BRMC Creates a Solution to the Malpractice Insurance Crisis
 

The medical malpractice insurance crisis that plagues West Virginia threatened BRMC's ability to provide medical services to our patients. This problem was such a serious one that the hospital took the initiative to develop a long-term insurance product to enable our doctors to purchase affordable, dependable insurance, thereby stabilizing the malpractice environment, and ensuring our patients that quality medical care will be available to them.

Program Background and Description

The insurance product initiated by Bluefield Regional Medical Center is a partnership. There are three entities in this partnership: 1)BRMC’s physicians; 2) Regional Physicians Services, Inc. (RPS), a new company formed to manage the insurance program, and is the decision making body in the insurance program; and 3) APCapital, a well-established medical malpractice insurance company.

In order to maintain the ability to provide access to specialized medical services for our patients in an environment where commercial medical malpractice insurers were leaving the state, BRMC and its health system undertook to create an insurance program that would relieve our doctors of the worries of an uncertain insurance market.

Like our proposal to partner with physicians to build an Ambulatory Surgery Center on a new campus in Bluefield, Virginia, and our future plans to add a Medical Office Building and a Cancer Center on the Virginia campus, this insurance product is a direct response to the needs of our patients, and represents a substantial investment by the hospital and Mountaineer Resources to assure our patients that they will continue to have the availability of adequate physician coverage for their health care needs.

The program was designed as a long-term project to stabilize the malpractice environment, cover our current physicians and enable us to recruit new physicians for our patient population.

We believe strong partnerships are the best way to successfully meet the healthcare challenges we all face.

The initial RPS board consists of three people. As the insurance program evolves the company will develop a committee structure to make recommendations on topics such as physician eligibility, underwriting and operations. The success of this program depends upon the input and participation of physicians on the RPS board and committees. Because RPS is a local company, the premiums paid will stay in reserves and be used to stabilize future premiums.

RPS selected APCapital, a Michigan-based, Excellent-rated, Class VIII insurance company, to provide malpractice insurance coverage. This company is large and financially secure, with assets of nearly $1 billion. RPS is using local insurance brokers — Acordia of West Virginia and Alan Light — to market and service the program.

APCapital was formed in 1975 in response to a national crisis in medical malpractice insurance when major insurance carriers abandoned Michigan physicians, much as they have those in West Virginia. The company was sponsored by the Michigan State Medical Society, and was originally named Michigan Physicians Mutual Liability Company.

APCapital is ranked 16th nationally among professional liability insurers, covering more than 12,000 physicians in 12 states. By the year 2000, APCapital had shown significant growth, producing net premiums of $187 million, with assets of $978 million, and reserves of $369 million.

It is rated A-minus by A.M. Best, and is rated A by Standard & Poors. APCapital went public in December of 2000, and trades on NASDAQ under the symbol APAC. APSpecialty, a wholly owned subsidiary of APCapital, provides medical professional liability coverage.

This insurance program was developed in an atmosphere of urgency, when many of BRMC’s doctors were faced with an imminent loss of coverage. In order to develop a solution to the malpractice problem, a lot of important decisions had to be made in a very short amount of time. We were path finding, and frankly underestimated the complexity of this process. Consequently, we had to make immediate decisions on a broad range of critical issues.

What we did was create a basic framework for the program. The program has already been modified to reflect changes in the marketplace. RPS will continue to evaluate the program and make improvements as appropriate. Any changes made to the basic program will, of course, be retroactive for physicians already enrolled in the program.

Here is a description of the basic program:

Eligibility: The program is available to members of the BRMC Active Medical Staff in good standing who are not employed by a hospital.

Prior Acts Coverage: To provide protection to the physician, RPS will provide prior acts coverage for participants in the insurance program. This will also limit exposure to the program, bringing all participants into the program claims-free. Physicians in the program for less than five years will reimburse RPS a pro-rata portion of 20 percent per year for the cost of the prior acts coverage.

Base Premiums: Premium levels have been set to maintain the financial viability of RPS. Premiums are higher in the first years than traditional insurance to cover start-up costs and build reserves for the future. Any surpluses will be retained by RPS and used to stabilize future premiums. Further, premiums will be discounted by 50% for physicians practicing 20 hours per week or less. Premium surcharges will also be developed based on the actual claims experience of physicians subsequent to entry into the program.

Premium Contribution: A premium contribution program is available to physicians as follows:

• 10% for participation in Risk Management programs
• 10% for other practice modifications to improve quality and reduce risk, as determined from physician input.

Coverage Limits: The policy issued by APSpecialty provides $1,000,000 / $3,000,000 coverage limits for procedures for which the physician has been credentialed. Virginia physician coverage limits will be $1,600,000 / $3,000,000. Loss adjustment expenses will be included within the $1,000,000 policy limit. All participating physicians will share a $13,000,000 master policy annual aggregate limit (cap).

Joint Defense: Joint defense provisions eliminate conflicts between multiple defendants. When there is only one defendant, total settlement amounts are generally smaller because the plaintiff is not able to play one defendant against the others. For this reason, we believe it is imperative that we stay united and aggressively defend against malpractice claims.

Consent to Settle: Optional consent to settle up to a predetermined limit. If the case is settled, RPS will attempt to have the physician(s) released, if facts justify it.

Tail Coverage: Free tail coverage will be provided to physicians who are retiring from practice. For physicians leaving the program, but not retiring, tail coverage will be available at a cost equal to two times the premium then in effect for that physician. A physician who becomes disabled will be treated as if he or she has retired.

For information on the APCapital program, contact:

- Jeff Eggleston of Accordia of West Virginia at 304-327-3421.
- Alan Light of Professional Insruance Services at 304-324-0921.