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 Winning the Game of Risk: Make The Right Malpractice Coverage Moves

Sometimes the least intriguing aspects of healthcare are the most important.

Despite the recent attention given to medical malpractice insurance, many physicians and healthcare facility administrators consider coverage only to the extent of cost and damage payment caps. An incomplete understanding of policy options or inadequate management of a policy, however, has the potential to destroy entire practices.

Medical malpractice insurance simply implies the transfer of a provider's professional liability to a third party, generally an insurance company, through contract. Like any insurance policy, it's a way to safeguard a physician and practice against the risk of damages. Yet signing a coverage agreement does not guarantee the security of a physician or practice. In one instance a practice purchased malpractice coverage on a claims made basis with a pre-paid "tail," but the carrier suffered financial difficulties and folded. The company in this particular case was a surplus lines carrier, rather than an admitted carrier, which prevents state guaranty funds from relieving a portion of any settlement. If a physician at this practice faces a claim for treatment provided while under contract with the troubled carrier, lawyers will seek damages from the entity with the deepest pockets—most likely the practice, rather than the physician.

Coverage options are of particular significance for physicians practicing on a locum tenens (or temporary) basis and for facilities employing interim providers. This is due to the business habits of many staffing firms as well as the transient nature of the industry. Physicians work through many different firms during the course of a year, while firms often switch malpractice carriers, seeking a "best value" opportunity. When a locum tenens staffing firm shuts down, restructures into a new entity or changes carriers without purchasing "tail" coverage for all of its providers, physicians may be left without insurance protection. When this occurs, the physician and the practice employing the physician are typically held financially responsible for any claim.

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