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Braving bitter pills: the exposures are so great in every facet of the health care industry that it is considered by many to be an industry in crisis. That's all the more reason why both providers and payors have been forced to face their risks head-on in order to stay afloat.

Sometimes it seems that health care is under assault from so many sides that it needs a trip to the doctor itself. Costs are rising, insurance premiums for employers, doctors and individuals are soaring, quality is under the microscope and groups and individuals with aggressive malpractice representation seem to be circling very close. Still, the industry in the United States is more capable than any in the world, and its providers and insurers are proud of their product and are constantly refining it.

Risks in health care are many and varied, and are no harder to see than the front-page news. They include record settlements, limits to services, closures of facilities, physicians bailing out, and consumers, employers, doctors, hospitals, insurers and the government all trying to shift costs among one another to keep the system functioning.

Stateside, 17 percent of the nation's gross domestic product goes to health care and, astoundingly, that may double in the next decade; and yet, the system can't adequately insure its public, doctors or hospitals and is perennially the target of significant government intervention.

"Media attention to all this, though, is amazing and is bringing about greater awareness and helping to push reform," says Paul Greve, senior vice president in the health care practice at Willis. We asked him, and others who have premier vantages to all this, what risks are most pressing in health care. If there were any surprises, it's that there weren't any surprises.


The stats in malpractice remain serious. The total number and size of awards keep going up, and dollars paid to claims continue to rise overall. Problems in accessibility and affordability of malpractice insurance have created a crisis, especially in certain states and certain specialty areas. Some physicians have moved, some have left medicine or retired, and some have switched or avoided certain specialties, causing shortages of doctors in obstetrics, neurosurgery and emergency medicine

Though nearly all physicians have some level of staff status and admitting privileges at a hospital, the vast majority remain independent contractors and are responsible for buying their own insurance. Because of the onslaught in the courts, many companies that provide this insurance have struggled and some have failed.

In certain specialty areas, a few claims or one significant adverse ruling may mean non-renewal for a practitioner. The expense of writing single policies is so high that some private practitioners had gone without insurance or had to go to nonstandard (excess and surplus lines) carriers, which means very high rates, including coverage for past years if these carriers will even accept past risk.

In this environment, some doctors hesitate or refuse to be on call on their hospital service, because urgent cases are more likely to result in claims. Some hospitals have had to suspend requirements that their staff members carry insurance, subsidize such premiums or indemnify staff against clames altogether, creating additional cost and risk in the hospital industry where profit margins are very thin.

But, says Greve, an authority on medical-malpractice liability trends for hospitals and physician groups, there are a few modest bright spots in the picture. "The medical-malpractice insurance industry is in a transitional phase right now that may stabilize it," he says. "There has been a dramatic deceleration of rate increases in recent years. And there is now renewed investment and competition, with some physician insurers showing profit recently."

In the trenches of health care, though, claims related to patient care remain the largest area of risk--not just for doctors but also for hospitals. This is true even for major delivery networks that can work must rigorously to prevent such loss.

About 75 percent of claims against Nashville-based HCA Inc.--a for-profit that owns and operates hospitals and other health care facilities in the United States and Europe--are in this category. But HCA has done the exceptional and halted the rise in these claims, according to Jim Hinton, vice president of risk and insurance at HCA. Hinton says that the key to vigorous risk management is "having good data and the ability to analyze it and attack it." And in this, he says, large hospital systems have a big advantage over smaller networks, single hospitals or even insurance companies. "With 200 hospitals in our system, we can benchmark the performance of one hospital service against another, look for what's causing claims, show the local management team how others are doing better and let them solve the problem."

HCA retains most of its risk through its captive risk subsidiary, but independent facilities or smaller hospital groups may have to purchase their own insurance in a market that has been tested and hardened in recent years.
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Title Annotation:Industry risk report: health care providers
Author:Allen, Russ
Publication:Risk & Insurance
Date:Jul 1, 2004
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