Ouch! Hospital Claims May Exceed 9%

By Daniel Hays

NU Online News Service, Jan. 27, 3:18 p.m.EST?Liability claims against hospitals, on average, willrise by 9.7 percent this year, according to a study by Aon RiskServices.

Greg Larcher, assistant director and actuary in the firm'sActuarial and Analytics Practice office in Columbia, Md., said thecompany is projecting that a typical hospital will have claimsagainst 4.5 percent of its occupied beds, and those claims willhave a severity level of $149,00.

Mr. Larcher, a co-author of the report with Erik Johnson, saidthe findings of the study mean that a 100-bed hospital could expectclaims against 4.5 of its beds amounting to $670,000, which wouldmean a loss cost for all the beds in the hospital of $6,600.

According to the report, the percentage of claims against bedsin a hospital is growing by 3 percent annually, while the severitylevel is growing by 6.5 percent annually.

Mr. Larcher said the report was based on $3 billion in lossinformation reported over 10 years by 61 acute-care hospitals with150,000 beds. Many of the hospitals, he said, are regionalorganizations encompassing several institutions.

The study found that over the past three years there has been aclaim cost growth rate of nearly 10 percent, and the 9.7 percentfigure is in line with that historical measurement.

"Compared to the [Consumer Price Index], it's a fairly highinflation rate," Mr. Larcher noted.

He said the report should be of value to hospital risk managersplanning their budgets. Highlights of the study are available atwww.aon.com/actuarial.

In doing its projections Aon limited its study to claims notexceeding $2 million.

In examining loss costs for physicians, the risk management firmfound that the per-bed cost in 2002 was $11,330.

Aon found that there was considerable variance among itsprojections for loss costs at hospitals in different states. Of the11 states where Aon had the most data, Louisiana was highest with aprojected loss cost benchmark of $11,800.

"This study shows that, in some states, tort reform laws arekeeping awards sizes down," added Theresa Bourdon, managingdirector and actuary. "This reinforces the fact that tort reform isstill very important to this industry."

Stephen Harri, managing director of the Aon Healthcare Alliance,a group that sponsored the study, called it a "credible andvaluable benchmarking tool" for hospital professionals andphysicians to understand the marketplace and compare theirpositions within it.

"It allows them to focus their efforts on problem areas, andprovides them with a useful negotiating tool," Mr. Harri said