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Health-care risk managers and their insurers are still trying to get their arms around professional liability. Two 2006 benchmark studies deliver different but similarly encouraging findings that could help--one, that the frequency of liability claims has stabilized and, two, that risk management actually does help prevent claims in the first place.

Pamela Popp, senior director of claims and litigation at Stanford University Medical Center, said that such benchmarking analyses are "wonderful resources" for health-care risk managers.

The first of these benchmarking studies was the seventh annual Hospital Professional Liability and Physician Liability Benchmark Analysis, a combined effort of Aon Risk Consultants and the American Society of Healthcare Risk Managers.

One of the most surprising findings here was that the average paid expense on expense-only claims increased by more than 15 percent--from $15,100 in 2004 to $17,400 in 2005. This "key finding . . . actually caught us by surprise," said Gregory Larcher, director and actuary at Aon and head of the research.

The average paid expense on claims with indemnity payments more than doubled from 2000 to 2005, from $28,000 to $58,000.

According to Popp, these expense costs are driven by "outside experts," and not just attorneys, making the most significant factor of overhead costs the hospital's decision to handle claims inside or outside.

Another key finding was that hospital professional liability claims did not increase for the second year in a row. Larcher attributed reforms in Texas, Pennsylvania, Florida and California with the slowdown in claims frequency.

"Tort reforms have started to be digested," he said. Health care's push for patient safety could also help to continue these trends going forward.

The other major benchmarking study of 2006, a tag-team effort by Advisen Ltd. and Zurich Financial Services Group, validated such risk management practices.

The study also reinforced risk assumptions held by underwriters. For instance, a hospital's bed size was found to be directly correlated with claims severity, while its location in an urban setting seemed to increase severity and frequency relative to a hospital in a rural setting. For-profit hospitals faired better in claims than nonprofit and government hospitals.

The Advisen/Zurich study also examined the relationships between claims and certain risk management best practices identified by the Centers for Medicare & Medicaid Services. The initial results showed that hospitals may experience fewer and smaller claims if they followed these CMS recommendations, though the study's authors plan to conduct further analysis.

The Aon/ASHRM study looked at about 47,735 claims; the Advisen/Zurich study analyzed 381,829 claims.

February 1, 2007

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