Hospitals Employing Physicians Show Less Profit

Kentucky based accounting firm Dean Dorton Allen Ford has teamed up with the Kentucky Hospital Association to conduct a survey of hospitals in that state, the finding was that the local facilities were inuring greater losses than the year before. 58% of the hospitals responding to the small (20 facility) survey reported losses at over $100,000 per employed physician. Although the survey is limited it matches countrywide anecdotal evidence that hospitals are finding wholesale employment of physicians in unprofitable.

This shows that although one of the central pillars of healthcare reform is consolidation of care systems the trend of employing physicians may not be as fruitful as many had hoped. With the market potentially changing doctors should examine their malpractice insurance strategy and the future need for tail insurance.

The market for malpractice insurance is continuing to be competitive and many physicians are looking to take advantage of potential cost savings. However, when purchasing a claims made policy some costs are pushed down the road until you tail them out. With a traditional insurance policy this tail is provided free at retirement, with many doctors and surgeons choosing hospital employment later in their careers this free tail becomes a less likely option.

Tail terms can be pre-negotiated with traditional insurance carriers and many would prefer to offer a lower tail premium later in exchange for signed a new client now. Working with an expert broker can ensure you get the best deal possible. The better you can plan the better costs can be budgeted and saved, contact us today to discuss tail insurance cost savings.

Tail vs Nose Coverage

As health care consolidation continues at a feverish pace many physicians who have never needed to pay attention to the details of their insurance coverage are being bombarded with discussion of “nose” and “tail” coverage. The purpose of this post is to discuss the difference between medical malpractice tail coverage and nose coverage.

Most malpractice policies are written on a claims made basis, meaning that the policy in place when a claim is filed is the policy that covers the costs of the potential malpractice claim. Because of this at any point in time a doctor or surgeon has exposure to future claims from incidents that have already taken place. Often times a change in employers or a move requires a switch in insurance coverage.

Nose Coverage

Nose coverage is almost always the cheaper of the two options if available. Nose coverage involves getting your new insurance or employer to “pick up” your prior acts. Getting a new insurer in the same state to pick up prior acts is fairly easy, changing insurers across state lines can pose a challenge.

In addition many large health systems have multi-million dollar self insured deductibles – because of this they are skeptical about exposing the system’s assets to the potential claims of events from the outside. This is especially true if the physician is bringing exposure from another area of the country where the system doesn’t have experience settling claims.

Tail Coverage

Tail coverage is the more expensive of the two options. Rolling forward your liability, through nose coverage, should always be explored first. Tail insurance is the more expensive of the two options as your close out your old policy while renewing a new policy, rather than roll everything forward together. If tail insurance is your only option explore all possible options, including limiting the reporting period, to reduce the cost.

Contact today to discuss your options and discuss managing your liability.

Tail Insurance Market Update

The marketplace for stand alone tail coverage continues to be strong, especially for physicians with higher premiums. Coverage for obstetricians and pediatric surgeons continues to be difficult to place in the standard market.

The biggest change in the last year is the flood of unrated carriers and risk retention groups (RRGs) into this space. The brokers at instruct clients to avoid buying coverage from carriers who may not be around to pay claims at all costs. Having a policy from an insolvent carrier means claims won’t get paid and it could jeopardize credentialing if a future employer or facility discovers your prior acts are uninsured.

Risk Retention Groups (or RRGs) pool together risk from similar insureds in an attempt to lower costs. The federal government has exempted them from state regulation, meaning no one monitors their capital position and there is no guarantee of funds in the case the company goes out of business. Even worse, most RRGs are allowed to assess former insureds to cover any shortfall in funds. A doctor could buy a tail for 20% less from an RRG only to get a bill for twice the original premium years later. Insurance brokers refer to strong carriers endorsed by AM Best, the industry rating agency, as “rated”. Many hospitals have requirements in their bylaws that staff physicians stick with rated carriers.

Physicians with RRGs and unrated carriers are generally stuck and unable to secure quotes from the rated insurers in the market. The underwriters are concerned with adverse selection, the bias that would cause someone to hide claims from their current unrated carrier in an attempt to buy a rated tail policy to ensure payment.

Gaps in coverage are an emerging issue that employers are concerned with. Our brokers have placed several complicated policies to close gaps in coverage years in the past.

Currently, there are no rated carriers offering standard terms to CRNAs, pharmacists, PAs, NPs, nurses or other mid-level providers. Restricted coverage is available starting at $10,000, which generally only appeals to those who have had claims issues or disciplinary actions. There are unrated carriers offering terms but as stated before, we do not recommend the purchasing of tail insurance from non-financially sound carriers.

The market remains strong, give our talented brokers a call today at 866.23.3820 to discuss your situations and get a free consultation on your options.

Survey on Physician Retirement

The 2013 Deloitte survey of physicians shows that 60% of physicians believe many of their colleagues will be retiring earlier than planned in the coming years. As physicians begin to look at the alternatives of private practice, health system employment or retirement tail insurance is often the elephant in the room.

Contact today to discuss planning the financial implications of your plans and how to best prepare financially.

Antitrust Suits Filed in Idaho

The FTC and the Idaho Attorney General have sued to reverse a year end merger between St. Luke’s Health System acquired Saltzer Medical Group. The AG is asking the courts to consolidate these suits with the one filed by competing St. Alphonsus Health System(which is part of Trinity Health).

Physicians who are contemplating selling their practice to a heath system should contact to discuss their financial options ahead of time.

Cost of Private Practice

The following infographic shows the reason so many physicians are moving to hospital employment from private practice – the cost.

Cost of Running a Private Practice – An infographic by the team at CompHealth Physician

Contact today to discuss your financial options when considering medical malpractice tail insurance.

Disclosure and Malpractice Suits

Much discussion has been had about the value in disclosing and discussing adverse outcomes and mistakes with patients. Many physicians leaving private practice to join hospital employment are being forced into programs where disclosure is required.

Contact to discuss how implementing a program of full disclosure can save you money on your tail insurance costs.

CFO of Hospital Sued for Defamation by Ex-Medical Director

The CFO of a Texas hospital specializing in anorexia, bulimia, binge eating and related disorders has been sued by the hospitals ex-medical director. The physician claims he was was defamed when the CFO said eh “the whole operation under Ed was a giant malpractice lawsuit waiting to happen” after he was fired.

The case is a reminder to those involved in the employment of physicians to document the termination process carefully and to avoid giving opinions of the issues to outside parties. Contact to discuss protecting your organization against the costs of litigation.

NYT Article on Sabbaticals

The New York Times has a blog post on doctors leaving practice for various reasons and reentering medicine years later.

What the article does not address are the malpractice complications of sabbaticals. Contact to discuss managing your malpractice insurance risk when taking a break from your practice.