New Coverage for HIPAA Proceedings

By Kimberly Wittchow, JD

Digest, Fall 2001

On January 1, 2002, OMIC will add patient privacy regulatory proceedings coverage to its fraud and abuse insurance program. This is because, hot on the heels of the government’s Medicare/Medicaid fraud and abuse initiative, another potential regulatory nightmare for ophthalmologists looms. The Health Insurance Portability and Accountability Act (HIPAA), one of the federal laws invoked in anti-fraud cases, contains new patient information privacy regulations enforceable beginning April 2003. This complex set of rules sets stringent standards for maintaining the privacy of individually identifiable health information.

Clarifications and guidelines already have been published to further elucidate the HIPAA statutes, with more to follow as health care providers try to make sense of HIPAA in relation to state privacy laws and their current practices. Simply stated, the law provides that a health care provider may not use or disclose protected health care information (PHI) except as required or permitted. Health care providers will need to provide patients with new blanket consent and specific authorization forms for the use of patient PHI. Ophthalmologists and anyone they share PHI with (such as companies providing accounting, billing, accreditation, or legal services) must enter into business associate agreements stating they will take appropriate safeguards in the transmission and use of PHI. When PHI is disclosed, providers may be require to de-identify the PHI or make reasonable efforts to disclose only the minimum information necessary to accomplish the intended purpose.

Under the new regulations, patients will have many affirmative rights that providers must facilitate. For example, patients can request restrictions on the use of their PHI; inspect, copy, and amend their PHI; and request an accounting of disclosures that providers have made of their PHI. In addition, health care providers must comply with certain administrative requirements, including: documenting their policies and procedures; appointing a privacy official; implementing privacy training; and creating administrative, technical, and physical safeguards to protect PHI.

HHS Encourage Cooperation
While much of this seems daunting, the U.S. Health & Human Services Department is encouraging cooperation and assistance to help providers achieve compliance – unlike the witch-hunt tactics of anti-fraud forces. Further, when assessing a practice’s reasonable compliance, the government will take into consideration a provider’s size and type of activities related to PHI. Punitive enforcement, at this point, is not a priority. However, civil fines, lawsuits, criminal fines, and imprisonment are tools the government can imply if it chooses to aggressively ferret out non-compliers.

What does this mean to OMIC insureds? First, it is essential that ophthalmologists understand the law and how it applies to their practice. Second, they must discern what steps to take to be compliant come spring 2003. Third, practitioners need to implement a protocol and then follow through on prescribed compliance procedures. Fourth, ophthalmologists should ensure that, as part of their insurance package, they are covered in the event the government targets their practice for violation of HIPAA regulations.

In light of the quickly approaching April 2003 deadline, OMIC is taking measures to protect and educate insureds. Risk management seminars will cover HIPAA privacy rules, and in early 2002, OMIC will make a HIPAA compliance program planning tool available to help insureds further understand the law and implement protocols to protect patient health care information.

Coverage for HIPAA Proceedings
Also in 2002, OMIC is expanding its fraud and abuse insurance program to cover HIPAA proceedings. OMIC’s Fraud & Abuse/HIPAA Privacy insurance will cover legal expenses civil proceedings instituted against the insured by a government entity alleging violations of HIPAA privacy regulations. OMIC’sComprehensive Fraud & Abuse/HIPAA Privacy insurance will cover legal expenses for proceedings instituted by a government entity alleging HIPAA privacy violations and resulting in administrative fines and penalties.

This HIPAA privacy coverage is in addition to both policies’ coverage of billing errors proceedings instituted by a government entity, third party payor, or qui tam (whistleblower) plaintiff under the False Claims Act. OMIC will provide a Fraud & Abuse/HIPAA Privacy policy free to its professional liability insureds $25,000 limits ($50,000 effective Jan 1, 2011). Higher limits to $100,000 are available for additional premium. OMIC offers American Academy of Ophthalmology members who are not OMIC professional liability insureds the opportunity to purchase this legal expense coverage as well. OMIC insureds and other Academy members also are eligible to purchase the Comprehensive Fraud & Abuse/HIPAA Privacy policy with limits ranging from $250,000 to $1,000,000. A $1,000 deductible applies to both policies.

For further information regarding OMIC’s new Fraud & Abuse/HIPAA Privacy program, please call the Sales Department at (800) 562-6642, ext. 654.

Limits of Liability

By Kimberly Wittchow, JD, OMIC Staff Attorney

Digest, Spring 2004

Press coverage of the industrywide rise in medical malpractice claims frequency and severity is abundant. This has many insureds questioning whether their current limits of liability are adequate for the increasingly litigious environment in which they practice. To help insureds assess their coverage limits and needs, this article will address what is meant by limits of liability, how to select limits, and how changing limits affects coverage if a claim arises.

Your limits of liability are the maximum dollar amounts of indemnity OMIC will pay on your behalf as a result of covered claims. Indemnity is the amount of damages awarded in a lawsuit or agreed to in a settlement between the parties. OMIC will pay your reasonable defense costs in addition to your liability limits.

All OMIC insureds have two separate limits: the per claim, or “medical incident,” limit and the aggregate limit. The per claim limit is the maximum amount of indemnity OMIC will pay per insured for all damages caused by any one medical incident, or by any series of related medical incidents involving any one patient, regardless of the number of injuries, claimants or litigants, or the number of claims (notices, demands, lawsuits) that result. The aggregate limit, on the other hand, is the maximum amount OMIC will pay per insured for all claims made and reported  during the policy period.

How to Select Limits

There are several factors to consider when selecting limits of liability. The limits you require may vary with changes in your state’s malpractice liability climate, the procedures you perform, and the makeup of your practice. Therefore, you should continually assess your current needs and corresponding coverage.

First, review the claims statistics for ophthalmologists. For example, as of February 2004, OMIC’s average indemnity payment was $130,166 and its largest indemnity payment was $1.8 million.

Second, consider your state’s risk relativity. When OMIC looks at risk relativity, it compares the number of insureds, the number of total claims, and the average indemnity paid per claim in each state. Under this analysis, due to the fact that OMIC has a large number of insureds in these states, OMIC’s highest claims activity is currently in California, Texas, and Illinois. For selecting limits, however, a better way to look at risk relativity might be to compare the average rate of claims per insured per state. OMIC insureds in Louisiana and Michigan currently experience the highest claims frequency.

Third, find out what liability limits your peers are carrying. The majority of OMIC insureds (65%) carry $1 million per claim/$3 million aggregate limits. Higher limits of $2 million per claim/and either $4 million or $6 million aggregate limits are selected by 21% of insureds. OMIC’s lowest offered limits of $500,000/$1.5 million are carried by 6% of insureds, while 4% select the highest limits OMIC offers, $5 million/$10 million. The remaining 4% of insureds carry other combinations of limits, including lower limits available exclusively to physicians who participate in their state’s patient compensation fund.

Fourth, consider the risks related specifically to your practice. Is your subspecialty one in which there is high claims frequency (e.g., cataract surgery) or large damage awards (e.g., neonatal care)? Do you share your coverage and limits with any ancillary employees or your sole shareholder corporation? On the other hand, have you ceased performing most surgical procedures or limited your practice to part time?

Fifth, assess your level of risk aversion. Would higher limits make you feel more secure because of the large indemnity cushion or less secure because of the “deep pockets” potentially discoverable by the plaintiff?

Finally, check with your hospital and state licensing board because they may specify the minimum amount of coverage you must carry. Also note that OMIC generally requires all OMIC-insured physiciansin practice together to carry the same liability limits. The practice’s legal entity cannot be insured at higher limits than those of the physicians.

Which Limits Apply to a Claim?

You should consider how changing your limits will affect the amount of indemnity available to you if a claim should arise. The limits of liability that apply to a claim are those limits that are in effect as of the date the claim is first made against you and first reported in writing to OMIC.  In other words, if you increase or decrease your coverage after you’ve reported a claim made against you to OMIC, the limits that you carried when you reported the claim, not the new limits, will be applied to the claim.

Subject to underwriting review and approval, you may increase or decrease your limits of liability at any time during the policy period (although OMIC typically does not consider requests to change policy limits while a claim is pending). If you are in group practice, discuss this desired change with your practice administrator and partners. Your OMIC underwriter can provide you with the most recent OMIC data to help you determine which limits are appropriate for you. However, OMIC representatives are not in a position to offer you advice. If you need further assistance, please consult your personal attorney.

The Cooperation Clause

By Kimberly Wittchow, JD

OMIC Staff Attorney

Digest, Winter 2005

In order to properly investigate and defend a medical malpractice claim, the professional liability company and the insured must cooperate. The participation of the insured, who is the subject of the lawsuit and holds first-hand information about the incident, is crucial to his or her own defense. Without such cooperation and assistance, the insurer is severely handicapped and may even be precluded from advancing any defense.

While the litigation process nearly always progresses successfully, there are times when some insureds thwart the resolution of their claims by failing to cooperate. Insureds may believe they have done nothing wrong and therefore avoid any work to counter the plaintiffs’ allegations. Or, afraid of the consequences, they may keep vital information away from their defense attorney until late into the case development. They might not understand the importance of their presence at litigation proceedings (such as depositions, mediations, or arbitrations) and worry about taking time away from their practice. Some attempt to handle matters “on their own” by discussing the case with plaintiffs’ attorneys against the advice of defense counsel or making payments without their insurers’ consent. Others may not want to tarnish their record and thus refuse to participate in settlement talks even when there is strong evidence that the standard of care was breached.

Investigation and Defense

That is why many professional liability policies contain Cooperation Clauses that require insureds to assist in the defense of claims made against them. OMIC’s policy has such a clause and, broken down, it requires the insured’s assistance on three levels. First and foremost, the policy requires that insureds assist in resolving the claim brought by the patient by helping with the insurer’s investigation and defense of the claim at trial or through settlement, as appropriate. This includes producing medical records, spending time with defense counsel, coordinating the appearance of staff at depositions or at trial, and attending court proceedings.

Coordination of Payment

The second situation is related to the coordination of payment among various legally responsible parties or insurers. The insured is required to cooperate in enforcing a right of contribution (where the loss will be shared) or indemnity (where another party is responsible for the entire loss) against someone else liable for the claim. For example, an insured may give notice under his or her OMIC professional liability policy for an office premises claim that might also be covered under the insured’s business owners or general liability policy. In this case, OMIC would ask the insured to help coordinate the defense and resolution of this claim with the other insurer.

Unauthorized Payments

Finally, the insured is prohibited from making payments, incurring other expenses, or assuming any obligations except at the insured’s own cost and with OMIC’s permission. OMIC wants to participate in its insured’s defense and work with the insured to come to the best resolution possible for the insured and the injured party. If the insured does not allow OMIC to participate, OMIC cannot be responsible for expenses the insured incurs. One example of this situation is where an insured decides, without the advice of defense counsel, to hire a private detective to track a malingering patient. This can be problematic for the defense because the defendant may be compelled to provide the plaintiff with this information. If nothing was revealed through the investigation, this could undermine the insured’s defense. Another example is when an insured, believing it is in everyone’s best interest, makes an out-of-pocket payment to the patient after a lawsuit has been filed. Again, if the case proceeds, this early payment to the patient may jeopardize its defense.

Even with the notice of required cooperation provided in the policy, some insureds still may not comply. The risk for these insureds is that they may be prevented from recovering under their insurance policies for the particular claim or they may lose their coverage altogether.

Before the situation reaches this level, however, the OMIC Claims staff would work diligently to educate the insured regarding the importance of his or her participation and cooperation in the defense of the claim and discuss what specific action is needed from the insured to bring him or her into compliance.

OMIC understands the issues that may impede a physician’s cooperation with his or her insurer and has several ways to assist its insureds with the upset of a lawsuit. First, OMIC provides access to one-on-one personal counseling (under the direction of the defense counsel in order to preserve attorney-client privilege) to help insureds deal with the emotional impact of litigation. OMIC also offers litigation and deposition handbooks to help insureds better understand the process. Finally, OMIC’s policy pays insureds for reasonable expenses incurred at OMIC’s request in the investigation or defense of a claim and for earnings lost as a result of attendance at court hearings or trials (see policy provisions for details).

Task Force Studies OMIC-Insured Surgical Facilities

By Kimberly Wittchow, JD, OMIC Staff Attorney

Digest, Fall 2005

Over the past year, a task force of OMIC Board and staff members, John W. Shore, MD, Anne M. Menke, RN, PhD, and Betsy Kelley, has been examining and revising underwriting requirements and risk management guidelines for coverage of outpatient surgical facilities (OSFs) insured by OMIC. OMIC’s Board of Directors assigned the task force to study scope of practice issues, state laws governing OSFs, and national, state, and local practice standards that establish a standard of care for cases performed in facilities insured by OMIC.

Types of Outpatient Surgical Facilities

First, the task force reviewed the type of facilities that OMIC insures. It found that OMIC insures a wide variety of OSFs with varying goals, scopes of business, and types of surgical procedures and anesthesia provided, including in-office surgical suites, refractive laser centers, and ambulatory surgery centers (ASCs). The types of anesthesia used in facilities insured by OMIC range from topical ocular anesthesia to full general anesthesia with invasive monitoring in high-risk surgical patients.

Some facilities are office-based treatment rooms where major eyelid and facial procedures are performed. Some of these offices permit outside surgeons of different specialties to utilize the in-office surgical suites. These surgeons, many of whom are not insured by OMIC, may perform major facial surgery in an unlicensed and loosely structured practice environment. This increases the vicarious liability shared by owners of the facility who are insured by OMIC.

Other surgical facilities are refractive surgical and laser centers. Surgical services in these facilities are usually limited to those requiring only topical anesthesia. The procedures are short in duration and the patients are relatively healthy. Some, however, are free-standing, licensed ambulatory surgery centers (ASCs), where surgeons of almost every specialty provide surgical services to a full range of pediatric, teenage, adult, and geriatric patients.

Review Process

Then the task force studied all of OMIC’s claims, suits, and settlements involving OSFs. The task force analyzed nursing, anesthesia, pediatric, and surgical standards by national professional groups as well as state and federal laws, regulations, and directives. Information gathered was used to revise existing underwriting requirements and risk management guidelines for OMIC insured OSFs. In addition to being discussed by both the Underwriting and Risk Management Committees, the proposed changes were extensively reviewed by consultants and practicing ophthalmologists with the goal of providing meaningful, clinically relevant, and workable requirements that cover all types of OSFs insured by OMIC. An anesthesiologist was consulted to review the anesthesia, monitoring, and emergency response requirements.

New Requirements

As a result of its work, the task force produced a rewritten and reformatted “Outpatient Surgical Facility Application” (OSFA), which was adopted by the OMIC Board of Directors. All ambulatory surgery centers, laser surgery centers, and in-office surgical suites used by physicians other than the owners and their employees will be required to complete the new OSFA. The OSFA contains detailed information about OMIC’s underwriting requirements pertaining to patient selection, type of anesthesia/sedation, pre- and postoperative assessments and monitoring, and emergency response and equipment. These requirements will be implemented immediately for all new OSF applicants and effective upon renewal in 2006 for facilities currently insured by OMIC.

It is important that insureds abide by all underwriting and notification requirements specified in the OSFA, as failure to do so could result in uninsured risk or termination of coverage. Working with OMIC’s experienced underwriters should enable insureds to complete the application, understand its requirements to avoid any coverage problems, and obtain an extension for those facilities that need additional time to comply with the requirements. While OSFs that are licensed or accredited may already meet or exceed these requirements, we anticipate that some OSFs may need additional assistance to implement them. Most accredited OSFs will receive a 5% premium discount for meeting the accreditation standards.  There are helpful resources listed at the end of the OSFA itself and OMIC’s risk manager is available for confidential consultations.

All OMIC-insured physicians help bear the cost of defending claims and paying indemnity. It is incumbent on the OMIC Board of Directors, therefore, to protect OMIC insureds as a whole by establishing requirements that it believes will best limit the company’s liability and by making certain that insureds abide by these requirements, while at the same time offering physicians the ability to practice in various settings.

The Impact of a Claim on Your OMIC Policy

By Kimberly Wittchow, JD 

OMIC Staff Attorney

Digest, Winter 2006

Stress and worries abound when a patient sues or claims malpractice. One concern of insureds is the effect such action will have on their insurance coverage. Although claims can and sometimes do have an impact on insurability, understanding how a claim is handled at OMIC may provide insureds with some peace of mind.

Each department at OMIC has a different responsibility when a claim arises. Risk Management encourages insureds to be proactive and contact the department when medical incidents or issues occur so the risk manager can help them appropriately respond to the incident and incorporate any necessary changes in their practices or procedures. The Claims Department, in cooperation with the insured, wants to resolve the claim or lawsuit as efficiently and cost effectively as possible. Underwriting, meanwhile, must make certain that OMIC insures good risks. Insureds may therefore get several seemingly conflicting messages from the company depending on the status of their claim. Rest assured, however, that there are checks and balances in OMIC’s operational protocols to balance these priorities. Most importantly, OMIC’s Board of Directors is made up of ophthalmologists who not only approve company processes but also conduct claims and underwriting reviews.

Physician Review Panel

OMIC employs a continuous underwriting process, monitoring the claims activity of all insureds not only in anticipation of policy renewal, but also during the course of the insured’s coverage. Whether an insured’s claim(s) will warrant further review by OMIC’s physician review panel depends upon the insured’s history of claims frequency the number of claims or suits) and severity (indemnity amounts) and on the specific circumstances surrounding the claim(s). This could include indications that an insured is performing experimental procedures outside of the ordinary and customary practice of ophthalmology or has provided substandard care, followed poor informed consent techniques, or failed to cooperate during the claims-handling process. OMIC’s reviewers consider the insured’s entire claims experience, including his or her experience with insurance carriers other than OMIC.

After consideration, the physician review panel may determine one of several outcomes, including any of the following:

• The panel may continue the insured’s coverage without any conditions placed on his or her policy.

• The panel might continue the policy coverage with conditions, such as endorsing the policy to exclude coverage for certain activities or reducing the policy limits.

• The panel could also conclude that the insured’s risk profile falls outside of OMIC’s conservative underwriting standards, and that OMIC, therefore, is no longer in a position to cover the insured beyond the expiration of the insured’s policy.

• Finally, the panel, in rare circumstances, might determine that the insured’s actions warrant mid-term cancellation if the reasons for the cancellation fall within the policy provisions. These include fraud relating to a claim made under the policy and a substantial increase in “hazard insured against,” such as claims frequency or severity or unacceptable practice patterns.

Insureds are provided the opportunity to appeal coverage and termination decisions to the full Underwriting Committee. OMIC would not generally apply a policy surcharge (higher premium) because of claims experience.

Reporting a Claim or Medical Incident

The policy requires that an insured report to the Claims Department any claim or medical incident that occurs during the policy period which may reasonably be expected to result in a claim. The reporting of such an incident triggers coverage with OMIC. Even if the insured doesn’t obtain an extended reporting period endorsement (tail coverage) when he or she leaves OMIC, OMIC will continue to insure him or her for all covered claims and incidents reported while the policy was in force. An incident that does not develop into a claim will have no effect on the insured’s premium and will not be included in claims history reports provided to hospitals or other third parties. Claims or incidents reported to OMIC’s Risk Management Department are kept confidential: they are not shared with the Underwriting or Claims Departments without an insured’s permission and are not considered reported to OMIC for coverage purposes.

Finally, any indemnity payment made by OMIC on behalf of an insured will result in the removal of the insured’s loss-free credit upon renewal and for two policy terms. Then, if no further claims payments are made on behalf of the insured, the insured will begin earning loss free credits again, beginning at 1% and increasing 1% annually to a maximum discount of 5%.