Hospital Liability's Healing

Analysis: Hospitals have lowest liability claims of last eight years, loss reserves not so lost.

By Matthew Brodsky

What do you get when you measure 65,689 claims from 90,000 beds at 1,000 facilities across 80 healthcare organizations? A chunk of healthcare liability losses greater than $7.7 billion, and insight into a positive trend in hospital claims.

That insight came care of Aon's 2007 Hospital Professional Liability and Physician Liability Benchmark Analysis, done along with the American Society for Healthcare Risk Management.

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The annual study reported that hospital claims were at their lowest in the eight years that Aon has published the benchmark. Claims frequency did not increase for the third straight year. Severity still appears to be trending upward, but at its lowest pace in those eight years--3 percent projected for 2008, compared with the 6 percent projected this time last year.

For many self-insured hospitals, said Greg Larcher, author of the study and director of Aon Global Risk Consulting, this trend could mean that they find their loss reserves in much better shape than their actuaries had anticipated.

In this "Wall Street twist to the story," said Larcher, this excess in loss reserves could be realized in hospitals' 2008 earnings.

One reason liability claims severity dropped, according to Larcher, is because hospitals have improved their ability to document patient safety issues and defend themselves should a claim arise.

"Hospitals have spent a lot of attention," he said, "getting their house in order."

Frequency's seen a downturn because of several outside factors, such as legislative reform and a heavy dose of patient safety initiatives.

For instance, this year's study uncovered that hospitals recognized nationally for excellence in establishing safe patient environments tend to have much lower liability loss costs relative to national averages.

Also, for the first time, Aon's benchmarking took into account statistics coming out of obstetrics and emergency departments at 800 facilities.

"Many of the patient safety initiatives are focused on emergency rooms and OB," Larcher said.

From 2001 to 2006, claims in both departments dropped--from 9.4 claims per 10,000 births to 6.2 claims in the OB/GYN side of things, and from 5.8 claims for every 100,000 emergency room visits to 3.4 claims.

These new data also serve all hospitals as a way to benchmark against each other and track improvements over time.

"You can only improve what you can measure," said Larcher.

December 1, 2007

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