An analysis based on the composite financial results of a large group of insurers that specialize in medical professional liability (MPL) coverage shows a steady drop in premium but remarkable calendar-year profitability nonetheless. However, despite the strong financial results, it appears that the MPL insurance market is continuing to soften. As the healthcare industry goes through a period of dramatic change, there is significantly more uncertainty in both the future of MPL claim costs and the future of overall MPL insurance market conditions.
Download and read the entire article here.
This article was originally published in the May issue of the Medical Liability Monitor.
Healthcare reform, mergers and acquisitions, expanding regulatory requirements, and downward pressure on reimbursement and margins create a challenging environment for healthcare management. Although self-insurance can help control total insurance expenses, staying up to date on the financial reporting requirements for this option can be difficult.
This article offers guidance on the key financial reporting issues for medical professional liability (MPL) self-insurance programs. Here is an excerpt:
The following practices will help in keeping on the right course toward full compliance in financial reporting.
• Update the key parties whenever you make changes. Frequent conversations are beneficial. At minimum, you should have annual conversations with the actuary and auditor. If changes occur, in either the program or your loss experience, it is important that all parties understand all of the program changes that have been enacted by management, as soon as possible. Table 1 shows some common questions.
• Create a checklist of requirements. The best way to stay “on top” of the requirements may be to use a single source that lists all of the requirements and indicates when each is due. In addition, it may make sense to determine who will complete each task and to have a strategy in place for efficiently completing the task.
• Seek timely advice. Guidelines are best interpreted by experienced professionals who have the skills needed to understand the current practices and communicate any change from the past. Auditors and actuaries make every effort to update management on a timely basis of any changes that would affect the financial reporting of the entity’s liability, but you can help out by proactively asking for advice for any changes you find out about.
• Request more frequent evaluations. When a program experiences adverse or favorable loss activity or undergoes multiple changes during a fiscal year, you can always ask for an interim actuarial study. You’ll need to determine your comfort level with the program’s current amount of activity, with the goal of reducing year-end “surprises.” Additional analysis may also be helpful during an audit.
Reprinted from the First Quarter 2013 issue of Physician Insurer Magazine, Physician Insurers Association of America.
Milliman’s Richard Frese has co-authored a new article on the financial reporting of medical malpractice self-insurance for the Healthcare Financial Management Association. Among other things, “Perspectives on Medical Malpractice Self-Insurance Financial Reporting” discusses how accountable care organizations (ACOs) may increase the frequency of medical malpractice claims.
Here is an excerpt:
Another trend that warrants monitoring is the emergence of accountable care organizations (ACOs) and the impact that such organizations will have on medical malpractice claims. Among the primary goals of ACOs is to improve integration of care, which should ultimately contribute to a reduction in medical malpractice risk. What remains to be seen is how independent healthcare entities forming ACOs will choose to manage medical malpractice risk (e.g., risk pools, captive insurance arrangements) and coordinate defense of medical malpractice claims. Some also argue that ACOs might increase the frequency of medical malpractice claims because patient expectations regarding quality of care will be heightened.
Read the entire article here.
Patrick Kitchen, of McGladrey LLP, contributed to this article.
Financial reporting of medical malpractice self-insurance is evolving. The accounting and financial reporting guidelines for medical malpractice, which are governed by the Financial Accounting Standards Board, are changing to uphold some historical practices and adjust others. This evolving landscape includes a review of the practice of discounting medical malpractice liabilities, medical malpractice litigation reform efforts in several states, and the potential impact of accountable care organizations (ACOs) on medical malpractice insurance.
This article describes the history of medical malpractice self-insurance, the current medical malpractice insurance landscape, and future trends affecting medical malpractice insurance.
In a recent article, Chad Karls, editor of the Medical Liability Monitor’s 22nd Annual Rate Survey, explores when the medical professional liability (MPL) market will break out of its current state and examines other factors influencing the MPL insurance market. He describes how that market arrived at its current position and the contradictory state of the market today; he also offers new ideas about how long it will be before the market begins to harden and why that will be necessary before change can occur.
This article was published in Medical Liability Monitor.
Richard Frese discusses how healthcare organizations can improve their year-end medical malpractice insurance accruals in his new article “An Improved Accrual: Reducing Medical Malpractice Year-End Adjustments” on HFMA.org.
In the article Frese highlights the following considerations for the budgeting of accrual amounts:
• Maintain productive communication
• Match accrual and accounting policies
• Adjust amount of credit to own historical loss experience
• Request more frequent analysis
• Obtain a second opinion
Read the entire article here. Also, for more perspective on how healthcare entities present medical malpractice liabilities on financial statements, read here.
Analysis of first quarter financial results suggests that medical professional liability (MPL) specialty writers will continue recent financial trends in 2012. Prevailing themes include declining premiums, which puts pressure on underwriting results, as well as the enduring drop in Treasury yields that places pressure on operations results. But MPL insurers are still benefiting from the persistent, favorable reserve releases that help to support excellent calendar year underwriting results and increasing dividends for policyholders. Early indicators for 2012 suggest that MPL underwriters will continue to see favorable results and strong operating margins in 2012.
For more, read the new article in Medical Liability Monitory.
While the medical professional liability (MPL) industry has enjoyed what is arguably its greatest financial success ever during the last several years, one cost element has increased at a noticeably higher rate than the others: the average defense cost per claim.
Gleaning insights into defense costs data can lead to a better understanding—and better management—of such costs.
The proliferation of web-based business transactions, paired with advances in data mining and data warehousing techniques, makes it possible to extract more detailed and valuable insights from existing defense cost data than ever before.
Armed with this information, companies will be able to better manage the entire claims process, including the cost of defense.
This article from the Physician Insurer explores these issues in depth.
Last year was another year of financial growth for the medical professional liability (MPL) insurance industry. The industry’s combined ratio and operating ratio in 2011 increased slightly from 2010, though both ratios remained near the low levels seen since 2006. Insurers were able to release reserves once again, and they returned a substantial portion of these releases as policyholder dividends. The MPL industry once again set a record for the amount of dividends returned to policyholders during 2011 despite the slight decline in financial results. Surplus also grew moderately in 2011, providing the MPL industry with additional capital support.
This article from the Second Quarter 2012 issue of Physician Insurer Magazine examines these dynamics.
Based on the historical relationship between quarterly and year-end figures of a composite of medical professional liability (MPL) specialty writers, Chuck Mitchell and Brad Parker attempted throughout the course of 2011 to project year-end results. With actual 2011 results now available, it’s time to review how this composite performed and how well the projections held up.
Based on data compiled by SNL Financial, the authors have examined the collective financial results of the composite, which had direct written premium totaling almost $4.13 billion in 2011. Despite the fact that direct written premium for the composite declined for the sixth straight year, this group of companies continues to achieve remarkable calendar-year profitability, which has been indicative of the broader MPL market.
This article was first published in the April 2012 issue of Medical Liability Monitor.
You can read the full article here.