Healthcare systems in 2018 could see an increase in claim frequency for claims greater than $5 million, along with an increase in batch claims, according to a new report.
Risk managers also should focus on sterilization issues and employee misconduct claims, says Erik Johnson, regional director and actuary with Aon Global Risk Consulting in Raleigh, NC. Those issues were associated with some of the larger claims figures in the Aon/ASHRM Hospital and Physician Professional Liability Benchmark report. (The report can be purchased online at: http://aon.io/2ABhZXp.)
The report includes the following findings:
• The projected loss rate for hospital professional liability is $2,750 per occupied bed equivalent (OBE) for events occurring in 2018. The frequency of claims is projected to be $1.61 per 100 OBE and the severity of claims is expected to be $171,000 per claim.
• The projected loss rate for obstetrics claims occurring in 2018 is $172 per birth, and ED is $5.78 per visit.
• The projected loss rate for physician professional liability is $5,710 per internal medicine physician for events occurring in 2018. The frequency of claims is projected to be 3.50 per 100 internal medicine physicians, and the severity of these claims is expected to be $163,000 per claim.
• Projected loss rate for hospital general liability is $130 per OBE; the average general liability claim is expected to be $42,000 for claims occurring in 2018.
• Labor and delivery- (L&D) related issues, with an average value more than $350,000, continue to be significantly more severe than claims related to other allegations. The costliest L&D-related issue was delay in delivery, with an average cost of more than $1.1 million.
• Projected hospital professional liability and PPL loss rates are increasing at a 2% annual rate.
“The frequency and severity of the most typical medical malpractice claims are very stable, as they have been for more than 10 years. But we see a trend developing in the most severe type of claims, those costing more than $5 million,” Johnson says. “That is alarming because that kind of claim drives so many dollars for both the insurance industry and the hospitals.”
The expected increase in batch claims is tied to sterilization issues and employee misconduct, both receiving more attention from the media and the plaintiffs’ bar, Johnson says. Those are now among the most common batch claims.
“Risk managers have to expect those types of batch claims but also look to the possibility of other types that we haven’t seen as much of yet,” he says. “This is tricky because you have to try to imagine batch claims that might come up and then look to the wording and specifications in your liability coverage to determine if and how they would be covered.”
Johnson advises meeting with the chief medical officer and chief financial officer to brainstorm about potential batch claims.
“Challenge the chief medical officer to think about circumstances that could affect multiple people. What kind of problem could you have that could result in many patients being harmed and bring claims?” Johnson asks. “On the other side, try to understand how insurers have reacted to batch claims in the past and how they might react to the type of batch claims you’re thinking about.”
Vicarious liability is another emerging risk, associated with physicians who are not employed by the hospital, Johnson says. The law on vicarious liability varies by state, but there have been successful cases recently in some states regarding a hospital’s liability for doctors practicing in the facility but not employed, he says.
Tort reform also may affect some healthcare organizations in 2018, Johnson says.
“In 2017, we saw tort reform in Florida with the overturning of the cap on economic damages. That will be a big issue for healthcare organizations in Florida determining how it affects their claims and their premiums,” Johnson says. “It’s possible we could see more of that kind of tort reform in other states.”
• Erik Johnson, Regional Director and Actuary with Aon Global Risk Consulting in Raleigh, NC. Phone: (919) 786-6246. Email: firstname.lastname@example.org.