Academic journal article Journal of Risk and Insurance

The Distribution of Claims for Professional Malpractice: Some Statistical and Public Policy Aspects

Academic journal article Journal of Risk and Insurance

The Distribution of Claims for Professional Malpractice: Some Statistical and Public Policy Aspects

Article excerpt

The Distribution of Claims for Professional Malpractice: Some Statistical and Public Policy Aspects

Introduction

Many physicians, over periods of five or ten years, experience several claims for medical professional liability. However, since most physicians have no claims over periods of comparable length, the usual presumption is that those physicians with several claims are incompetent. The calls for action have included pleas for the development of merit rating, for systematic professional review (Hofflander and Nye, 1985), and even for criminal prosecution (Stein, 1986). The purpose of this article is to examine the implications of public policy measures in this area.

The incidence of accidental events within "groups" of individuals seldom exhibits the traditional Poisson distribution. This finding has been reported for automobile accidents (Stanford Research Institute, 1976), health insurance claims (Lundberg, 1940), and professional liability claims (Hofflander and Nye, 1985, and Rolph, 1981). Most studies have attempted to explain this phenomenon by appealing to the notion of differences in "accident proneness" of the individuals in the particular group under analysis. The typical model presumes that each individual within the group has an inherent accident rate and that the number of accidents he/she will experience in a given period has a Poisson distribution with expectation equal to this accident rate. Accident rates are presumed to differ among individuals according to some probability distribution, such as the gamma distribution. This "compound Poisson model" has been successfully fitted to the accident or claim experience of groups of individuals.

The individual Poisson accident rate provides an expected accident rate per unit time; i.e., a weighted measure that recognizes both inherent ability (claims per opportunity) and how often the task is performed (opportunities per time unit). In the case of automobile drivers then, the expected number of automobile accidents which one individual might have in a year obviously depends on the number of miles that the individual drives. Similarly, the number of claims that a physician might expect could depend on the number of patients that are treated by that physician. Thus variation in the Poisson parameter among individuals does not directly imply variation in inherent ability. It could be explained equally well by the alternative hypothesis that all individuals have identical inherent ability but differ in their level of activity.

If all observed variation in individual Poisson accident rates is due to variation in physician activity levels, then the only direct effect of a public policy restricting the practice of physicians with higher claims rates would be to substitute the services of one professional for those of another who has exactly the same probability of contributing to a mishap on any given opportunity. Under these circumstances a public policy that creates barriers for professionals with high numbers of malpractice claims would have no benefits and would have substantial costs.

The notion that all variation in observed claims rates is due either to variation in level of inherent ability or variation in activity level is, of course, simplistic. In all likelihood, professionals differ both with respect to the probability that they will suffer an untoward event during a given procedure, and also differ in the number of procedures they conduct in a month or year. Data on activity levels would permit a study of the relation between the level of activity and the number of claims and lead to the development of better models to guide public policy decisions. Since health insurers have information on the services provided by physicians it does not appear infeasible to collect reasonable information in this area.

An important assumption in public policy measures based on inferences drawn from fitting the incidence of professional liability claims with a compound Poisson model is that the individual Poisson parameters or accident rates are stable over time. …

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