Hospital board members have a fiduciary duty to the community they serve: The board is charged with effectively managing and preserving the organization's assets to support the delivery of its health care services.

The board and organizational leaders also are charged with implementing a patient safety program with rigorous quality monitoring and improvement activities as essential components. Thus, in collaboration with the medical staff, the governing body is responsible for overseeing the overall quality of care.

In addition to regular quality, patient safety and risk management reports from senior leaders, the board should receive a report on liability claims trends and results. This data can help to personalize the nature and cost of adverse events, and determine whether they are resolved in a manner reflecting the character and goals of the health care organization. Understanding these issues leads to a greater understanding of the impact on financial resources and also influences ongoing patient safety efforts.

By periodically evaluating and benchmarking the organization's claims and litigation management program, the board will be able to more effectively identify strengths and opportunities for improvement. Use these questions to begin a discussion about your organization's claims management program.

1 Why evaluate your organization's liability claims management program?

The board fulfills several key governance responsibilities when liability claims are assessed, and this information also helps the management team analyze insurance costs and risk controls, adverse event trends, and deployment of resources for ongoing patient safety and clinical risk management activities. The assessment helps to validate the organization's financial viability to meet expected claims costs, particularly for hospitals or systems that self-insure or have large deductibles exposed on each claim.

In addition, appropriate claims policies and procedures to manage financial obligations are confirmed. By identifying contributing factors to specific liability claims — and implementing appropriate corrective actions — the potential for similar claims will be reduced.

The claims function should be seen as connected with ongoing patient safety and clinical improvement efforts to eliminate errors in processes or by care providers that result in injuries. Thus, claims management information also is intertwined with the hospital's core mission of providing safe, high-quality patient care, and increasing patient satisfaction.

2 What does a trustee need to know about claims management?

Whether the claims and litigation management functions are performed in-house or by a third-party administrator, the board will need to determine if those functions are being managed effectively. Through active monitoring, the board:

  • acts as a prudent steward of the organization's assets;
  • assures that claim reserves, paid losses and costs of defense have been fairly determined and funded;
  • determines if patients who were harmed as a result of substandard care are treated in a manner consistent with the organization's values.

When assessing functions of the claims management process, trustees can compare their organization's performance to professionally recognized benchmarks. However, the board also needs to determine whether the organization has clearly delineated processes, goals and metrics related to the claims management program; and whether it has tools to evaluate the program strengths, benchmark the information and identify opportunities for improvement. When these items can be answered in the affirmative, trustees will be in a better position to understand and evaluate claim reports brought to their attention.

Supervising staff should evaluate each claim professional's performance and claim outcomes on a regular basis to ensure that the organization is achieving effective and efficient financial results, as well as meeting various regulatory requirements for reporting claims and maintaining confidentiality of patient information.

Additionally, an objective, third-party review of the entire claims management program can be undertaken by an experienced examiner capable of evaluating accuracy of reserve estimates, reasonableness of claim strategies and loss payments, and effectiveness of defense counsel and defense strategies.

This review also evaluates potential gaps in processes or previous errors committed by the organization's claims staff or attorneys, in order to recommend methodologies to improve performance and compliance with the organization's desired protocols. Claim auditors fall short if they are not also recommending best practices for effective claims management and comparing the claims trends and results with other organizations.

3 What areas should be reviewed in evaluating liability claims program effectiveness?

There are five core components to a claims management program evaluation:

  • Claims reserving process, including timeliness and accuracy to outcome
  • Financial controls and documentation processes
  • Communication and collaboration mechanisms to counsel, insurers, risk management and regulators
  • Claim processes and controls, including correct policy assignment and interpretation, diaries for communication and key events, and records retention
  • Technical capabilities to manage strategy and litigation, including claims personnel and defense attorneys

While evaluating these elements, an assessment also should include: a thorough review of the organization's claims history (that is, the loss run); an assessment of the organization's file management, reserve setting and claim resolution practices; an evaluation of the competency, performance and collaboration demonstrated by outside defense counsel; and an audit of the fees charged by outside defense counsel to determine reasonableness.

Feedback should include: how the organization's claim outcomes compare against industry averages in terms of such outcome metrics as percentage of cases closed without payment; percentage of defense verdicts for cases that went to trial; and average indemnity payments by claim type.

A Matter of Mission

Periodic, objective and comprehensive audits of the professional liability claims management program give the board the information it needs to feel confident that the system's values are upheld, and that its reputation and financial assets are protected. Such audits also identify how the system's practices compare with recognized benchmarks and where improvements would help the organization to achieve the mission of high-quality care for the community.

Anne V. Irving, M.A., FACHE, DFASHRM, CPHRM (, is assistant vice president of risk management, and Adrienne Prager, J.D. (, and Carolyn Standley, J.D. (, are senior claims managers for Premier Insurance Management Services Inc., San Diego.

Dig Deeper

For health care liability claims data at the state level, see these reports from state insurance commissioners:

• Connecticut:

• Florida:

• Tennessee:

• Washington: