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Perspectives on the Med Mal crisis From buyers within AHA Tony Spohn Vice President

Perspectives on the Med Mal crisis From buyers within AHA Tony Spohn Vice President AHA Financial Solutions For PLUS—March 11,2003. Highest reported Lowest reported. 81%. 67%. 58%. 58%. 57%. 56%. 40%. 39%. 32%. 29%. Pennsylvania. West Virginia. Indiana. Montana. Texas.

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Perspectives on the Med Mal crisis From buyers within AHA Tony Spohn Vice President

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  1. Perspectives on the Med Mal crisis From buyers within AHA Tony Spohn Vice President AHA Financial Solutions For PLUS—March 11,2003

  2. Highest reported Lowest reported 81% 67% 58% 58% 57% 56% 40% 39% 32% 29% Pennsylvania West Virginia Indiana Montana Texas Professional liability premiums are increasing sharply for physicians… Medical Liability Insurance Rate Increases Highest States as Reported by Selected Insurers, 2001-2002* *Chart reflects rate increases for internal medicine, general surgery, and Ob/Gyn physicians.

  3. Decrease or No Change 1% - 9% 10% - 49% 50% - 99% 100% and over …and hospitals… Distribution of Premium Change for a Sample of Hospitals1 2000-2002* Percentage of Hospitals 44% 16% 32% 5% 3% 2000 n=97 14% 4% 54% 12% 16% 2001n=110 11% 4% 41% 11% 33% 2002n=66 Percent Change in Premiums *Results from an AHA/ASHRM Survey of Hospital Experience with Professional Liability Insurance. Not all respondents provided data for all years. 1 Survey distributed to members of ASHRM, including approximately 1,250 hospital-based risk managers, 132 responded

  4. Increased Deductible 35% 31% Changed Carriers Reduced Level ofCoverage 17% Other Self-Insurance Options 14% Assumed a Deductible 13% 12% No Action Created a Captive 9% Opted not to Purchase Coverage 1% 0% 5% 10% 15% 20% 25% 30% 35% 40% Percentage of Hospitals …forcing hospitals to assume more risk… Percentage of Hospitals Reporting Actions Taken to Reduce Cost of Professional Liability Coverage 2002* *Results from AHA/ASHRM Survey of Hospital Experience with Professional Liability Insurance (n=132)

  5. More Difficult to Obtain Physician Coverage 38% Physicians RelocatingOut of Area or Retiring 27% More Difficult to Attract Physicians to Community 25% 20% Curtailment of Services Complete Closure/ Discontinuation of Services 6% 0% 5% 10% 15% 20% 25% 30% 35% 40% Percentage of Hospitals … and affecting access to care for physician and hospital services. Percentage of Hospitals Reporting Impacts of Current Professional Liability Market on Health Care Delivery 2002* *Results from AHA/ASHRM Survey of Hospital Experience with Professional Liability Insurance (n=132)

  6. 15.6 15.3 15.1 14.6 14.1 2000 1996 1997 1998 1999 While the number of medical liability reports has remained stable… Number of Physician Medical Liability Payment Reports1 (in thousands) 1996-2000 1Reports refer to all medical liability payment reports submitted to the National Practioner Databank

  7. …the size of jury awards has escalated… Median Compensatory Jury Awards (in thousands) 1994-2000 $1,000 $734 $700 $503 $500 $475 $363 1994 1995 1996 1997 1998 1999 2000

  8. $158 $125 $116 $101 $100 1996 1997 1998 1999 2000 …contributing to rapid growth in the size of claims paid by insurers. Median Indemnity Paid, Combined Specialties (in thousands) 1996-2000

  9. 14% 11.5% - High 12% 10% 8% 6% 4% 4.3% - Low 2% 0% 1996 1997 1998 1999 2000E As insurer expenses have risen, a declining return on invested assets has driven non-premium revenues down. Average Return on Invested Assets, Property and Casualty Insurers 1996-2000E

  10. Neurosurgery $33,101 Cardiovascular Surgery $28,328 Ob/Gyn $21,446 General Surgery $19,860 Orthopedic Surgery $17,812 Otorhinolaryngology $10,793 Urology $9,903 $8,751 Cardiology $8,004 Anesthesiology Ophthalmology $6,934 Hematology/Oncology $6,520 $6,202 Radiology $6,144 Internal Medicine Gastroenterology $6,138 Family Practice $6,125 $5,213 Pediatrics Pathology $3,829 Neurology $3,525 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 Medical liability expenses vary across specialties… Median Professional Liability Premium Rates by Specialty 2000

  11. Ob/Gyns as aPercentage ofPhysicians 5% Ob/Gyn Claims as aPercentage ofAll Claims 14% Ob/Gyn Pay-outs as aPercentage ofTotal Pay-outs 23% 0% 5% 10% 15% 20% 25% …due to differences in risk and claims experience. Ob/Gyns as a Percentage of Physicians, Claims, and Pay-outs 1999

  12. $202,949 $160,746 $115,429 $13,874 $12,288 $11,580 Dade/BrowardCountiesFL DallasHoustonGalveston,TX NYCNassauSuffolkCounties, NY Indiana Nebraska SouthDakota Highest Lowest Premiums also vary widely across cities and states. Highest and Lowest Premium Rates Reported by Insurers in Specific Markets, Ob/Gyn July 2001

  13. Some states have capped awards for pain and suffering… Limits on Damages for Pain and Suffering1 2001 RI None DE None DC None Limits on damages forpain and suffering None Under $250,000 $250,000 - $499,999 $500,000 - $999,999 $1,000,000 and over 1Map values represent caps for non-economic damages except for the following states in which they refer to total caps: Indiana, Louisiana, Nebraska, New Mexico, South Dakota, and Virginia

  14. …and taken measures to prevent plaintiffs from collecting from multiple sources. Reform of Collateral Source Rule 2001 RI Mandatory DE Discretionary DC None None Mandatory Discretionary Case Law Support

  15. Bill Date Introduced Limits on Non-economic Damages Collateral Source Payment Offsets Statute of Limitations Mandatory Alternative Dispute Resolution Limits on Attorney Contingency Fees Penalties for Frivolous Suits Joint and Several Liability Reform H.R. 5 “Help Efficient, Accessible, Low Cost, Timely Health Care (HEALTH) Act ” February,03 $250,000 3 yrs after injury S. 1370 “Common Sense Medical Malpractice Reform Act of 2001” August 3, 2001 $250,000 2 yrs after discovery H.R. 2103 “Medical Malpractice Rx Act” June 7, 2001 $500,000 5 yrs after injury H.R. 1639 “Common Sense Medical Malpractice Reform Act of 2001” April 26, 2001 $250,000 3 yrs after injury H.R. 5344 “Common Sense Medical Malpractice Reform Act of 2000” September 28, 2000 $250,000 3 yrs after injury Attempts at tort reform have been made at the federal level, as well.

  16. $250,000 Illinois Highest $197,500 DC Pennsylvania $192,755 Indiana $100,000 Lowest Utah $90,000 $55,000 California All $125,000 0 50,000 100,000 150,000 200,000 250,000 MICRA reforms in California have helped to control increases in payments… Median Physician Medical Liability Pay-out 2000

  17. $6.5 $6.0 $5.5 $5.0 $4.5 $4.0 $3.5 (in billions) U.S. Premium +420% CA Premium +168% $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 …and premiums. Medical Liability Premiums, CA vs US (in billions) 1976-1999

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