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Speech to the NASOG-RANZCOG Conference, AMA President, Dr Kerryn Phelps

**Embargoed Until: 8.30am Saturday 12 May 2001**

Speech to the NASOG-RANZCOG Conference

Sydney, 12 May 2001

THANK GOD!! I'M A COUNTRY KID

Good morning and welcome.

This is a very important conference at a very important time.

While you have many critical matters to discuss, none is as vital to your specialty at the moment as medical indemnity.

The medical indemnity crisis is indeed a crisis.

The effects are bad enough now but - unless something is done and done soon - the worst effects will be felt by future generations of Australians.

Already the numbers of obstetricians in country Australia are decreasing.

Those who remain are getting older, and many will leave or stop delivering babies because of the escalating costs of indemnity insurance and the lawyers sitting on their shoulders in the delivery suite.

Young obstetricians will not move to the country under these circumstances. There are no incentives, just more and more disincentives.

If things don't change, in 15 years there will be no obstetricians left in rural and regional Australia.

As is already happening, mothers will have to go to the cities to have their babies.

Australian kids will no longer be able to say they are 'country born and bred'. It'll be a case of 'city born and country bred'. Hasn't quite got the same ring to it, has it.

What is happening to the great egalitarian Australian society - equal access to quality services, equal access to a quality of life?

Why should country mothers have to travel to the capital cities or larger regional centres to have their babies?

Why should country obstetricians be forced to pay around $70,000 a year in medical indemnity insurance premiums if they want to keep doing the job they trained and worked so hard for - a job they obviously love.

We have all seen the newspaper headlines and reports:

"Spiralling costs may force rural doctors not to deliver babies."

"Gosford specialists Forced To Leave NSW Public Hospitals."

"Specialists leaving in droves."

And on it goes.

But why is it that in a country that is one of the safest places in the world for a woman to give birth or for a child to be born that, for some, it is getting harder to have a baby where you want to have a baby.

Let's look at some statistics - after all, statistics never lie - to give us an overview.

I have borrowed these numbers from a paper by Dr Chris Maxwell, our AMA councillor representing obstetrics and gynaecology. Chris is here today and his paper is being distributed here today as well.

The Australian Institute of Health and Welfare Report, "Australia's Mothers and Babies 1998", indicates the national perinatal mortality rate has declined by 63.3% to a record low of 8.3 per 1000 births.

Australia fares better than most other developed countries behind only Japan and Spain, but ahead of the UK and the USA.

The latest available international figures from WHO and UNICEF addressing those countries where accurate statistics are available indicate that, with a maternal mortality rate of only 9 per 1000,000 live births, Australia is behind only Canada, Spain, Sweden and Israel as the safest place in the world for a mother to give birth.

So, both mothers and babies operate in a safe environment here. The quality of care is very high.

But what about the doctors - the obstetricians? How are they faring?

In the last 12 months, MDO subscriptions for some obstetricians have risen from $2000 in 1988 to $42,000 in 2000, and are likely to increase to $70,000 by next year.

Even these rises do not reflect the true cost of indemnity coverage for obstetricians.

It would appear that they are uninsurable.

The most recent figures show that the number of obstetric providers in Australia has dropped by an alarming 26 per cent in five years - GP/obstetricians down by 40 per cent and specialists by almost five per cent.

These figures pre-date the height of the medical indemnity crisis.

More disturbing still, 30 per cent of trained specialists no longer practise obstetrics.

There is increasing evidence that more and more established obstetricians are withdrawing from practice.

Rural centres, particularly in NSW, are losing their obstetricians.

Senior members of the profession are altering their practices to non-obstetric services.

The February 2000 RANZCOG/NASOG Workforce Study indicated that 26 per cent of practising specialists had pursued career changes not involving obstetrics during 1999 - and a quarter of these were unrelated to medicine.

In January this year RANZCOG surveyed its recently elevated Fellows and senior specialist trainees regarding their practice's intentions. The survey found that24 per cent had chosen NOT to practise community-based obstetrics.

Medical indemnity issues were the most common cause given - 44 per cent - and 16 per cent of responses indicated non-obstetric sub-specialty as the chosen career instead.

Meanwhile, the 2001 RACGP survey indicated that only 43 per cent of rural GPs provide obstetric services, with 53 per cent of those who did not indicating the high cost of indemnity insurance as the reason.

Nothing has yet had an impact on indemnity insurance premiums. They haven't paused, they most definitely haven't decreased, and it is inevitable that they will continue to rise.

The demise of HIH will only worsen the situation.

I think if you overlaid a graph charting the decrease in the number of providers of obstetric services on a graph charting the increase in the amount of premiums, an interesting correlation would become clear.

We've had a look at the statistics that underline one graph. Let's now take a look at the statistics that underpin the other graph - escalating premiums.

It is estimated that some 470,000 people are harmed each year from preventable adverse medical outcomes. Of these, 18,000 die.

Even though these figures are generated by almost 40,000 medical practitioners who conduct millions of consultations and procedures, the number is still too high - even though they indicate a high level of safety and quality of care among the best in the world.

Nevertheless, nationally, only 1,500 claims were made last year (by way of letter of demand or issue of court proceedings).

Only a handful of cases go to court each year, the majority of which appear to be won by the health professional. Most cases involve small payments.

However, UMP finalised 9 cases last year for amounts of $1 million or more. A few very large claims impact dramatically on medical indemnity premiums because the cost of the claims is to be covered by the 40,000 doctors.

Frequently these cases take years to finalise and the outcome and size of the settlement are highly unpredictable. It is a system that works poorly for patients and doctors alike.

To achieve a reduction in medical professional indemnity insurance premiums, it is necessary to identify the various causes of the current rise in premiums.

Only then can recommendations be made to governments as to appropriate tort law and procedural reforms that can be incorporated into a national or nationally coordinated medical health compensation scheme that will lead to a significant reduction in medical indemnity premiums.

Ideally, any proposed model for a medical health compensation scheme must be practical, acceptable to state and federal governments and the community, and not compromise the needs of patients who have suffered loss and damage by reason of a medical negligence.

There is insufficient information and data available to assess:

whether there has been an under-reserving for future claims by MDOs

whether inadequate premium levels in the past have contributed to the rise in premiums

whether there has been an increase in the number of cases proceeding to litigation

whether, because of the costs and risks of litigation, settlements have had an adverse impact on premiums

whether there has been an increase in value of larger claims only, or certain types of other claims, and, if so, which ones

whether there is a higher risk of adverse outcomes in a particular area of medical practice, and, if so, which ones, and whether those adverse outcomes translate into small or large damages awards

and whether there is a higher risk of adverse medical outcomes in the public or private health systems.

On the other hand, we do know what has been contributing to the increase in indemnity premiums.

There has been an increase in transaction costs such as legal fees and insurer/MDO administrative costs.

There is an increased incidence of long drawn-out court hearings in respect of larger civil damages claims.

There has been an increase in demand for representation of MDO members in other forums as a consequence of greater regulation of the providers of health services.

There has been an increase in the value of the largest claims in a small number of cases. Awards of damages for catastrophic brain damage have increased from around $2 million to the $5 million to $10 million range in less than a decade.

There has been an increase in future care costs. Improved medical care has resulted in keeping more brain-damaged babies alive at birth, and in much longer life expectancy than before.

There has also been an increase in the cost of provision of care, as services previously seen as welfare-based have become commercialised - and costs have risen with inflation.

The AMA has not been idle in this regard.

The AMA has led the campaign for medical indemnity reform.

We held the Medical Indemnity Crisis Summit in 1999.

Our Professional Indemnity Review revealed that around 25 to 30 per cent of the premium received for medical negligence goes to the injured person.

And 45 per cent of this amount goes to the insurer of MDOs in administrative costs, including provision of services for their members.

Another 30 per cent of this amount goes to the legal profession.

To reduce the huge expenditure on lawyers, the AMA - as reflected in our position statement - supports the greater utilisation of alternative dispute resolution procedures to manage disputes in relation to medical negligence claims.

Changes are coming into effect in the States and the Federal Court systems - and the AMA has input to these changes - but so far, despite our best efforts, it has been too little, and too slow.

Through the AMA's Medical Professional Indemnity Task Force, the AMA proposes substantial changes to the way in which medical liability issues are determined. We want determinations made by more appropriately constituted bodies and tribunals - with relevant medical experts included to advise or assist the tribunals.

The NSW Government is considering the inclusion of a rate relativity framework in its tort law reform package that will be designed to ensure the medical profession as a whole supports its high risk but essential colleagues, and to discourage cherry picking by indemnity providers.

In other words, groups such as the non-procedural GPs, dermatologists, and physicians will be forced to continue subsidising medical indemnity costs for obstetricians, neurosurgeons and other higher risk groups.

While not necessarily wishing to eliminate all cross subsidies immediately, I am not sure that this is a long term answer as it does not address the underlying fundamental problems but takes the pressure off governments and others to address the issue.

I understand that an unsubsidised premium for an obstetrician in NSW would exceed $100,000 a year, while for neurosurgeons it would be closer to $200,000 a year. Not exactly a great temptation for specialists to stay in practice, is it?

While the situation is grim at the moment, there are some slivers of light appearing, hopefully with positive results, and sooner rather than later.

A lot of work has been done on the issue of the rising cost of medical indemnity and its cost to the community.

The Australian Health Ministers have acknowledged that the increased cost of medical indemnity cover is now a matter of national concern.

AHMAC has set up a Working Group to find practical solutions to the problem.

This development makes a national or nationally coordinated approach to solving the problem more likely and provides the AMA with the opportunity of taking recommendations in relation to tort law reform directly to the Health Ministers.

Again, a step I the right direction, but not a solution in itself.

On another front, the AMA is vigorously lobbying the Federal Government about federal tax reform needed for better use to be made of structured settlements.

Our lobbying appears to be proving effective with positive responses from Assistant Treasurer, Senator Rod Kemp. The AMA will be included in a consultative group to progress this matter.

The Federal Opposition is already on the record as supporting structured settlements.

As already mentioned, the NSW Government has recognised the need for urgent action with the Health Care Liability Bill 2001.

The need for procedural reforms to the adversarial court-based system and in the way in which expert medical evidence is taken has been recognised in most states and by Federal and State courts. New practice directions are emerging, and better court management of litigation is occurring.

Nevertheless, no single legislative model has been identified which might successfully incorporate the desired procedural and tort law reforms needed to effect a significant reduction in indemnity premiums.

For the future of obstetrics in this country, we need to see premiums reduced - significantly and soon.

But how?

We need to obtain data on amounts expended from the premium fund including transaction costs, administration and insurance/MDO legal costs, lump sum settlements, and award payouts.

We must pursue the establishment of a national de-identified data collection method for health care negligence cases in order to target tort law reforms that will significantly reduce indemnity costs.

We must identify areas in which efficiency improvements will reduce the cost of indemnity cover.

More immediately, we can explore alternative dispute resolution methods that will facilitate the early resolution of grievances arising out of adverse medical outcomes, to reduce legal costs.

And we can identify tort law reforms that will contain court awards of damages and rationalise the delivery of future care needs, particularly to the catastrophically injured.

Soaring medical indemnity premiums are not just a problem for obstetricians. Nor are they are a problem for doctors alone. They affect whole communities, particularly - up until now - in country areas.

As we see country obstetricians moving out, so too will the city and suburban obstetricians in time.

In the same way that country people have seen the demise of important services like their banks, their post offices, their Telstra depots and their government services, they will now have to travel to a bigger town or the city to have their babies.

Another crack appears in the traditional Australian community.

Nothing's local anymore.

Something must be done to turn this around.

The community has a view. The medical profession has a view. If governments are listening, they will adopt the same view.

Thank you.

CONTACT: John Flannery (02) 6270 5477 / (0419) 494 761

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