(Insurance News) – The Health Care Reform law, signed by President Barrack Obama on March 23, 2010, could potentially have a positive effect on medical malpractice liability, actuaries were told at the Casualty Actuarial Society (CAS) Seminar on Reinsurance.

John Mize, consulting actuary, Towers Watson, noted that some provisions of the law emphasize value-based compensation programs. “Hospitals will get penalized if they have a larger proportion of readmissions than others. Hospitals are already focused on loss prevention, and hopefully through this process there will be even more motivation for hospitals to provide better care, which will result in more favorable outcomes and fewer claims,” he said.

Paul Fields, vice president – underwriting, Odyssey Re, added that hospitals will need more stringent quality control measures. “How do hospitals integrate this into their system? What is the cost differential? What is the impact — better quality of care, better support services? It’s not clear, but there is going to be much more focus on primary care.”

According to Fields, accountable care coordination programs that are jointly managed by hospitals and physicians have the potential to create a smoother continuum of care. “As the programs are further developed, we’ll learn more about the benefits. Perhaps it could reduce or eliminate some of the gaps in the current structure,” he said.

In addition to enhanced hospital loss prevention activities, other potential favorable factors have improved medical malpractice loss experience in recent years.

When the cost of medical malpractice increased dramatically about 10 years ago, hospital systems became more focused on loss prevention, Mize said. “They looked at where their most expensive claims were occurring, and created loss prevention activities to reduce risks in those specific areas.”

“Plaintiff attorneys have also become more selective about their cases due to the high cost of litigation. This has helped drive claims frequency and costs down,” Mize explained.

Some of these favorable factors, however, may not hold over time. If medical malpractice is viewed as more fertile ground for plaintiff attorneys in the future, they may accept more cases, which would drive up claims frequency. Likewise, jury attitudes may change over time and become less favorable to healthcare providers. However, the loss prevention activities that hospitals have put in place should have a lasting impact, assuming hospitals are persistent in those efforts.

Looking at the potential of tort reform, Mize said that his sense is that the most effective tort reform seems to be passed when constituents feel that access to care is at risk. If a federal tort reform law pre-empted state laws, some states that currently have strong tort reform may see costs increase as a result of the change.

The panelists noted that there could also be negative effects from the health care reform law, including the short term potential for the primary care network to be overburdened. Physicians could become more leveraged, and increase their reliance on physician assistants or nurse practitioners. This burden may cause lesser trained care providers to look at more complicated health issues.

“While there’s a plan to educate and train physicians, it’s not broad enough,” said Fields. “The number of patients who are seen in a given day creates a strain. For example, if patients are seeing their doctor for 15-20 minutes now, that might drop to 5 or 10 minutes. If that happens, the error rates will go up.”

Fields added that there is also the potential to increase the administrative burden on physicians. “This could put more pressure on physicians to hire people to handle administrative duties, or if they handle the duties themselves, it will take away more time from patients.

“There also could be pressure to try to reduce costs, and testing could be an area that is cut back. Testing has improved the physician’s diagnosis so if testing is cut back, there could be an increase in cases of misdiagnosis or failed diagnosis. That has the potential to create bad outcomes and increase claims.”

Kelly A. Salmon, an actuarial associate for Guy Carpenter, moderated the panel session, which was held at the CAS Seminar on Reinsurance in New York City on May 6, 2010.

The Casualty Actuarial Society fulfills its mission to advance actuarial science through a focus on research and education. Among its 5,200 members are experts in property-casualty insurance, reinsurance, finance, risk management, and enterprise risk management.