Discounting medical malpractice claim reserves for self-insured hospitals

Estimating the self-insured medical malpractice reserves in financial statements is the responsibility of hospital management, usually the CFO. This is no easy task, and even small changes in the discount rate can result in significant changes in the discounted reserve. CFOs often work with actuaries to determine the reserves, and their estimates are examined by an external auditor. A formal policy that sets forth the rationales for discounting and selecting the discount rate can be a great help to all three parties.