Blog: Regulators hear merits of proposed medical-malpractice buyout
Jul 22, 2011
The following article was posted to the St. PetersBlog on July 22, 2011:
Regulators hear merits of proposed medical malpractice buyout
Regulators dug Thursday into the proposed sale of Florida’s largest medical-malpractice insurer, with supporters saying the deal won’t threaten competition in the market.
By Peter Schorsch
The $363 million deal would marry two major players in the medical-malpractice industry. The Doctors Company, a California-based firm that is the nation’s largest insurer of doctors, would buy FPIC Insurance Group, the top insurer in Florida, reports Jim Saunders of the News Service of Florida.
If the sale is approved, The Doctors Company would control about 30 percent of the Florida market. But officials said during a hearing at the Office of Insurance Regulation that combining the firms won’t hurt the broader medical-malpractice industry.
“Florida currently is one of the most competitive states and would remain so after the proposed acquisition,’’ said Charles Nyce, a Florida State University risk-management and insurance professor who testified on behalf of The Doctors Company.
But Tallahassee attorney Reginald Garcia, who represented the Florida Justice Association trial-lawyers group, said such competition should lead to lower medical-malpractice insurance premiums than what currently exists.
Garcia said insurers have long pointed to problems in the market as they have lobbied the Legislature to place more limits on medical-malpractice lawsuits.
“It’s amazing when they (industry representatives) are under oath, how healthy the market is,’’ Garcia said during a break in the hearing.
The Doctors Company and Jacksonville-based FPIC announced the proposed sale in May, though it still needs regulatory approval in Florida, Texas and Missouri. FPIC is a holding company that has subsidiaries based in each of those states, with First Professionals Insurance Co. and Anesthesiologists Professional Assurance Co. in Florida.
The Office of Insurance Regulation will accept public comments for 30 more days about the proposed deal. If it determines it has all the information it needs, it will then have a maximum of 90 days to make a decision.
FPIC shareholders are expected to vote Aug. 12 on the deal, which involves The Doctors Company paying $42 a share. The Doctors Company is a privately held “reciprocal” company, which means it is owned by its members.
Robert White, president of First Professionals and Anesthesiologists Professional Assurance, said they also started with physician ownership. He said that makes The Doctors Company sale attractive.
“We’re all very excited about the chance to return to our doctor-owned roots,’’ White said.
The Florida Medical Association and Florida Dental Association sent letters to regulators supporting the sale, though they did not appear at Thursday’s hearing. The associations said they are familiar with The Doctors Company.
“We view the proposed transaction as one that will benefit Florida physicians and the medical professional liability market and respectfully request that you approve the pending application, as approval is in the best interests of Florida physicians,’’ Tim Stapleton, the FMA’s executive vice president, said in his organization’s letter.
White said he expects 10 to 12 employees in FPIC’s Jacksonville headquarters to lose their jobs because of the sale. He said those employees primarily have accounting and other jobs related to FPIC being a publicly held company.
Robert Francis, chief operating officer for The Doctors Company, said the sale would not immediately affect insurance rates for physicians or lead to a large number of policies getting dropped.
Francis said it is hard to project the long-term rate effects, at least in part because anti-trust requirements prevent the companies from sharing such information before a deal closes.
The Doctors Company already has about 8 percent of the Florida market, and the Office of Insurance Regulation has rejected two small rate increase proposals by the company during the past two years.
Francis said the company is trying to expand to deal with changes in the health-care industry, such as the consolidation of physician practices and the acquisition of practices by hospitals. He said the company needs to be larger and more geographically diverse because of those changes.
Like Nyce, Francis described the Florida market as “absolutely very competitive.’’ But while the market is competitive, he said many doctors still can’t afford coverage.
Doctors and insurers lobbied heavily this year to place new limits on malpractice lawsuits because they said coverage was too expensive. Those efforts led to partial victories, including approval of a bill that would place restrictions on out-of-state expert witnesses who testify against Florida doctors — a longtime priority of the FMA.
Garcia said the Florida Justice Association hasn’t taken a position on the sale of FPIC. But as he spoke to regulators, he noted that the testimony Thursday about competition in the insurance market was substantially different from what lawmakers hear.
“I frankly wish every member of the legislature could have been here this morning,’’ Garcia said.