National healthcare reform legislation passed by Congress in 2010 may or may not survive consideration by the U.S. Supreme Court, but the healthcare system already has been evolving in ways that are likely to proceed regardless of the success or failure of national reform efforts, experts say.
The evolutionary pressures on the nation’s healthcare delivery system and the liability exposures that go along with those changes have not been unnoticed by insurance companies, either.
The insurance industry is well-situated to respond to developing risks in health care with new products and thoughtful underwriting, according to Jim Fasone, senior vice president of Alliant Insurance Services in Denver, Colo., which specializes in helping healthcare professionals and facilities with their insurance and risk management needs.
“I think the insurance industry has been pretty adaptive at finding opportunities where there’s a need out there,” he said. Companies are “creating products to respond to that, reputational risk issues, Medicare fraud and abuse issues, there’s product evolving for that.”
In addition to medical malpractice exposures faced by hospitals, physicians and other healthcare providers, changing employment patterns, decreasing reimbursements and greater regulatory scrutiny are among the increasing challenges healthcare executives must manage.
“There’s going to be some gray areas between traditional malpractice and D&O risk and other, broader emerging risk issues,” Fasone said.
Hospitals and other medical care entities are increasingly hiring — rather than contracting with — physicians, and healthcare professionals such as physicians’ assistants and certified nurse practitioners are taking on greater roles in the delivery of healthcare services.
These employment trends in health care organizations add new complications — and possibly more opportunity for claims — in the medical professional liability line of insurance, according to Laurel Byerly, senior vice president for Western Litigation, a third party administrator that manages medical malpractice claims and litigation for self-insured entities.
When hospitals employ more physicians, “they expose themselves to more direct malpractice risk from the physician-led services being provided,” Fasone agreed.
Byerly added that “the more people that hospitals employ, the more their risk is going to increase. If a physician is an employee of a hospital, that immediately makes the hospital vicariously liable for the acts of that employee, whether it’s a nurse, a radiology tech, or a physician. They’re going to be added to a lot more lawsuits simply because they are employing this person. … And hospitals are not going to be able to get out of cases as easily, maybe, as they have in the past, when physicians were considered independent contractors. They’re going to be seen as much more responsible for the risk management and training of the physicians that they’re employing.”
The additional utilization of non-physician healthcare providers, such as physicians’ assistants and certified nurse practitioners, may also heighten an organization’s exposure to what Byerly called “mid-level provider” issues.
“Most of these people are very well-trained. They have extensive education, licensing, testing that they need to go through,” Byerly said. “The impulse to hire them is to be able to provide more care to more patients. The idea is you’re going to put them on cases that may not require, at least initially, the intensive attention of a physician. I think what’s happened is that a lot of care has been pushed down to that level. …
“It’s another person to bring to the party, so to speak. So as these providers are providing more care to patients and their names are appearing in the record, plaintiff attorneys go through the record and it’s like, ‘OK, Sue Smith, PA, saw the patient. She had an opportunity, we think, to bring a particular situation to the doctor’s attention. She didn’t. We’re naming her as a defendant.'”
At the same time, many of these mid-level providers may not have “the same experience with litigation and a litigious environment that many of our physicians have. So they’re not quite as sophisticated about medical malpractice as a physician would be, and they require more education from the claims staff, when they are sued, about what the process is about,” Byerly added.
Increased Regulatory Scrutiny
Managing reimbursements from both private and governmental (Medicare) has always been a challenge for healthcare organizations and practitioners, but now the coding and billing practices of such entities are coming under increased scrutiny, Fasone said. That’s not likely to change even if part or all of the Patient Protection and Affordable Care Act (PPACA) is shot down.
“Healthcare executives have more and more responsibility to make sure that the organization is not only run well financially and operationally, but they comply with all the various codes and changes that are going on in a declining reimbursement environment,” Fasone said.
There have always been “reimbursement challenges to a degree, but [10 years ago] it didn’t seem as though the regulators were as aggressive as they are now in making sure that the billing environment is properly done,” he said.
Regulatory bodies are investing more time and energy “in going after healthcare organizations to make sure they’re not improperly coding and billing the government, and trying to recapture some of those monies,” he added.
A lot of the regulatory framework for newer healthcare models such as Accountable Care Organizations “has yet to be hammered out,” said Kristin McMahon, vice president of underwriting for IronHealth. But, she added, regulators are paying attention to issues such as medical loss ratios and billing/coding fraud, whether intentional or not.
“The government has dedicated a lot of funding to oversight of Medicare fraud — all of the upcoding, the double billing,” McMahon said. “You’re going to see the government continue to come down pretty hard on the medical community … for any fraud. It’s billions of dollars are recovered every year, and that number’s going up, by the government, because of the increased resources that they’re dedicating to it.
In this new environment, healthcare providers are trying to determine whether they can survive in this era of declining reimbursements and increased scrutiny, Fasone said.
“So more and more companies are looking to either merge or come together with other organizations because they don’t quite have the capital or leadership team ready to handle the challenges,” he added.
Less Litigation, Higher Payouts
Medical professional liability insurance has had a good news/bad news story to tell in recent years. While the frequency of claims filed against medical professionals that are being litigated has generally declined over the last decade, payouts for successful medical professional liability claims have increased.
One of the main drivers of the trend toward higher claims payouts is increased selectivity of cases by the plaintiffs’ bar, according to Byerly.
“When I first started in this industry, 20 years ago or so, if you had 100 claims that you were managing, maybe 30 of them were cases that you knew, right off the bat, really had no merit,” Byerly said. “Twenty of them were really bad cases that you had concerns from the beginning about liability and causation, that you really needed to keep an eye on. And then everything else kind of fell in the middle.”
Over the years, malpractice insurers have become more defense-oriented, she said.
“Our attorneys have been trained to vigorously defend cases, we’ve been very successful with our defense verdict rate, and been very aggressive about defending and trying cases,” Byerly said. “That has really forced the plaintiff bar to become better attorneys and to become highly selective about the cases they’re choosing. Medical malpractice cases have historically been very expensive to try. The experts are expensive. Discovery is prolonged. So it’s really an economic factor for the plaintiff attorneys.”
Watch exclusive Insurance Journal interviews with Western Litigation’s Laurel Byerly and Alliant Insurance Services’ Jim Fasone on IJTV.
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