Malpractice insurers focusing on risk management; tightened reporting requirements – Practice Trends
PMA Medical Specialists, a 24 physician multispecialty practice in suburban Philadelphia, was facing a crisis. Since buying out the previous owners–the University of Pennsylvania–in 2002, PMA had been struggling to get malpractice insurance. The group had managed to get a policy for 2002 from St. Paul Fire and Marine, only to find that the company planned to exit the malpractice market altogether beginning in 2003. That left PMA wondering how it would find insurance again.
Meanwhile, attorneys at Duane Morris, a Philadelphia law firm, decided that the malpractice crisis in Pennsylvania was getting way out of hand. Their solution was a bit unusual: They started a malpractice insurance company.
“We went and looked at what the costs of claims were, and why we believe there is a crisis,” explained Duane Morris partner C. Mitchell Goldman. “It’s part bad regulation by the insurance department, part bad pricing by insurers, and some bad performance by small numbers of physicians.”
The attorneys then looked at what they and the physicians could do to help stabilize malpractice premiums, he continued. One way was to tighten reporting requirements.
“Doctors are always very late to report incidents,” Mr. Goldman said. “If the first thing you hear about is a lawsuit, you’re stuck with [making a] legal defense, but if you’ve got lots of time to work with the claim before it becomes a lawsuit, there is lots of opportunity to keep the lawyers out before it becomes a loss.”
Then there is the issue of working with hospitals to keep malpractice claims to a minimum. “Historically, [doctors and hospitals] have each viewed the other as the enemy. The plaintiffs played off the hospital against the doctor, and the hospitals would usually lose,” said Mr. Goldman.
With these ideas in mind, the law firm created a subsidiary called Wescott Holdings and used it to start up the Pennsylvania Healthcare Providers’ Insurance Exchange. Duane Morris does not provide any legal services to the company; instead, it receives a fixed tee for managing it. So far, the exchange insures just under 700 physicians, including the members of the PMA group. Clients must:
* Pay a nonrefundable membership fee the first year. In the case of PMA, that fee was about $250,000. The fee is in addition to the annual premium.
* Call in incidents or potential problems as soon as they occur.
“The first four incidents we had were all reported within less than a week, and three were reported within a day after they occurred,” Mr. Goldman said. Of those incidents, “one was settled very, very quickly at about one-tenth of what we thought the case was worth, and the others haven’t even become claims yet.”
* Comply with whatever risk management procedures a hospital has in place. “Hospitals don’t have leverage over doctors, but our subscriber agreement requires [insured physicians] to comply,” Mr. Goldman said. “If they [don’t], that could be grounds for not covering the claim.”
* Agree to use a common attorney if named as joint defendants in a malpractice case and if not adverse to one another.
In exchange for meeting these requirements, doctors who sign up are guaranteed underwriting for 3 years. “The premium may get high if they have a bunch of claims, but we’ll guarantee the underwriting,” he said.
“Our underwriting is very, very rigorous but also very labor-intensive, unlike companies that say, ‘If you have two claims, you’re out,'” he said. “Those claims could be two nicked teeth that cost $5,000, and they would treat that the same as two major claims.”
Despite its unusual underwriting practices, the company has had no trouble getting reinsurers, he added. “We have an A-rated company and four others signed on; we’re oversubscribed. That’s when you know you’ve really hit a home run.”
PMA decided to sign up after looking at several alternatives, according to Dr. Paul Rogers, a cardiologist with the practice.
“There was the state insurance fund, which was exorbitant, an outfit like Lloyd’s of London, which is also exorbitant, or the exchange, which was a new organization,” he said.
Dr. Rogers said that he is relieved that PMA can take a breather from finding malpractice coverage. “They are renewing us from year to year; that relieves us of the big headache of going back to the market, which gets worse every year.”
The Pennsylvania insurance exchange is not the only malpractice insurer that’s paying special attention to risk management. COPIC, a physician-owned malpractice insurer in Colorado, also has very strict reporting requirements, according to Dr. Jeffrey Varnell, one of the company’s three physician risk managers. Not reporting claims quickly can result in penalties all the way up to noncoverage of the claim, said Dr. Varnell, in Denver.
COPYRIGHT 2003 International Medical News Group
COPYRIGHT 2003 Gale Group