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Hold on to your tail

Questions to ask about malpractice insurance

From the November ACP Hospitalist, copyright © 2012 by the American College of Physicians

By Stacey Butterfield

How much does it pay? What's the schedule? Is there potential for advancement?

When a hospitalist considers a job offer, these questions are more likely to be at the front of his mind than malpractice coverage. But the malpractice insurance an employer offers should be a consideration, experts say.

Photo by Thinkstock.

Photo by Thinkstock.



Limitations in coverage can cause problems if a physician is sued, of course, but also during future employment changes.

It might feel awkward to discuss leaving a new job before you even start it, but that's actually the most important malpractice coverage issue to discuss with potential employers, said Barry Halpern, JD, a partner with Snell & Wilmer in Phoenix, Ariz.

“The hospitalist ought to think, ‘What will happen after I leave this position? Will the current institution provide ongoing coverage?’” Mr. Halpern said.

Types of coverage

The concern when a hospitalist leaves a practice is that a malpractice claim could still arise based on a patient encounter that happened much earlier. There are two usual ways that a physician can be protected against this possibility.

One is to have an occurrence malpractice policy. “The beauty of occurrence is the policy says, ‘So long as we covered you when the occurrence happened, you're covered when the claim is made.’ It's the best insurance. You let the policy expire and move to Australia, you're covered,” said Andrew Knoll, MD, JD, FACP, a partner with Scolaro, Shulman, Cohen, Fetter & Burstein, PC, in Syracuse, N.Y.

However, “occurrence unfortunately is getting rarer and rarer,” he added. The more common alternative is claims-made coverage, which means that an insurer will only cover incidents that both happened and were claimed to be malpractice while the physician was on the insurance policy.

So a hospitalist switching jobs needs some protection against those late claims. Typically, such insurance is purchased from the insurance company that has been covering the doctor until the job switch, and it's called tail coverage. (When the coverage is purchased from the insurer at the new job, it is known as nose coverage, but it's much more unusual.)

Pin down the tail

The status of tail coverage is the most important insurance issue to discuss with a potential employer. “You just have to ask the questions: ‘What type of policy do you offer? Does it need a tail? If there's a tail, who pays it?’” said Dr. Knoll.

Most large hospitals and hospitalist companies pay for tail coverage as a standard part of their contracts, according to Dr. Knoll. “They have a lot of money and recognize that there's a lot of turnover in hospital medicine,” he said.

With smaller hospitals or independent physician groups, tail coverage could be more of an issue. Some employers might split or fully cover the cost, depending on how long a hospitalist stays with them. Others might say that tail coverage is entirely the physician's financial responsibility.

If that's the case, and you aren't planning to stay in the same job for the rest of your career, you'll want an advance idea of the expense entailed. “Typically, the tail costs two years' premium,” said Dr. Knoll. But if you're considering a specific job offer, it's possible to get a more exact estimate. “Find out who is covering them now, call the carrier and say, ‘If I were to quit tomorrow, how much is the tail?’” he said. Ask for the “mature” rate, because tail coverage premiums increase over the first few years on the job.

The answer you get is likely to depend a lot on the state you practice in. “Policies tend to vary a lot based on the state. Some states tend to have higher premiums than others,” said Allen B. Kachalia, MD, JD, ACP Member, a hospitalist at Brigham & Women's Hospital in Boston.

States with more lawsuits naturally have higher premiums, and that means that tail coverage premiums vary widely, too. Maybe it's a fairly minor amount or, in a high-cost state like New York, it could be $40,000.

Go beyond the tail

State-to-state differences affect other issues that malpractice experts suggest hospitalists consider when taking a new job. Tail coverage is the most likely cause of concern, but other aspects of an employer's policy are worth asking about, they said. “I'd want to know the limits of coverage,” said Robert Perkel, MD, a professor of family medicine at Thomas Jefferson University Hospital in Philadelphia.

Those limits should meet or exceed state requirements (which can be found in a Web search). In lawsuit-prone states, that might mean above a million dollars, while in Texas, typical limits would be more like $100,000. In Florida, it's possible to have nothing at all. “Florida doesn't require you to carry medical malpractice insurance. If you don't have it, you just have to have a sign in your office that says, ‘I don't have it,’” said Charles A. Fitzpatrick III, JD, an attorney with Rawle & Henderson LLP in Philadelphia.

In Florida, and in other states, a cautious hospitalist might want to hold her employer to a higher standard. Dr. Perkel recommends researching the average payments that have been made in successful malpractice cases in the area. “If the average payout for a claim against a hospitalist is $750,000 with some payments in the $2 million range, I would want to make sure my coverage is at the upper end covering me for the $2 million,” he said.

Other experts think hospitalists don't have to be quite so cautious. “As an employed hospitalist, there will always be somebody behind you with a deeper pocket than you,” said Dr. Knoll. “Throughout my medical and legal career, I have thrown out the challenge for someone to tell me of any person who has malpractice insurance and has ever involuntarily paid a malpractice claim out of their pocket. In twenty-something years, no one has.”

Know the nitty-gritty

When delving into the details of a malpractice policy, other issues to consider include whether the physician's consent is required before an insurer settles a claim, whether the physician gets some choice in which attorney represents him (the preferred answer to both being yes), and what happens if there's a conflict between the physician's interests in the resolution of a claim and the practice's or hospital's (the preferred setup is that the insurer will pay for a separate attorney for the physician).

“These issues can sound a bit mind-numbing to someone who is not involved in the insurance or legal arenas, but are very important to sort out at the front end,” said Mr. Halpern.

For physicians who are willing to risk a little numbing of the mind, these questions can mostly be answered by reviewing insurance documents and questioning the employer's human resources personnel. Or you can have an expert do it for you.

“A lot of physicians have an attorney look at their contracts before they take a new job. This would also be a good opportunity to have the attorney advise on your insurance coverage at that time,” said Dr. Kachalia.

If the potential job is with a large employer who offers a standard contract, hiring an attorney to research these questions might not be necessary, according to Dr. Knoll. “If you're dealing with some small group, you might want some reassurance,” he said.

Negotiate your terms

The advantage of working with a small group is that unsatisfactory answers might also be more open to negotiation. All of the experts recommended asking for any expected coverage types that aren't offered. “Everything is negotiable,” said Dr. Perkel.

Dr. Knoll agreed, to a point. “In every employment agreement where the person is being told they have to pay the tail, I always ask that the employer pick it up,” he said. But, he warned, “I rarely get it. People aren't negotiating contracts much anymore. They pretty much give their best offer up front.”

If the employer sticks to the original offer, a hospitalist has a couple of options, experts said. “If you're getting the idea that your prospective employer won't change the contract, either that's not the kind of employer you want to work for, or maybe they're right and you're making much ado about nothing,” said Dr. Perkel.

There's also always the option of paying for more insurance yourself—for example, if you find the employer's limits too low, excess coverage is available, and you can buy your own tail coverage. “You can…insure around it from outside sources,” said Mr. Halpern.

“Take the job where you want to go and where you want to work. If something is not perfect, it doesn't necessarily make it a dealbreaker,” said Dr. Knoll. “Just factor it in.”

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