Mounting Medical Malpractice Claims Creating Insurance Crisis

Healthcare organizations, from hospitals to physicians’ groups and nursing homes, are facing a dramatic increase in medical malpractice claims. Since 2009, the average cost of medical malpractice claims in the United States has increased by 50 percent. Although healthcare organizations have insurance to cover these claims, the sharp increase is raising premiums to an almost prohibitive level, leaving many groups with less-than-adequate coverage at best and potential threats to financial security at worst.

Before a solution can be found, it’s crucial to understand why medical malpractice claims are rising.

Why the Rise in Malpractice Claims

The last 10 years or so has seen a dramatic increase in outlier verdicts, with an increase of claims greater than $500,000 increasing from 10 percent in 1999 to 20 percent in 2017. The past five or six years have seen additional increases in claim severity, which is adversely impacting professional liability insurance company profitability.

According to Justpoint, a medical malpractice research group, a vast majority of medical malpractice claims from 2013-2017 were due to diagnosis error (33%), surgical errors (24%) and improper treatment (14%).

Change in Social Views

As social media and 24-hour news cycles turn fortunes on a dime, healthcare organizations are becoming more maligned. Many juries see corporate-run healthcare systems as cold organizations with deep pockets, with juries (and the public) wishing to see the large systems pay. This has led to a trend toward higher pre-trial settlements to avoid the risk of unfavorable outcomes in jury trials.

Predatory Legal Firms, Batch Claims and Rising Costs

As the opportunity for higher settlements and awards rise, more legal firms are engaging in predatory practices to pursue medical malpractice claims. On top of that, third-party litigation funding is fueling an industry that is attracting billions in private equity funds to invest in plaintiff actions as an investment opportunity. There has also been an increase in claims alleging sexual misconduct against providers, which has resulted in several large class action “batch” claims filed on behalf of mistreated patients.

These circumstances are making it more costly to defend malpractice allegations, putting a further financial strain upon healthcare organizations.

Risk Management Preparation

With these rising costs, it can feel inevitable for your organization to be faced with a high severity medical malpractice claim. The emphasis on malpractice claim prevention is now an increasingly important risk management priority.

Download the white paper Medical Malpractice: Using Data to Stay Ahead of Risks to learn more about how medical malpractice claims are impacting insurance and some strategic solutions to mitigate risk.