perspectives on the med mal crisis perspectives on the med mal crisis from buyers within aha tony...

Perspectives on the Med Mal crisisPerspectives on the Med Mal crisisFrom buyers within AHAFrom buyers within AHA

Tony SpohnTony SpohnVice PresidentVice President

AHA Financial SolutionsAHA Financial SolutionsFor PLUS—March 11,2003For PLUS—March 11,2003

Medical Liability Insurance: Looming Crisis?Medical Liability Insurance: Looming Crisis?

Professional liability premiums are increasing sharply for physicians…Professional liability premiums are increasing sharply for physicians…

Medical Liability Insurance Rate IncreasesHighest States as Reported by Selected Insurers,

2001-2002*

*Chart reflects rate increases for internal medicine, general surgery, and Ob/Gyn physicians.

81%

67%

58% 58%57%

40%

29%

39%

56%

32%

Pennsylvania West Virginia Indiana Montana Texas

Highest reported

Lowest reported


Distribution of Premium Change for a Sample of Hospitals1

2000-2002*

…and hospitals……and hospitals…

Percent Change in Premiums

2001n=110

11%

14%

44%

4%

4%

16%

41%

54%

32%

12%

33%

16%

3%5%

11%

2000 n=97

2002n=66

Decrease or No Change 1% - 9% 10% - 49% 50% - 99% 100% and over

Percentage of Hospitals

*Results from an AHA/ASHRM Survey of Hospital Experience with Professional Liability Insurance. Not all respondents provided data for all years.1 Survey distributed to members of ASHRM, including approximately 1,250 hospital-based risk managers, 132 responded


Percentage of Hospitals Reporting Actions Taken to Reduce Cost of Professional Liability Coverage

2002*

…forcing hospitals to assume more risk……forcing hospitals to assume more risk…

*Results from AHA/ASHRM Survey of Hospital Experience with Professional Liability Insurance (n=132)


1%

9%

12%

13%

14%

17%

31%

35%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Opted not to PurchaseCoverage

Created a Captive

No Action

Assumed a Deductible

Other Self-InsuranceOptions

Reduced Level ofCoverage

Changed Carriers

Increased Deductible


Percentage of Hospitals Reporting Impacts of Current Professional Liability Market on Health Care Delivery

2002*

… and affecting access to care for physician and hospital services.… and affecting access to care for physician and hospital services.

*Results from AHA/ASHRM Survey of Hospital Experience with Professional Liability Insurance (n=132)

6%

20%

25%

27%

38%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Complete Closure/Discontinuation of Services

More Difficult to AttractPhysicians to Community

Curtailment of Services

Physicians RelocatingOut of Area or Retiring

More Difficult to ObtainPhysician Coverage



Number of Physician Medical Liability Payment Reports1 (in thousands)1996-2000

While the number of medical liability reports has remained stable…While the number of medical liability reports has remained stable…

1Reports refer to all medical liability payment reports submitted to the National Practioner Databank

15.615.114.114.6

15.3

1996 1997 1998 1999 2000


Median Compensatory Jury Awards (in thousands)1994-2000

…the size of jury awards has escalated……the size of jury awards has escalated…

$700

$1,000

$503$475

$734

$500

$363

1994 1995 1996 1997 1998 1999 2000


…contributing to rapid growth in the size of claims paid by insurers.…contributing to rapid growth in the size of claims paid by insurers.

Median Indemnity Paid, Combined Specialties (in thousands)1996-2000

1996 1997 1998 1999 2000

$158

$125$116

$101$100


Average Return on Invested Assets, Property and Casualty Insurers1996-2000E

As insurer expenses have risen, a declining return on invested assets has driven non-premium revenues down.

As insurer expenses have risen, a declining return on invested assets has driven non-premium revenues down.

4.3% - Low

11.5% - High

0%

2%

4%

6%

8%

10%

12%

14%

1996 1997 1998 1999 2000E


Median Professional Liability Premium Rates by Specialty2000

Medical liability expenses vary across specialties…Medical liability expenses vary across specialties…

$3,525$3,829

$5,213$6,125$6,138$6,144$6,202$6,520$6,934

$8,004$8,751

$9,903$10,793

$17,812$19,860

$21,446$28,328

$33,101

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

NeurologyPathologyPediatrics

Family PracticeGastroenterologyInternal Medicine

RadiologyHematology/Oncology

OphthalmologyAnesthesiology

Cardiology

UrologyOtorhinolaryngologyOrthopedic Surgery

General SurgeryOb/Gyn

Cardiovascular SurgeryNeurosurgery


Ob/Gyns as a Percentage of Physicians, Claims, and Pay-outs1999

23%

14%

5%

0% 5% 10% 15% 20% 25%

Ob/Gyn Pay-outs as aPercentage ofTotal Pay-outs

Ob/Gyn Claims as aPercentage of

All Claims

Ob/Gyns as aPercentage of

Physicians

…due to differences in risk and claims experience.


Highest and Lowest Premium Rates Reported by Insurers in Specific Markets, Ob/GynJuly 2001

$11,580$12,288$13,874

$115,429

$160,746

$202,949

Dade/BrowardCounties

FL

DallasHouston

Galveston,TX

NYCNassauSuffolk

Counties, NY

Indiana Nebraska SouthDakota

Highest Lowest

Premiums also vary widely across cities and states.


Limits on Damages for Pain and Suffering1

2001

1Map values represent caps for non-economic damages except for the following states in which they refer to total caps: Indiana, Louisiana, Nebraska, New Mexico, South Dakota, and Virginia

None

Under $250,000

$250,000 - $499,999

$500,000 - $999,999

RI None DE None DC None

$1,000,000 and over

Limits on damages forpain and suffering

Some states have capped awards for pain and suffering…


Reform of Collateral Source Rule

2001

None

Mandatory

Discretionary

Case Law Support

RI Mandatory DE Discretionary DC None

…and taken measures to prevent plaintiffs from collecting from multiple sources.


Attempts at tort reform have been made at the federal level, as well.

Limits on Non-

economic Damages

Statute of Limitations

Mandatory Alternative

Dispute Resolution

Limits on Attorney

Contingency Fees

Penalties for

Frivolous Suits

Joint and Several Liability Reform

Date Introduce

d

Collateral Source

Payment Offsets

Bill

September 28, 2000

H.R. 5344“Common Sense Medical Malpractice

Reform Act of 2000”

April 26, 2001

H.R. 1639 “Common Sense Medical Malpractice


June 7, 2001

H.R. 2103 “Medical Malpractice Rx Act”

August 3, 2001

S. 1370“Common Sense Medical Malpractice


February,03

H.R. 5 “Help Efficient, Accessible, Low Cost, Timely Health Care (HEALTH) Act ”

$250,000

$250,000

$500,000

$250,000

$250,000

3 yrs after injury

2 yrs after discovery

5 yrs after injury

3 yrs after injury

3 yrs after injury


Median Physician Medical Liability Pay-out

2000

$125,000

$55,000

$90,000

$100,000

$192,755

$197,500

$250,000

0 50,000 100,000 150,000 200,000 250,000

All

California

Utah

Indiana

Pennsylvania

DC

Illinois

Low

est

Hig

hest

MICRA reforms in California have helped to control increases in payments…


Medical Liability Premiums, CA vs US (in billions)

1976-1999

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

$5.5

$6.0

$6.5

76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99

U.S. Premium+420%CA Premium +168%

(in

bill

ions)

…and premiums.

perspectives on the med mal crisis perspectives on the med mal crisis from buyers within aha tony...

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