Doctors sue Franchini over malpractice agreements
Physicians: Secret deals with large providers could further compromise struggling fund
Four New Mexico doctors, including the president-elect of the American Medical Association, are suing state Superintendent of Insurance John Franchini, claiming his office violated state law by secretly striking a deal with Christus St. Vincent Regional Medical Center and other large providers that allows them to tap into an already troubled medical malpractice fund.
According to the complaint, recently filed in the state’s First Judicial District Court in Santa Fe, the Office of the Superintendent of Insurance allowed the local hospital and “15 more large corporate hospitals and 34 outpatient facilities” to become eligible to use the state-administered fund to pay malpractice claims without conducting a public process, which would have included studies to determine the appropriate premiums the providers should pay to offset their potential claims.
As a result of these backdoor deals, the four doctors say, it’s impossible for other members of the Patients Compensation Fund, some of whom have been paying in for decades, to know how much the high-risk hospitals are paying into the
fund “and whether their cumulative risk will overwhelm the fund,” which was deemed fiscally unsound in a 2017 report from the state auditor.
“It was all done in secret,” the complaint says. “The Superintendent never disclosed that he was negotiating with the hospitals nor the amount he was requiring each hospital and outpatient care facility to pay into the fund to offset the additional risks and liabilities the fund would be assuming.”
If the fund were to be depleted, said Stephen Marshall, an attorney for the plaintiffs, it would have an enormous impact on New Mexico patients who are the victims of medical malpractice because there would be no money available to pay their claims. This also could affect the availability of doctors in the state, he said, because practitioners would be forced to pay exorbitant rates for other forms of malpractice insurance.
The plaintiffs — Dr. Barbara McAneny, president-elect of the American Medical Association and president of the New Mexico Cancer Center; Dr. William Ritche; Dr. William Liakos Jr., president of the New Mexico Medical Society; and Dr. Albert Kwan — are asking the court to rule that because Franchini skirted the public process, his actions are null and void.
The doctors also are asking the court to order Franchini to reconsider admission of the large providers in a public process.
Franchini said in an email Tuesday that the allegations are without merit.
“[The Office of the Superintendent of Insurance] is confident that it has followed the law and, to that end, has been transparent in this process while following the applicable state statutes which allow for hospital participation in the fund,” Franchini said in his statement. “We cannot comment further on this pending litigation.”
The fund was created after Travelers Insurance Co., essentially the only company offering malpractice insurance in the state, announced in 1975 that it would stop offering coverage for New Mexico doctors because of problems it was having in Texas, the complaint says.
A committee that included a New Mexico Supreme Court justice and members of the New Mexico Medical Society, the New Mexico Trial Lawyers Association and the State Bar of New Mexico brainstormed solutions and came up with the Medical Malpractice Act, which created the Patients Compensation Fund and related regulations.
Participating doctors pay annual surcharges, the primary sources of revenue for the fund. This entitles them to pay claims out of the fund in cases in which damages exceed $200,000.
Hospitals were “essentially unaffected by the insurance crisis that promoted the creation of the Act,” according to the complaint, “because they were all either self-insured or insured by other carriers.”
Christus St. Vincent was allowed to become a qualifying provider “for an unknown sum” in 2009, according to the complaint, and the other facilities were allowed to join in 2016.
Franchini, who was named insurance superintendent in 2010, has refused to answer questions from doctors who participate in the fund about what studies were undertaken to ensure a balance between the risks the hospitals represent and the premiums they pay, the lawsuit says.
Attached to the complaint is an affidavit from state Senate Majority Leader Peter Wirth, in which Wirth attests that he asked for the information in October 2016 and that Franchini’s office met with him but “did not provide the actuarial studies supporting the decision.”
Wirth couldn’t be reached for comment Tuesday. His voicemail message said he would be out of the office until Aug. 14.
Christus St. Vincent Regional Medical Center spokesman Arturo Delgado said Tuesday it wouldn’t be appropriate for him to comment, given that the hospital is not named as a defendant in the lawsuit.