Hospitals should get ready for a reversal of fortune when it comes to liability claims, according to a broker report.
Although claims against hospitals declined for a good part of the last decade, a new analysis from Aon Risk Solutions concludes that the frequency of claims against hospitals is on the way up.
"Keep an eye on your own data; look at your benchmarks," advised Erik Johnson, leader of Aon's health care practice and author of the analysis, "Hospital Professional Liability and Physician Liability Benchmark Analysis."
Mr. Johnson said that tort reform, a focus on patient safety and technology, and overall sympathy toward health care providers drove the drop in frequency, which took some time to realize because of the long-tail nature of the claims.
"Now there has been no new tort reform and existing reforms have eroded," Mr. Johnson observed.
The health care reform law offers no new tort reform and the economy is also playing a role, he noted.
"People are more likely to make a claim," Mr. Johnson said. "Grievances are up. That is normally a leading indicator."
Stressed incomes impact the likelihood of someone filing a claim, he added.
Next year, hospitals can expect loss rates–the cost of medical malpractice claims per hospital bed–to increase $150 from $3,130 in 2010. The rate in 2011 is expected to be $300 more than 2009′s rate of $2,980, said Aon, which has been putting out the analysis for 11 years.
The increase of frequency and severity is likely to increase liability costs at a rate higher than general inflation.
According to the report, hospitals expected more than 44,000 claims, costing more than $8.6 billion. Claims from the obstetrics unit and the emergency department make up more than 25 percent of that expense, Aon said.
ZURICH ANALYSIS
Separately, Zurich North America reported slightly declining claims medical malpractice frequency and leveling claims severity in an analysis of trends for report years 1997 through 2007.
Zurich used its own claims information and claims self-reported to Zurich by hospitals seeking quotes for professional liability insurance for its analysis, making up a database of 240,000 non-zero claims accumulating to $34 billion in undeveloped losses from approximately 1,600 hospitals.
According to the Zurich study, claims frequency was 1.96 claims per 100 occupied bed equivalents in 2007.
Severity over the 11-year time period studied rose at an average annual rate of 4 percent, Zurich reported, noting that this result was lower than last year's calculation of 6 percent.
Interpreting the severity results, the report said that "the largest claims are not necessarily getting larger. Rather, it is the severity of the medium, or 'typical' claim that is growing."
In addition, Leo Carroll, head of Healthcare-Specialty Products, Zurich North America Commercial, said that while the most severe claims–those valued above $1 million and $5 million–have stabilized overall, the frequency of those large losses has increased slightly."
Very large claims, those over $5 million, still account for only 0.3 percent of all ultimate non-zero claims, Zurich said, noting that only 800 out of 240,000 claims over the past 11 years have been greater than $5 million.
Mr. Carroll noted that the most severity-prone states continue to be New York, Illinois and Pennsylvania. "We're continuing to monitor the impact to claim activity by changes in tort reform, patient safety initiatives and use of technology to improve quality of care," he said.
Additionally, Zurich reported that teaching and children's hospitals have higher claim severity than acute care community hospitals and outpatient facilities.
Nonprofit hospitals have the lowest severity; and among non-profits, faith-based institutions have the lowest severity of all.
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