Hospitals have increasingly been purchasing physician practices and hiring physicians directly. How will this impact their medical malpractice liability and costs? Providers of malpractice insurance assess the risks when underwriting policies. The type of policies that independent physicians purchase is different than hospital policies. Hospitals typically participate in plans with “captive” insurance companies.
The Becker Hospital Review explains that many hospitals may be overlooking or underestimating their true malpractice costs and liability with new physician employees. In addition, there is also the potential burden of liability for covering the physician's “tail coverage” for any arising claims that occur in the first couple of years from actions that occurred when they were previously in private practice.
Most of those physicians who have traditionally been hospital employees have been specialists who operated a great deal of the time in the hospital setting, thus there was adherence to hospital risk and safety protocols and supervision. Increasingly, hospitals are hiring more general practitioners or primary care providers. Many of these doctors spend the majority of their time in off-site office locations.
Towers Watson conducted a study showing that hospitals that employed physicians in a variety (mix) of specialties had the best financial outcomes relating to malpractice. When hiring a new physician, the hospital is assuming new risk. They found that hospitals who examined this risk had better results. This is done by reviewing the physician's history of malpractice claims and any disciplinary activity.
Medical malpractice insurance providers have typically either specialized in larger entities, such as hospitals, or independent physician practices or groups of physicians. With more physicians working as employees of hospitals, there may be a benefit to hospitals when defending claims of malpractice.
Many surgical claims are brought both against a physician and the hospital in which they were operating. If both are insured together, the defense of the claim is often coordinated and may be less costly to the insurer in terms of process and claim value. The entity insurance programs should have a lower cost on a per physician basis than an independent physician policy.
Many hospitals have someone on staff with a title such as Risk Manager or Chief Risk Officer etc. As it relates to medical malpractice, this individual has three primary considerations:
- Analysis and management of risks when adding new physician employees
- The costs of the malpractice insurance
- Working with the insurer to mitigate new risk
Another difference between policies for physicians compared to those for entities is how the Consent to Settle is handled. With the physician policies, the doctor must provide consent prior to making a settlement offer. Most doctors seek to protect their reputation; therefore, they may be uncomfortable in transitioning to an entity policy. Entity policies generally have no such requirement in negotiating settlements.