Vicarious Liability and Physician Rates

October 12, 2012

Often when I post information to educate our physician policyholders on our website, I share information from the Crittenden Medical Insurance Newsletter. In an issue from May of this year, the issue of vicarious liability is addressed. As experts in medical malpractice insurance, we are keenly aware of the perils of NOT insuring the entities that tie physicians together. The assumption that is made often is: well, we’re all covered, someone will surely pick up the risk for the facility, the center, the clinic or the HCO connecting all of us.

In this time, during the time of the creation of Accountable Care Organizations, there will be a need for corporate, entity protection more then ever. The Doctors’ Insurance Agency has markets and resources and, perhaps, more importantly experience in finding insurance coverage for these new entities in the healthcare environment.

We refer to this medical malpractice insurance that is designed to cover the entity as “entity only’ medical malpractice insurance.

In the new healthcare environment, individual physician and groups more frequently work with mid level providers and hospitals, creating partnerships amongst physicians and participating in the many new health care organizations that will arise.

According to Wikipedia: An accountable care organization (ACO) is a healthcare organization characterized by a payment and care delivery model that seeks to tie provider reimbursements to quality metrics. The idea is to reduce the total cost of care for an assigned population of patients. A group of coordinated health care providers form an ACO, which then provides care to a group of patients. The physicians are incentivized to provide quality, affordable heath care to more patients. This three pronged goal, more, better, more affordable are often at odds. In the quest to achieve all three, we may just not achieve them all; and, the accountable care organization may end up creating its own, definable professional liability insurance.

The ACO is accountable to the patients and the third-party payer for the quality, appropriateness, and efficiency of the health care provided. This model will be rolled out to private payer models and the government model ACO. According to the Centers for Medicare and Medicaid Services (CMS), an ACO is "an organization of health care providers that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it.

Theoretically, this is the answer. Practically, it looks like another opportunity for healthcare providers to ‘cut their own reimbursements’…almost a voluntary presiding over their own demise financially.

But, the argument goes: how else are we going to achieve the goal of accommodating so many more into the healthcare world. How else are we going to bring 31 Million Uninsured Americans into the system. We simply have to find new medical healthcare entities willing to try, to innovate, to take risk and bring more healthcare to populations of patients.

The risk surfaces as individual physicians and groups more frequently work with mid level providers and hospitals and facilities. Increased reliance on nurse practitioners and physician assistants will increase supervision and vicarious responsibility for the quality of care. The mid level provider may, in fact, be acting on their own, but the medial malpractice insurance policy ought to be in a position to acknowledge the relationship, contemplate the risk between the mid level and the physician and be prepared to respond on both parties behalf. Mid level providers are required by most states to be insured, and their supervising physicians are required to be insured. Our agency is well positioned to help you address the risk of that vicarious connection between the two entities, the physician and the mid level. There will likely be an increase in claims frequency encompassing mid level practitioners boosting the need for more insurance, more robust and independent defense, physicians may burn through limits, previously unencumbered by the inclusion of these mid level practitioners. Even if the mid level practitioner purchases separate limits, their own policy, the physician may still face greater exposure on their own policy due to the supervisory role.