Malpractice Costs to Continue to Outpace Inflation

Physicians and the hospitals that employ them should prepare for increasing medical liability costs, rising at a rate that will continue to outpace inflation, a new study estimates.

Physicians and the hospitals that employ them should prepare for increasing medical liability costs, according to a survey by Aon Risk Solutions, the risk-management unit of Aon Corp.

Increases in the number of claims and the severity of claims is expected to drive liability costs up at a rate higher than the rate of inflation, according to the 2010 Hospital Professional Liability and Physician Liability Benchmark Analysis, which was done in conjunction with the American Society for Healthcare Risk Management.

Hospitals were hit by an estimated 44,000 liability claims in 2009, with costs expected to exceed $8.6 billion, Aon reported. More than a quarter of that cost relates to claims emerging from the obstetrics unit and the emergency room. For accidents occurring in 2010, hospitals should expect to incur $204 per birth for liability costs associated with obstetrics claims, and $6.30 per visit for ER claims, the study notes.

The loss rates, or total cost of malpractice claims per hospital bed, are expected to increase at an annual rate of 5%, the study said. For 2011, the loss rate for hospitals is anticipated to grow to $3,280, an compared with $2,980 in 2009.

"The uncertainties of health care reform and difficult economic times represent significant sources of risk for many hospital systems," said Erik Johnson, Health Care Practice leader for Aon Risk Solutions' Actuarial and Analytics Practice and author of the analysis, said in a statement. "Whether commercially insured or self-insured, hospitals and physicians should prepare for increases to their professional liability costs in the coming years."

The AON study did note that it expects to continue to see a shift in claims from physicians’ professional liability to hospitals’ professional liability, as more hospitals recruit doctors away from private practice. From 2005 to 2009, the study said, the average number of employed physicians per hospital bed increased 12% annually.

The 2010 survey included 119 hospital systems and more than 1,800 facilities, representing nearly a quarter, or 23%, of the total U.S. hospital industry segment.