Tracking The High Growth of Hospital Professional Liability Costs
According to the “2009 Hospital Professional Liability and Physician Liability Benchmark Analysis”, a study by AON the leading global provider of risk management services, medical malpractice claims are increasing after years of decline. In addition, higher costs per incident are leading to major growth in the cost per bed of liability lawsuits.
Hospital Professional Liability Claim Frequency Rising
The study shows that the frequency of hospital professional liability (HPL) claims has been steadily increasing since 2007. Prior to 2007, HPL claims had been decreasing in regularity for 7 straight years. In 2010 AON estimates that the frequency of HPL claims will be approximately 2.06% per bed, about 5.3% higher than in 2006 when HPL frequency trends began to rise.
AON suggests several different theories to explain the claim increases, including the downturn in the U.S. economy, changes to CMS reimbursement rules regarding never events, and changes in public sympathy toward healthcare providers. Never events, in particular, have received extra attention from attorneys representing clients because they have been designated by CMS as entirely preventable. As a result, hospitals are perceived as having a significantly weaker defense against never event claims.
Liability Claim Severity Rising
Although claim frequency trends have changed significantly from negative to positive in the past ten years, claim severity has remained consistently positive. Research by AON shows growth in claim severity has increased significantly 2004 through 2008, starting at an average of $116,000 per claim and gaining 3.5%-6.5% per year. Estimates suggest that claim severity will continue to rise 4% per year in 2009 and 2010.
Total Cost of Liability Risk Rapidly Rising
As a result of the increases in hospital professional liability claim frequency and severity rising, the total cost of hospital liability risk has grown significantly in recent years.
Although decreases in claim frequency translated into generally lower total costs starting in 2000 at $2,790 per bed and ending in 2005 at $2,420 per bed, increases in claim severity have reversed the cost trend since then. In 2007, when claim frequency began to increase, the total cost of liability began to rise considerably. As a result, total costs of risk are expected to rise 5% to $3,020 in 2009 and $3,170 in 2010.
The High Cost of Patient Falls and Bed Sores
According to AON, patient falls and injuries and Bed Sores are never events that comprise a large portion of all HPL costs. Patient falls and injuries encompass 12.5% of total costs, and bed sores encompass 2.1% of total costs. Consequently, the HPL claims from these two never events will cost an estimated $463 per hospital bed in 2010. The large HPL costs of these select never events run in addition to the costs already incurred by the hospital due to CMS never event non-reimbursement.
