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Two underwriting experts take the pulse of the medical professional liability market under the Affordable Care Act

Insurance Market Source regularly taps its network of experts for insight into key trends and developments across the insurance landscape. Here Ken Rice, Director of Underwriting, Atain Insurance Companies, and Michael Muglia, Underwriter, Burns & Wilcox Professional Liability Center of Excellence, tell us what we can expect in the medical professional liability market.

IMS: What trends are transforming the healthcare industry?

Michael Muglia (MM): The U.S. Census Bureau reported that by 2029, all Baby Boomers will exceed the age of 65. That is more than 20 percent of the U.S. population. As healthcare reform expands insurance coverage and our population ages, the healthcare industry is poised for incredible growth in terms of services provided and total employment. Personal health aids and personal care aids will be in especially high demand over the next decade. A greater number of elderly individuals want to stay in their homes for a longer duration of time, but may require supplemental care to allow them to do so.

The next largest influencer is technology. Healthcare has never been more connected, automated and accessible than it is today. But technology also creates new risks and challenges for data security.

IMS: How has the role of professional liability insurance changed as the industry has evolved?

MM: Simply put, professional liability policies are becoming more complex and often combine multiple lines of coverage into a single policy form in order to appropriately address risk. Smart risk managers define the scope of services their company offers so they remain within the four corners of their company’s professional policy. We receive numerous inquiries from retail brokers and agents everyday, asking if their insureds were to start a new service, would their professional policy cover the liability associated with that service.

Whether your clients are a startup, a 100-year-old hospital, or a hospital that is merging with private practices to adapt to industry trends, liability risks are extremely high and it is critical to make sure your clients are covered. Identifying and containing liability is becoming a larger portion of the logic behind many of the mergers and acquisitions in the healthcare industry right now.

IMS: As the industry grows, why is liability risk increasing?

Ken Rice (KR): Since the early 1970s, our culture has become increasingly litigious, and it continues to grow by double digits year after year. Just look at all the advertisements you see from trial lawyers, which would have been illegal 30 years ago. When someone gets hurt, someone gets blamed and that person gets sued. Often insurance carriers are the easiest, least complicated way to transfer that risk.

IMS: What about innovation? Could any of the changes in how services are delivered mitigate liability risks?

MM: Technology has certainly streamlined charting, provided quicker access to health records and automated processes, but that all leaves a digital footprint that could become discoverable. For example, telemedicine is firmly on the rise and often provides a detailed record of the provider/patient correspondence and transaction. But that detailed record could provide the information to dismiss a lawsuit that has no merit, or possibly be the “smoking gun” for a defense attorney.

KR: That means attorneys have a lot more to hammer the defense teams with during evidence presentations. Thirty or 40 years ago, if you did not have evidence in writing or a witness, it was one person’s word against the other. Today’s technology makes litigation even easier.

IMS: How has the Affordable Care Act changed the liability landscape for medical professionals?

MM: Service providers have seen reimbursement amounts change, often decreasing significantly. The Medicare Competitive Bidding Program now dictates the amount Durable Medical Equipment (DME) providers can charge to Medicare customers. To counteract lower reimbursement, DME companies have looked to alternate delivery and product instruction methods to decrease internal costs. Often they will ship smaller products directly to customers and utilize online tutorials rather than provide in-person instruction. As you can imagine, that exposes the medical provider to different liability risks than they may be accustomed to.

Cost reduction is also fueling consolidation. An increased number of facilities perform more services than advertised on the outside of the building or their online listing may suggest. For example, I just reviewed an application for a physical therapy facility that recently added medical imaging, dietary, and wellness coaching services.

KR: Essentially, liability risks and costs are higher now than they have ever been for medical professionals. Compensation is down while insurance is becoming a higher percentage of overall expenses. A comprehensive and favorable liability policy is critical to your client’s business in this new landscape.

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