Ouch! Hospital Claims May Exceed 9%

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, will rise by 9.7 percent this year, according to a study by Aon Risk Services.

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

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

According to the report, the percentage of claims against beds in a hospital is growing by 3 percent annually, while the severity level is growing by 6.5 percent annually.

Mr. Larcher said the report was based on $3 billion in loss information reported over 10 years by 61 acute-care hospitals with 150,000 beds. Many of the hospitals, he said, are regional organizations encompassing several institutions.

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

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

He said the report should be of value to hospital risk managers planning their budgets. Highlights of the study are available at www.aon.com/actuarial.

In doing its projections Aon limited its study to claims not exceeding $2 million.

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

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

"This study shows that, in some states, tort reform laws are keeping awards sizes down," added Theresa Bourdon, managing director and actuary. "This reinforces the fact that tort reform is still very important to this industry."

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

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