Weigh tail options when hiring MDs
Deciding who pays for a new physician's tail coverage usually hinges on who has the leverage in the hiring situation, says Mary Anne Hilliard, JD, BSN, CPHRM, chief risk counsel with Children's National Medical Center in Washington, DC, and president of the American Society for Healthcare Risk Management (ASHRM) in Chicago.
Hilliard has seen it go both ways. Sometimes the job offer is contingent on the doctor getting his or her own tail coverage. Other times the hospital pays for the coverage as part of the employment contract.
"I've also seen arrangements where the doctor has a duty to pay the hospital back with interest for the tail cost and that obligations goes away over time," Hilliard says. "So, for example, the doctor owes the whole amount back to the hospital, and that liability goes down by 20% each year that the doctor remains employed by the hospital until the entire amount is forgiven."
Covering a physician through a hospital's insurance program offers more flexibility around pricing and coverage. "The downside risk and this is significant is that the hospital did not manage the physician during the period at issue and, therefore, the relative risk is arguably unknown," Hilliard says. "Generally speaking, in my experience, hospitals prefer to not cover an old liability, and they would rather have the doctor come without pre-existing insurance exposures. No one wants to pay for problems that arguably belong to the last employer."
When paying an outside insurer for a physician's tail coverage, Hilliard says it is generally advisable to maintain coverage with the original insurer, unless circumstances arise that make that company unreliable. Carefully study the stability of the company selling you the insurance, the scope of coverage, and the limitations on coverage.
"You want to be sure, for example, that the coverage goes back far enough and that it covers the doctor for all his or her known and unknown exposures," Hilliard says. "In that regard, it's very important for the physician to disclose any known or suspected liabilities to the carrier. Failure to be truthful on the application could lead to denial of coverage."