N.Y. Metro Hospitals Decry Average 27% Annual Malpractice Insurance Hike

January 10, 2005

Hospitals in the metropolitan New York area have experienced annual malpractice premium increases of 27 percent per year from 1999 through 2004, and a cumulative percentage increase of 147 percent over that five-year period, according to a new study by the Greater New York Hospital Association (GNYHA).

These increases, coupled with a decrease in the number of malpractice carriers that are willing or able to provide this type of insurance, are contributing toa financial deterioration of New York’s not-for-profit hospitals and more limited access to certain types of patient care services such as obstetrics, according to the hospital group.

“The increasing cost of malpractice insurance has become a pressing burden for New York’s financially fragile hospitals, which have experienced four consecutive years of bottom-line losses,” said GNYHA President Kenneth E. Raske. “A collaborative group—composed of hospital management, consumers and consumer advocates, health care unions, physicians, the legal community, and our legislators—must work together to institute reforms that will ensure that our hospitals, physicians and other providers are able to continue providing access to the high quality services that New Yorkers need and now enjoy, a goal that is very much threatened by the skyrocketing cost of malpractice coverage.”

Additional findings from GNYHA’s recent survey of New York hospitals include:

* On an annual basis, malpractice insurance premiums averaged 27 percent, with individual hospitals experiencing premium increases of 40 percent and higher at one or more points during this period and one hospital reporting the highest observed one-year premium increase of 152 percent.

* Medicare and Medicaid fail to reimburse New York hospitals adequately for the malpractice insurance portion of their costs.

* New York is one of 20 medical malpractice “crisis states” for physicians designated by the American Medical Association. Despite New York State’s various attempts to ensure the availability and affordability of physician malpractice coverage, New York’s physician premiums are among the very highest in the nation and the number of providers relying upon the state’s high-risk pool program is growing.

* From 1992 to 2003, long term care nursing facilities experienced a sevenfold increase in costs per bed related to defending malpractice claims. Suits against nursing homes are among the fastest growing areas of health care litigation, and liability costs are occupying a greater and greater proportion of available Medicaid reimbursement, the primary source of payment for nursing home care.

* The financial condition of malpractice insurers is deteriorating. In the past four years, two of the six insurance companies offering physician coverage in New York have become insolvent and two more have stopped offering specific lines of coverage. According to the National Association of Insurance Commissioners (NAIC), based on 2002 data, New York’s insurers have the fourth worst loss experience of any state in the country, paying out on average $1.44 in claims and expenses for every $1.00 collected in premiums. Only Illinois, Nevada, and Mississippi have worse loss ratios.

* Increasing costs per malpractice claim—as opposed to an increasing number of claims being filed—constitutes the single largest driver of increases in malpractice premiums. Six out of the top 10 malpractice verdicts reported in the country in 2002 occurred in the metropolitan New York area, with five in New York City alone. Total losses incurred by insurers in 2002 as reported to the NAIC were more than $1 billion in New York State — that’s 84 percent higher than in Illinois, which had the next highest incurred losses.

* Oobstetrician/gynecologists (OB/GYNs) report that they have stopped or decreased the amount or nature of obstetrical care they perform because they fear malpractice exposure. In New York, the number of OB/GYNs per 100,000 population caring for patients decreased by 4.1 percent from 1998 to 2002, while the number of patient care physicians overall declined by 1.5 percent. In addition, in December 2004, two hospitals sought permission to terminate their obstetrics service and in 2003, two New York City birthing centers closed due to malpractice insurance issues.

* Available studies show little correlation between actual provider negligence on the one hand and malpractice claims and awards on the other. That is, few negligent injuries result in malpractice claims, and few malpractice claims actually involve negligence.

GNYHA said it will use its report to advocate for medical malpractice reform at the state and federal level.

Topics New York Senior Care Medical Professional Liability

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