Call it a case of credit being given where credit is due; perhaps long overdue.
After years of tortuous increases in medical malpractice liability premiums, healthcare providers find themselves facing a subsiding storm.
A combination of the impact of tort reform, wiser insurance financing mechanisms and improved attention to patient safety have got medical risk managers breathing a little easier, and maybe looking in their morning mirrors and saying, if not, "Who is the fairest of them all?" at least "Hey, good job."
The painful increases of four years ago have evaporated and are being replaced with reductions in market premiums that were in the 10-percent or more range for many providers in 2006 and 2007.
"There just doesn't seem to be anything close to a crisis," says Patrick Riley, managing director of the Risk Solutions Healthcare Group in Marsh's Richmond, Va., office.
Many are quick to credit tort reform, which has brought relief to medical insurance payers in states with sizable economies such as Ohio, Texas and Illinois. Underwriters that had fled for, or should we say from, cover in 2002 through 2004 have re-entered those states under the wing of tort reform.
Mark Rose, vice president of legal affairs for Canton, Ohio-based Aultman Hospital, for example, says the number of malpractice cases filed against the hospital have been cut by more than half in the past two years.
He credits tort reform, which was passed in that state in 2005. But he also points to improved risk management on the part of the medical institution where he has worked for the past eight years.
Although Rose thinks greater transparency in reporting of medical errors and an emphasis on safety has helped in his hospital and others, he finds fault with a federal Centers for Medicare and Medicaid Services system that gives equal weight in reporting to a wide variety of safety measures. He says the culprit is an all-or-nothing scoring approach to weighing core measures that may not have equal weights.
In his example, a hospital in a tobacco-growing region of North Carolina that for cultural reasons won't give smoking cessation advice gets a zero in the Centers for Medicare and Medicaid Services reimbursement system for the quality of its efforts to prevent acute heart failure.
Under the all-or-nothing scoring system, he says, hospitals can improve their heart failure prevention score from zero to 10 just by adding one subindicator, like giving smoking cessation advice. Rose thinks that particular system isn't weighted properly.
He says subindicators that are much more directly tied to a patient's condition, like the type of medication given and when it's given, should get greater weight than, for example, smoking or dietary counseling. As a result, not all state or federal-run reporting systems and safety measures should get credit for improved safety, he says.
"I think the drive for quality improvement across the country and the motivations for hospitals to do better, that they're going to have an impact on outcomes, I don't buy into that lock, stock and barrel," Rose says.
Another Marsh executive says she too thinks external reporting has its limits.
"My fear is that people are going to be pulled in so many directions that they'll be focusing too much externally and not enough internally," says Lorie Larsen-Denning, a senior vice president in Marsh's Portland office.
Denning feels that although the market is softening in her area, tort reform isn't the main reason. "I don't think tort reform has occurred in enough locations to where it is leading to a softening of the market, at least not in the Northwest," she says.
An insurance industry healthcare specialist who serves clients in Ohio from her office in Detroit says though that customers across the state have clearly benefited from tort reform, even though the state's Supreme Court is now hosting two challenges to the 2005 law.
"Every one of my clients has received deductions in excess premiums this year and many of them received reductions last year as well," says Ruth Goodell, a managing director in Marsh's Detroit office.
She says healthcare providers and medical device manufacturers, however, are waiting "with baited breath" for the outcomes of the Ohio State Supreme Court challenges to tort reform in that state.
Elsewhere, risk managers and brokers interviewed for this article expressed positive impressions of the state of the medical malpractice marketplace.
Hospitals that created captives, took on increased retentions to protect themselves from high rates and improved patient safety are watching their excess premiums decline in what is generally seen as softer market than that in 2003 and 2004.
So, tort reform, better financing and a nationwide drive for patient safety that has underwriters, doctors and brokers working together and seeing positive results is going to usher in an extended era of good feeling and reduced risk, right?
Not so fast.
THE NEW MALADY
As the Bush administration and medical providers push to provide greater patient and physician access to electronic medical records, risks are emerging that have the potential to produce a new wave of medical malpractice claims.
Cyberliability and the risk associated with lost or stolen medical records made all the more portable by their electronic medium is a growing fear for risk managers.
Marsh's Goodell, like many, can see the benefits of greater access to patient records through electronics.
"Certainly the implementation of electronic medical records provides a huge benefit to patients, but it does bring a whole lot of potential for privacy risk," Goodell says.
"I found that the electronic medical record was a big one, a very big one," says Shulamith Klein, senior director of risk and insurance services for Atlanta-based Emory Health Systems.
Greg Suffield, a broker in the Chicago office of Integro Insurance Brokers, agreed that electronic medical records can create problems. "Cyberliability can affect health care providers from all kinds of angles," Suffield says.
Emotional distress and embarrassment due to the public revelation of a loathsome disease; employment loss or the erosion of benefits when a fatal condition is made public are just some of the risks.
In addition, personal data from a government-issued medical insurance card and financial information taken in a coverage application can all go public if an electronic record is hacked or a hospital employee loses a company laptop.
Stolen identities are well worth their risk and mean big bucks in some countries. On the identity theft black market in Eastern Europe, the Pacific Rim or Nigeria, for example, a single medical record can go for $100, according to a cyberliability expert with Aon.
"It can get pretty big pretty fast," says Michael Lamprecht, a broker in Aon's Chicago office.
Allow us to employ the phrase "medical identity theft," to describe a new crime Lamprecht says he has seen emerging as part of his work with a former employer and now Aon.
In some low-income communities, the working uninsured poor or drug addicts are corrupting identity theft to a new use: assuming someone's identity with the purpose of getting medical treatment or access to prescribed narcotics or other psychotropic medications.
Lamprecht says he has seen more than 25 medical identity theft cases in the past two years. He says medical providers should protect themselves against the corresponding medical malpractice liability should their system be found to be at fault for the lost information.
Adding to the exposure is that once a medical identity is stolen, a patient's record can become distorted. A thief may add or subtract treatments or medications to the host client's record that could lead to disastrous consequences.
"The difference between 'do' and 'do not' in medical treatment is really big," Lamprecht says.
Stopping medical identity theft, much less providing coverage for it, is going to be an uphill struggle. One reason is that the crime is so new. Several brokers interviewed for this story but not mentioned in it hadn't even heard of medical identity theft yet.
Lamprecht says encryption of medical records is the best defense against medical identity theft, but not all hospitals and doctors offices have implemented it. And he says any system can be defeated by a corrupt employee, who may themselves be desperate enough for drugs or some other medical care that they would steal.
"I haven't really figured out a way to solve that problem. A lot of the techniques they are using have failed because the source of the leak has come from the hospital," says Lamprecht.
DAN REYNOLDS is senior editor of Risk & Insurance®.
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