Moody's: Medical Malpractice Insurance Market Driven by Healthcare Delivery

side note: The article linked to below gives a synopsis of a recent analysis of the medical malpractice insurance market published by Moody’s Investment Services, the well-known provider of credit ratings and research covering debt instruments and securities.

In its analysis titled “U.S. Medical Professional Liability Insurance: A Specialty P&C Insurance Sector Tied Closely to the Structure of Healthcare Delivery,” Moody’s rightfully notes that the future health and success of the medical malpractice insurance market will largely depend on anticipated changes in the method of healthcare delivery in the United States. These changes will most likely be dictated by the success of President Barack Obama’s Patient Protection & Affordable Care Act.

The way it is designed, the Patient Protection & Affordable Care Act will favor physicians participating in an Accountable Care Organization (ACO). An ACO is a healthcare delivery model that seeks to tie physician reimbursements to specific quality and efficiency metrics as well as an overall reduction in the total cost of healthcare. An ACO model accomplishes these metrics and cost reductions by moving the delivery of healthcare away from traditional, small-group practices toward multi-specialty and — in some cases — multi-state physician networks.

This move toward the ACO model of healthcare delivery is anticipated to have a significant effect on the medical malpractice insurance market — especially in the short term. This is true because hospital systems look to be making a move towards acquiring independent practices and their patient base in order to create large-scale ACOs for themselves.

How will this affect the medical malpractice insurance market in the near term? Larger multi-line malpractice insurance companies that do business in several states should be fine, but smaller malpractice insurers may get squeezed out of the market. If this is the case, expect a further consolidation of insurers as the larger companies acquire the smaller ones.

Change can be scary, but changes are necessary for the future success and affordability of healthcare in the United States. The good news is that the medical malpractice insurance market has had much financial success during the last five or six years, and should be in a strong-enough position to adapt to upcoming market changes.

The evolving U.S. health care delivery system presents both opportunities and challenges for medical professional liability insurers, according to an analysis released Monday by Moody’s Investors Service.

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