1. HomeTown Health, LLC HR Workshop March 16, 2010 Presented by: Charley Malmquist President, Potter-Holden & Company “What Hospitals Should Know about the 2010 Insurance Market”

2. Introduction: Charley Malmquist President, Potter-Holden & Company “What Hospitals Should Know about the 2010 Insurance Market ” Healthcare Liability Specialists Insurance Placement & Brokerage Program Consulting Risk Management Insurance Since 1918

3. What Hospitals Should Know about the 2010 Insurance Market 1. The constitutionality of caps on non-economic damages is being challenged in State Supreme Courts across the country. Mississippi: current cap of $500,000 in med mal lawsuits California: current cap of $250,000 Oklahoma: current cap of $400,000 Georgia: current cap of $350,000 per physician Illinois: The Supreme Court has overturned the $500,000 cap

4. What Hospitals Should Know about the 2010 Insurance Market 2.Congress is considering the repeal of the McCarran-Ferguson Act, which could increase medical malpractice premiums and limit competition. The American Academy of Actuaries is concerned that the enactment of HR 3962 would strip an antitrust exemption for medical professional liability insurers by precluding their ability to share data across companies, limiting competition and potentially increasing premiums. (This is also referred to as the repeal of the McCarran-Ferguson Act.)

5. What Hospitals Should Know about the 2010 Insurance Market 3. The majority of Americans support Medical Malpractice Reform. An Associated Press poll shows that the majority of Americans support medical malpractice reform. Stanford University data released November 19, 2009 found that 54% of Americans favored making it harder to sue healthcare workers and hospitals for mistakes when taking care of patients, compared to the 32% who opposed. The results cut across political lines: 58% of Independents, 61% of Republicans, and 47% of Democrats are in favor of making it harder to sue.

6. What Hospitals Should Know about the 2010 Insurance Market 4. Congress Suggests Limiting Malpractice Awards could reduce Federal Deficit by $54 billion. According to the Congressional Budget Office, limits on jury awards in malpractice cases could reduce the federal deficit by $54 billion over ten years: doctors treating Medicare and Medicaid patients would order fewer tests to safeguard against being sued.

7. What Hospitals Should Know about the 2010 Insurance Market 5. The practice of defensive medicine adds up to unnecessary dollars spent, according to one state’s Medical Society. Last November, the Massachusetts Medical Society surveyed its members. According to the 900 physicians anonymously surveyed, an average of 18 to 28% of tests, procedures, referrals and consultations, as well as 13% of the hospitalizations, were ordered to avoid lawsuits. This adds up to $1.4 billion in annual health-care costs in Massachusetts alone; national estimates range as high as $200 billion.

8. What Hospitals Should Know about the 2010 Insurance Market 6. Who is most negatively impacted by caps on Medical malpractice damages? Studies conducted by a law and psychology professor from Duke University suggests that women, the elderly, and those most seriously injured as classes most impacted when damages are capped.

9. What Hospitals Should Know about the 2010 Insurance Market 7. What are the factors shaping the 2010 medical malpractice market place? Based upon a review by A M Best, the medical malpractice industry is viewed as stable but remains competitive. The level of competition varies by state. New competitors in the market combined with a significant drop in frequency of claims have driven rates down. Because of the cyclical nature of our business, soft markets to hard markets, many industry experts advise caution about future rate adequacy and durable financial strength.

10. What Hospitals Should Know about the 2010 Insurance Market 8. What are the reasons for the significant drop in medical malpractice claims frequency? Experts cannot point to a single reason for the significant drop in medical malpractice claims experienced across the county since 2003, but there are at least four reasons that are being cited: 1) tort reform 2) the patient safety movement 3) the economics for the plaintiff has changed/more expensive to sue 4) overall shift in society’s attitude against bringing claims against healthcare providers

15. Q & A Session Charley Malmquist President, Potter-Holden & Company For more information, or to request a copy of today’s slides: -www.potterholden.com -The HTH Wiki space, under Business Partners -Email Charley: cmalmquist@potterholden.com Insurance Since 1918 “What Hospitals Should Know about the 2010 Insurance Market”