Stable Medical Malpractice Line Could Benefit From Proactive Risk Management

October 30, 2014

Nationwide, health care providers continue to experience relatively flat medical malpractice costs according to the Aon/ASHRM Hospital and Physician Professional Liability Benchmark report. The 2014 report was released by Aon Risk Solutions, the global risk management business of Aon plc, in conjunction with the American Society of Healthcare Risk Management.

“Although overall cost levels appear to be calm, these seemingly still waters hide a system of swirling undercurrents,” said Erik Johnson, leader of the health care practice group with Aon’s Actuarial & Analytics Practice. “Proactive organizations are using data, analytics and business intelligence to reduce costs and strengthen risk management in this stable environment. Our report helps these organizations to identify underlying problem areas, even when the overall picture looks good.”

Ron Calhoun, health care practice leader for Aon Risk Solutions adds, “Health care providers are adapting to transformations in the way services are paid for and delivered. The benchmark information in this report can serve as a diagnostic tool to identify areas where clinical integration and risk management can be used to narrow practice pattern variations and improve results.”

The 2014 report examines medical malpractice trends from several useful vantage points, including:

The link between quality of care and medical malpractice claim frequency

New to this year’s study, patient satisfaction scores were compared to the frequency of medical malpractice claims for specific facilities. Facilities scoring highly in the survey tended to have significantly lower frequency of medical malpractice claims. The result indicates that risk managers can use survey scores as a “marker” for detecting and remediating areas in need of improvement.

A survey of claim frequency and severity by cause of loss

For the first time, the report incorporates text mining techniques to measure the relative frequency and severity, or average cost, of claims by the cause of loss. This brings a new level of specificity to risk managers’ ability to identify potentially costly risks.

Claim frequency and severity benchmarks by state

The benchmark study provides statistical information specific to 27 states as well as the District of Columbia. For California, a special section of the report highlights our analysis of the impact of Proposition 46 – the proposed change to the Medical Injury Compensation Reform Act’s non-economic damage caps.

Some statistics from the report:

  • Projected loss rate for hospital professional liability is $2,870 per occupied bed equivalent for events occurring in 2015. The frequency of claims is projected to be 1.69 percent per OBE and the severity of claims is expected to be $170,000 per claim.
  • Projected loss rate for physician professional liability is $6,230 per class 1 (internal medicine) physician for events occurring in 2015. The frequency of claims is projected to be 3.37 percent per class 1 physician and severity of claims is expected to be $185,000 per claim.
  • Projected loss rate for hospital general liability is $125 per OBE; the average general liability claim is expected to be $38,000 for claims occurring in 2015.
  • Projected loss rate for obstetrics claims occurring in 2015 is $163 per birth; emergency department is $6.44 per visit.
  • The Aon/ASHRM Hospital and Physician Professional Liability Benchmark database includes claims from all US states and provides specific benchmarks for 27 states as well as the District of Columbia. Florida ($7,920) has the highest projected loss rates for 2015; Indiana, ($800) and Minnesota ($770) have the lowest projected loss rates for 2015.
  • In California, the report estimates that the passage of Proposition 46, an increase in the Medical Injury Compensation Reform Act’s non-economic damage caps, would result in an increase in medical malpractice costs of 15 to 35 percent.
  • Using its excess claims database, Beazley Group provides analytics detailing the increasing severity of the largest claims by venue and highlighting the growing number of claims hitting excess layers of coverage.
  • Data from Aon Global Risk Consulting’s self-assessment tool, the Risk Maturity Index, benchmarks the risk management capabilities of the health care industry and provides an example of how this tool can be used to analyze risk management gaps and help develop strategies to enhance plans.

To purchase a copy of the 2014 Aon/ASHRM Hospital Professional Liability and Physician Liability Benchmark report, visit ASHRM online store:
About the Aon/ASHRM Hospital Professional Liability Benchmark report

The database includes 110 US [ADL1] health care systems, representing 29 percent of the total U.S. hospital industry. Data collected includes approximately 100,000 non-zero claims, representing more than $16 billion of incurred losses. The database contains historical claim information for 10 accident years (2004 to 2013). All ASHRM members were invited to participate in the study, which is designed as a hands-on tool to provide health care risk managers with a better understanding of their cost of risk compared to an industry benchmark. Through measurement, analysis and comparison of the claim and exposure data, risk managers develop proactive strategies to reduce risk related costs and ultimately improve outcomes.

Source: Aon Risk Solutions/American Society of Healthcare Risk Management

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