Hub International’s Shawn McLaughlin outlines how the ways in which people receive healthcare are transforming and the role insurance has to play.
IBA: What has been the recent trend in medical malpractice claims?
Shawn McLaughlin: Over the past decade, the average severity for medical malpractice claims has continued to worsen. If you go back 20 years, you can see a pattern: As technology, treatments and pharmaceutical breakthroughs improve, the approach to treating a patient changes as information becomes more readily available. This usually creates a better outcome for the patient. We have seen the frequency of claims reduce and bottom out, despite the new risks that technology creates.
However, while there has been a trend of fewer claims over this time, medical inflation and patient access to more information than ever before have resulted in severity continuing to worsen.
IBA: What factors are affecting the severity of claims?
SM: I think the severity of the outcomes has always been there. In my opinion, there is a perception amongst patients that doctors will be able to fix their injuries and return them to good health, but in many situations, that is not the case, especially as we age. Before technology was so prevalent, you really had to rely on the doctor’s opinion, and most people didn’t question it. Today, more people are taking a more active role in their health.
In the past, a claim might not have been brought up in these situations; now we see claims occurring.
IBA: What are the major trends affecting the overall healthcare industry today?
SM: The healthcare industry has consolidated quite a bit, with hospitals and physician groups merging or being acquired. While we are seeing new businesses come into the industry – especially in senior care, home health, telemedicine and outpatient services – traditional brick-and-mortar healthcare businesses have experienced major consolidation. As a result, carriers are chasing a smaller and smaller group of clients. There is a lot of competition to keep rates pressed, despite the claim environment.
At the end of the last millennium, medical malpractice went from being one of the least profitable lines of coverage to one of the most profitable. Now the trend is pointing toward higher losses again. Medical malpractice is what we in the industry call a long-tail business, because often a patient is treated today, but it can be five to seven years before a claim is resolved.
For some time, carriers benefited from duplicate reserves and healthy, stable bottom lines. However, as competition increases, many carriers are expanding outside their territories and competitively pricing risks, despite worsening trends and smaller duplicate reserves. Only recently are we seeing rates in certain states increase.
IBA: What are some emerging areas of healthcare?
SM: First, we are seeing more and more private money go into healthcare. Additionally, we have an aging population of baby boomers entering the last phase of their lives, when the amount of care needed increases dramatically. Historically, the industry has not had enough nursing home beds to meet this new demand, so now there are a lot of individuals being pushed into home healthcare and receiving care via telemedicine – areas in which we are seeing dramatic growth.
Also, the emergence of lower-care (and lower-cost) senior care and assisted living facilities are filling the need of a shortage of nursing home beds for those who are not fit to be at home unsupervised, but don’t need the skilled care of a nursing home. We have seen carriers very concerned about the care provided as a result of people staying in these facilities longer than necessary.
IBA: How is technology transforming healthcare?
SM: Technology has had a major impact on healthcare. In the past, you had to go see a clinician face-to-face to be treated, and afterwards, they would fill out a medical record by hand. The business has gone through a radical change in the past 15 years, and most practices now use electronic medical record systems, which has caused an evolution in how clinicians provide care and can communicate with each other in real time. Telemedicine reaches patients that might not have access to care otherwise.
That said, there is also a downside to modern technology. Errors can occur when workers don’t use the systems correctly or are not properly trained. Another major concern is the protection of vast amounts of patient information and the increased exposure to data breaches. Healthcare has always been one of the more highly sought-after areas for cyber criminals because medical information is so valuable. While there is a risk with using technology, the good outweighs the bad.