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The Malpractice Crisis-- A Large Hospital System Perspective

The Malpractice Crisis-- A Large Hospital System Perspective. James D. Hinton HCA Inc. March 11, 2003. Hospital Prospects are Good. Managed care pricing is up 8 – 10% Improved Medicare pricing Aging baby boomers drive volume gains Nursing shortage eases somewhat

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The Malpractice Crisis-- A Large Hospital System Perspective

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  1. The Malpractice Crisis--A Large Hospital System Perspective James D. Hinton HCA Inc. March 11, 2003

  2. Hospital Prospects are Good • Managed care pricing is up 8 – 10% • Improved Medicare pricing • Aging baby boomers drive volume gains • Nursing shortage eases somewhat • Costs for new technology continues

  3. Impact of PhysicianMalpractice Crisis on Hospitals • Hospitals are requested to lower / eliminate insurance requirements • More physicians are bare in Texas and Florida • Physicians are more reluctant to take ED call • Some hospitals are paying physicians

  4. Impact of PhysicianMalpractice Crisis on Hospitals • Physicians are relocating / retiring early / curtailing practice • Hospital recruiting costs are up • Service cutbacks are being made in some situations • Employment of physicians trends up again

  5. HCA Loss Trends • Overall frequency of claim is down 3 – 4 % • Frequency of large claims is up • Results of 1998 – 1999 accident years was very poor • Early indications that 2000 – 2001 accident years are better

  6. Number of Large Claims Paid

  7. Impact of the Hard Market on Hospitals • Dramatically higher retentions • HCA: $2 million in 2000 $25 million in 2003 • Formation of new captives / risk retention groups • Heightened senior management attention • Insurance costs rising faster than hospital revenues • Renewed investment in loss prevention • Additional staff is added • New programs / initiatives are approved

  8. Buyer Frustrations • Little evidence of underwriter judgment • Too actuarial focused • Little differentiation of risks • Data requests • Too much • Often irrelevant • Diminished value of long term relationships

  9. Differentiating HPL Risks • Effectiveness of claims handling • Experience and staffing levels • Proven success at reserving adequately and timely • Adequacy of data • How does RM use the data? • Effectiveness of Loss Prevention activities • Appropriately addresses significant loss trends • Is function adequately staffed? • Are results measurable? • Corporate Commitment to: • Nurse training and retention • Patient safety initiatives

  10. Outlook for HPL Underwriting • Should be positive • Rates are adequate (or more than that) • Loss results will improve because • Patient safety initiative • Renewed loss prevention focus • Tort reform • Warning signs • Hospitals may keep high retentions

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