Health Care Industry Faces Unprecedented Change in Hospital Landscape: Aon Risk Solutions

CHICAGO, Oct. 18, 2011 /PRNewswire/ -- It is estimated that 50 to 60 percent of physicians and hospitals are exploring ways to team up, according to a recent article in The New York Times. Aon Risk Solutions, the global risk management business of Aon Corporation (NYSE: AON), expects this trend to lead to significant collaborative activity, including mergers, acquisitions, joint ventures and additional forms as hospitals and health care systems across the U.S. look to deliver high-quality care while reducing unnecessary expenses.

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"This expected increase in hospital and physician collaboration can be directly linked to the Patient Protection and Affordable Care Act, which is motivating a shift in the marketplace," said Ron Calhoun, managing director and Health Care Practice leader for Aon Risk Solutions. "Hospitals are moving from volume-based reimbursement methodologies to outcome-based solutions. This requires a more integrated approach to care delivery to achieve the cost efficiencies necessary to compete in today's evolving market."

Health systems will face significant risk management challenges associated with integrated physician-hospital medical malpractice and professional liability risks. In addition to regulatory scrutiny, risk-related issues such as the following must be considered:

• Experience rating variables
• Allocation strategies
• Tail coverage issues
• Capital requirements
• Increased premium flow
• Financial reserve methodologies
• Coordinated defense strategies
• Clinical risk management efficiencies

Released today, Aon's 12th annual Hospital and Physician Professional Liability Benchmark Analysis found that 73 percent of systems surveyed will self-insure the combined hospital-physician malpractice risk.

"We believe this report to be the most comprehensive analysis of self-insured risks in the health care industry. Our findings reflect that when hospitals team up with physicians, they are effectively doubling down on medical malpractice risk," said Erik Johnson, author of the analysis and Health Care Practice leader for Aon Global Risk Consulting. "As a result, medical malpractice for new physician-hospital arrangements will be a critical issue."

Aon recognizes this collaboration trend can impact health care systems, as illustrated by the following examples:

• Smaller regional and local hospitals may find themselves without the capital, infrastructure or expertise to develop as an Accountable Care Organization.
• Regional hospital systems may not own the assets needed to be competitive and could be looking to buy specific physician practices to fill the gaps.
• Middle market hospital systems are looking to develop capabilities to help drive efficiencies in specific clinical specialties, such as radiology and orthopedics.
• Integrated health systems may be rethinking relationships with home health agencies, home infusion companies, hospice agencies and behavioral health firms to achieve a more seamless delivery of service post-discharge.

The Hospital and Physician Professional Liability Benchmark analysis was created by Aon in conjunction with the American Society for Healthcare Risk Management. The study details the growth of integrated self-insurance strategies and highlights the challenges faced by systems as they pursue the cost of risk savings. Included in the analysis is an examination of malpractice claim frequency and severity for hospitals and physicians by state, service and type of claim, looking at trends in frequency, severity and overall loss rates related to hospital and physician professional liability for more than 10 years. The 2011 analysis is based on the participation of 117 hospital systems and more than 2,300 facilities. Findings are subject to the conditions and limitations stated in the report.

To purchase a copy of Aon's 2011 Hospital and Physician Professional Liability Benchmark Analysis, visit www.aon.com/hplreport or www.ashrm.org.

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About Aon

Aon Corporation (NYSE: AON) is the leading global provider of risk management services, insurance and reinsurance brokerage, and human capital consulting. Through its more than 60,000 colleagues worldwide, Aon delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Aon's industry-leading global resources and technical expertise are delivered locally through more than 500 offices in more than 120 countries. Named the world's best broker by Euromoney magazine's 2008, 2009 and 2010 Insurance Survey, Aon also ranked highest on Business Insurance's listing of the world's largest insurance brokers based on commercial retail, wholesale, reinsurance and personal lines brokerage revenues in 2008 and 2009. A.M. Best deemed Aon the number one insurance broker based on brokerage revenues in 2007, 2008 and 2009, and Aon was voted best insurance intermediary, best reinsurance intermediary and best employee benefits consulting firm in 2007, 2008 and 2009 by the readers of Business Insurance. Visit http://www.aon.com for more information on Aon and http://www.aon.com/unitedin2010 to learn about Aon's global partnership and shirt sponsorship with Manchester United.

About ASHRM

The American Society for Healthcare Risk Management (ASHRM) is a personal membership group of the American Hospital Association with more than 5,500 members representing clinical care, insurance, law and other related professions. ASHRM initiatives focus on developing and implementing safe and effective patient care practices, the preservation of financial resources and the maintenance of safe working environments.

SOURCE Aon Corporation