Weighing the uncertainty: with the number of bariatric surgeries rising, medical-malpractice writers are scrutinizing the procedure's risks.

With the number of bariatric surgeries increasing, the impact of the procedures on the health-care system and health insurance is currently the subject of considerable debate. The spurt of bariatric procedures also is creating uncertainty for medical professional liability insurers.

According to the American Society for Bariatric Surgery, an estimated 140,000 bariatric procedures were performed in 2004, which represents nearly a nine-fold increase since 1994. From 1994 to 1999 the average annual growth was approximately 12%, which compares with an average annual growth of nearly 40% for the period from 2000 to 2004. This dramatic growth is expected to continue with a corresponding increase in the number of practicing surgeons and facilities offering these procedures.

The rapid growth of bariatric procedures performed presents a significant source of uncertainty to medical-malpractice insurers for a host of reasons:

* Increased exposure to potential claims;

* Unique underwriting considerations; and

* Inconclusive long-term efficacy of bariatric procedures.

Increased Exposure

One of the most difficult aspects from a medical-malpractice pricing perspective is the limited volume of statistics on claim frequency and severity attributable to bariatric surgeons. Historically this has not been a major concern because of the relatively small portion of total exposure represented by surgeons performing bariatric procedures. With the procedure's increasing popularity, bariatric surgeons have come under the scrutiny of the medical-malpractice industry. In the past, a surgeon performing bariatric procedures typically would have been rated on a par with general surgeons. However, of late, many carriers have slotted bariatric surgeons into higher premium rating classes. The range of reaction in the industry is quite wide, which speaks to the limited data and resulting uncertainty related to this exposure. For those carriers who are distinguishing between general and bariatric surgeons, there is a rate differential ranging from 10% to more than 70% higher than general surgeons, and in some cases, bariatric surgeons are rated similarly to obstetricians and neurosurgeons (typically found in the highest rated classes).

Because of the limited volume of claims statistics, a portion of the industry response may be attributed to a reaction to the increased uncertainty and corresponding risk.

However, available data, albeit limited, would support the assignment of a higher rating class for bariatric compared with general surgeons. Based on data contained in the Physician Insurers Association of America Data Sharing Project, which contains information on more than 192,000 closed claims and suits, the average indemnity and allocated loss-adjustment expense payment per closed claim is between 15% and 20% higher for bariatric compared with general surgeons. The closed claim database for bariatric surgeons is limited in volume and represents industry-wide statistics. As such, the indicated relationships for an individual carrier will likely vary, and in some cases, considerably. Additionally, this comparison addresses cost differences strictly from a claim severity standpoint. To the extent that claim frequency is higher for bariatric compared to general surgeons, this would further contribute to the indicated rate differential.

The following "quantitative" example is strictly intended to illustrate the claim potential underlying the increased number of bariatric procedures. For this illustration, it is assumed that 140,000 procedures will be performed annually (representing the number estimated for 2004). Research has shown a mortality rate of between 0.3% and 1.0% related to complications arising from bariatric surgery. This would suggest that between 420 and 1,400 bariatric procedure-related deaths may be expected each year (calculated as 140,000 times 0.3% and 1.0%, respectively).

Additionally, research shows that between 10% and 20% of patients having bariatric procedures experience surgery-related medical problems. This rate reflects the fact that many patients may have an increased risk of complication due to underlying co-morbidities. The assumed complication rate suggests that between 14,000 and 28,000 surgery-related complications may be expected each year (calculated as 140,000 times 10% and 20%, respectively). Because of the extended "recovery period" for bariatric surgery, including dietary and exercise requirements, the period of time during which a complication may arise is longer than most other surgical procedures. This increases the level of uncertainty from a malpractice perspective.

The "Bariatric Surgery's Growing Exposures" table suggests an annual incidence of between 14,420 and 29,400 bariatric surgery-related deaths or complications, assuming the number of procedures remains flat. This compares with roughly 1,500 to 3,500 of such instances based on the number of procedures performed in 1994. As such, the exposure to claims related to bariatric procedures has risen in the past decade.

While surgery-related mortalities and complications certainly do not indicate, in and of themselves, the existence of malpractice, it would seem fair to loosely characterize such events as potential for malpractice claims for purposes of illustrating the increased exposure.

Exacerbating the uncertainty stemming from the increased exposure to potential claims related to the rapid growth in number of procedures is the "reporting lag" associated with malpractice claims. It may be two to four years or longer for actions arising out of procedures performed in 2004 to be reported as claims of malpractice. Further, once these claims are reported, it may take an additional two to four years or longer for the claims to be resolved. It may be several years before the true impact of the increased exposure even begins to be realized.

Unique Underwriting

The unique underwriting considerations associated with bariatric surgeons are another contributing factor related to medical-malpractice insurers' uncertainty. Beyond the traditional underwriting and risk management criteria, bariatric surgeons present additional important considerations related to the following:

* Credentialing and experience;

* Patient screening criteria; and

* Patient management.

Until recently, there has been a lack of consistency by credentialing committees as well as the medical community in applying standards for bariatric programs. Further, there are a relatively limited number of requirements for a general surgeon to perform bariatric surgery. As a result, there may be inadequately trained surgeons performing bariatric surgery and hospitals not adequately equipped to manage morbidly obese patients.

An important underwriting consideration relates to the level of training and experience of the particular surgeon. Beyond this, it is important that staff members are appropriately trained, from the nurses to the nutritionists, in dealing with any special requirements. Additionally, treatment facilities must contain the specialized equipment that is necessary to accommodate the patients' weight requirements.

In an effort to improve matters, the leadership of the American Society for Bariatric Surgery recently recommended the formation of an independent surgical-review corporation to implement a program of Centers of Excellence in Bariatric Surgery. This program provides a comprehensive and standardized set of guidelines and criteria to assess the quality of bariatric programs using a host of required criteria. This certification process may prove to be a critical underwriting aid for the medical-malpractice insurance industry in distinguishing between various potential insureds.

A second unique underwriting facet relates to the quality of the patient screening process. For bariatric surgery candidates, this is a critical part of the process in reducing risk. Guidelines must be established related to the physical attributes as well as the emotional and psychological condition of the surgical candidate. Additionally, it is important that sufficient time and opportunity be granted to pursue alternative nonsurgical treatment options. The expected near-term launch of new, anti-obesity pharmaceutical treatments adds another potential risk, wherein a surgeon may be accused of rushing to surgery instead of waiting for these other therapies. The importance of the patient screening and evaluation process is pronounced due to the significant long-term postoperative patient commitment, including dietary restrictions and exercise programs, required for a successful outcome.

A third aspect that distinguishes bariatric surgery is the increased importance of a proactive and engaged approach to patient management--especially patients' expectations. This process begins with a thorough explanation of the benefits and risks of surgery along with the nonsurgical alternatives. This also requires a well-reasoned assessment of patient goals in order to shape realistic expectations. Patient management involves postoperative follow-up, including protocols to evaluate cooperation with the dietary and exercise commitments required to achieve patient expectations. A proactive and engaged approach to patient relations can effectively manage patient expectations and reduce the risk of an actual or perceived bad outcome, which is particularly important for bariatric patients.

These unique underwriting considerations complicate the ability to distinguish between various qualities of risk and add to the uncertainty with respect to pricing the professional liability policy.

Jury's Out

One issue that is more speculative relates to the inconclusive long-term efficacy of bariatric procedures. Despite the fact that bariatric surgeries have been performed for more than a decade, the research into the risks and benefits is still in its developmental stages. In particular, the inconclusiveness regarding potential nutritional deficiencies represents a long-term risk for the medical-malpractice industry.

A catastrophic scenario for the medical-malpractice industry would involve a tidal wave of claims or class-action lawsuits resulting from latent medical issues related to bariatric procedures. Though the likelihood of such a scenario is not quantifiable and seemingly remote, the nature of the U.S. tort system would tend to increase the risk of such a circumstance.

This is not the first time, and will likely not be the last, that changing medical practices present a major concern to the industry. A recent example with similar characteristics was the proliferation of refractive surgery for vision correction. Refractive surgery also presented pricing and underwriting challenges related to rapid growth, limited claims data, surgical training and experience issues, patient screening and management of patient expectations. Though some uncertainty still exists, refractive surgery has not yet presented major difficulties to the industry. Similarly, bariatric surgery has yet to produce a significant disturbance to the industry, though a long and uncertain road lies ahead.

Key Points

* Many medical-malpractice writers have placed bariatric surgeons into higher premium rating classes.

* Even though bariatric surgeries have been performed for more than 10 years, research into the risks and benefits is in developmental stages.

* Bariatric surgeons have unique underwriting considerations, including patient management and credentialing.

Bariatic Surgery Risks

* Infection

* Hemorrhage

* Leakage of Bowel Connections

* Obstruction of Stomach Outlet

* Protein Deficiency

* Vitamin and Mineral Deficiency

Source: Association for Morbid Obesity Support

The Gastric Bypass Procedure

Roux-en-Y gastric bypass, one of the most common procedures that can be used to cause significant weight loss in obese persons, involves creating a stomach pouch of a small portion of the stomach and attaching it directly to the small intestine, bypassing a large portion of the stomach and duodenum.

Source: MedlinePlus, a service of the U.S. National Library of Medicine and the National Institutes of Health

Contributors: Kevin J. Atinsky is an actuary and Chad C. Karls is a principal and consulting actuary in the Milwaukee office of Milliman Inc. Both specialize in medical-malpractice insurance.

Bariatric Surgery's Growing Exposures

This example suggests bariatric surgery can cause 14,420 to 29,400
deaths and complications annually.

                                           1994             2004

Number of Bariatric Procedures             16,000          140,000

Component                               Low    High      Low     High

Assumed Mortality Rate (%)              0.3     1.0      0.3      1.0
Estimated Mortalities                    48     160      420    1,400
Assumed Complications Rate (%)         10.0    20.0     10.0     20.0
Estimated Complications               1,600   3,200   14,000   28,000
Estimated Mortalities and
  Complications                       1,648   3,360   14,420   29,400