Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports
if they are used for other purposes.
Current FIRs (in HTML & Adobe PDF formats) are a vailable on the NM Legislative Website (legis.state.nm.us).
Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and
attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.
F I S C A L I M P A C T R E P O R T
SPONSOR Gonzales
ORIGINAL DATE
LAST UPDATED
2/19/07
HB 970
SHORT TITLE Professional Medical Liability Act
SB
ANALYST Wilson
Duplicates SB 944
Relates to SB16, SB 49, SB 22, SB 23, HB 956, HB 639, HB 398 and HB 14.
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)
FY07
FY08
FY09 3 Year
Total Cost
Recurring
or Non-Rec
Fund
Affected
Total
$0.1
Non-
Recurring General
Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
SOURCES OF INFORMATION
LFC Files
Responses Received From
Administrative Office of the Courts (AOC)
Attorney General’s Office (AGO)
Corrections Department (CD)
Health Policy Commission (HPC)
No Response From
Public Regulation Commission (PRC)
SUMMARY
Synopsis of Bill
House Bill 970 enacts the “Professional Medical Insurance Liability Act" which will generally
regulate and limit causes of action, claims and damages awards against health care providers.
The HPC provided the following synopsis:
HB 970 enacts the Professional Medical Liability Insurance Act to limit damage amounts that
may be awarded against any “health care provider" and limits exemplary damages.
HB 970, “Health care provider" is defined to be a person licensed, certified, registered or
chartered by the state, and includes its officers, directors, shareholders, members, employees,
independent contractors acting on the provider’s behalf.
pg_0002
House Bill 970– Page
2
HB 970 defines “Health care professional" as a physician; a physician assistant; an osteopathic
physician's assistant; a radiation therapy technologist; a nuclear medicine technologist; a
radiographer; a naprapathic practitioner; a radiologic technologist; an athletic trainer; a
respiratory care practitioner; a registered nurse; a licensed practical nurse; a certified nurse
practitioner; a certified nurse anesthetist; a dentist; a dental hygienist; a pharmacist; a nursing
home administrator; a psychologist; a nurse assistant or aide; a certified medication aide; an
optometrist; a certified nurse-midwife; a physical, occupational or speech therapist or therapy
assistant; a speech-language pathologist; or an audiologist.
The bill defines “economic damages" to mean compensatory damages intended to compensate a
claimant for actual economic loss, including the expenses of necessary health care received
before a judgment or the estimated expenses in the future for treatment of an injury. “Future
damages “are defined also.
HB 970 notes that the Tort Claims Act controls if a conflict arises between the provisions of the
Professional Medical Liability Insurance Act and the Tort Claims Act. It also notes that except in
the case of the Tort Claims Act, a conflict arising between the Professional Medical Liability
Insurance Act and another act of New Mexico law, the Professional Medical Liability Insurance
Act shall control within constitutional limits; provided, however, that the Professional Medical
Liability Insurance Act does apply to a claim in which the defendant is a health care provider
pursuant to the current Medical Malpractice Act.
HB 970 defines “vicarious liability “ to mean in a claim brought pursuant to the Act in which the
claimant alleges that a health care provider was acting within the course and scope of the health
care provider's employment the claim shall be brought against the employer and not against the
health care provider.
The bill will limit non-economic damages awarded against one or more health care providers,
including all persons or entities for which vicarious liability may apply, to an aggregate limit of
$250,000. The bill does not limit economic damages. A jury may not be informed of the non-
economic damages limit, and if the award exceeds that limit, the judge must reduce it
accordingly.
Exemplary or punitive damages may only be brought under the act if the claimant proves by
clear and convincing evidence that the harm claimed resulted from conduct that was willful,
wanton, malicious or reckless. The act requires that exemplary damages be based on reason and
justice, and the amount must be reasonably related to the injury and damages given as
compensation. Evidence of ordinary negligence, gross negligence, bad faith or deceptive trade
practices will not satisfy the requirements of the act for exemplary damages purposes.
HB 970 provides a formula for determining whether the exemplary damage amount is
reasonable, requiring that it be no more than two times the amount of economic damages
awarded, plus the amount of non-economic damages. The bill prohibits notifying the jury about
this provision of law should it be enacted. It provides that any group making claims based on an
injury to or death of one person will be treated as if they are one claimant.
If the claimant relies on a statute establishing a cause of action and authorizing exemplary
damages in specific circumstances or in conjunction with a specified culpable state, exemplary
damages may be awarded only if the claimant proves by clear and convincing evidence that the
pg_0003
House Bill 970– Page
3
damages resulted from that circumstance or conduct.
As set out in HB 970, exemplary damages are precluded if only nominal damages are awarded. If
a claimant elects to have an award increased based on a provision of law not included in the act,
they may not also be awarded exemplary damages. Exemplary damages may only be awarded
against a specific health care provider, or providers, and only the providers named will be liable
for the amount.
The bill prohibits prejudgment interest on damages, but permits a bifurcated trial upon the
motion of a defendant health care provider, finding liability for compensatory and exemplary
damages plus the amount of compensatory damages in the first phase, and then determining the
amount of exemplary damages to be awarded in the second phase. The bill lists factors to be
considered in the award such as “the enormity and nature of the wrong," and aggravating and
mitigating circumstances. Evidence that is only relevant to the amount of exemplary damages
awarded will not be admissible in the first phase of a bifurcated trial.
The bill requires that upon appellate review, the court must specifically state its reason for
upholding or overturning any related finding or award of exemplary damages.
HB 970 requires health care providers to show proof of professional responsibility in the amount
of $250,000 for each claim up to a maximum of $500,000 in the aggregate for all claims in an
insurance policy year, calendar year or fiscal year. The bill offers different means of showing
proof including insurance coverage, maintenance of financial reserves, coverage from a trust,
any other contract or arrangement for transferring or distributing risk. If evidence of financial
responsibility is established by the time of judgment, the limitations on damages contained in the
act will apply to claims filed on or after July 1, 2007.
In any claim for which the present value of the award of future damages equals or exceeds
$100,000, the court must order that medical, health or custodial services be paid in periodic
payments rather than a lump sum. Entry of the order for payment of future damages by periodic
payments is deemed a release of the liability claim filed.
FISCAL IMPLICATIONS
There will be a minimal administrative cost for statewide update, distribution and documentation
of statutory changes. Any additional fiscal impact on the judiciary will be proportional to the
enforcement of this law and requirements for the presentation of additional evidence, required
judicial review and motions made pursuant to the Act. New laws, amendments to existing laws
and new hearings have the potential to increase caseloads in the courts, thus requiring additional
resources to handle the increase.
SIGNIFICANT ISSUES
In addition to limiting the award of certain damages against health care providers, the new act
appears to regulate pleading and practice within the courts. The AGO believes several of its
provisions may violate Article III Section 1 of the New Mexico Constitution as an improper
intrusion by the legislative branch into the conduct of the Judicial Branch.
pg_0004
House Bill 970– Page
4
Article VI Section 1 of the Constitution vests the judicial power of the state in the courts. Several
provisions in this bill appear to regulate and restrict that judicial power. For example, the
requirements that courts provide bifurcated trials and certain jury instructions, along with
prohibitions against suing employees and the standards of proof required for an award of
exemplary damages are usually subjects within the purview of the courts.
The New Mexico Health Care Association (HCA) is supporting this bill to “hopefully reduce the
number of frivolous claims being brought against the [nursing home] industry". They claim it
has been two years since the State of Texas passed similar legislation and that Texas went from
having zero providers of liability insurance to having now 15 providers of insurance. HCA
believes that this clearly demonstrates that establishing rational parameters around subjective
awards allows insurance companies to properly assess risk and provide affordable coverage.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
HB 970 is a duplicate of SB 944, Professional Medical Liability Insurance Act. HB 970 is related
to SB16, Limited Liability in Emergency Situations; SB 49, Health Care Provider Insurance
Coverage; SB 22, Health Care Provider Emergency Liability; SB 23, Certain Healthcare
Provider Limited Liability; HB 956, Health Care Provider Tort Immunity; HB 639, Cardiac
Arrest Aid Liability; HB 398, Certain Malpractice Premiums Emergency Fund; and HB14,
Certain Tort Claims Maximum Liability.
TECHNICAL ISSUES
The HPC suggests the following amendments:
On page 4, lines 17-25 and page 5, lines 1-4, there is a definition of “health care liability claim."
Should there not be a provision for negligent credentialing.
On page 4, lines 5-16, there is a definition of health care institution. However, that definition
does not include clinics or physician offices. It does include “emergency medical services
provider" on page 4, line 8.
On page 5, lines 6-18, there is a definition of health care professional. Should that definition not
as well include emergency medical technicians since they are defined as part of health care
institution. Missing are medical technologists, medical laboratory technologists, registered
dieticians, pharmacy technicians, podiatrists, licensed midwives, anesthesiology assistants, social
workers, and behavioral health personnel such as alcohol and drug counselors.
HB 970 notes that except in the case of the Tort Claims Act, a conflict arising between the
Professional Medical Liability Insurance Act and another act of New Mexico law, the
Professional Medical Liability Insurance Act shall control within constitutional limits (page 9,
lines 3-12). Under the Medical Malpractice Act, there is a cap of $600,000 except for punitive
and economic damages. Under the Professional Medical Liability Insurance Act, there is a cap of
$250,000 for each claim up to a maximum of $500,000 in the aggregate. Is it possible to have a
constitutional limit of $250,000 under one law and $600,000 under another for damages of an
exact or similar nature under both acts.
pg_0005
House Bill 970– Page
5
OTHER SUBSTANTIVE ISSUES
In 1975, Travelers Insurance Company, the primary writer of medical malpractice for New
Mexico’s doctors, exited the state after citing the state’s lack of tort reform and small market
size. In response, the Legislature passed the Medical Malpractice Act of 1976 with the express
purpose to “promote the health and welfare of the people of New Mexico by making available
professional liability insurance for health care providers in New Mexico."
The Act contains the following benefits for qualifying health care providers:
$600,000 cap on damages other than medical bills and punitive damages
3-year statute of limitations on the filing of a claim
Mandatory review of claims by a medical/legal panel prior to the filing of lawsuits
State participation in malpractice insurance coverage via a “patients compensation
fund"
To be qualified under the Act, health care providers must either obtain base coverage from an
admitted insurer on an “occurrence" policy form or else maintain a substantial cash deposit with
the Superintendent of Insurance. In addition to their base coverage premium payments,
qualifying health care providers must also pay an annual surcharge to the Patient’s
Compensation Fund.
The list of health care providers that are eligible to be covered under the Act includes physicians,
chiropractors, podiatrists, nurse anesthetists, physicians’ assistants, hospitals and outpatient
health care facilities. Any health care practitioners or facilities not on this list, such as midwives,
nurse practitioners, dentists and nursing homes, are excluded from coverage under the Act. HB
970 attempts to rectify this exclusion by creating a new avenue for New Mexico’s health care
providers can obtain professional liability insurance.
The language of the Act requires the use of occurrence coverage. The Act’s inability to predict
the market dominance of the claims-made product has, over time, severely restricted the number
Current Environment for Long Term care Providers
Recent studies indicate that the general liability and professional liability costs for the long term
care industry in New Mexico have been increasing above the inflation rates for the past decade.
One study indicated that the annual loss cost in 1996 of $40 per bed is projected to grow to over
$3510 in 2005. This pattern of increasing litigation costs is similar to that experienced in other
states that were forced to eventually enact litigation reforms.
The New Mexico study also showed that the average claim cost analyzed in the study
was over $400,000.
The study also noted that the frequency of claims per year for every 1,000 occupied
skilled nursing care beds has nearly doubled from 4.5 claims per 1000 beds in 1996 to 8.5
claims per 1000 beds in 2006.
Other conclusions from the study are that New Mexico general liability or professional
liability loss costs are absorbing an increasing portion of funds available to pay for
patient care. These costs are expected to absorb 7.4% of the average Medicaid
pg_0006
House Bill 970– Page
6
reimbursement rate for long term care providers in New Mexico, up from 1.9% in 1999.
Also, less than half of the total amount of claims costs paid for New Mexico claims in the
long term care industry goes directly to patient and /or family compensation with the
remaining 55% going to litigation costs, including attorney’s fees.
The study also noted that annual commercial premiums levels have increased
approximately 20% over the prior year with the number of carriers writing professional
liability coverage is limited.
Current Environment for Certified Nurse Midwives
Almost a third of all babies born in New Mexico are delivered by midwives. This is by far the
highest midwife-attended birthrate in the nation. Midwives, who tend to service low-income
families, receive much of their revenues from Medicaid reimbursement. Approximately three-
quarters of New Mexico’s midwives are certified nurse midwives and the remaining quarter are
licensed midwives. Certified nurse midwives usually deliver in hospitals while licensed
midwives usually deliver in homes and birthing clinics.
Malpractice insurance remains available for certified nurse midwives but at premiums that have
increased by approximately 30% per year for the past several years. Since malpractice insurance
is not available for home births, the vast majority of licensed midwives have no malpractice
coverage. Only those licensed midwives who deliver in birthing centers are able to obtain
insurance, at rates that are triple those of 2004/05 and that now equal approximately half their
income.
DW/mt