Industry Experts Share Their Experiences

Robert L. Barrese
03/07/2008

Resolving challenges relating to medical malpractice insurance is critical for the successful operation of urgent care centers. Immediate Care Business asked leaders of the insurance industry to address the most pertinent issues facing physicians in the following case studies.

Case Study #1
Medical Malpractice Insurance Coverage: Is It All the Same?

Medical malpractice insurance is about three things: price, service and coverage. Everyone thinks they understand price although the net cost gets more complicated when dividends or loss-sensitive plans are involved. In comparing price, one must make sure that the exposure basis used in comparisons (physicians, visits, etc.) is the same. Looking deeper, one should know whether a policy is assessable, are dividends likely and is ownership or stock available.

Service, of course, means getting questions answered promptly, being able to add and subtract physicians easily, receive policies, invoices and endorsements promptly, have access to claim decisions, receive risk management support, and ideally having access to the insurance company decision-makers.

Coverage is the most complex variable and the least understood. After comparing limits, deductibles, claim or occurrence triggers and retroactive dates, most buyers assume one policy is pretty much like any other. Ultimately, the buyer is responsible for understanding coverage but agents and insurers have a professional responsibility to be experts, to divulge all information and provide clear, detailed proposals.

During the creation of Urgent Care Assurance Company we realized that we would have a greater responsibility to ensure a complete understanding of coverage to our policy owners. After all, our insureds are shareholders and/or board members and they have an opportunity to demand answers and accountability, more so than with more passive insurance arrangements. Through this process they become smarter insurance buyers, taking control of insurance rather than relying totally on agents and the volatility of the insurance marketplace.

As crazy as it sounds, a sale not made is one that we are particularly proud of and one that will ultimately result in a long-term relationship with a better-educated buyer. During a recent proposal and ensuing due diligence process we realized that the buyer had an incorrect understanding of blanket prior-acts coverage relative to newly hired physicians.

Prior Acts Defined
When a physician leaves employer A and moves to employer B, he/she is customarily given the opportunity to purchase tail coverage from employer A’s insurer. This will protect them from litigation brought against them while with employer A even though the claim is made after they have moved on. In some group policies coverage would extend to the departed physician as long as the entity still has coverage with the insurer. Upon joining employer B, the physician’s date of coverage (retroactive date) is the date of hire. In some instances the insurer from employer B can underwrite the new physician and charge an additional premium for acts while they were with the previous employer. That is called prior acts coverage.
The Disconnect
The confusion was that this buyer believed that retroactive dates were “slots” and transferable to newly hired physicians. Thus if a physician who had been with the firm since 1988 retired, they believed a newly hired physician would take that slot and have retroactive coverage back 20 years — coverage that would include all previous employments if a claim were to be made during the policy period. Thus the insurer without benefit of any underwriting data would pick up unknown exposures, having nothing to do with the urgent care center operations being covered.

In this case, a review of the policy revealed that prior acts coverage could be provided if a detailed application were provided on the physician and an additional premium determined. The buyer confirmed that no such application was ever filled out and since the policy contained no endorsement extending coverage for prior acts, he had in effect been operating under a misunderstanding for many years.

The Search for Clarity
The prospect questioned the agent and even the president of the insurance company. The latter promising the coverage was there and a confirming letter would follow. Many weeks passed with no letter and more inquiries were made. Now conflicting stories started to pop up between agent and insurer. Since the policy indicated that it is the sole authority and side agreements or letters would not take precedence we advised the prospect to insist on a letter, plus a policy endorsement and a letter from the reinsurer indicating their agreement and compliance. Most insurers take a limited amount of risk and the balance is reinsured. Reinsurance treaties invariably exclude prior acts coverage without an in-depth underwriting process.

To date this buyer is still trying to get the promised coverage and with each passing day realizes that the president cannot deliver on his off the cuff comment without getting a lot of other ducks in a row.

How Did It Happen?

It happened because agents rarely receive a current policy to analyze and provide coverage recommendations. Some buyers think that giving out the policy and prices is somehow unfair to the incumbent agent. This antiquated thinking results in competition on price only and an assumption that all coverage is the same (it is not). Thus the original misunderstanding is perpetuated until someone gets an opportunity to do a coverage review by convincing the buyer it is in their best interest and that any fair competition means that each side has access to all information.

In our case the buyer had made a commitment asked for an invoice and was sending payment when we realized the misunderstanding. When you are being handed a check it is difficult for any sales person to say, “Wait a minute, let’s look at this a little deeper.” However, we are confident that our actions will build trust and pay dividends with future prospects.

My advice is to make sure you are getting second opinions on coverage and rethink that objection to giving a competitor full access to information, including the current policies. If someone comes to you for a second medical opinion, shouldn’t you have access to X-rays and other tests? Information not shared can result in mistakes and misjudgments. Give agents and insurers the tools they need to help you: access to information.

Robert L. Barrese is program manager and a director of Urgent Care Assurance Company, RRG. He can be reached at bbarrese@assuranceagency.com

Case Study #2
Finding a Solution for a Physician’s Non-Renewal Notice

By Tracy C. Bautista

An urgent care center was insured by a local mutual insurance company for their medical professional liability. This policy was written on a per-physician basis with separate limits of liability for each physician and the entity. The state medical board mandated one of the physician partners to enter a monitored aftercare program (MAP) for substance abuse. This situation caused the insurance carrier to issue a nonrenewal notice on the clinic’s policy.

We presented two solutions for this situation: First, we asked the carrier if they would consider reversing their non-renewal if we obtained a separate medical professional liability policy for this physician only, including vicarious liability for the entity with respects to his services. Second, move the entity and physicians to a carrier that would accept all providers despite the board issue. In presenting both of these solutions we also provided an evaluation of the costs and benefits of each option.

In solution No. 1, the most important benefit was that the entity and all other providers were able to maintain the same coverage with an A-rated, admitted carrier with separate limits of liability. In solution No. 2, our service included marketing the entity and providers (including the physician with the board issue) to all available carriers for quotes. We prepared a comparison of the quotations we received based on the coverage and premiums and reviewed this with the clinic. The coverage ranged from separate limits for each physician provider to each sharing in one limit of liability with the entity, various deductible options, as well as variations of retroactive coverage or extended reporting period options.

After reviewing their options, this clinic ultimately decided to take solution No. 1, as this option was the best for them based on their dynamics. They indicated that it was preferential for them to maintain the majority of their coverage with a standard, admitted insurance carrier who was able to offer separate limits of liability on a more comprehensive policy form.

Tracy C. Bautista is with Desert Mountain Insurance. She can be reached at tracy@desertmountaininsurance.com

Case Study #3
Insurance Needs are as Diverse as the Clinics Themselves

By David A. Wood

The immediate care industry is comprised of urgent care clinics, occupational medicine clinics and pediatric, internal medicine and family practice groups that do not require appointments. Due to the wide variety of medical disciplines and settings we have discovered several different approaches to managing immediate care services. There are three types of clients we see come to our firm; we see established immediate care/urgent care clinics, physicians and providers starting up a new immediate care/urgent care clinic, and existing primary care groups that are integrating a “no appointment needed” service within their existing practice. Under all three settings there are risk management and operational decisions that will enable them to lessen the exposure to liability claims and affect their insurability and insurance cost. The following are examples of actual applicants from our insurance program and touch upon major points related to insurance cost and insurability and recommendations.

Profile of an Established Urgent Care Clinic
Clinic application was received. Legal liability territory was preferred. There were no problems associated with the name. The Web site was reviewed. Limits were in line with jurisdiction. Needed prior acts, wanted a lower cost, and currently had separate policies for each physician. No claims. Clinic had been in operation for three years with 17,000 patient visits. One week to get the quote completed.

When reviewing the risk we found the following items:

Affecting cost:

Performed phone follow-up for after care but had no criteria or structure. Recommendation: Use our high-risk diagnosis- based phone follow up criteria; follow up within one hour for emergent transfers, determine the type of follow up the physician should make vs. lower level staff and implement a letter follow up system that is sent out in addition to the phone follow up.
The types of visits were not broken out by modality of care. Recommendation: Provide the data to allow us to offer a lower-cost quote. Without the information the insurer will assume all visits are in the higher-risk category.
No radiologist over-reads performed. Recommendation: Consider minimally having the over read for non extremity X-rays but prefer that all are over-read. This has a positive impact to the cost of insurance.
Chart reviews were only completed every six months and there was no structure or guidelines. Recommendation: Minimally perform chart reviews each quarter and follow the same high-risk diagnosis list from the phone follow-up process. Add other types of audits based on the clinic volume and emphasis of care.

Affecting insurability:

Their Web site placed too much emphasis on their service replacing the emergency department (ED). Recommendation: We requested that they downplay this as a point by emphasizing the types of services they offer and focusing on the patient avoiding long waits at the ED when they have the stated conditions.
They maintained a crash cart but did not have advanced cardiac life support (ACLS)-trained staff on premises at all times. Recommendation: Have ACL-Strained staff on premises at all time.
They did not check provider’s prior claims or board actions prior to contracting/ hiring the providers. Recommendation: Begin doing this as part of their hiring/contracting process.
No policy and procedure manual. Recommendation: Implement a policy and procedure manual within 90 days after binding. We provide resources to use as the framework of the client’s own manual.

Missing items that were still required:

Applications, CVs and loss runs for each physician and for the clinic
Confirmation of accomplishing the agreed upon changes to their operations
Copies of declarations pages from current policies for proof of retroactive dates

Outcome: Applicant adopted the recommendations and was able to save 20 percent from the current insurance cost.

Start-Up Urgent Care Clinic Profile
Received a clinic application and copy of proposed policy and procedure manual table of contents. Legal liability territory is average. There are problems with the name, and no Web site set up to review yet. Limits are in line with jurisdiction. No prior acts needed except for one owner. Emergency physicians are owners who want lower cost, need coverage before they open to meet health plan requirements, and want to add providers quickly. Owners are dealing with construction delays. There is a prior emergency medicine large shock claim. No former ownership of an urgent care clinic. There is a projection of 20,000 visits in year one. Two weeks to get the quote completed.

When reviewing the risk we found the following items:

Affecting cost:

The applicant was optimistic, projecting 20,000 visits the first year. Recommendation: Our experience in their area and based on their staffing size would indicate a fair visit estimate at 10,000 for the first year. Our policy allows for a 20 percent growth allowance. This lowered the upfront cost.
Applicant did not have a system for patient follow-up or chart auditing: Recommendation: Implement these items as part of the operation. We provided sample approaches for them to consider using.
Patient intake was initially performed by an MA. Recommendation: Develop a written protocol for the MA to follow to be able to determine if the patient needs immediate attention by the physician. Have a meeting to go over this with the MAs and manage their medical and communication skills in this area.

Affecting insurability:

The entity has the word “emergent” in the name: Recommendation: Remove any reference or derivative of the word “emergency” in the entity name. This leads to extreme legal liability exposure since the urgent care clinic is not an emergency department of a hospital.
One of the owners had a $1 million emergency medicine claim within the past five years. Recommendation: Provide the loss run from the insurer and a narrative from the defense attorney that will describe the nature of the claim. What the insurer is looking for is if the claim was due to falling below the standard of care in an area that would be applicable in the UC, if the claim resulted in the loss of hospital privileges, if there was a board action, if the claim resulted from poor communication or from poor patient relations.

As part of our proposal we would provide a letter to the insured that stated they were approved for insurance that could be used for the health plans. We could not assure the applicant that each health plan would accept the letter but it was an attempt to avoid having to purchase coverage before the clinic opened. Due to the anticipated construction delays there was a high probability that the policy would be in force three to four weeks before opening.

Missing items that were still required:

Applications, CVs and loss runs for each physician
Narrative regarding the large shock claim
Confirmation of accomplishing the agreed upon changes to their operations

Outcome: Applicant adopted the recommendations, accepted our advice and was able to achieve the goals of having a competitively- priced policy, met the health plan requirements without purchasing early and received administrative ease for adding providers.

David A. Wood is president of Scottsdale, Ariz.-based Wood Insurance Group, Inc. He can be reached at davidw@woodinsurancegroup.com

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