Underwriters are demanding more and looking more closely for potential flaws

Self-assessments help prepare for their visit, show ways to improve

Insurers continue to exert pressure on risk managers, and industry leaders say you should be getting a closer look from underwriters than you have ever had before.

The latest example comes in the form of underwriters who may poke around your facility looking for any flaws that might signal a liability exposure. This kind of scrutiny often turns up problems that the insurer can use to justify higher premiums, coverage restrictions, or nonrenewals, so risk managers are well-advised to take action before the underwriters knock on the door, says Kenneth W. Felton, RN, MS, FASHRM, senior vice president and health care practice leader with Webster Insurance in Waterbury, CT. He addressed the topic recently during an audio conference sponsored by the American Society for Healthcare Risk Management (ASHRM) in Chicago. Felton is a former hospital risk manager.

Risk assessments have become an integral part of the underwriting process, more so in the past few years, he says. Changing market conditions in the insurance industry have forced insurers to take a hard look at health care providers before they offer coverage, Felton says, so risk managers must be ready for a close inspection. "Underwriters use risk assessments to identify exposures," he says.

"In many cases, they will look at high-risk areas like obstetrics or bariatric surgery and will consider whether the units are too big or too small. They will review the practitioners’ credentials and who is allowed to practice there. They will look at the consistency of the units on-site and off-site, looking for consistency among policies and procedures."

More comprehensive looks

The underwriters also will focus on claims experience and incident reporting processes. Then they will use all that information to make critical decisions such as whether to offer terms and conditions, the attachment point, and whether to reduce limits, Felton explains. "Underwriting requirements have become much more disciplined, comprehensive, and stringent," he says. "Many insurers are requiring assessments now, and I’m sure many of you have experienced during your last renewal significant increases in the amount of information you must provide."

Insurers sometimes perform risk assessments targeted to specific areas, but Felton says it is becoming more common to see "holistic" or "enterprise-based" assessments that seek to analyze the risk with a more global view. "Nowadays, underwriters specifically want to look at your risk management program and how well you integrate risk management and continuous quality improvement," he says. "They want to know that when they sit down to evaluate your risk and exposures that they’re dealing with an institution that has a commitment from the top down to deal with risk and quality improvement issues. This is extremely important."

The risk manager must present proof of such a commitment to the underwriter, Felton says. Take senior leaders from quality improvement and top administration to meet with the underwriters, and come prepared with documentation showing how your organization is addressing issues that affect risk exposure, he suggests. "When you have face-to-face time with an underwriter, they can associate your institution with your face and they are more apt to look at your submission sooner than others they just receive through the mail," Felton explains.

Assess yourself first

The best way to be ready when those underwriters show up, he says, is to conduct your own self-assessments — often and thoroughly. That idea is seconded by Donna Young, CPHRM, FASHRM, vice president of risk management services with Mutual Insurance Co. of Arizona in Phoenix. She also spoke at the ASHRM audio conference and notes that ASHRM offers a self-assessment tool on its web site at www.ashrm.org.

Many insurance carriers also will provide forms and other resources for conducting self-assessments, Young says. To illustrate how a risk manager might conduct a self-assessment, she focuses on one area that she says is often overlooked and might raise a red flag with underwriters: exposures in the ambulatory care setting.

Hospitals and health care groups are buying more physician practices and ambulatory care clinics, but risk managers may be lagging behind in assessing the risk exposure, Young notes. Under-writers will zero in on that danger, she warns.

To conduct a self-assessment, the first step is knowing what to look for in your own organization. Young notes that, according to data compiled by the Physician Insurers Association of America (PIAA), 30% of all malpractice claims occur in the physician office practice, and 70% of those relate to diagnostic problems, usually failure to diagnose.

"When we look closely at the individual cases, there is a common thread to the contributing factors that lead to these failure-to-diagnose claims," she says. "Inadequate communication is No. 1. This includes inadequate communication between the physician and patient, particularly in the history-taking process, and inadequate or no communication between the physicians."

Look beyond hospital walls

Other communication breakdowns occur between the staff and patient, and underwriters are noticing more communication failures between hospitalists or the hospital and the primary care physician.

Ambulatory care is only one of many settings that may need a self-assessment, Young says, but it is a good example of how risk managers must consider all risks in the same way an underwriter will.

"Professional liability carriers want to know that risk management extends beyond the hospital walls," she says. "The fact that you are doing audits and surveys and have produced risk management plans will be very important to the underwriters and will definitely improve your credibility both within your organization and with the carrier."