1. Casualty Actuarial Society 2006 Spring Meeting May 9, 2006, Puerto Rico Medical Malpractice: Is the Crisis Over? Kevin Bingham, ACAS, MAAA Senior Manager (860) 725-3056 kbingham@deloitte.com Deloitte Consulting LLP

2. Confidential and Proprietary – ©2004 – Deloitte Development LLC 1 Introduction From Who’s Perspective The Future – Challenges The Future - Opportunities Conclusion

3. From Who’s Perspective 2

4. Confidential and Proprietary – ©2004 – Deloitte Development LLC 3 From Who’s Perspective Medical Malpractice Insurance Companies Patients Physicians Hospitals Is the Crisis Over?

5. The Future - Challenges 4

6. Confidential and Proprietary – ©2004 – Deloitte Development LLC 5 The Future - Challenges Constitutionality of tort reform Maintaining underwriting excellence Soft market pressures Regulatory pressure (e.g., tort reform, public rate hearings, etc.) Shareholder expectations Captive pricing Adequacy of original rates The new member dilemma – “Are all new members better than average?” Loss emergence versus original assumptions Member retention during soft market Ratemaking diligence

7. Confidential and Proprietary – ©2004 – Deloitte Development LLC 6 The Future - Challenges New errors CPOE/EMR – Lead to new types of errors Bar codes placed on wrong patient Accurate programming of software (e.g., drug interactions) Drugs and medical technology advancement Dealing with “old” errors Medication events (e.g., unlabeled medicine, unapproved abbreviations, illegible, etc.) Of the 3,548 sentinel events reported to JCAHO between January 1995 and December 2005, 10.1% (358) were adverse medication events Removing the wrong limbs or organs, slicing into the wrong side of bodies and performing surgery on the wrong patients. JCAHO’s head Dennis O’leary - “It’s Getting Worse.” (USA Today) Health-care facilities reported 84 operations to the commission that involved the wrong body part or the wrong patient. “I can assure you that this is just the tip of the ice berg.” Despite years of patient safety efforts

8. Confidential and Proprietary – ©2004 – Deloitte Development LLC 7 The Future - Challenges Medical errors accounted for 1/4 th of all reports but only 1% of all serious events. Stated another way, in almost 99% of the cases, no patient was harmed by the medication error. Unfortunately, medication errors involving children and adolescents were more likely to result in patient harm.

9. The Future - Opportunities 8

10. Confidential and Proprietary – ©2004 – Deloitte Development LLC 9 The Future - Opportunities I’m sorry legislation COPIC’s 3R program – (R)ecognize patient injury, (R)espond soon after event, (R)estore I’m Sorry Works ( www.sorryworks.net)www.sorryworks.net CPOE/EMR Technology and medical advancements Patient safety awareness Hospitals (e.g., Root Cause Analysis) Educational institutions and focus on patient safety in curriculum Physicians Sharing of information/lessons learned (e.g., Patient Safety Advisor, studies, etc.)

11. Confidential and Proprietary – ©2004 – Deloitte Development LLC 10 The Future - Opportunities Medical malpractice insurance company risk management programs Risk management training Informed consent Chart documentation Delivering difficult messages Physician boot camps Patient satisfaction Predictive modeling…

12. Confidential and Proprietary – ©2004 – Deloitte Development LLC 11 Predictive Modeling

13. Confidential and Proprietary – ©2004 – Deloitte Development LLC 12 Predictive Modeling Vision Reason codes Map scores to filed plan Protect confidential scores Subjective → Objective Filed Schedule Rating Plan Record keeping Patient Procedures Continuing Education (CED) Risk Management Telephone Protocol Cooperation Staffing Prior loss history Premium Quote With Reason Codes Standard Information + “Reasons” and “Actions” CED Patient Satisfaction Results Etc. Incentivize Physician To Act Take recommended CED courses Attend physician “boot camp” on communication skills Etc. SUCCESS STORY Physicians Address RM issues and improve patient safety Ultimately benefit from lower premiums Insurers Move from one price fits all to right price Favorable impact on patient safety Outside traditional tort reform debate Right thing to do