For Christus Health System, the benefits of Proposition 12 aren't hypothetical.
They are a solid, tangible $21 million – the amount the Catholic not-for-profit system expects to save on liability insurance this year in the 48 Texas hospitals and facilities it owns or manages.

"The primary factor in that is tort reform," said Randy Finley, Christus' director of risk management.

"It's not the only factor, but it's the primary factor."

Nearly a year after voters approved Proposition 12 to permit limits on malpractice damages, insurance premiums for many doctors haven't gone down. And many plaintiffs' attorneys say they can't afford to take injured patients' cases because of the law's limit damages.

But the caps are a good thing for many hospitals, which have seen a sharp drop in malpractice lawsuits since the limits went into effect last September.

A survey by the Texas Hospital Association found that its members' malpractice liability premiums were down 8 percent for their 2004 fiscal years and down 17 percent for fiscal 2005. (Premium figures are based on the year in which the coverage ends.)

Many Texas hospitals said their insurance premiums increased this year. But even that trend is encouraging.

In 2003, 95 percent of hospitals paid more for premiums than in the previous year. In 2004, 45 percent saw an increase. In 2005, according to the survey, only 19 percent will pay more.

Last year, the Legislature limited the non-economic damages that doctors, hospitals and other medical personnel and facilities could face in a liability lawsuit. The limits are for intangibles such as mental anguish, pain and suffering or loss of companionship.

Before the limits, the amount plaintiffs could win was limited only by the extent of a jury's sympathy for a victim of medical malpractice.

Now the maximum is $250,000 for any single person or facility, although an award can go as high as $750,000 in some cases.

The limits went into effect Sept. 1. On Sept. 13, Texas voters approved Proposition 12, which gave the Legislature the power to set such limits. Proponents wanted the amendment to protect the caps from legal challenges.

Now some big players are reporting big savings, primarily hospitals that self-insure for the first $10 million or more in liability losses, then use "excess insurance carriers" for larger losses.
HCA savings

Hospital giant HCA Inc. projects that its liability costs will be down $28 million annually, and it's cutting the liability insurance premiums it charges its 35 Texas hospitals and 23 surgery centers by 20 percent.

Baylor Health Care System says its liability insurance costs will decline "in seven figures," and doctors in its Health Texas group will see their malpractice insurance premiums decline by more than 10 percent.

Even if Baylor's liability costs had stayed the same, general counsel John Thomas said, it would have been an improvement.

Two years ago, Baylor's "risk management" expenses jumped 121 percent. Last year, the increase was 45 percent. For the current fiscal year, the expenses will decline 2 percent, he said.

"We're seeing these savings, and the law could actually be better. We think it's important to improve the law in the next session," Mr. Thomas said.

Texas hospitals that don't self-insure haven't seen huge savings – or, in some cases, any savings.

But Charles Bailey, general counsel for the Texas Hospital Association, said hospitals are feeling the beneficial effects of the damage caps.

"Generally, for those who aren't seeing savings, we're seeing stabilization" of insurance premiums, he said. "Some of the smaller hospitals, instead of a decrease, are seeing no increase, which is positive as well."
THA survey

The Texas Hospital Association surveyed its 236 acute-care hospital members in July. It got responses from 172, or 72 percent.

The hospitals that responded averaged 160 lawsuits a month filed against them in the year ending Aug. 31, 2003. In the 10 months since the caps went into effect, from Sept. 1 to June 30, they averaged 54 cases a month.

Even so, some insurers – facing a huge backlog of cases filed right before Sept. 1 – have been slow to lower rates.

"That [spike in lawsuit filings] concerned a lot of the hospital actuaries," Mr. Bailey said. "They're reluctant to say there's going to be major savings."

Kim Hollon, executive vice president at the nonprofit Methodist Dallas Medical Center, said he expects to see benefits from the damage caps eventually.

For the next year or so, insurance companies will be paying to defend the spate of lawsuits before Sept 1, 2003, he said.

As a result, "we don't really expect a significant decrease this coming year," Mr. Hollon said. "We think we'll see that in two or three more years."

Jon Opelt, executive director of Texas Alliance for Patient Access, which pushed the limits, said hospitals are using the savings from insurance premiums to invest in better patient care or facilities.

"Not all Texas hospitals are realizing a savings. However, most facilities have had an easier time recruiting physicians because of the state's [more] favorable liability climate," he said.

For rural towns like Muenster in North Texas, officials say the damage caps make it easier to recruit physicians.

Richard Arnold, administrator of Muenster Memorial Hospital, said the damage limits don't affect the facility because it was already protected by laws that limit claims against public hospitals.

But Proposition 12's damage limits indirectly helped the district, which subsidizes insurance premiums for doctors it recruits to the community for the first two years. In addition, physicians considering a Texas practice aren't as spooked by rising insurance rates.