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You Signed What? Contractual Liabilities Are Expanding in Health Care. The Uninformed Can Be Uninsured!

June 30th, 2015

You-Signed-What?

Years ago, we saw for the first time many physicians and their practices executing contracts whereby they were asked to transfer their clinical skill sets from direct patient care within their practices to either:

 (a) Non-owned, facility-based supervision;
 (b) Third-party, non-practice employee supervision; or
 (c) Assisting some corporate entity in developing products and/or services.

Whether by serving as a Medical Director over some department at a local hospital; supervising all local hospital employees participating in a hospital-sponsored program; supervising residents or fellows from a teaching institution; offering clinical advice to a pharma or medical device company; or assisting a nursing home to both develop and administer care parameters for all of its staff and residents, physician demand outside of the practice grew, and continues to grow, significantly.

Some of these contractual arrangements pay very well. Others pay poorly. And, some pay nothing at all. With declining reimbursements, many practices and their physicians see these arrangements as revenue generators or future revenue builders. We get that. Universally though, we see many practices and their physicians giving no thought – NONE – as to how the language in these contracts affects their liability, and how it may affect their coverage under our policy if they are sued for some injury that results from their contractual undertakings.

So, here are some very simple questions that every practice should address to ensure that mistakes are not made in contract negotiation and execution, thereby leaving you with increased liability and, potentially, no coverage for it:

1. What are the practice and physicians’ protocols for reviewing each such contract?
2. Is it mandated that the practice review and approve the contract before it becomes binding?
3. Who ensures consistency in key provisions over multiple contracts within the same practice?
4. Is there mandated, outside legal counsel review?
5. Do you send the contract to your underwriter at Medical Mutual BEFORE any contract is executed to ask whether the contract creates any coverage gaps?

 
Here are two of the most common problems that we see in contracts sent to us for review and comment:

1. “Indemnification” clauses. These clauses often seek to transfer to the physician all liability for anything that happens while the physician is carrying out responsibilities under the contract. So, if the hospital’s employee in the department for which the physician is charged with (some or all) supervising screws up, then the physician agrees contractually that it is “all on him.”  Worse, the contracts often go on to say that the physician will indemnify and hold harmless the other party for any liability that it may incur for such an event – regardless of circumstances. NO!! These liability shifting clauses are great for the other side. They keep their liability insurance premiums lower. But, they are AWFUL for the physician, and many times take the physician outside of our coverage. We only agree to cover the physician and his/her practice. Our premium structure does not take into account the liabilities of third-parties, hospitals, nursing homes, labs, pharma companies, etc. We believe that each side to a contract should shoulder their own liabilities – and only those that they uniquely create.

 

2. “Insurance” clauses. Many contracts contain provisions that obligate the physician to have in place insurance coverage that will respond to all liability that can possibly arise under the contract. This would include liability assumed through any Indemnification clause (see above). But these Insurance clauses often go farther, requiring that the physician carry insurance covering any liability that he incurs while doing anything under the contract. So, let’s say a suit is brought by a patient in a nursing home who was injured by a total breakdown in some internal protocol that was not followed, or was not appropriate in its design. Part of the physician’s contractual responsibilities included both of these areas – generally. The physician never saw this patient, did not treat this patient, and did not specifically direct the care of this patient. But, because of the contractual responsibilities, the physician is named in the suit brought by the patient. What insurance policy does the physician have that will respond – as is required by the Insurance clause in the contract?  More than likely none. The physician should never agree to have in place any insurance coverage until confirming that the carrier(s) will agree to provide it for any and all liabilities

 
Contracts in health care are not for the faint of heart. Be smart before signing on the dotted line. Call us anytime for help at 800.662.7917.


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