The trend of high insurance rates experienced by hospital professionals and physicians over the past three years shows signs of slowing in 2005, according to a study released today by Aon risk services experts.
Aon’s Hospital Professional Liability and Physician Liability 2004 Benchmark Analysis, the largest of its kind, reveals that claims costs in 2004 are trending at 8 percent – the lowest level in the study’s five-year history. Using ten years of loss data and measuring trends in loss costs, claims frequency and claims severity the study reveals that trends in both the frequency (0.5 percent) and severity (7.5 percent) of claims are contributing to an overall 8 percent annual trend rate, a significant decrease from prior studies. In the last three successive benchmark studies the claim cost trend had been steady at 10 percent. The reduction in the 2004 measurement is largely based on frequency.
“This year’s analysis reinforces our findings in prior studies that the driving factor underlying the continued increase in the cost of hospital and physician professional liability is escalating claim sizes,” said Theresa Bourdon, managing director and actuary, Aon Actuarial and Analytics Practice. “While the number of claims per bed appears to have stabilized in recent years, there is no indication that claimant monetary demands are leveling off.”
“New to the 2004 analysis is a focus on hospitals by type of operation,” added Greg Larcher, assistant director and actuary, Aon Actuarial and Analytics Practice. “While overall benchmarks continue to provide broad market indicators, risk managers are increasingly interested in benchmarking against peer hospitals. We are now able to drill down into the database and provide benchmarks that are more meaningful to individual operators.”
The study is based on approximately 152,000 acute care bed equivalents and 10,000 class-one physician equivalents, creating a powerful indicator on the state of medical malpractice. Benchmark statistics for five types of hospitals including religious, specialty, publicly traded, community not-for-profit and community other than not-for-profit are included in the study. Among the study’s other conclusions:
Hospitals affiliated with religious institutions hold a significant loss cost advantage over other types of hospitals. However, the loss cost trend for this group is the highest. This indicates that the cost advantage is eroding over time.
Specialty hospitals, which include childrens, teaching, cancer centers and trauma centers, exhibit the highest average severity. This average is 20 percent higher than the overall benchmark severity. However, in 1999, the average severity for the specialty group was 50 percent higher than the overall benchmark.
Community not-for-profit hospitals exhibit a 10 percent loss cost advantage over community hospitals without the not-for-profit status.
The 2004 analysis is the fifth-annual study produced by Aon’s actuarial and analytics specialists. The database underlying the study has grown to include approximately 152,000 hospital bed equivalents and 10,000 physician equivalents on an annual basis. More than 40,000 hospital liability claims and close to 5,000 physician liability claims were analyzed for the 2004 study.
Highlights from the Hospital Professional Liability and Physician Liability 2004 Benchmark Analysis are available at www.aon.com/actuarial.
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