Hi. I'm Dr. Joseph Chang. For this topic, I wanted to talk about malpractice and really some of the legal aspects of the contracts that you're going to be looking at. I want to talk about the types of malpractice insurance, and there's really two main types, and really the main type that are used is based on your practice environment. If you're in a private practice, you may be more familiar with something called a claims-based malpractice insurance. Claims-based insurance are those where the malpractice claim is filed or occurs during the insured period, that is when your malpractice insurance was enforced and also filed within that same amount of time. This is the cheaper type of malpractice, and it's very similar to term life insurance, where it's really that term of time that you are being insured for, and then if you leave your position or drop that carrier, that claims-based insurance disappears with them. This is important because if you have a claims-based insurance, which is typically offered in a community and in private practice, you'll actually have to pick up something called a tail coverage. A tail coverage then continues to insure you for events that may have happened during the time you were at another facility, during a claims-based insurance malpractice policy, but then has subsequently left. As you can imagine, tail coverage can be pretty expensive. For example, when I was at Yale in New Haven, one of our faculty who came to our system from a private practice setting within New York, the tail coverage after she had left that position was roughly $400,000 a year to cover that, just because of the liability of the risks of something that may have happened prior to that. If you can't or don't get a tail coverage for yourself, then sometimes you can negotiate with your new insurer to provide what's called a nose policy. A nose policy is very similar to a tail coverage, except that it is your new employer or a new position that is offering to pay for the liability risks of the actions that occurred while you were at another position before that. And the costs, again, will vary, but both of them tend to be fairly high. Claims-based is pretty common. They typically have limits, such as a $1 million, $3 million policy is one of the more common limits for neurosurgeons. For others, such as in family practice, the numbers are a lot less. They may be $100,000 to $300,000 as far as the limit. What the $1 million, $3 million means is that the maximum payment from the policy per occurrence will be $1 million with a $3 million aggregated total cost for your policy period. Now, you may ask, what happens if I exceed that? Well, it all is based on your contract overall, but unfortunately, if you exceed that, you typically are considered personally liable for the excess amount of damages. As far as occurrence-based policy, this is more common in academics and training areas, just because of the liability risks in training residents. Residents and fellows, even though they are considered trainees, still have a certain liability and really malpractice risk and need for coverage associated with them, but they're also there in a very temporary position and are planning to move to a more permanent position after they finish their training. You can imagine that a spine fellow or a neurosurgery resident will find a program very unappealing if they know they're going to be at high risk overall, and you can't imagine the challenges it would take to train someone during a pediatric rotation if they knew that the pediatric neurosurgery rotation that they were on gave them an 18-year liability, say, for example, with congenital defects such as children with Chiari malformations, need for shunt, and with severe disabilities, et cetera. So because of that, most of the hospital systems within the academic world really will pay by what's called occurrence-based policies, which means that you're going to be insured for whenever that occurrence occurs, if that occurrence occurs during your insured period. And this is really the same as a claims-based policy, but with the tail coverage or, in a sense, the nose coverage as well built in so that the person leaving that position never really has to worry about it. But it's also a reason why sometimes our residents, when they finish training, don't really understand the differences and can get into trouble during their contracting by not understanding what they're signing on for overall. Both of the main types of insurance that I kind of alluded to, the claims-based and occurrence-based, they both have policy limits. Claims-based policies are $1 million, $3 million typically, but could be as high as $3 million, $5 million. But in general, it's $1 million, $3 million because the higher you go, the expenses for that policy rises dramatically. And then if you think about how insurance works, which is a risk pool, this is very similar to your car insurance where if you have a $500 deductible or a $1,000 deductible for a car that is considered a set value, that's going to be a significantly different payment for your policy than if you had a deductible of $10 or even no deductible and they pay for everything. And so it's important to understand that. But policy limits also means that if you're doing procedures that have a risk of judgment above this, you may be potentially personally liable for the excess costs for that. For example, a patient underwent a elective spine surgery with percutaneous screws and navigation system, but then sustained a spinal cord injury. Certainly very devastating for the patient and a settlement was $17 million. Unfortunately, what this means is that if you had a $1 million, $3 million policy with a $3 million maximum occurrence or $1 million, the remainder of that settlement that is the $14 million or $16 million based on how this was applied is now the personal liability of the physician. But most physicians don't have that amount of resources. And so those high amounts like that will certainly be appealed and can be reduced by a judge in order to make something more tolerable for the physician to pay. But there is a good chance that you will have significant financial losses personally based on where you are. That's also one of the reasons why certain states, for example, like in Florida with the Homestead Act, many physicians will put a variety of assets into their personal homes and things that are in a sense protected or in a safe haven. That is, despite the judgment, for example, they can't take away your home. But that's not true in other states. And there's also many states with policy caps overall. Occurrence-based policies also have policy limits. And that's why it's also important to talk about that based on whoever you're working with or for in the environment that you're in. Most academic centers, because of the, especially with level one trauma centers, comprehensive stroke centers, or those that are truly providing a higher level of care, because of the more complex systems and patients, you will typically have a much higher policy limit overall. For example, in Cincinnati where I practice, because we are the level one trauma center, the comprehensive stroke center, and really absorb a lot of the more complex patients, our policy limits actually go up to $34 million initially before catastrophic insurance kicks in. And that has to do with the fact that we do take care of patients that we sometimes don't know if severe disabilities or lifelong cause may occur in trying to treat them for a very severe disorder. But you can also now understand why there are many community hospitals and neurosurgeons in a practice in a community who will have no problems sending patients for the higher level of care to the academic centers because of these risks, not necessarily because they won't be reimbursed for the procedure overall. As far as these various policies, sometimes you have to understand the various rates and policies that you get in there. And it's important to understand the balance of what kind of practice you want to have versus what you're going to potentially be liable for overall. And it's one of these things where if you get a policy that seems to be very cheap initially, it's similar to health insurance where if a patient gets a narrow network insurance because it comes across as really one of the cheapest things out there, but then when they actually need it, realize the limitations, that's also similar to your malpractice insurance. Based on your overall idea of what your practice should be like, so for example, if you're taking stroke call or doing a lot of neurovascular neurosurgery, if you train in skull base versus spine, if you do spine and are doing a lot of complex deformities versus minimally invasive outpatient type surgeries, your balance of your risk versus what you want to pay will be significant. The rates are also very different based on where you are and where you live. So for example, if you're in Omaha, Nebraska, your malpractice rate will be significantly lower than if you lived in Manhattan where the cost of living is fairly high. So as you choose your positions and look at your overall relative overhead and cost, you realize that if you decide to practice in the middle of Manhattan, your malpractice rates will be more than about five times higher than if you took the same position in Omaha, Nebraska. This is very similar to tax rates, and it's important that you as a physician understand that. So for example, I learned that the hard way when I was in Tennessee, a state with no state income tax. We had no city tax. All I had was a nominal property tax, and then I paid federal tax. We did have a higher sales tax, but when I went to New Haven, I ended up paying not only my federal tax, I ended up having a new state tax to pay for. I had a new city tax for the city of New Haven that I had to pay for, and then we also had a separate mill tax, which is a personal property tax that I never knew about until I went up to Connecticut, which ironically, even though I was being compensated higher at Yale, my take-home pay was actually lower because of all these additional taxes. This is important when we talk about malpractice rates and the overhead, so that as you're looking for your positions, you want to look at your compensation and your overall overhead costs as aggregate, so that when you look at positions and take a job, unless you have a strong desire to be in New York City, if you didn't care either way, you may want to look at other places within the country that allow you to start a practice that you're looking for and that may be better compensated for your overall practice.

Dr. Joseph Chang

malpractice insurance

legal aspects

claims-based insurance

occurrence-based insurance