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Hahnemann Closure Affecting Malpractice Coverage For Local Physicians

Hahnemann University Hospital in Philadelphia closed its doors in 2019 after 170 years of providing medical care. The hospital began an “orderly wind-down plan” that started on July 7 and continued through September 6, the date which the hospital closed its doors. The closure was due to financial reasons; Hahnemann’s parent company, Philadelphia Academic Health System, LLC (PAHS), filed for Chapter 11 bankruptcy.

The hospital is now closed while bankruptcy proceedings continue for PAHS. An unforeseen issue for physicians—which is now the focus of some of these proceedings—involves medical malpractice insurance coverage for medical residents and fellows who lost their positions when the hospital closed. Doctors who worked at the hospital were insured through American Academic Health System. This coverage included “tail insurance,” a policy extension that covers the physician for the period of time worked at the hospital once he or she leaves.

Tail coverage can be an important element of medical malpractice insurance coverage because of the length of time it often takes malpractice victims to realize the extent of their injuries. Quite often, claims for medical errors can be brought years after the error was made. Despite the fact that they thought they had coverage following the closure, the physicians formerly employed at Hahnemann were recently informed that their tail coverage is set to expire. The doctors thought that the tail coverage would be funded through the sale of the residency programs. The sale of the program for the price of $55 million was authorized by a U.S. Bankruptcy Judge. However, the Centers for Medicare and Medicaid objected to that sale, and now the appeal is being litigated in the court system. Once their existing coverage expires in January 2020, 960 former employees of the hospital will be without tail coverage.

Many employees are facing the reality of having to fund their own tail coverage, and many cannot afford to do so. The cost of the coverage varies, based on the specialty they practice and how long they had worked at the hospital. Some specialties are deemed “low-risk” based on the chance a practitioner may be served a medical malpractice lawsuit. Pathology is one such low-risk specialty, and tail coverage for a pathologist may cost around $2,000. Coverage for a doctor practicing in a specialization that is more likely to face a malpractice claim, such as an OB-GYN, might be facing costs of upwards of $70,000 for such coverage.

The American Medical Association  is taking on the cost of a lawyer to represent the doctors in bankruptcy and related proceedings to fight for coverage of the tail insurance for these former employees.

About the Author

Briggs Bedigian
Briggs Bedigian

H. Briggs Bedigian (“Briggs”) is a founding partner of Gilman & Bedigian, LLC.  Prior to forming Gilman & Bedigian, LLC, Briggs was a partner at Wais, Vogelstein and Bedigian, LLC, where he was the head of the firm’s litigation practice.  Briggs’ legal practice is focused on representing clients involved in medical malpractice and catastrophic personal injury cases. 


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