To survive liability crunch: Be careful, cover your tail

Commentary. By William C. Schumacher, MD, amednews contributor. Nov. 12, 2001.

COMMENTARY

Observations on the state of medical practice and medical life

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Medical liability insurance has not been a front-burner issue for many physicians in recent years, if only because we have had a bigger headache to worry about -- namely, managed care.

But times change, and liability insurance again is becoming a critical practice management issue. As reported by AMNews and other publications, liability rates are skyrocketing, with rate increases running as high as 200% to 300% in some areas.

While the cost of purchasing new policies can be a major concern, the financial chickens really come home to roost when it comes time for physicians and groups to "cover their tails." The new, higher rates mean that tail coverage costs are going to be exponentially higher in many cases than physicians might expect. Indeed, in a "hard" insurance market, tail costs often run greater than 200% of the last policy premium and can reach into the tens of thousands of dollars and beyond.

What should physicians do given this somewhat alarming trend? The following are a few points to consider:

Remember that you are building risk. At some point, the bill for covering this risk is going to come due, and either you or the group will have to pay for it.
If you work for a group or a management firm, know something about its financial strength. Assess its ability to pay for rising tail coverage. Make sure the group has the cash reserves or a line of credit to pay the hundreds of thousands or even millions of dollars needed when and if the tail is to be paid. If you are a solo practitioner, prepare yourself financially for the inevitable tail cost.
If you work with a group, have a feel for the organization. Are the leaders committed to quality physician relations? Can you trust them to provide you with the security of continued liability coverage even after they have exited the contract or you have left the practice?
Know something about the policy that is being provided. How high is the insurance company rated according to the AM Best rating organization? Your carrier should be rated A or better with a minimum of $25 million policyholder surplus. If the group chooses to self-insure through a captive, fund a retention fund, or a state-managed cap fund, make sure that the group is financially secure to service these programs.
Reducing risk of medical malpractice is a must in a hard market. If you experience a claim, whether you are "guilty" or not, you lose. The insurance company doesn't care if they pay the patient or pay the lawyers to defend you. So even if you win the case, it's not unusual for the defense expenses to run into the tens of thousands of dollars or even hundreds of thousands of dollars.

One's losses are counted against the group and the individual doctor. The more losses one experiences, the more expensive the insurance and the less valuable the individual physician becomes.

Here are some pointers on how to reduce your risk:

Focus on patient relationships. The great majority of claims we see arise out of a perception problem that probably could have been avoided through better physician-patient communication. Risk is greatly reduced if patients are satisfied that they have been treated with dignity and respect and if some personal connection is experienced between the patient and the doctor. In other words, talk to and listen to your patients and treat them the way you would a family member or friend.
Re-evaluate your documentation system. There are templated systems available today that can help ensure a regimented and thorough approach to the patient as well as augment documentation. Good documentation is good for quality of care and has the added value of increasing reimbursement as well.
Rely on your team to assist you. You don't have to be the Lone Ranger. Nurses, ward clerks and other personnel can help clue you in as to what is happening with a patient. Listen and consider what they have to say before you make critical decisions.
If you are covering the emergency department, err on the side of caution. Admit patients to the hospital or consult the local medical physician if you have any concerns that it may be necessary, regardless of hospital, patient or local medical physician pressures. Remember, from an emergency physician's perspective, you generally have only a one-visit relationship with emergency patients. What you don't know about the patient's history and the personality of the patient may expose you and the patient to increased risk.

Despite the gravity of the insurance crisis, it's important to stay positive. The insurance crisis is just another irritant we must put up with to have the privilege of practicing medicine. Like many things, the liability insurance market is cyclical. We have enjoyed a soft market and now must weather a market that is hardening, but it won't last forever. As my gastroenterologist colleagues are fond of saying, "This too shall pass."

Note: This column originally appeared in print as "Expert's Focus."

Dr. Schumacher is board certified in emergency medicine and is CEO of The Schumacher Group, an emergency medicine management firm based in Lafayette, La. He can be reached by e-mail (william_schumacher@tsged.com).