Malpractice Claims Frequency Holding Steady While Severity Increases

October 15, 2020

The frequency of hospital professional liability claims is holding steady, but the cost of those claims is expected to increase by 3% next year, according to an actuarial analysis by Aon and the American Society of Health Care Risk Management.

For professional liability claims against hospitals, the report sets this year’s loss rate per occupied bed equivalent at $3,740. That’s up from $3,630 in 2019 and $2,820 in 2013.

For employed physicians, the loss rate is $5,640 for each doctor at the family practice level. That’s up from $5,490 in 2019. But only slightly higher than the 2013 rate of $5,590.

The severity of malpractice claims against hospitals and against their employed physicians are both expected to increase by 3%. For hospitals, each claim is projected to cost $228,000. For employed physicians, $150,000.

All of the preceding figures assume a self-insured retention of $2 million per occurrence.

The actuaries analyzed data from 108 health care systems with 183,281 occupied hospital beds, or about 30% of the total US hospital industry.

Claims related to labor and delivery continue to be the most expensive professional liability claim, averaging $1,167,900 in indemnity cost, the report says. Labor and delivery accounted for 7.7% of all claims, but 16% of costs.

Treatment issues was the most frequent cause of professional liability claims, accounting for 41.1% of the total. The average indemnity cost was $338,000 for treatment-related claims and 34.5% of costs.

The report includes an analysis of malpractice verdict awards by TransRe Senior Vice President Richard T. Henderson. Although jury awards represent only a fraction of claims paid — perhaps 5% — the size is significant because they influence perceptions about the potential value of claims, Henderson wrote.

From 2016 to 2019, the top 50 medical malpractice awards had an average cost of $22.9 million, according to the report. That compares to $19.2 million from 2012 to 2015 and $15.2 million from 2008 to 2011.

Claims related to birth accounted for 38 of the top 100 malpractice verdicts in 2019, surgery accounted for 24, diagnosis errors 18 and abuse six.

The report, however, called attention to abuse claims as a cause for concern. Many states have passed “reviver” statutes that waive or extend the statute of limitations for claims related to abuse.

Though claims involving abuse account for just six of the top 100 verdicts, they have yielded large awards. Three of the six abuse claims involved behavior that took place within hospitals. A $60 million award in Georgia involved alleged employee sexual abuse of a patient in a behavioral health facility. A $48 million verdict in Illinois and a $45 million verdict in New Jersey involved a failure to detect signs of child abuse in an emergency room.

The report notes that its database does not include a $165 million verdict against the New Jersey Department of Children and Families for failing to detect sings of child abuse. A pre-trail settlement of $7.5 million by medical defendants in that case was publicly reported.

“Medical professionals, as well as insurers and attorneys, should be keenly aware of the explosive value abuse-related claims can yield,” the report says.

Aon provided a courtesy copy of the report to the Claims Journal, but did not allow distribution to the public.