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Analysis

Hospitals Need to Brace for Upward Trend in Malpractice Claims

By Christopher Cheney  
   December 02, 2019

A new report shows an increase in the average value of paid claims as well as a hike in the proportion of claims exceeding $5 million.

There has been a dramatic upward trend in hospital medical malpractice claims over the past two decades, according to a new report from Aon and Beazley Group.

Over the past two decades, the medical professional liability insurance marketplace has been hardening in response to higher paid claims. The evolving market is putting upward pressure on premiums and downward pressure on insurance industry capacity.

Average paid claims in 2018 were 50% higher than in 2009, Valentina Minetti, U.S. hospitals focus group leader at Beazley, said in a prepared statement. "The average paid claim with indemnity closing in 2018 was 6% higher than in 2017. While that is only a single-digit increase from year to year, the cumulative effect of similar rises has taken the average paid claim from $400,000 in 2009 to almost $600,000 last year."

Multimillion-dollar paid claims are taking a toll on insurers and healthcare organizations alike, she said. "The double-digit million-dollar claims are having a chilling effect on the medical liability community. Awards of this size drive hospitals to increase their self-insurance, can cause premiums to rise and industry capacity to decrease, so there is certainly a shared interest in seeing these rising costs stabilize."

Multimillion-dollar malpractice claims

The new report, which is based on Beazley claims information that represents 47% of U.S. hospital beds, includes a pair of key data points about large claims:

  • The average indemnity paid for claims over $5 million was $8.6 million from 2013 to 2015, compared to $10 million from 2016 to 2018
     
  • The proportion of claims exceeding $5 million has increased steadily since 2000, with a steep increase in recent years: 2000-2002, 0.5%; 2003-2006, 0.7%; 2007-2010, 1.0%; 2011-2014, 1.2%; and 2015-2018, 1.9%

"News headlines from around the U.S. commonly detail $30 million, $80 million, and greater than $150 million jury awards with no apparent end in sight. As plaintiff attorneys have become successful in achieving these high value verdicts in their hometowns, they have become more confident in trying cases in new venues," the report says.

Claims defense strategies

There are five primary defense strategies when healthcare organizations face malpractice claims, the report says.

  • Use mock juries and focus groups to prepare for trials.
     
  • Deploy defense counsel to counteract the strength of the plaintiff's counsel. "While a healthcare organization may have a long-standing relationship with one firm, they may not be best equipped at managing defense of a claim depending on the strength and previous success of plaintiff's counsel," the report says.
     
  • Hold workshops and retreats for defense counsel to share best practices.
     
  • Try to resolve claims quickly, which tends to reduce litigation time, costs, and claim values.
     
  • When a quick resolution is elusive, healthcare organizations should be prepared to go to trial.

As the medical professional liability insurance marketplace hardens, healthcare organizations should establish strong teams to handle claims, the report says. "This includes not only the internal risk management or financial leaders of the healthcare organization itself but reinforcing the need to have support from healthcare industry-focused brokers, consultants, actuaries, insurance carrier partners, and even experienced and effective defense counsel."

Christopher Cheney is the senior clinical care​ editor at HealthLeaders.


KEY TAKEAWAYS

From 2009 to 2018, Beazley Group claims data shows the value of an average paid claim for hospitals increased 50%, from $400,000 to $600,000.

The proportion of claims exceeding $5 million has increased steadily over the past two decades, rising from 0.5% in 2000-2002 to 1.9% in 2015-2018.

Claims defense strategies include using mock juries and focus groups to prepare for trials.

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