Trusts could benefit from significantly reduced clinical negligence payouts and insurance premiums if the NHS Litigation Authority successfully reforms “draconian” risk assessments, HSJ has been told.

Payments made under the NHS’s clinical negligence scheme for trusts reached £729m in 2010-11, a 90 per cent increase on 2005-06 and a 12 per cent rise on the previous year.

The increasing cost of clinical negligence claims means trusts are facing a 10 per cent rise in their contributions to the scheme. In total they will pay £950m for 2012-13.

The rising cost is alarming some trusts. Outgoing litigation authority chief executive Steve Walker admitted that three were “thinking about” leaving the scheme as a result. He also revealed the authority hoped to reform the negligence scheme – a risk pooling system funded by voluntary contributions from NHS trusts, foundation trusts and primary care trusts.

Under the scheme, the litigation authority calculates the total sum required to cover clinical negligence claims each year. The premiums needed to insure this sum are paid by member trusts based on the quantity and nature of their work.

Following a risk assessment trusts are given a risk level rating of 0-3, with a lower risk level potentially earning them discounts on their contributions.

Analysis by HSJ has shown the acute trust sector could save nearly £115m if all trusts were assessed at level 3 – the lowest level of risk. However, trusts that are ambitious enough to attempt to be designated level 3 face the possibility of being designated level 0 if they do not achieve the required standard. Most, therefore, are cautious and choose to be assessed by lower standards.

Mr Walker told HSJ these rules were “draconian” and the authority was “looking to change them”. He also said it was considering increasing the discount rate given to trusts rated level 3 to provide “more incentive” to achieve the highest standard. He said discounts of “35 or 40 per cent” were being considered.

The proposed reforms follow a review of the litigation authority commissioned by the Department of Health. It recommended that the authority adopted a “tougher stance” on non-conforming trusts, potentially downgrading or imposing financial penalties on those failing to comply with improvement actions or reporting deadlines.

The review, by insurance broker Marsh, also called for the authority to share more information with the NHS to help drive improvements.

The DH has also agreed to consider whether the threshold for making a foundation trust application should be a level 2 risk rating rather than the current level 1.