Change can impact a physician’s two key risk exposures: professional liability and long-term disability. Here's how to reduce your risks.
Three trends impacting our physician clients have caught my attention recently. Here are some interesting facts I’ve observed about each of them:
1. Aging Ranks. The aging of America includes physicians. No surprises here, but the actual numbers are revealing. Recent data confirms a trend of physicians working longer as they approach retirement age. Today almost half of practicing U.S. physicians are age 55 or older, and more than 25 percent are age 60 or older, according to the Association of American Medical Colleges.
2. Physician Shortage. A number of studies have emerged recently attempting to quantify what many consider to be a foregone conclusion. While the numbers vary significantly, the result is always the same: We will experience a serious shortage of physicians over the next decade. The Association of American Medical Colleges has produced a study designed to quantify this shortage, and the number they’re projecting is a big one. It ranges from a 90,400-physician shortfall by 2025 on the high end, to 46,100 on the low end.
3. Practice Ownership and Physician Employment. Early anticipation of Affordable Care Act impacts on healthcare delivery spawned a significant ramp-up in acquisitions and consolidation of independent practices. Industry data during this timeframe showed fairly dramatic shifts in key measures:
• Physician ownership in practices dropped from 61 percent in 2007 to 53.2 percent in 2012
• Physicians employed by practices partially or wholly hospital-owned moved from 16.3 percent in 2007 to 23 percent in 2012.
These trends prompted dire predictions of the end of independent practice - an assertion that was quickly refuted by the AMA. However, after a few years of frenetic activity, the trend leveled off. Interestingly, we are now beginning to see early signs of potential dissatisfaction with many of these combinations, as hospital systems grapple with the high cost of directly employing physician specialists.
What Does It All Mean?
To put it simply, it means one thing: change. I’m not trying to be clever, and I’m not talking about just general change. Specifically from my perspective, it’s change that can impact a physician’s two key risk exposures: professional liability and long-term disability (which includes business interruption/viability risks).
For experienced insurance professionals, change means one thing: Review client risk. ("Opportunity" would be the wrong answer, by the way.) Change impacts risk profiles and coverage strategies, yet is frequently overlooked in the rush of reorganizations, reassignments, and new situations.
Here are examples of a few of the possible impacts flowing from the changes outlined above that may be overlooked, and come back to haunt the physician if a claim situation arises:
Ownership Redefinition. Practices will continue to experience changes in ownership. Many will be passing from older docs to younger docs. Others may be absorbed in the slower, but continued acquisition trend where ownership and/or employment status can change dramatically. Others could be spinning back out of a large organization that couldn’t make the numbers work. Any change in ownership creates a potential change in risk and coverage specifics.
Hiring Physician Extenders. To cope with the growing physician shortage, practices will be hiring, training, and integrating many more nonphysician practitioners that will change the structure of their clinical makeup, patient flow, and their risk and liability profile.
Geographic Expansion. To cope with cost pressures and physician shortages, organizations may find themselves straddling state boundaries where differences in regulations can have a significant impact on handling risk and insurance strategies.
What Can You Do?
While change is inevitable, here are three things I suggest you consider as you navigate the potentially turbulent waters of the decade ahead:
1. Involve your broker. In an age of tremendous cost-cutting pressure, advisers and consultants are often seen as an additional expense. In the case of your insurance broker, this couldn’t be further from the truth. These experienced professionals actually reduce your overall cost and exposure by bringing to the table years of insight and capability to ensure that your risks are fully identified and cost-effectively covered.
2. Scrutinize changes that affect ownership or employment. Any changes in practice ownership, employment, pay or bonus plans, or new clinical employees should raise a flag that warrants investigation by an insurance professional. There are many potential impacts related to risk, liability, taxes, and state-specific regulations that need to be carefully vetted. Also be alert to situations that may cross state lines.
3. Get ahead of the curve. Know what you’re getting into before you get into it. Even if you don’t know all the specifics, involve your insurance professional early in the game. This will not only help create the best fit for managing risk and coverage, but can provide valuable information to include in negotiations and agreements as new arrangements are being charted.
As they say, there is nothing more constant than change. But change well-managed is what makes the ride an adventure.