There has been a rise in the hospital industry’s professional liability claims frequency and severity, according to a new benchmarking report on professional liability claims trends in the hospital industry.
The study, conducted by Zurich, a property and casualty insurance provider globally and in North America, is based on Zurich's claims data (through 2008, the latest information available) of 343,000 non-zero claims and $27 billion undeveloped losses from approximately 1,150 hospitals nationally.
In its sixth annual report, Zurich noted that the claims frequency increase is in contrast to the past few years in which frequency had declined or stabilized. It also found that between 2002 and 2008, severity rates rose 6.3 percent per year.
"Comparing hospitals' claims experience has always been difficult because exposures vary by the type of facility, size of the institution, services provided, location, patient demography and regional/legal climate," said Leo Carroll, head of Zurich's Healthcare practice in North America. "But many of these apples-to-oranges discrepancies can be eliminated by standardizing exposures across health care organizations."
Carroll said that to standardize exposures, Zurich’s claims data uses an occupied bed equivalent (OBE), calculated by assigning a standard relativity to exposures for:
*The number and type of beds devoted to certain categories of care such as acute care, long term care and rehabilitation;
*The number and types of visits for emergency department, laboratory and other services
*Other procedures, such as births and surgeries;
*Staffing, as reflected in the number and specialties of physicians and employees.
"With the development of a common denominator for exposure, data on state and national frequency rates and average claims severity can be compiled and evaluated across different segments of the industry and within specific peer groups," said Carroll.
Other highlights of the study included:
Difference in claims severity trends between different types of organizations narrow: In the past, non-profit hospitals have seen considerably lower severity rates than for-profit hospitals. Now, non-profit hospitals have higher claim severity than for-profit organizations.
Comparing faith-based and non-profit health care organizations: The report reviewed loss cost, frequency and severity. Overall, loss costs for both faith-based and non-profit organizations are similar. But the report finds that frequency rates are higher in faith-based organizations, while severity rates are lower.
Claims severity by facility type: The report compared acute care, children’s hospitals, teaching hospitals and outpatient facilities. Teaching hospitals are defined as those that are part of academic institutions or sponsor resident education programs. Children’s hospitals continue to have the highest severity over time. This is likely due to the high costs of providing medical care over the child’s lifetime. Teaching hospitals contribute significantly to overall severity.
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