Self-Purchased Coverage or Employer-Provided Coverage

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Behavioral healthcare providers working at hospitals, clinics or facilities may opt for coverage under the entity’s policy instead of purchasing their own coverage. At first glance, doing so may seem to be a wise choice from an economic standpoint; however, there are other equally important factors that should be considered before making such an important decision.

1. Avoiding lawsuits

Anyone can pay an attorney but the real trick is having the right resources in place that can reduce your risk of being sued. Sure, hospitals can hire risk managers and everyone has quality controls, but risk managers with experience advising behavioral healthcare providers are key to your overall protection.

•  Do they know the behavioral healthcare lingo? Risk managers should speak your language – ECT, CBT, TMS and more.

•  Is the risk management department a start-up with just a few years of experience or a seasoned department with 20+ years of experience? This should not be a risk manager’s first “rodeo”.

•  How much time is dedicated to behavioral healthcare? A jack-of-all-trades is the master of none. The majority of their time should not be spent with other specialties.
Do they know the nuances? For example, suicide risk factors impact behavioral healthcare providers more than other specialties.

•  How robust is their experience? Risk managers with legal and clinical backgrounds have a unique and solid understanding of the challenges healthcare providers face.

Risk managers can help you avoid complaints, negative outcomes, or high payouts by advising you on points like assessing suicidality and documenting that assessment.

2. Defending lawsuits

“To defend or settle?” is an age-old question facing everyone in our civil legal system. How can this affect providers that work in a hospital setting?

Cash-strapped hospitals that have self-insurance programs may have various motives for settling claims. Although this may appear to be a short-term gain, settlements can stay on a provider’s record for at least 10 years.

Self-insured hospitals that go into bankruptcy may leave the provider uninsured with no legal recourse. Conversely, many commercial insurance companies are backed by state guarantee funds in the unlikely event they become bankrupt.

Good attorneys and experienced insurance companies know the value of a claim. Reputable companies invest in successful attorneys to represent their clients’ financial interests (e.g., losing claims can impact your rate) and reputation (e.g., National Practitioner Data Bank that tracks certain claims and state board websites).

Some hospitals may already employ attorneys but ask yourself:

•  Does the hospital have an insurance policy representing the provider’s interests separate from the employer or is there a joint defense?

•  What assurances does the provider have that claims would be covered? Commercial policies will itemize the coverage up front.

•  Is coverage impacted based on allegations of gross negligence or other caveats?

•  What are the limits of liability and will they fully indemnify the provider – especially if the hospital is forced to pay based solely on its status as the provider’s employer?

•  Does the attorney have experience defending behavioral healthcare malpractice cases in court?

•  Can an employed provider choose whether or not claims are settled?

•  Will there be a settlement to avoid bad press?

•  What percentage of cases have they won?

There are plenty of other costs for some events even when there is no lawsuit. For example, the events listed below could cost $1,500-$2,000 in attorney fees:

•  Families of patients who commit suicide often consider pursuing litigation against the provider. Insurance companies should have a plan how to effectively pay attorneys to respond to a negative outcome

•  Proactive insurance companies will hire attorneys experienced with subpoenas when needed to help the insured respond accordingly.

•  Providers may be called to testify or be deposed for various reasons. Defense attorneys will represent their interests in case the target of a legal action changes.

•  Angry patients may threaten lawsuits. Do not discount them. Early intervention by attorneys may prevent future problems.

Quickly including a defense attorney is an important step so nobody is caught off guard if various complaints are made.

3. Financial stability.

Risk can be transferred many ways. However, no matter how successful hospitals or insurance companies have been, there must be a prudent system to consistently evaluate financial stability. Financial experts are only one facet of the comprehensive actuarial analysis that is required to improve chances of correctly predicting future claims. Hospitals have many other unrelated expenses and may not have the resources – or expertise – to answer some important questions including:

•  If the hospital is viewed as a deep pocket, how are reserves properly maintained over the long term?

•  How do non-malpractice claims like worker’s compensation or wrongful termination impact the hospital’s claim reserves?

•  Since different provider specialties impact malpractice costs in different ways, how does this impact the hospital’s claim projections?

Many insurance companies must be approved by state insurance departments to confirm there are sufficient reserves to pay claims now and in the future. Hospitals and other groups may form other alternative programs but, although there may be some regulations, the standard to support stability is higher for state-approved insurance companies.

Reputable agencies like AM Best and Standard & Poor’s provide ratings to admitted insurance companies. Check these services to see how well a company is rated if they are rated at all. As a reminder, self-insurance programs are probably not rated or vetted by these agencies.

There are many factors involved with ensuring your livelihood is adequately protected by having the right insurance program at your side. PRMS has experienced risk managers, a successful record of defending claims, knowledgeable insurance experts, and a financially strong insurance company. To ask a question or get a free policy assessment, contact me at 800-245-3333 orTheProgram@prms.com.

Rich Stagnato, PRMS Account Manager
  Mr. Stagnato is responsible for new and renewal business, providing customer service, insurance counseling as well as obtaining competitive data on the medical malpractice market. He is a licensed Property and Casualty agent. Richard Stagnato rejoined PRMS in 2004 after almost a year as an underwriter at NCRIC. Prior to joining the company in 2000, he had been an insurance specialist for five years with the Boat U.S. insurance program.

This blog has been cross-posted on LinkedIn.

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