Tag Archives: malpractice

5 Questions on Telemedicine Coverage

Teleradiology and telemedicine have increasingly become popular as hospitals and other healthcare providers outsource their radiology and other specialty work to independent practitioners. These practitioners often operate from remote locations, with some based in the same city but many based in distant states or even overseas.

Telemedicine organizations provide diagnostic and clinical medical services to urgent care facilities, hospitals, trauma centers, imaging centers, mobile imaging units, jails, nursing homes, corporate health departments and outpatient medical facilities. As many physician practices enter into this dynamic field, they will find that their current malpractice carrier and the insurance coverage they offer cannot provide them with the pricing and coverage flexibility they will need.

The most common problems encountered will include:

  • Inability to cover reads that come from states outside of where the practice is located.
  • Lack of premium pricing flexibility to base premium on exposures (number of reads or revenue).
  • Lack of portability of coverage and “tail” issues for departing physicians.
  • Inflexibility in underwriting requirements for pre-approval of new or last-minute physicians reading for the group.

Any one of these issues can trigger the need to seek alternative coverage tailored for these exposures. Physicians in the telemedicine field will need to recognize their changing medical malpractice insurance needs and, with the help of their brokers, find insurance coverage that is designed for these types of practices and exposures.

When it comes to covering the telemedicine provider with professional liability insurance, here are five important questions you should ask when searching for the right coverage for this unique risk:

#1: Does your current policy allow for additions of employed or contracted physicians automatically or with a minimum amount of information about them up front?

Just about every telemedicine company will have a situation where it needs to add a provider quickly. Many carriers require a completed application and loss history prior to their approving additions to the provider roster. This creates an unnecessary logjam when telemedicine groups need to fill a spot in a hurry.

#2: Does your policy cover contracted services provided in any state?

As a growing telemedicine provider, you want to be able to obtain contracts in any state. Many carriers cannot cover exposures in all states.

#3: Does your current policy have continuous coverage for terminated/departed physicians after they leave the group?

It’s called Rolling IBNR coverage (Incurred but Not Reported), and having this coverage in place is critical for many telemedicine groups because of the transient nature of the physician labor force in this area. Having the coverage affects up-front negotiation of contracts as well as provides for a much smoother transition when a physician leaves the group as it eliminates the problem of having to purchase a tail for each departed doctor.

#4: Does your current policy provide individual limits for each employed or contracted physician?

Many carriers can provide only “per event” limits for the employed and contracted physicians. In a lot of cases, this is completely acceptable, and many telemedicine groups operate fine with this coverage. However, some groups encounter situations where the healthcare entity or governmental body they’re contracting with requires individual limits, not just per-event limits, for each employed or contracted doctor providing services on their behalf.

#5: Can your insurance carrier provide you with limits up to $5 million or more if statutes or contract clauses require it?

Many healthcare systems and governmental bodies are requiring higher limits from their contractors.

Physicians specializing in the areas of teleradiology or telemedicine should discuss these questions with their insurance broker to be sure they are adequately covered. As the healthcare landscape changes, so will the potential liability of the healthcare professionals. Finding the right malpractice insurance program can benefit these companies in many ways.

Why U.S. Healthcare Is So Mediocre

In my capacity as benefits consultant, I often hear employees say they know we have the most expensive system in the world, but they feel that is a fair trade-off because we have the U.S. healthcare system is the best in the world.

Well, let me disavow you of that notion. Every metric measurable shows that we have a mediocre system, at best! The World Health Organization ranks the U.S. healthcare system as 37th in the world, strictly based on outcomes. That puts us tied with Slovenia but significantly behind Costa Rica, Saudi Arabia, Colombia and the bankrupt country of Greece.

Part of the reason for the poor results, I believe, is because we don’t ask hard questions on the quality of care we receive (and likely wouldn’t get answers, if we did). Does anyone know the readmission rate or infection rate of the hospital they are about to have a surgical procedure in?

Stephen Dubner of Freakonomics fame asked the following question: There are two major cardiology conferences each year, where more than 7,000 of the top cardiologists and thoracic surgeons go for one to two weeks each; what happens to the quality of care in their facilities while they are gone?

I tried to imagine: Would I want to even go to the hospital knowing the top doctors were away?

To get to the answer on quality of care, Dubner used 10 years of data from Medicare looking at more than 10,000 patients with emergency types of heart conditions (like heart attacks) so that patient choice of facility is largely removed as a variable. The baseline for the comparison against the work of these top doctors was data from teaching hospitals, even though conventional wisdom says, “Take me to the facility with the top doctors and keep me away from a teaching hospital. I don’t want any residents cutting their teeth on me!”

The answer: If you were brought to a teaching hospital for a heart attack, your mortality rate was about 15%. Mortality rate at a non-teaching hospital, with those top doctors, the week before or week after the convention was 25%! This is a HUGE swing! This means that, for every 100 heart attacks brought in, 10 more people die when the top doctors are around!

Let me put this in perspective. If you look at all treatments given for a heart attack, like beta blockers, Plavix, stents, angioplasty, aspirin….all these COMBINED reduce mortality by 2% to 3%!

Here is another interesting point. The amount of invasive treatments, like angioplasty and stents, are used in about 33% FEWER cases when the cardiologists are away.

Okay, so wait a second. Did I just say that better care is given when the top doctors are away, and, at the same time, less severe treatments are being administered and fewer dollars are being spent?

That sounds pretty counter-intuitive. Let me give my take on why.

When I think of a “top” cardiologist, an image comes to mind. He has lots of gray hair (not sure why my mind imagines a male, but it does), and has been doing cardiac surgery for decades. Does this sound about right?

Well, this doctor was trained in medical techniques 30 or 40 years ago, and he has likely been sued for malpractice, perhaps multiple times (which leads to “defensive” medicine). He frequently has ownership or at least compensation tied to the profitability of the facility where he practices. These traits lead to more care and often inappropriate (or unnecessary) care. The younger doctors, meanwhile, are less jaded by malpractice, less engaged in profits and more recently trained.

I ask you to question EVERYTHING when it relates to care. Assume nothing. One thing is clear; the more involved the patient is in her own care, the better the outcomes (and the lower the costs, too)!

How to Innovate Under Obamacare

Now that the implementation of the Affordable Care Act (ACA) is well underway, opportunities for insurance product innovations are emerging.

The ACA, or Obamacare, has been accelerating the changes that have been occurring in the last decade in how healthcare is delivered. A large portion of this change has manifested itself in the consolidation of healthcare institutions, physician medical practices and the employment of physicians by hospitals. As a result, the ACA is contributing to blurring lines that have separated those providing, managing and coordinating care. All those changes create opportunities for innovative carriers to thrive over the next decade.

As an example, look at the trend of hospitals and hospital systems directly employing physicians, which Obamacare is encouraging, to seek greater efficiency and lower costs. Healthcare organizations are adding physicians, either by hiring them or by purchasing practices that employ them, and this shift has substantially increased demand for a seldom-used feature of a product known as the extended reporting period (ERP).

An ERP endorsement, as part of what is known as a claims made product, addresses medical incidents that have occurred during the period of a policy that is about to expire but that are not yet known or made as a claim. Using ERP coverage can help insulate a new employer from any lingering medical incidents that occurred before it employed the physician but that become claims during his time with the new employer. Claims of malpractice can take months or even years to surface and then resolve, and a facility employing a new physician wants to be sure it isn’t inheriting a host of problems. The ERP carries an additional premium that is sometimes 250% of the expiring annual premium.

Historically, ERP was largely purchased by physicians as a last resort – if they were leaving a claims made carrier, and the new carrier wouldn’t honor the prior carrier’s retroactive date (the date after which any medical incident must take place to potentially be covered under a policy). This situation requiring the purchase of ERP was relatively infrequent, and pricing the risk was a challenge, because exposure can be carried for an unlimited time under an ERP. Typically, the physician’s only option was to buy it from her incumbent carrier, which is generally required to offer an ERP endorsement. Few carriers developed a separate ERP product to compete with the incumbent carrier’s endorsement approach, so there was little competition.

In 2012, though, there was an opportunity to provide a competitive stand-alone ERP policy. The ACA was accelerating consolidation in the industry and boosting interest in purchasing ERP. At the same time, ERP pricing was still based on the hard market that began in the late 1990s even though claims frequency was showing an unprecedented decline in more recent years. In other words, premiums were substantially more than adequate for the risk. For quick-acting carriers, there was a chance to offer a stand-alone policy at generally a better price, but one that was still adequate in a small but rapidly expanding market.

This also opened up the opportunity to innovate on product features, including providing options of different limits, various levels of risk-sharing and a variety of durations for the ERP.

The market welcomed these pricing and innovations.

Here is an example of how the ERP issues play out:

A physician enters into an employment contract with a hospital, coming out of private practice. She may have done most or all of her work at that very same hospital, and, as part of standard guidelines for credentials in most states, she needed to provide proof of insurance of at least $1 million/$3 million to maintain privileges there while working as an independent contractor.

Options for the prospective hospital employer are:

  1. Ask the physician to obtain a quote from her existing insurance carrier for an ERP. That amount could become part of negotiations about her compensation.
  2. Assume the exposure for the physician’s prior acts as part of the hospital’s self-insured retention, its captive insurance program or its balance-sheet obligations. After all, the physician practiced at this hospital almost exclusively, and the hospital may consider that it has the exposure to the physician’s incurred but not yet reported liability obligations anyway.

Under option 1, there can only be one quote for the ERP, because there is only one existing insurance carrier. If the carrier provides ERP coverage, it is increasing the time period within which claims can be brought under its policy, which increases uncertainty and requires, in the actuarial vernacular, “risk load” or “rate load” (defined as rate needed to account for the potential adverse claims fluctuation inherent in the extended time frame for claim reporting) or, from the perspective of a cynic, increases the fat, the fudge or the cushion, which creates an opportunity in option 2. Given that ERP rates are based on historical losses and that claims frequency has declined, it’s a good bet that – with the added risk load and without the challenge of competition – the quote may be, as an actuary or a lawyer might say, “disproportionate to the risk.” Moreover, with the existing carrier, there oftentimes are no options for a deductible that has a different (lower) limit or shorter duration as a means of lowering the cost to the physician and her new employer.

Option 2 introduces a wrinkle: When a hospital grants a physician privileges as an independent contractor, the hospital potentially has a stronger defense than when it employs the physician. If the physician’s prior acts as an independent contractor are covered under the hospital’s insurance program, the lines between independent contractor and employee blur, and the hospital may become more vulnerable.

Additionally, the hospital’s coverage would not generally provide a specific individual limit for the physician, meaning the hospital exposes its entire tower of insurance to a claim against the physician. With an ERP covering the period before she became an employee, a $1 million policy might suffice, and the hospital could maintain its defense against claims for her time as an independent contractor.

There is an opportunity for stand-alone ERP policies to provide a third option – one that can carry a better price than in Option 1 and that allows for the opportunity to provide a better defense against claims than Option 2.

ERP is just one of many opportunities to innovate that ACA will provide. There could be, for example:

–A blurring of the lines between different aspects of healthcare and of health insurance products.

–An explosion in the power of telemedicine – and for new thinking about coverage.

–A need to be far more careful about data breaches and other cyber issues – perhaps even leading to a decision to confiscate physicians’ phones.

My colleagues and I will tackle these and other topics in subsequent articles.

Financial Reporting Of Medical Malpractice Self-Insured Losses

Healthcare entities, or groups of physicians (through a captive), may self-insure losses to better control the costs of medical malpractice insurance, particularly when insurance premiums rise. Self-insured losses are typically estimated by an actuary, who will provide an unbiased estimate of the loss reserves and can also forecast losses for the next policy period for purposes of budgeting and assessing the feasibility of self-insuring, while an auditor will ensure full compliance with accounting and financial reporting standards. The following will provide background information and points to be discussed with the actuary and auditor.

Common Coverages

In a self-insured program, losses are retained by the program up to the self-insured retention amount, while losses greater than the retention amount are the responsibility of the excess or reinsurance policy. A claims-made policy provides coverage for claims that are reported within the policy period; claims reported after the policy expiration date are not covered. Most programs continually purchase claims-made policies for reportings in subsequent years. Occasionally, when a program changes excess carriers, it may purchase a tail policy for prior acts that have yet to be asserted. Physicians that purchase commercial claims-made coverage may also purchase a tail policy when leaving an organization or ceasing to practice.

When following guidance in the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC), most of these same entities record the self-insured liability in their financial statements on an occurrence basis. An occurrence basis is determined by when the incident happens, or occurs, regardless of when it is reported. An occurrence year can also be viewed as the combination of claims-made losses and tail reportings for claims occurring during a year that are unreported. It is important to note that if the physicians are covered on an occurrence basis by an entity (hospital or captive), but the entity purchases claims-made coverage from a commercial carrier for its physicians, then the entity is liable for the tail reportings.

Unpaid Claim Liability And IBNR

The self-insured liability recorded in financial statements has two main components: 1) case reserves on known claims and 2) an incurred but not reported (IBNR) provision for unknown losses. The case reserves are determined based on the most current available information about the known claims while IBNR losses are usually estimated by an actuary. The IBNR losses account for case reserve development on known cases, pure late reportings, reopened cases, and pipeline claims (reported but not yet recorded in the system as a claim). Liability is simply losses that have occurred but are unpaid.

Actuarial Theory

Actuaries utilize models, centered on the theory of consistency and the assumption that the past is predictive of the future, in order to project losses of a program. This includes similarities in reserving strategy, payment philosophy, homogeneous risk management exposures (same types of procedures, same mix of specialties and maturities of physicians), and other program design characteristics. Any intentional change in a program by management should be reported to the actuary to avoid redundant or inadequate estimations.

Financial Reporting Discussion Points

Five key financial reporting items to discuss with both the actuary and the auditor are listed below.

  • Discounting
    Currently, guidance in the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide Health Care Entities permits, but does not require, medical malpractice reserves to be recorded in the financial statements on a discounted basis. In order to discount a malpractice liability: 1) the amount of the liability must be fixed or reliably determinable; 2) the amount and timing of cash payments for the liability, based on the healthcare entity’s specific experience, must be fixed or reliably determinable; and 3) the expected insurance recoveries, if any, must also be discounted. If discounted reserves are presented, management must disclose the discount and be able to support the discount rate, which may include 1) the return on investments used to pay claims expected to be realized over the period the claims are expected to mature; 2) a risk-free rate; and 3) highly rated corporate bonds with maturities matching the average length of a malpractice payment, all of which may need to be periodically adjusted for future expectations.
  • Percentile
    Some healthcare entities record malpractice liabilities and fund for these losses with a contingency margin, such as at the 75th percentile, selected by management based on the nature and loss experience of the entity. ASC 954-450-25 provides that the liability recorded is independent of funding considerations. ASC 954-450-30 states that an entity should use all relevant information, including entity-specific data and industry experience, in estimating the liability.
  • Gross vs. net presentation
    FASB Accounting Standards Update (ASU) 2010-24, Healthcare Entities (Topic 954): Presentation of Insurance Claims and Related Insurance Recoveries, requires healthcare entities to report medical malpractice and similar liabilities on a gross basis, separately reporting any receivable relating to anticipated insurance recoveries. One of the outcomes of such gross presentation is to more clearly reflect the entity’s exposure to credit risk from the insurer, as the healthcare entity generally remains primarily liable for payment of claims until the insurer makes payments. ASU 2010-24 must be applied to all policies, including ground-up commercial policies, where the entity has a gross liability even though the net liability is $0.
  • Tail liability
    As addressed in ASC 720-20-25 and ASC 450-20-25, entities that maintain claims-made coverage must accrue for incurred but not reported claims and incidents as of the reporting date if the related loss is probable and reasonably estimable. Some believe the tail should be estimated based on an unlimited basis while others assume a limit based on the entities’ historical loss experience (also known as the “working layer”). Regardless of the limit assumed, the entity cannot assume that claims-made coverage will continue to be purchased in the future.
  • Conservatism in estimates
    Management should understand the amount of conservatism in the actuary’s estimate. Understanding the impact of large losses, where estimates fall within a range, and how actual loss experience is used compared to relying on industry information is important.

Working With The Actuary And Auditor

Management should set a goal to have frequent conversations and in-person meetings with both the actuary and the auditor. Although actuarial analysis and financial reporting can be complicated, it is critical for management to have a full understanding and the ability to effectively communicate its program and story. Finally, management should not be afraid to ask questions of both the actuary and auditor as this often leads to a better understanding for all parties and supports a collaborative working relationship between management, the actuary, and the auditor.


Richard Frese collaborated with Pat Kitchen in writing this article. Pat Kitchen is an assurance partner in the Chicago office of McGladrey LLP’s Great Lakes health care and not-for-profit practice. Pat leads McGladrey’s health care practice in Chicago and in its Great Lakes region. He has more than 24 years of experience serving a variety of health care organizations, including hospitals and health systems, specialty hospitals, academic medical centers and faculty practice plans, physician practices, and continuing care retirement communities. Pat assists clients with financial statement audits and reviews, compliance audits, accounting consultation, internal control reviews, acquisition-related due diligence, agreed-upon procedures and debt and equity financings.

Four Risk Management Tips For Medical Malpractice Lawsuit Prevention

A wealth of tips can be found for the prevention of medical malpractice lawsuits, but the truth is, there is no way to prevent someone from filing a lawsuit for malpractice. However, there are many things that can be done which can lessen the risks of a patient wanting to sue, as well as greatly reducing the likelihood of losing such a lawsuit, should one be filed.

The following tips can be part of an effective risk management program. If you don’t already have an aggressive risk management program in place at your practice or healthcare facility, you are statistically more likely to be the target of such a suit and more at risk of being unable to successfully defend against one.

The potential for being named in a malpractice lawsuit has nothing to do with your level of expertise, previous success rate or where you studied medicine. The fact is that a lawsuit may be brought against you even though no error was made or as a result of a situation which no physician could reasonably foresee. And there is certainly no shortage of cases in which the named physician was blameless, but actions (or inactions) by others created an issue. As a medical practitioner, you can still find yourself named in a malpractice lawsuit despite your best efforts to protect your patients and yourself.

So the ultimate tip would be: simply ensure that no mistakes are made. While you may say, “more easily said than done,” this is where a comprehensive risk management program can literally save your future and that of your practice.

Risk management programs actually help in two distinct fashions:

  1. They afford you and your staff the opportunity to proactively avoid mistakes that could lead to a medical malpractice claim.
  2. When properly implemented and enforced, they demonstrate a proactive effort to ensure high quality of patient care. This can greatly reduce, or even eliminate, your liability in the event of litigation.

If you have ever had to endure a malpractice claim, you were probably inundated with advice, after the fact. You may have heeded that advice going forward. But as hindsight, it did you no good at the time.

A risk management specialist can offer you that advice now, before you are faced with the ugly realities of a malpractice lawsuit. Find one that specializes in helping his clients avoid, rather than settle.

Meanwhile, here are four tips describing measures that you can implement to lessen your risk:

1. Audit
Review the standards and practices employed by yourself and your staff. Ideally, this is best undertaken by a disinterested third party service, specializing in med-mal risk management. It should involve a meticulous analysis of all potential risks, such as patient care, equipment certification and maintenance, procedures, checks and verifications, records … virtually any other aspect which has the potential of contributing to a breakdown in the quality of care provided.

Understandably, there are a great many aspects of your practice that can fall into this category. They should all be examined, and the audit team will evaluate the risk of each, making specific recommendations to mitigate those risks and assist you in establishing procedures to ensure ongoing implementation of corrective measures.

2. Training
Training is the heart of risk management. Regardless of whether all your staff carries their own med-mal insurance coverage, the buck will stop with the physician that owns the practice, regardless of who might be found at fault. Your staff must be thoroughly familiar with your risk management measures, understand their importance and know that total compliance is essential. You, as the responsible physician, must enforce that compliance.

3. Stress Test
This refers to performing an analysis of past small claims that may have been settled out of court, or hypothetical issues that seem possible, after viewing vulnerabilities in a practice’s procedures. The process helps identify areas that are weak, either procedurally or in compliance, and can provide valuable assistance in strengthening your practice’s risk management posture.

4. Accreditation
Achieving accreditation by an independent organization such as JCAHO (Joint Commission on the Accreditation of Healthcare Organizations), which performs periodic on-site surveys of procedures and compliance, can be very helpful in maintaining both awareness of and compliance with established risk management measures.

The Benefits
Adding these four measures to your practice’s toolset can prevent mishaps, while strengthening your position in the event of a formal lawsuit. It also offers the obvious benefit of helping you maintain high standards of patient care, and can be instrumental in lowering insurance premiums, due to the attendant reduction in claims.

Some claims can result in litigation, of course, in spite of your best efforts to avoid them. But having an exacting risk management program in practice will reduce your vulnerability a great deal and facilitate a successful defense. It will also offer the additional benefit of helping you find ways to improve the quality of care your practice provides.