Medical malpractice claims are increasing in severity and recent healthcare reforms have only complicated matters. HRMR asks how to keep claims to a minimum—and how to ensure your organization is adequately covered.
Medical malpractice is a perennial headache for risk managers. Whether working to mitigate the risk of lawsuits occurring or dealing with claims when they do arise, it is a daunting and often costly challenge that calls for a wide range of proficiencies, from forward planning to excellent people management skills. Throw recent healthcare reforms into the equation and the issue becomes even more challenging.
“Risk managers are well versed in identifying and managing the traditional medical liability claims. The big challenge will be identifying and reducing the likelihood of future new liability exposures as a result of the sweeping changes that are occurring in our healthcare delivery system,” says Diane Doherty, vice president at ACE Medical Risk Group. “The manner in which risk managers view and address risk is evolving as a result of these challenges.”
The frequency of medical malpractice claims has remained relatively stable in recent years and may even have declined slightly. However, claim severity has experienced moderate increases. Many experts believe the use of electronic health records might be helping to keep claim frequency down, along with the tremendous industry focus on reducing hospital-acquired conditions (HACs). Increasing severity is being driven by the rising cost of medical care for injured parties, as well as the increasing costs to defend claims, especially when e-discovery (the exchange of electronic documents) is involved.
Against the backdrop of Medicare and Medicaid reimbursement cuts, all large, fixed-cost items are problematic for healthcare organizations, says Kevin Junod, executive vice president, healthcare industry practice leader for Lockton. “Industry margins were very thin to begin with, but current revenue pressures are threatening the very survival of many healthcare organizations,” he says.
For many risk managers, there are further changes afoot: several states have implemented or are exploring legislation aimed at reforming medical malpractice claims resolution. These measures are often designed to promote patient access and safety while resolving claims fairly and more rapidly.
What can a risk manager do to prevent these claims arising in the first place? According to Suzanne Bachovin, an attorney at Christie, Pabarue, Mortensen and Young and president of the Philadelphia Area Society for Healthcare Risk Management, there needs to be a focus on good patient care, ensuring staff get the paperwork right, and responding proactively to any issues that occur.
“Risk managers are responsible for making sure that staff are educated, that there’s a quality review process, that staff always have the ability to ask questions of the administration, and that there is a proactive relationship with patients and families so that the patients and families understand not only the care that’s given but also the outcome,” she says.
When problems occur, the priority should be to carry out an early investigation, making sure that the documentation is complete, and communicating with the families so that they understand why there may have been a bad outcome even though the hospital did nothing wrong.
“Communication is the key,” she says. “Preventing medical malpractice litigation is a priority and risk managers are vitally important in that role.”
Junod agrees. He recommends that risk managers develop a disclosure and apology program for when a medical error has occurred. “Sensitivity and empathy work, and they go a long way in times of crisis,” he says.
Honesty is also important. Katherine Laws, vice president, client advocacy for Alliant Healthcare Solutions, recommends that a strong error disclosure policy should be implemented and appropriately followed, while her colleague Janet Hale, managing director of Alliant, stresses the importance of identifying potentially compensable events (PCEs) early, in order to mitigate the eventual cost of the claim.
“While this increases the frequency of reported claims, there is an opposite and positive effect on severity and the actual cost of the claim,” she says.
With this in mind, it is important to create an environment in which staff members feel able to report potential problems. Doherty believes there is room for improvement on this front.
“Healthcare risk management has come a long way in recent years, but an educational effort is still required to promote and increase a culture of safety, to foster a blame-free environment in which all team members feel comfortable about reporting medical errors and near-misses,” she says.
However much care is taken to ensure the correct procedures and policies are in place and that staff adhere to them, medical malpractice lawsuits will almost certainly occur, and with this in mind, it is wise to give careful consideration to the insurance products that protect your institution and its staff.
Junod recommends that risk managers take care to ensure that the breadth of the contract is right for the organization; the structure of the program optimizes risk retention and risk transfer levels; and the cost of the program reflects the value of the insurance purchased.
“Risk managers and chief financial officers must revisit and often modify their risk financing programs in order to optimize their risk retention and risk transfer levels, as well as re-examine capital deployment related to current and past insurance and self-insurance programs,” he says.
He adds that the risk manager’s starting point is to find a broker who is focused on the healthcare industry sector and who can be trusted to provide expert, independent analysis and consultation. “This is not an area for generalists,” he says
Now more than ever, healthcare organizations need to proactively manage a broad spectrum of healthcare industry exposures in an ever-changing environment. Doherty advises that this should be done centrally at the senior level of the organization with a comprehensive enterprise risk management plan in place incorporating adequate insurance protections.
“The proper selection of a sophisticated insurance provider can provide coverage to protect the balance sheet of a healthcare organization in the event of a significant incident,” she says.
What are the hottest medical malpractice topics at present?
“Two items are very topical. First, with the proliferation of physician employment, several issues arise in the due diligence process: practice risk assessment, addressing the handling of tail liabilities, and the impact on go-forward risk financing programs. Second, healthcare reform will be transforming hospital and physician organizations from being the providers of care, to serving as the managers of health.
“Accountable care organizations (ACOs) will be the primary vehicle for contracting for these endeavors, and we expect to see healthcare organizations of all types provide more community outreach and education as they attempt to manage population health. Hence, future liability claims may not be framed as arising from the provision of ‘medical services’ as defined in current insurance policies.”
Kevin Junod, executive vice president, healthcare industry practice leader for Lockton
“Risk managers are looking at new technology-driven exposures such as telemedicine and telehealth services as well as continuing safe implementation of the electronic health record. With increased integration of physicians and healthcare systems, risk managers are assuming new roles in physician-related risk management including in the office practice setting.”
Katherine Laws, vice president, client advocacy for Alliant Healthcare Solutions
“Most of our large clients have significant control of their traditional medical malpractice losses. For large systems these losses are statistically predictable, and clinical risk mitigation strategies are strongly and effectively implemented. New concerns lie in non-traditional risk exposure which lacks case law and statistical loss information. These concerns include regulatory risk, compliance with and the cost of privacy breaches, and business practice errors and omissions exposure arising out of new affiliations and partnerships with other healthcare organizations.”
Janet Hale, managing director for Alliant Healthcare Solutions
Medical malpractice, healthcare reforms, communication, insurance