April 28, 2014

Hospitals battle medical malpractice costs

Photo | CNN
Photo | CNN
Rocco Orlando, senior vice president and chief medical officer, Hartford Healthcare

Connecticut hospitals have seen a slow, but steady decline in medical malpractice insurance expenses in recent years, a positive sign for an industry that was battered by skyrocketing costs a decade ago.

The state's 29 acute care hospitals spent $119.9 million on medical malpractice insurance in fiscal year 2012, down 5.6 percent from a year earlier and 16.1 percent since fiscal 2009, according to data from the state Office of Health Care Access.

The decline, healthcare executives say, has been driven in part by hospitals' efforts to improve patient outcomes and prevent costly medical mistakes. Hospitals' stronger negotiating power and a more competitive medical malpractice insurance market are also helping.

Still, hospital officials warn, the lower costs may not be a long-term trend.

Not all medical centers are seeing improvements, and malpractice costs have a history of seesawing. Last decade, for example, Connecticut physicians were hit by a tsunami of increasing insurance rates, fueling debates about malpractice reform.

"Physicians are not seeing the increases they saw, but they haven't gotten relief from where rates used to be," said Todd Liu, assistant to the president at Griffin Hospital in Derby. "From an industry standpoint, premium levels for hospitals and physicians are still high."

Cost control

Medical malpractice has been a contentious issue nationally and in Connecticut for years as policymakers look for ways to reduce healthcare costs. Debates over tort reform have often pitted physicians against trial lawyers and consumer advocates.

In 2005, the state legislature passed several measures aimed at tightening medical malpractice oversight, including requiring patients who want to file a negligence claim to first get their case reviewed and certified by a medical expert in the same field as the accused doctor.

The law, however, didn't cap jury awards, which physicians and hospitals favored.

A 2013 report by the Connecticut Insurance Department found that there were 3,221 closed malpractice suits in the state over five years from 2008-2012, which paid out $836 million to patients.

In Connecticut, most hospitals self-insure their medical malpractice risks, or use a captive insurance company. That means hospitals pay a certain percentage of claims out of pocket (typically up to $5 million) and purchase excess liability insurance to cover payouts that exceed a certain threshold.

Stephen Geib, senior vice president of insurance brokerage Willis Holdings in Hartford, said competition in the private insurance market, which includes players like Travelers, AIG, ACE, and Zurich, has been strong in recent years, which has helped keep medical liability rates competitive.

In addition, Connecticut hospitals have been gaining better bargaining power as they consolidate into larger medical systems.

Being self-insured or using a captive also gives hospitals greater control over malpractice premiums, which could also impact total expenses, said Paul E. Knag, a lawyer for Murtha Cullina.

A hospital that has built a strong reserve fund to pay out potential future claims, for example, could lower its annual malpractice premiums and reap the savings.

Beyond insurance pricing, however, hospitals around Connecticut have been investing heavily in risk management programs aiming to improve patient safety and reduce costly medical mistakes. The programs also prepare medical centers for a future that increasingly will pay them based on outcomes, rather than fee-for-service.

Cutting down on mistakes

A few years ago the Connecticut Hospital Association (CHA) began a high-reliability collaborative that encouraged medical centers to adopt strategies used in other complex industries, like nuclear power or aerospace, to minimize risks and mistakes.

CHA Vice President and Chief Quality Officer Mary Cooper said almost all hospitals are participating in the program, which encourages things like clearer communication among staff and the use of check lists in operating rooms and emergency departments to make sure all safety precautions are taken.

"This is about putting systems in place to prevent mistakes from ever reaching the patient," Cooper said.

Hartford Healthcare has adopted mandatory risk education for employees at all of its hospitals, which is delivered through conferences and online courses, said Rocco Orlando, Hartford Healthcare's senior vice president and chief medical officer.

A lot of the training is centered on improving communication with patients and making sure information is shared by various medical providers. A key source of malpractice suits, Orlando said, is failing to properly diagnose a patient's illness.

If, for example, a patient comes in with a broken leg, but the doctor also spots an irregular lump on the person's lung, that incidental finding needs to be reported to a primary care doctor, who can follow-up on that health risk.

If that ailment gets overlooked it could lead to a future malpractice suit.

In response, Hartford Healthcare has developed a hospital care team to improve the communications process so primary care physicians have reports and X-rays from a hospital patient.

"It's really a variety of interventions and good communication to patients regarding expectations of expected outcomes," Orlando said.

Fewer cases

Rocco said Hartford Healthcare hospitals have seen decreases in medical malpractice costs in recent years as the severity and number of claims are down significantly.

In fiscal 2012, for example, Hartford Hospital saw its medical malpractice insurance costs drop 6 percent to $12.8 million. Meriden's MidState Medical Center saw its malpractice costs drop 19 percent to $4.2 million, OHCA data shows.

Meanwhile, Griffin Hospital, which saw its malpractice insurance costs drop 61 percent in fiscal 2012 to $945,755, has implemented an apology and disclosure program that requires physicians to be upfront with patients when a mistake happens, said Liu. Studies have shown, he said, that malpractice lawsuits are more likely when patients don't get a full picture from a doctor about a complication or medical error.

A simple apology can mitigate risks of prolonged legal action, Liu said, and the hospital tries to work with patients to develop an agreed upon settlement before claims go to court.

They've also implemented daily organizational safety huddles, where staff will talk about potential patient safety threats and issues, like when two patients with same name are admitted to the hospital at the same time.

Meanwhile, technology like bedside bar code readers, which scan prescribed medications before they go to the patient, help ensure the right drugs are given to the right person.

"Hospitals and physicians have done tremendous work to try to advance patient safety and implement technology that reduces medical errors," Liu said.

Still a major expense

Liu said new patient safety measures are bearing some fruit, but malpractice costs remain a serious issue for hospitals.

Medical centers still spend millions of dollars each year on insurance and/or settlements, and when lawsuits are filed they can take five-to-seven years to navigate Connecticut courts. Paying outside counsel to defend a suit can cost up to $400,000, he said.

Also, malpractice insurance rates still haven't come down much when costs significantly spiked 10-15 years ago, he said.

Susan Martin, vice president of finance at Middlesex Hospital, said her medical center has been aggressive in adopting new patient safety protocols, but she's cautious about the outlook for malpractice costs.

Many patients, she said, have put off medical care in recent years because of the poor economy, which means they're eventually going to be sicker and require more challenging treatment, which increases liability risks. There are also many malpractice attorneys advertising their services on TV.

Martin said Middlesex Hospital has seen fewer claims, but dollar amounts for suits are up.

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