Calculating Your Practice’s Medical Malpractice Risk

The August 18th issue of the New England Journal of Medicine contained what has to be one of the most robust studies of medical malpractice risk ever conducted. Anupam B. Jena and a bunch of other smarties at Harvard Medical School sifted though over 40,000 records from a major national medical malpractice carrier. The data, collected over a 15-year period, included over 230,000 physician-years of coverage and was large enough to derive specialty-specific risk metrics for 25 specialties.  You are encouraged to spend a few minutes reading through their outstanding analysis here.  In reading this paper, providers and practice managers can come to a better understanding with respect to several depressing pieces of data, including:

  • How likely you are to be sued in a given year
  • How likely you are to pay a claim in a given year
  • The average size of a claim in your specialty
  • Your lifetime risk of facing a claim
  • The comparative risk of your specialty relative to other fields of medicine

Given our interest in helping medical groups better manage their medical malpractice risk, we thought it might be useful to slightly extend this work and distill it into a form that would be easily accessible to our uses and prospective clients.  Therefore, I reached out to Dr. Jena and requested some of the summary data (which was presented in the paper in graphical form only) and built out a simple model in Excel.  The excel model takes Dr. Jena’s data and extrapolates it to calculate the annual risk for a group medical practice.  I have placed the data Dr. Jena sent me into the linked Excel workbook so that they can access it if they like (it is in the “Input Parameters” worksheet).

The Math

Though Dr. Jena produced a lot of data, calculating your practices risk is actually fairly simple.  To calculate the annual lawsuit risk for your practice, simply calculate the annual risk that an individual physician in your speciality WILL NOT be sued (1-Ri), and raise it to the nth power, where n is the number of physicians in your practice.  (1-Ri)^n.  This is the annual probability that none of the physicians in your practice will face a lawsuit in a given year.  The difference is obviously the risk that you will be sued in a given year.  We perform similar calculations to determine the probability that someone in your practice will face a claim.  Also, we extrapolate this data out over ten years to show what your overall risk is.

The Model

Below is a brief explanatory video showing how the model works.  You can download the Excel model and use it to calculate your practice’s medical malpractice risk.

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