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Hospital Malpractice Claims Increase for Third Consecutive Year

by Leah Greene, JD, LLM on October 18th, 2010

For the third year in a row, the frequency and severity of claims against hospitals and physicians has increased after a period of decreases in those claims. This change will likely result in an increase in liability costs greater than the general inflation rate.

On October 12, 2010, AON Corporation, in conjunction with ASHRM, released their 11th annual study on the frequency and severity of claims against hospitals. The authors of the study surveyed 119 hospital systems and 1,800 facilities. The results of the study showed that hospital claims have increased by 1% per year since 2007.

The 1% increase in claims against hospitals was predicted by the same study last year. The authors of the October 2009 study attributed the increase to the worsening economic conditions and the changes in Medicare and Medicaid reimbursement rules regarding “never events.”

The 2010 study included the following findings:

  • Hospitals are employing more physicians, resulting in a shift of claims costs from physician professional liability to hospital professional liability.
  • The severity of claims (indemnity and claim-related expenses) is expected to increase by 4%.
  • Hospitals can expect a nationwide total of 44,000 claims from incidents which occurred in 2009. The cost of those claims is expected to total $8.6 million.
  • One quarter of the claims will result from the typical targets of hospital claims: obstetrics and emergency departments. Hospitals can expect to incur $204 per birth for liability costs associated with obstetrics claims and $6.30 per visit for emergency department claims.
  • Loss rates, which assess the total cost of medical malpractice claims per hospital bed, are expected to increase by 5% annually. The expected 2011 rate for hospitals is $3,280, a $150 increase from 2010’s expected rate of $3,130 and a $300 increase from 2009’s rate of $2,980.

Erik Johnson, Health Care Practice Leader for Aon Risk Solutions’ Actuarial and Analytics Practice, attributes this year’s increase in claims to the uncertainties of health care reform and the current economic difficulties. He urges hospitals to adjust their risk financing programs for the increase in claims: “While many hospitals have grown accustomed to declining professional liability costs, the underlying claim frequency and severity cost drivers have entered a period of growth. Whether commercially insured or self-insured, hospitals and physicians should prepare for increases to their professional liability costs in the coming years.”

Uncertainties in health care reform and in the economic climate could continue for at least the next two years, as it appears many voters plan to vote against nearly all incumbent officeholders. The resulting legislative changes, coupled with the litigation challenging the constitutionality of the recent health care reform laws, could result in continued fluctuation in the number of malpractice claims.

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