The Worst Business in America

Suppose you couldn't raise prices, you couldn't control expenses, and you were morally obligated to meet the needs of customers who are eager to sue if anything goes wrong. Suppose you were a group of doctors trying to birth babies in the 21st century.

In seven days their medical practice could be forced to shut down, and the sheer absurdity of the situation has put doctors Richard Levine and Michael Faust in a slightly silly mood. Seated in Faust's cramped office overlooking the hills of northwestern New Jersey, the two managing partners of Valley Center for Women's Health are still trying to sort out their feelings about an offer they just got on this sunny day in late July. A malpractice insurer has promised very attractive policies to their four partners in obstetrics-gynecology, but the insurer refuses to cover Faust and Levine, the two managing partners, at any price. Since their current insurer has already announced that it will not renew any policies written in New Jersey, Faust, 49, and Levine, 50, are only days away from being left "naked"--and legally barred from practicing medicine.

"So, we're going to start looking to open a pizzeria somewhere," jokes Levine, who has a sunny disposition to go with his toothy smile.

"I have some pretty decent typing skills," says Faust.

The two doctors are on intimate terms with life and death, with miracles and tragedies. They have been delivering babies for most of their adult lives, and thousands of those deliveries have been joyous events. But on rare occasions, Faust and Levine have brought newborns into the world who were distressed, deformed, dying, or dead. Some of those babies' parents have sued, and even though no jury has ever found Faust or Levine culpable in a malpractice case, they are marked men nonetheless, their livelihoods threatened by a suddenly cautious insurance market.

Earlier this year, when malpractice premiums were already eating up one of every seven dollars of the practice's gross receipts, Faust and Levine learned that, with their current insurer planning to leave the market, no established insurer was willing to write them a new policy. During a five-month stretch (in which the practice delivered more than 250 babies) Valley Center's six physicians had to face up to one grim possibility after another, including having to play risky games of "chicken" with the health care companies they rely on for patients and income, having to lend start-up capital to a fledgling insurer, and maybe even having to break up the partnership--all driven by a nationwide meltdown in the malpractice insurance market.

Doctors, particularly obstetricians, are in many ways well conditioned for the perils and uncertainties spawned by rapid change. Remaining calm amid adversity is the doctor's stock in trade. But for almost two decades, most of America's physicians have been treated like chum in a trillion-dollar health care ocean swarming with sharks. Every other player in the game--hospitals, government agencies, health care companies, and malpractice insurers--has put a squeeze on physician incomes. It's no coincidence that doctors, on the frontline of patient care, have the clearest ethical commitment to place healing above earning.

The practice of medicine has gotten so tricky and profit margins so slender (though doctors seldom speak, or think, in such terms) that the independent, self-assured instincts honed in the profession can actually land doctors in financial trouble. As one health care consultant likes to point out, physicians who fly their own planes tend to be more prone to crashes than other pilots because they are more apt to overrate their flying abilities. When you do godlike things on a day-to-day basis, the reasoning goes, why not take on a thunderstorm without radar?

For the doctors of Valley Center, the thunderstorm is here.

The news arrived at Michael Faust's house with the February 3 Bergen Record. Zurich North America, the only insurer that had even offered Faust and his partners a policy eight months earlier, would be pulling out of the New Jersey market. Valley Center would have until July 31 to find another insurer.

Coincidentally, that very morning marked day one of the first physicians' work stoppage in New Jersey history, a statewide protest by the medical profession against spiraling malpractice rates. A cold late-winter rain was falling that morning as Faust and his partners prepared to join 5,000 other medical professionals for a mass rally at the state capitol in Trenton.

The doctors found that no established insurer would write them a policy--at any price.

At the rally that day, doctors cried out for a bill that would impose caps on jury awards in malpractice cases, waving lawyer-bashing protest signs ("Need a doctor? Dial 1-800-LAWYER") and leading spirited chants of "Cut the crap! Pass the cap!" Faust, all six-foot-six of him in a damp white clinical coat, stood by quietly. He is a soft-spoken man who brims with midwestern civility, and he felt self-conscious, as a physician, protesting in the street. Near him, sticking out in the white-coated throng, was a group of sympathetic Teamsters, all in their distinctive union local jackets, joining in the chanting, cheering, and especially the jeering. Teamsters, unlike doctors, have a proud history of sticking up for themselves. And Faust had another thought: "Maybe we need to get some of those jackets."

At the end of that day, however, neither new laws nor a more militant political posture could guarantee Valley Center's six ob-gyns the insurance they need to stay in business. New Jersey is one of 19 states that the American Medical Association cites as "in crisis." These are states in which jury awards and insurance costs are climbing, and doctors are either leaving their practices or their states. Reasons why premiums have skyrocketed are numerous and complicated--the stock market decline and a lack of capacity in the reinsurance market brought on by the September 11 terror attacks being just two. Some say insurers had underpriced their policies to build market share and then, in 2002, raised rates in hopes of recouping their losses. But doctors and insurance companies blame multimillion-dollar jury verdicts, and nine states, along with Congress, have responded with proposed legal caps on damage claims.

 1 | 2 | 3 | 4 | 5 | 6  NEXT