“The risks faced by hospitals and health care organizations are continuously changing at an incredibly fast pace,” says Philip Reischman, CPCU, ARe and president of Gallagher Healthcare, a division of Arthur J. Gallagher & Co. in Houston. “While insurance pricing has recently stabilized, health care providers continue to find themselves exposed to new risks arising from technology, new treatment protocols and the increasing demand on the part of consumers for a perfect outcome. In this environment, it is important for providers to consider all possible avenues for risk management and mitigating losses while providing quality patient care.”
Smart Business talked to Reischman about some of the insurance challenges and solutions facing the health care industry.
What areas of risk management should health care providers be cognizant of?
Medical malpractice is the most volatile and expensive risk to which health care providers are exposed. This risk can be partially addressed through proactive measures to improve the quality of care and enhance communication with patients and their families, so expectations can be managed. The cost of medical malpractice claims can be financed in the worldwide insurance and reinsurance marketplace.
Health care organizations also face claims arising from the management of their businesses, such as claims against directors and officers for financial mismanagement or claims from employees arising out of the work environment.
Finally, health care providers have the same property and casualty risks as many other businesses and should procure insurance for their business property, general liability, auto liability, workers’ compensation and other exposures.
What special concerns should business managers and executives be aware of?
In the health care industry, business managers and executives are experiencing dramatic changes in the legal, regulatory, economic and social climate in which they operate. Society is expecting high-quality health care without regard to a person’s ability to pay. Thus there is increased scrutiny of all types of health care organizations by various stakeholders that can lead to increased litigation or regulatory actions against them. Organizations are mitigating these risks through the development of corporate compliance programs and ongoing training and education of all employees.
How does commercial auto risk for health care providers differ from other industries?
Procuring auto liability coverage can be more challenging due to such loss-sensitive exposures as those associated with patient transport or hired and non-owned liability. Whether they are ‘911’ providers, home health agencies or executive fleet managers, they need comprehensive commercial auto liability programs combined with comprehensive loss-control support.
How does employee dishonesty exposure differ in the health care industry?
While other industries experience mergers, acquisitions, downsizing and other forms of restructuring, the rapid growth of the health care industry exacerbates these areas even more.
Regulatory uncertainty has increased the challenge of maintaining a strong system of internal controls. Likewise, the expansion of technology has drastically changed the speed with which fraud can occur.
Health care companies face unique fidelity exposures beyond the theft of money, securities and cash on hand. Larger thefts created by white-collar criminals involve elaborate check kiting or duplicate accounting schemes that are often perpetrated by long-term employees. Employee dishonesty losses can encompass inventory fraud and manipulation, drug theft, accounts payable and receivable scams, computer theft and vendor collusion.
Given these unique and potentially catastrophic crime exposures, it is important to look beyond traditional ‘package’ crime policies and evaluate sophisticated loss-analysis and valuation tools.
What are some of the keys to managing risk?
Obtain expert help in developing internal procedures, programs and service tools to address the risks. Determine what risks you can cover internally and which need insurance coverage. Consider self-insurance and purchased insurance options.
Review not only costs, but stability, financial security, experience and reputation. Determine what services should be outsourced and which are best handled internally. When claims are made, make sure that you obtain the services of professionals who will proactively manage the claims and litigation process in a manner that has the best potential of reflecting positively on your business.
PHILIP REISCHMAN, CPCU, ARe, is president of Gallagher Healthcare, a division of Arthur J. Gallagher & Co. Reach him at (713) 935-8872 or firstname.lastname@example.org.