By Drew M Smith
For more information on our Healthcare Liability coverage, please click here.
Drew: What can you tell us about your position at PL Risk Advisors, Inc.?
Mark: Well, for one it is extremely rewarding. I am allotted the a
bility to solve peoples’ problems. Whether it is to simply place a policy in a tight window of time or amend and enhance the coverage being provided because it is important to the Insured’s business or services they provide or significantly reduce the premium and save the insured thousands on the bottom line, we are constantly solving problems and helping others and that is rewarding both professionally and personally. I also need to be in position where I can adapt quickly to changing conditions. Regardless if its specific to healthcare or other industries, placement of insurance is ever changing. These changes can be driven by multiple factors, industry changes themselves or possibly claim activity/loss results within a particular industry. Regardless, I and other brokers, need to know what is affecting insurance placements and why.
Drew: What type of insurance does a healthcare provider need?
Mark: Healthcare providers, from our standpoint of being Professional and Management Liability brokers, need Professional Liability (E&O and in some cases medical malpractice), Management Liability (D&O/EPL/Fiduciary/Crime) in most cases, and Cyber Liability. If you are a solo practitioner there probably is not a need for Management Liability insurance other than perhaps a Crime policy, but if you are a hospital or medical group, the likelihood that there is a need for D&O/EPL/Fiduciary/Crime insurance is much higher. Typically, those organizations will have a Board of Directors, many employees and perhaps offer 401(K) and/or other pension plans to their employees. Cyber Liability is highly recommended for any healthcare risk given the amount of PII and PHI gathered about their patients and the mandate to electronic records. In addition, data breaches could have significant impact s on healthcare organizations operations, including shutting down critical, health related systems. The cyber exposure has significantly increased over the past few years and is only growing. This holds true for just about any industry as it relates to cyber liability.
Drew: How does it impact the patients?
Mark: The impact on patients can vary. We as patients expect that when a healthcare need arises the services we receive address the problems we have and do not expose us to any other potential dangers. We expect that the facility we visit is clean and virus free. We expect that our doctors are properly licensed and have educated themselves properly to provide the services they are professionally licensed to render. We expect the same of the nurses and other staff members too. But we are all human beings so the chance that something could go wrong somewhere along the way is always present. This could be as small as a minimal billing error and as severe as loss of life, but overall in my own opinion my guess would be that there is minimal impact to the patients as an overall industry as it relates to the healthcare services we receive. I think the biggest impact on patients is simply the sheer cost. To go a bit further, a question to ask might be how do insurance premiums in the healthcare industry impact patient care? I think it is pretty clear that insurance premiums are being passed to the consumer in some regard but what percentage of those premiums I think is still not completely clear. I do believe that the current healthcare environment is leading to a greater potential for negative patient impact. There are added pressures from new regulatory demands under the Affordable Care Act which could lead to more challenges. When you combine that with other demands to provide quality patient care, it is clear patient safety may be at risk in the future.
Drew: What kind of risks exists when dealing with the healthcare industry?
Mark: There are numerous risks facing the healthcare industry and many of the challenges continue to emerge. The greatest current risk is probably the cyber risk. The mandate to electronic healthcare records has opened up the so called “Pandoras Box” as is relates to patient privacy exposures. Everybody’s information is more easily accessed by all, including cyber criminals. Other significant risks are healthcare acquired infections, telemedicine and violent incidents in hospitals. Billions of dollars are spent, and many lives are lost each year fighting infections patients obtain while being treated for something else. As I mentioned before, that is why it is so important that facilities are clean, and everybody is trained properly on how to use the sanitation systems. Shortages of physicians and technological advances have helped telemedicine increase in popularity but will that also lead to an increase in claims alleging negligence as there currently is no federal standard of clinical guidelines for telemedicine. Unfortunately, violence seems to be everywhere, so it is extremely important for hospitals to develop comprehensive violence prevention program. There are many other risks facing the healthcare industry, but we can all agree today is the most challenging time for the healthcare industry.
Drew: What professionals would need insurance?
Mark: Any licensed healthcare professional, group or other type of business rendering services to others in need of insurance. This could be an individual physician, dentist, chiropractor, podiatrist, pharmacist etc. or a physician group or other doctor practice. This may also include healthcare consultants such as an expert witness, medical record review consultant, disability evaluation consultant, independent medical review consultants. Long Term Care Facilities, Nursing Homes, Assisted Living Facilities, Hospitals, surgical centers and medical testing labs are examples of businesses in need of insurance. So, the list of consumers needing insurance is vast as is the range of services being provided and, let me simply add that this is an extremely short list. The number of individuals, groups and other business needing insurance is far greater than what has been provided.
Drew: What are some claims scenarios?
Qui Tam Plaintiff Proceedings (Federal False Claim Act)
Example 1:
The Insured was served with a qui tam action by the U.S. Department of Justice alleging $2,067,042 in erroneous or overcharged billings in connection with approximately 120 patient encounters in violation of the False Claims Act. More specifically, the complaint alleged, among other things, that the Insured charged for pelvic ultrasounds, when the patient had, in fact, only received a bladder scan. The case eventually settled for $1 million, $500,000 of which was fines and penalties. In addition to paying the fines and penalties, Underwriters paid $92,000 in legal expenses.
EMTALA Proceedings (Emergency Medical Treatment and Active Labor Act)
The Insured received a letter from a Quality Improvement Organization (“QIO”) authorized by Medicare to review medical services provided to Medicare patients alleging that the Insured did not meet recognized standards of care in treating a patient in the emergency department of the hospital at which the Insured had privileges. More specifically, the patient presented with an obvious act of self-harm, but the Insured failed to recognize or act on the patient’s psychiatric emergency medical condition. The QIO alleged that this constituted a violation of EMTALA (Emergency Medical Treatment and Labor Act). The Insured incurred $18,800 in legal expenses in responding to the QIO investigation.
Error in Anesthesia: A patient undergoing surgery is given an anesthetic which, due to a previous treatment, poses an increased risk of use. As a result of using the anesthetic, the patient suffers liver damage and dies.
In this case all three elements are present - injury, negligence and cause. Had the patient not died and perhaps recovered quickly, there would be no damages for which to sue, despite the fact that the doctor negligently administered anesthesia.
Mistake During Childbirth: During her delivery, a patient suffers umbilical cord prolapse, which poses a serious threat to the life of the baby if a C-section is not performed immediately. The doctor fails to act in a timely manner, delaying the C-section. As a result of the delay, the baby suffers brain damage.
If the doctor had acted in a timely fashion as is standard, the baby would not have been harmed.
Negligence during childbirth is a common medical malpractice claim.
Anti-Competitive/Business Interference Claim (From Doctor or Competitor): Defense and Settlement: $1.8 million A physician opened his own practice in a small town to provide much needed cardiology coverage at the hospital-run medical group. After the hospital encouraged and agreed to support the expansion of the physician’s practice, he invested substantial sums in buying equipment, property and hiring other cardiologists. Shortly after, the hospital- run medical group went behind his back, took his cardiologists, drastically cut his on-call schedule and directed the coverage to its newly established hospital-run cardiologist group. The physician then filed suit for interference with prospective economic advantage, intentional interference with contractual relations, as well as violations of antitrust and unfair business practices.
Physician Credentialing/Practice Privileges Claim: Defense Costs: $200,000 A specially formed committee found the doctor violated the hospital’s code of conduct, thereby requiring him to attend an anger management program. After refusal, for over a year, to attend anger management training, the doctor’s medical staff privileges were suspended by the hospital for 14 days. The doctor filed a complaint alleging the hospital had improperly suspended his privileges in violation of the hospital’s Peer Review Policy and the Medical Staff Bylaws.
Cyber Liability Breach: A healthcare company provides health plans through Medicaid, Medicare and the health insurance marketplace, as well as other health solutions through specialty services companies. The company became aware that hard drives used for a data project to improve the health outcomes of their members could not be accounted for. The company determined the hard drives contained personal health information of 950,000 individuals who received laboratory services, including name, address, date of birth, social security number, member ID number and health information. The hard drives did not include any financial or payment information. Breach counsel and forensic vendors were retained on the healthcare company’s behalf and it was discovered that an employee of the company shredded the hard drives. This reduced the severity of the case significantly and the matter was resolved for USD $2.5 million.
Cyber Liability Breach: A third-party provider of electronic medical records services to healthcare providers experienced a server breach. This impacted approximately 4 million people and exposed medical records and information in three primary categories: (1) clinical, which includes diagnostic information, lab results, medications and other treatment information; (2) demographic, which includes name, social security number, address/zip code and date of birth; and (3) financial, which is primarily comprised of claim information. Vendors were retained on the company’s behalf for forensics, legal, public relations, credit monitoring and call center services, and notifications were issued via U.S. Mail and substitute notice to the potentially impacted individuals. Counsel was retained to defend against putative class actions, as well as regulatory inquiries initiated by the FTC, OCR/HHS and a number of state Attorneys General. Total payout was USD $10 million.
Privacy Breach: An employee of a rehabilitation center improperly disposed of 4,000 client records in violation of the center’s privacy policy. The records contained social security numbers, credit and debit card account numbers, names, addresses, telephone numbers, as well as sensitive medical information. The center settled the claim with the state of Massachusetts and agreed to pay fines and penalties imposed by the state as well as extend $890,000 in customer redress funds for credit monitoring on behalf of the victims.
Drew: Any other important topics that you feel are important in the industry regarding healthcare?
Mark: Sexual Abuse/Molestation is another important topic within the healthcare industry and something that should be addressed with Insured’s. There are some carriers that offer a stand-alone Sexual Abuse/Molestation product however, those do tend to be quite costly. The more common way of providing coverage for sexual abuse/molestation is via a sublimit and included on the Professional Liability policy which often times also includes General Liability if it is a healthcare related account. Sub limits for sexual abuse/molestation do vary from carrier to carrier and from account to account depending on various factors like type of risk, loss history, exposure to those types of claims etc. We generally are asking for at least a 1MM Sexual Abuse/Molestation sublimit on accounts.