New Mexico Legislative Update

NOTICE:

The materials The Doctors Company has prepared and made available to New Mexico healthcare providers regarding HB 75 is not intended to be, and should not be relied on as, legal advice.

Providers are strongly advised to consult their personal counsel about how HB 75 and the significant changes it makes to the New Mexico Medical Malpractice Act may impact them, their practices, and their exposure in the coming years.

On April 1, 2021, Governor Michelle Lujan Grisham signed into law House Bill (HB) 75, which makes the most sweeping amendments to the New Mexico Medical Malpractice Act (MMA) since it was enacted in 1976.

The changes made by HB 75 will change the practice of medicine in New Mexico. It is imperative all pro­viders review the impacts of HB 75 on your practice with your personal counsel and insurance professional. You can read HB 75 in its entirety in this final PDF.

2022 HB 75 Changes and Their Significance

Not since the 1976 enactment of the MMA have as many dramatic and sweeping changes been made to the medical liability environment in New Mexico as are contained in HB 75, which was recently signed into law by Governor Grisham.

HB 75 will change the practice of medicine in New Mexico. It is crucial that all providers review the nature and structure of their practices with their personal counsel to evaluate the impact HB 75 may have.

The following are some of the important revisions to the MMA that will impact you and your practice effective January 1, 2022.

• Increase in the MMA cap/primary layer/number of occurrences for independent providers. HB 75 increases the cap on damages from $600,000 to $750,000 beginning January 1, 2022, for independent providers (a term that includes business entities such as personal corporations, and their employees).
  
  The primary layer will increase from $200,000 to $250,000 and the PCF layer will increase from $400,000 to $500,000, for a total available recovery of $750,000 plus past and future medicals. Beginning January 1, 2023, the cap will be adjusted in accordance with the cost of living for urban dwellers, and annually thereafter.
  
  HB 75 retains the limit of three occurrences for independent providers.
  
  SIGNIFICANCE: In addition to increased premium to account for the additional exposure from higher caps, individual providers will also face increased PCF surcharges, and additional PCF surcharges may be levied to extinguish the PCF deficit by December 31, 2026.
  
  UPDATE: During a special legislative session convened in December 2021, the legislature amended the definition of “independent provider” to clarify that an independent provider who treats a patient in a hospital or outpatient healthcare setting will only be subject to the $750,000 damages cap, and not the $4,000,000 hospital/outpatient healthcare facility cap. The amended definition of “independent provider” eliminated the term “agent” of a hospital or outpatient healthcare facility for clarity.

• Increase in the MMA cap/number of occurrences/policy form for outpatient healthcare facilities and hospitals. HB 75 places “outpatient healthcare facilities” under the same cap as hospitals. On January 1, 2022, facilities that fall under the definition of outpatient healthcare facility will go from a $600,000 cap to a $4,000,000 cap overnight. Thereafter, the cap will increase by $500,000 annually until 2027 when it reaches $6,000,000 plus an annual cost of living increase. HB 75 defines “outpatient healthcare facility” to include “an entity that is licensed pursuant to the Public Health Act as an outpatient facility, including ambulatory surgical centers, free-standing emergency rooms, urgent care clinics, acute care centers, and intermediate care facilities and includes a facility's employees, locum tenens providers, and agency nurses providing services at the facility.”
  
  HB 75 allows outpatient healthcare facilities and hospitals to be insured under either an occurrence or claims made and reported policy form.
  
  Outpatient healthcare facilities and hospitals are not limited to only three occurrences per policy period. Until January 1, 2027, amounts due from a judgment or settlement in excess of $750,000, excluding past and future medical expenses, shall be paid by the hospital or outpatient healthcare facility and not by the fund.
  
  SIGNIFICANCE: Several practices may fall under the definition of “outpatient healthcare facilities.” HB 75’s definition of outpatient healthcare facilities means that these groups will have an annual OSI risk assessment and have the choice of a claims made and reported or occurrence policy with primary limits. While HB 75 states that “independent providers,” a term that includes group practices, are NOT outpatient healthcare facilities, it appears that determination may rest on whether the facility is licensed pursuant to the Public Health Act or is found to be an agent of a hospital or outpatient healthcare facility.
  
  UPDATE: During a special legislative session convened in December 2021, the legislature amended the definition of “outpatient healthcare facility” to clarify that hospital majority-owned facilities will operate under the $4 million hospital cap on medical liability damages in 2022, but outpatient facilities majority-owned by independent physicians will operate under a $750,000 cap for 2022 and 2023. After that, the cap escalates to $5 million per occurrence in 2024, increasing $500,000 annually to $6 million in 2027, after which the cap will be annually adjusted by the consumer price index.
  
  The New Mexico Department of Health Licensing Division has a link to the list of practices that are licensed pursuant to Public Health Act. Queries can be tailored to county, city, and facility type.
  
  Summary of Adjustments to Cap on Non-Medical Damages for Healthcare Providers

• Hospitals and outpatient healthcare facilities are being excluded from the PCF beginning in 2027. Hospitals and outpatient healthcare facilities will be prohibited from participating in the PCF beginning with claims occurring on or after January 1, 2027. Between January 1, 2022, and December 31, 2026, the PCF’s exposure to claims against a hospital for any one occurrence is capped at $500,000 plus past and future medical expenses. After January 1, 2027, the hospital or outpatient facility is responsible for any settlement or judgment up to the new hospital cap because they no longer qualify to participate in the PCF.
  
  The definition of “hospital” includes a vicarious liability provision that allows hospital parent corporations, subsidiary corporations, or affiliates to be covered under the MMA but only if the affiliated entities are “incorporated or registered in New Mexico.” Employees and agents of a hospital or outpatient healthcare facility are subject to the higher MMA cap as well.
  
  SIGNIFICANCE: Before HB 75 was signed into law, hospitals and outpatient healthcare facilities enjoyed all the protections of the MMA, like individual providers, including the current $600,000 cap. HB 75 puts outpatient health care facilities into the same category as large hospital systems.
  
  The risk posed to the PCF by continued hospital participation in the fund until December 31, 2026, is lessened to some degree by the cap on the PCF obligation at $500,000 plus past and future medicals.

• Definition of occurrence: HB 75 defines “occurrence” as “all injuries to a patient caused by healthcare providers' successive acts or omissions that combined concurrently to create a malpractice claim.” The term “occurrence” is further explained in the remedial section of HB 75 that states what an “occurrence” is NOT. That provision states: “The term ‘occurrence’ shall not be construed in such a way as to limit recovery to only one maximum statutory payment if separate acts or omissions cause additional or enhanced injury or harm as a result of separate acts or omissions. A patient who suffers two or more distinct injuries as a result of two or more different acts or omissions that occur at different times by one or more healthcare providers is entitled to up to the maximum statutory recovery for each injury.”
  
  SIGNIFICANCE: We expect to see more multiple occurrence claims based on allegations of additional or enhanced injuries.

• Inclusion of advanced practitioners and employees in the patient compensation fund. The definition of who qualifies to participate in the PCF has expanded to include certified nurse practitioners, clinical nurse specialists, certified nurse-midwives, and a business entity's employees.
  
  SIGNIFICANCE: The expansion of who may participate in the PCF broadens the population of providers contributing to the PCF and may improve the ability of the PCF to address the deficit. However, the additional exposure to the PCF for the acts of these new participants may offset their contributions.

• PCF organization, operation, oversight, and deficit reduction. HB 75 significantly recodifies the way in which the Superintendent of Insurance assesses surcharges against all participants, who determines annual surcharges, who manages the day-to-day functions for the PCF, and how the PCF deficit will be addressed.
  
  SIGNIFICANCE: HB 75 creates an Advisory Board comprised of nine members as follows: two representatives from the trial lawyers’ association; two representatives from the hospital association; two representatives affiliated with physicians; two patient advocates and one representative from certified nurse practitioners. This board will have the duty to work with the OSI to not only assess surcharges for the PCF but will have access to claims experience of participants in the PCF.
  
  HB 75 requires the PCF to be managed on a day-to-day basis by a third-party administrator selected by the Superintendent and the Advisory Board. The third-party administrator will provide a separate audit of the PCF to the Superintendent and the Advisory Board. HB 75 requires the PCF deficit to be eliminated by December 31, 2026. This means that beginning January 1, 2022, participants in the PCF will be assessed not only the primary policy premium and ordinary PCF surcharge, but also, a deficit reduction component may be added to the PCF surcharge. While a significant proportion of the deficit reduction charges should be assessed against hospitals, it is not clear how much any hospital or individual practitioner will have to pay towards the deficit reduction. HB 75 does not specifically address how the Superintendent will determine what amount of the projected deficit is attributable to hospital claims experience and what amount is attributable to independent providers.

• Panel proceedings. HB 75 makes significant changes in how the New Mexico Medical Review Commission conducts panel proceedings and which providers are entitled to a panel proceeding. Effective July 1, 2021, hospitals and outpatient healthcare facilities will no longer participate in Panel proceedings. Only “independent providers” are subject to panel proceedings, and the process is optional if the parties stipulate to forego a hearing.
  
  SIGNIFICANCE: Historically panel proceedings served as a screening process that resulted in some claims not being pursued in court. The removal of hospitals and outpatient facilities from the panel process was designed to reduce the number of panels needing to be convened and therefore, reduce the number of attorney and physician volunteers needed to serve on panels. HB 75 will succeed in reducing the number of panel proceedings convened.