Amidst Healthcare Uncertainty, PIAA 2017 Medical Liability Conference Focused on Current Challenges, Future Concerns
Hosted at the Broadmoor Hotel in Colorado Springs, Colo., with the backdrop of a Republican plan to repeal and replace the Affordable Care Act stalled between the U.S. House and Senate, the 2017 PIAA Medical Liability Conference convened from May 17 – 19 to examine the many challenges currently facing the medical professional liability insurance industry.
“This is a time of significant uncertainty for PIAA, the medical profession and the professional liability community,” acknowledged Richard Anderson, MD, PIAA chair as well as chairman and chief executive of The Doctors Company, during the opening remarks to the conference. “The evolution in healthcare delivery is transforming healthcare financing, organization and regulation, while challenging traditional definitions of good medicine. … The consolidation of healthcare delivery is well into its second decade and will be only marginally affected by national politics. Eighteen-percent of the American economy is in play. This is a non-partisan process that is unlikely to be interrupted. PIAA is working to move the process of ‘repeal and replace’ toward reasonable solutions, if this is possible in Washington today.”
Following are some of the highlights from the educational sessions at this year’s Medical Liability Conference.
Healthcare in the Digital Age
Keynote speaker Robert M. Wachter, MD, professor and chair of the Department of Medicine at the University of California, San Francisco, launched the two-day Medical Liability Conference with a session titled, 21st Century Medicine: IT, New Practice Methods and More.
Wachter started by acknowledging, “the angst of the modern physician is the challenge to “deliver high-quality, safer, satisfying and more affordable care.”
The answer to that challenge is clearly tech-enabled, but the medical industry remains in its infancy stage regarding information technology. Wachter illustrated this point by citing statistics from the Office of the National Coordinator for Health IT that show only 9.4 percent of hospitals employed electronic health record technology in 2008, but that number jumped to 83.8 percent by 2015.
Drawing upon his professional experience and real-life case examples to explore some of the unforeseen consequences in healthcare’s adoption of data information technology, Wachter noted how the clerical burden of electronic health records has pushed physician burnout rates above 50 percent (up 9 percent in the last three years); how the intensive care unit at his hospital has an average of 2,558,760 audible alerts per month, which has created staff alert fatigue; and how digitization has threatened the doctor-nurse collaboration as well as the doctor-patient relationship.
Later that day — and in the wake of the previous week’s massive “Wanna Cry” ransomware attack that paralyzed many hospitals and physician offices in the United Kingdom — a chilling session titled The Data Privacy & Security Landscape: Today’s Threats & Risk Mitigation explored the many ways digital criminals are targeting the healthcare sector.
Panelist Gamelah Palagonia, Willis Towers Watson senior vice president, walked attendees through the increasing complexity and endless array of developing threats such as Ransomware, Distributed Denial of Service (DDoS) attacks and vulnerabilities associated with the “Internet of Things” (IoT) that has propelled the cyber risk landscape into uncharted territory.
“Healthcare is the most vulnerable industry in America,” Palagonia said, noting that the healthcare sector accounted for 22 percent of all hacking incidents by industry. The good news, she said, is that proper employee training can mitigate two-thirds of all cyber risks facing healthcare.
In a session titled Storm on the Horizon: Determining the Next Claims Hurricane, moderator Sarah Pacini, JD, chief executive of the Cooperative of American Physicians, led panelists through emerging trends in handling medical professional liability claims.
Panelist Matthew Nielsen, Esq., vice president of claims for OMS National Security Co. RRG, brought attendees’ attention to the relatively growing trend where medical liability plaintiff attorneys invest in litigation cost insurance, which covers expert fees, deposition transcripts, travel, trial exhibits, mediator expenses, copies, etc., in the event that the plaintiff loses at trial. Such coverage is currently available in 16 states. Nielsen opined that this insurance product carries the potential to spike the volume of medical liability claims filed, swell the number of cases that go to trial, increase indemnity and embolden plaintiff attorneys to spend more money on expert witnesses and the overall amount they are willing to spend on a medical malpractice trial.
Joel Hopkins, Esq., partner at Saul Ewing LLP, spent significant time exploring the inherent challenges presented by electronic health records and the discoverable metadata found in the technology’s audit trails. Not only does the available metadata raise issues of privilege and confidentiality, it can push an insurer’s loss adjustment expense into the five figures.
During the session Employment or Private Practice: Factors Influencing this Key Decision, moderator Mary Ursul, Coverys executive vice president, and panelists looked at the data indicating physician employment continues to increase as well as the factors leading to a doctor’s decision to remain in private or employed practice.
Panelists cited data from a 2015 Merritt Hawkins “Survey of Final-Year Medical Residents” that indicates 36 percent of today’s physicians finishing their residency or fellowship are open to a hospital-employed practice — up from just 3 percent in 2003. These young doctors most value free time, educational debt relief and a good income when determining how to practice. Panelists also noted medical liability as a “significant concern” to young physicians has dropped significantly since 2011.
During Leveraging Data to Change the Risk Mitigation Game, Rick Hammer, MD, senior vice president at SE Healthcare Quality Consulting, and James Saxton, Esq., chief executive at Saxton & Stump LLC, discussed how empowering doctors with their own data could serve as one of the foundational elements necessary for success. They noted that — when utilized in a very specific way — data could be a gateway to professional liability risk mitigation. To illustrate this point, the panelists looked at how the implementation of a data-driven obstetric patient safety program at the New York Weill Cornell Medical Center decreased its number of sentinel events from five in 2000 to none in 2008 and 2009; during the same period, the hospital’s obstetric department reduced its average annual compensation payments from $27,591,610 between 2003 and 2006 to $2,550,136 between 2008 and 2009.
The Financial State of MPLI
Diving deep into the financial health of the medical professional liability insurance industry, during the session MPL Insurance Industry Performance: What’s the Latest?, Chad Karls, principal and consulting actuary at Milliman Inc., examined the underlying drivers of the medical professional liability industry’s financial condition.
Karls began his presentation with the unsettling fact that the industry’s overall direct written premium decreased by 24 percent between 2006 and 2016. That number is an even bigger 32 percent when looking solely at the direct written premium from traditional physician liability insurance — as opposed to including hospitals, other facilities and other providers.
The most impressive news Karls shared was the extreme slide in claims frequency, which has fallen around 40 percent since 2001. “This is really big stuff,” he marveled. “It’s huge.” Karls later explained how the industry’s almost 40-percent drop (relative to 2000 – 2002 levels) in physician paid indemnity is “driven totally by the fall in claims frequency.”
While the decline in claims frequency and paid indemnity is a positive, Karls brought attention to “the fly in the ointment” — allocated loss adjustment expenses (ALAE) have ballooned by 6.3 percent between 2005 and 2015. Even more concerning, 38 percent of ALAE costs are spent on claims that are dropped, withdrawn or dismissed, and ALAE severity is outpacing indemnity severity. Obviously, defense costs are getting out of control.
Combined ratios inched above 100 percent for the first time since 2005, denoting an underwriting loss, but Karls noted medical professional liability insurers are buoyed by “incredibly strong balance sheets … the strongest balance sheets we’ve ever had.”