Stormy Winds Begin to Blow

Medical professional liability (MPL) insur- ers have likely passed an inflection point in the market cycle. Its subtlety, however, may not be evident to the casual observer, especially when the industry is still reporting positive income results. Insurers’ continued strong financial posi- tion would typically allay all concerns. The problem is that a key measure of insurers’ profitability has started to show signs of deteriorating.

The index known as the calendar-year combined ratio— which measures insurers’ losses and expenses relative to their premium writings—jumped 4 percentage points, to 90%, in 2010. At this point in the cycle, most any increase would raise some eyebrows, but such a large jump has caught the attention of some analysts.

The 90% ratio is still far lower than levels reached at the height of the cycle, which led to the previous hard market when it topped 150%. Nonetheless, it seems to be rapidly approaching insurers’ underwriting break-even point of 100. Once the index moves above that level, insurers are losing money, from an underwriting perspective.

What may be even more of a concern is that MPL insurers’ current profitability largely stems from policies written years ago during the hard market of the early- to mid-2000s, when premiums adequately covered losses and then some. Over the four- to five-year period, industry premiums doubled to $10 bil- lion, as insurers increased premiums to cover burgeoning losses.

On the heels of the premium increases that insurers were implementing, claims cost unexpectedly began to fall. From 2003 through 2007, insurers’ claims frequency fell approximately 40%. The combined effect has been that the ultimate value of the losses for the policies written during the early to mid-2000s is much less than insurers’ initial estimate. The loss reserves that insurers built up during the beginning of the decade are now buoying their sagging underwriting results for current policies.

Richard B. Lord, MCAS, MAAA, is a Principal & Consulting Actuary with Milliman in Pasadena, California. Stephen J. Koca, FCAS, MAAA, is a Consulting Actuary with Milliman in Pasadena, California.

Reserve releases commence

Insurers first realized the redundancy of these prior-year loss reserves in 2005. Uncertain of the level of loss redundancy at that time, insurers moved cautiously, slowly releasing reserves, but momentum built in the ensuing years, and increased further in 2010. Based on data compiled by Milliman from a select group of physician MPL insurers, $5.7 billion in reserves were released over the six-year period, whereas the MPL industry as a whole released $10.2 billion in reserves over this period. While reserve figures are still evolving, the peak of reserve releases was likely reached in 2010, and insurers may have to start to put the brakes on the releases in the near future.

Reserve releases have kept insurers’ profitability on solid footing, at least on a calendar-year basis, but if we look at insur- ers’ results on what is known as a policy-year basis—results for just those premiums written during a given year, let’s say 2010, and any losses arising from those policies—we can see that the premiums that insurers are charging for their current writings are less than what actuaries expect the ultimate value of their future losses will be.

The effect of this underpricing can be seen in a 2010 policy- year combined ratio, which, when reserve releases are added back into losses, turns out to be 114%, an increase of 11 percent- age points over the past 2 years. While losses for the most recent policy years are immature, this jump in the index should not be taken lightly, as it is more likely than not that we will see further increases in subsequent years due to current trends in claims and pricing.

Reserve releases have bolstered insurers’ results in recent years, but they also created conditions that promoted a soft or buyers’ market for MPL insurance. One way to think of the mar- ket impact of reserve releases is in terms of pric- ing. If reserve releases averaged between 20% and 25% of written premium, as they have for the past several years, insurers need to charge insurance buyers only 80 cents on the dollar to break even on an underwriting basis. This means that insurers can take on business at an underwriting loss in a given year, when they are releasing reserves, and still report a profit because of their accumulated excess reserves.

Loss of premium revenue

How much premium revenue have insurers waved off? Annual written premiums have declined by around $1 billion since 2006, due primarily to the combined impact of lower average costs and reserve releases.

Time, however, may be running out on the profitability resulting from excess reserves: the reserve releases may continue for only another

three to four years, declining each year, if the current cycle unfolds similar to the previous one, which until now it has. In 1989, when the hard market just previous to the last

ended, the MPL industry reduced reserves by approximately $1.5 billion, and continued to generate excess reserves for some ten years afterward. The peak was reached in 1994, when reserve releases topped $2 billion or 46% of earned premium. Based on this timeframe and the pattern of reserve releases thus far, insurers are now approximately just past the midway point of the current reserve release cycle.

A challenging terrain

Unlike the previous cycle, however, insurers cannot rely on invest- ment income to offset pricing discounts to the same extent they did during the 1990s and, for that matter, the past 30 years when generous investment income allowed insurers to periodically write business at an underwriting loss. But record low interest rates on bonds, which typically comprise approximately 80% of insurers’ investments, have not provided the pricing subsidy that insurers once had. Moreover, many MPL insurers also sustained investment losses in 2008, which may have accelerated reserve releases in that and the following year, and may have also shortened the time over which insurers can use reserves to support income.

At the same time, claims cost inflation remains stubbornly high. Even though insurers are seeing significantly less claims than they did ten years ago when claims frequency began to tumble, medical cost inflation has greatly increased the cost of each claim. Insurers also no longer benefit from a declining claims frequency, which appears now to be level.

The other dark horse for insurers is the potential impact of the Patient Protection and Affordable Care Act on the MPL mar-

Record low interest rates on bonds, which typically comprise approxi- mately 80% of insurers’ investments, have not provided the pricing subsidy that insurers once had.

ket. On the surface, the law is likely to have little direct impact states. In February 2010, the movement was dealt a considerable

for one simple reason: the law does not address MPL in any meaningful way.

The law, however, could increase the cost of care, as more people enter the healthcare system and began to utilize services. As medical costs increase, so would the cost of MPL claims, or what is known as claims severity. The increase in the raw num- ber of people in the system—many of whom may not be as healthy as current healthcare users—would also increase expo- sure, which in turn could trigger a rise in number of claims or claims frequency. This situation—an increase in claims severity and frequency—is often toxic for MPL insurers.

In the long term, the increased numbers of people in the system cause medical costs to ease somewhat, as more people receive regular care, which promotes better overall health and lower costs. But over the next three or four years, the law’s potential drag on the MPL market lines up with a period when the cost outlook is already tenuous.

Whether this cost rationale becomes reality is a matter of considerable speculation, but it is plausible and contributes to the growing number of challenges facing MPL insurers.

Also counted among that number is the stall, if not reversal, in tort reform, which not too long ago had been instrumental in limiting punitive and non-economic damages in a number of

Figure 2 Historical MPL Reserve Changes, as a Percent of Net Earned Premiums

blow by a decision of the Illinois Supreme Court, which ruled a cap on MPL awards unconstitutional. And while the course of court rulings has rarely been clear, even to the most astute legal observer, state legislatures have rarely been motivated to take up actions to support MPL tort reform when insurers’ capital posi- tion is unthreatened.

And MPL insurers may face an ever-dwindling market, as more and more physicians leave private practice for employ- ment in hospitals. Over the past several years, the movement that started some ten years ago seems to have gained traction and could accelerate when MPL insurers raise premiums. Rather than absorb double-digit premium increases, as many physi- cians did during the previous hard market, greater numbers may prefer to seek shelter under a hospital’s cover. This move would decrease MPL insurers’ market at a vulnerable time.

For now, the market is relatively calm. But it also seems that just as an array of positive factors converged during the beginning of the decade to propel MPL insurers toward prof- itability, negative forces are now gathering to disturb the market once again and send prices higher. How and when they take shape could greatly alter the trajectory of the cycle.

Rising Malpractice Insurance Premiums? Yes and No

October 5, 2011 — In yet another plea for tough tort reform, organized medicine told the deficit-cutting Congressional super committee earlier this week that problems in the current medical liability system “contribute to the increase in medical liability insurance premiums.”

That assertion would be true — and yet also would be untrue.

Premiums indeed rose dramatically in the early part of the new century, but in 2011, they declined for the fourth straight year for 3 representative medical specialties, according to a publication called Medical Liability Monitor (MLM). Its annual rate survey, highly regarded in the field, was published this week.

Rates for obstetrician/gynecologists, general internists, and general surgeons decreased on average by a miniscule 0.2% this year after a 0.5% decrease in 2010. Rate decreases of 2.5% in 2009 and 4% in 2008 were more substantial. These declines have only partly erased premium increases from 1999 to 2007 that topped 80% for obstetricians/gynecologists and 100% for general internists and general surgeons, according to MLM.

Still, a downward trend is a downward trend, even though it is leveling out, and another upward trend is not imminent, said Chad Karls, a consulting actuary from a company called Milliman, who edits the MLM rate survey.

“Rates will remain flat in the foreseeable future,” Karls told Medscape Medical News.

MLM tracks hundreds of medical liability insurance rates charged by multiple carriers on a regional basis: an entire state, a portion of a state, or a single county. It asks insurers for the standard rates that they filed with state insurance regulators for policies with limits of $1 million for an individual claim and $3 million in any given year for all claims.

Rates listed in the survey, effective as of July 1, do not reflect credits, debits, or other factors that may tweak the cost up or down. Insurers have stepped up their use of credits, awarded for attending risk management seminars and using electronic health record systems, for example, and thus deepened the extent of rate cuts on the books with state insurance departments. So an average 0.2% reduction reported for this year could be closer to those seen in 2008 and 2009 (4% and 2.5%, respectively), when credits were not offered as freely, according to Karls.

The percentage changes in premiums cited by MLM apply to the 3 surveyed specialties on a nationwide, aggregate basis. The MLM report does not present national trends for each specialty. Karls notes that the medical liability insurance is a “state-by-state business.”

Of the rates that insurers quoted on a regional basis in 2011, 55% did not change from the previous year. Roughly 30% of the rates decreased, and another 15.5% increased. Most increases and decreases were lower than 10%, according to Karls. Last year, 67% of rates stayed flat, 19% were lower, and 14% were higher.

“Caps Can’t Be the Only Reason”

Karls attributes the recent downward curve in premium rates to several causes. One is a wave of tort reform legislation passed by various states in the preceding 10 years that, among other things, limits how much plaintiffs in a malpractice case could collect for noneconomic or pain and suffering damages. A $250,000 cap found in California, Texas, and other states is what organized medicine seeks on a national basis. Advocates of caps say they discourage frivolous lawsuits and prevent runaway jury awards.Those laws, Karls said, have led to fewer malpractice claims being filed, which in turn has lowered premiums — a pattern attested to by a number of academic articles. However, premiums also have decreased in states, such as Oregon, that do not cap noneconomic damages.

“So caps can’t be the only reason,” Karls said. “I think the push for patient safety and risk management also has played a role” in reducing claims and premiums.

14-Fold Difference in Highest, Lowest Rates for Internists

Premiums for medical malpractice insurance within a given specialty vary widely by region, reflecting differences in not only state medical liability laws but also judges and plaintiffs’ lawyers, the willingness of injured patients to sue, the willingness of juries to award hefty damages, and the quality of medical care.

As in 2010, the highest quote for a $1 million/$3 million policy for a general internist is found in Miami-Dade County, Florida, where First Professionals Insurance charges $47,431, down 1% from the year before. The lowest quote is $3375 throughout Minnesota, offered by ProAssurance Wisconsin Insurance.

Miami-Dade County puts in another repeat performance as the most expensive place for general surgeons needing coverage: First Professionals charges them $190,926. On the other extreme, ProAssurance Wisconsin quotes $11,306 for this specialty in Minnesota.

Obstetricians/gynecologists in the New York counties of Nassau and Suffolk on Long Island continue to pay the highest rate in their field, at $206,913, as quoted by Physicians Reciprocal Insurers. On the low end is a quote of $15,484 for obstetricians/gynecologists in mid-California from Cooperative of American Physicians, a rate that rose almost 16% from the year before.

Rates for a particular specialty also vary widely within states, in part because of demographic differences among patients and juries. In Detroit, Michigan, a medical malpractice carrier called Medical Protective quotes $34,922 for a general internist, but if the same internist practiced on the other side of the state, in Kalamazoo, the Medical Protective rate would be $14,143, or 60% less.

When Will the Market Harden Again?

Medical societies use dramatic adjectives like “soaring” and “skyrocketing” to describe premiums for medical liability insurance. However, the American Medical Association and 98 other medical societies linked the milder adjective “rising” to premiums in their October 3 letter to the Joint Select Committee on Deficit Reduction, or the super committee, as it is called.

The recent debt-ceiling deal that averted a government default on its debt assigned this bipartisan group the task of finding $1.5 trillion in savings that Congress must enact by December 23. The medical societies urged the committee to include a set of tort reform measures, including a $250,000 cap on noneconomic damages, in its recommendation to Congress. Such tort reform, they write in their letter, would make healthcare less costly, reduce the federal deficit by $62.4 billion over the course of 10 years, and protect patient access to care.

When asked to comment on the recent downward direction of malpractice insurance premiums, an American Medical Association spokesperson told Medscape Medical News that “national premium trends do not mean much for physicians in states that have not seen medical liability insurance costs go down.” Despite improvements in this market, he said, the MLM data suggest that “premiums in many states remain much higher than they were before the liability crisis.”

The gradual flattening of rate decreases, from 4% in 2008 to 0.2% in 2011, might suggest to some that premiums are poised for another upswing in what insurance professionals call a “hard market.” Karls, the editor of the MLM rate

survey, said he does not envision such a turnabout for at least several years. However, several factors may be setting the stage for an eventual hard market.

In the current “soft market,” competition between insurers is stiff, causing them to loosen their underwriting policies for the sake of insuring more physicians. In other words, they undercharge physicians whose risk for medical liability warrants a higher rate, or even denial of coverage. When insurers go too far in such laxity, they may not take in enough premium dollars to remain profitable, which motivates them to jack up their rates again. Karls said the industry is not at a point of such a rate rebound, “but we’re headed in that direction.”

Likewise, Karls also sees indications of patients filing more malpractice claims. Several years ago, claims frequency was trending downward for all malpractice insurance carriers in their various regional markets, he said. Today, for about a third of these carriers there are signs of higher claims frequency.

“It’s too early to make a definite statement that frequency is on the rise, but it’s something we’re watching closely,” he said.

Yet another pressure on premiums is the rising cost of defending physicians accused of malpractice on a per case basis. Karls offers several possible explanations as to why:

  • Plaintiffs’ attorneys are filing more medically and legally complex cases.
  • Plaintiffs’ attorneys are spending more on expert witnesses and medical animation technology, raising the ante for the defense.
  • With claims frequency declining substantially since 2003, malpractice carriers can devote more staff and time to defending each case.

The Role of the Expert Witness

Lancet Staff Report

Dr. William Luria is president of Lancet Indemnity and presented a session on this topic at the National Risk Retention Association (NRRA) national conference in 2010. Dr. Luria framed his presentation with a historical treatise on the role of the expert witness.

We have heard the terrible stories of Civil War surgeons amputating limbs. This was the standard of care at the time. Following the war, doctors actually started trying to save the limbs. While the X-Ray became a tool in this effort, it also brought about the first wave of medical malpractice claims.

It was at this time in American history that the American Medical Association was formed in part to combat the crisis of such claims. The Association worked to move medical malpractice from contract law to tort law and medical malpractice insurance was formed. Unfortunately, neither of these solutions was very effective. The end result was that medical malpractice was expanded from wealthy doctors to the entire profession. Mal-occurrence became the new definition for malpractice. As advancements were made in diagnosis and/or treatment, so rose the claims of medical malpractice. The following chart by Tillinghast – Towers Perrin shows the dramatic increase in tort cost over the years since 1930.

US Tort Costs Versus US Gross Domestic Product
Luria has stated that, in his opinion, the increase in litigation can be traced to the advent of the Advocate Expert Witness. The legal profession now shops for an expert witness that can influence the courtroom. When a court makes an award in a malpractice suit, the plaintiff receives about half of the total award, the attorney about 40%, and the expert witness almost 2% of the award. Dr. Luria estimates that the total annual cost of malpractice litigation is around 500 million dollars, increasing at twelve per cent annually. Peer review of the testimony of expert witnesses may be one way to hold down the overall cost of litigation. Luria further cites the Daubert Definition of Good Science which looks at: (1) evidence based on a testable technique, (2) a theory that has been peer reviewed, (3) a known error rate, (4) a standard control technique, and (5) evidence that the underlying science has been generally accepted by a relevant scientific community. Furthermore, the Federal Judicial Center, in looking at the foremost problems with expert testimony, reports that experts often lose objectivity and become advocates for the hiring attorney. These experts are excessively expensive, and the validity of their testimony may be questionable. The Center also cites that there is often conflict among hired experts and there are often varying levels of competence among opposing experts.

Dr. Luria concludes that federal and state legislation dealing with the issue of an acceptable expert witness among other expert witness issues may have a dramatic impact on the credible use of expert witnesses and bring a balance to good medical practice and medical litigation.

Malpractice Fear Factor

Lancet Staff Report

Citing a report in Health Affairs (September, 2010), Joe Cantelupe points out several interesting pieces of information as to the effect of fear of malpractice litigation on doctors. Many doctors report that they are forced to practice defensive medicine, which contributes to unnecessary procedures and a rise in the cost of healthcare. Over $55 billion dollars are spent each year for malpractice liability and defensive procedures.

Cantelupe provides details of a conversation he had with James Reschovsky, senior health researcher of the Center for Study in Health System Change. A study revealed that the fear of litigation caused physicians to over-test for conditions that actually had a lower risk for a negative medical outcome.

Some may think that a move toward tort reform may have an impact on reducing the fear factor of litigation on physicians. This apparently is not the case. Reschovsky reports that, even in states where tort reform has occurred, the behavior of physicians with regard to malpractice fear has not diminished. Even when the risk quotient is relatively low, physicians’ concerns of medical malpractice are inordinately high. The types of reforms reported include caps on litigation damages. Even so, OBYGN’s and emergency physicians are especially fearful of malpractice claims.

Unfortunately, defensive medicine is often thought to be the best defense against litigation. Cantelupe reports that the estimated cost of defensive medicine, out of the fear of malpractice litigation,reaches over $45 billion per year. He also suggests that the cost of fear is not only monetary, but is also affecting the way in which physicians interact with their patients. Communication between physician and patient may diminish causing doctors to no longer perform their jobs in the manner they choose.

As the United States moves toward health reform, the entire issue of fear from litigation plays a major role in the overall goals of that reform.

Update on Electronic Health Records

Lancet Staff Report

As technology has greatly enhanced the efficiency of record keeping, it has also created a potential for malpractice claims. A report by the Florida Academy of Family Physicians (2010) presents a number of liability issues and suggestions for addressing them.

There are instances where liabilities begin with contractual arrangements with vendors or suppliers of technical services. Sometimes software does not identify conflicts in medicines that are prescribed for patients. In these cases malpractice carriers often do not provide indemnification. It is recommended that physicians do not sign agreements that hold harmless vendors or suppliers.

There may also be times when the physician may violate standards that are embedded in pre-set clinical requirements for prescriptions. Medical providers should be aware of practice guidelines and document when exceptions must be made.

It can be of great benefit for the physician to have a complete electronic record of his or her patients. A problem may arise in the physician knowing too much of the patient’s information. Knowledge of all of this information may expose the health care provider to potential malpractice claims. It does, obviously, require a great deal of time and effort for the doctor to review all of a record for reliability.

There may be instances where the quality of one physician may be questioned as a result of electronic information that may have been initiated by one or more previous providers. Incorrect information may be inadvertently passed from one provider to another. It is strongly suggested that physicians establish a policy that patient records are not to be copied and pasted.
Patients have long relied upon, and reported to others, the quality of bedside manner. While the computer can be a tremendous tool, patients rely on the personal manner of their doctor. When
entering data, it is recommended that doctors ask patients to verify information that is being entered.

Finally, the report points out that, even in this modern age, social media are not HIPPA compliant. Facebook or text messages of data entry may expose a physician to liability. Only secure portals should be used while documenting patient information. Even email attachments of medical reports should be encrypted where they can only be opened with a password that is sent in a separate email or communicated over the phone.

Ten Most Costly Medical Errors

Lancet Staff Report

This may never make David Letterman’s top ten segment but to many physicians it may be much more meaningful. Cheryl Clark of Health Leaders Media (August, 2010) discusses the impact of these “top ten” most costly medical errors.

It is reported that almost $20 billion of the annual healthcare bill can be attributed to avoidable medical errors. The greatest part of that amount was the cost of pharmaceutical services to patients involved with medical errors.

The overwhelming numbers of errors were attributed to pressure ulcers. Many of these were determined to be preventable. Most of the remaining top 10 were related to postoperative infections and prosthetic devices.

The report estimated that, of the 6.3 million medical injuries, almost two million were deemed as medical errors. The following is a breakdown of the most prevalent claims of medical errors and the associated average cost per error.
(1) Pressure ulcers, with 374, 964 errors at $10,288 per error.
(2) Postoperative infections, resulting in 252,695 errors at $14,548 per error.
(3) Mechanical failure of a device or implant that amounted to 60,380 errors at $18,771 per error.
(4) Postlaminectomy syndrome with 113,823 errors at $9,863 per error.
(5) Hemorrhage that complicated a procedure amounted to 78,216 errors at $12,272 per error.
(6) Infection following infusion or injection at 8,855 errors at $78,083 per error.
(7) Pneumothorax, 25,559 errors at $24,132 per error.
(8) Infections due to a central venous catheter totaled 7,062 errors at $83,365 per error.
(9) Complications from internal prosthetic devices. These attributed to 26,783 errors with a cost of $17,233 per error.
(10) Finally number ten was the ventral hernia without mention of gangrene. There were 53,810 errors for a cost of $8,178 per error.

One of the goals of health care providers should be to find ways to reduce the costs of care. Finding ways to improve outcomes and prevent the applicable costly errors shown above should be a major concern for all health care providers.

Security and Risks of Confidential Medical Records

Lancet Staff Report

All of us have been treated by one or more medical practitioners in our lifetimes, and have filled out medical release forms. Most of the time, however, we don’t give a great deal of thought to all of the intricacies surrounding the confidentiality of our medical records. As medical providers we do know that this subject is one of the inviolate precepts of the medical profession. It is essential that, if there is concern that a request for records indicates a professional liability claim, a medical claim specialist be notified. This does not suggest that all requests for records bring threats of lawsuits. Attorneys’ requests for records can be for a variety of reasons. Following is a summary of salient points regarding the issue of medical records privacy and the security required to protect those records.

Since 2003, the Health Insurance Portability and Accountability Act (HIPAA) has been the primary safeguard for the privacy of health information. Because medical records are considered confidential, a person should not be able to access another’s information without specific written consent. Every patient has the right to access his or her own personal health records, but with written permission, health care providers can release records to others. Hence the HIPAA release forms patients are now asked to complete upon an initial visit to a provider.
One may ask who can authorize the release of medical records. Generally, only the patient can sign for the release of confidential records. In most cases these additional parties may sign a
release: parents of minor children, a court-appointed legal guardian, or a representative acting with a Healthcare Power of Attorney.

The Privacy Rights Clearinghouse (2010) advises that federal law protects substance abuse records and many states protect HIV/AIDS information and mental health records. It is the intent of these laws to encourage patients inflicted with conditions to seek needed medical treatment, without the fear of disclosure.
All of this being said, there are instances when records can be released without a patient’s consent. Examples of these are: health care workers who have a need for records in order to treat a patient, qualified employees who work with medical record transcription, data processing, or other related functions. If a patient’s medical condition is involved in a lawsuit, retained representatives may have access to related records.

The caution of protecting medical information not only includes paper records, but electronic health records as well. Technology has enabled practitioners to economically consolidate, store, retrieve and share a patient’s entire medical history. The Privacy Rights Clearinghouse reports that George Bush called for a nationwide network of electronic records by 2015.

Technology software has made great strides in securing medical records and reducing exposure for risk, but hardware can produce problems as well. The Lexington Herald-Leader in Lexington, Kentucky, reported that a laptop computer was stolen from an office of the University of Kentucky. The computer contained patient names, dates of birth, diagnoses, mothers’ names and Social Security numbers. Even though the UK Health Care has policies and procedures to protect patient information, the university has a huge risk exposure due to the identity thefts of hundreds of individuals. This issue points out one more threat in the arena of medical risk management that healthcare providers and insurers must face everyday.

If you have questions concerning if the request for records of one of your patients involves a medical liability claim and how much information needs to be delivered, please feel free to call our Lancet customer service representatives toll free at (877) 370-2262. They are there to help you.

Lexington Herald-Leader, August 22, 2010.
Privacy Rights Clearinghouse (rev. 2010), Electronic health records: What are the benefits and dangers? (

Limit Risk with Ethics and a Code of Conduct

Lancet Staff Report

The two may not always be paired, but loss and informed consent go hand in hand. A shared decision making process between the patient and the physician results in a clear informed consent and will strengthen the bond between patient and physician. The clinical risk management guide states, “Informed consent is based on the ethical principal of self-determination. Physicians can do much to reduce informed consent claims by engaging in shared decision making with their patients, building patient trust, creating realistic expectations, and documenting the informed consent process” (2005).

Medical ethics have long held that the information shared between patient and physician is to be considered absolutely confidential. This relationship is essential for the patient to be able to make a complete disclosure of information that will aid in the development of an effective plan.
There are, however, hotspots that, in spite of ethical and legal obligations, can increase the risk factor for health care providers. The American Medical Association (2010) points out that “the ethical guidelines are not binding by law, although courts have used ethical obligations as the basis for imposing legal obligations.” As mentioned previously, maintaining patient confidentiality is a legal duty as well as an ethical duty, and could cause exposure to risk if not adhered to.

Codes of conduct, if applied, can establish a base of defense if unwarranted claims are made. The premise behind a code ethics is to treat others with respect, trust, and dignity. By treating patients with trust and dignity, the health care professional will conduct business honestly, fairly, and with integrity. It is in the best interest of all health care providers to make certain that patients are made aware of their rights, as well as their responsibilities to themselves and their physicians.

While not the only area of concern for risk exposure, electronic health records (EHR) have given greater access to confidential records than ever before. Physicians in an “integrated delivery systems” or groups have access to confidential information from all patients in that group. Clinics and other ancillary facilities also share data bases. The key is for health care professionals to balance the efficiency of technology with maintaining strict confidentiality.

Not every physician will engage in medical research, but it is a growing field of practice and exposure to risk has grown also. The BayCare Health System (2006) suggests a number of procedures to follow when conducting research. These procedures follow accepted legal and ethical standards that can serve as a basis for protection against adverse claims. Several of these are: obtain approval from the Institutional Review Board, provide all participants with pertinent information, submit accurate information to the IRB, report any adverse reactions to the IRB, avoid scientific misconduct, and submit accurate costs of all research grants.

In summary, the best way to prevent exposure to liability is to “do the right thing” and abide by an ethical code of professional conduct.

References American Medical Association (2010). Patient Confidentiality. BayCare Health Systems (2006). Ethics and code of conduct,
p.8. guide, p.15.
Medical Protective (2005). Clinical risk management reference

Medical Malpractice and Professional Liability

Lancet Staff Report

Economic stress has placed increased pressure on medical practitioners and insurers alike. No longer part of the market scene is the long term professional liability policy and rates on short term policies have risen dramatically. In addition to cancellations, physicians who have been considered good risks in the past are finding substantial premium increases. Indemnity payments that were around $100,000 in the early 1900’s are now over $200,000. The National Practitioner Data Bank (NPDB) indicates that claims paid on behalf of practitioners have risen from over $150,000 to nearly $250,000. The percentage for claims over $1,000,000 has nearly doubled. Since more patients are seeking out-patient services, physicians providing in office services have seen a rise in incident exposure. Leading these cases are mis-diagnoses for breast cancer and cardiac issues. In-office procedures, or the lack thereof, are often identified as the basis for such exposure.

All too often doctors must face the dilemma of practicing defensive medicine or try to lower healthcare costs. Over utilization creeps in while doctors would rather trust their own clinical judgment. Therefore, physicians will practice defensive medicine in order to reduce their chances of facing a medical malpractice lawsuit. Dr. Richard Anderson, an oncologist, states, “Physicians are between a rock and a hard place…the legal system is set up to encourage defensive medicine. It drives the standard of care. The message is that if you miss something, you’ll get sued.” Defensive medicine requires that doctors order tests or procedures to reduce exposure to malpractice liability. The most pervasive form of defensive medicine is usually practiced in the emergency room. Many ER physicians will test extensively in order not to miss a diagnosis of heart attack, stroke, or other fatal illness. These physicians walk a line between being cautious and overly aggressive. While most doctors win in lawsuits, courts can be unpredictable and the ordeal can be devastating to the healthcare professional.

There is some good news on the horizon. An Aon study finds that insurance claims against doctors and other medical professionals have stabilized. The study found that the overall frequency of medical malpractice claims has not increased for the second straight year.

The Claims Journal reports that medical malpractice insurers in Florida earned an average return on surplus of 6.6%, the sixth straight year of profits. These profits were less than in previous years, but the trend is on the positive side. The report showed that Florida’s loss ratios were competitive with other states. In net loss, Florida ranks lower than New York, Massachusetts, Pennsylvania, and New Jersey. The Florida Insurance Commissioner reports that that the marketplace continues to be strong and competitive relative to other large states. This is encouraging for Florida doctors and hospitals.

In summary, the fear of doctors being sued won’t be relieved until doctors’ risk management officers insist that better communication and documentation are imposed. Brian Kern, an attorney and professional agent states that “good documentation makes it easier to defend in court and often discourages attorneys from bring suit.”

References Aon Physician Alliance, 2006.
Claims Journal, 2010. Florida Medical Malpractice Insurance Market Found in Good Health.
Crane, Mark, 2009. Must you still practice defensive medicine to avert a malpractice lawsuit?

How Will Your Practice Stand Up To a Risk Assessment?

Lancet Staff Report

While quality assurance officers have attempted to minimize the exposure to risk, and therefore, financial exposure, in a variety of businesses for many years, it is perhaps more critical than ever to have a coordinated risk management plan.

Sometimes it is thought that the medical community should be primarily concerned with preventing injury to patients. In actuality, it is prudent for health providers to have a comprehensive program that manages risks to employees and other members of the health care team. It would be ideal to prevent all risks, but Lancet Indemnity RRG recognizes that such a goal is not possible. The very nature of medical practice brings inherent risks and the cost of trying to prevent every accident or injury would be prohibitive: thus the term risk management.

The International Organization for Standardization (IOS) suggests that risk management involves identifying the possibilities of exposure and assessing the negative impact of unfortunate events. It is important to identify the resources necessary to minimize and control the cost of such occurrences.

Then what are some strategies for managing risk? Douglas Hubbard, a risk management expert, (2009) states, “The strategies to manage risk include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk.”

Regardless of which strategy is selected, it is important that a priority scale be used. The first priority to be addressed is a scenario where the risks with the greatest loss and the highest probability of occurrence are in tandem. Risks with lower probability of occurring and with lower financial exposure would be handled next. In reality, risks are not always easy to diagnose and the possibility of miscalculation is always present.

Lancet utilizes ASTAT Practice Management, who has developed a site evaluation that assesses the level of risk of medical practices. The evaluation covers `19 areas of risk and includes topics such as patient care records, patient notification of test results, confidentiality of medical records, project research studies, office manuals with policies and procedures, dispensing of prescription medications, professional employee job descriptions, telephone procedures, contractual relationships with HMOs, PPOs, IPAs, etc., and review by a business attorney for undue personal and professional exposure.

Lancet uses several ASTAT experienced representatives that conduct the risk review for the participating medical practice and submits the results as part of the overall Professional Liability Application.

The International Organization for Standardization (ISO/IEC 27001) suggests that after completion of the risk assessment, a risk treatment plan should be devised. This plan documents the decisions about how each of the risks identified in the assessment should be handled.

In order to be truly effective, the risk treatment plan must be periodically reviewed and evaluated. Through experience and, yes, actual loss, there may be a need for future changes in the plan. New information will allow for possibly different decisions to be made when faced with the risk of loss.

References Hubbard, Douglas (2009). The Failure of Risk Management:
Why It’s Broken and How to Fix It. John Wiley & Sons, P. 46.
ISO/IEC Guide 73:2009 (2009). Risk Management—Principles and guidelines on implementation. International Organization for Standardization.