What do you think about when you hear words like “risk” and “insurance?” For most physicians, medical malpractice immediately comes to mind. But med mal is just the tip of the iceberg. To insulate your center from expensive liabilities, a complete risk transfer strategy is essential. But this is a place where independent facilities often fall short.
The right types and amounts of ASC insurance minimize financial loss from claims, keep your facility afloat in the event of a catastrophic claim, and can even save your center’s reputation (an insurance settlement is preferable to a lawsuit, right?). So get out your policies, open them up, and let us give you a crash course in risk transfer. The next time you meet with your insurance agent, you’ll know exactly what they’re talking about.
One Trade-Off You Should Never Make
You already know that there’s no relationship between cost and quality, so never, ever make a decision based on cost alone. Coverage terms and premiums vary by specialty (some specialties are higher risk than others) and by carrier. So if you get three quotes and think you’re comparing apples to apples, you’re not, according to ASCA 2017 presenters and risk management strategists Sarah Logue and Linda McSmith. To fully evaluate both your current policies and new ones, you must be able to do three things, they say:
Step 1: Identify and explain your risks and exposure.
Common risks in a surgical setting include things like infection control, labeling, procedure privileges, and many more. What risks can you minimize or eliminate?
Step 2: Evaluate policy language and services.
The number of ASC owners who have read—and understood—their ASC insurance policies is probably about the same as the number of patients who have read—and understood—their health insurance policies. So…not many.
Step 3: Compare policy language.
One policy is not like the next. You must evaluate each policy’s coverage and services side-by-side.
Are you underinsured? If you haven’t re-evaluated your policies lately, you might be. Maybe you’ve added new equipment. Maybe real estate values have risen. Whatever the case, you may need more coverage due to that growth.
Insurance 101: A Glossary
Who wants to read pages and pages filled with legal mumbo jumbo? You may not relish that task, but it’s better to do it now. If you wait till a claim is made, you could be in for some nasty (and expensive) surprises. The following terms are common in liability policies, say Logue and McSmith. Here’s what they mean:
Amendments to a policy that change something about the original policy. For example, an endorsement might add coverage for additional employees or exclude certain acts from coverage.
Coverage for audits and investigations, like RAC audits. Complying with audit requests can cost a lot of money and lost productivity—even if no wrongdoing is discovered. It may be included in some policies, other times you must purchase it.
Prior Acts Coverage
If you change insurers, they may provide this coverage, which protects you for the time period between your retroactive date and the date that the new policy begins. If an incident occurred under your old ASC insurance policy, but the claim is filed under the new policy, you’re covered.
This should be simple but can actually be confusing (kind of like figuring out when the 90-day post-op period begins and ends). It’s date that you first became insured under a claims-made policy (more on that later). It determines if and under what policy you’ll be covered under when a claim is made.
Self Insured Retention (SIR):
Similar to a deductable, with some key differences. When a claim is made, you pay the SIR before your insurance coverage kicks in, whereas with a deductable, you pay after. Also, the SIR does not count as a deduction from coverage like a deductable does.
Tail Coverage/Extended Reporting Endorsement
These extend coverage for incidents that occurred during the in-force period of a claims-made policy, but weren’t filed as a claim until after the policy period ended. You need either prior acts or tail coverage, not both.
The process where a carrier decides—based on your risk exposure and prior claims history—if and how much coverage they will provide, and how your premium will reflect your risk exposure.
Liability carriers will not usually retroactively cover any uninsured period, so you must maintain continuous coverage to avoid lapses in coverage.
Common ASC Insurance Policies
Many physician-owners aren’t aware of all the risks they face and the various types of coverage available. During their ASCA session, Logue and McSmith explained the variety of policies you may need:
This is the policy you hope to never use—med mal. There are two types: claims-made, and occurrence. Claims-made policies cover claims that occur and are reported during the policy period. The second type is “occurrence” coverage, and is increasingly less common. Under an occurrence policy, coverage is provided for all incidents that occur while the policy is in effect even after the policy is cancelled.
General liability typically protects against liability for bodily injury, property damage, advertising injury, and personal injury, say Logue and McSmith. If a patient slipped in your icy parking lot and broke their wrist, or if someone’s laptop was stolen from the waiting room, the claim would be made under this policy.
Directors and Officers Liability
D&O is essential coverage for physicians who are also ASC owners or executives. Without it—and it is often overlooked—you could face personal liability for problematic business decisions or practices. “Make sure you are selecting the correct policy based on [the] complexity of the organization,” advise Logue and McSmith.
Planning to invest your group’s 401K in Bitcoin? If so, you’d better have this type of coverage. It protects your personal assets from claims made regarding mismanagement of employee benefit plans. Examples include reckless investment of group funds or mistakes in benefits administration that result in an employee losing benefits.
Employment Practices Liability
For claims involving sexual harassment or discrimination, this is the coverage that will protect you.
Provides wage replacement and other benefits to an employee who is injured at work (it includes volunteers). In return, the employee has no legal rights to sue for negligence. “Know your state laws,” advise Logue and McSmith. “Maintain safe work environments [and] hold regular training sessions,” they add.
Know whether it’s the current value or the replacement value that is insured. If you add a specialty and buy a lot of new equipment, verify that your coverage is still adequate. And don’t forget about costs related to business interruption stemming from property damage.
Your facility may not have its own vehicles, but that doesn’t mean you can skip out on auto insurance. Do you have any staff members that drive back and forth from the ASC to the practice on work business? Most personal auto insurance policies exclude work-related accidents from coverage, say Logue and McSmith.
This is sometimes included in professional liability policies, but the coverage limits are usually much too low. The per-record cost of a data breach is now $141, according to the Ponemon Institute’s 2017 Cost of Data Breach study. Multiply that by the number of patient records your ASC stores, and that will give you some perspective on whether or not your coverage is adequate.
ASC Insurance Q & A
Q: What about reinsurance?
A: Under value-based reimbursement, bundling and capitated contracts are more popular than ever. But if the cost of a patient’s care exceeds your pre-set payment, you’re responsible. “We have considered that but we do not [have it],” says Marian Lowe, chief strategy officer at United Surgical Partners International. Why? “Reinsurance for some of these things is very expensive,” she explains. Lowe’s centers have enough volume that they can offset the occasional bad outcome. The “potential upside is less than the cost,” she notes. It’s “also demoralizing for physicians.”
Know Your Limits
Coverage limits are the maximum amount of funds that your ASC insurance policy will pay out. There are usually two limits: per-claim, and annual. For example, your policies per-claim limit may be $1 million, but $5 million annually for all claims combined. If you have one claim exceeding $1 million, or multiple claims that exceed $5 million in aggregate, you’d be responsible for paying the overage. If these limits concern you, based on your claims history and risk exposure, you can purchase an “umbrella” policy that provides coverage beyond your primary policy limits.