Embracing change


Embracing change

Healthcare reform will undoubtedly change the risk profile of healthcare organizations, especially hospitals, but will it reverse the medical professional liability industry’s long trend for profitability? Paul Greve from Willis Health Care Practice gives his perspective.

The medical professional liability (MPL) industry is in one of its longest sustained periods of profitability since the mid-1970s. The industry combined ratio for 2012 is projected to come in at significantly under 100 for the seventh consecutive year.

The combined ratio has been under 100 since 2006. Claim frequency has remained at historically low levels and claim severity is increasing at actuarially predictable levels. 

In 2013, the US healthcare delivery system is undergoing a dramatic transformation. Fee-for-service reimbursement is slowly being eroded but the pace may accelerate quickly in the years ahead as reimbursement moves to pay-for-performance and quality measures.

Many in the MPL insurance industry are predicting that reform will reverse the positive trends and profitability of the last decade. Healthcare reform is often predicted to inaugurate another malpractice crisis. But will it?
The public’s attitude towards malpractice litigation over the last decade has changed for the better. While the trend cannot be totally explained, there are far fewer patients seeking out the plaintiff’s bar for potential litigation. The expense to the plaintiff’s bar of pursuing litigation, thought to be typically in the range of about $100,000, has also eliminated the pursuit of many cases with an economic value at or below $500,000.

The public’s favorable attitude toward malpractice litigation is not likely to erode quickly. However, the increased consolidation among healthcare facilities, especially hospitals, may potentially cause unfavorable attitudes over time and lead to larger MPL verdicts and settlements. Local control of facilities is lost and may affect the loyalty of the patient populace. Consolidation may further drive aggressive pricing of hospital services and collection policies at a time when many are still struggling due to the economy.

The rapid movement of physicians to the hospital employment model may have an impact on MPL in that the higher MPL limits carried by hospitals will now be exposed in litigation where employed physicians are the primary actors in claims scenarios. These types of physician claims become more volatile for that reason and could drive up severity over time.

Consolidation and physician employment may have an unfavorable impact on MPL. Let’s examine some of the healthcare reform issues that are likely to impact MPL favorably.


While there is genuine concern over the negative impact of the electronic medical record (EMR) on malpractice litigation due to the advent of e-discovery and the documentation (or lack thereof) indicating substandard care, the EMR can also demonstrate that the standard of care was met. When asked about the impact of the EMR on litigation, the general counsel of one facility that had installed a system more than 10 years previously replied: “It’s helped us in some cases and hurt us in others.” Precisely.

A study published last year in The Archives of Internal Medicine attributed a significant reduction in claims (one sixth) for physicians that implemented an EMR. 


With physician employment, everyone is now on the same team: hospital administrative staff, physicians, nurses, and ancillary staff. This greatly facilitates collaboration on quality, risk management, and patient safety initiatives. Patient care should improve and fewer patient injuries should result.

Physician employment greatly assists a unified defense in litigation. Finger-pointing is eliminated, making the plaintiff’s burden of proof more difficult.


Data is king in the world of healthcare reform with its greater emphasis on quality, value, and pay-for-performance. This will allow us to identify substandard care more readily and eliminate it.
Risk management information systems will need to change accordingly and mine the gold that is there beneath the surface in event reporting and open/closed claims data. A two-sentence loss or event description is not going to be very helpful in the future. The factors that caused patient injuries must be identified with much more precision and detail so as to be helpful for future loss prevention.


The healthcare delivery system at present has many silos. Providers do not communicate very well. The movement towards clinical integration and the creation of care networks in the form of such structures as accountable care organizations (ACOs), clinically integrated organizations (CIOs), and patient-centered medical homes should improve care and reduce substandard care. There will be hiccups initially and the patient hand-offs will be tricky at first but will improve over time. The EMR will greatly facilitate communication in time.


Historically, the hospital setting is the site of most malpractice claims and where the most serious injuries occur. Reform’s focus is on preventive care delivered in outpatient settings that seeks to treat chronic disease and other conditions before the patient requires inpatient hospital care.

The EMR will allow providers to document noncompliant patient behavior more easily. The net effect should be reduced numbers of malpractice claims.


Malpractice claims occur when issues such as symptoms, patient history (such as drug allergies), and critical test results get missed or overlooked. The EMR and other electronic systems will help prevent these types of events by prompting providers in a timely manner.


Telemedicine claims can be complex due to the diversity of jurisdiction. However, there have been very few telemedicine claims over the last decade despite its increasing use. Telemedicine improves care by making physician specialty expertise more widely available in remote and underserved regions.


The Affordable Care Act will offer coverage to tens of millions of previously uninsured patients as of January 1, 2014. Patients often sue when ongoing care is expensive and they have no health insurance coverage. Expansion of health insurance may help reduce the numbers of malpractice claims filed.


Healthcare reform will undoubtedly change the risk profile of healthcare organizations, especially hospitals. Factors such as consolidation through mergers and acquisitions will result in larger healthcare systems. This may erode the current goodwill of the public towards providers and malpractice litigation. Physician employment may expose hospitals’ higher limits of liability.

There are many other factors that will also impact MPL, but it is important to keep in perspective all the potential improvements in patient care that will result from reform and that will accordingly improve quality, reduce patient injuries, and prevent malpractice litigation.

medical professional liability, healthcare risk management, healthcare reform, litigation, Crisis management