MINUTES OF THE meeting

of the

ASSEMBLY Committee on Judiciary

 

Seventy-Second Session

April 7, 2003

 

 

The Committee on Judiciarywas called to order at 8:12 a.m., on Monday, April 7, 2003.  Chairman Bernie Anderson presided in Room 3138 of the Legislative Building, Carson City, Nevada, and, via simultaneous videoconference, in Room 4401 of the Grant Sawyer State Office Building, Las Vegas, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Guest List.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

 

Note:  These minutes are compiled in the modified verbatim style.  Bracketed material indicates language used to clarify and further describe testimony.  Actions of the Committee are presented in the traditional legislative style.

 

 

COMMITTEE MEMBERS PRESENT:

 

Mr. Bernie Anderson, Chairman

Mr. John Oceguera, Vice Chairman

Mrs. Sharron Angle

Mr. David Brown

Ms. Barbara Buckley

Mr. John C. Carpenter

Mr. Marcus Conklin

Mr. Jason Geddes

Mr. Don Gustavson

Mr. William Horne

Mr. Garn Mabey

Mr. Harry Mortenson

Ms. Genie Ohrenschall

Mr. Rod Sherer

 

 

COMMITTEE MEMBERS ABSENT:

 

Mr. Jerry D. Claborn (excused)

 

 

STAFF MEMBERS PRESENT:

 

Allison Combs, Committee Policy Analyst

Risa B. Lang, Committee Counsel

Sabina Bye, Committee Secretary

 

 

OTHERS PRESENT:

 

Dr. Weldon Havins, Clark County Medical Society

Bill Bradley, representing the Nevada Trial Lawyers Association

Alice Molasky-Arman, Commissioner, Division of Insurance, Nevada Department of Business and Industry

Marte Hilario, President, Adult Care Association of Nevada, Las Vegas

Theresa Brushfield, Adult Care Consultants, Las Vegas

Wendy Simons, Park Place Assisted Living Residential Neighborhood for Seniors, Reno

Lawrence Fry, Board of Directors, Dayton Parkview Adult Residence, Dayton

Pamela Graham, Chief, Bureau of Licensure and Certification, Health Division, Nevada Department of Human Resources

 

 

Chairman Anderson:

[Roll was called.]  A quorum is present; 13 members are present.  [The Chair reminded the Committee members and those present in the audience of the Standing Rules and appropriate meeting etiquette.]

 

Assembly Bill 300:  Provides for creation of screening panels for medical and dental malpractice claims. (BDR 3-927)

 

Assemblyman Garn Mabey, District No. 2, Clark County:

[Introduced himself]  Assembly Bill 300 basically regards the re-creation of the Medical Legal Screening Panel.  Last summer, A.B. 1 of the Eighteenth Special Session passed and I am very grateful for what happened there; however, I was disappointed that the Screening Panel was eliminated.  I really felt it was an important part of the system in Nevada; for that reason, when I became elected, I toyed with dropping the bill draft request and hoped that it would become a bill.  I did that and hopefully it will become a law.  I acknowledge that I have strong opposition and I look forward to hearing the comments.  However, I feel strongly that it should be reinstated and I will go over the reasons why. 

 

Dr. Havins is in Las Vegas and he will speak more towards the bill and I will speak towards why I think we should have it.  I would also like to acknowledge Ms. Combs for helping me; she put a lot of this information together.

 

First, I was somewhat surprised about the history of the Medical Screening Panel.  It started all the way back in the 1960s when it was a voluntary panel.  Then, in 1975 it became a law in our state and then it was felt that it wasn’t effective and back in 1981 it was done away with, similar to what happened last year.  In 1985, because of the increase in the number of lawsuits, it was reinstated.  I think in 1986 dentists were added to it and the idea was that it would sunset in 1989.  The Chairman of this Committee knows much more about this than I do, but it was supposed to sunset but did not; the law was changed.  So, it continued with some changes occurring until last year when it was discontinued.

 

Basically, the way the panel worked, to explain for those who have not been involved with this, if a patient was injured or thought he were injured, he would go to his attorney and would file a claim with the Department of Insurance.  There the defense would have so many days to respond and then the plaintiff would have more time to respond after that.  Then, a group of physicians—three on the panel—and three attorneys would then decide whether there was reasonable probability that malpractice was committed.  After that they could still decide to proceed with a lawsuit.  Whatever happened in the panel did not determine what happened in court, so there was no obstruction to anyone from filing a lawsuit.  What was frustrating to the physicians was that, even though there was a finding by the panel that there wasn’t malpractice, claimants would go ahead and sue.  So that is one of the reasons why some doctors asked that the panel not be continued.  My feelings about that were that it really needed to be fixed and not discontinued. 

 

For that reason I have introduced A.B. 300.  I have given you some information (Exhibit C) that has happened since the panel.  Since the panel was discontinued in October—you can see the claims skyrocketed, November especially—it has continued to be about double of what it was every year.  Now, I understand and acknowledge that a lot of the claims coming out immediately after the panel was discontinued was because there was a backlog and I appreciate that.  I still feel that there are about double the number of claims filed now compared to when the panel was in [force].

 

There really continues to be a problem.  In a section of the Reno Gazette-Journal on Friday, it mentioned in Desert Springs Hospital that they don’t have any general surgeons, so they have not been able to do any surgeries; following are the last two paragraphs:

 

Doctors have expressed concern that the lack of surgeons at the facility could jeopardize patient health because immediate lifesaving care to the patient will be delayed.

 

General surgeons have quit working at Desert Springs because frequent 24-hour emergency room shifts are too tedious.  They say the risky on-call work can raise their already skyrocketing rates of medical malpractice insurance.

 

[Assemblyman Mabey continued.]  Even though A.B. 1 of the Eighteenth Special Session passed, it continues to be a problem.  In fact, things have gotten worse in some specialties more than others.  In my opinion, reestablishing the malpractice [Medical Legal] Screening Panel would be helpful.

 

I have had four lawsuits brought against me and I would like to share those with you.  The first one was in 1985, ten days after I started my practice.  I had come over from the clinic and one of the doctors asked if I would like to do a delivery.  I said I would love to do a delivery and went back to the delivery room with the doctor; she was a second-year resident and I was a first-year resident.  I started the delivery; the head came out but the shoulders wouldn’t.  So, she took over and delivered the baby.  Since the shoulders were difficult to deliver, the baby had a little palsy and couldn’t move its arm very well.

 

About a month later I received notice of a lawsuit.  Back then, in 1985, they didn’t have the screening panel.  In about another month the claimants said they wanted to settle and they wanted me to settle for $2,500.  I said I hadn’t done anything.  They thought—the patient thought—that I had let the nurse do the delivery; they thought the female doctor was really a nurse, so they sued me and didn’t sue her.  They also sued another doctor who did an ultrasound and he said the claim should have been bigger, but they wanted to settle for $2,500.  I thought that was not very much and asked why they wanted to settle.  The ultrasound doctor said it was because the panel was going to start the next month and it needed to be resolved before that.  He said it was only $2,500 so I went ahead and settled.  But in my heart I didn’t really feel I had done anything wrong.

 

I think in that case, if the panel would have been there, it would have shown what happened; it would have shown the baby really wasn’t doing poorly, but I think the panel would have helped.

 

[Assemblyman Mabey continued.]  Later the same year, a baby was born with cerebral palsy.  In that case they found that I didn’t—the panel was in effect then—commit malpractice, but the people went ahead and sued.  To make a long story short, about a year and a half ago the complaint was dismissed, but it lasted from 1986 all the way into last year because the statute of limitations was longer; they really hadn’t filed until 1994.

 

I was involved in another case when I was a resident where two ureters were cut.  In that case I was there, but I was not responsible for either, but I was named in the lawsuit.  In that case the panel was unsure whether I was responsible.  They said that they thought I was; I wasn’t.  Finally, I was dropped from the case; somebody else settled.

 

Finally, about six years ago I was named in a lawsuit where they found that I was not responsible, but the claimants went ahead and sued and I ended up settling.  So I have been involved in malpractice suits four times, once without the malpractice panel and three times with it.  Once the panel thought I was responsible; once they weren’t sure; and once they knew I wasn’t.  So, I have had some experience with the panel.

 

In my opinion the number of claims has gone up since the Medical Malpractice Panel was discontinued; the number of frequencies results in the liability insurance companies charging us more, so I would like the panel reinstated. 

 

Chairman Anderson:

Are there any questions for Dr. Mabey?

 

Assemblyman Conklin:

Dr. Mabey, just out of curiosity, one of the things that I have heard is that part of the problem with the panel is the amount of time it takes to get a decision from the panel.  Whether that is a backlog or what, I am not sure.  Looking through the bill, I really don’t see anything that addresses that.  How do you anticipate this panel being better than the last one in terms of being able to address those particular needs in a timely fashion?

 

Assemblyman Mabey:

I think Dr. Havins will address this a little bit more when he talks to you.  Basically, the law has an administrative court judge who will expedite things greatly.  Everything has to be in and out by six months.  That was one of the problems with the panel.  Sometimes it went on for years; they would ask for delays and those would be granted.  So, you’re right; that was one of the arguments; it raised the cost of defending it and prosecuting it.  I agree that was a problem and that is why we would like to fix it and eliminate that.

 

Assemblyman Mortenson:

You said the number of claims has gone up since the panel was abolished.  Has it grown slightly like the population has grown or has it been a spectacular increase.  Do you have a number?

 

Assemblyman Mabey:

On the sheet (Exhibit D) that was handed out, you will see that the claims have gone up.  As Las Vegas has grown, so have the number of claims and I would expect that to happen, but since the panel has been discontinued, claims have gone up considerably.  I did mention that part of that was because of the backlog.  In 1985, when they reinstated the Medical Legal Screening Panel the number of claims diminished by about 50 to 60 percent, so I think in this case we will find they will probably go up about 50 to 60 percent.

 

I will mention one other thing that I have heard.  Some people may feel that it would be unconstitutional to have a Medical Legal Screening Panel and a cap on awards.  Other distributed information (Exhibit E) that Ms. Combs obtained shows that there are actually six states in our union that have a cap and a Medical Legal Screening Panel.

 

Assemblywoman Buckley:

I guess my concern with this bill is priority, articulated to you before.  There is always a balance between ensuring a stable insurance market and protecting the rights of people who are truly victimized and ensuring that they have fair compensation.  One of the things we tried to do in the Eighteenth Special Session was balance those between caps on damages and the other barriers that we would erect in the system.  The physicians and the insurance companies told us that they did not want the screening panel.  So we looked at all of the issues and we agreed, although several of us on this Committee strongly opposed that and thought it was short-sighted, especially because it seemed to not understand why we had the screening panel in the first place, which was to try to weed out frivolous claims and not be a mini-tribunal.

 

I guess my concern at this point is after we dismantled it, after the employees were transferred, the physicians came back and said they had changed their minds.  From our position, we told them this wasn’t a good idea and in exchange, the physicians said they would rather have caps on damages than have a screening panel.  These are really important issues and when it involves dismantling a section of our Division of Insurance and now having to recreate it and causing all the havoc of all the cases to go in and then go back, I don’t know.  It strikes me that maybe the physicians should have listened to the Legislature on this item.

 

Assemblyman Mabey:

I agree with you that it does make it complicated; six months ago we discontinued it and now we want to reenact it.  Personally, I think there is uncertainty as to what is going to happen.  Since A.B. 1 of the Eighteenth Special Session passed, premiums have continued to rise.  We may have to wait years and years before we really know what is going to happen.  I think the panel should have stayed in place and I understand that some physicians wanted it out and I am sure others didn’t.  I was not here and I don’t know exactly how it happened, but I was disappointed that it did happen the way it did.  I agree with you on those; I can’t argue that.  One thing that I think it does is really make everybody lay out their cards on the table with a panel; everybody knows where everybody is coming from and I think that gives it a chance to get resolved.

 

Assemblyman Horne:

On the issue on mini-tribunals, I was concerned about your challenges to the members who would be on the panel.  We would have, basically, a voir dire of these members.  Is there another way that it could be done?  We don’t want this to be like mini-trials and the like.  I know we don’t want members on the panel who may have conflicts.  Could it be something as simple as forms that they submit, fill out their affiliations, who they work for?  This would go also for the administrator if a hospital were to be involved.  Maybe an administrator at one hospital will have a conflict because the hospital is part of a parent corporation.  Did anyone talk about that instead of turning it into a little mini-trial questioning?  It seems like that process would make it longer.

 

Chairman Anderson:

I want to make sure we understand; we are concerned about the make-up of the screening panel and how the physicians are going to be cross-examined, voir dired, before they are brought in?

 

Assemblyman Mabey:

I think that question would be better asked of Dr. Havins, who was the one I relied on to help me draft the wording.  I am very open.  I have no strong feelings about what the make-up should be.  I feel it is important to have the panel, and if the Committee wants to make it a certain way, that is okay with me.  If there were concerns by members of the Committee on the make-up of the panel, I would have no objections to changing that.

Assemblyman Carpenter:

Dr. Mabey, if I remember right the dentists still have a Medical Screening Panel and I was wondering if you were able to get any statistics on what has happened there since we took it off?

 

Chairman Anderson:

Mr. Carpenter, when we eliminated the Medical Screening Panel, the name had been changed from medical screening to medical/dental screening, so we eliminated it for everybody.  The dentists didn’t want us to do it, but we did it for them too.  We eliminated it with A.B. 1 of the Eighteenth Special Session; we eliminated it for doctors and dentists.

 

Assemblyman Carpenter:

I thought the dentists stayed in, so I stand corrected.

 

Chairman Anderson:

I am sorry, Dr. Mabey, I shouldn’t have stepped in there.  Having been through that particular battle, I still have scars.  The Chair has one question of you.  One of the criticisms that seemed to come up during the Medical Screening Panel issue was the delay caused because of the physicians and attorneys being able to change—being able to get off the Medical Screening Panel that they were on—then a new panel had to be put together.  So, in your new bill, would they still have the option of popping in and out because of changes in their calendars?

 

Assemblyman Mabey:

I think Dr. Havins could answer that question better.  From my experience with the panel, every case in which I was involved, the attorney took over.  He didn’t call me up and talk to me about it; it would go for months or sometimes, in a couple of cases, over a couple of years.  I think the delay was mainly with the attorneys and not with the doctors, at least in my three cases.

 

Dr. Weldon Havins, Clark County Medical Society:

Assembly Bill 300 would reconstitute the panel in a very similar fashion with improvements.  We should all be aware that this is a short-term solution to a medical crisis problem we have, particularly in the south; this will not, we feel, be a long-term solution.  Nonetheless, it is due to sunset in October 2009, in recognition of the short-term solution to the problem.

 

There has been an increased frequency of cases.  It looks like it is going to be about double, or a little over double, of what has occurred in previous years on a stable basis now that the cases have come out of the panel when they had an option to do so after October 1, 2002.  With the increased frequency, there are increased insurance costs and with insurance companies defending the cases that will increase premiums, and the problem is going to continue.

 

Under this bill the differences in the panel are that rather than volunteering, the panel members are paid.  This way, multiple cases can be heard during the day.  The panel will be selected by the Insurance Commissioner rather than, as in the past, by the attorneys and by the Executive Committee of the Nevada State Medical Association.  The panel members themselves will be selected by the Insurance Commissioner and will be paid.  They will be expected to be there and be on time or their contract will be severed.  There are two, rather than three, preemptory challenges; that differs.  There is an administrative law judge whose duty and authority is to see that these cases are processed expeditiously and according to statute.  That was not occurring before.  It was not uncommon for a case to be on the panel for two years.  All the cases should be in and out of the panel within six months under the provisions of A.B. 300; the administrative law judge has a duty to see that that occurs.

 

The question as to constitutionality, there is no impediment to trial, just as there was with the other panel.  Some physicians were distressed about the panel, both from the length of time the cases were in the panel and because 75 percent of the cases with no probable malpractice went forward.  Many physicians did not understand that this is not a judicial proceeding; this is a screening proceeding.  Patients retain the right—injured victims as Ms. Buckley would say—to redress their grievances in court.  So, this panel does not differ from the other panel.  It is intended to be a more improved, more efficient panel.  We need to realize that injured patients have the right to financial redress of their injuries.  Delays in that are unfair.  The reason the panel worked in the past is that the plaintiff bar did the screening.  Some physicians did not appreciate that and were in favor of eliminating the panel.  I personally think that was a mistake.  The panel needed to be improved and in the crucible of time of the Special Session, it may have been easier to just eliminate it rather than to work towards improving it.  I am available for questions.

 

Assemblywoman Buckley:

What was the Medical Society’s position on whether the panel should be eliminated?

 

Dr. Weldon Havins:

The Medical Society’s position, the Nevada State Medical Association (NSMA), and the Clark County Medical Society (CCMS) were opposed to eliminating the panel.  They thought the panel should be fixed.

 

I absolutely agree with Ms. Buckley that physicians should have done more listening and less talking during the Special Session.

 

Assemblyman Carpenter:

Would you explain a little more how you feel the administrative law judge is going to help this situation and what his duties would be?

 

Dr. Weldon Havins:

His duties would be to chair the panels and to see that materials were produced in an expeditious fashion, and to not permit stipulated delays between the attorneys.  That was rampant in the old panel, where the attorneys would agree to put it off for six or eight months.  To have anything delayed in that fashion would require a motion and a hearing and then the administrative law judge would only approve a delay for a good cause.  It would be the administrative law judge’s duty to see these cases through.

 

In California, since they passed what is known as the Trial Court Delay Reduction Act in 1990, the judges are mandated to get 90 percent of all civil cases through their courts in one year.  In San Diego and in Orange County, they are averaging 95 percent of cases filed, completed, and disposed of within one year.  But the duty falls not on the plaintiff attorney to prosecute the case, the duty falls on the judge to get the case through.

 

Assemblyman Horne:

Dr. Havins, on my question I posed to Dr. Mabey about the procedure on voir dire in relation to your panel, were there other methods that were used in the previous panel?

 

Dr. Weldon Havins:

No, this would be the same as before; there can be challenges for cause.  Then the administrative law judge would make a decision on that, whereas under the current panel the decision is made by the Insurance Commissioner.  There are two preemptory challenges; two attorneys can be preemptory challenged and physicians can be preemptory challenged.  It is important to realize this is not a judicial proceeding; this is a screening procedure and so this in no way abrogates a person’s right to proceed in court—just as it was with the other panel.

 

Assemblyman Horne:

That was the reason why I was concerned, not being a judicial procedure and this voir dire falls in that realm.

Dr. Weldon Havins:

There was no voir dire with the other panel and there is no voir dire on this panel.  On the other hand, it is not a judicial proceeding.

 

Assemblyman Horne:

On your filing fees in Section 10, paragraph 2, on page 3, you have “not to exceed $500” for each filing and that includes responding.  What is your rationale for that?  It seems odd to have someone pay to respond.

 

Dr. Weldon Havins:

Yes, in the original panel it was $350 to file and $350 upon the answer.  This can be a higher amount because you are now going to be using paid members rather than volunteers, and there needs to be a payment inducement to be sure that they are there on time and can hear multiple cases during the day so these cases don’t get delayed.  But, it is the same procedure in the sense that both parties pay.

 

Assemblyman Geddes:

My question is on the sunset provision.  I am looking at this bill and seeing the value of putting in the medical and dental screening panel and I am wondering why you would want to sunset it at some point?  I’m not sure why we would put something in just to address the current situation.  If this panel has value in reviewing the lawsuits to determine if they are meritorious in moving forward, why sunset it?

 

Dr. Weldon Havins:

As you recall in Assemblyman Mabey’s testimony, the original panel had a sunset in 1989, but was continued.  This one could be continued also.  It is the hope that whatever long-term solution is derived from this session of the Legislature, that solution will be in place and effective by October 2009.  It may not be necessary to have the panel in existence.  That is a decision that could be made by the Legislature at that time.  If you can control the severity of cases—at least in California’s experience—you don’t have to control the frequency.

 

Assemblyman Mortenson:

Of the number of cases that came before the panel, how many were deemed worthy or unworthy of proceeding?

 

Dr. Weldon Havins:

In the past, almost every year the numbers were the same and about one-fourth were probable malpractice, one-fourth were unable to decide, and 50 percent were no probable malpractice.  Of the 50 percent with no probable malpractice, the percentage of cases that went forward to district court did gradually increase and in the last few years it was around 70 percent going forward.  Mr. Chairman, I understand you were one of the “fathers” of the first panel and I hope you will be one of the “fathers” of this one.

 

Chairman Anderson:

I think the addition of the dentists as part of the screening panel is something that I had requested.

 

Assemblyman Carpenter:

Doctor, it seems to me like you have followed this situation fairly closely.  Did you see anything that would have indicated that once they went to the screening panel, they may or may not have settled?  Is there any indication of that one way or the other?

 

Dr. Weldon Havins:

Unfortunately, the county medical societies only receive the results of the panel, but don’t receive results of the ultimate disposition of the cases.  We would love to see the disposition of cases posted on the Nevada Board of Medical Examiners’ Web site.  We have tried to obtain that in a specific format where we did not have to go through every single licensed physician on their Web site—a format in an electronic form where we could compare those with the cases to see what the correlation is.  We have not been able to obtain that information, so, I really can’t say. 

 

Mr. Byrd, president of MLAN (Medical Liability Association of Nevada)—the Governor’s insurance plan—testified that in about 75 percent of their cases, they settle without payment.  He is drawing back to his experience as president of the Nevada Medical Liability Company; 20 percent proceed and are settled; 5 percent go to court; and the majority of those have findings for the defendant, if that is helpful.

 

The main value of the screening panel is to have plaintiff attorneys do the screening.  Because of the cost associated with the panel, it is not financially viable to take a case through the panel if there is not, in the mind of the plaintiff attorney, merit and substantial damages.  That means that there are some people who have valid cases with little damages who will find it difficult to have an attorney take the case through.  Some of those cases went through pro se, that is, the individuals took them through themselves.

Chairman Anderson:

Is there anyone in Las Vegas testifying in support of A.B. 300?  Is anyone here in the north speaking in support of A.B. 300?  Let me move to those in opposition to A.B. 300.

 

Bill Bradley, representing the Nevada Trial Lawyers Association:

It is with a great deal of pleasure that I appear in front of you on two consecutive days regarding this very contentious issue of medical malpractice insurance reform, liability reform, and one of my “babies,” the Medical Legal Screening Panel.

 

I was one of the original drafters, a ”junior” drafter in 1985.  At that time, we had to fight for every square inch against the doctors and the insurers to create the Medical Legal Screening Panel; it went into this Committee strongly opposed by both.  I was breaking up fistfights out in front of the old judiciary panel between physicians and lawyers at that time.  So, I had a great deal of pride associated with the 1985 screening panel.  I was the northern Nevada coordinator for the attorneys’ side of the screening panel, and I did the videotape presentation training new physicians and doctors about proper panel procedure.

 

As you can understand from our proceeding on Friday, we felt completely different about the cause for this medical malpractice crisis and continue to feel very strongly that the problem was with the economic cycle and not the experience in Nevada.  We will stand by that position.  When we worked for seven months with the Physicians Task Force, we continued to talk about the benefits of the panel and how that was the best system in the United States and how we did not need the tort reform that ultimately was passed.  When Chairman Anderson talks about scars, many of us bear the scars of a battle that we felt logically was never understood but emotionally was driven by anecdotal and terrorist tactics.

 

This bill, unfortunately, creates a completely different type of panel than the panel we envisioned, and we are strongly opposed to the re-creation of this panel.  Under the old panel, it was a voluntary “coming together” of concerned physicians and concerned lawyers who were willing to donate their time to try and help resolve problems and cases involving medical malpractice.  Where the panel broke down, particularly in southern Nevada as referenced by Dr. Mabey and Dr. Havins, was the total misunderstanding of the physicians regarding the effect of the panel. 

 

The panel had shortcomings; there is no doubt about it.  It was expensive; it would cost anywhere from $10,000 to $20,000 to file a claim; it would cost that much to defend a claim.  That is why every insurer in a March 4, 2002, hearing in front of the Insurance Commissioner strongly opposed allowing the panel to remain.  I will quote from that hearing just one of the insurers, but this insurer spoke exactly as the others.  This was Mrs. Lantree from TIG Insurance Corporation, which is one of the insurers that does insurance of physicians and dentists in Nevada: “We strongly recommend the screening panel, as it is presently constituted, be abolished and I will tell you the reason why.  It typically costs us an average $10,000 to $15,000 in defense costs just to go through the screening panel, which adds to the cost of litigation.”  That was one of the shortcomings.  When we devised the screening panel, the idea was a screening.  That was quickly obliterated by aggressive insurance and defense techniques trying to misuse the panel, make it something it wasn’t, make it more a tribunal than it was intended to be.

 

[Bill Bradley continued.]  The panel was intended to be simply a review of the records.  We would get the records on a client; we would submit the records.  Based on the records, we expected a screening panel to review it and see if there was merit, if there was no merit, or, if based on the record, it just couldn’t be determined.  Pretty soon we started getting affidavits from the involved physicians, or the involved nurses, or the involved radiographic assistants, who would say in an affidavit, “I know this is what the record says, but this isn’t really what happened.  Now let me tell you what really happened.”  And so we would have evidence outside the record.  We had to fight for four years before we got the opportunity, based on that misuse of the screening panel, to file a reply because all we were enabled to do was submit our medical records to our experts and they would make a decision based on the records.  When everybody changed their stories and affidavits, we felt we needed to respond.  We finally got the reply, I believe, in 1989.

 

As Dr. Havins talked about, when there is an up-front cost of $10,000 to $15,000—again because the panel is being used for something it wasn’t ever intended to do—it eliminated people with small cases, such as someone who had an operation on the wrong limb, but only wound up with a scar and a month away from work.  You simply could not afford to take those cases because of the cost.

 

Another real fault of the panel was the length of time.  That time factor was attributable to a host of problems.  Lawyers representing the plaintiffs and the physicians did, more often than not, need additional time.  I have to strongly disagree with Dr. Havins, whether it is an administrative law judge or whether in that instance it was the Insurance Commissioner, the only reason an extension could be granted was for good cause.  We did, however, have to submit an affidavit that an expert was out of the country or our client was out of the country, and that did contribute to the delay.

 

[Bill Bradley continued.]  Whatever screening panel you talk about, when it turns into some sort of an adversarial proceeding, as the original screening panel was and as this panel in A.B. 300 is, what you have to balance is what Assemblywoman Buckley mentioned, the right of the patient versus the right of the system.  These screening panels had no ability to cross-examine; the ability to cross-examine is something that is fundamental to the right of due process.  When a physician would give an affidavit, we were unable to cross-examine that physician at the time of the screening panel.  If our patient said something happened, and the physician said something didn’t happen, there was no mention in the records because the records were so poorly drafted it left a gap.  Absent the right to cross-examination, that finding of the panel being admissible to a jury becomes very significant.

 

When we talk about the fact that roughly 50 percent of the cases, despite a no malpractice finding, went forward, it is an interesting statistic.  The really interesting statistic is what happened to the 50 percent of the cases where there was no malpractice that went forward, and, unfortunately, none of us can tell you that.  I can tell you from my anecdotal evidence, and those of my friends and members of my organization, many of those cases went on to settle in meritorious circumstances because once the right to depose under oath and cross-examine was given to us, facts were elicited that were completely different than at the panel.

 

I am happy to present the one case that is anecdotal, but still very important, where an affidavit of a physician was actually not accurate.  Later, we learned that the affidavit that the physician had given to the panel was inaccurate regarding what had happened at an autopsy.

 

We balance that screening and the need to eliminate frivolous cases; that was one of the functions of the screening panel, the rights of the injured patient.  When this tremendous pressure came to enact tort reform, nobody was really interested in listening to the story we told you on Friday about the economic reasons.  When we continually said this screening panel is working—it could use some work but don’t throw this baby out in order to get tort reform—it was unanimously ignored.  I have to disagree with Dr. Havins; we had representatives of the NSMA and the CCMS on the Physicians Task Force and they did not ever, as I recall, ask that the panel be maintained.

 

It was unfortunate to watch the panel go away but now we have real tort reform, like the supporters of tort reform argue for.  Their model is California, the MICRA (Medical Injury Compensation Reform Act); you’ve heard it a thousand times.  In California, there is no screening panel.  In California there is not even a requirement of an affidavit.  Unfortunately for the Assembly Committee on Judiciary, you were not able to hear the testimony from The Doctor’s Company in the Senate Committee on Judiciary, where they actually indicated that frequency is not a concern of theirs in California.  They have been able to, as Dr. Havins just said, control severity through their tort reform. 

 

[Bill Bradley continued.]  The model in California is a model that is not based on the screening panel.  We feel the combination between a very severe form of tort reform contained in A.B. 1 of the Eighteenth Special Session, and an additional impediment of a screening panel is overly burdensome to victims of medical malpractice.  It eliminates the rights of small malpractice cases to go forward.  The proposal under A.B. 300 is incredibly expensive.  There is a fiscal note on it, but I am sure the Insurance Commissioner will relay that to you. 

 

Dr. Havins talked to you about the duty of a judge.  For those of you who weren’t here for A.B. 1 of the Eighteenth Special Session, rather than do the screening panel, we created a mandatory settlement conference early in the process of a medical malpractice claim under A.B. 1 of the Eighteenth Special Session.  The original function of the screening panel was to eliminate the frivolous cases at an early stage and settle the meritorious cases.  If you go back to the verdict sheet we showed you on Friday, you will see how poorly the insurance industry respected the results of the screening panel.  It did do a job of eliminating frivolous cases.  In fact, it went too far and eliminated small but meritorious cases.  But in terms of convincing them to settle meritorious cases, you will see case after case where the screening panel ruled malpractice and the insurers ignored it.  I can tell you from first-hand experience the secondary goal of a screening panel to settle the meritorious case at an early stage was sorely lost and disrespected by the insurance industry.

 

I have studied A.B. 300 and tried to understand what Dr. Mabey was attempting to create here.  Unfortunately, I don’t believe, with the administrative law judge, that Dr. Mabey’s intent was carried forward.  Under the old panel, there were statute of limitations arguments.  For example, whether a plaintiff was too late in bringing the case, there were arguments about certain evidence coming into the screening panel process; there were incredible arguments that only creative and, sometimes, frivolous lawyers could dream up.  In those instances, under the Insurance Commissioner’s rules and regulations, they were disregarded because once again we were getting away from the rule of the screening panel—review the records.

 

With an administrative law judge who has incredible authority—only subject to judicial review in the district court—there will be numerous motions filed by both sides.  This administrative law judge will be barraged by time-limit motions, competency of experts to give an affidavit, on and on and on.  What this bill unfortunately creates is not a mini-tribunal, but, in my opinion, an actual tribunal.  Now, under this bill we have to do the same thing twice.  We have one trial in front of three doctors and three lawyers with an administrative law judge serving as a referee.  Once we get done with that, we go into trial and do it again, unfortunately, and I don’t think this was Dr. Mabey’s intent.  This type of process, as opposed to the process we had before, is incredibly expensive and incredibly lengthy.  It is for that reason, as well as the passage of A.B. 1 of the Eighteenth Special Session, that we must strenuously oppose something that I drafted and supported for the last 18 years.

 

Assemblyman Horne:

Can you tell me the level of discovery at these screening panels?

 

Bill Bradley:

Zero.  We got the medical records.  We did build subpoena power into it where we could attempt to subpoena policies, protocols, and procedures.  That was somewhat effective in getting basic documents—for example, trying to read the handwritten, scribbled notes of a nurse who wrote entries at 3:00 in the morning that we could not get translated.  So the ability of an expert to try and elicit what actually happened based on illegible notes was nonexistent.  We had subpoena power for written documents, but we had no ability to do depositions or use the right of cross-examination to elicit the truth.  That is why the findings, though admissible, were admitted into a courtroom with a cautionary instruction to the jury.  That is why the “unable to decide” was legislatively decided not to be admissible in a courtroom.  It really got away from what this Legislature intended back in the late 1980s.

 

Assemblyman Horne:

Is it your opinion that regardless of what the screening panel does—even if we were to put something in there saying discovery from which all documents are generated—that it would undermine either side’s case in trial?

 

Bill Bradley:

You have to do it twice, if we are doing it in front of the screening panel.  Now when we file our case under A.B. 1 of the Eighteenth Special Session, we must have affidavits.  Dr. Havins and I differ on the extent of the affidavit and the legislative intent covers the affidavit.  Once we show that we have an affidavit of a physician, we are entitled to start our discovery under A.B. 1 of the Eighteenth Special Session.  Under the screening panel, there was never any discovery and there was never intended to be any discovery because it was intended to be a screening process, not a finding on the merits.

 

That is what frustrated physicians like Dr. Mabey, because if the records were unclear or even resulted in a no malpractice finding and someone like Dr. Mabey said, “Thank God, I got found innocent by a screening panel,” they called it “innocent”; it is not going to go forward.  If we filed and went forward, that really frustrated physicians.  The physicians, as Dr. Havins said, never understood this was merely a screening.  It was a screening to totally eliminate the frivolous cases in the early stage and get that meritorious case settled at an early stage.  It worked very well to eliminate the frivolous case.

 

I sat on a panel a week ago because it is still reviewing some old cases.  The panel eliminated the frivolous case; it eliminated the small, meritorious case, unfortunately.  We can’t say that the other goal of early resolution of the mandatory case was met.  That’s actually what Dr. Havins has talked about.  One thing I agree 100 percent on—whether it is construction defect or medical malpractice—the aggressive early intervention of judges is desperately needed in these cases.

 

Assemblyman Geddes:

I have two questions and a comment.  I am impressed with the amount of times I have heard tribunal today; I have not heard that for a while.  Referring to the chart that the Nevada Trial Lawyers Association handed out Friday, which unfortunately, I do not have in front of me, in 1985, when you helped draft the first panel, I recall we were in a recession, but I wasn’t sure whether investments were on the slope.  Was the first panel put in to address a similar situation or the same situation?

 

Bill Bradley:

It was; 1985 was the extraordinary inflation.  Mr. Sharp is here and I have my little insurance cycle sheet.  In fact, Dr. Mabey wasn’t quite correct.  In 1985 we had the same crisis going on that we have right now.  We drafted the screening panel as a response to that crisis in lieu of what we felt, and still continue to feel, was absolutely unjust tort reform that unfairly punished victims of medical malpractice.  That was the purpose for the re-creation of the panel in 1985.

 

Assemblyman Geddes:

In looking at the crisis that we have now, it seems like as part of everything else that is going on, such as the bill on Friday, that this would be another positive tool—maybe not A.B. 300 as it is drafted.  But if it was a screening panel as you helped draft in 1985, would that be helpful in solving the crisis?  Why was it helpful then and it won’t be helpful now?

 

Bill Bradley:

What helped the crisis in 1985 was a turn around in the economy and that is what is going to help this crisis.  The sooner we get out of the current war and our economy starts generating, you will see the liability insurance market relax.  Unfortunately, with respect to our tort reform, it will take a couple of years.  Maybe we can get it in front of the court earlier to deal with tort reform.  The insurers in other committee hearings have used the cost of the screening panel to justify their increase in rates.  Unfortunately, none of them are here today as you will note, and the insurers strenuously oppose the continuation of the panel, based on cost.

 

Assemblyman Geddes:

That alone may be a reason to put it in, if they are opposed to it.

 

Bill Bradley:

They were strongly supportive of tort reform and the people that testified in front of the Senate Judiciary have told that committee, and I will be happy to present that testimony to you on the CD-ROM, frequency does not matter to us in California; it is severity.  What the screening panel theoretically dealt with was the frequency issue.  That is not a concern to the second largest insurer in the state; they are more concerned with severity and we have dealt with the issue of severity in A.B. 1 of the Eighteenth Special Session.

 

Consequently, I would have to say, and I have not looked at the information you have in front of you, but I will because I am interested to see how many panels where the tort reform is voluntary and how many are mandatory.  It is a tremendous burden to make people go through, make a victim go through that sort of tribunal, then go forward again.  They have to submit an affidavit at both ventures.  That is going to cost more for the plaintiff; it is going to cost more for the defense; and it is going to drive up the cost.  I don’t think you can have both, Assemblyman Geddes. 

 

I really felt very comfortable with the screening panel in its existence, but to a person who was opposed on the Physician’s Task Force in lieu of civil justice reform, it is very frustrating to sit in front of this Committee and listen to what I had to listen to last summer and then see another group of physicians come forward and say, “Oops, the group you guys dealt with last summer really didn’t know what they were talking about.  Now, we know what we are talking about, listen to us.”  That is frustrating because we tried like heck to do some education, but it didn’t work.  So, I can’t agree that in light of our passage of A.B. 1 of the Eighteenth Special Session that an additional hurdle of a screening panel is in the best interest public policy-wise of the state.

 

Assemblyman Mortenson:

Is there anything that you, any amendment, could do to make this panel a viable panel in your estimation?  Could you help Dr. Mabey to amend his bill?

 

Bill Bradley:

Unfortunately, I would have loved to have done that before A.B. 1 of the Eighteenth Special Session became reality.  If I spoke up here and said, “Yes, repeal A.B. 1 and we will go to work like heck on a good screening panel,” I would be harpooned from many different sides.  But that’s the way I see it.  We have been told over and over again that California is the model; now we have the model and I can’t offer amendments that would help this panel at this stage.  I apologize for that because, like I said, I drafted the panel.

 

Assemblyman Brown:

I have two questions.  You testified earlier that after the initial creation, the panel, which was to be a document review, quickly went to affidavits.  What time frame was that?

 

Bill Bradley:

It was the third panel.

 

Assemblyman Brown:

Do you feel that the panel can operate effectively without affidavits?

 

Bill Bradley:

No, affidavits from experts are essential.  Allowing a physician or a nurse to say, “This is what I said in the records, but this is not really what I meant,” is not helpful.  So, unfortunately, under A.B. 1 of the Eighteenth Special Session, we are the only ones required to file an affidavit now.  The defense does not have to file an affidavit in their answer, so we took a step backwards, as far as we are concerned, in establishing the merits of a malpractice case at the filing stage when we passed A.B. 1 of the Eighteenth Special Session.

 

Assemblyman Brown:

So, history will not teach us anything on this as to how to actually operate a reasonable panel?

 

Bill Bradley:

Actually, history will teach us something in terms of the insurance cycle, but it isn’t going to teach us much in the history of the panel.

 

Assemblyman Brown:

Do any other states have panels that have been able to rein some of that external type evidence from coming in?

 

Bill Bradley:

There are other states with panels, but we were the first state to do a panel.  I can’t tell you how other states are handling their panels.  But I can tell you that the more burdensome it becomes at the panel stage, the more likely it is to constitutional challenge in light of the fact that following that hurdle you have another impediment called “civil justice reform.”

 

Chairman Anderson:

Mr. Bradley, one of the big concerns that we consistently hear about are changes in the system and then the fact that there is no decline in the offsetting insurance premiums that are being charged to the physicians.  Some of it may be the cyclical nature of the stock market and its investment problems.  I think that’s where we were on Friday.  One of the problems, however, seems to be the fact that in almost every case these kinds of panels have to be challenged in the Nevada Supreme Court.  Has the Medical Screening Panel ever been challenged by the courts?

 

Bill Bradley:

I can’t give you the time frame, Chairman Anderson, but it was challenged a couple of times.  It went up to our Supreme Court under the original format, the 1985 format with the reply.  The Supreme Court did declare that panel constitutional.  There wasn’t any accompanying civil justice reform at that time.

 

Chairman Anderson:

So, we should anticipate if A.B. 1 of the Eighteenth Special Session passed in the August session, it would have to eventually make it to the Supreme Court before we will have even an idea that it is correct.  If we add in the Medical Screening Panel, does that delay the constitutionality of the process even more?  I guess that is the real question.

 

Bill Bradley:

Chairman Anderson, in my opinion, and I am not a constitutional lawyer, but having reviewed these cases across the country, I believe that it increases the chances of a successful challenge to A.B. 1 of the Eighteenth Special Session, based on the additional presence of a screening panel.

If I may, Chairman Anderson, this entire Legislature worked very hard to build safeguards into A.B. 1 of the Eighteenth Special Session to withstand constitutional challenge.  When Senate Bill 97 makes its way over here, we will revisit several of the things the legislators tried to do in order to make it uphold constitutional challenge.

 

The good news is, based upon what the Legislature did, Mr. Byrd, Chairman of the Governor’s insurance company, has testified in front of the Senate Committee on Judiciary that S.B. 97 will have a significant impact on premiums.  That was good news for all of us.  I would hate to see the screening panel come up now and create an additional vehicle for constitutional challenge.

 

Chairman Anderson:

Are there additional questions from the Committee?  Does anybody else wish to testify in opposition to A.B. 300?  Does anybody wish to give additional information to the Committee relative to this piece of legislation?

 

Alice Molasky-Arman, Commissioner, Division of Insurance, Nevada Department of Business and Industry:

[Introduced herself]  As you are more than aware, the Commissioner did administer the screening panels as they existed prior to October 1, 2002.  We do, as Mr. Bradley referred to, still have screening panel cases that we are winding up through the process.  The claimants for panel cases were required under A.B. 1 of the Eighteenth Special Session to exercise an option if they wish to remain in the panel process.  We had nearly 400 cases at that time.  Of those cases, approximately 132 cases remained with the panel by voluntarily exercising that option and 234 did not choose to stay with the panel.  In fact, that means all of those cases left the panel system effective October 1, 2002.

 

Mr. Bradley testified as to the desires of the insurers and he is absolutely correct.  Slightly over a year ago, we conducted a hearing on the crisis of medical malpractice in this state and the insurers did question the value of the screening panel process.  They also indicated that it cost anywhere from $10,000 to $20,000 to defend those cases before the panel.  I cannot recall any positive or negative statement that was made by the medical association or the medical societies and there was no support to maintain the panel.  Of course, at that time we were not considering anything as far as the existence of the panel itself.

 

In looking at the panel as it existed, I can recall remaining troubled for a long period of time and that was principally because the Division of Insurance was unable to exercise the statutory requirements.  Under the former panel, cases were contemplated to take no more than 180 days; that is according to the statutes.  In truth, however, they remained before the panel for some period of years, principally, because there was no time to hear those cases.

 

[Alice Molasky-Arman continued.] I believe it was 1997, I came to you and asked that you change the law and rather than allowing the Commissioner to continue the hearings where a party claimed to have good cause, I asked that a date certain be set principally for the pleadings to be submitted; you did that and provided for a 60-day period.

 

Regarding the absence of stipulations, I heard Dr. Havins say that there was no provision in here for stipulations and I don’t know whether the effect of that would be fair or not, because certainly, there are circumstances where a pleading might be late.  In many instances what we have seen in the panel currently, and in the past, is the failure of someone to recognize a subpoena on a timely basis and that could cause a reply or an answer to be delayed in being submitted to the panel.

 

I have remained troubled all these years by the timing of this because my staff and I were responsible for getting these cases through.  Right now we have fewer than 100 cases and we are attempting to put those cases through as quickly as possible.  The same problems do remain with the delays because the panel’s physicians and attorneys are professionals and there are times when they must call in at the very last minute and drop out of a panel process.  That causes us to have to cancel or postpone the panel setting and await another day.  This is very consistent.  It is also extremely difficult for us to receive the agreement of physicians and attorneys to sit on those panels, particularly now.  In fact, in the Senate Committee on Judiciary, I made a request to the attorneys and to the medical professionals to agree to sit on the remaining panels so that we can process those on a timely basis.

 

There is a question also, Mr. Chairman, as to the constitutional challenges, and I do want to say that throughout our experience with the former panel, we did see a number of constitutional challenges.  All of those did not go on appeal to the Supreme Court, but there were a number of occasions where our panel cases had to be continued because of constitutional challenges in the district court.  In those instances, it was our responsibility to defend the panel and we did so through the representation by the Attorney General’s Office.

 

As Mr. Bradley indicated, we do have a fiscal note.  I was a little bit surprised when I heard that the panelists in this bill would anticipate payment.  Very frankly, we did not see that in this bill so the fiscal note that we do have does not include what those costs would be.  If you would like me to, I can tell you the cost that we do anticipate and the structure that we would have to anticipate under this bill.  [Chairman Anderson indicated that she continue.]

 

[Alice Molasky-Arman continued.] What we have here is a Chief Administrative Law Judge, who would be in the southern part of Nevada where we would expect most of the cases.  Then in the north, Reno, an Administrative Law Judge and a Legal Secretary II.  For the southern panel what we anticipate would be the need for a Chief Administrative Law Judge, a Legal Secretary, an Accountant Technician and an Administrative Assistant I.

 

We have learned through experience that these cases are document-intensive.  In fact, we have a room set aside at the Division of Insurance to store the records and papers for all of these cases.

 

We have noted that there is a cost in the bill of $500 per party.  Our costs for the staff—what we are looking at is a total in fiscal year 2004 of $456,312; in fiscal year 2005 it would be $440,157.  With the fees that would be estimated for collection, there would be a deficit between those fees and the costs in fiscal year 2004 of $300,312; in fiscal year 2005 it would be $232,157.  As I indicated, this would not include any compensation that would be paid to the panelists.

 

I have also noted a couple of things in this bill.  One is, principally, there are no provisions here for the timeliness or the time in which answers or replies would be made.  There is a reference of such in Section 11 that states, “Not later than 30 days after the expiration of the time in which to answer the complaint that the administrative law judge will hold a conference.”  But there is no provision in here for answers or for replies to be filed.

 

Assemblywoman Angle:

I just want to understand a little bit.  Is the panel still in place at this time, the Medical Legal Screening Panel that we did have is still in place?

 

Alice Molasky-Arman:

Yes, it is still in place only for the purpose of winding up the cases that were filed prior to October 1, 2002.

 

Assemblywoman Angle:

So, if we were to reinstate this then there would not be any start-up cost, it would just be a continuation of what we already have in place.  Is that correct?

Alice Molasky-Arman:

No.  We do not have the same arrangement right now.  We have one coordinator who is, in effect, a legal assistant.  We have an administrative assistant and then we have a secretary who serves half-time, but that secretary also serves for our legal enforcement section, so, in effect, we have two people on there and their classifications are considerably less than would be contemplated in this bill.

 

Assemblywoman Angle:

Within the bill, it says that the Commissioner shall set the fees in the amounts sufficient to cover the anticipated cost of the screening panels and their administration.  I was under the impression that this would take care of its own cost; somehow we would be able to mitigate those costs.  You don’t see that happening?

 

Alice Molasky-Arman:

The calculations that I provided included the maximum $500 and it would still not be sufficient to cover the cost of the panel.

 

Assemblywoman Angle:

We have this chart and I don’t know if you saw it, the one that shows the increased filings.  Can you give me your impression of why that has happened since the screening panel went away with A.B. 1 of the Eighteenth Special Session?  Why are we seeing this increased filing now?

 

Alice Molasky-Arman:

We have not, at the Division of Insurance, actually followed the filings in the district courts in southern or northern Nevada.  We do believe that the great difference that we saw last fall, early winter, was due to the 234 cases that did drop out of the panel process.

 

Chairman Anderson:

I see no indications of other questions.  [He requested that Mr. Bradley return to the witness table to answer questions.]  I have a question relative to one of your documents and Mrs. Angle’s question re-stirred that.  Did you have an opportunity to see the Clark County District Court medical malpractice filing chart that shows 184 cases in November of 2002?  I am looking at your chart on page 22 (page 12 of Exhibit F), which shows 84 cases in November of 2002; there is a 100-case difference here and I am a little concerned as to why the number differs so greatly.

Bill Bradley:

I have not had an opportunity to discuss this with Dr. Havins but I believe that based on our research—we actually got copies of each filing in Clark County—I believe the difference between our number and the number from the Medical Association has to do with multiple-party cases.  In other words, if three members of the same family filed a claim for the wrongful death of the breadwinner, I think that the Medical Association counted that as three filings and we counted that as one filing.  I have not had the opportunity to discuss that specifically with Dr. Havins, but I think that’s the case.

 

Chairman Anderson:

Does anyone else wish to give testimony on Assembly Bill 300?  I see a gentleman sitting at the desk in Las Vegas.  Did you wish to give testimony?

 

Dr. Weldon Havins:

Yes.  I just have a couple of follow-ups.  In the bill it was intended for the answer to the complaint to be within 60 days and the reply within 30 days.  That was an oversight.  In the old panel, it was 90 days to answer; this panel would shorten it to 60 days to answer.  The reply period would be the same, 30 days.

 

Chairman Anderson:

Would you restate that again Doctor?

 

Dr. Weldon Havins:

There is a 60-day period to answer a complaint filed with the panel, and it should be in this new bill, and then 30 days to reply to that answer.  So it reduced it by 30 days overall.

 

Chairman Anderson:

And that was in the answer, not the reply?

 

Dr. Weldon Havins:

That is correct.  Then in the chart that you have there, those are the number of health care providers filed against for medical malpractice in Clark County District Court; that’s what those numbers represent—from January 2001, through most of March; we will have the March numbers more accurately this week.  The base numbers were huge in the fall.  As the Insurance Commissioner said, predominantly, for sure, from cases coming out of the panel electing to file in district court.  So the base numbers are more accurately represented in the January, February, and March numbers, which are roughly double.  This is not surprising because when the panel was instituted Mr. Bob Byrd said there was about a 40 percent decrease in the incidence, the frequency of filings.  Now with the panel gone, to see it doubling is not surprising; you could almost predict it.

 

Just to correct something Mr. Bradley said regarding the opposition to eliminate the panel, the Nevada State Medical Association was opposed.  You can check with Larry Mathias and Dr. Robert Shreck, who is President of NSMA, CCMS President Dr. Warren Evins, and myself.  I attended those task force meetings and we were opposed to eliminating the panel and felt that it should be fixed.  There were a few that were for eliminating the panel and feeling that, the president of that large group felt that there would not be an increase in frequency but we disagreed with that.

 

Bill Bradley:

I have not looked specifically at the history, but I believe we originally included a 60-day filing for the answer that sent the defense lawyers defending positions because they simply felt they had not even close to adequate time within 60 days to prepare an answer.  This is where we started building all the extensions of time that led to a lot of the delays.  I am actually not comfortable speaking for defense lawyers, but I know that was a huge “bone of contention” and I think the Insurance Commissioner would agree that we built in a stipulation for an automatic 30-day extension if they merely asked.  That was one of the time frame problems.

 

Chairman Anderson:

So this is a place where we will have to do a little sanding if we need to get the bill through.  Does anybody else wish to be heard on Assembly Bill 300?

 

Let’s close the hearing on Assembly Bill 300 and bring it back to Committee and we will see if we can get it sanded tight for our work session.  Dr. Mabey, is there anybody working on amendments that you are aware of?  [Dr. Mabey’s response was inaudible.]

 

Let’s turn our attention then to Assembly Bill 350. 

 

Let’s take a five-minute break.

 

Let me reconvene to take up Assembly Bill 350.

 

Assembly Bill 350:  Prohibits State Board of Health from requiring certain residential facilities for groups to purchase or maintain policy of liability insurance. (BDR 40-971)

Assemblywoman Ohrenschall, District No. 12, Clark County:

I am here today to present Assembly Bill 350, or rather what we would like Assembly Bill 350 to become.  Due to circumstances and information that arose after the bill was drafted, I am going to be asking this Committee to consider some major changes to the bill.  Before I get to that, I would like to start out with some background.

 

Nevada Revised Statutes 449.017 defines a “residential facility for groups” as “an establishment that furnishes food, shelter, assistance and limited supervision to an aged, infirm, mentally retarded or handicapped person.”

 

The liability insurance for these small group homes is constantly rising and is a financial burden for the operators of these facilities.  Further, as with other liability insurance markets, such as the doctors that we saw during the special session last summer, it is harder and harder to obtain coverage and the price for that coverage—the coverage that a person is able to purchase—continues to increase.  If we do not do something to take this financial burden and mitigate it for these operators, they could be forced to close their facilities.  That would leave a tremendous hole in services that are necessary in the state of Nevada.

 

Because the bill was sent to my office on the last day that bills were sent up, the decision was made strategically at that point to ask this Committee to consider amending the bill because the bill did not entirely meet the needs that the homes faced and, I believe, did not take advantage of various possibilities that the Committee could look at.

 

The operators, at least in homes in southern Nevada who originally came to me and asked for consideration of this bill, a group called ACAN, Adult Care Association of Nevada, had asked me to consider getting a bill drafted that, among other things, would allow the owners of such facilities to group together to form a self-insured coalition where their money would be combined to set it up if permission could be obtained from the State Legislature.  That was one option they wished to have considered and possibly included in the bill.  The second was some form of cap upon their liability.

 

The more that I look at their liability situation and what we did last summer for the doctors who are facing similar problems in Nevada, many of whom were closing their doors at that time, it seems to me that the situations tend to be very parallel.  In fact, perhaps it may be harder on the group care providers because they go through a lot more hoops in terms of licensure and insurance coverage, I think, than—I am not sure, possibly the doctors have as many hoops.  It just seems to me that looking at the amount of bureaucracy that they must go through is more.  I’ve never seen so much bureaucracy over one profession in my life in looking at things.

 

The other possibility that they wanted was if they could get a $350,000 limitation on economic damages; basically, that’s parallel to what we had in Assembly Bill 1 of the Eighteenth Special Session for the doctors.  If that did not work, consider a $100,000 limitation on any and all liability across-the-board.  So those are the three options that they had asked to be considered.  If they got two out of the three, I think that would go a long way towards helping them.

 

There are several witnesses in southern Nevada; we have two here in northern Nevada, also, from a group of care homes who are here to testify as to the situations that they have.

 

I would be very happy to work with the Committee.  I realize we are running out of time, but if the Committee would allow or decide to redraft this bill quickly, they could serve and allow the group care homes to remain in full function.  We really do need them.

 

Chairman Anderson:

I appreciate you coming with the legislation.  I have two people from the south who have indicated a desire to speak and yet I have a long list of people who are interested in the bill.  Do you have a process in mind in terms of me calling people today?

 

Assemblywoman Ohrenschall:

I believe we should certainly hear from Marte Hilario, President, Adult Care Association of Nevada; I think he is in the audience and the persons he designates down there, because different members have seen the market from different aspects, different size group homes, and so on.

 

I think the people from here are in agreement with everything I stated, so if the Committee simply wants to hear a “me too” that might speed it a little bit.

 

Marte Hilario, President, Adult Care Association of Nevada:

[Introduced himself.]  First of all I would like to thank all of you legislators.  I am speaking on behalf of all group home operators.  I am testifying in favor of A.B. 350.  This bill will help us a lot with our expenses.  If you can imagine, almost our own salary goes to the insurance company.  It seems we have not gotten any increases in our SSI, which is the project of our Governor Kenny Guinn’s task force to give us seniors the corresponding correct amount for SSI.  In the meantime, A.B. 350 will be helping only people 60 years old and up.  What about the residents who are 60 years old and below?  Please, I beg you to amend this bill, A.B. 350, to include people 60 years old and below.  Please give us a $100,000 cap for the claim of liability insurance.  Then, eventually the insurance company will only charge us $200 per bed, per annum, instead of the $550 per bed they are charging us now.  Nobody can live with that, especially with the—I would say the right word—mental health program.  We have about 75 group home operators registered in Las Vegas, so we cannot stay open if we pay $550 a month for each bed. 

 

Theresa Brushfield, Adult Care Consultants:

[Introduced herself.]  I am the operator of two facilities.  At the current time, my insurance costs are approximately $8,600 a year for my two facilities.  I am also a consultant; I help people starting up new businesses and some people that have existing businesses.  Right now we are having a crisis in southern Nevada where there is no insurance available if we have an endorsement for mentally ill clients; we cannot get insurance.  There is one outlet where a facility can get insurance; it costs $21,000 a year.  Taking the amount of money that state mental health pays right now—I believe it is about $835 per resident—and multiplying that by 12 months and 6 residents, then take 90 percent of that, it comes out to $55,000 a year.  No facility can afford $21,000 a year for insurance if its income is only $55,000 a year.  It doesn’t make sense.  I know I could not afford it.  My average rate for a resident is $1,200 a month.  With all the hoops that I have to go through to stay in compliance, I would not be able to afford it; I would be forced out of business.

 

I believe that having no insurance could be harmful, but I know facilities right now that are unable to get insurance.  They have invested a lot of money in their properties and invested money with the state because they have subsidized the state in the care of the frail elderly, the indigent elderly, and state mental health client.  Now, if they have no insurance, they are going to be put out of business.  So the time and effort that they have spent has been for naught.

 

I hope that you will look at different things—maybe a cap.  I came from a state where we could not get insurance for our business and they had assigned risk pools where insurance companies were forced to insure us.  I don’t understand insurance that well to know if it would work in this case.

 

Also, I would just like to say that in 1995, I was our representative, John Ensign’s delegate, to the White House Conference on Aging.  I met a lot of people from the East Coast and I was telling them how great it was to do business in Nevada even though we had a lot of regulations.  I thought those regulations kept the residents safe and the caregivers on their toes.  I was told that I was really naïve because on the East Coast, facilities were being sued left and right for the very reasons that clients come into the facility.

 

We get residents because they are at risk of falling; they have suffered from dehydration; they have suffered from malnutrition; they have had a lot of medical problems and they can’t live by themselves anymore.  Unable to take care of themselves, they come into the facility and they are there for 36 hours and something happens to them.  They go back to the hospital and the guardian or loved one is watching television and they see from attorneys—three different attorneys here in Clark County—that if a loved one lives in a group home and suffers from malnutrition, has had a fall, or suffers from dehydration, ”sue, come in and see us.”  So people are being told all the time to sue us when we are trying to do the best job that we can.

 

I have never been sued, but yet my insurance continues to go up.  We just had an increase; the State of Nevada Bureau of Licensure increased our license fees 272 percent this last fall.  We only have one insurance agent in town who can get insurance, and he can’t even get us insurance now.  New people who are trying to go into the business are having a difficult time because of the underwriting—no mental health at all. 

 

Chairman Anderson:

I have no questions from the Committee for anyone in the southern area.

 

Wendy Simons, Park Place Assisted Living Residential Neighborhood for Seniors:

I appreciate the opportunity to speak today and I would also like to express my appreciation to—pardon me, for the record my name is Wendy Simons—I am actually representing myself as a provider in the industry and as an administrator of assisted living residential care facilities since 1972, but I have the pleasure of serving on several state boards and commissions with regard to this industry.  First, I am northern Nevada chairman of the Coalition of Assisted Residential Environments or CARE, and a northern Nevada chairman of the Assisted Living Advisory Council, which works with the Bureau of Licensure and Certification under the Health Division (testimony provided in Exhibit G). 

 

There are a few points I wanted to—just for the point of history—bring to you today.  You heard from our providers in the south as well as Assemblywoman Ohrenschall that there is a crisis facing our industry with regard to obtaining liability insurance.  I brought this question forward to partners in the insurance industry to ask them to speak to the two councils that I chair and to educate us with regard to the concerns and issues that have occurred.  From listening to the testimony this morning regarding the physicians, it is evident that this is not a unique situation and you are very well apprised of what is currently occurring and it has been a result of the events of September 11, 2001, among other things.

 

I also am wondering from the discussion that I heard this morning if the liability crisis lapses, if we will be in a better situation for obtaining liability insurance.  A second challenge facing our residential facilities is the fact that the insurance for this industry falls under surplus lines in the state of Nevada.  Facilities are not given advance notice when their insurance is coming up for renewal and the notice of non-renewal, due to the lack of carriers that are coming into this area; oftentimes they have less than 30 days.  Once their insurance has lapsed, they cannot obtain insurance.  The biggest part of that reason is no company wants to pick them up with that gap and the potential risk that might be imposed for the duration that they were uninsured. 

 

The Bureau of Licensure and Certification recognizes this problem.  Pam Graham will be speaking to that after us.  But the long and the short of it is, they took the initiative to recommend to the Board of Health under the Nevada Administrative Code (NAC) Chapter 439 variance application piece that these facilities are at least able to apply for a variance in the NAC 449 requirement to have liability insurance.  Bearing in mind currently that is where this resides, it is in NAC 449 in our regulations that say we have to carry liability insurance.

 

The Board of Health has been granting variances to facilities under this hardship issue in hopes that eventually they could secure additional insurance with the caveat that they are required to notify the family members and the residents and the consumer that they are not operating with any liability coverage.  I think it is good public policy to, certainly, have that notification for consumer protection.  Many, many providers have contacted me; they have said that they can’t get insurance.  The mental health issue that you heard about is very prevalent.  One provider that has a mental health facility in northern Nevada went from liability insurance of $7,000 a year to $50,000.  The only carrier that she could get was Lloyds of London.

 

We have to find a way to attract more carriers back into our community.  I want to really thank Assemblywoman Ohrenschall for bringing this bill forward from the standpoint that it gave us a heightened awareness and certainly gave the legislative body a heightened awareness that we are in trouble, along with the doctors and everybody else.  The residential care facility is in trouble and it is to her credit that she brought this bill forward.  I also want to thank her with her offer to consider some amendments.

 

If there were some way we could integrate liability caps in this—I am not familiar with how the total legislative process works—but that would be tremendous.  I am aware of Assembly Bill 187, which might be very helpful in this course and might be beneficial to consider it—it might very well pick up some of the slack for us as an industry as well as with the capping.  With that I would like to thank Assemblywoman Ohrenschall once again, and not take any more of your time.  I appreciate your consideration of the issue.

 

Chairman Anderson:

Haven’t you presented any specific amendment language to Ms. Ohrenschall?

 

Assemblywoman Ohrenschall:

No, sir, they have not at this time, but I don’t think that it would be very difficult.  Just briefly speaking before we came up, I was under the impression that both of these witnesses were pretty much in agreement in the spirit of the three different possibilities that I mentioned to the Committee.

 

Lawrence Fry, Board of Directors, Dayton Parkview Adult Residence:

[Introduced himself]  Thank you for the opportunity to speak on A.B. 350 today.  I am wearing a couple of hats.  First of all, Dayton Parkview Adult Residence is a licensed assisted living facility in Dayton.  We cater primarily to SSI and clients that are on welfare.  The other hat that I’m wearing is that I‘m the legislative chair for CARE, which is the Coalition of Assisted Residential Environments.  We represent over 60 facilities both in the north and the south with about 1,400 beds.  We totally empathize with the motive and the origins behind the bill.  There is a liability insurance crisis in our industry and that has been felt in other industries as well for a variety of reasons.  So we certainly see the motivation behind the bill; however, we do feel that there are better ways to address the problem.  We have concerns about the bill that I would like to just outline here.

 

First of all, we feel that if the bill would pass as originally introduced without the amendments it would portray Nevada as an unregulated state, which could adversely affect our operations in a number of ways.  It would make it even more difficult for us to obtain liability insurance because the insurance industry, nationwide, would look at Nevada as an unregulated state in this area.

 

Secondly, we think that the consumer would have less confidence in the assisted living industry in this state because, if this bill were to pass, I would imagine that from a consumer protection standpoint, a facility would need a notice or a posting for the public as to whether the facility carried liability insurance.  We think this would degrade the confidence in the industry.

 

The third point is from a practical consideration; if an uninsured facility does have a legal action brought against it, in terms of the investigative cost and the legal costs associated with that action, even if they are found to have no wrong doing, how would that affect the cash flow of a business?  Would the facility risk closing and the residents moving when all of this could have been avoided with insurance, which presumably would pick up some of these costs?  So those are three areas where I think there are problems.

 

Also, I want to remind you that current law does allow some flexibility by allowing a facility to apply for a waiver from the Board of Health so it can continue operating temporarily while it seeks insurance solutions.  I also question if there are legal implications for the state because of the facilities’ relationships with the Bureau of Licensure and Certification, with the Board of Health, and with the Bureau of Examiners for administrators launching care facilities.  Are there any legal ramifications there?

 

Now, I would like to say that to address the problems, and Ms. Ohrenschall very properly brought up the operation itself, we would actually think that tort reform is a more viable alternative because it would put a cap on non-economic damages.  Specifically, I am talking about A.B. 187; it would put a cap on non-economic damages; it would—I may be speaking out of turn, but all I am doing is trying to present before the Committee viable alternatives.  [Ms. Ohrenschall made an inaudible comment.]

 

Chairman Anderson:

We need to talk about this bill, that’s what Ms. Ohrenschall is trying to tell you.

 

Lawrence Fry:

I apologize.  So those are my thoughts representing our segment of the assisted living industry.  Also, I would like to enter into the record testimony from David Breedlove; he is an independent insurance broker; I believe you all have written comments (Exhibit H) from him.  He is with D.L.B. Insurance Marketing in Las Vegas, and I will just address some of the main points of his letter.

 

He also feels that passage of this bill would make it more difficult for people to obtain insurance.  He has questions about the care facility operator fighting legal challenges if action is brought against him from a cash-flow standpoint.  One good thing that he does say about Nevada is that, from an insurance industry prospective, we do have a good regulatory structure in this state.  He would hate to see that go backwards instead of forwards.  He does feel that Nevada has taken a hit in liability premiums; that is a result of actions in other states, not as a result of the very good experience we have had here in Nevada.  So he does bring up a very good point that we should take into consideration there.  He also thinks that tort reform, legislatively, would be a good avenue to go to address this problem, so those are my comments and if there are any questions, I would be happy to take those. 

 

Chairman Anderson:

Mr. Fry, I presume this Coalition of Assisted Residential Environments care is your group?

 

Lawrence Fry:

I am a legislative chair for that group.

 

Chairman Anderson:

Is this your submission (Exhibit I)?  It’s not signed.

 

Lawrence Fry:

I apologize for that; that is mine.

 

Chairman Anderson:

Is the second one from Mr. Breedlove?  What I am trying to do is make sure that we have your suggestion clearly identified.

 

Lawrence Fry:

That is correct, on behalf of our organization and, again, I am remiss in that.

 

Assemblywoman Buckley:

This question is for either Mr. Fry or Ms. Simons.  Have you made any actual efforts to evaluate whether developing your own self-insured group is possible under our current laws?

 

Lawrence Fry:

We have not made a formal effort in that regard.  I know that was a suggestion from the southern CARE providers.  I have gotten some feedback from David Breedlove on this from a practical standpoint and it is his opinion that in Nevada you would need about a $30 million fund or insurance pool to adequately fund a self-insured group situation.  So this represents quite a hurdle when you look at the fact that there are only about 300 licensed facilities in this state.

 

Assemblywoman Buckley:

What about pooling nationally?  Have you investigated that at all?

 

Lawrence Fry:

That, we have not investigated.

 

Assemblywoman Buckley:

I guess my only comment would be that we are finding insurance rates are doubling, as I am sure Ms. Ohrenschall has already told you, in every business arena—even our conventioneer and visitors authority liability insurance went up 50 percent because the market is so bad and that is what the insurance industry uses.  It is very difficult to ride out the storm for many businesses.  What many are finding is, if they pool and they are in the business not for a profit, that the rates are coming down.  Obviously, one of the problems in this arena is that we have had some nursing homes in our history provide terrible care and truly injure people.  If you gave them just an open license to do that, it will reflect poorly on the job that you all do, which is so spectacular in helping our elderly residents and so that always is the balance.  So, certainly, trying to pool the good operators together, like you all, to get those costs down makes a lot of sense.

 

Chairman Anderson:

Ms. Ohrenschall, I thought all these folks were going to be up here supporting you.

 

Assemblywoman Ohrenschall:

These two individuals told me from the beginning that they would be helping with the amendment, not the original bill.  We informed them when they came to us Friday, which is the first time I met them, that I would be asking the Committee to consider an amendment because the original bill that was sent up did not reflect accurately what was requested.  As far as I knew, that was what they agreed to speak on.  I apologize.  If I may, I want to simply emphasize the point that Ms. Brushfield made, which was that a lot of the insurance in this area is not only too expensive, but simply not available at all, especially if you care for the mentally ill and so on, and many of these homes do; so they really have a double problem.  But the folks in southern Nevada are totally in support.

 

Chairman Anderson:

I see no indication of other questions.

 

Assemblywoman Ohrenschall:

With the Committee’s permission, I would be very happy to work on submitting the proposed amendments and I could probably have it ready very quickly.

 

Chairman Anderson:

There is a possibility we will be doing that.  We still have a couple of people who wish to testify. 

 

Pamela Graham, Chief, Bureau of Licensure and Certification, Health Division, Nevada Department of Human Resources:

[Introduced herself]  I am here to provide testimony in opposition to A.B. 350, which prohibits the State Board of Health from requiring certain residential facilities for groups to purchase or maintain policies of liability insurance.  Currently, liability insurance is a requirement under NAC Chapter 449.  However, pursuant to NAC Chapter 439, facilities do have the ability to request a variance to this requirement and the State Board of Health may grant those requests as appropriate on a case-by-case basis.  This flexibility would be lost.  This bill treats facilities providing services only to persons over age 60 differently than others.  Passage of this bill would result in an inconsistent application of the State Health Division’s current regulation that requires liability insurance for other medical facilities, facilities for the dependent, and other health facilities.  This creates the potential for residential facilities for groups that provide care for only elderly persons to be in a position of potential litigation if there is an event that causes harm to a resident or other person in the facility.  The facility may have to prove they were not negligent, rather than have the ability for early resolution by submitting a claim against the liability insurance for certain types of damages.  Such litigious action may result in the closure of facilities.  Thank you for this opportunity to comment on A.B. 350.

 

Chairman Anderson:

Are there questions for Ms. Graham?

 

Assemblyman Carpenter:

What kind of limits do you require them to have now?  Does it depend on the number of residents or what?

 

Pamela Graham:

Sir, if you could please clarify, do you mean as far as is there a liability cap or is there a cost?  We do not have any dollar amount in the regulation that requires them to have liability insurance at this time.

 

Assemblyman Carpenter.

Do you mean they don’t have to have a $100,000 or $200,000 policy?  Do they just have to have insurance with no specifics?

 

Pamela Graham:

Yes, that is correct.  There is no set amount in the regulation, just that they must have a liability insurance policy.

Assemblyman Carpenter:

So then it is left up to the individual facilities and their insurance agents to decide what kind of risks they might have?

 

Pamela Graham:

Yes, that is correct.  Whatever they deem is appropriate for their facility and the type of facility that they have.

 

Chairman Anderson:

You don’t currently monitor, other than the fact that they have a policy, what the per-bed number is relative to the level of insurance that they carry.

 

Pamela Graham:

Yes, that is correct.

 

Chairman Anderson:

Just that they have a policy, that is all you care about.  Are there questions from the Committee?  Is there anybody else who feels a compelling need to speak on Assembly Bill 350?

 

Theresa Brushfield:

I would just like to add one thing, may I?  To answer the question . . .

 

Chairman Anderson:

Which question might that be?

 

Theresa Brushfield:

It was the last question that was asked about the amount of insurance that is required.  In southern Nevada, there is only one insurance company and they will not insure for less than $1 million.  There is no company that will insure us for less than $1 million or $2 million.

 

Chairman Anderson:

Does anybody else have a compelling need to speak who has not spoken?  Let me close the hearing now on Assembly Bill 350 and bring the bill back to Committee and indicate to Ms. Ohrenschall, that if you are going to be working on this, you need to try to get your amendments and paperwork together immediately.  So we will need to get it done right away if we are going to move on it.  It is not looking really good at this time, Ms. Ohrenschall.

 

Assemblywoman Ohrenschall:

If I may try, I would certainly appreciate the opportunity.  So, until the end of today or first thing tomorrow . . .

 

Chairman Anderson:

If you could get it to us the first thing tomorrow by the end of Committee hearing tomorrow, that would be great.

 

Assemblywoman Ohrenschall:

Thank you very much.  I will.

 

Chairman Anderson:

I think we better do this tomorrow.

 

I have set aside Thursday and Friday evening for us, but I know it is going to be a long session today. 

 

We are adjourned [at 10:33 a.m.].

 

 

RESPECTFULLY SUBMITTED:

 

 

 

                                                           

Sabina Bye

Committee Secretary

 

 

APPROVED BY:

 

 

 

                                                                                         

Assemblyman Bernie Anderson, Chairman

 

 

DATE: