Medical Liability and Tort Claims: What’s at Stake for Hospitals

In 2000, Texas faced a medical liability crisis. Skyrocketing malpractice insurance premiums were pushing physicians out of business and out of the state. Hospital liability premiums nearly doubled between 2000 and 2002, causing private practices to close and physicians to stop delivering babies and treating high-risk patients. Hospitals were also put in a perilous position: as physicians left, they were paying higher premiums instead of investing in staff and technology. To keep physicians in our communities, lawmakers passed medical liability reform in 2003, which placed caps on how much hospitals and physicians can be sued for, and as a result drastically lowered insurance premiums and kept caregivers local.

Separately, the Texas Tort Claims Act (TTCA), an older statute, governs suits against governmental entities, including hospital districts and other public hospitals. It was also updated in 2003 to provide important protections for public hospitals and their employees.

At THA’s annual conference, legal experts examined the details of the 2003 tort reform and the Texas Tort Claims Act, and how they hold up ahead of the 90th legislative session.

Understanding Tort Caps in Medical Liability Cases

A tort claim is a request for monetary compensation for harm a victim suffered. Damages fall into three categories: economic, non-economic and punitive. In a healthcare liability claim, Texas treats each differently in court, and non-economic and punitive damages each have their own cap. When passed in 2003, these caps were critical to combat the medical liability and insurance crisis physicians were facing. As a result, non-economic damages – such as pain and suffering, emotional impairment and mental anguish – are capped at $250,000 per liable provider, with up to $750,000 recoverable if more than one provider is found responsible for the damages.

Exemplary (punitive) damages are capped under a separate provision of Texas law. Economic damages – which include medical bills, lost wages and lost earning capacity – are generally easier to assign a dollar value and are not capped. Historically, the possibility of an unlimited jury award for non-economic damages is what created the crisis that the 2003 reforms were intended to address. After the 2003 legislative session, Texas voters approved a constitutional amendment confirming the legislature’s approach and authority to limit these damages in medical negligence cases.

For public hospitals, the Texas Tort Claims Act limits the recovery of all damages to amounts specified in the statute. These amounts differ depending on the type of public hospital being sued. The recovery against a public hospital owned by a hospital district, for example, is limited to $100,000, whereas a state-owned hospital’s liability is limited to $250,000.

How Cases Reach the Merits: Notice and Governmental Immunity under the TTCA

For a victim to successfully sue a public hospital, the case must first clear two hurdles before it can be tried on its merits. The first is formal written notice of the claim within 180 days (six months) of the incident. Missing that deadline can bar the claim permanently. The second is overcoming governmental immunity, which is not as cut and dry.

The TTCA, passed in 1969, partially waives sovereign and governmental immunity, the legal protection that shields government entities, including public and county hospitals, from most lawsuits. A hospital district can be sued only if the claim fits a statutory waiver, and negligence alone does not provide one. That means a public hospital generally cannot be sued for medical negligence based on poor judgment or a wrong diagnosis. Immunity is waived only if the injury is caused by the condition or use of tangible personal property – such as defective medical equipment, a machine malfunction, or the misuse of a medical supply, medication, or instrument. The property must actually cause the injury; merely being involved in the care is not enough.

Even after a claim clears these hurdles, the TTCA still limits when, how and for how much a governmental unit – in this case a public hospital – may be sued, as noted above. Perhaps as importantly, in 2003 the TTCA was revised to allow for the dismissal of any suit against an employee of the public hospital if the suit could have been brought against the employer. This protection provides an incentive for physicians and health care providers to associate with public hospitals, often located in remote rural areas where workforce recruitment is difficult.

How Tort Reforms Protect Hospitals

Texas medical liability statute and the TTCA do more than shield providers and hospitals from insurance premiums that could force them to close or relocate. They also keep hospitals from spending time and money in court that could go toward care and patients. The limitation on non-economic damages keeps claimants from filing meritless claims in hopes of receiving a settlement borne out of the uncertainty and possibility of a large jury award for an element of damages that is difficult to quantify. Under the TTCA, because a claim must fall within the Act’s limited waiver before it can proceed, hospitals avoid spending heavily to defend cases that will be dismissed at the threshold stage.

“The liability crisis before 2003 was not just a financial crisis for Texas hospitals and physicians. Access to care in certain specialties and in certain parts of the state was severely limited directly because of the liability climate that existed in Texas,” said Steve Wohleb, Senior Vice President and General Counsel of Legal and Regulatory Compliance at THA. “But we don’t have to look back to the early 2000s to understand the impact of undoing the 2003 reforms, we only need to look at other states that are experiencing the same problems with access to care because the liability climate in those states is forcing their providers to relocate to Texas.”

The Future of Tort in Texas

Several other states, including California, Colorado and New Mexico, have recently updated, raised or indexed their caps for inflation. Texas’ core $250,000 structure has remained largely unchanged since 2003. This is expected to be a hot topic during the 90th legislative session.

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