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Digital EditionEnsuring Access: The Imperative in Preventing Medical Deserts
Nat Cross is the Global Head of Healthcare at Beazley. He can be reached at [email protected].
From X-rays to pinpoint a broken bone to a round of antibiotics to treat a bacterial infection, we take it for granted that when we fall ill, we can count on our doctors to diagnose us and endeavor to make us well again. Indeed, access to emergency services, preventative care and routine treatment are essential components of modern society. A stable network of providers and accessible facilities not only helps to reduce the risk of disease for individuals, but also contributes to the quality of life for entire communities.
The potential loss of that kind of access is a frightening prospect to contemplate – and yet that’s the stark reality of medical deserts.
A medical desert is a geographic area where residents have difficulty accessing health care services. There are many reasons that access to hospitals and other medical providers may be limited in any given area, including physical distance or a lack of local transportation options.
Scarcity of local health care providers and facilities can also be a factor contributing to medical deserts – and it is one that may soon be amplified in U.S. markets if the financial impact of rising social inflation impels hospitals to shut their doors and physicians to move to less litigious areas[2]. With medical professionals’ litigation costs spiraling out of control and insurance carriers rethinking coverage terms in response, this is a precarious time for the future of medical access in the U.S. We must acknowledge and address these challenges before the consequences become severe.
The Challenge: Medical professional liability claim severity is at an all-time high.
Thanks to the modern patient safety movement, quality and risk management have increasingly been embedded into health systems over the past 20+ years, and this increase in the safety of patient care has notably led to a decrease in US hospital professional liability claim frequency. But over the same period, the cost of resolving individual claims is rising.
The drivers of the increase in individual claims costs have been well documented: namely the accentuation of social inflation, compounded by heightened economic inflation in 2021 and 2022. Society is increasingly less tolerant of egregious instances of medical malpractice, and as a result, plaintiff attorneys have successfully driven up the highest value claims such that they have an outsized impact representing a much larger share of total medical malpractice costs. Further compounding the issue is the growing trend of litigation funding, which gives plaintiff attorneys greater resources with which to bring cases to trial. But even when a claim does not go to trial, the cost to hospitals is greater than ever, with average settlements increasing 12.5% pa between 2018-2024. It’s also worth noting that plaintiff attorneys typically take roughly 40% of any award or settlement, increasing their incentive to drive these figures as high as possible.
The escalation in nationwide severity in recent years, coupled with the outsized impact that the small proportion of large claims can have in this era of social inflation and nuclear verdicts, is having a significant impact on the insurers who provide cover for the health care industry. Nationwide, the proportion of $10m+ settlements doubled between 2019 and 2023, which will likely disproportionately impact excess towers.
The Impact: The growing litigation environment has put pressure on the insurance market, creating coverage gaps.
Absent any improvement in the litigation environment, excess hospital professional liability insurers will likely see double-digit inflation on their portfolios this year and each year that follows. This is clearly not sustainable, and in order to service clients adequately elsewhere, insurers have had to rethink their strategies. However, the impact of such a decision comes with very real and challenging implications for the availability of medical services in this country.
Without adequate insurance cover, hospitals cannot remain in operation, but if too many carriers are unable to maintain their offerings, the remaining coverage options may include policy terms and self-insured retention funding requirements that are simply untenable. It would not be surprising to see some hospitals close their doors under such circumstances, leaving decreased access to health services (medical deserts) in their wake.
The adverse effects of insufficient access to medical resources and facilities present a very real concern for communities and individuals alike. One of the biggest societal challenges is that remaining services become increasingly inaccessible to all but the wealthiest individuals due to long waiting times and disproportionately high cost of service at the facilities that remain. An increased burden is also placed on families of the sick, including missed work days to seek treatment. And in the long term, lack of access to routine preventative care and emergency services can jointly lead to higher morbidity and mortality levels.
Taking Action: What Can Be Done?
Though this is a problem that has been largely accelerated by lawyers, it is one that we collectively need to face head on. The onus is on all of us to put our heads together and pursue a path to ensure that a rise in medical deserts is not our eventuality. Responsibility cannot be solely placed on the insurance industry to address this challenge of course, but we do need to be active in the conversation.
One way that change can be brought about is through legislation, which some states already pursuing. In Georgia, for example, Governor Brian Kemp has recently unveiled comprehensive tort reform legislation[3] aimed at curbing the impacts of legal system abuse. The proposal, which is based on a recent state insurance department report that revealed a 25% increase in Georgia’s five-year average of litigated claims, will help reduce insurance costs if passed.
In addition to pushing for legislative reform across pockets of the country, we have the opportunity to socialize specific legislative changes that different venues are pursuing, in order to raise awareness to other areas of the country around the battles that are worth fighting. This will be an important step in the process of driving consensus and bringing about change in the way that future claims are litigated in the U.S.
The time is now to ensure future viability of medical accessibility. Let’s amplify the issues and come together to solve the problem, instead of walking away. &
