Aon: Hospital Liability Claims Take Drop

Aon insurance brokerage said it found liability claims for the hospital industry have dropped to new lows as more safety initiatives have been introduced in some high risk areas.

The Chicago-based broker's report entitled, "Aon Corporation 2007 Hospital Professional Liability and Physician Liability Benchmark Analysis," was done with the American Society for Healthcare Risk Management, a hospital association.

The study released today measured 65,689 paid claims representing more than $7.7 billion in insured losses. More than 80 health care organizations representing 1,000 facilities and 90,000 licensed beds contributed to the study.

Among some of the findings:

o Hospital claims are at their lowest levels in eight years. Liability losses are projected to be just three percent higher in 2008, down from six percent in the 2007 projection.

o Claim severity is increasing at just three percent annually, the lowest severity trend in eight years.

o For the third straight year, there was no increase in the frequency of claims. Since the last edition of the study, the trend in the severity of claims was cut in half.

o Patient safety initiatives aimed at obstetrics and emergency departments are linked to reductions in the number of claims in those areas.

o Facilities that are recognized for their patient safety initiatives exhibit lower liability loss costs.

o Frequency, severity and loss cost benchmark statistics vary significantly by state.

"We continue to recognize improvements in the underlying claims environment and have enhanced our ability to measure the impact of the improvement on claims costs," said Greg Larcher, director and actuary of Aon Global Risk Consulting and author of the analysis in a statement.

He said he expects many hospitals to realize lower liability expense in 2008 as hospitals adjust "to the new cost environment."

The 2007 study introduces benchmark statistics for the obstetrics and emergency departments. More than 800 facilities that experienced approximately 700,000 births and 16 million emergency department visits provided historical loss information for these measures.

"Since many of the patient safety initiatives being implemented focus on obstetrics and emergency departments, it is important to have industry benchmarks available to measure their effectiveness," said Frank Dodero, senior vice president of Aon Healthcare.

The study found that the number of claims per 10,000 births decreased from 9.4 in 2001 to 6.2 in 2006 while the number of claims per 100,000 emergency department visits dropped from 5.8 to 3.4 in that same period.

The report includes a case study of a multi-state hospital operator where similar improvements were linked to patient safety initiatives.

In addition, the study found that the nation's best hospitals, those recognized for their patient safety environments, exhibit significantly lower liability loss costs compared to the national averages.

Aon said this finding is important because hospitals that emulate the nation's best in terms of their patient safety environment may realize reduced liability costs in the future.

Additional information on purchasing the report is available at: www.aon.com/hpl_study.