What are your options in a malpractice crisis?

June 1, 2006

You might be surprised how close you actually are to retirement.

You don't need to read another article telling you how terrible the malpractice crisis is. You already know that lawsuits are on the rise, jury awards are out of control, malpractice premiums are escalating to the point of being unaffordable, and the practice of medicine as we know it is severely threatened.

What you do need are alternatives and solutions. To best judge the alternatives, you need to understand the pros and cons, as well as the costs and benefits of each alternative. The purpose of this article is to help you better understand what you can do so you can make an intelligent decision, take action, stop worrying, and get back to the practice of medicine.

Here are some options.

The easiest alternative is to just pay the premiums on the table from your malpractice carrier.

We recently attended a conference in San Diego that was devoted solely to the "hard-to-place" medical malpractice market. As a result of the contacts we have made, we have helped quite a few doctors find malpractice coverage after they were canceled or not renewed. One organization we met actually has the capability to help doctors in 30 states.

The key point is that, even if you think you aren't insurable, there might be a carrier out there willing to write a policy for you, thus preserving your privileges at the hospital and your relationships with your insurance payers.

Self insure

Many large groups are considering self insurance. You can join an existing risk retention group or set up your own captive insurance company.

We have assisted hundreds of medical groups analyze the benefits of captive insurance companies over the years. Although most medical groups find alternative means of protecting themselves from medical malpractice, a growing number of medical practices are using the risk management, asset protection, and tax-favored benefits of self insuring with captive insurance companies.

Typically, medical groups use captive insurance companies to self insure for risks other than traditional medical malpractice. These risks might include legal defense, HIPAA violations, Medicare fraud, insurance fraud, loss of medical license, and similar risks. Recent changes in the law on captive insurance companies make it important for a physician to find an advisory firm with a great deal of experience in captive insurance and the health care industry.

Quit medicine

Ah! A sigh of relief. Now, pinch yourself-the dream isn't over just yet. When the time is right, see a financial planner who can help you comfortably plan your well-deserved retirement. You might be surprised how close you actually are to it.

Go bare

Although many physicians are considering this option, especially in Florida and other high-risk states, the decision to go bare-that is, to go without malpractice insurance-has many pitfalls. The main benefit is that you will be a less-attractive lawsuit target if you don't have insurance, but this is true if and only if you have implemented a comprehensive asset protection plan prior to any action that could potentially result in a lawsuit.

Placing assets in a spouse's name or into a living trust does not provide asset protection. Although some states offer tenancy by the entirety, some homestead protection, and some protection of insurance or annuities, it is imperative that you have an attorney research the recent case law in your state as the statutes often do not match the actual results in the courtroom. Further, your brokerage accounts and rental real estate are not protected in any state!

Finally, your practice assets-equipment, real estate, and accounts receivable-may be at risk to lawsuits from your actions or those of your partners. Are you the worst doctor in your group? If you aren't, the potential liability of the physician who is may cost you dearly.

Regardless of how you choose to deal with the current medical malpractice situation, our advice is: Don't do it alone. Your first and best step in making an informed decision about your future is to consult with an expert in financial planning and asset protection.