Community Health Systems 2015 Annual Report Download - page 101

from the results of all of these methods, we typically cannot quantify the precise impact of such factors on our
estimates of the liability. Due to our standardized and consistent processes for handling claims and the long
history and depth of our company-specific data, our methodologies have produced reliably determinable
estimates of ultimate paid losses.
The following table presents the amounts of our accrual for professional liability claims and approximate
amounts of our activity for each of the respective years (excludes premiums for excess insurance coverage) (in
millions):
Year Ended December 31,
2015 2014 2013
Accrual for professional liability claims, beginning of year ...... $ 924 $ 644 $ 622
Liability for insured claims (1) ............................ 3 6 (5)
Liability acquired through HMA merger:
Gross liability acquired ................................ - 292 -
Discount of liability acquired ........................... - (7) -
Discounted liability acquired .............................. - 285 -
Expense (income) related to:
Current accident year .................................. 183 179 135
Prior accident years ................................... (60) (51) (26)
Expense (income) from discounting ...................... 5 (7) (15)
Total incurred loss and loss expense (2) ..................... 128 121 94
Paid claims and expenses related to:
Current accident year .................................. - - (1)
Prior accident years ................................... (154) (132) (66)
Total paid claims and expenses ............................ (154) (132) (67)
Accrual for professional liability claims, end of year ........... $ 901 $ 924 $ 644
(1) The liability for insured claims is recorded on the consolidated balance sheet with a corresponding
insurance recovery receivable.
(2) Total expense, including premiums for insured coverage, was $174 million in 2015, $170 million in 2014
and $134 million in 2013.
The impact of risk management patient safety quality programs and initiatives implemented at our hospitals, as
well as decreasing obstetric admissions, surgeries, admissions and a slightly lower same-store acuity case mix,
resulted in the current accident year expense decreasing, as a percentage of net operating revenues, for each year
presented. Income/expense related to prior accident years reflects changes in estimates resulting from the filing
of claims for prior year incidents, claim settlements, updates from litigation and our ongoing investigation of
open claims. Expense/income from discounting reflects the changes in the weighted-average risk-free interest
rate used and timing of estimated payments for discounting in each year.
We are primarily self-insured for these claims; however, we obtain excess insurance that transfers the risk of
loss to a third-party insurer for claims in excess of our self-insured retentions. Our excess insurance is
underwritten on a claims-made basis. For claims reported prior to June 1, 2002, substantially all of our
professional and general liability risks were subject to a less than $1 million per occurrence self-insured retention
and for claims reported from June 1, 2002 through June 1, 2003, these self-insured retentions were $2 million per
occurrence. Substantially all claims reported after June 1, 2003 and before June 1, 2005 are self-insured up to $4
million per claim. Substantially all claims reported on or after June 1, 2005 and before June 1, 2014 are self-
insured up to $5 million per claim. Substantially all claims reported on or after June 1, 2014 are self-insured up to
$10 million per claim. Management, on occasion, has selectively increased the insured risk at certain hospitals
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