Physicians paid $7 billion in malpractice insurance premiums in 1992, according to the American Medical Association. Estimates of the total cost of malpractice range from $7 billion to $25 billion a year, including the cost of "defensive medicine," the practice of conducting unnecessary tests and procedures in order to protect against the possibility of lawsuits.

Erling Hansen, general counsel for GHAA, said the logic behind enterprise liability is flawed. The administration "assumes a lot more control over physicians by HMOs and other managed care organizations than is the case," he said. "They're asking us and other institutional providers to buy a pig in a poke."

The administration's final proposal may include other malpractice- reform provisions, such as encouraging alternative forms of dispute resolution and capping the amount of punitive damages an aggrieved patient could collect in court, [Robert Berenson] said. Health plans, he said, could not make physicians pay a surcharge to cover the companies' additional financial burden, but it likely would be reflected in lower physician salaries.