Healthcare liability moves beyond hospitals to specialized facilities

Someone once said “change is inevitable” and in the health care arena that especially rings true. 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 remind Americans of the now abandoned practice of the “home visit” by a family doctor.

So where is healthcare headed? Very specialized treatment facilities 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 Chicago, the topic “Miscellaneous Facilities: Risk Mixing and Matching,” was tackled by a full panel of insurance and legal experts.

According to Paul Greve, Jr., senior vice president with Willis Healthcare Practice in Fort Wayne, Ind., by the year 2010, with aging baby boomers, 70 million people in the U.S. 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 heath care facilities we see growing in numbers.”

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.

Growing market

The numbers nationwide tell the tale. There are more than 5,500 ambulatory surgical centers; more than 2,800 imaging centers; an estimated 11,00 home health care agencies and, as for medical labs, the count is 5,000 and growing.

With the emergence of these free-standing structures comes unique challenges in underwriting and risk management.

According to Bob Jurgel, producer line manager of 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.”

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

“There is also a lot of 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 writing in this market include Ace, Admiral, AIG, Arch, CNA, Colony, Darwin, Evanston, Lloyd’s of London, NAS, OneBeacon, Zurich, RSUI, United National, Interstate and James River.

The correct price

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.

Practicioner coverage, venue differences, loss experience and the quality of risk management assessment are all factors that impact the price.

“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 need to purchase the right amount of coverage. Greve said physicians typically purchase the $1 million limit and $3 million policy aggregate, unfortunately.

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

Leslie Miller, senior vice president of National Specialty Underwriters, Chicago, emphasized that these 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 providers, 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 offered three key points for any carrier: have a complete application with a supplement to be certain that all of the information is collected; understand what really goes on inside the facility; and know the client’s growth strategy.

Additional exposures

Underwriters should be alert to certain areas of exposures including non-RN or professional staff as well 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.

While it’s a good market, it is not without its risk. The panel cautioned underwriters and risk managers to know the history of the facility they plan to underwrite and what future plans are in the works.

One underwriter noted an eye surgery facility with past claims showing a patient going blind because he wasn’t screened properly. Surgical centers with a “past” often become deep pockets for litigant happy patients, the panelist said.

Topics Carriers Underwriting Risk Management Medical Professional Liability