Amid speculation that malpractice insurance rates will rise, maintaining an air-tight risk management plan should be on doctors’ agenda this year.
Malpractice insurance rates declined over the last decade as tort reform and industry safety measures led to fewer claims, but the size of the largest claims is growing. This could lead to higher rates in the future, experts say.This article appears in the 4/10/18 issue of Medical Economics.
“It’s not widespread, but we’re finally beginning to see some upward pressure on [malpractice insurance] rates,” says Chad Karls, FCAS, principal and consulting actuary for Milliman, a Brookfield, Wis.-based actuarial and consulting firm. The examples are spotty geographically, but primary care practices are among those at higher risk, he says.
A 2017 study of hospital professional liability by consulting firm Aon and the American Society for Healthcare Risk Management projects no increase in the number of claims below $2 million for 2018, but a 2 percent rise in claim severity. The study also noted “early signs” of a rise in the number of claims above $5 million, but the data wasn’t conclusive enough to quantify the increase.
Also on the rise, the report found, are so-called batch claims, or multiple claims resulting from a repeated behavior. One example: improperly sterilized equipment.
Karls expects liability insurance rates to stay favorable for another couple of years, but there are some signs of change ahead. Increasing demand for electronic records and safeguarding patient privacy could spur a rising number of claims.
Internal medicine providers, in particular, could see higher rates as claims centered on failure to diagnose rise, Karls says. These types of claims can often take an extended time to surface as more is learned about how a disease progressed, so he urges doctors to be sure they are working with a highly-rated carrier.
Beyond taking care when choosing a carrier, practice owners should stay vigilant in maintaining their risk mitigation strategies, he says. And that involves protecting a doctor’s personal finances from excess professional liability as well as those of the practice.
“Large hospital systems today have whole risk management teams to do investigations and implement policies,” says Craig Brodsky, JD, a partner with the law firm Goodell DeVries in Baltimore, Md. “The question is how to put that type of system in place at a smaller practice without breaking the bank.”
Physician, audit thyself
Physicians should start by taking advantage of the resources available through vendors, Brodsky says. Liability insurers typically offer some risk mitigation reviews as part of their contracts or provide more comprehensive services for a fee, and many offer discounts if physicians attend risk-mitigation seminars.
Primary care doctors, in particular, need to be aware of some newer types of risks, he says. Mandatory use of EHRs elevates their exposure to possible security and data breaches. Increased use of telemedicine raises the possibility of more diagnostic errors. Practice mergers and rising numbers of non-physician providers can chip away at the close personal relationship doctors used to have with their patients, and studies show patients are more likely to sue providers they don’t know well.
The renewed focus on sexual harassment in the workplace also poses a risk, one the practice’s attorney should address through written policies and procedures, says Brodsky.
Fees for these services vary depending on the size and scope of the practice. Another route to explore, particularly if budgets are tight, is checking with a practice’s admitting hospitals for any risk-management audits or other services they offer to affiliated physicians.
Physicians should be aware that those hospital affiliations, along with other agreements, can lead to certain conflicts of interest, experts say. Physicians in a small group practice, for example, often have contractual arrangements with other entities for providing care or procuring services. These arrangements can leave a practice, or an individual physician, exposed from a liability standpoint.
In the Aon study, 61 percent of hospital providers were moderately or extremely concerned about vicarious liability from non-employed physicians, and 73 percent said they require those physicians to carry between $1 million and $2 million in coverage.
As more primary care physicians have become employed by or affiliated with hospitals, a possible outcome could be higher numbers of large claims as plaintiffs’ attorneys seek deeper pockets, says Erik Johnson, regional director for Aon Global Risk Consulting and author of the report.
As a result, it’s essential to understand the professional liability implications of the agreements, experts say. Often, a large network will move to settle claims quickly, for example, when an individual doctor might be better off fighting them to clear their professional record.
“Doctors still have an individual interest and they need to be aware that a business entity is not going to look out for their interests,” says John Lyddane, JD, a partner with law firm Dorf & Nelson LLP in New York. Negotiating for an independent attorney or liability insurer as part of an employment agreement is the best way to avoid those conflicts ahead of time, he says.
Frequently, joint practice agreements will spell out how legal claims will be handled, and the arrangements typically are meant to serve the organization, not necessarily to get the best outcome for an individual doctor. “In a sense, [physicians] really can’t just go hire their own representation because the contract itself says you are agreeing to their risk management system,” Lyddane said.
If a practice decides to settle a malpractice case instead of going to trial, for example, the physician named in the suit has to live with the repercussions of having his or her name and the incident (along with whether a monetary settlement was involved) in the National Practitioner Data Bank.
This, in turn, can lead to denials for participation in certain healthcare plans, Lyddane says. It could also affect a physician’s employability and likelihood of receiving hospital admitting privileges, he says.
Go beyond the chart
Practice consultants routinely chide physicians for not documenting courses of action that they recommend to patients. This lack of documentation can be problematic in lawsuits, but limiting it to a chart entry isn’t always sufficient, either.
For example, if a primary care physician refers a patient to a specialist but the patient doesn’t go, the PCP can be held responsible in a lawsuit if there was no follow-up with the patient or the specialist, Lyddane says. Often, he says, he recommends that referring physicians make a follow-up call directly to the specialist to confirm that the patient was actually seen and the results of the visit were added to the primary care physician’s record.
And physicians must remember to incorporate phone and email conversations into the record as well, he says. An electronic message trail is better than no trail at all to document a physician’s orders, but if the order never makes it into the official record it can be a problem, he says.
Copying and pasting previous notes in the EHR when seeing a patient with a recurring problem is another mistake from a liability standpoint, he says. That’s because any inaccurate information in those notes gets repeated in newly-created notes. For each visit, physicians should create a new electronic record, he says.
Consider the whole team
The use of ancillary services, physician assistants, and nurse practitioners is yet another factor to consider when it comes to managing risks, experts say.
Vicarious liability, or the responsibility of a physician for the actions of subordinate providers of care, is an important part of assessing a practice’s overall risk profile, says Ingrid Hubbard Reidy, vice president of risk management for ISMIE Mutual Insurance Company, a Chicago-based medical liability insurer.
Some states require written collaborative practice agreements covering the scope of work performed by non-physicians, she says, and all providers should have documentation of staff members’ credentials and continuing training. And be aware that state laws covering these arrangements are changing frequently, she says.
Even among physicians, other types of documentation are crucial, she says. For example, when practices don’t have access to their patients’ data from admitting hospitals, it creates a significant liability risk, she says.
Many physicians today are so accustomed to EHRs that they don’t think about picking up a phone to inform a colleague about a development with a patient, she says. So if a specialist is not connected to the primary care provider via the EHR, the primary physician can be left completely unaware of a patient’s progress.
Care coordination poses another potential risk, particularly for primary care physicians, Reidy says.
“It’s in the handoffs of care that we’re missing a lot of things,” she says. “Many of the large health systems are doing a good job within the confines of their own system with this, but it’s a real challenge for [doctors] not in the system. Sometimes, [primary care providers] don’t even know their patient is in the hospital. They’re really struggling with that and it provides a lot of risk for them” because they don’t know to ask questions about their patients’ last medical encounters.
Often, simply asking a patient if they’ve seen any other physicians since their last office visit is an effective way of catching errors of omission in the information trail, she says.
Another important risk mitigation tool is simply the human element, experts say. As medical groups get bigger and more corporate, the deep personal relationships formed between patients and doctors are under siege, Reidy says.
One way providers can mitigate this trend is by sharpening their communication skills. Be very clear with patients about the diagnosis and treatment plan, she says. Making sure to educate patients and getting them to acknowledge that they understand what they need to do to comply with the plan is crucial, she says.
Shielding personal savings
While relatively few malpractice awards exceed physicians’ insurance limits, it’s important to consider personal assets when thinking about protection against liability claims.
Employer-sponsored retirement accounts generally are protected from claims and a workplace 401(k) or 403(b) plan carries the most asset protection from creditors because they are protected by federal labor law. IRAs have fewer protections than employer plans in non-bankruptcy liability cases, though state laws vary regarding these accounts.
Some states offer strong protections for IRAs against creditor claims, says Richard Naegele, JD, an employee benefits attorney with Wickens, Herzer, Panza, Cook & Batista Co. in Avon, Ohio. California, on the other hand, leaves wide discretion to judges as to how much money in an IRA can be included in a malpractice award.
And in some states, SEP-IRAs (designed for the self-employed) are not protected from claims, he says. Physicians with funds in these accounts may want to discuss with a financial adviser the idea of converting them to Rollover IRAs, which are designed to house funds moved from other types of accounts, says Naegele, who studied state laws governing IRA claims.
The takeaway, he says, is to plow as much savings into a practice’s 401(k) plan as possible, but be aware how vulnerable funds in IRAs could be in the event of a creditor issue. They carry more protections than a non-retirement taxable account does, but depending on the state the protections could still be weak.
To be sure, Brodsky adds, the need to maintain robust risk management principles isn’t going away.
“HIPAA compliance and general data breaches is a massive issue right now, bigger than any exam-related issues” says Brodsky. “As the government continues to add regulations, it becomes harder to keep the system secure.”