The environment we work in

Our total provisions for all of our indemnity schemes continue to rise from £65 billion last year to £77 billion at 31 March 2018. 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). The unsustainable increase in costs has understandably brought about greater scrutiny, by government and others in the health and justice sectors, of the costs of clinical negligence. We welcomed the examination of the costs of clinical negligence in NHS trusts during 2017/18 by the National Audit Office (NAO) and the Public Accounts Committee (PAC).

The NAO report Managing the cost of clinical negligence in trusts, published on 7 September 2017 examined “what is causing the rising costs of clinical negligence claims” and “whether NHS Resolution and the Department are taking effective action to understand and control the costs and are working effectively with other bodies to reduce the need for future claims”.

There are three recommendations that impact NHS Resolution directly, which we are pleased align with our five-year strategy. The NAO found that we have taken effective action to control costs and have achieved significant savings for the taxpayer from contesting unmeritorious or excessive claims and legal charges. Between 2006/07 and 2016/17 our average operational cost per claim reduced from £721 to £414 and operational costs as a proportion of total spending on all clinical negligence claims also reduced from 1.7% to just over 0.6% during this period.

Having examined the influence of damages and legal costs on the cost of clinical negligence claims, they determined that the rise in cost for high value claims (above £250,000) was mainly due to the value of the damages awarded, while the rise in costs for lower value claims (below £25,000) was mainly due to a rise in legal costs.

The subsequent PAC report, published on 1 December 2017, made a number of recommendations and emphasised that tackling the costs of clinical negligence requires far-reaching cross-government action.

Recommendations included for example that, with the Ministry of Justice and Department of Health and Social Care (DHSC) we continue to focus on actions to reduce patient harm, in particular harm to maternity patients, and working with NHS Improvement and trusts to explore the use of consistent classification across incidents, complaints and claims data.

We are informing an increasingly active policy environment and continue to work with DHSC, HM Treasury and the Ministry of Justice in the development of the cross government strategy on the costs of clinical negligence. We also share an objective with NHS Improvement to achieve reduced levels of harm through increased reporting and learning from errors.

Rapid Resolution and Redress

Following the government consultation of 2 March 2017 into Rapid Resolution and Redress, its proposed scheme to provide support to families caring for children with severe brain injury caused by avoidable harm, a response was published in November 2017 with the aim that Rapid Resolution and Redress will be operational from April 2019. We continue to advise DHSC on areas within our expertise.

Fixed Recoverable Costs

Responses to the DHSC’s consultation launched on 30 January 2017 on the possible introduction of Fixed Recoverable Costs (FRC) for lower value clinical negligence claims were sought by early May 2017. The government’s preferred option was to mandate FRC for claims valued between £1,000 and £25,000 – costs are not normally recoverable in personal injury cases below £1,000. NHS Resolution had advised DHSC on the consultation and supplied much of the published data. The formal government follow-up to the consultation was published on 15 February 2018. In the interim Sir Rupert Jackson, a senior judge in the Court of Appeal, had issued a report in July 2017 recommending the extension of FRC across all types of civil litigation where the concept does not currently apply. For clinical negligence cases he recommended FRC for cases up to £25,000, subject to the proviso that there be a simplified process and a matrix of applicable fees to contain costs, with details of both to be agreed by a working party involving both claimant and defendant representatives. He also suggested an intermediate track for cases between £25,000 and £100,000, to which a higher level of FRC would apply, but concluded that relatively few clinical negligence cases would fall into it owing to issues of complexity. Unsurprisingly the consultation produced polarised views. The government response stated that it was considering all of Sir Rupert’s proposals and in tandem agreed that a working party should be established to develop a bespoke process for lower value clinical negligence claims and a costs matrix. We are pleased to have been invited to participate in the group. It is expected that the group will publish recommendations in December 2018.

Personal Injury Discount Rate

The reduction of this rate from 2.5% to minus 0.75% on 20 March 2017 resulted in very significant increases to the value of claims entailing any element of future loss, especially if there is a long life expectancy. On 7 September 2017 the Ministry of Justice published a response to its consultation on how the rate might be set in future, concluding that a fairer and better framework should be established. Following a report by the Justice Select Committee on 1 December 2017, the government published a Civil Liability Bill on 21 March 2018, including a number of important changes such as: the establishment of a committee of experts to advise the Lord Chancellor on the appropriate rate; reviews at least every three years; and basing the rate more closely on the returns claimants actually obtain on their investments as opposed to return received on IndexLinked Government Stock, which is the current position. As subject matter experts for indemnity and compensation in the NHS we expect to be heavily involved in, and look forward to, supporting these three strands of work.

General Practice Indemnity

In October 2017, the Government announced an intention to deliver a more stable and affordable system for primary care indemnity via a state-backed indemnity scheme for general practice. On 30 November 2017 DHSC confirmed that we will be administrators of the scheme. The model for scheme operation has yet to be determined, but we are supporting DHSC and others in the design of the arrangements for the proposed general practice indemnity scheme, as well as putting the resources in place for NHS Resolution to establish and administer the scheme with effect from April 2019.

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