Working at the crossroads between the healthcare and justice systems, we operate in a complex and evolving environment. This has shaped our strategic approach and will continue to do so in the future.
The rising cost of negligence claims
The cost of clinical negligence claims against the NHS is rising at a faster rate than healthcare funding. This is having a significant impact on the essential resources available for frontline patient care and is therefore coming under increased scrutiny from the government and others in the health and justice sectors.
Over the past 10 years, clinical negligence claims have risen significantly. The annual cost of harm for clinical negligence compensation for secondary care in England through our Clinical Negligence Scheme for Trusts (CNST) stood at £9 billion in 2018/19. Our schemes work on a pay-as-you-go basis which means we only pay in what we expect to pay out in any given year. This means that cash out of the door (in made or approved payments) was £2.4 billion in 2018/19, an increase from £0.8 billion in 2008/09.
Our total provisions for all of our indemnity schemes continue to rise and stood at £83.4 billion as of 31 March 2019. This represents the estimated value of claims in respect of incidents up to that date that we have either received or expect to receive in the future (in the unlikely event these costs were to be met at that point, rather than paid as planned over many decades). A cross-government strategy was developed on the back of the National Audit Office and Public Accounts Committee recommendations to address the rising cost of clinical negligence, and we await further details on this.
Many of the drivers of these rising costs are outside of the control of our organisation. However, those that we can control continue to shape our strategic direction moving forward. This includes supporting our scheme members to take action to reduce harm and improve the way in which they respond when something does go wrong. We will also continue to challenge claims where necessary and work to reduce the number of claims going to formal litigation unnecessarily through, for example, alternative dispute resolution.
Personal Injury Discount Rate (PIDR)
The original reduction of this rate from 2.5% to minus 0.75% in March 2017 resulted in significant increases to the value of claims with any element of future loss, especially if there is a long life expectancy. The Civil Liability Act 2018, which received Royal Assent in December 2018, introduced a new basis for setting the PIDR in the future, establishing a committee of experts to advise the Lord Chancellor on the appropriate rate with reviews taking place at least every three years. The Act also based the PIDR on the returns that claimants actually receive on their investments as opposed to the return received on index-linked government stock.
In July 2019, the Lord Chancellor announced the introduction of a revised PIDR of minus 0.25%, following completion of the first discount rate review under the terms of the Civil Liability Act 2018. This will inevitably have an impact on settlement behaviour in the legal market.
Fixed recoverable costs
The costs of claimant lawyers in relation to damages has long been a topic for discussion, particularly in relation to low value claims. Whilst fixed recoverable costs were implemented in 2013 for most employer liability and public liability personal injury claims valued under £25,000 (under the Legal Aid, Sentencing and Punishment of Offenders Act 2012 or LASPO), costs of clinical negligence claims remained uncapped.
Following the publication of a report by Sir Rupert Jackson (a senior judge in the Court of Appeal) in July 2017, which recommended the extension of FRC across all types of civil litigation, the government called on the Civil Justice Council to form a working group to formulate recommendations. NHS Resolution formed a key part of this group and the outcomes were published in a report in October 2019.
In March 2019, the Ministry of Justice launched a consultation on introducing fixed recoverable costs to other types of claims, including noise-induced hearing loss. This consultation closed in June 2019 and the government is currently analysing responses.
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