The new Medical Malpractice Insurance Model to accommodate Hospitalists

October 12, 2020

More and more, The Doctors Insurance Agency of Northern California; specialists in Medical malpractice insurance for over 20 years, is seeing the need to reinvent the old conventions of medical malpractice insurance.

The model of how to insure physicians requires creating new ideas; The new medical malpractice policy for Hospitalist Groups is to build a policy allowing for three things:

  • Separate Malpractice Insurance Limits providing claims made coverage
  • Administrative Ease to allow for quick physician malpractice insurance approval
  • No tail cost when the physician is no longer needed to staff the 24 hour/7 day week hospitalist coverage.

In other words, these policies need to be designed so that there is expensive tail bill when the physicians are no longer needed and cancel.

What flexibility for a medical group administrator means is: ease of adding the physicians and not worrying about tail.

That is to say: the application and approval process should be brief, cut through unnecessary and redundant credentialing and approve the physicians so that they can go to work quickly, often with less than a day’s notice to the insurance underwriter.

and, the policy must allow for easy cancellations when the term of service ends, without triggering a tail bill.

As the national dialogue about healthcare ramps up and the need for technology and medical staffing models puts pressure on insurance companies to evolve,

The Doctors’ Insurance Agency and The Doctors’ Company is proud to be ahead of the curve with a hybrid occurrence/claims made insurance policy.

Premiums that equal the service of the physician

The Doctors’ Company Malpractice Insurance Carrier based in California was one of the first innovative carriers to develop a policy that allows for emergency medical groups to price their malpractice risk in direct proportion to the risk. The ‘patient visit, broken down by acuity of the visit’ method was first used by The Doctors’ Company Underwriters, to allow for emergency medical groups to control the cost of tail on their medical malpractice insurance policies.

(this was derived from the idea of paying into a ‘tail annuity’ to gradually allow for this unavoidable budget line item – the inevitable cost of tail when the physicians cancelled or retired.)

This same philosophy of pricing the physicians only in proportion to service applies to Urgent Care Centers and to Hospitalists.

And, with Hospitalist Practices growing and spreading to almost every state’s medical landscape, these flexible policies are increasingly needed.

Medical Groups have formed to bring 24 hour care to hospitals, increasing the quality of care at the site, while taking the pressure off of the attending or admitting physicians’ s office.

The old style of the physician always on call has given way to sophisticated, skilled hospitalists (Internal Medicine, Surgical Specialty or OB/GYN always there, trained to hand off and receive patients so that the patient is immediately attended.

Hospitalists groups are improving patient safety and quality of care:

One prominent group in Arizona reports that their medical group of hospitalists is always studying ways to improve and to better their patient safety results.

“We focus on performance metrics aligned with what hospitals want. The time it takes for a patient to see a doctor to the time it takes for a patient to be discharged or admitted – all these indicators of patient satisfaction are tracked,” says Dr. Foster. of Mesa Hospitalists Group.

This group then provides the physicians with measurable feedback about performance, the patient satisfaction, complaints about pain, ease of transfer and reported improvements in their condition.

The problem with all of this quantitative analysis, says a Dr. Jacobson whom we insure for a hospitalist professional liability insurance policy is: the physicians don’t always like to know that they aren’t doing a great job; some of them end up quitting,

leaving the group with a large and unbudgeted tail bill.

Physician Scorecards

“Doctors are hard to manage,” says the physician from the Mesa Group.

Dr. Jacobson concurs, especially when they have not been managed before.

Most patient discharges are followed by the quantitative scorecard.

If a physician does not like the score, then they eventually might leave the group (and, trigger a tail that might not be in the budget)

you might have an unfunded liability on your hand, unless you pay the tail.

With improved methods of rating the physician so comes innovative

RVU Pricing Method develops fair premium

The Doctors Insurance Agency Hospitalist Policies develop the premium purely according to the services provided. Unlike a physician centered policy where the premium is set ‘per physician, per specialty, per year’ regardless of the hours that the physician may work, the hospitalist policies are priced per RVU generated by each physician. Hospitalist Groups require a number of physicians to staff the all day, every day contractual requirements of their work; These hospitalist groups are required to staff the hospital 24 hours a day.

What is unique and affordable about these hospitalist policies is that their premiums priced by the amount of services provided. So, if a physician is idle, there is no cost component developed.

This is like purchasing a machine to run real time manufacturing; you only run the engine when the staff is producing.

Pricing Fairly, No Tail

RVU method of pricing the policies prices the risk fairly and provides for the easy cancellation that most claims made policies do not include.

Each specialty has a nationally published ‘RVU/Physician number published by the American Group Practice Association. That number is usually around 5,000 to 8,000 depending upon the specialty.

For Family Practice, let’s say that it is 6,000.

This number becomes the denominator in the equation of calculating the ‘Full Time Equivalent of the policy. The FTE’s will then multiply by the annual premium according to the l level of maturity within the specialty.

The Numerator is simply the total number of RVU’s developed by the medical group. The formula is designed to yield a pure risk factor, per Physician/RVU

pricing number that is a true reflection of the risk of the group.

Tail and Recruit Expense Trap:

The important thing to remember is: each physician on the policy has their own separate limit, and tail is built in to the policy.

And, when they cancel, they do not generate tail.

Tail costs can put hospitalist groups out of business (or, at least out of profitability), the same concept holds for urgent care or emergency room medical groups, if the roster of physicians changes, while the need for more physicians increases, the medical group is stuck in the expense trap.

With health care changes looming on the horizon, and physician shortages becoming a foreseeable problem ahead for our society, perhaps, there is room for malpractice insurance companies, and their active, knowledgeable agencies to become part of the solution.

Back to the Mesa Arizona Hospitalist Group: and to their leader, Dr. Mullins:

Dr. Mullins says the MESA team keeps focused on its core values: “What does it mean to be a good doctor? patients satisfied? Do you have high standards?”
If malpractice insurance companies support aggressive interventions and discipline in patient safety habits, they can improve the experience of the patient and, healthcare in general. When the price of malpractice insurance is controlled, the malpractice insurance carrier becomes part of the solution by helping the medical group grow and invest in other technologies.

Malpractice Insurance Premium Discounts

This is a time for Malpractice Insurance Carriers to continue working on the policy benefits and pricing strategies to help keep premiums down. The Doctors’ Company works with many national and county medical associations in order to reduce premiums by applying association or society discounts.

In addition to full time physician discounts, The Doctors’ Insurance Agency works to provide affordable premiums and specialty coverage for Allied HealthCare Providers.

Employing the services of part time and allied healthcare workers is part of the answer to our healthcare crisis.

And, improving the outcomes, controlling costs and cutting out unnecessary and redundant premiums from malpractice policies is as important as risk management protocol in carving out a future for health care reform.

One aspect of a large hospitalist group, with a hospitalist priced malpractice insurance policy is the ease of scheduling. The size of their physician pool allows for flexibility – needed flexibility that allows for staffing of many hospitals and clinics to fulfill around the clock care in many locations. With the right malpractice insurance policy, and a large enough hospitalist group, the doctors can choose to work full-time, part-time or be on call. Our insurance agency is on the phone every day with our insured physicians to help understand their group practice dynamics and to advocate with the underwriters for important changes in the coverage terms.

We appreciate the strategic differences that define each medical group; our agents bring years of experience to listen to your practice details and to work with our underwriting team to develop the best insurance policy fit to protect your practice and hold premiums down as low as possible.

The Doctors’ Insurance Agency has been working for physician and healthcare providers liability protection for 25 years.

Brad O'Brien

The Doctors' Insurance Agency

6 Hamilton Landing, Suite 170

Novato, CA. 94949

415-218-2761 (direct)

415-506-3031 (fax)