5 Steps for Surgeons to Resolve Liability Insurance Before Employment TransitionHere are five steps for spine surgeons to resolve medical liability and malpractice issues before becoming a hospital employee.
1. Purchase insurance to cover the "tail" after leaving physician practices. Most hospital systems are self-insured and most physicians are not. This must be reconciled when entering into an employment agreement. Medical liability claims are filed within a certain period of time after they occur. However, surgeons that become employed by hospitals usually cease their personal insurance coverage before the claim comes. In order to fix this situation, a physician will purchase a "tail" insurance policy that covers future claims from past acts.
"For most surgeons, if they are sued today for something that happened two years ago, their policy will cover it," says Tom Firestine of Calculated Risk Associates. "When they are leaving, there is a bucket of potential claims that could come from when they were in private practice, and hospitals don't want to bring outside exposure from the physician group onto their balance sheet."
The insurance policy is expensive and could become a bargaining chip between the physician and hospital.
"It comes up because when they are looking at the pool of compensation, insurance is going to be the biggest line item making this transition," says Mr. Firestine. "The hospital will give surgeons a large signing bonus and 90 percent will go to pay for the liability insurance. The more you can reduce that expense, the easier it will be for both sides to get the deal done."
2. Start looking for quotes early. The earlier surgeons can begin collecting quotes for insurance to cover the tail, the better position they will have at the negotiation table. In most cases, surgeons know they'll be making that transition months in advance, and they should take that time to do their research.
"The sooner you know this might happen, the better," says Mr. Firestine. "If you know you are going to take employment, start talking to insurance companies right then. The more time you have, the more you can prepare for this transition. Estimate the costs and negotiate these rates ahead of time. If you start looking two weeks before you become employed at the hospital, it's hard to get alternative quotes."
These policies can reach into six figures for an individual surgeon and potentially cost several million dollars for a larger group, so it's crucial to negotiate the best rate possible.
3. Pay attention to state-specific laws. Each state has different laws regarding liability insurance and medical malpractice, so work with someone who has a good understanding of the laws in your state. Some surgeons might require heavy coverage while others need less to safely make that transition.
"When you tail out of a standard insurance policy, some companies will offer a policy that lasts forever when you try to cover that tail," says Mr. Firestine. "You don't need that because most states have a statue of limitation on medical liability. You could work with someone who understands state laws to craft a policy so you aren't paying for more coverage than you need."
On the flip side, you don't want to purchase a policy that is so small it leaves coverage gaps. "When people look at your past insurance history, you don't want future employers to see an insurance gap that they could have a lawsuit over," says Mr. Firestine. "That slows the process and prevents the deal."
4. Understand the hospital's malpractice options. Spine surgeons should understand the hospital's malpractice options before signing the hospital contract and whether the hospital is self-insuring physicians. Around 80 percent of risk managers for hospitals employing physicians indicate that their hospitals self-insure their physicians, according to a recent study by Aon and the American Society of Healthcare Risk Management.
"This figure is up from last year and the fact that it continues to grow presents a unique set of challenges for hospitals that self-insure, including establishing and managing an adequate amount of capital assets to sufficiently address claims against physician employees," says Jack Meyer, senior vice president of The Doctors Company. "While the perception may be that self-insurance offers potential cost savings, unified claims defense and uniformity of system-wide risk management, there are challenges with so-called captives. The total financial commitment of the captive, as well as the commitment required of each member, can be significant."
The spread of losses over a small group of physicians is less predictable for insurers, so captives have to outperform the market. Spreading losses over a large group for a longer period of time is a more attractive option.
"Failure of any of the captive functions may cause the whole project to fail with physicians then running the risk of going bare and not being able to get prior acts coverage," says Mr. Meyer. "Physicians who retire and are concerned about the viability of a captive may need to consider tail coverage with an admitted insurer, which may not be available to them."
5. Look for key liability components in the fine print. Before signing the employment agreement, surgeons should run the contract through their legal team and pay close attention to the medical liability components. The hospital should cover the surgeon while employed and address what happens when the contract is up.
"When signing a contract that includes coverage for medical liability, surgeons should make sure that everything regarding the doctor's legal liabilities are clearly articulated upfront and run by legal counsel," says Mr. Meyer. "Surgeons should also make sure that if they leave the hospital's employment, the hospital will cover the claims exposure that they accrued while they worked there."
The physician should also make sure the hospital takes on liability for their practice's residual liability exposure and address adequate limits of liability, expenses outside of indemnity and financial solvency of the carrier, according to Mr. Meyer.
More Articles on Spine Surgeons:
5 Proactive Steps for Spine Surgeons to Influence Spine Care Policy
18 Recent Spine Surgeon Accomplishments
9 Mistakes to Avoid When Adding Spine Surgery to an ASC
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