Every hospital makes mistakes. But some New York City hospitals may not have enough money to pay for them.
Several of the city's most troubled hospitals are partially or completely uninsured for malpractice, state records show, forgoing what is considered a standard safeguard across the country.
Some have saved money to cover their liabilities, but others have used up their malpractice reserves, meaning that any future awards or settlements could come at the expense of patients' care, and one hospital has closed its obstetric practice, in part out of fear of lawsuits.
Executives of these hospitals, most of which are in poor neighborhoods, say their dire financial circumstances and high premiums make it impractical to pay millions of dollars a year for insurance.
But insurance experts say that though dropping coverage may make economic sense in the short term, it is hardly in the best interest of patients, and in the long term it may be costly to hospitals and their bondholders, including some bonds backed by the state, should large judgments force them into bankruptcy.
"From a kind of self-interest of the hospital, it seems if you're a marginally capitalized hospital barely making it, it would be perfectly rational not to buy insurance," said Tom Baker, a law professor at the University of Pennsylvania who has written about malpractice insurance.
"From a social perspective, it's very irresponsible. They're taking in these people knowing they're not able to make good on the harm they caused. Even a really good hospital is going to have a certain amount of medical malpractice. It's inevitable."
Hospitals in New York do not need malpractice insurance to function, and they need not tell patients when going "naked" or "bare," in industry parlance.
Many states do not require malpractice insurance, and New York is not the only city where hospitals go without coverage. Generally the uninsured hospitals are in areas where juries award big judgments, insurance executives say.
"In New York and in poor venues, difficult venues - Philadelphia is one, New York City, Chicago Cook County, Florida Dade County - it's not effective for the hospitals to buy the coverage because they charge so much," said Dominic A. Colaizzo, chairman of the national health care practice for Aon, an insurance brokerage.
The choice may be grim. "If I have to pay for nurses versus fund for malpractice, what are the hospitals going to do?" Mr. Colaizzo said.
There is no central record of which hospitals have insurance. But in 2009, the state Health Department took a survey of so-called self-insured hospitals. It found that three - Interfaith Medical Center, Kingsbrook Jewish Medical Center and Wyckoff Heights Medical Center, all in Brooklyn - were completely self-insured.
Twelve other hospitals across the city were partially self-insured, including St. Vincent's Hospital in Manhattan, which went bankrupt and closed in 2010; Lenox Hill in Manhattan; Jamaica Hospital Medical Center in Queens; and New York Hospital Queens.
Some of the 12 had bought insurance to cover lower-dollar or "primary" claims, but not "excess" judgments. The others had excess coverage but not primary.
The Health Department has not done a follow-up survey, but hospitals that responded to questions about their coverage said it had not changed.
In interviews, some hospital executives said their physicians had separate insurance which is subsidized or reimbursed by the hospital. Interfaith, for one, gives its emergency-room physicians a letter promising to assume liability, said Luis A. Hernandez, the hospital's chief executive.
Without insurance, many hospitals set aside money to pay for claims, but a review by The New York Times of state records and hospital financial records indicates that several of the hospitals have insufficient reserves to cover their malpractice liabilities.
Two of the hospitals without insurance have no money set aside, according to their financial documents and interviews with hospital officials. In the case of the third, Kingsbrook, it is unclear from financial statements if it has any money in reserve.
Dr. Linda Brady, the hospitals chief executive, was overseas and was unavailable for comment, said Enid Dillard, a hospital spokeswoman. But Ms. Dillard, when asked if the hospital was paying malpractice claims out of its day-to-day budget, said, "This would be a fair statement to make."
In 2009, Wyckoff Heights Medical Center, in Bushwick, had $50,000 in its malpractice fund; in 2010, the amount put aside to cover claims had dwindled to "0," according to its financial statements. Yet the hospital listed professional liabilities of $37 million. Ramon Rodriguez, the chief executive, declined to comment.
Mr. Hernandez acknowledged that Interfaith had exhausted its malpractice reserves and that it had "significant millions of dollars of liability which are not funded."
"As things come up, we utilize day-to-day working capital," he said. "If we ever get a large award, it could hurt us significantly."
A jury awarded a $31.6 million judgment against the hospital in 2006, which was later reduced to $12.9 million and is being paid out in installments through 2018. As a result of that case, Mr. Hernandez said, the hospital closed its obstetric unit because it could not afford the liability. The hospital was also not delivering enough babies to justify the expense, he said.
Henry W. Fust of Fust Charles Chambers, a Syracuse firm that provides accounting services to hospitals across New York State, said that for hospitals to "go totally naked" was very unusual and "would draw into question the viability of the entity." It would also be difficult for any patient to recover money from hospitals like Wyckoff and Interfaith, which are already deeply in debt. "You can't get blood out of a stone," Mr. Fust said.
An absence of insurance is generally a sign of double trouble, signifying that rates have gone up because of high claims. Many commercial insurance companies pulled out of New York years ago because "this is a very litigious state, high severity and high frequency," said Edward J. Amsler, vice president of Medical Liability Mutual Insurance Company, which is owned by its policyholders. Financially stable hospitals have responded by banding together in groups like Mr. Amsler's, setting premiums and reserves and sometimes sharing risks. (Lenox Hill has primary liability coverage through this company, setting aside reserves for larger claims.)
"If you were on the board of a public corporation, and you had director responsibility, and if it was a health care corporation, you would damn well demand that the management of that hospital was properly insured," said Stephen Berger, the head of a state task force on ailing Brooklyn hospitals, which recommended that Interfaith and Wyckoff Heights merge with a stronger hospital.
"You wouldn't let somebody pick up a Q-tip if you weren't comfortable with the level of malpractice, liability, fire, coverage, everything else that you had in that hospital, because you would have liability if you failed to perform your true duties."
Some hospital executives say, however, it is better to be effectively uninsured, because lawyers follow the money.
"Malpractice insurance is a lawsuit magnet," said a former hospital administrator who did not want to be named to avoid upsetting potential employers. Malpractice lawyers said that underinsured hospitals put them in a tricky position.
"There is some arm-twisting," said Alan Fuchsberg, a personal injury lawyer in Manhattan, as plaintiffs are told that they will end up with nothing and push the hospitals into bankruptcy if they do not "just take the little bit" that is offered to them.
"You don't know if that's really true or not, and it's very difficult to advise your client," he said.
The lawyers said they were often forced to take payment on installment, or to try to pin more blame on physicians, who may have their own insurance. Martin Seinfeld, a malpractice lawyer, said he had had three cases this year involving Jamaica Hospital and New York Hospital Queens in which hospital lawyers had held out the specter of bankruptcy if he did not reduce his demands.
When a hospital is bankrupt, its creditors, including malpractice plaintiffs, are often forced to accept less than they are owed through litigation. "They're forcing settlement terms for payouts over six or seven years," Mr. Seinfeld said, "because they put you in the position of saying, 'Fine, close a community hospital.'"
Camela Morrissey, a spokeswoman for New York Hospital Queens, declined to comment on Mr. Seinfeld's assertion or on the hospital's financial condition. Jamaica also declined to comment.
Mr. Hernandez, of Interfaith, said the hospital was not trying to duck responsibility. "Eventually we recognize the liability," he said. But at this point, he added, with a mordant chuckle, "We're just trying to buy another day."