RISK IS IN THE EYE OF THE BEHOLDER

RISK IS IN THE EYE OF THE BEHOLDER
Claims History Dictates Insurance Rates for ASCs

By John Roark

With medical malpractice rates escalating, insuring an ambulatory surgery center (ASC) requires a lot more than pocket change. Knowing what to look for is critical when choosing a carrier.

There is no denying that the cost of medical malpractice insurance has been steadily escalating for the past few years. Does this mean that overall, ASC coverage is on a one-way course through the roof?

“From our perspective, insurance rates for the ambulatory surgery industry, just like the rest of medical malpractice, are climbing,” says Susan Chmieleski, APRN, CPHRM, JD, vice president for healthcare and director of risk management at Darwin Professional Underwriters. “What we find, though, is if the center is a quality organization that has had a good claims history, the increases are probably less than they were last year. However, for those with poor claim histories, the increases can be even higher than last year. And for some of those who have had significant claims, their problem isn’t necessarily the cost of their insurance; it’s finding a carrier to offer it.”

“It’s hard to really be specific in this marketplace,” says Brad Shannon, vice president at JG Parker Insurance Associates. “It’s a constantly changing animal because insurance carriers were hit so hard with all the losses and changes, and 9/11, and all those kinds of things. I think that many carriers got out of certain lines of business and it created a tremendous narrowing of the market overall, especially for medical malpractice. As a result of that, we had very few markets that were providing coverage in that area for two or three years. We’re now starting to see a slight expanding of that market, a flattening of the rates. In that sense, I see it as an improving situation, but it’s still changing.”

At this juncture, Shannon expects the plateau to continue. “We’re seeing a few more insurance providers getting into the game, which provides a little more competitiveness, and this also will help flatten the rates. I would say overall, it’s an improving environment for ASCs in terms of medical malpractice coverage — to a degree. The rates are very, very high; don’t get me wrong — but that’s a function of the last three years. The rates just have gone up and up and up. If you’ve got a facility and you’ve got loss problems, that’s a different story because the underwriter is going to look at that risk. They’re either going to deny the coverage or they’re going to price it accordingly.

That can kick the rate way up.” But the average ASC, he says, typically does not have a lot of losses. “That’s why I say we’re seeing a flattening of the rates. That’s what I see for the time being unless something happens that would be very bad for the country overall: a major terrorist attack or something like that that would throw everything into a tizzy.”

The Informed Buyer

Rates are based on a number of factors, says Chmieleski: the state or county where the ASC is located, the facility’s claim history, the number and type of procedures being done, and the extent to which a center is willing to take some risks. “If they’re willing to maintain some kind of substantial deductible, or selfinsured retention, they can save some money,” she says.

Darrell Ranum, vice president of risk management at OHIC Insurance, sees a parallel between claims in the ambulatory arena and the office setting. “In the outpatient setting, our cases all tend to be the same types of issues that we see with physician office practices, or with inpatients, which is the failure to diagnose, or delay in diagnosis; not really from invasive procedures being done in the outpatient setting,” he says. “If the organization is well-equipped to deal with the complications that can arise — the respiratory arrest, the cardiac arrest, the uncontrolled bleeding — if they’re prepared to respond to those situations, then normally they do fine.”

What are the most important factors when shopping for coverage? Take a close look at the carrier, says Shannon. A.M. Best Ratings and Analysis publishes an annual rating of insurance providers based on a quantitative and qualitative evaluation of a company’s balance sheet strength, operating performance and business profile. A Best’s Financial Strength Rating (FSR) is an opinion of an insurer’s ability to meet its obligations to policyholders. Ratings range from superior (A++) to poor (D), and include carriers under regulatory supervision and in liquidation.

“Unless it’s almost impossible, we try and use an A-rated insurer for the ASCs,” says Shannon. “In today’s market I’d look at the size and the strength of the carrier. In the past there have been some carriers who have just gone out of business, and created problems within the industry as a result of that.”

Chmieleski agrees. “Just as insurance carriers are looking to insure quality organizations, quality organizations need to be sure that they’re insured by a quality insurance company,” she says. “And certainly they need to be looking at the financial stability of the insurance carrier, just to make sure the company’s not going to go belly-up.

“You need to look at the policy form, make sure that you’re an informed buyer and that you are working with a sophisticated broker who can explain the differences in coverage from one policy form to the next,” Chmieleski continues. “Look at what kinds of value-added services come with your policy. Claims services, risk management, consulting services — usually these are just a standard part of the package, but not all companies offer them.” Risk management generally includes consulting services such as clinical risk assessment, educational programs, or access to resources like newsletters and vendor services, she says. Also, “working with the client to track and trend their claims and try and figure out where their liability areas are.

“Pricing is obviously something you want to look at, but a lot of times in this market, there’s not a tremendous amount of variance when you’re talking about looking at A-rated carriers,” says Shannon. “You may not have a lot of choice in the matter. You’re not going to be looking at quotes from four or five carriers, so you’ve got to evaluate the carriers you do have, determine if they’re a good quality carrier, that their pricing is appropriate, and go from there.”

“I would be leery of a financially small company with a B rating or less, simply because you don’t know where they’re going to be a year from now,” continues Shannon, underscoring the importance of thorough research. “That’s a decision that has to be made by the surgery center, and in some cases it may be the only alternative. If that’s the case, you have no choice. It’s just something to look at, and if there are alternatives, evaluate the alternatives and then make your decision.”

Keep in mind that you’re not insuring doctors when insuring an ASC — you’re only providing coverage for the facility. “If you are the entity, which is the ASC, you need to make sure that the surgeons that are operating in your center have appropriate and adequate insurance coverage themselves, so that you don’t become the deep pockets for their errors,” says Chmieleski. “If it’s a model where the ASC is a corporation and buys insurance just for the corporation, then each physician or anesthesia provider there is responsible for their own medical malpractice insurance. You need to make sure that they have appropriate coverage with no gaps in it.”

Don’t overlook general liability coverage either, advises Shannon. “Because we’re not providing coverage to the docs, the liabilities for an ASC are the result of something that happens that one of the staff members does: helping a patient and then letting them slip and fall; not cleaning the OR appropriately and then having a staph infection; some kind of equipment malfunction that may initially involve the surgery center — maybe they didn’t do appropriate maintenance, those kinds of things. We do not see a whole lot of that, quite honestly. Once in awhile we see something, but it’s rare. That’s why the loss ratios typically for surgery centers are pretty good.”

Chmieleski warns: let the buyer beware. Cutting corners may come back to haunt you. “I think that sometimes, buyers look simply to the bottom line and go for the lowest premium, rather than looking at all the things that they should look at, like financial viability of the carrier, the services provided, etc. There are still some carriers out there that will buy market share by just throwing out a low number. Then the first renewal year, the client comes back and finds that their premium has doubled.”

Eight Smart Ideas

The following salient points are important for all ASC owners and operators to keep in mind:

• Make sure you have a significant investment in patient safety, and that patient safety is part of your culture. “Looking to the national patient safety goals is a great place for ASCs to start,” says Chmieleski.
• Have sophisticated credentialing and privileging policies and procedures, and ensure that an appropriate peer review system in place. “In addition to the credentialing of physicians, there needs to be a process for documenting the competence of nursing and other staff who provide patient care,” says Ranum. “Regular reviews of staff members’ work and performance should be carried out.”
• Make sure that your providers carry appropriate insurance with no gaps in coverage.
• Seek accreditation. “Outside organizations can provide insight and motivation for meeting the highest standards,” says Ranum.
• Maintain appropriate selection of candidates for surgery in an ASC. “In addition to appropriate selections, the physician needs to document his/her rationale for approving the patient in this setting,” says Ranum.
• Have back-up procedures in place to respond to possible complications that can arise.
• Make sure that appropriate policies and procedures are in place for clinical practices, specifically with regard to informed consent and documentation.
• Have policies and procedures in place for incident reporting and adverse event reporting, including investigation procedures, as well as performance improvement plans.

What Happens Next?

Chmieleski believes ASCs will follow the mindset of hospitals. “I think that we’re starting to see ASCs follow the trend of hospitals in that they’re taking more significant retentions and deductibles,” Chmieleski observes. “If a center has had no or just a few very small claims, they can take a $50,000, $100,000 or $250,000 self-insured layer and then just buy catastrophic coverage above that if they don’t want to invest in first-dollar coverage.”

Shannon foresees a continuation of the status quo. “We’re seeing a few more insurers come back into the market. Not many — one or two,” he says. “That is helping to maintain rates rather flatly. I don’t see any one carrier that is going to be a national presence, writing in every state across the board. It’s still somewhat regional in nature. I may use one carrier for the northeast area, and a different carrier in the south. It depends on who is writing in those particular areas. But there’s not one single carrier that you can look at and say, ‘Were going to go to these guys, and they’ll definitely write it.”

Doctors Launch Aggressive Campaign for Federal Liability Reform Legislation

WASHINGTON, D.C. — A newly formed coalition of 230,000 specialty physicians has unveiled a hard-hitting national media campaign targeted at those U.S. senators who oppose federal medical liability reform legislation.

“People are dying because of politics,” says Dr. Gail Rosseau, national spokesperson for Doctors for Medical Liability Reform (DMLR). “Not because we don’t have the technology, not because we don’t have the doctors, but because astronomical medical liability insurance rates are taking doctors away from our patients at an alarming rate.”

Rosseau, a practicing neurosurgeon and director of cranial base surgery at the Chicago Institute of Neurosurgery and Neuroresearch, explained that DMLR was created to urge U.S. senators to support federal medical liability reform legislation that includes caps on non-economic damages awarded in medical liability cases. Last July, a handful of senators blocked consideration of medical liability reform legislation, which had passed in the U.S. House of Representatives and is supported by President Bush.

Rosseau insists that national reform is essential to prevent more patients from losing access to healthcare. “As physicians we can no longer stand by and watch our patients be placed in such an unacceptable level of risk. We have a duty to them, and to the profession we have chosen as our life’s work, to lead a medical liability reform movement that will, finally, protect patients now.”

DMLR’s national campaign will launch initially in Washington and North Carolina, urging their U.S. senators to support reform. In addition, DMLR is preparing to deploy its campaign in several other key crisis states, including South Carolina, Georgia, Florida, Illinois, Nevada and Pennsylvania.

The campaign features a 30-minute “Protect Patients Now” television newsmagazine that began airing nationwide in targeted states Feb. 11. The newsmagazine highlights the patient access-to-care crisis created by skyrocketing insurance rates that drive physicians out of practice and out of state. During the program, citizens are asked to call their senators and urge them to support federal medical liability reform legislation.

There are currently 19 states experiencing a medical liability crisis: Arkansas, Connecticut, Florida, Georgia, Illinois, Kentucky, Mississippi, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Texas, Washington,West Virginia and Wyoming. Of the remaining states, 25 have the potential to be deemed “in crisis.” Only six — California, Colorado, Indiana, Louisiana, New Mexico and Wisconsin — are considered stable; all six have longstanding state laws placing caps on non-economic damage awards.

Rosseau emphasizes that DMLR is dedicated to the passage of comprehensive federal medical liability reform legislation that includes a cap on non-economic damages. “We need access to care everywhere, not just in the few states that have implemented effective reforms,” Rosseau says. She explains that the noneconomic portions of damages are often impossible to quantify and are frequently manipulated by plaintiff attorneys and easily inflated. Damages for such things as lost wages, inability to work, medical expense recuperation or long-term care compensation will be fully compensated under reform legislation supported by DMLR.

“Like most Americans, we strongly believe that a wrongful or neglectful medical event should result in full, fair awards. It is the unreasonable, lottery-style awards that enrich personal injury attorneys with millions of dollars that are forcing good doctors to give up the work they love and are putting patients at risk of having no access to healthcare. If something doesn’t change, it’s our patients who will pay the final price. And at the end of the day, we’re all patients.”