june 23, 2015 timothy c. mosler, fcas, maaa arthur r. randolph, ii, fcas, maaa medical professional...
TRANSCRIPT
June 23, 2015
Timothy C. Mosler, FCAS, MAAA
Arthur R. Randolph, II, FCAS, MAAA
Medical Professional Liability Five Years into the Affordable Care Act
2
• Disclaimer• Hospital Employment of Physicians• Defensive Medicine• Transition to EHRs• Impacts on Healthcare Captives• Market Observations• Impacts on Physician Insurers
Agenda
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Throughout this presentation, we will discuss the potential impacts of changes in health care. We can only speculate as to the impacts and, as we are in the initial implementation phases of the Affordable Care Act (ACA), it is too early to discuss the impacts with certainty. Ultimate long term impacts will depend on many factors including the actions of claimants, lawyers, insurers, regulators and health care providers.
Disclaimer
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• Recognition of scale advantages• Control of quality• Revenue advantages• Smaller administrative load
• Corresponding decrease in solo practitioners• Increasing number of accountable care organizations (ACO)
Increased Hospital Employment of Physicians
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Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
0
100
200
300
400
500
600
700
800
Number of ACOs has Quadrupled Since Q1 2012
Source: Health Affairs Blog (www.healthaffairs.org/blog)
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2000 2005 2009 2013 2016 (est)0
100
200
300
400
500
600
700
800
900
683723
757794 821
389354 326 294 271
Total Independent
Amounts in Thousands
Increasing Number of Physicians / Declining Independence
Source: Accenture
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• Favorable• Consistent risk management approach• Focus on patients, not on managing the practice• Motivation to succeed: ACOs that succeed in both
quality care and lower costs can share in savings that may result
• Unfavorable• Physicians may take less responsibility as hospital
employees than as independent practitioners• Poor performers could take longer to be detected
in large health care systems
Effects of Doctors Becoming Part of a System
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• Improvement in claims handling with multiple defendants sharing a common employer
• Different claim handling practices between hospital programs and physician insurers
• What happens when the hospital wants to settle and the doctor wants to defend
• Higher limits• Closed claim reporting to regulators
Effects of Physician Employment on Claim Resolution
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Given the statement: Hospital employment of physicians is a
positive trend likely to enhance quality of care and decrease costs.
Physicians Foundation 2014 Survey – Hospital Employment
2014
Mostly Agree
Somewhat Agree
Somewhat Disagree
Mostly Disagree
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Given the statement: Hospital employment of physicians is a
positive trend likely to enhance quality of care and decrease costs.
Physicians Foundation 2014 Survey – Hospital Employment
2014
Mostly Agree 9.3%
Somewhat Agree 27.8%
Somewhat Disagree 28.8%
Mostly Disagree 34.1%
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Given the statement: Hospital employment of physicians is a
positive trend likely to enhance quality of care and decrease costs.
Physicians Foundation 2014 Survey – Hospital Employment
2014 2012
Mostly Agree 9.3% 4.6%
Somewhat Agree 27.8% 19.9%
Somewhat Disagree 28.8% 32.8%
Mostly Disagree 34.1% 42.7%
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• There is evidence that some tests and procedures are run unnecessarily
• The standard of care may, in many cases, be above the reasonable person standard
• What will be the effect on medical professional liability (MPL) if there is a reduction?
Defensive Medicine
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US Health Care Costs
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
National Health Expenditures Health Care as a % of GDP
Bill
ions
Based on CMS reports
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Trends in Indemnity Claim Frequency
Estimated US Doctor Count
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.000
0.500
1.000
1.500
2.000
2.500
Ratio of Indemnity Claims to 100 Doctors
Based on multiple editions of AMA’s Physicians Characteristics manual and the National Practitioner Data Bank
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Count of Closed Indemnity Claims
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013620,000
640,000
660,000
680,000
700,000
720,000
740,000
760,000
780,000
800,000
820,000
Count of Patient Care Physicians
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• ACA offers incentives for “meaningful use” of EHRs• An individual’s EHR is a digital record of their health
information and can include • Medical history• Allergies• Prescriptions• Test results• Radiology results• Vital signs
• Can potentially be shared by all of the individual’s health care providers
• Viewed as a key component in achieving quality outcomes
EHRs
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• Better access to information• Include a complete history which will allow for
detection of conditions that are growing worse• Can be shared across health providers
EHRs are Expected to Reduce the Number of Bad Outcomes
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• MPL claim payment requires four steps• Bad medical outcome• Filing of a claim• Settlement or finding of negligence• Damages awarded• Use of EHRs moves the latter three out of four
toward higher costs• Also
• Potentially higher standard of care given that more information is available to the doctor
• Privacy concerns
But, How Will the EHR Affect Costs once There is a Bad Outcome?
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Given the statement: How has EMR affected your practice?
Physicians Foundation 2014 Survey – Electronic Health Records
2014
Improved Quality of Care
Detracted from Quality of Care
Improved Efficiency
Detracted from Efficiency
Improved Patient Interaction
Detracted from Patient Interaction
Has had Little to No Impact on the Above
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Given the statement: How has EMR affected your practice?
Physicians Foundation 2014 Survey – Electronic Health Records
2014
Improved Quality of Care 32.1%
Detracted from Quality of Care 24.1%
Improved Efficiency 24.3%
Detracted from Efficiency 45.8%
Improved Patient Interaction 4.6%
Detracted from Patient Interaction 47.1%
Has had Little to No Impact on the Above 7.6%
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• Provisions of ACA encourage consolidation– Likely to be more hospital captives– Definitely more physician group captives
• Coverage/Pricing Considerations– Possible higher retentions– Tail Liability – Per-Occurrence retentions– Batch Claims
Growth in the Number of Captives
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Tail Liability
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2010 CM1 CM2 CM3 CM4 CM5
2011 CM2 CM3 CM4 CM5
2012 CM3 CM4 CM5
2013 CM4 CM5
2014 CM5
2015
2016
2017
2018
2019
RYAY
Assumes the doctor’s practice began 1/1/2010 and shut down on 1/1/2014 when the doctor went to work for a hospital/physician group
Claims reported 10 – 14 are covered by the
doctor’s insurer
Accidents in 2015 and after are covered by the hospital/physician group’s policy
Who insures these cells?
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Per-Occurrence Retention
• All defendants named for a particular occurrence are subject to one retention• Different from each physician having their own retention
Def1 Def2 Def3$0
$100$200$300$400$500$600$700$800$900
$1,000
400
200
100
Claim Amount
In T
hous
ands
Occ1$0
$100$200$300$400$500$600$700$800$900
$1,000
700
Claim Amount
In T
hous
ands
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Per-Occurrence Retention (cont’d)
In all of the above cases, it’s possible that the amounts could also be equal with a per-defendant and per-occurrence retention
• Helpful for physician groups• Harder to estimate funding
– But certain relationships should hold relative to a per-defendant retention
Relative to per-defendant
Claim Count Average Severity
Total Losses
Below the retention Less Greater Less
Above the retention Less Greater Greater
Total Limits Less Greater Equal
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Doctor A:
- Performs a particular type of surgery
- They are not fully trained to perform this
surgery
- 40 surgeries in a year
- 5 meritorious claims are filed by patients
- They are a solo practitioner
Is this a batch claim?
Batch Claims
Doctor B:
- Performs a particular type of surgery
- They are not fully trained to perform this
surgery
- 40 surgeries in a year
- 5 meritorious claims are filed by patients
- They are a hospital employee
Is this a batch claim?
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• Favorable• Patients will have access to affordable healthcare• More frequent interactions with health care providers
• Unfavorable• Access to health insurance won’t change individuals’
behavior regarding their health• A larger number of insureds could actually increase the
delay in getting a doctor’s appointment• Higher deductibles on health insurance policies could delay
visiting the doctor until the condition is more severe
Effects of Greater Access to Healthcare
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• Study conducted by ACAView• New-patient volumes
– Increased physician workloads - no evidence– Increased proportion of comprehensive patient evaluations– More patients with acute conditions – no evidence
• Increased insurance coverage– Significant decrease in uninsured patient visits– Stable provider relationships– Elimination of age disparities
2014 ACA Observations – Operational
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• Shrinking exposure base• Concern with premium revenue• Reinsurance considerations• Focus on diversification strategies
– Acquisition – scale and geographic penetration– New class of insureds – rural health systems– New, complementary lines of business – WC, CMP, cyber– Non-risk bearing services – TPA, advisory, captive
management– Alternative markets – captives, RRGs, E&S
Impact on Physician Insurers
28Commitment Beyond Numbers
Thank You for Your Time and Attention
678-894-7254
Tim Mosler
678-894-7258