When a new doctor or a group of doctors are considering selling out to a hospital will the practice be forced by the hospital to purchase an expensive “tail” for their malpractice insurance policy or will they be allowed to keep their retroactive coverage without buying a tail?
Hospitals and doctors looking to become hospital employees undoubtedly have two different perspectives on this issue. Hospitals prefer not to purchase retroactive coverage for the doctors they purchase for a number of reasons. The first is the decreased expense of a first-year claims-made policy versus a more expensive policy that includes mature retroactive coverage. The second reason is that hospitals do not want the doctors’ previous practice risk exposure to potentially harm the claims record of the hospital should a purchased doctor have a claim that is a result of his or her previous practice. Third, if the hospital does allow doctors to join them with their previous practice’s retroactive coverage intact then it could become a Stark issue if the whole package is considered over that undefined edge. Additionally, hospital insurers or their captives’ reinsurers have started to strongly suggest, and in some cases require, that hospitals force doctors to purchase tails before a purchase is finalized. Finally, hospitals need to be very concerned about the differing “triggers” in malpractice insurance policies as serious and expensive gaps in coverage can be created on this front.
The only reason a hospital would ever want to purchase retroactive coverage for a new doctor is to make its recruitment efforts easier since doctors often balk at the high cost of malpractice insurance “tails” but hospitals will inevitable learn that cheap can become expensive quickly on this coverage.
In short, many hospitals are taking the position that they do not want to insure what they cannot control, such as doctors’ past malpractice exposure so are forcing doctors to purchase tails before practicing for the hospital.
As always, I recommend that you contact your practice advisor and malpractice insurance carrier for detailed advice and assistance with these issues.
Article submitted by Matt Gracey, CEO of Danna Gracey, The Malpractice Insurance Experts. www.dannagracey.com