An Analysis of the Effects of Malpractice Insurance Cost in the Healthcare System

Categories: Health

This paper looks into the ways by which malpractice insurance cost has affected the healthcare system. To achieve this, it will address several issues which include: the role of malpractice insurance cost in healthcare organizations, its role in relation to the manner in which risk management has been dealt with across the healthcare industry; how malpractice insurance cost impacts the staffing capability, cost of healthcare, as well as other activities in the healthcare industry at large. Additionally, the paper will look into the ways by which malpractice insurance cost relates to the regulatory environment provided by the government.

The involvement of other relevant healthcare organizations and other interest groups in the healthcare system will be also described based on how they contribute to determining the ways the risk management practices are carried out in the United States. Towards the end, the paper will recommend new strategies that can be used while implementing malpractice insurance cost in healthcare organizations. Any impacts malpractice insurance cost might have on the healthcare policy will also be looked into.

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Effects of Malpractice Insurance Cost on the Healthcare System


Risk management can be defined as the process of identifying, assessing, and prioritizing risks. It is then followed by the harmonized and cost-effective use of resources to reduce, monitor and organize the likelihood and influence of adverse turns of events or to make the most of the realization of prospects. Risks can be due to ambiguity in financial markets, legal liabilities, accidents, project failures, credit risks, natural disasters and causes in addition to premeditated attack from an enemy or events of unpredictable or uncertain root-cause.

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More than a few risk management principles have been established. Definitions, methods and objectives have a wide variance depending on whether the risk management technique is in the framework of actuarial assessments, security, project management, engineering, financial portfolios, industrial processes, or public safety.

According to Emslie & Hancock (2008), healthcare risk management is dynamic and involving. Professionals in this sector work across various sectors in the health care industry. Malpractice insurance is a kind of specialized liability insurance bought by the healthcare personnel. Its insurance coverage looks after healthcare givers against patients who take legal action against them under the assertion that they were harmed due to the doctor’s careless or deliberately damaging treatment verdict. Premiums are more often based on the physician’s area of expertise and geographic location but not on claims know-how. This means that even if legal action has never been taken against a physician, he or she can end up paying tremendously high premiums. Premiums can escalate because of various factors such as claims severity, amount of coverage needed, location of practice, claims frequency and the areas of legislation (Emslie & Hancock, 2008). The strategies used in risk management include passing the risk onto another party, making sure the risk does not occur, minimizing its negative effects, and sometimes accepting the problems that might occur because of the risk and owning up to them.

Literature Review

A number of studies have been carried out focusing on malpractice insurance cost on the health system. According to Youngberg (2010), the current economic climate in the country has forced healthcare providers to evaluate the efficiency of their operations. Most of the healthcare organizations have been keen on profit making rather than providing quality healthcare and safeguarding the lives of the employees. Nonetheless, it should be understood that it is very unlikely that an organization can operate for a long time without supporting its expenditures. However, the question is how much risk organizations should take to meet these expenditures.

Kavaler & Spiegel (2003) argue that the biggest problem of risk management is demonstrating its value. It is not clear how one would quantify something that does not happen based on the fact that it was prevented. Furthermore, the healthcare industry is mainly based on measurement and benchmarking. Therefore, it becomes difficult to make a case on risk management. The greatest challenge here lies in coming up with a metrics that can be used to efficiently and effectively measure its value. However, the authors affirm that risk management helps in improving the quality of care provided to the patients. Furthermore, it reduces the chances of an adverse outcome escalating into a malpractice claim. All in all, the ultimate goal of risk management is to minimize risk in whatever situations.

Malpractice torts claims exist on the day to day running of the healthcare industry. However, a study by Groszkruger (2011) shows that most cases of negligence or complications never enter the tort system and most of the alleations has no merit. Moreover, there is very limited evidence that the process of malpractice litigations stops malpractices or identifies bad doctors. Therefore, there is need to put in place measures that can help in improving the risk management process rather than concetrating on disciplining the health care providers. Different environmental and personal exposures caused by qualitative and quantitative assessment of health risks to human beings have become a key issue for governements decisions related to risk management.

Risk management in healthcare industry

Emslie & Hancock (2008) allege that the existing financial environment is continuing to compel healthcare organizations to assess the effectiveness and efficiencies of their operation. Making maximum profits or at least avoiding losses has been at the front position of business goals. A small number of organizations can continue to exist ultimately without meeting their expenditures. Risk management is characteristically a fusion of functions joining a number of disciplines to lessen the occurrence of institutional loss. Actions can be down to business, attempting to avert or mitigate a loss or reactive or rather damage control.

Risk management approaches in the healthcare sector seek to decrease the likelihood of hazards and losses. These approaches direct efforts into four key directions: detection of possible risks, approximations of the possibility of an unfavorable effect, estimations of the magnitude of the unpleasant effect and managing the risk.In medicine specifically, risk management system seeks to advance the value of medical care and cut off the relative amount of medical misconduct claim. Risk management system also analyzes malpractice claims. These efforts are directed towards the reduction of the likelihood of damage to patients.

As a main notion in modern healthcare management across the world, risk management deals with a variety of issues. These issues include safety of the patients, occupational safety and device safety. Its extent also covers quality improvement and accident investigation. Risk in healthcare transforms into surgical mistakes an unexpected death and wrong diagnosis or treatment. The greater part of these incidences can lead to legal action. Risk management techniques support both proactive and reactive measures. Whereas proactive efforts seek out to avert the incidence of bad situations, reactive techniques address hostile events which have by now occurred. Even though data are critical for undertaking proactive or rather down to business proceedings, information about risk in healthcare sector are not at all times solid.

Youngberg (2010) affirms that the majority of the impediments due to medical treatment and inattention do not result to malpractice tort claims. For this reason, statistics cannot address these instances. Moreover, in several cases judicial measures do not succeed in detecting the malpractice.

Given that steady establishment for business administration and financial liability like other types of risk management, healthcare risk management also deals with a number of specific notions which are not distinctive of business in general. These include failure mode outcome analysis, adverse incident, root cause analysis and incident reports. An unpleasant occasion is a grievance set off by medical intrusion. Failure mode outcome analysis facilitates the detection of possible failures. Incident reports provide evidence of events which are unexpected in medical practice. Root cause analysis, on the other hand, makes out the most fundamental factors which lead to difference in outcome.

A report by Emslie & Hancock (2008) shows that risk management has various impacts on healthcare. Some of these impacts include an increase to the costs of health. However, contrary to what most people believe, the costs of malpractice in the healthcare organization are not too high, therefore, leading to a small increase in the cost of healthcare. Healthcare risk control or rather management became a key issue in American healthcare system in the 1970s during the purported medical malpractice insurance predicament. The insurance premiums in California shot up by over 300 percent due to frequent accountability claims. This tendency drove a lot of physicians, especially those implicated in high-risk regions, such as obstetrics and neurosurgery, out of the profession. In the mid 1970s, Governor Jerry Brown called for the state’s legislature with the intention of addressing the malpractice disaster. The state of affairs called for a more strict safety and answerability rules and traceability of medical disasters.

Medical responsibility premiums in the US grew rapidly in the 1980s. This compelled some of states to control malpractice insurance costs. In spite of the actions undertaken from then on, the healthcare organization is faced with a constant need to advance its risk management approaches. Previous research has acknowledged problems with medical care and safety, underinvestment in IT and hopeless IT systems in addition to shortages of competent employees among others. For this reason, the healthcare system can advance its implementation by an enhanced focus of the risk management process. Specialists recommend that risk management processes should be rooted into healthcare planning and operations (Kavaler & Spiegel, 2003).

Because of qualms in information, the health establishment directs significant efforts into the reporting and identification of events in healthcare. These authorities try to make out and address possible tort claims, evaluate complaints and document possibly difficult procedures. To reduce risks, health establishments pay fastidious consideration to ensuring the primary and ongoing proficiency of staff, while assessment and criticism are also fundamental to effectual risk management procedures.

Formerly, the quality improvement and risk management functions over and over again functioned independently in healthcare organizations and persons in charge of each task had dissimilar position of reporting. This was an organizational arrangement that additionally separated quality improvement and risk management. In the present day, quality improvement and risk management efforts in healthcare organizations are concerned with patient safety and coming up with ways to work jointly more efficiently and effectively to make sure that their organizations convey quality and safe patient care.

A number of programs in the last couple of years have assisted to form and advance a union between quality improvement and risk management. These comprise of the joint commission standards for safety of the patient, the federal government’s purchasing provisions based on value and efforts of the private sector to improve the quality of healthcare. As a result, some larger institutions are shifting quality improvement, risk management and patient safety actions to one department. In lesser organizations, the quality improvement manager and risk manager are better synchronizing their efforts where they have common characteristics to make certain better placement of patient safety scheme and use of scarce resources (Kraus, 2010).

If demonstration of cost savings can also be made, it would address those individuals who are responsible for managing the sector’s financial activities. There are various ways in which business cases can be created. To begin with, one could associate a decline in malpractice assertions or protection funds connected to disclosure or the patient relations procedure – there have been some lately in print information of success. Alternatively you could make obvious a decrease in reported unpleasant proceedings in connection to execution of precise targeted lines of attack, for instance, decrease of falls subsequent to accomplishment of a falls decrease program or the utilization of skin care code of behavior to put off skin ulcers. Another strategy could be to work in association with an insurance carrier loss control specialists or broker to get your hands on risk management credit that will have a positive influence to your rate of insurance.


Emslie & Hancock (2008) allege that although statistics are very important in the risk management pocess, the manageers involved should be more keen and improve their visibility to make the process better. There are a number of strategies that can be put in place to improve the risk management process. For instance, the doctors should be involved in the Board of Director conventions that offer education on inner risk management matters, how the matters are being handled, and the industry trends. Attending such seminars will provide insight into ways of dealing with problems at the workplace. Alternatively, doctors can learn how to be efficient in their practices to avoid possibilities of malpractice costs.

Secondly, it is important that doctors and risk management personnel host regular meetings with senior management to discuss the actions in the organizations and how the entire process can be improved. The safety of patients should be the most important agenda in the discussions. Once the patients are safe, there will be minimal chances of malpractices emanating from the healthcare organization. However, there is need to involve every stakeholder in the discussion to generate better ideas of dealing with the issues.

It is also very important that the healthcare organization responds to the requirements by the stakeholder in time. This helps in ironing out any differences that might arise before the problems runs out of control. Ideally, it is easier to solve problems at the institutional level rather than allowing it to involve many parties that would make it more complicated (Groszkruger, 2011).

Additionally, healthcare personnel should be on the frontline of ventures that are meant to spearhead the achievement of the goals and ideas. To achieve this, there is need for them to take part in educational programs that would improve their skills. They should also be part of the committees that work to come up with initiatives of improving the risk management programs in the industry. Sharing ideas with key stakeholders in the industry will lessen the burden of addressing risks that might have been prevented. Doctors should also concentrate on their specialized obligations making it a main concern to meet time limits.


Risk management in healthcare sector plays a major role in the welfare of both the patients and the medical practitioners. Various parties including the government and the private sector have shown great interest in improving risk management in healthcare, therefore, ensuring an immense growth in this field. Due to its necessities, various strategies have also been implemented to ensure that this sector continues to grow. More so, the necessity of risk management in healthcare field has also influenced the policy making in various countries (Groszkruger, 2011). The main challenge facing risk management in health care is the measure of its value.

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An Analysis of the Effects of Malpractice Insurance Cost in the Healthcare System. (2022, May 04). Retrieved from

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