Risk mixing and matching with miscellaneous health care facilities

Someone once said “change is inevitable,” and in the health care arena that truism rings a bell. It wasn’t so long ago that the only place a person would go for immediate treatment was the emergency room of their local hospital or the office of the family physician. Only the drawings of Norman Rockwell now remind us of the abandoned practice of the “home visit” by your family doctor.

So where is health care headed now? As we all know, it is headed to new, very specialized facilities for every ailment or treatment and these places are now part of the landscape in towns large and small. Insurers are looking at underwriting and risk management guidelines for these facilities from a different perspective than those used for the hospital.

At a recent Professional Liability Underwriting Society (PLUS) Seminar held in March 14-15 in Chicago, the topic “Miscellaneous Facilities: Risk Mixing and Matching,” was tackled by a full panel of insurance and legal experts.

Moderator Paul Greve, Jr., senior vice president with Willis Healthcare Practice in Fort Wayne, Ind., said that by the year 2010, with aging baby boomers, “70 million people in our country will have chronic illnesses.”

“One in five dollars will be spent in the year 2015 on health care,” Greve said. “And these dollars will not only be spent on traditional hospital and doctor visits, and pharmacy bills, but will include the new specialized health care facilities we see growing in numbers.”

Some examples of the new types of care facilities include: Alcohol and drug rehab centers, ambulatory surgery centers, ambulance services, blood banks, clinical testing labs, diagnostic imaging centers, drug testing centers, dialysis centers, hospices, outpatient clinics, pain management centers, and public health clinics and more.

Numbers nationwide tell it all:
Surgical Centers — more than 5,500 ASC’s;

Imaging Centers — more than 2,800 facilities;

Home Health Care — more than 11,000 agencies; and

Medical Labs — more than 5,000.

And with the emergence of these new free-standing types of structures comes new unique challenges in underwriting and risk management.

According to panelist Bob Jurgel, producer line manager of Boston-based Lexington Insurance Company, the key to risk management and underwriting these new facilities is, in some part, understanding the demographics.

“This is a $750 million marketplace. There are more than 50,000 prospects out there and 20 plus insurance carriers and 5,000 brokers all ready to jump into this business,” Jurgel said. “The potential is huge.”

Moderator Greve concurred, saying that this it is a fairly crowded market that to date has shown better loss experience than traditional hospitals.

“There is also a great capacity for lots of carriers to enter this market,” he said. Wholesale brokers are the most experienced in this market because many of the carriers sell excess and surplus lines policies and so wholesale brokers often handle this type of business best, Greve added.

Carriers mentioned as writers in this market were Ace, Admiral, AIG, Arch, CNA, Colony, Darwin, Evanston, Lloyd’s of London, NAS, One Beacon, Zurich, RSUI, United National, Interstate and James River.

Classes, history impact premium dollars
Jurgel said that the key to successful underwriting of these varying facilities is to know the class the facility falls into, understand the types of exposures and the differences between the risks. He added that the practioner coverage, venue differences, loss experience and the quality of risk management assessment are all factors that impact the price that should be charged for the coverage.

“Be sure to charge the correct price for the exposure” was Jurgel’s message throughout his presentation.

From the perspective of the medical provider and facility, doctors to need to purchase the right amount of coverage, the panel said.

Greve said that physicians generally purchase the typical $1 million dollar limit and $3 million policy aggregate.

“Often it is not enough,” Greve said. “If the facility and the doctor are sued, depending on the location, these limits may fall short. Physi-cians should check local defense counsel and settlement trends to be sure they are purchasing adequate coverage limits.”

Panelist Leslie Miller, senior vice president of National Specialty Underwriters, Chicago, emphasized that these new specialized medical facilities are here to stay and can’t be lumped in the more traditional health care facilities.

“These centers are easily identified by what they are not,” Miller said. “They are not a provider, not hospitals and not long-term care or nursing homes. How you underwrite them will not be the same as well.”

Deductibles and the amount of coverage vary from carrier to carrier. Miller said that three key points for any carrier is to have a complete application with a supplement to be certain that you have all of the information, understand what really goes on inside the facility; and know your client’s growth strategy.

Additional exposures
Advice on new exposures was addressed by the panel. Non RN or professional staff was mentioned as an area of new exposure as were some others such as investigational drug therapies, IT exposures, record, transmit and interpretation of data, multiple state or county operations without a clear chain of command, molecular medicines, implants and privacy issues.

Some concrete examples given by the panel regarding past history included an eye surgery facility that has past claims that show a pa-tient going blind because he or she wasn’t screened properly or the technician fails to calibrate. Surgical centers with a “past” often become deep pockets for litigant happy patients, the panel said. The panel cautioned that underwriters and risk managers should know the history of the facility they plan to underwrite and what future plans are in the works.

How the facility is managed, how many professionals are on-board are also critical in underwriting and assessing the facility you plan to cover. Some concrete examples given by the panel regarding past history included an eye surgery facility that has past claims that show a pa-tient going blind because he or she wasn’t screened properly or the technician fails to calibrate. Surgical centers with a “past” often become deep pockets for litigant happy patients, the panel said. The panel cautioned that underwriters and risk managers should know the history of the facility they plan to underwrite and what future plans are in the works. How the facility is managed, how many professionals are on-board are also critical in underwriting and assessing the facility you plan to cover.

Topics Carriers Underwriting Risk Management