How Hospitals Can Cut Medical Liability Costs

Roxanna Guilford-Blake, for HealthLeaders Media , December 13, 2010

Then put the power of the purse behind the call for change. Once the executive team has identified high-risk areas, allocate money to reduce the risk, Nelson says. For instance, if patient falls are increasing, allocate capital funds for equipment to limit that risk; if workplace injuries are an issue, invest in equipment to help staff lift the patients.

Review the coverage
If you have outside coverage, take advantage of everything your insurer offers, says Nelson. You may be able to align internal improvements with incentives from insurers.

CFOs also should look for potential pitfalls; they should review their policies carefully with an attorney experienced in insurance coverage issues, says attorney William J. Spratt, Jr., a partner with K&L Gates' Miami office. Many policies have exclusions and limitations that effectively nullify the coverage, he warns. "Unfortunately, the exclusions become the focus when a significant claim arises and the insurance company seeks to deny or rescind coverage."

A detailed analysis of the policies and the foreseeable risks, by an experienced insurance coverage attorney, will reveal gaps in coverage, Spratt says.

 From there, the CFO, working with the head of risk management, should develop a matrix and:

  • Analyze the loss ratios across all lines of insurance
  • Analyze the cases for trends
  • Develop a proactive strategy to tailor coverage for the predictable risks and develop risk abatement strategies

Monitor the cases
The CFO also should monitor the status of cases. Rooney advises monthly or quarterly meetings between the CFO and chief legal counsel. "Regular review of new cases and proper estimation of reserves is essential, which can be a bit of an art and needs the input of an experienced litigation attorney."

The hospital legal department should include at least one attorney with medical liability insurance experience, he adds. "This helps not only with estimating reserves but in managing the costs of outside law firms hired to defend the hospital."

Monitoring reserves makes sense, but the lessons learned may come too late. "The self-insurance reserve is a lagging indicator," Rooney warns. "By the time it starts moving up, it's too late."

The same may apply to any clues yielded on the balance sheets, says Spratt.

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