Make Sure your Medical Entity and Owners, Directors and Investors are Properly Insured

November 07, 2018

Physician Owned Medical Malpractice, Medical Professional liability Insurance looks at where we are are today: trends, challenges:

The Physicians Insurance Association meets annually with each of its specialty Medical Professional Liability Insurance carriers to discuss growth and expense (payout) trends and other medical business dynamics that affect the future of these often smaller (relatively) medical malpractice insurance carriers.

Dr. Richard Anderson is the Chair of the Physicians Insurance Association; he shared his unique hard earned insights into the business of defending and protecting doctors from malpractice claims and the future of financing and defending them. “This is a time of significant uncertainty for PIAA, the medical profession and the professional liability community,” acknowledged Richard Anderson, MD, PIAA chair as well as chairman and chief executive of The Doctors Company, during the opening remarks to the conference.

“The evolution in healthcare delivery is transforming healthcare financing, organization and regulation, while challenging traditional definitions of good medicine”. …

The consolidation of healthcare delivery is well into its second decade and will be only marginally affected by national politics. Eighteen-percent of the American economy is in play. This is a non-partisan process that is unlikely to be interrupted. PIAA is working to move the process of ‘repeal and replace’ toward reasonable solutions, if this is possible in Washington today.”

Technology, the rapid advancements, capabilities and deployment of which has forever changed healthcare as an industry and what providers can accomplish has changed the responsibility of medical entities. The HealthCare organizations (in addition to perfecting the expert and effective practice of medicine without harm) are now held accountable to protect and secure electronic records and protected health information (PHI)

Two limits:

Limits of Liability protecting against Medical Professional Liability claims as well as another full million protecting the organization against incidences of breach of data or broken delivery in the technology preventing the diagnosis and prescription to effect the patients illness or injury. If the patient does not actually receive the information from the telehealth provider due to a breakdown in the technology then there is no treatment, it is as if the ‘virtual visit’ never happened. And, since so much of healthcare is dependent on successful communication and subsequent action taken from the visit as prescribed and directed by the physician or other healthcare provider, a breakdown in the technology (or wearable) can cause real actual bodily injury (or, as they say in the liability insurance world: BI)
If a policy that proposes to cover you against technology or cyber events does not specifically include bodily injury then it is not as thorough or specific as the policy should be:

The healthcare organization should have two 'towers of insurance at least one tower (which is insure speak for 'limit of liability') to protect the entity when it is named vicariously along with an associated provider for medical professional negligence leading to bodily injury and another tower to protect the entity from claims of security breach and economic harm to the organization and potentially to patients from a loss of Protected Personal Health Information.

Medical professional liability insurance policies have the former and most can 'buy up' the latter to add to its already included sublimit protecting the entity from data loss and or breach.

Addressing the challenges and rapid proliferation of technology at this year's convention of physician insurance companies was Robert Wachter, M.D. (long time leader in hospitalist and innovative niches within healthcare organizations.

Keynote speaker Robert M. Wachter, MD, professor and chair of the Department of Medicine at the University of California, San Francisco, launched the two-day Medical Liability Conference with a session titled, 21st Century Medicine: IT, New Practice Methods and More.

Wachter started by acknowledging, “the angst of the modern physician is the challenge to “deliver high-quality, safer, satisfying and more affordable care.”

The answer to that challenge is clearly tech-enabled, but the medical industry remains in its infancy stage regarding information technology.

2008- 2015 explosive growth in technology implementation in healthcare.

Wachter illustrated this point by citing statistics from the Office of the National Coordinator for Health IT that show only 9.4 percent of hospitals employed electronic health record technology in 2008, but that number jumped to 83.8 percent by 2015.

Drawing upon his professional experience and real-life case examples to explore some of the unforeseen consequences in healthcare’s adoption of data information technology, Wachter noted how the clerical burden of electronic health records has pushed physician burnout rates above 50 percent (up 9 percent in the last three years); how the intensive care unit at his hospital has an average of 2,558,760 audible alerts per month, which has created staff alert fatigue; and how digitization has threatened the doctor-nurse collaboration as well as the doctor-patient relationship.

Gamelah Palagonia, Willis Towers Watson senior vice president, addressed at this same conference (21st Century Medicine (new methods, practice….) walked attendees through the increasing complexity of developing threats such as:

  • Ransomware
  • Distributed Denial of Service (DDoS) attacks
  • vulnerabilities associated with the “Internet of Things” (IoT) that has propelled the cyber risk landscape into uncharted territory.

“Healthcare is the most vulnerable industry in America,” Palagonia said, noting that the healthcare sector accounted for 22 percent of all hacking incidents by industry. The good news, she said, is that proper employee training can mitigate two-thirds of all cyber risks facing healthcare.

It has never been more important to ask about insuring the entity against both medical malpractice insurance claims (with a 1 Million limit of per claim medical malpractice insurance policy) and another 1 Million limit of cyber/tech errors and omissions protecting the entity against claims of failed technology or stolen or broken or breached data leaking protected healthcare information records about patients.

These twin responsibilities of delivering perfect healthcare which brings about healing and recovery and new returned to life and health and also protecting perfectly against cyber theft and ransom demands which might bring financial harm to the investors in medical technologies and profitable health care organizations is almost too much to ask of the HCO’s today.

Entity Limit protecting the owners and investors against medical malpractice liability claims.

-- The entity limit of medical professional liability insurance protects the business entity and ownership group against losses due to the alleged negligence of others associated with them.

APSI does not have this separate limit at this time. Your entity shares your limit if anyone else is named in a claim. As your practice grows, this extra premium to add a separate limit to cover just the entity is a smart solution to consider.

This concept started back in the days of big merchant ships sailing with fortunes of inventory to deliver overseas subject to theft and damage and careless navigation resulting in losses. The shippers (customers) had no recourse but to blame and sue the carriers, giving rise to a gold mine of future ‘responded at superior’ claims against companies, manufacturers and employing healthcare providers and HCO’s).

So, this is one of the many subjective issues that have kind of loosely defined guidelines to direct the coverage decision.

10 % of Underlying base medical malpractice physician premium will provide the entity with that vicarious liability protection:

The ‘dotted line’ that guides whether we add a 10 % (10 % of the mature premium for the physician’s specialty) to your policy and officially cover you for claims resulting from your association with another independent physician is how much of their independent work comes from (or is associated with) you…or in this case APSI.

If more than 30 – 40 % , I would say we should add a vicarious liability fee. At the end of the day, it’s a nominal charge (usually between 300 and 500 dollars per year) and it provides that endorsement officially linking your Doctors Company Malpractice Insurance covering APSI to this regular producing physician. The theory behind this is if they are a regular part of your team (even if independent) then they are following your protocol and practicing under your indirect (or even direct) supervision