FAQs About California’s “Three Strikes” Law
The following is a list of questions we anticipate about the application of the recently enacted “Three Strikes” law, which will be administered by the Medical Board of California. We have also included a brief history of the creation of this scheme and a brief summary.
Background
For a number of years, the Medical Board of California (“the Board”) has been required by law to collect reports from insurers and other sources regarding indemnity payments in excess of $30,000 paid on behalf of licensees regulated by the Board. Since 1990, effectively all indemnity payments have been required to be reported to the National Practitioner Data Bank (NPDB).
In 2002, following a series of articles critical of the Medical Board as a public watchdog agency, a public records request was filed by a newspaper to obtain settlement reports from the Board, which holds such records for a period of five years. These records reflected all cases of settlements of $30,000 or more involving licensees dating back to 1997 (the Board’s practice was to destroy such records after five years). Although the Board was prepared to comply with the records request, a lawsuit was filed to stop the production, and an injunction was ultimately issued keeping the records from the public.
Legislation was then introduced to require the Board to make public all reports of settlements held by the Board. The Doctors Company and a number of other organizations worked to dissuade the legislature from adopting this proposal. Ultimately, a pared-back proposal was passed as SB 1950, which became law effective January 1, 2003. SB 1950 requires the Board to continue to collect records of settlements in excess of $30,000, and when a licensee has three settlements in excess of $30,000 on his or her record in a 10-year period, make public the fact of those settlements via the Board’s Web site. This scheme has been dubbed “Three Strikes.” (However, as required under SB 1950, the Board is currently developing standards for identifying high-risk specialties which will be subject to a “four strike” rather than a three strike standard and is developing regulations to identify settlement amounts as below average, average, and above average by medical specialty.)
In another significant development contained in SB 1950, the Board now requires reporting entities, such as The Doctors Company, to submit reports when a claim is settled on behalf of an entity, such as a professional corporation, for $30,000 or more when a licensee is also a party to the settlement and that licensee owns, contracts with, or is employed by the settling entity. This change was enacted as a response to a perception that reporting requirements were being evaded by settling on behalf of the entity rather than on behalf of the licensee whose negligence was the actual cause of the claim.
To date, there are no cases construing the newly enacted requirements created by SB 1950. The Medical Board is, as noted above, trying to develop rules for the application of the four-strike rule, and is working to develop a view of how the new reporting requirements are to be implemented.
It is worth noting that the “Three Strikes” scheme should not impact the vast majority of The Doctors Company’s California insureds through actual disclosure on the Board’s Web site. When The Doctors Company did a survey in 2002, only a handful of the thousands of our California insureds would have had three strikes if settlements over the past 10 years were included and no adjustment made for high-frequency specialties.
The following is a list of questions we anticipate about the “Three Strikes” scheme.
When does the three strikes law begin? Do I have a strike if I settled a case for more than $30,000 in 2002?
The three strikes law became effective January 1, 2003. Regardless of how many settlement reports may have been submitted to the Board before January 1, 2003, only reports submitted on or after January 1, 2003, will count towards the total strikes against a doctor.
Will this three strike rule affect my premium?
The answer to this question is unclear. At present, The Doctors Company has no plan to seek rate increases based on three strikes alone. However, insurance experts who have reviewed this proposal believe that the three strikes reporting scheme will result in fewer settlements of marginal or indefensible cases, which will result in poorer results at trial, which could—and many experts believe will—result in higher claims payments, which could in the future result in higher premiums for California physicians as a group.
If the portion allocated to me as part of the settlement is below the $30,000 threshold, but the total settlement including my professional corporation exceeds $30,000, must the settlement be reported? What will the Medical Board do with this information about me?
If a settlement is entered into on behalf of an entity, such as a professional corporation, and a licensee exceeds $30,000, and the licensee is an employee, owner, or contractor with the entity, that settlement must be reported.
How the Medical Board will treat such reports and what it intends to do with that information is not yet clear. There is a perception that in the past, claims were misallocated to entities to avoid the reporting requirements for licensees. There is no reason to believe that the Medical Board will second-guess objectively reasonable good faith allocations of settlements. If, however, the Medical Board concludes that a reporting entity, such as The Doctors Company, has submitted a misleading report premised on an indefensible allocation, it is likely that the reporting entity will be fined. Fines can range as high as $10,000 per incident. How the Medical Board would treat a misallocation situation with regard to the involved licensee is not known.
If I don’t settle, will the company view me adversely?
The Doctors Company prides itself on defending good medicine. While factors such as venue and jury sympathy sometimes enter into the calculus in analyzing potential liability, the core focus is on the medicine. When The Doctors Company encourages its insureds to settle cases, it is generally because the medicine is marginal and, occasionally, indefensible. In such cases, a settlement can generally result in resolution of the claim for less money than a jury verdict. The Doctors Company does not anticipate that simply declining to consent, which is the physician’s right under California law, would be viewed adversely assuming the medicine is good and the conduct reasonable.
If I am going to end up with a strike anyway, why shouldn’t I just take the case to trial rather than settle for more than $30,000?
Physicians should know that under current law the Medical Board is required to disclose to the public all judgments entered after January 1, 1993, of more than $30,000. Thus, a judgment of $35,000 would be disclosed, but a settlement of $35,000 would only be disclosed once the third or fourth strike is reported in a 10-year period.
Based on data from prior years, it is expected that very few physicians, as few as a couple of dozen, will have three or four strikes in a 10-year period. Based on our data from the last 10 years, The Doctors Company expects that 30 times as many doctors will have one strike. If that strike is the result of a settlement, it would be confidential until the third or fourth strike in a 10-year period. If the case is tried to a verdict in excess of $30,000, the Medical Board would disclose it immediately.
If I am party to a lawsuit, and the lawsuit is settled by payment allocated solely to my professional corporation or other entity only based on the negligence of my nonphysicians, why will my name be included in any report?
If no licensees are included in the settlement, the settlement will not be reported to the Board. However, if any portion of a settlement is allocated to a licensee who owns, contracts with, or is employed by the entity, and the amount of the settlement exceeds the reporting threshold of $30,000, that settlement must be reported. The Board requires that the report include a narrative identifying all persons who were alleged to have been negligent which would include all persons named in the complaint, even if funds are not paid on their behalf.
If my name is going to be included on a report, will I be provided a copy of it, regardless of whether the settlement is on my behalf, or if the amount of the settlement allocated to me meets the Medical Board reporting threshold?
The Doctors Company will provide a draft copy of the Medical Board and NPDB reports to each of its insureds listed on such reports.
Is there any way I can avoid being reported?
The short answer is, if you meet the requirements, no. If The Doctors Company makes an indemnity payment on your behalf, and that amount exceeds $30,000, or makes a payment on your behalf in conjunction with monies paid on behalf of an entity that you own, contract with, or are employed by, which exceeds the reporting threshold, then that settlement must be reported.
Will I have a say in what you will report?
The Doctors Company claims personnel will prepare both the Medical Board report and the NPDB report. These reports draw on and rely on the claims personnel’s expertise in addressing issues of liability and allocation. If you are included in such a report as an insured of The Doctors Company, you will be provided a draft copy of the report for your review. However, the reports will ultimately be prepared by The Doctors Company’s claims personnel.
What information is to be made public? Just the settlement amount? Can I include my position that the claim was frivolous and that I settled rather than lose significant time from my practice?
SB 1950 as codified sets out a number of items the Board is required to post regarding licensees and malpractice. The specifics can be seen in Business and Professions Code Section 803. SB 1950 specifically provides that the dollar amount of a settlement is not to be posted. The Board is directed to put the number and amount of the settlement in context by doing the following:
Comparing the settlement amount to the experience of other licensees within the same specialty or subspecialty, indicating if it is below average, average, or above average for the most recent 10-year period
Reporting the number of years the licensee has been in practice
Reporting the total number of licensees in that specialty or subspecialty, the number of those who have entered into a settlement agreement, and the percentage that number represents of the total number of licensees in the specialty or subspecialty
The Board is also required to put the following explanation on its Web site:
Some studies have shown that there is no significant correlation between malpractice history and a doctor’s competence. At the same time, the State of California believes that consumers should have access to malpractice information. In these profiles, the State of California has given you information about both the malpractice settlement history for the doctor’s specialty and the doctor’s history of settlement payments only if in the last 10 years, the doctor, if in a low-risk specialty, has three or more settlements or the doctor, if in a high-risk specialty, has four or more settlements. The State of California has excluded some class action lawsuits because those cases are commonly related to systems issues such as product liability, rather than questions of individual professional competence and because they are brought on a class basis where the economic incentive for settlement is great. The State of California has placed payment amounts into three statistical categories: below average, average, and above average compared to others in the doctor’s specialty. To make the best health care decisions, you should view this information in perspective. You could miss an opportunity for high-quality care by selecting a doctor based solely on malpractice history.
When considering malpractice data, please keep in mind: Malpractice histories tend to vary by specialty. Some specialties are more likely than others to be the subject of litigation. This report compares doctors only to the members of their specialty, not to all doctors, in order to make an individual doctor’s history more meaningful.
This report reflects data only for settlements made on or after January 1, 2003. Moreover, it includes information concerning those settlements for a 10-year period only. Therefore, you should know that a doctor may have made settlements in the 10 years immediately preceding January 1, 2003, that are not included in this report. After January 1, 2013, for doctors practicing less than 10 years, the data covers their total years of practice. You should take into account the effective date of settlement disclosure as well as how long the doctor has been in practice when considering malpractice averages.
The incident causing the malpractice claim may have happened years before a payment is finally made. Sometimes, it takes a long time for a malpractice lawsuit to settle. Some doctors work primarily with high-risk patients. These doctors may have malpractice settlement histories that are higher than average because they specialize in cases or patients who are at very high risk for problems.
Settlement of a claim may occur for a variety of reasons that do not necessarily reflect negatively on the professional competence or conduct of the doctor. A payment in settlement of a medical malpractice action or claim should not be construed as creating a presumption that medical malpractice has occurred.
You may wish to discuss information in this report and the general issue of malpractice with your doctor.
At present there is no mechanism to include a licensee’s explanation of a settlement as part of the Medical Board’s Web site.
If I pay less than $30,000 toward the settlement, but the overall settlement value is over $30,000, will it count as a strike against me?
No. Strikes are settlements of $30,000 or more entered into after January 1, 2003.
Where can I get additional information regarding this legislation?
State Senator Liz Figueroa wrote SB 1950. She can be contacted regarding her legislation in Sacramento at the State Capitol, Room 4061, Sacramento, California 95814, telephone (916) 445-6671, Fax (916) 327-2433, or in her district office at 43271 Mission Boulevard, Fremont, California 94539, telephone (510) 413-5960, Fax (510) 413-5965. You may also get more information about SB 1950 and its implementation from the Medical Board’s Web site at www.medbd.ca.gov.
