Michigan Professional Liability Insurance by nfm94660


Michigan Professional Liability Insurance document sample

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									 Preventing Emergency
Department Emergencies
    South Florida Hospital &
  Healthcare Association Annual
          June 8, 2007
                        What are we really dealing with?

   Physician’s Top Three Priorities

     •   Liability
              Physician-Patient Relationship with Individual Unassigned
              Increased Exposure to Professional Liability

     •   Lifestyle
              Change in Expectations, Culture, Concept of Social Contract
              Loss of Sleep and Other Serious Disruptions to Normal Daily Routines

     •   Compensation
              On Call Obligations set forth in Medical Staff Bylaws, Rules and Regulations not Enforced
               unless Pattern of Failure or Refusal to Come In Combined with Unfavorable Clinical Outcome
              Opportunity Costs – not providing care for elective patients
              Extra costs physicians absorb to diagnose and treat uninsured and underinsured
              American Academy of Orthopaedic Surgeons Position Paper – The Responsibilities of Hospitals
              Equitable Treatment for All Physicians – American Academy of Family Physicians Position

              What Does a Hospitalist Program Look Like?

Unassigned Patient Program – Take Pressure off Primary Care Physicians otherwise On
    •   Specific quality improvement criteria are condition of contract in response to history of
        physicians admitting but not seeing patients for several days
    •   Contract with Two Separate Internal Medicine Group Practices
             One Group Strictly Hospital-Based, No Outside Practice
                 •   Emergency physician determines if individual requires observation or admission by member of group
                 •   On duty group member must respond within one hour and admit as appropriate per criteria unassigned
                     individual whether or not insured and coordinate consultations and work with nursing and case
                     management to expedite further medical examination and treatment
                 •   Payment is made on a per patient encounter basis with payment reduced by one half for Medicaid
                 •   Group bills and collects and collections are netted against per patient encounter payment and
                     reconciliation on quarterly basis is made (guarantee payment methodology for hospital-based group)
             Other Contracted Group’s Members Also Maintain Outside Practice
                 •   Per patient encounter payment is made only for response to uninsured individuals, and group bills,
                     collects and keeps payment from third party payers
    •   Hospital also maintains separate professional liability insurance policy with payment
        amount of premium based upon number of emergency department patient encounters and
        coverage of all physicians who serve on call

With No End in Sight, Is There A Creative Solution?

Collaborative Effort – Update on Palm Beach County
  • Countywide shortage identified three years ago
  • Medical Society engaged and Hospitals participated in
    funding detailed investigation and recommendations from
    MDContent (emergency physician and health care
    economist from Ann Arbor, Michigan)
  • Emergency Department Management Group formed in
    April, 2005, as committee of Medical Society Services
        Goal of twelve-member group – to improve emergency department
         on call access for county residents

Collaborative Effort Being Pursued

   Primary objective – to establish system to help hospitals
    ensure they have place within county to refer patients in
    need of specialists hard to find
     • Require county health care district and local hospitals to pay
       specialists to work at certain hospitals to handle emergencies
       while also furnishing the specialists with professional liability
       insurance coverage
   At end of November, 2006, group submitted proposal to
     • District has nearly twenty years experience administering
       county trauma system
     • Organizing on-call coverage program through political
       subdivision of state affords hospitals antitrust protection

What Would Governance of Collaboration Look Like?

      District board of directors to appoint advisory
       committee similar to existing trauma system advisory
      Advisory committee to include nine members
        • Three hospital executives, one of whom must be CEO
        • Three physicians, two of whom must be available on call to
          emergency department for one or more hospitals in county and
          one of whom must be emergency physician who works in
          emergency department of at least one hospital in county
        • Two at large community leaders
        • One district board member, preferably not public office holder

What Governmental Approval Needs to be Sought?

       Actual implementation plan will require approval from
        district’s board of directors, Florida Agency for Health
        Care Administration and U.S. Department of Justice
       Proposal submitted is framework for specialty care
        access services network
       Proposed framework was structured to be consistent
        with MDContent recommendations that
         • Solution to specialty availability crisis, to succeed, must be
           fair, transparent, durable and easy to administer

What Objectives are Intended to be Met?

     • Solution must satisfy physician objectives
          Liability coverage for emergency department care

           rendered (priority #1 - liability)
          Fewer call days (priority #2 – lifestyle)

          Guaranteed payment for services (priority #3 –

     • Solution must also satisfy hospital objectives
          To meet legal/regulatory requirements

          To not be cost prohibitive

          To allow hospitals to continue to provide elective services
           when there are not enough physicians to cover the
           emergency department every day of the month

What Objectives are Intended to be Met?

      Proposed specialty care access services network is
       intended to accomplish following objectives –
       •   Assure consistent access to specialty services
       •   Establish shared financial responsibility
       •   Provide for quality monitoring
       •   Provide liability protection for participating physicians
       •   Allow voluntary participation by hospitals and physicians
       •   Provide market-based compensation for participating

      What is the Status of this Project Now?

   Mentioned in U.S. News and World Report article as
    multi-pronged solution that would regionalize certain
    critical on-call services, allowing several hospitals to
    pool on-call doctors to make sure these specialties are
    covered at any given time and have hospitals pay for
    liability insurance just for on-call cases
   District Board of Directors Action on Specialty Care
    Access Services Network Proposal - Update

    How Can We Get Information to Address
           Needs Now and Later?
   County-wide physician census for Palm Beach
    County was conducted by the Medical Society per
    recommendation of MDContent to get data to address
    immediate supply needs for critical physician
    specialties and for long-term physician recruitment
    needs for Palm Beach County.
   Report was provided to help leaders address projected
    shortfalls by 2011 that will affect ED on call access.

    Why is Determination of Fair Market Value Important?

   Stark law, 42 U.S.C. §1395nn, Prohibition

     • Professional services arrangement exception [42 U.S.C. §1395nn(e)(3);
       42 CFR §411.357(d); Federal Register, Vol. 69, No. 59, pages 16138-
       39, see, also, discussion on pages 16089-93 (March 26, 2004]

     • Fair market value definition from Stark II Phase II regulations [42
       CFR §411.351; Federal Register, Vol. 69, No. 59, page 16128, see,
       also, discussion on page 16107 (March 26, 2004)]

            the value in arm’s length transactions, consistent with the general market
             value. General market value means . . . the compensation that would be
             included in a service agreement as the result of bona fide bargaining
             between well-informed parties to the agreement who are not otherwise in a
             position to generate business for the other party . . . at the time of the
             services agreement

            What Should Valuator Know and Do?

• Prohibition based upon definition against taking into account other agreements
  for comparable services between physicians and hospitals in a position to
  generate business

• Independent third party valuation
       Certain objective thresholds applied in consistent manner
       Valuator has knowledge and familiarity with Stark definition of fair market value
        and prohibition against reliance upon comparable agreements between referring
        physicians and hospitals
       Valuator also cognizant of “one purpose test” from Greber anti-kickback case.
       Particularly important if compensation arrangement with on call physician includes
        multiple facets such as
          • Per diem fee
          • “Activation fee” – payment triggered upon physician responding at the request by the
            emergency physician to actually come into the emergency department
          • Fee per service furnished to unassigned individuals examined and treated at hospital in
            observation or admitted through emergency department
          • Professional liability insurance coverage for examination and treatment of unassigned

What can Payments be For? What Must Valuation Include?

  • Stark requires payment be made only for services reasonable and
    necessary for legitimate business purposes of arrangement and
    compensation be set forth in advance and not exceed FMV

  • Third party valuation must verify valuation includes
         Analysis of important terms and provisions of proposed arrangement
         Terms referenced in valuation are consistent with terms set forth within
         Valuation references same parties as does contract
         Valuator had opportunity to make site visit if appropriate/necessary, and
          questions answered to valuator’s satisfaction
         Term through which valuation is effective is stated
         Any comparables used not in position to refer
         Definition and methodology used consistent with Stark definition of fair
          market value

        On-Call Compensation Issues

   Cost (and the slippery slope)
   Compliance with FMV
   Maintaining equity among the
    medical staff
   Selecting from among various
    payment methodologies
   Administrative difficulties

       Prevalence of Compensated Call
           Coverage Arrangements
   In a survey conducted by Sullivan &
    Cotter, 46% (of 167 surveyed
    healthcare organizations) reported
    that compensation is provided for
    on-call availability
   Establishing the FMV of on-call
    arrangements is HealthCare
    Appraisers’ most requested type of
        Available On-Call Compensation
             Payment Mechanisms
   Payment earmarked to defray professional
    liability expense or hospital indemnification
    for claims arising from emergent care
   Payment for unfunded care
   Per diem (typically a 24-hour period)
   Per diem plus payment for unfunded care
   “Activation fee”
   Specialists’ Pool of Funds
   Deferred compensation plan

          Pros/Cons of Various
      Methods of Compensation -
Payment for Professional Liability Insurance
   Pros
    • Relatively inexpensive
    • Simple to administer
   Cons
    • Value to each physicians varies based
      upon days of call coverage
    • May be a short-term solution

            Pros/Cons of Various
         Methods of Compensation -
         Payment for Unfunded Care
   Pros
    • Relatively inexpensive
    • Equitable among the various on-call
    • Directly addresses the complaint
      regarding unfunded patients
   Cons
    • May be a short-term solution
    • Requires claims adjudication (e.g.,
      global coverage periods)              19
            Pros/Cons of Various
          Methods of Compensation -
                 Per Diems
   Pros
    • Easy to administer (unless
      uncompensated care is included)
    • The most prevalent form of
   Cons
    • Likely to be expensive; there is no
      natural ceiling for per diem rates
      (other than perhaps locum tenens
      rates)                                20
             Pros/Cons of Various
           Methods of Compensation -
                “Activation” fee
   Pros
     • Easy to administer
     • Directly addresses those days in which the
       physician has to present to the ED
     • Equitable among the various on-call
     • Usually results in a cost savings to the
   Cons
     • May not be viable if call frequency is active
     • Physicians may ask for an “unrealistically
       high” activation fee                        21
       Specialist Compensation Pool for
        Unfunded Care – One Example

• In addition to hospitalist program…
• A “pool” is set aside quarterly for surgical and
  medical specialist unfunded emergent/follow
  up care
      Pool based upon actual number of unfunded patients
       times pre-determined per patient case rate
      Case rate established annually by independent
       valuation firm
      Allocation for surgical and medical specialists in a
       ratio subject to revision based upon actual claims
      Claims adjusted based upon (90) day determination
       of unfunded status

         Specialist Compensation for
         Unfunded Care (continued)

• All consultations based upon weighted average acuity
  level as determined by independent third party valuation
• Separate rates determined for initial consultation and
  follow up consultations
• For surgical specialists, payment is based upon surgical
  consultations not resulting in surgery
• For medical specialists, payment is based upon actual
  number of initial and follow up consultations (max of 5
  per patient)
• Targeted payment at a given percentage of Medicare
  (e.g., 110%)
• If physicians also participate in other hospital funded
  programs (e.g., funding of PLI) costs of such program
  must be considered in determination that overall
  compensation is consistent with FMV

       Deferred Compensation
   Relatively new concept
   Physicians receive deferred
    compensation subject to a vesting
    provision (typically 5-7 years)
   Hospital funding of the compensation
    can be handled through various
    means, including through the use of
    life insurance policies
         Deferred Compensation
   May be administratively difficult
   Once in place, it’s difficult to modify

      Valuation Considerations
   Direct market data may be biased
    and/or lack comparability
   There is no OIG safe harbor for on-
    call compensation
   A Cost Approach (i.e., hiring
    physicians) is generally impractical
   An Income Approach is not
         Factors Affecting the Value
            of On-Call Services
   Frequency and nature of call events
   Nature of the specialty
   Compensation earned by such
    specialists for clinical work
   Number of physicians available to
    participate in call rotation
   Exposure to unfunded/underfunded
       Sources of Compensation Values

   Sullivan & Cotter and other published
   Hospital and medical associations
   Local, regional or national market
   Independent appraiser


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