Tag Archives: medical malpractice

How to lower defense costs using analytics (infographic)

For medical malpractice insurers, market pressures continued in 2018 despite overall profitability, according to a May report by AM Best. One way to combat potential headwinds is by lowering defense costs using advanced analytic techniques. In 2017, NORCAL Group began using Milliman’s Datalytics-Defense®, which uses proprietary data-mining techniques to analyze companies’ defense cost invoices and produce actionable insights. The results shown in the case study infographic below demonstrate the extent NORCAL was able to reduce their defense costs, all the while maintaining their overall claims-with-payment ratio.

Tort overhaul: Patient compensation system legislation raises more questions than answers

In recent legislative proposals in Florida and Georgia, lawmakers have sought to establish a patient compensation system (PCS) as an alternative to litigation for compensating patients with injuries that could have been avoided under alternative healthcare (referred to as “medical injuries” within the legislation).

Proponents say offering a PCS as an alternative to litigation could lead to faster outcomes with claims. Advocates claim that faster claim resolutions and less attorney involvement would ultimately reduce overall costs, while providing access to compensation for more patients. They also argue that this system would benefit claimants with minor injuries, who are frequently excluded under the current system, because their claims generally do not result in the kind of large monetary awards that make taking a medical professional liability (MPL) case cost-effective for plaintiff attorneys.

Can PCSs really provide the many benefits, in cost savings, fairness, greater access, and efficiencies, that their proponents claim? This article by Christine Fleming, Eric Wunder, and Susan Forray offers some perspective.

This article was originally published in Inside Medical Liability, First Quarter 2014.

How can hospital and physician groups manage tail liability?

The creation of accountable care organizations (ACOs) is leading hospitals to acquire physicians rapidly. During the process hospitals should consider how a physician’s integration may increase tail liability related to medical malpractice insurance.

Richard Frese’s co-authored article “Managing tail liability” offers hospital and physician groups perspective on tail liability issues that may need to be reflected on the balance sheet.

Here are some specific tail liability considerations:

First, leaders should understand the level of tail liability exposure their physicians face, including exposure related to a physician’s specialty, FTE value, participation in outside activities (such as moonlighting), and prior insurance coverage. This consideration is particularly important when acquiring physicians and when preparing for a physician exit. For example, it is important to know whether the insurance program will provide coverage for prior acts or tail coverage when a physician leaves, and whether a physician will need to come into a program “clean,” with his or her tail liability covered by another organization.

Employed physicians usually are covered under occurrence-based medical malpractice policies. Some organizations may choose to cover employed physicians’ liability through a self-insured vehicle, such as a captive or risk-retention group, or through self-insured retention (a dollar amount that must be paid by the organization before the policy will cover a loss). Nonemployed physicians also may be offered such coverage through an insurance vehicle, but they must secure coverage on their own; the hospital itself cannot provide this insurance. In addition, some healthcare entities purchase commercial claims-made coverage for employed physicians, but will offer physicians the option to purchase occurrence coverage. This approach results in tail liability for the organization.

The article also details solutions that can help hospitals and physicians control these liability expenses:

Use a self-insurance vehicle. Self-insurance is an option, particularly when insurance prices are high during a hard market. Theoretically, an entity experiences savings through the profit, contingencies, and insurer’s expenses built into the rate. Self-insurance also allows an entity to maintain more control of the losses, because the carrier may not be involved until claims reach the excess layer. Pooled physicians might have the additional benefit of obtaining lower insurance rates. But there also is increased risk and variability with self-insurance, because cash flows may not be known up front as they are with commercial insurance. Administrative costs also may increase when claims previously monitored by an insurance company become the responsibility of the self-insured entity. Use of self-insurance also requires greater knowledge of underwriting, and actuarial estimates will be needed for funding future losses.

Consider combined limits between hospital and physicians. Programs that have separate limits for the hospital and physicians may find savings in having a single combined limit. This practice may not be feasible in some states with medical malpractice funds, depending on the rules, but for other states, there are clear advantages. First, programs that have single combined limits experience reduced legal expenses, because alignment of the hospital’s and physicians’ goals and incentives allows for joint defense of claims and reduced “gray boxes” of coverage. This approach also avoids internal situations where the hospital and the physicians blame each other for an incident, as well as situations where the hospital may be brought into a claim as a deep pocket. Combined limits also allow for more protection for physicians, because commercial coverage usually has lower limits.

Ryan Weber, of McGladrey, also contributed to this article.

How can healthcare organizations improve budgeting of accrual amounts?

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.

More from the Prairie State

On Monday, we blogged about new analysis of a court decision to reverse medical malpractice damage caps in Illinois. Subsequent coverage offers more detail—and also some alternative perspectives.

First, perspective from AM Best’s, which gives the five-year view of Illinois tort reform:

The court found that portions of a 2005 statute that capped noneconomic damages at $500,000 against doctors and $1 million against hospitals violated the separation of powers between the Illinois General Assembly and the judiciary. The case, Lebron vs. Gottleib Memorial Hospital et al, was filed by Frances Lebron, the mother of baby Abigaile Lebron, who was born at Gottlieb with “numerous permanent injuries” allegedly sustained during a Caesarean procedure, the court noted. Lebron filed suit against the hospital and her medical team in 2006, and in 2007 the Cook County Circuit Court found the caps unconstitutional (BestWire, Nov. 13, 2007).

The Milliman study buttresses insurers’ argument that the cap is good for Illinois, said Jeffrey Junkas, a spokesman for the American Insurance Association. Moreover, the legislature is unlikely to act to rectify the ruling anytime soon, he said.

“There’s no appetite to address this issue again,” Junkas said. “We may have to get back to that crisis condition we had in ’03 and ’04.”

Without a cap from 1997 to 2005, Chicago physicians saw liability premiums jump an average of 10% to 12% a year. When the cap was reinstated in 2005, premiums for Chicago physicians stabilized and even began to shrink, according to the American Medical Association (BestWire, Feb. 4, 2010).

The top Illinois writers of medical professional liability coverage in 2008, according to BestLink, were: ISMIE Mutual Group, with 55.3% market share; APCapital Group, 5.2%; Berkshire Hathaway Insurance Group, 4.5%; American International Group, 3.8%; and ProAssurance Group, 3.2%. BestLink provides online access to A.M. Best’s Global Insurance & Banking Database.

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Medmal frequency leveling off?

Medical professional liability claims frequency has declined in recent years. But that may be changing. Here is an excerpt from a recent Best’s Week article:

Chad Karls, a principal and consulting actuary at Milliman who specializes in medical professional liability, said frequency in 2008 and 2009 is no longer falling and has even increased in some spots.

“That needs to be kept in perspective,” Karls said. “While it may be increasing, I don’t see it at the 2002-03 levels.”

Karls was referring to a tumultuous period for medical professional liability of nearly a decade ago. It arrived after the largest medical malpractice writer in the United States chose to forego the line and take a $900 million write-down. St. Paul Cos., which has since merged with Travelers, had written 9% of that sector’s direct premium in 2000 before pulling out, according to A.M. Best data.

What followed was a call for tort reform measures to mitigate jury awards and litigation costs, along with a heightened public awareness of the rising insurance costs that physicians faced. Karls said the medical community successfully framed that pushback effort as an access-to-care issue for patients at large.