up, and they're going to continue to go up. And so I think as far as that's concerned, I mean, I've been working in this industry, defending hospitals and doctors since 1988, in California 89 Excuse me.


    And I've always been impressed with the risk and quality, the services and resources that are done in this in this space. And I think that there's just going to be a greater focus on that more money spent to that. I think that someone is going to have to pay for these higher damage results. The end. And really, we're going to see more litigation. And no one really talks about the cost involved in those 90% of cases that are disposed of. I mean, to defend a case, in a med mal case where you have to have a medical expert in order to, from the plaintiff standpoint, and we usually retain experts also, it's 100 $150,000, at least, and then you're talking about the folks that have to come online to be interviewed or deposed or things like that, there's a significant cost, we're going to see a great deal more claims, we're going to see a lot more lawsuits, and there's going to be a greater burden on the providers. So,


    Jerrod Bailey  30:52

    indeed, well and we've certainly, it's not hard to get the crystal ball up, because there's other states that have not had these same caps and limitations. So we kind of look at, at how things play out there and kind of get an idea of how they'll work and in a place like California, so, but yeah there's a lot of in other places, there's a lot of attention to how to create more efficiencies in the prep part of the process, I mean, many places is born out of that desire to create efficiencies in working up cases and in litigating them and things like that. So I'm sure there's going to be some of that going on to help kind of counterbalance it. But if I think about it, there's I could probably think of a couple of stakeholders that are benefiting most from this bill, like, who would you say is benefiting the most from this bill?


    Scott Buchholz  31:47

    Well, I certainly think that injured patients who have valid medical malpractice claims will benefit. There's obviously a greater opportunity to for damages here. And, and, and so I think that is a significant, significant thing. I also think that the plaintiffs bar and, and the legal industry is going to benefit. Frankly, it'll be more work for me. So I suppose I'd benefit. I I'm not, I'm not sold that on the idea that patients generally benefit. Because I, I think that the more litigation leads to more defensive medicine, and greater costs and litigation and is a leakage in a system. Yeah, Medicare doesn't reimburse for Medicare doesn't reimburse for it. And it is a leakage in the system that whether right or wrong, it always comes down to scarcity. Yeah, that's right.


    Jerrod Bailey  33:16

    Well, we've got the fairness for injured patients act, two out there. So what is that in, in? How does that relate to AB 35? Is this because we talked about patients benefiting? Is this move in the right direction, like help me understand these two?


    Scott Buchholz  33:32

    Well, the fairness for injured patients act is actually and I have to check on this. But the promise was that they would remove that off the ballot with the signing of AB 35. And so that, that law would have done a good deal. That would have been much more significant from the from the healthcare provider side than what we what was come up with a B 35. So it's my understanding draw is that this is not going to be going to ballot that A B third with AB 35. That that fairness for injured patients act will no longer be considered.


    Jerrod Bailey  34:19

    Got it. Okay. Good to know. So, just to kind of close up, feel free to give me any other closing ideas that you've got, but you know, we did just touch on whether this will have a national impact. What's your kind of final thoughts on that? I mean, it sounds like maybe, maybe not.


    Scott Buchholz  34:36

    You know, it, I think, I think eventually the federal government will step in, at some point with its own program, national program versus sort of a each state having their own. We're talking we're talking about Every integrated health system throughout the United States, so I think we'll see the federal government come in and probably set their own laws, eventually in healthcare. As far as other states are concerned, it really depends how strong their medical we have in California, a very strong medical physician lobby group, which has which has done well to keep MICRA as it was in 1975. And I'm not so sure that the ballot measure that was on the ballot would have been successful. a ballot measure, similar ballot measure was in 2014, was soundly defeated. I think people still have a halo with doctors, especially after COVID. But the same, I think other states will certainly consider it. But I think at the end, if the federal government doesn't come in the state will need to come in. And I think, like, I believe Florida does this. Providers will only need to pay a certain amount. And the state covers everything else. Because in Birth Injury Cases in high exposure cases 20 $50 million potential verdicts on a on a case or incident where a split second decision may have been the wrong one. Right. That's tremendous exposure,


    Jerrod Bailey  36:42

    and two will lose doctors for that


    Scott Buchholz  36:45

    year here. So


    Jerrod Bailey  36:47

    yeah, That's fascinating? Well, just to end I don't know if there's advice that you give folks or advice that's generally just sort of good practices right now, for those in the risk industry that are thinking about these laws or anything that that we should be thinking of doing next, or monitoring, or


    Scott Buchholz  37:06

    I think at this point, that they should be bullying healthcare providers, booing, should we be doing their risk programs, I think they need to be attentive to incidents on the unit, I think they need to follow up, I think they need to bolster and make their risk programs more robust. And that's also medical groups to attack these things early on, as you mentioned earlier, because the exposure, that couldn't be four or five-fold what it was this year, in the coming year, and it's going to be it's going to be there's going to be more claims and more lawsuits. But the sooner we get to this, and frankly, from a defense side, the sooner we can avoid a patient going out and seeking the services of an attorney. We can talk to that person and try to resolve it. Rightfully.


    Jerrod Bailey  38:05

    That's, that's great. Yeah, I mean so for those who have been thinking about CRP, but haven't made it into it, yeah, this is another reason to dust off those efforts. And in try to get something in place, I think looking at reserves is probably going to be a natural part of this probably already happening, certainly at the carrier level, but captives and anything like that would be important. California allow captives? I don't know, though, okay. You know, the just the risk tower behind that and how the reserves are stacked against what's inevitably going to be higher payouts in general across the board. Well, this has been great. Scott, thanks for educating me on this. It's always good to hear from somebody who's really in the middle of this. Any final thoughts before I close this up?


    Scott Buchholz  38:53

    No, I know in my job, I'm so privileged to represent those who heal others and I am in my years of working with them. These are wonderful people, the folks that that provide for others, and, and I stand by them, and it's a privilege to do that on a daily basis in my work, and I wish them the best and, and I know from the defense bar standpoint, my colleagues and defending them, I know we're getting ready for what expects to be, we expect to be an onslaught of new matters. And so be it. We'll be ready.


    Jerrod Bailey  39:37

    Nice to know you guys are ready. That was well said. Thanks so much. Well, for everyone else. Thanks for listening to reimagining healthcare and new dialogue and risk and patient safety. Subscribe and Share if you found the value in this episode. And if you'd like to participate and guests as I mentioned, just email us at speakers at Medplace.com and last make sure to follow Scott. I'll put your LinkedIn if you prefer that on in the show notes it'll be a great place for those who have questions and follow up to be able to find you. And thanks again for the time. This was really great.


    Scott Buchholz  40:08

    Garrett, thank you so much. And thank you to Medplace for the opportunity to present here today. Best wishes.


    Jerrod Bailey  40:15

    Our pleasure, and thanks so much God, we'll talk soon. Bye Well

Scott Buchholz discusses California's recent overhaul of medical damages caps. Scott also talks about the history of the state's malpractice laws and the potential fallout of the new bill, including plaintiff lawyer strategies and what healthcare workers can do to protect their practice.

Scott Buchholz

Guest - Scott Buchholz

Defense Lawyer

Scott D. Buchholz is the managing partner and senior trial lawyer at Dummit, Buchholz & Trapp.  He specializes in civil litigation with emphasis in professional liability, commercial and business litigation as well as arbitration and administrative licensing matters.  He regularly consults with health care institutions on regulatory and compliance issues.

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