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Medical liability claims flat, but loss rates rising


ANAHEIM, Calif. — Hospitals will not be “fighting fires” concerning their professional liability insurance costs next year, said a co-author of a just-released study on the issue. “Things are pretty flat; things are pretty benign," said Erik Johnson.

The Raleigh, North Carolina-based director of Aon Risk Solutions' global risk consulting unit made the comments in discussing the 2014 Aon/ASHRM Hospital & Physician Professional Liability Benchmark Analysis.

The 15th annual study was released Tuesday at the American Society for Healthcare Risk Management's annual conference in Anaheim, California.

Mr. Johnson said the study, which includes data from 110 health care systems, found that the frequency of professional liability claims is flat, and there will be an annual loss rate of $2,870 per occupied bed in 2015.

Loss rates are increasing at a modest 2.5% annual rate, according to the study. Because of the flat frequency and modest loss cost growth, “there are opportunities to actually take that flat curve and bend it down” to reduce costs, he said. “There's business intelligence out there” that hospitals can use in this effort.

Mr. Johnson said among the hospital industry's strengths is a long history of self-insurance, while its weaknesses include a lack of standardization in analyzing claims.

Topics covered in the survey include California's Proposition 46 on the Nov. 4 ballot, which would increase the current $250,000 cap on noneconomic damages for pain and suffering awards established by the Medical Injury Compensation Act of 1975 to $1.1 million, and then be indexed annually based on inflation.

Gregory Larcher, Columbia, Maryland-based regional director and actuary at Aon Risk Solutions' global risk consulting unit and a co-author of the study, said if approved, the higher noneconomic damage cap would increase claims costs by an estimated 15% to 35%, with the lower range based on the assumption of no change in terms of filing claims.

However, he said, there also is the possibility that “this could be a real game-changer in the costs in California” should voters approve the proposal, he said.

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