Study: insurance rates for hospitals and physicians may slow in 2005.

The three-year trend of high insurance rates for hospital professionals and physicians shows signs of slowing in 2005, according to a study by Aon risk services experts.

Aon's Hospital Professional Liability and Physician Liability 2004 Benchmark Analysis found claims cost increases in 2004 are 8%, the lowest level in the study's five-year history. Using 10 years of loss data and measuring trends in loss costs, claims frequency and claims severity, the study found that increases in frequency--0.5%-and increases in severity--7.5%--are contributing to an overall 8% annual increase in claims rates. In the past three successive benchmark studies, the claim cost trend had been steady at 10%. The reduction in the 2004 measurement is largely based on frequency.

"The number of claims has flattened but the size of claims is growing," said Greg Larcher, author of the study. He said the study includes large losses, but limits them for the purpose of the study to $2 million. Hospitals often retain their losses up to a certain amount, often $t million to $5 million, and buy insurance for losses greater than that.

Liability per bed rose to $7,000 from $6,600 last year, Larcher said. The good news is the emphasis of risk management and some legislative changes have helped to slow escalating costs, he said.

The study also found that nonprofit and religious institutions tend to have lower losses than their for-profit and specialty hospital counterparts. "Part of that is the location of the hospitals. The nonprofit hospitals tend to be in rural or suburban areas, where publicly traded hospitals tend to be in more urban areas. In states like Florida and Texas, court room verdicts have traditionally been larger," Larcher said.

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.