Presentation on theme: "MEDICAL NECESSITY & BATCH CLAIMS: KEEPING UNDERWRITERS UP AT NIGHT?"— Presentation transcript:
1 MEDICAL NECESSITY & BATCH CLAIMS: KEEPING UNDERWRITERS UP AT NIGHT? MEDICAL PL SYMPOSIUM – MARCH 24 & 25, 2011 – SHERATON CHICAGO HOTEL & TOWERSThursday, March 24, 2011, 4:00 - 5:15 p.m.MEDICAL NECESSITY & BATCH CLAIMS: KEEPING UNDERWRITERS UP AT NIGHT?Chicago, IL ~ March 24 & 25, 2011
2 MEDICAL NECESSITY & BATCH CLAIMS: KEEPING UNDERWRITERS UP AT NIGHT? Moderator:Kirsten E. Faria, Senior Vice President, Allied World Assurance Company, Ltd.Panelists:William B. Bower, JD, Chief Risk Executive and Executive Director,Claims & Litigation, Northwestern Memorial HealthCareAmy Evans, Esq., Executive Vice President, Western LitigationPaul McKeon, Senior Vice President, Transatlantic Reinsurance CompanyKristin D. McMahon, Esq., Chief Claims Officer, IronHealthMEDICAL PL SYMPOSIUM – MARCH 24 & 25, 2011 – SHERATON CHICAGO HOTEL & TOWERSThursday, March 24, 2011, 4:00 - 5:15 p.m.MEDICAL NECESSITY & BATCH CLAIMS: KEEPING UNDERWRITERS UP AT NIGHT?
3 A Perspective Broad Batch Issues Four Categories: Type of programs being purchasedFrequency & Severity of batch claimsChanging landscapeFour Categories:Sterilization: (Hepatitis, Foreign Substance - ie Bleach, Hydraulic fluid).Hiring/ Supervision (Rogue employees, Drug abuse, ’Angel of Death’, Infant shaking)Sexual Abuse*Medical Necessity (Angioplasty, Stents, Gyn surgeries, Cataract surgeries)Is this a Big Issue … or simply something to underwrite?Healthcare ReformChanging incentives for payors and hospitalsWhat will be the public’s view of healthcare?
4 Healthcare Reform Concerns Increasing Patient Volume…Decreasing primary care physicians30,000,000 more “insureds” by 2014Number of physicians retiring may outpace physicians coming out of residency in primary careWill CMS maintain funding of residency programs?Will care model switch to NP/midlevel provider model? Other…?Electronic Health RecordHealthcare Reform incentivizes use of EHRMost Practitioners don’t have itLearning curve and communication breakdowns my increase exposureCopy Forward?
5 Healthcare Reform Concerns (Cont’d) No Meaningful Tort ReformDownward Pressure on Reimbursement (both CMS and Third Party Payors)Net Patient Revenue will decreaseSerious Adverse Events (“never events”) will be used beyond intended reimbursement purposeInstitutions will seek greater economic efficiencies
6 Why I Want Batch Coverage Predictable RiskManaged within the RetentionRequires greater sensitivity to exposuresDrives Quality and Process Improvement DiscussionsCatastrophic ExposureThe reason we pay/cede premium“Batch” events are, by nature, catastrophic and “unpredictable”Cardiac StentsDuke Hydraulic FluidRadiation Exposure“angel of Death”Software FailureSterilization Mishap
7 Why I Want Batch Coverage (cont’d) Vertical AND Horizontal Protection“Want” protection from the single/batched event – VerticalAlso “want” protection for the frequency spike - HorizontalExpectationsScope of CoverageAttachmentContract CertaintyPARTNERSHIP
8 Examples/Case Studies Examples of Catastrophic Healthcare Related Events Which Bring the Issue of Batch Claims To the Forefront:Unnecessary surgeries performed by cardiac surgeons;Abuse of patients by a single employee or group of employees over several year period;Angel of Death scenario in long term care or hospital setting;
9 Examples/Case Studies (Cont’d) Improper calibration of medical devices leading to over radiation of 100s of patients;Tuberculosis (TB) outbreak in neonatal unit of hospital due to newborn’s exposure to medical resident who tested positive for TB;Shooting of patients in hospital emergency room by employee nurse armed with glock;Improper sterilization of surgical equipment leading to spread of infectious disease, bacteria among surgical patients.
10 Case StudyAbuse of Hospital Patients by Employee –Hepatitis C ExposureIn 2007, a U.S. based hospital system noted several cases of hospital acquired hepatitis. The hospital checked the usual transmission sources, including insulin vials that are used multiple times, but everything came back clean. The hospital began tracing the footsteps of the infected patients. All of their paths crossed at the hospital’s radiology unit where the patients undergo procedures such as tissue biopsies. Twenty three different employees were tested and one radiology technician came back positive for Hepatitis C.
11 Case Study (Cont’d)In 2009, the radiology technician who tested positive for Hepatitis C admitted to authorities that, from he would periodically inject himself with a syringe of fentanyl (a drug more potential that morphine), refill the syringe with saline and then leave the syringes to be used on the patients. In the process, he exposed patients to hepatitis C. To date, there has been one death and dozens of injuries.
12 Case Study #2Hospital Medical Malpractice Litigation Arising From The Fentanyl SiphoningA state law wrongful death suit arising out of the radiology technician’s siphoning of the drugs was filed in 2009; the second negligence suit was filed in 2010 by patients claiming excessive pain and suffering due to the hospital’s failure to provide them with requisite pain relief; and a third class action suit was filed in early 2011 on behalf of all patients who contracted Hepatitis C.
13 Case Study – Insurance Implications Whether these lawsuits present a horizontal/multiple limit/retention or vertical/single tower/retention exposure to the hospital and its professional liability insurers will depend, in large part, on the nature of the related medical incident or batch claim language contained in the hospital’s liability policy.Distinguish between Related Medical Incidents generally involving a single patient and Batch Event Language addressing the multiple patient scenario.The Policy language will determine which insurers ( or 2011) will pay out on these fentanyl patient abuse claims.
14 Case Study – Wordings Scenario I Policy contains Related Medical Incident languageMedical Incident means the rendering or failure to render professional healthcare services. All medical incidents to any one person arising from “related medical incidents” shall be considered one Medical Incident. As used herein, “related medical incidents” means all medical incidents to any one person arising out of a single act, error, or omission, or arising out of acts, errors, or omissions that are logically or causally connected by any common fact, circumstance, situation, transaction, event advice, or decision, in the rendering or failure to render professional healthcare services.Each of the three towers could be implicated depending on whenthe claims are deemed made if the there is no language in thePolicy which allows the insurers to relate claims involvingdifferent persons/patient.
15 Case Study – Wordings Scenario II Batch Event Endorsement Involving Multiple PatientsFor purposes of determining the applicable shared Limit of Liability for Medical Incidents....injury to one or more persons caused by a Batch Event shall be deemed to arise out of one Medical Incident. All injuries and damages resulting from a Batch Event shall be treated as arising out of one Medical Incident, regardless of the number of persons injured, the number of Claims made or suits brought, the number of Covered Persons involved, or the time period over which the Batch Event happened, provided the first act, error or omission which causes injury happened on or after the Retroactive Date.
16 Case Study – Wordings Scenario II (cont’d) Batch Event means a Medical Incident:a. which causes injury to one or more persons, which injuries are attributable to the same act, error, or omission or to related acts, errors, or omissions, in the rendering of or failure to render Professional Healthcare Services.B. For which a Claim is first made during the Policy Period and is notified in accordance with the Reporting and Claims Handling Condition of the Policy; it being understood that all subsequent Claims relating to a Batch Event shall be deemed to have been made at the time the first such Claim is made.Hospital/Insurers will likely batch claims to a single policy period – the period in which the first claim is made and reported.
17 Things to Consider Prior to Binding: Triggering Coverage Work closely with your claims departmentConsider auditsRefine your applicationConsider making the application a part of the policyRefine your policy languageTriggering CoveragePolicy language- Batch language- Definition of a loss event- Anti-stacking provisions- ExclusionsLimitsClaims filesClass ActionManaging Aggregates
18 Looking forward Managing the Care The Future of Batch Maintain your relationship with the insuredWork closely with the defenseKeep your friends close and your enemies closer – maintain direct contactThe Future of BatchMRSA & C DiffAntibiotic resistanceEquipment reuseState and federal investigationsState Board investigationsAffects of Healthcare Reform on ClaimsFrequencySeverityRemains to be seen
19 Insurer Perspective Concerns about batch How to Underwrite for it: Risk selectionPricing for batchWordings selectionsTimelineScopeAgreementReporting of a batchHC Reform:increased regulatory scrutinyRAC auditsincreased utilization review
20 Insurer PerspectiveIncreased on-boarding of physicians under hospital insurance programs and employment structuresDo we understand how physicians are compensated?How does the peer review/credentialing process factor in?Check and balance/auditing etc.Elimination of impact of financial considerations in the practice of medicine and the peer review process
21 What are we doing about it? Book analysisDialogue with brokersDialogue with clientsAppropriate attachmentAWARENESSTough decisions.