The High Cost of Malpractice: New Mexico’s Healthcare Strain

In New Mexico’s remote northeastern corner, Union County General Hospital (UCGH) in Clayton is the sole provider of health care, offering everything from emergency services to routine checkups. However, the facility faces the imminent threat of closure due to severe financial pressures. In just over a month, it may have to shut its doors for good.

Like many rural hospitals across New Mexico and the United States, UCGH is grappling with an array of challenges. These include declining populations, inadequate reimbursement rates from Medicare and Medicaid (which cover a disproportionate number of rural residents), and a national shortage of medical professionals, with more doctors opting to practice in urban areas. But in New Mexico, a unique issue has intensified the crisis: the state’s highly litigious environment has led to soaring medical malpractice insurance premiums, pushing many insurers out of the state altogether.

Tammie Chavez, CEO of UCGH, spent months searching for an insurer, reaching out to companies in London, the Bahamas, and other international markets, only to be rejected by over 40 firms. “My policy was going to expire at midnight on December 31, and I thought we were going to be closing the doors on January 1,” Chavez recalls. After an exhaustive search, she finally found two insurers willing to cover the hospital, but at an astronomical price. The cheapest option cost $850,000 annually, nearly 500 percent higher than the $142,565 premium UCGH had previously paid. To secure coverage, Chavez also had to deposit $100,000 and shut down the hospital’s bariatric program, which the insurer refused to cover. With this costly decision, the hospital was able to keep operating for another year.

However, as the policy nears expiration again at the end of this year, Chavez faces the looming threat of even higher premiums. If the prices continue to rise, it could force UCGH, along with the county’s only health clinic and school-based health center, to close permanently. “There is not another hospital in New Mexico close to me for 84 miles,” Chavez says. “Without this hospital, people will die.”

This crisis is not unique to Union County. Hospitals across New Mexico, particularly in rural areas, are facing skyrocketing insurance premiums due to a sharp increase in malpractice lawsuits. New Mexico’s legal environment has made it one of the most attractive states for medical malpractice claims, attracting law firms from out of state and leading to extraordinarily high settlement amounts. In 2021, New Mexico raised its caps on malpractice liability from $600,000 to $6 million over five years, among the highest in the country. This has led to enormous payouts, such as a $23 million verdict in 2023 following a botched prostate surgery, and a $68 million judgment against a hospital in Gallup.

These high liability caps, combined with the absence of limits on attorney’s fees and punitive damages, have driven up the cost of malpractice insurance, making it unsustainable for many hospitals. According to Fred Nathan, Executive Director of Think New Mexico, the state’s malpractice laws have resulted in substantial financial burdens for hospitals, particularly in rural areas. “The patients go to Texas, and the lawyers come to New Mexico,” says Kaye Green, CEO of Roosevelt General Hospital in Portales, who struggles to recruit doctors due to the state’s malpractice environment.

This shortage of medical professionals is compounded by New Mexico’s low reimbursement rates and its unique tax system, which reduces the income doctors can earn. Over the past five years, the state has seen a net loss of 248 physicians, the only state in the country to experience such a decline. This shortage, combined with malpractice concerns, has made it even harder to attract physicians to rural hospitals like UCGH, where specialists are in especially high demand.

While New Mexico’s state government has attempted to address these issues through measures like increased Medicaid reimbursements and subsidies for rural hospitals, many believe these efforts don’t go far enough. Advocates like Fred Nathan call for comprehensive reforms to the state’s malpractice laws, including capping attorney’s fees and limiting punitive damages, to ease the financial burden on hospitals and ensure they can continue to provide care to underserved communities.

For now, the future of Union County General Hospital remains uncertain. If the hospital shuts down, it will not only leave Union County without critical health care services but also devastate the local economy, as UCGH is the county’s largest employer. As Commissioner Clay Kiesling warns, the closure would be “catastrophic,” leading to population loss, further economic decline, and a collapse of essential services in the region.

Without urgent intervention, rural New Mexico faces a growing health care crisis that could have far-reaching consequences for its residents, particularly in areas where medical care is already scarce.

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