By: Bill Bower, Rob Blasio, Kirsten Mickelson, Joe Zinga



November 15, 2023 — In recent years, the healthcare industry has faced a number of challenges that have impacted the ability of organizations to effectively mitigate risk, manage unique and complex claims challenges, and reduce total cost of risk (TCOR). COVID-19's lasting effects are still a prominent topic of conversation in the industry. From new strands of the virus and long COVID symptoms to the industry-wide struggle with managing resources and retaining staff, the pandemic forced healthcare organizations to reevaluate their strategies for managing risk, claims, and potential litigation.

Virtual capabilities have become a necessary and growing part of everyday operations, but adopting telehealth services and virtual care creates both pros and cons for healthcare organizations. Clinicians can reach their patients faster, delivering care without an in-person visit, but the lack of personal, face-to-face interaction can lead to miscommunication, misdiagnosis, and related errors. For claims professionals, they can conduct business and connect with clients virtually, thus reducing the expense and time of travel and in-person meetings and, oftentimes, the time needed to resolve a claim or case. However, similar to clinicians and their patients, losing the in-person connection has its drawbacks.

Rising jury verdicts are a constant area of concern for healthcare clients across the country. In claims and litigation, our team has historically been tasked with minimizing costs and marshaling a strong defense in order to mitigate awards. However, the rise in aberrational verdicts has impacted the industry in terms of reserving, negotiating resolutions, and deciding whether or not to take a case to trial. When combined, the increasing medical, claim, and litigation costs, on top of rising social inflation, pose a significant threat to organizations. As these conditions evolve, so should the strategies used by organizations to mitigate risk.

As healthcare costs continue to rise and access to quality care becomes increasingly important, understanding the dynamics of the claims, risk, and insurance markets is vital for organizations focused on mitigating risk and controlling costs. In this market outlook, we will explore the current state of the healthcare industry, identify some emerging opportunities and challenges, and provide insights into proven risk mitigation strategies to help healthcare organizations achieve superior outcomes.

Current and Future Industry Challenges

Talent and Labor Shortage

In every industry, employee turnover means more time spent on rehiring, retraining, and reinvesting in new talent. For the healthcare industry, however, staffing shortages combined with the additional costs of recruitment, onboarding, and training have become increasingly daunting.

Attracting and retaining talent has become more expensive and challenging as temporary staffing agencies provide financially attractive alternatives that healthcare systems find difficult to match. Both clinical and administrative workers are searching for alternatives, raising several concerns from a risk management perspective.


Training: Onboarding new staff (whether direct hires or through an agency) requires training at the institutional level. Hospital system processes, policies, and procedures need to be reviewed and understood to mitigate unnecessary risk, which takes time, and failure to comply can lead to severe liability issues.


Contracts: With respect to agency contracts, the organization needs to develop strong indemnity agreements so that in the event of an incident caused by an agency employee, risk can be transferred to the outsourcing entity.


Quality of Care: According to a report from the Association of American Medical Colleges, nearly half of practicing physicians in the US are 55 or older.1 In addition, the nomadic nature of both full-time and agency staff can lead to inconsistency in the provision of care — experienced staff are exiting, increasing the burdens of new, less experienced, or less trained staff. This collective loss of first-hand institutional knowledge is likely to impact safety, productivity and efficiency.

Also, shortages in frontline staff negatively impact staff-to-patient ratios, leaving frontline nurses and clinicians to care for a greater patient volume. This comes at a time when more and more organizations are facing a hardening insurance market, causing them to rethink risk transfer and assume additional risk in an effort to reduce premium costs — a perfect storm for service degradation and increased liability.

Workforce burnout in the healthcare arena is real and a growing concern from a risk management perspective. Through the pandemic, which pushed U.S. doctor burnout to an all-time high of 65%,2 clinicians had to work shorthanded, sacrificing their normal work/life balance to take on extra hours with patients and face the unprecedented demands of COVID-19. During the same period, 44% of nurses reported experiencing physical violence, and 68% reported experiencing verbal abuse.3 This kind of physical and mental exhaustion negatively affects not only the care provider but also the patients in their charge.

Mental and behavioral health is still largely underserved. With historic social stigma, a lack of insurance reimbursement, and the current geographic distribution of care providers, healthcare professionals start at a disadvantage. But organizations that recognize the need for mental health support, proper rest, and work/life boundaries — and deploy resources to support their staff — stand to improve the operations surrounding patient care as well as their claims and risk management outcomes.

The talent challenge is destined to persist well into 2024, which should drive healthcare organizations to review existing strategies for attracting, training, and retaining their workforce in an effort to reduce risk.

While there are a number of ways to approach risk reduction, one comprehensive way an organization can reduce TCOR is by using a third-party administrator (TPA) to manage claims. Clinical risk management has historically been a part of hospital system operations, but managing claims and litigation is not part of a hospital's core business.

First, the operational and administrative costs of outsourcing claims and litigation management are a fraction of what organizations may pay to self-administer. Salaries, overhead, and the expense of running and servicing a necessary risk management information system can be onerous. Second, the expertise in managing, litigating, and resolving complex medical liability that an experienced vendor delivers can result in significant savings in both expense and indemnity. Finally, by outsourcing, the organization transfers its risk of possible E&O exposure to the service provider. With the complex nature of risk transfer, reinsurance participation, and excess coverage, a mistake can cost tens of millions of dollars. Outsourcing claims management through a qualified TPA provides numerous benefits that can reduce TCOR and, therefore, allow for greater financial means to strengthen hospital resources.

Rise and Impact of Telehealth

Before the pandemic, the use of telehealth was already rapidly increasing in both urban and rural areas. With it, the employment of telehealth and virtual visits increased even further, particularly for behavioral health and psychology, cardiology, and primary care. Many younger patients are less interested in establishing a particular physician-patient relationship, so telehealth presents an easy and accessible option. However, a number of barriers exist: Healthcare organizations must be aware of legal and regulatory issues, such as state practice laws and rules on licensure, reimbursement is still evolving, and the secure transmission of data is vital.

On the liability front, healthcare organizations need to ensure that the level of care is appropriate for the interaction, meaning a healthcare professional must determine if a virtual setting satisfies the patient's needs or, if not, convert their care to an in-person visit. Furthermore, healthcare organizations need to consider using an appropriately styled consent, which reflects not only the risks and benefits of treatment but also the potential shortcomings of remote treatment compared to an in-person visit.

Additionally, there is an inherent cyber risk when it comes to services that rely on technology and the digital transfer of sensitive information. If the technology is not well secured, it opens up a number of opportunities for threat actors to exploit that technology and threaten access to electronic protected health information. Companies need to ensure various safeguards are in place to help prevent adverse cyber events. Because data privacy regulations and cyber risk are constantly changing, adopting and implementing these tools as a part of daily operations without creating unnecessary risk exposure will need to be an ongoing effort for healthcare organizations.

While strengthening processes, fortifying cybersecurity infrastructure, and understanding the inherent risks in telehealth are vital to establishing a robust telehealth system, most organizations lack the internal wherewithal to engage fully. Retaining outside expertise is fundamentally necessary to optimize operations and ensure the greatest mitigation of risk.

Evolving Nature of AI and Automation

Artificial intelligence (AI) replicates how we think, and intelligent automation replicates how human beings act. Both are being used at an increasing rate and are quickly becoming standard in the healthcare industry, spanning from chatbots to complex algorithms aiding in care delivery. AI is anticipated to broadly and positively impact patient outcomes for the foreseeable future in various areas: improved diagnosis, decision support, treatment selection, and overall care, as well as greater access to and affordability of healthcare. Inroads have been paved in radiology (diagnosis of abnormal findings), cardiology (EKG interpretation), and risk prediction in obstetrics (to alert care providers to abnormal EFM patterns), to name a few.

By leveraging these AI-enabled diagnostic tools that examine patient data, clinicians can intervene before medical emergencies arise. Conversely, manual documentation procedures are transactional in nature, frequently expensive, and prone to mistakes, making them one of the best use cases for implementing AI-enabled software.

While not yet tested in the courts, we can anticipate that healthcare risk and liability will eventually intersect with the employment of AI and automation in the near term. With wearables and the remote transmission of personal health information, data breaches are always a concern. Further, the use of AI will need to be expertly scrutinized by healthcare practitioners. For example, if a modality fails to identify a certain condition or process, the clinician cannot simply point to a device or rely on its output. As science evolves, this may change — perhaps to the point of liability falling on organizations that fail to use AI.


For healthcare organizations in 2024 and beyond, addressing the risk management challenges outlined above requires a tailored, proactive approach, careful risk management, and strategic planning. Partnering with experienced professionals who can guide risk mitigation strategies, compliance, and liability/litigation procedures can serve as a crucial first step in ensuring the delivery of safe and high-quality care, improving cost control, and positioning organizations for continued success in the future.

To learn more about Gallagher Bassett's multi-disciplinary approach to risk management for healthcare clients, visit our healthcare industry solutions page.


Bill Bower

Bill Bower

EVP — Director of Healthcare
Rob Blasio

Rob Blasio

Managing Director — GB Specialty
Kirsten Mickelson

Kirsten Mickelson

Cyber Product Group Leader
Joe  Zinga

Joe Zinga

EVP — Risk Management

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