Many hospitals hire formerly self-employed doctors to serve as staff physicians. However, this arrangement often comes with difficult decisions regarding risk management. Should each physician be responsible for his or her own malpractice coverage or should the hospital cover all doctors under the same policy? What about physicians who may potentially face liability for past acts?
Hospitals are split on the best resolution to this issue, especially if the doctor was previously insured under a claims-made medical malpractice insurance policy.
Unlike occurrence policies, which cover all incidents arising during the coverage period, claims-made policies only cover incidents that occurred after the policy’s retroactive date and that were reported during the policy’s effective period.
Many states allow several years to lapse between the time an alleged act of malpractice was committed and the time an injured patient must bring a claim. Thus, a doctor may need to purchase additional “tails coverage” to cover claims that were not reported during the effective period of a claims-made policy.
Many hospitals do not want to pay for this coverage, since they don’t think they should be financially responsible for a doctor’s actions before joining the hospital.
Malpractice Coverage a Common Negotiation Tool
However, this financial obligation may be unavoidable for hospitals that are either facing competition from neighboring facilities or recruiting high-demand specialties.
Insurance experts report that during negotiations, hospitals are increasingly likely to favor the physician’s financial desires over the hospital’s risk management needs. Malpractice coverage is an attractive carrot that can be used to lure a talented physician out of private practice and into the hospital. Often, several hospitals are competing over the same doctor, who usually ends up choosing whichever facility offers the best compensation package.
Some hospitals have struck an effective middle ground — they will provide coverage for any claims that arise as a result of the doctor’s work at the hospital with the organization’s captive insurer, but will purchase separate tail coverage from the doctor’s prior insurer. That way, the doctor remains thoroughly covered but the hospital will not have to mount a costly insurance defense if the doctor gets sued.
Medical malpractice claims can be damaging and costly for physicians and hospitals alike. However, through thorough analysis of each party’s risk tolerance and coverage requirements, doctors and hospitals can strike a balance that suits everyone’s needs.
