In his book, The Perfect Storm, Sebastian Junger described the horrific consequences that resulted when a series of natural occurrences converged in one location. For the last half decade, Floridas healthcare industry has confronted a different type of storm one that has had serious repercussions with no end in sight. It wasnt long ago that the insurance market was soft. Since then, a series of events have occurred which created the hardest insurance market anyone can remember.
There were the shocking terrorist attacks in 2001. The medical malpractice insurance crisis hit the next year. In 2004, Florida suffered through four hurricanes that inflicted tremendous damage. In 2005, we had the busiest hurricane season in recorded history, including the most financially devastating hurricane ever when Katrina laid waste to the Gulf Coast. Many insurers have now abandoned Florida, while others have significantly reduced the risk they will insure here. The remaining insurers are able to dictate coverage terms and premiums.
These events have created a maelstrom for Floridas healthcare providers, with insurance costs spiraling out of control. Martin Memorial, a not-for-profit community health system, illustrates how healthcare organizations can be affected. Since the year 2000, the cost of Martin Memorials property insurance premiums have increased more than 1,000 percent. Hurricane and flood coverages have significantly decreased, with higher deductibles. Professional and general liability self-insured retentions have increased many-fold, yet premiums have risen precipitously. Higher retentions mean higher reserves. The end result is increased annual expenses of several million dollars, with no corresponding increase in revenues to offset this expense.
The bottom line: these trends must change. Resources that should be used to purchase new technologies, increase staffing or otherwise improve the quality of care are now earmarked to pay the cost of managing risk. Ultimately, these expenses are paid by patients, many of whom are already struggling with rising healthcare costs.
Are there ways to solve this problem? Yes, although good fortune will play a role. We need nature to spare our region from a series of additional natural disasters.
First, we need a way to cover the cost of catastrophic events other than traditional insurance. For this to happen, governmental action is required. Establishing a state or national catastrophic loss pool would greatly assist all of us in managing business and personal risks associated with natural disasters and terrorist attacks, and our region would once again become attractive to insurers. The creation of such a fund would be a great challenge, but one worth undertaking.
Second, we need to re-address the topic of malpractice reform. Several years ago, Floridas legislature enacted limited reform. However, there is much more that could be done. Other states have meaningfully reduced frivolous lawsuits and run-away verdicts. By taking what has worked elsewhere and implementing it here, we can turn Florida back to what it once was: an attractive area for physicians and other healthcare professionals to earn their livings. Without further reform, we should expect continued difficulty keeping our physicians as well as difficulty attracting new ones.
Action must be taken and soon so that Floridians continue to have access to good healthcare. If action is not taken, these ever-rising expenses will cause Floridians to suffer the effects of this imperfect storm for years to come.
