Five Steps to Building Your Medical Malpractice Risk 'Crash Cart'

Crash carts in hospitals and medical offices stand ready to assist doctors who need to deliver care, often in emergency situations. Carts may carry a mobile stock of IV supplies, scalpels, suction devices, trach tubes or defibrillators. So equipped, doctors and other health care professionals are poised to address everyday risks that surface on the front lines of patient care. Sometimes, despite best-laid treatment plans, unforeseen and unforeseeable medical complications still arise. To paraphrase and sanitize a popular car bumper sticker, “Stuff happens.”

‘Black Swans’

Epistemologist Nassim Nicholas Taleb caught the attention of risk professionals in 2007 with the publication of his book, The Black Swan. In it, Taleb argues that rare and unpredictable events challenge human understanding. Further, he maintains that people gravitate retrospectively toward simplistic explanations of such events, often not learning from them. Hence, the phrase “black swans” entered risk management’s lexicon.

Physicians also face black swans. These, however, occur not in the form of super storms, tornadoes or nuclear reactor meltdowns. Instead, they can beset doctors cloaked in the guise of medical malpractice lawsuits, loss of professional privileges and media exposes. Today’s physicians navigate a perilous tort minefield. One wrong move or decision can expose them and their medical practices to explosive liabilities. Medical malpractice claims remain a threat to the financial viability of doctors, hospitals and medical practices. Due to inflation in medical and legal bills, claim costs are rising.

Caps on Damages

While some states have damage caps on recovery for general damages, i.e., pain and suffering, others have repealed those caps. For example, caps in Ohio, Georgia and Illinois have been ruled unconstitutional. Other states face legal challenges to existing caps. Further, caps on general damages often are of little help in high-value claims involving obstetrics and pediatrics, where the economic damages can be catastrophic.

In terms of claims against hospitals, a 2011 Zurich Insurance Company claim study revealed a slight rise in medical malpractice claim frequency, with severity trending up (about 6.3% per year from 2002 to 2008). Large-claim frequency continues to rise, mostly driven by claims in the $1 million to $5 million bracket.

Further choppy waters on the medical malpractice sea may loom. Health care reform may alter the liability landscape. Reimbursement cuts may hit hospital balance sheets. This, in turn, could trim staffing, leaving fewer dollars for patient safety and risk management. Further, the influx of millions of additional patients into the healthcare system, combined with a shortage of primary care physicians may increase medical errors, claims and lawsuits.

Five Steps

One safety net cushioning the impact of those physician liabilities is insurance, which often spells the difference between survival and insolvency for doctors. It is an asset. Like any asset, medical professionals should preserve and manage it by not jeopardizing it. One way to manage insurance assets is to avoid missteps that could negate insurance coverage, cloud the prospect of financial protection, and increase the doctor’s own antacid consumption. Adroitly managing insurance as an asset through policy compliance and alertness at the buying stage will maximize the asset as a safety net, cushioning the impact of professional liability costs.

Here are five steps toward building a risk management “crash cart” to smoothly navigate the medical malpractice insurance claim process:

Step 1: Embrace Prompt Loss Reporting’

Insurance policies generally require prompt notice of a claim as a condition for coverage. If a patient, another doctor, attorney, hospital or anyone reports an adverse outcome, handle it immediately. Do NOT bury it on the desk. Send written notice to the insurer within 24 hours. Send it certified, Return Receipt Requested, to document that you reported the loss and when. Assign this task to an office manager and have clear, written protocols about how the medical practice handles reporting to the insurer, with time-limits.

Many insurance policies require that you notify the company “as soon as possible” or “as soon as practicable” after a loss or claim. The consequences of not giving prompt notice differ, depending on the contract wording and jurisdiction. Since the consequences may be serious, though, time is of the essence. Communications should be a two-way street. When you give a loss report, you should also get certain things. This leads to tip number two.

Step 2: Ask the Insurer for Four Things When Reporting Any Claim, Lawsuit or Incident