Practice Economics

Why Hospitalists Remain Outside Malpractice Insurers' High-Risk Categories, For Now


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Figure 1. Average indemnity and total expense by responsible service, 2007-2012.
Source: The Doctors Company

Ten years ago, the national headlines on malpractice insurance were staggering. Media reports catalogued OB-GYNs who proclaimed they were shutting down their private practices in the face of runaway premiums. Surgeons and other proceduralists decried payments tied to lawsuits they’d argue were arbitrary and capricious. And the American Medical Association (AMA) made announcement after announcement about states being in a “malpractice crisis.”

In recent years, premiums have actually dropped and stabilized at levels that most physicians agree are manageable for bottom lines. But, in that time, there has been scant discussion about hospital medicine’s relationship with malpractice. It’s not because the issue isn’t omnipresent for all healthcare practitioners, including the relatively nascent specialty that is HM.

Practice management experts say anecdotally that delayed diagnosis of, or treatment for, a spinal epidural abscess (SEA) is likely to get more than a few hospitalists sued. And, the proliferation of co-management of other specialties—particularly those with higher risk of incidence and higher premiums than internal medicine—open up hospitalists to further liability.

The issue is that at less than 20 years as a specialty, HM is in its infancy when it comes to its interaction with malpractice premiums. Health insurance companies and trade groups that track the insurance industry are just beginning to have enough data on claims, premiums, and payouts to make recommendations on risk factors, risk mitigation, and potential trends.

Tips for Hospitalists

Hospitalists aren’t taught much about medical liability insurance in medical school or during residency, so it’s not surprising that strategies to reduce liability risks may not be well known. Tips include the following:

  • Clarify to the patient and colleagues the role and scope of care to be provided. When patients feel like they understand what is happening, they are more satisfied. When specialists discuss ahead of time their roles on a case, there is less chance for confusion.
  • Be aware of when the greatest risks occur. Handoffs are a vulnerable time, whether it’s department to department or discharge to a primary care physician. Establish a system that ensures follow-up protocols.
  • Use standardized methods with other providers to avoid miscommunication. Checklists can be helpful to make sure “basic yet vital” information is always collected.

Still, even in a landscape of limited information, there are a few rules of thumb hospitalist group leaders should live by when it comes to managing exposure to malpractice cases, according to interviews with a half dozen healthcare professionals:

  • Know how your coverage works. Is there “tail coverage” that ensures you have protection for incidents that happened at an institution where you no longer practice? Even though hospital-employed physicians rarely have rate discussions directly (the hospital typically covers premiums as part of the compensation package), take the time to learn the basic details.
  • Be diligent in documentation. Note concerns in charts when appropriate, and stand up for your point of view. There’s a fine line between picking fights with other physicians involved in a patient’s care and making your concerns known, but don’t be afraid to put your clinical view on the record.
  • Avoid the practice of “defensive medicine.” Ordering tests and procedures that aren’t clinically necessary might seem like it can serve as a protection from later lawsuits, but it adds to healthcare costs and is just not the right thing to do, says hospitalist Allen Kachalia, MD, JD, of Brigham and Women’s Hospital in Boston, who has studied the phenomenon (see “Culture Shift Necessary to Defeat “Defensive” Medicine,” on p. 38).
  • Recognize the risks associated with co-management. Caring for neurology, cardiology, and other subspecialty patients is a revenue boost for HM groups, but when some of those complex cases have adverse events, the hospitalist who interacted with the patient daily could be included in a lawsuit.
  • Focus on communication skills. An analysis of claims data by The Doctors Company (TDC) (, a medical malpractice insurance company exclusively endorsed by SHM, reports that the second most common factor contributing to patient injury by hospitalists is “communication breakdown among healthcare professionals.”
  • Manage workloads to avoid burnout. Don’t take on too many patients at the expense of being involved in hospital committees or quality initiatives.

To be sure, many of the same tenets of being a productive hospitalist with high patient satisfaction scores—maintain manageable censuses; focus on patient centeredness; and use checklists, technology, and regimented protocols to reduce adverse events—translate very well to being a lower-risk hospitalist in relation to malpractice cases.

When you’re “thinking of patient satisfaction strategies, also think of them as risk mitigation strategies,” says John Nelson, MD, MHM, FACP, medical director of the hospitalist practice at Overlake Hospital Medical Center in Bellevue, Wash., an SHM co-founder and practice management columnist for The Hospitalist. “They overlap tremendously.”

A History Lesson

Medical malpractice has been around for centuries and has two prevailing goals: 1) to provide monetary remuneration to patients who have been injured via substandard care and 2) to deter that poor treatment through fiscal punishment.

Malpractice lawsuits were not prevalent enough to be a major medical concern until the early 1800s. By the middle of the 19th century, the country hit its first periods of crisis.1 Cycles ebbed and flowed from there, with malpractice premiums causing crises in the 1980s and again in the early 2000s.

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Manages workload

  • Follows professional consensus on workload




  • Holds privileges for covered specialties
  • Uses non-physician providers to supplement—not replace—MD coverage

Communicates effectively

  • Follows communication protocols for patient introductions
  • Makes post-discharge phone calls to patients within a specified time frame, or designates a staff person to make these calls

Participates on hospital committees

  • Participates in hospital orientation program and annual updates
  • Stays aware of patient satisfaction metrics
  • Participates in quality improvement activities

Maintains competency

  • Is board certified in internal medicine or other appropriate specialty, and is enrolled in PIMs (ABIM’s Hospital-Based Practice Improvement Module) for hospital practice or in SHM’s Fellows Program
  • Follows Core Competencies for Hospital Medicine

Works in settings with limited process variations

  • Works in hospitals that use the same EHR as well as other similar processes, protocols, and policies
  • Doesn’t rotate to hospitals in different systems
  • Covers in-house, not on call from home or another hospital

Most common malpractice allegations against hospitalists†





Most common factors contributing to patient injury by hospitalists†





* Nelson J. Heavy Workloads. The Hospitalist. October 2012. Available at: Accessed June 24, 2013.

**General industry consensus.

† The Doctors Company, Hospitalists Claims Update, 2013. More than one factor can contribute to a patient injury.

Source: The Doctors Company

Now, rates for medical professional liability insurance have been dropping for seven years, and an eighth straight annual decline is expected this year, according to Mike Matray, the editor of trade publication Medical Liability Monitor and the chief content officer of its associated website,

“We are in the longest, deepest soft market that the malpractice insurance industry has ever been in,” he says. “Right now, things are really good for the doctors, as far as rates coming down.”

Matray says he understands that declining rates may seem immaterial to a physician who receives an insurance bill that eats into the bottom line. For some specialties, that premium can be as high as $200,000 per physician, per year—or more.

“I’m not saying it isn’t expensive,” he adds. “It’s expensive to run a medical practice. At the same time, medical malpractice insurance is less expensive in today’s dollars than it was in 2005.”

The reduction in rates is multi-faceted. Prominently, state-level tort reforms like non-economic damage caps, health courts, and arbitration hearings are making it harder to bring cases to trial, particularly for lawyers who take cases on contingency. Second, frivolous lawsuits “are making an impression on jury pools,” Matray says, which means fewer filed claims and fewer cases that make it to trial. Third, this soft cycle has outlasted the typical pattern of rates falling for three to four years before rebounding.

“A lot of smart actuaries keep saying this has to change soon, because in a soft market there is a lot of competition,” he says, noting that in order to compete for low rates, insurance companies offer credits to clients and use their own reserve cash piles. “So things are really going to change in the next couple of years.”

“Hospital medicine is different than other specialties, because the hospitalist treats a broad range of patients in an acute care setting—from a pediatric patient to an adult patient with many chronic illnesses.”

—Robin Diamond, senior vice president and chief patient safety officer, The Doctors Company

In Need of Data, Patience

So what does it all mean for hospitalists and HM group leaders looking to be proactive about medical malpractice liability insurance? Patience is required.

For starters, there is no designated premium category for hospitalists. Much like the situation that exists for coding issues, the closest proxy for HM is internal medicine. According to Medical Liability Monitor, the premium paid by internal medicine physicians as of July 1, 2012, varied widely across the country. In South Florida, internal medicine insurance premiums in Miami, Dade, and Broward counties were between $42,000 and $46,000 per year. In South Dakota, one insurer reported rates of just under $4,000 per year. There is no average or median figure available, and Matray notes that actual rates paid can vary from county to county.

Moreover, it is difficult for group leaders or hospital executives to use past history to negotiate rates with insurers because of a shortage of reliable data. In its spring 2013 newsletter, the PIAA (formerly known as the Physician Insurers Association of America) published its first report on hospitalist claims reported to its Data Sharing Project. Of the 92,868 closed claims reported from 2002-2011, just 312, or 0.3%, named hospitalists as the defendant.

The data also showed that, of those claims, 20% were settled through insurance company payments. Those payments totaled $17.1 million, with an average payout to a claimant (known as the indemnity) of $272,553 per claim. Overall, hospitalists had a 20% paid-to-closed ratio, totaling more than $17.1 million. By comparison, the percent of paid-to-closed claims for all physicians was 29.3%, according to PIAA.

In a separate data set compiled this year by TDC, 34% of allegations against hospitalists were related to missed or failed diagnoses, with 28% tied to “improper management of treatment.” Twelve percent of allegations were the result of either improper medication management or ordering errors.

Robin Diamond, TDC’s senior vice president and chief patient safety officer, says that teasing out trends from the initial data can be challenging. Hospitalists, she says, can deal with so many different patients, diseases, and severity levels that it is difficult to draw conclusions.

“Hospital medicine is different than other specialties, because the hospitalist treats a broad range of patients in an acute care setting—from a pediatric patient to an adult patient with many chronic illnesses,” she says.

Divya Parikh, PIAA’s director of research and loss prevention, says HM group leaders should avoid reading too much into the first batch of data, because it’s a small sample size.

“A big part of that is we feel that a lot of hospitalists are intermingled into the other medical specialties,” she says. “So this becomes a very small subset where they are distinctly identified as hospitalists. And that’s the challenge.”

In particular, Parikh is curious to see whether HM’s rate of claims paid through insurance payments drops from 20% (already below the overall healthcare industry average). “It will be interesting as we see if they begin to mitigate areas of risk where we used to see a lot of claims,” she adds. “If you look at a hospital setting, there has been some shift change in what the errors are. And, what you’d hope with hospitalists within these environments who are really owning this specialty, is that you’d see a decrease in that. There would be that connective care. There would be the patient that felt that they had an individual who was their go-to individual throughout their care at a hospital.”

A Peek at the Future

Insurers have begun compiling claims data on hospitalists and are taking a longer-term view of the specialty. TDC, for example, has analyzed its data and identified characteristics it says make a low-risk hospitalist, an analysis the company says is the first of its kind (see Figure 1). The insurer adds that it sees its responsibility as making sure everyone understands the hospitalist’s role within the acute care setting so that its pricing is commensurate with the liability risk.

click for large version

Figure 1. Average indemnity and total expense by responsible service, 2007-2012.
Source: The Doctors Company

“We’re looking at the systems within the hospitalist group, as well as how well that group is integrating with the hospital where they’re practicing,” Diamond says. “What kind of patient mix is this particular hospitalist group seeing in that particular hospital, because it can be different in a large healthcare corporation in Manhattan, New York, from a community hospital in rural Texas.”

The growing popularity of hospitalists taking on co-management responsibilities for other specialties is another trend to keep an eye on, as it creates what insurers call “vicarious liability.” Working together in teams with other specialties can improve communication, reduce errors during transitions of care, and create better outcomes. However, in instances where there are problems, being on a care team means hospitalists can open themselves to liability. To mitigate that risk, hospitalists can look to other groups that have dealt with shared liability issues in the past, Parikh says.

“Historically, you would have seen it with anesthesiology,” she explains. “And one huge improvement anesthesiologists have made when a patient comes in for a surgery now is they come out, introduce themselves, say hello, and tell you what’s going on. They put a face to the name, so that it’s not just a no-name anesthesiologist who gets included in the lawsuit as well because they’re naming everybody in the group.”

But, holistically, the best long-term mitigation strategy appears to be tort reform and new ways of looking at the way in which healthcare liability issues are handled in the U.S., says Anupam Jena, MD, PhD, assistant professor of healthcare policy and medicine at Harvard Medical School, and an internist at Massachusetts General Hospital, both in Boston. Dr. Jena says that there is limited evidence that enacted malpractice reforms have produced more than a 2% to 5% reduction in healthcare spending compared to states that have not.2 Instead, healthcare leaders should push for the elimination of defensive medicine, which he says contributes the lion’s share of the estimated $50 billion annual cost of malpractice liability across the country.

“Do I think the country is in a malpractice crisis? No,” he says. “Do I think that defensive medicine is larger than we think it is? Yes.

“If physicians practice as they felt they should practice without ordering extra tests and procedures, my guess would be you could reduce healthcare spending by substantially more than $50 billion.”

Richard Quinn is a freelance writer in New Jersey.


  1. Spiegel AD, Kavaler F. America’s first medical malpractice crisis, 1835-1865. J Community Health. 1997;22:283-308.
  2. Chandra A, Jena A, Seabury, S. Defensive medicine may be costlier than it seems. The Wall Street Journal website. Accessed September 21, 2013.

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