Medical Malpractice Becoming More Costly

The average cost of a medical malpractice claim in the United States has increased by 50% since 2009 with a sharp rise in the number of claims of more than $5 million over the last four years, according to Beazley, an insurer of hospital professional liability (HPL).

These findings have been published in a collaborative article on the HPL insurance market by Beazley and Aon, a firm that provides risk, retirement, and health solutions. The article is contained within the latest annual Aon/ASHRM Hospital and Physician Professional Liability Benchmark Study.

Specifically, the article studies trends in HPL claims above $5 million and the impact on the HPL insurance market. It was based on data from Aon’s extensive hospital and physician professional liability claims database and Beazley’s database of more than 850,000 unique professional liability claims, representing 47% of all U.S. hospital beds. 

“The average paid claim with indemnity closing in 2018 was 6% higher than in 2017,” says Valentina Minetti, U.S. hospitals focus group leader at Beazley. “While that is only a single-digit increase from year to year, the cumulative effect of similar rises has taken the average paid claim from $400,000 in 2009 to almost $600,000 in 2018. That means paid claims are 50% higher than they were nine years ago.”

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Beazley’s findings further showed that large claims––defined as larger than $5 million––now comprise a much greater portion of all claims than in years past. In looking at the period 2015-2018, these claims were 1.9% of total claims versus 1.2% in the prior four-year period 2011-2014.

“The percentage of the very biggest claims is up versus the previous four-year timeframe and now much greater than in the early 2000s when $5 million claims were less than 1% of all claims,” Minetti says. “We attribute this rise to a combination of aggressive plaintiff attorneys and generous jury awards.

“Double-digit million-dollar claims are having a chilling effect on the medical liability community,” she adds. “Awards of this size drive hospitals to increase their self-insurance, can cause premiums to rise, and industry capacity to decrease, so there is certainly a shared interest in seeing these rising costs stabilize.”

Now in its 20th edition, the Aon/ASHRM Hospital and Physician Professional Liability Benchmark Analysis is produced under a co-marketing agreement between Aon and The American Society for Healthcare Risk Management (ASHRM). The study is designed as a hands-on tool to provide healthcare risk managers with a better understanding of their cost of risk compared to an industry benchmark. Through measurement and analysis of claim and exposure data, risk managers develop proactive strategies to reduce risk-related costs and ultimately improve outcomes.