
Welcome From Our Chair & CEO Member Hospitals, Healthcare Facilities, and Providers Competitive Strengths Upcoming Events Home		Welcome From Our Chair & CEO When 17 hospitals formed BETA Healthcare Group 29 years ago on June 1, 1979, the overarching objectives were availability, affordability and control. California hospitals wanted a healthcare professional liability program that put them in a position to set rates based on verifiable claims data, structure a reinsurance program that reflected catastrophic loss potential and the group’s ability to retain risk, and design high-quality services and a governance structure suited to their needs. Hospitals and physicians had just weathered the first medical malpractice crisis that resulted in huge increases in premiums, cancellations of coverage, withdrawal of insurers from this volatile line of business, boycotts by healthcare workers, and the formation of many new healthcare provider-controlled insurance companies. Since that time, the “bed pan mutuals,” as the old guard derisively labeled them, have grown to dominate the healthcare professional liability sector. There have been two more hard market periods and three soft markets, the most recent occurring right now. The large commercial insurers continue to have a role making inroads sporadically and advantageously and, thereby, driving the cyclical nature of this long-tail, difficult to price line of insurance. In the hard market, when costs oftentimes soar and coverage is sometimes impossible to purchase, the actuaries are in control and analytical reasoning and pricing prevails. But as pricing is deemed to be too high, excess claims reserves are released and rates fall unrealistically downward, the salesmen and marketers gain control as top-line revenue growth replaces attention to bottom-line profitability. And, the poor underwriting decisions we swore not to repeat begin again. Welcome to 2008! So, what’s different about BHG from the rest of the herd galloping toward the next crisis? We have not and we never will change our focus: Providing our members with a stable, affordable and comprehensive risk financing program where they, not distant and disparate shareholders, receive the benefits. For our many long-term members, this is BHG business as usual, but for our newer members, this may be a style you have not experienced before. We encourage you to look at BHG as your long-term risk management partner through hard markets and soft markets so that the goals can continue to be achieved for all of our members’ benefits. During 2007, BHG’s Combined Statements of Operations reported record revenues of $93.1 million, up 13% over 2006. Contributions increased 7.5% to $88.4 million and investment income recovered nicely growing 37.8% to $14.1 million. The BETA Council declared a $5 million dividend to members, and the fund balance grew by $12.6 million to $89.4 million. Year-end assets totaled $407.6 million, a 9.9% increase over 2006, while invested assets rose 14.4% to $320.0 million. Overall, BHG earned 6.9% (net of fees) on its invested assets and had an investment yield of 4.6%. Although BHG ended the year with 88 members, down four from 2006, four new members were added: Children’s Hospital and Research Center of Oakland Mountain Communities Healthcare District University of Southern California USC Care Medical Group Similar to other healthcare professional liability programs throughout the United States, claims frequency continues to decrease dramatically. In BHG, over the last ten years, frequency per 100 exposure units has declined about 30%. Counterbalancing this good news, the frequency of losses greater than $1,000,000 has increased even more dramatically, as discussed below. For the year, BETA opened 814 claims, closed 821, and had 846 open claims at year end. Eighty-three percent of the 704 healthcare professional liability (HPL) claims were closed with no indemnity payments up from 75% in 2006. These claims cost the pool $6.1 million in defense expenses, an average of $10,504 per claim. Of the 122 HPL claims closed with an indemnity payment, the average total cost was $312,749, consisting of $254,350 in indemnity expense and $58,399 in defense costs. Overall, defense expenses represented 30% of all claim costs which is down substantially from 40% in 2006. Total incurred costs for the 52 directors and officers’ liability closed claims were $1,255,528, for an average of $24,145 per claim. Defense costs represented 78% of total incurred costs. There were 74 auto claims closed at an average cost of $3,271. In 2007, BHG continued its excellent trial record receiving defense verdicts in nine of the 11 claims it took to trial. In the 50 trials over the past six years, BHG received defense verdicts in 86%. The BETA Council added two new members during the year, Wright Lassiter, Chief Executive Officer of Alameda County Medical Center, and Mark O’Connor, a Board Member at El Camino Hospital. Don Larkin, former Chief Executive Officer of San Gorgonio Memorial Hospital, and June Snow, a Board Member at Antelope Valley Hospital resigned during the year. At his retirement, Mr. Larkin was the longest tenured current BETA Council member having served 23 years while representing three BHG members. Don’s commitment to and support of BHG were remarkable and will be missed greatly. BHG’s A. M. Best rating was reconfirmed at “A-” (Excellent) for the eleventh year in a row with a “stable” outlook for both BETA and Health Providers Insurance Reciprocal, RRG (HealthPro). According to A.M. Best, “The rating reflects BETA Healthcare Group’s adequate risk-adjusted capitalization, favorable operating profitability and conservative loss reserve philosophy...The group benefits from its strong market position in California, its tax-exempt status and very high member retention derived from its high-quality claims and risk management services, stable rates, and member dividends.” An area of increasing concern is the continuing escalation of large losses, particularly in obstetrics. There were ten claims closed with indemnity expense of at least $1 million, up from six in 2006, but these claims represented 71% of all indemnity costs and had an average total cost of $2,431,800. Fifty percent of these large claims occurred in obstetrics and were responsible for over 92% of all incurred costs in this service area. HealthPro continued to grow adding over 200 physicians from 13 medical groups. Premiums increased 27% to more than $14.6 million. The Risk Retention Group ended the year with 49 subscriber medical groups covering over 1,400 physicians. During 2007, there were 143 claims closed at a cost of $5,647,447, 59% of which was indemnity expense. Ninety-one percent of all HealthPro claims closed without indemnity, but had average defense expenses of $10,095. BETAlliance Insurance Services, the attorney-in-fact for HealthPro, added two new board members in 2007: Bob Hemker, Chief Financial Officer of Palomar Pomerado Health in north San Diego County, and Ray Hino, Chief Executive Officer of Mendocino Coast District Hospital. BETA continues to have a broadly diversified international reinsurance program under which it retains the first $3 million of each claim for HPL and directors and officers’ liability and $500,000 for each automobile liability claim. HealthPro provides most of its insured’s with limits of $1 million per occurrence subject to a $3 million annual aggregate limit. Reinsurance costs were down 3.5% to $9.7 million. During 2008, BHG will be focusing on several initiatives to enhance our ability to provide services to its members and to encourage, assist and reward members’ risk management activities. Internally, we are transitioning to a paperless office which should be completed by year end resulting in improved efficiency, decreased costs and a better, greener environment. In light of the continued growth and cost of million dollar plus claims, BHG’s Risk Management staff is continuing to work with our members to enhance patient safety and decrease risks in obstetrics and emergency medicine. For both BETA members and HealthPro subscribers BHG will be encouraging the use of risk reducing policies and procedures, which if implemented by May 1, 2009 will result in contribution/ premium credits. On behalf of the members of the BETA Council and the BAIS Board of Directors and all the BHG staff, thank you for your continued participation. It is your program and we will endeavor constantly to earn your support and trust. Return to Top Telephone: (925) 838-6070 Email: © 1997-2007 BETA Healthcare Group Privacy Policy

Welcome From Our Chair & CEO
Member Hospitals, Healthcare Facilities, and Providers
Competitive Strengths
Upcoming Events

Welcome From Our Chair & CEO

Sam and Tom

When 17 hospitals formed BETA Healthcare Group 29 years ago on June 1, 1979, the overarching objectives were availability, affordability and control. California hospitals wanted a healthcare professional liability program that put them in a position to set rates based on verifiable claims data, structure a reinsurance program that reflected catastrophic loss potential and the group’s ability to retain risk, and design high-quality services and a governance structure suited to their needs. Hospitals and physicians had just weathered the first medical malpractice crisis that resulted in huge increases in premiums, cancellations of coverage, withdrawal of insurers from this volatile line of business, boycotts by healthcare workers, and the formation of many new healthcare provider-controlled insurance companies.

Since that time, the “bed pan mutuals,” as the old guard derisively labeled them, have grown to dominate the healthcare professional liability sector. There have been two more hard market periods and three soft markets, the most recent occurring right now. The large commercial insurers continue to have a role making inroads sporadically and advantageously and, thereby, driving the cyclical nature of this long-tail, difficult to price line of insurance. In the hard market, when costs oftentimes soar and coverage is sometimes impossible to purchase, the actuaries are in control and analytical reasoning and pricing prevails. But as pricing is deemed to be too high, excess claims reserves are released and rates fall unrealistically downward, the salesmen and marketers gain control as top-line revenue growth replaces attention to bottom-line profitability. And, the poor underwriting decisions we swore not to repeat begin again. Welcome to 2008!

So, what’s different about BHG from the rest of the herd galloping toward the next crisis? We have not and we never will change our focus: Providing our members with a stable, affordable and comprehensive risk financing program where they, not distant and disparate shareholders, receive the benefits. For our many long-term members, this is BHG business as usual, but for our newer members, this may be a style you have not experienced before. We encourage you to look at BHG as your long-term risk management partner through hard markets and soft markets so that the goals can continue to be achieved for all of our members’ benefits.

During 2007, BHG’s Combined Statements of Operations reported record revenues of $93.1 million, up 13% over 2006. Contributions increased 7.5% to $88.4 million and investment income recovered nicely growing 37.8% to $14.1 million. The BETA Council declared a $5 million dividend to members, and the fund balance grew by $12.6 million to $89.4 million. Year-end assets totaled $407.6 million, a 9.9% increase over 2006, while invested assets rose 14.4% to $320.0 million. Overall, BHG earned 6.9% (net of fees) on its invested assets and had an investment yield of 4.6%.

Although BHG ended the year with 88 members, down four from 2006, four new members were added:

Children’s Hospital and Research Center of Oakland
Mountain Communities Healthcare District
University of Southern California
USC Care Medical Group

Similar to other healthcare professional liability programs throughout the United States, claims frequency continues to decrease dramatically. In BHG, over the last ten years, frequency per 100 exposure units has declined about 30%. Counterbalancing this good news, the frequency of losses greater than $1,000,000 has increased even more dramatically, as discussed below.

For the year, BETA opened 814 claims, closed 821, and had 846 open claims at year end. Eighty-three percent of the 704 healthcare professional liability (HPL) claims were closed with no indemnity payments up from 75% in 2006. These claims cost the pool $6.1 million in defense expenses, an average of $10,504 per claim. Of the 122 HPL claims closed with an indemnity payment, the average total cost was $312,749, consisting of $254,350 in indemnity expense and $58,399 in defense costs. Overall, defense expenses represented 30% of all claim costs which is down substantially from 40% in 2006.

Total incurred costs for the 52 directors and officers’ liability closed claims were $1,255,528, for an average of $24,145 per claim. Defense costs represented 78% of total incurred costs. There were 74 auto claims closed at an average cost of $3,271.

In 2007, BHG continued its excellent trial record receiving defense verdicts in nine of the 11 claims it took to trial. In the 50 trials over the past six years, BHG received defense verdicts in 86%.

The BETA Council added two new members during the year, Wright Lassiter, Chief Executive Officer of Alameda County Medical Center, and Mark O’Connor, a Board Member at El Camino Hospital. Don Larkin, former Chief Executive Officer of San Gorgonio Memorial Hospital, and June Snow, a Board Member at Antelope Valley Hospital resigned during the year. At his retirement, Mr. Larkin was the longest tenured current BETA Council member having served 23 years while representing three BHG members. Don’s commitment to and support of BHG were remarkable and will be missed greatly.

BHG’s A. M. Best rating was reconfirmed at “A-” (Excellent) for the eleventh year in a row with a “stable” outlook for both BETA and Health Providers Insurance Reciprocal, RRG (HealthPro). According to A.M. Best, “The rating reflects BETA Healthcare Group’s adequate risk-adjusted capitalization, favorable operating profitability and conservative loss reserve philosophy...The group benefits from its strong market position in California, its tax-exempt status and very high member retention derived from its high-quality claims and risk management services, stable rates, and member dividends.”

An area of increasing concern is the continuing escalation of large losses, particularly in obstetrics. There were ten claims closed with indemnity expense of at least $1 million, up from six in 2006, but these claims represented 71% of all indemnity costs and had an average total cost of $2,431,800. Fifty percent of these large claims occurred in obstetrics and were responsible for over 92% of all incurred costs in this service area.

HealthPro continued to grow adding over 200 physicians from 13 medical groups. Premiums increased 27% to more than $14.6 million. The Risk Retention Group ended the year with 49 subscriber medical groups covering over 1,400 physicians. During 2007, there were 143 claims closed at a cost of $5,647,447, 59% of which was indemnity expense. Ninety-one percent of all HealthPro claims closed without indemnity, but had average defense expenses of $10,095.

BETAlliance Insurance Services, the attorney-in-fact for HealthPro, added two new board members in 2007: Bob Hemker, Chief Financial Officer of Palomar Pomerado Health in north San Diego County, and Ray Hino, Chief Executive Officer of Mendocino Coast District Hospital.

BETA continues to have a broadly diversified international reinsurance program under which it retains the first $3 million of each claim for HPL and directors and officers’ liability and $500,000 for each automobile liability claim. HealthPro provides most of its insured’s with limits of $1 million per occurrence subject to a $3 million annual aggregate limit. Reinsurance costs were down 3.5% to $9.7 million.

During 2008, BHG will be focusing on several initiatives to enhance our ability to provide services to its members and to encourage, assist and reward members’ risk management activities. Internally, we are transitioning to a paperless office which should be completed by year end resulting in improved efficiency, decreased costs and a better, greener environment. In light of the continued growth and cost of million dollar plus claims, BHG’s Risk Management staff is continuing to work with our members to enhance patient safety and decrease risks in obstetrics and emergency medicine. For both BETA members and HealthPro subscribers BHG will be encouraging the use of risk reducing policies and procedures, which if implemented by May 1, 2009 will result in contribution/ premium credits.

On behalf of the members of the BETA Council and the BAIS Board of Directors and all the BHG staff, thank you for your continued participation. It is your program and we will endeavor constantly to earn your support and trust.

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