The Good, The Bad, and The Feo

History:

During the 2021 legislative session, HB75 was introduced by the Rep. Damon Ely on behalf of the New Mexico Trial Lawyers Association. Although the Society wanted to delay any amendments to the Act until the COVID-19 pandemic ended and the proposed amendments were properly vetted, the House of Medicine had to introduce its own amendments to the Act. Those proposed amendments were contained in SB239 , which was carried by Senator Liz Stefanics and Senator Gay Kernan. Politics played out in a particularly frightful manner and a heavily amended HB75 was signed into law by Governor Michelle Lujan Grisham on April 1, 2021.

At the end of November 2021, when outpatient health care facilities began receiving letters from liability insurers declining to insure them under the new $4 million cap applicable to outpatient facilities and hospitals under HB75, NMMS became heavily involved in the second special legislative session of 2021, which was intended to focus solely on redistricting. However, between December 6^th and the 17^th, the Society convinced the Governor to amend the proclamation that created the second special session to allow HB11, carried by Representative Doreen Gallegos and Representative Day Hochman-Vigil, to be heard. After extensive negotiations with the Trial Lawyers, numerous committee hearing testimonies, several floor debates, and a tremendous amount of work by practices and physicians, HB11 passed both chambers of the Legislature and it was signed by the Governor on December 22, 2021.

As it stands today, HB75 and HB11 had both a positive and negative impact on the Act and the Patient’s Compensation Fund (“PCF” or “Fund”):

The Good:

1. The cap applicable to an independent provider increased from $600,000 to $750,000. Given that no cap increase is "good," this increase made it into the "good" category because 1) the cap had not increased in 36 years and, 2) a $750,000 cap is significantly less than the $1,000,000 cap agreed to (though vetoed by the Governor) in 2011.

2. The liability cap for independently owned and controlled outpatient healthcare facilities, including ambulatory surgical centers, is $750,000 until January 1, 2024.

3. Hospitals and outpatient health care facilities can qualify for coverage under the Act with a claims made policy.

4. The risk assessment required for hospitals to qualify for coverage under the Act was improved to ensure that the PCF can properly assess the risk that hospitals pose to the Fund.

5. The screening process provided by the New Mexico Medical Review Commission was maintained under the amended Act.

6. Funding for the New Mexico Medical Review Commission was increased to $500,000.

7. The operation and administration of the PCF will be handled by a Third-Party Administrator. [Integrion was subsequently awarded the contract by the OSI].

8. Hospitals are required to cure any of the PCF deficit attributable to hospitals before they lose PCF coverage on December 31, 2026.

9. Annual actuarial studies of the PCF are now required and will be completed to examine the financial health of the Fund and to make any necessary changes to decrease the Fund’s deficit.

10. The PCF Advisory Board was created, which is made up of representatives from NMMS, the New Mexico Hospital Association, the Trial Lawyers Association, patient advocates, and a nurse representative. The primary focus of the PCF Advisory Board is to advise the Superintendent and the Third-Party Administrator regarding PCF surcharges.

The Bad:

1. As result of negotiations between the hospitals and the Trial Lawyers, hospitals and outpatient health care facilities that are majority owned and controlled by hospitals will be subject to a $4 million cap, which will increase in half-million-dollar increments until it reaches a $6 million dollar cap in calendar year 2026.

2. Under HB75, any clinician who could be deemed an agent of a hospital or an outpatient health care facility had potential exposure to the higher cap of $4 to $6 million. Fortunately, because of HB11, agents of hospitals and outpatient health care facilities are covered by the lower, $750,000 cap.

3. Surcharges on independent providers are required to be set with the intention of bringing the PCF into solvency with no projected deficit by December 31, 2026. Notably, during the regular legislative session in 2022, the Legislature appropriated $30 million to pay down a portion of the PCF deficit that has been attributed to clinicians.

4. Despite the intention of the stakeholders involved in the negotiation of HB75, the definition of “occurrence” could be interpreted to entitle an injured patient to multiple cap recoveries for one injury. That said, the Trial Lawyers and NMMS have reached an agreement that legislation will be pursued if courts in New Mexico interpret the current definition of occurrence to mean something other than one cap amount per injury despite the number of errors or health care providers that caused or contributed to the injury.

5. Hospitals and licensed outpatient health care facilities will lose their ability to participate in the PCF on December 31, 2026.

The Feo:

On January 1, 2024, the cap on independently owned licensed outpatient health care facilities will increase to $5 million. To date, independently owned licensed outpatient health care facilities have been unable to find an authorized insurer to write professional liability policies under the $5 million cap. If affordable liability insurance remains unavailable, NMMS could pursue legislation in 2023 to address the crisis facing independent outpatient health care facilities.

Frequently Asked Questions about the new Act

New Mexico Medical Society - Medical Malpractice Act Frequently Asked Questions (FAQ) (5/20/2022)