New Mexico Management Of Medical Malpractice Compensation Fund Lawsuit

New Mexico maintains a Patient Compensation Fund designed to assist healthcare providers in paying malpractice claims which surpass the $200,000 threshold for personal liability. The state has a cap (limit) on claims of $600,000. The Superintendent of Insurance Office oversees the program led by John Franchini. 

A lawsuit was filed by active members of the state’s medical society citing mismanagement of the dwindling Patient Compensation Fund and for allowing 16 hospitals and several outpatient clinics to enter the program. The suit states that the office has kept the amounts that these new facilities are paying into the fund undisclosed, although they bring potentially significant loads of liability. The suit claims that the Fund is $36 million below where actuators say it should be. Although the program requires a risk analysis of new members, the plaintiffs feel that not disclosing the payments puts the public at risk.

Original Purpose of NM Malpractice Act

A business editorial in the Albuquerque Journal reviewed this suit which seeks to block the Superintendent of Insurance Office’s choice to allow hospitals and outpatient facilities to join the program. It discussed the origin of the New Mexico Medical Malpractice Act by looking at its initial intent. The purpose (Article 5) of the Act was to further the health & safety of the state’s citizens through professional insurance for liability covering medical providers. The Act actually includes hospital and outpatient facilities; however, they have been unable to meet the requirements for entrance.

These facilities were unable to conform to a requirement regarding future claims coverage; however, they have now met the necessary criteria for entrance to the program. The article pointed out three parts of the suit that seemed contradictory to the provision in the Act:

• Hospitals and outpatient clinics were always eligible, if they could meet the requirements
• The Superintendent of Insurance Office does not have the authority to prevent or include entities that do not meet the Article 5 criteria.
• Their ability to qualify is reviewed by submitting data through an independent actuary.

Public Access & Fund Outlook

This editorial also questions the suit’s assertion that the newcomers are entering in “secrecy” or in a covert manner. All data is available for public access electronically, except for amounts of premiums paid, which simply must be formally requested. In 2016, the rates that were published showed a 17% spike in provider premiums and the deficit of the Fund was based solely on performance prior to these new entrants. Adding the hospitals and outpatient sites has thus far lowered the Fund’s deficit. The state’s Act was largely based on the model implemented in Indiana; however, physician premiums there are roughly 50% lower.