Should a Physician Accept an Arbitration Clause? Arbitration Clauses | Medical Agreements
Arbitration involves submitting a dispute to a neutral party who hears the case and renders a decision. Arbitration takes the place of a trial before a judge or jury. A doctor who signs a contract with an arbitration clause gives up the right to go to court.
One can find the most common form of an arbitration clause in any contract negotiation. What are the benefits of this? Arbitration agreements are a clause or provisions within contracts that oblige parties with disputes they wish not to head back into court for settlement. It reduces both sides’ time and money spent on legal fees and helps keep personal information private from other aspects of society who may be interested in these details.
An arbitration agreement is often included at the beginning stages when drafting larger documents, such as employment contracts and consumer deals. Because it helps lay out all possible matters beforehand, there’s less chance for dispute between either party later down the line about clauses not related but still present nonetheless.
People Sign Arbitration Agreements Without Knowing About Them
Arbitration clauses often appear as “fine print” in lengthy standard contracts, but they are essential for any business to include. Usually, people sign the clause without realizing it because of how small and hidden arbitration agreements can be at first glance within a contract. Businesses should always ensure that their employees or customers know what kind of clause they sign, especially regarding dispute resolution methods. Methods which could cost them far more than if an employee simply received proper training on time management skills!
What to Expect at an Arbitration for a Medical Provider?
An arbitration hearing is less formal and customarily shorter than a trial before a judge or jury. Each party presents its version of the facts, offering witnesses and documents like a trial. Still, the rules of evidence and other court procedures generally do not apply. After considering the evidence, the arbitrator renders a decision.
Compared to a court trial, binding arbitration is relatively inexpensive and brief. The courts usually refuse to overturn arbitration decisions and can step in if necessary so parties can move forward with final outcomes while avoiding public scrutiny associated with the courtroom process. The benefits of arbitration, as opposed to litigation, include:
- Confidentiality which provides for more peaceful settlements,
- Less time spent on preparing cases because there’s no jury involved,
- And lower costs than those incurred by litigants with attorneys or outside counsel attended depositions/arbitrations-related tasks.
Arbitration allows for more creative rulings than civil courts can issue. For example, the court could award damages if you sue your former employer for wrongful termination. Still, an arbitrator may order to reinstate you instead of giving monetary compensation or stopping it altogether and leaving employees without any redress whatsoever.
Benefits of Arbitration
- Quick Resolution
- Simplified discovery and rules of evidence
- Generally, less expensive
Drawbacks of Arbitration
You may wonder why you should care where your claims get heard, as long as they are heard somewhere. An arbitration differs from a court case in several ways; many differences work against employees. Most important is that an arbitrator hears both sides, while most cases only have one side present their story to a jury with no chance for rebuttal or cross-examination. This makes it more difficult to win than just presenting evidence by yourself – not being able to question witnesses removes some opportunities because there’s less opportunity for clarification on testimony. Juries often pity employee defendants (though sometimes this can be bad), but again without having any input from counterparts, along with a lack of questioning & chances at refutation.
In contrast to the court system, arbitration limits both parties from accessing too much information about each other’s cases. It is usually more beneficial for employers because they possess most documents and data relating to an employee’s situation at work. However, this can be detrimental if a worker has been wrongfully terminated or unfairly compensated. The arbitrator cannot rule on their own decision, which makes it less appealing than going through trial with a higher authority that could potentially overrule previous verdicts- but still leaves the opportunity open.
In comparison with trials by courts, employment cases go into arbitration, limiting either side’s access to vital records such as those belonging only to one party, making them advantageous towards the said employer, who would have all relevant info pertaining
- No appeals
- No jury
- Lack of transparency
Is an Arbitration Agreement Fair for the Physician?
Overall, yes, arbitration is fair for both parties. Most physicians prefer to avoid lengthy, drawn-out litigation, and arbitration can be resolved much faster than litigation.
In arbitration, a trained professional arbitrator will act as your judge. Unlike traditional legal procedures, the ground rules for this process are up to negotiation between both parties involved in the dispute; even judges can be retired from their careers and sometimes serve on cases!
In contrast to high-stress litigation or mediation sessions where arguments often fall back on what has been said before by one party out of desperation rather than any progress towards resolution, here you get a chance to start fresh every time.
Arbitration clauses are often included in employment contracts, and consumers may find themselves vulnerable to them. In arbitration lingo, repeat players are parties that frequently participate in arbitrations to avoid lawsuits. By contrast, one-shot players typically have little experience with the process of arbitration, which can leave them open for exploitation by corporations looking out for their best interests rather than those of individual customers or employees now involved in a dispute with company representatives.
Should You Sign?
Should you sign an arbitration clause? This is a question that requires careful consideration on your part. Suppose you voluntarily engage in possible future arbitration, mutually determine the ground rules of arbitration, and select impartial arbitrators together. In that case, it will likely be inexpensive, fast, and fair for both parties involved. However, if there’s any pressure from one party to coerce into signing such agreements, I would advise consulting with legal counsel before going forward. It might not end well for either party down the road when they’re debating whether their case has been subjectively judged by someone who didn’t actually train in law like yourself was (or are).
Physician Employment Contract Review
Contracts are a pervasive and obligatory part of nearly all business and legal transactions. Well-drafted contracts help to enumerate the responsibilities of the involved parties, divide liabilities, protect legal rights, and ensure future relationship statuses. These touchstones are even more crucial when applying their roles to the case of a physician employed by a hospital, medical group, or other health care provider. While contract drafting and negotiation can be long and arduous, legal representation is necessary to protect your rights.
The present-day conclusion is simple: A physician should not enter into any contract without having a physician contract reviewed by legal counsel.
There is simply too much risk for physicians to take contract matters into their own hands. In addition to the specific professional implications, contract terms can significantly impact a physician’s family, lifestyle, and future. There are many important contract terms and clauses which can present complex and diverse issues for any physician, including:
- Non-compete clauses
- Verbal guarantees
- Insurance statements
Additionally, often the most influential terms and clauses in any employment contract are the ones that are not present. With the advent of productivity-based employment agreements, any physician must review an employment agreement before they execute it. Attorney Robert Chelle has practical experience drafting and reviewing physician contracts for nearly every specialty.
A thorough contract review can benefit new residents, attending physicians, doctors entering their first employment contract, or established physicians looking for new employment. By employing an experienced attorney for your representation, you can ensure that you will be able to fully understand the extensive and complex wording included in your contract. By fully understanding the contract, you will be in a better position to make your own decision on whether or not you want to enter into the agreement, which will affect your career life for years to come.
The financial benefits gained from having your contract reviewed and negotiated by an experienced healthcare attorney far outweigh the costs associated with a review. You are a valuable resource, and you should be treated and respected as such. Attorney Robert Chelle will personally dedicate his time to ensure that you are fully protected and assist you in the contract process so that your interests are fairly represented.
Every physician’s contract is unique. However, nearly all contracts for health care providers should contain several essential terms. If the contract does not spell out these crucial terms, disputes can arise when there is a disagreement between the parties regarding the details of the specific term. For instance, if the doctor is expecting to work Monday through Thursday and the employer is expecting the provider to work Monday through Friday. Still, the specific workdays are absent from the agreement. Who prevails?
Physician Contract Checklist Including Malpractice from Patients
Spelling out the details of your job is crucial to avoid contract conflicts during the term of your employment. Below is a checklist of essential terms that contracts should contain (and a brief explanation of each term):
- Practice Services Offered: What are the clinical patient care duties? Are you given time for review of administrative tasks? How many patients are you expected to see (like in pediatrics)? Is there nursing assistance?
- Outside Activities: Are you permitted to pursue moonlighting or locum tenens opportunities? Do you need permission from the employer before you accept those practice of medicine related positions?
- Practice Call Schedule: How often are you on call (after hours office call, hospital call (if applicable))?
- Base Compensation: What is the annual base salary? What is the pay period frequency? Does the base compensation increase over the term of the Agreement? Is there an annual review or quarterly review of compensation?
- Productivity Compensation: If there is productivity compensation; how is it calculated (wRVU, net collections, patient encounters, etc.)? Is there an annual review?
- Paid Time Off: How much time off does the job offer? What is the split between vacation, sick days, CME attendance and holidays? Is there a HR guide?
- Continuing Medical Education (CME): What is the annual allowance for CME expenses and how much time off is offered?
- Dues and Fees: Which financial expenses are covered (board licensing, DEA registration, privileging, AMA membership, Board review)?
- Relocation Assistance: Is relocation assistance offered? What are the repayment obligations if the Agreement is terminated prior to the expiration of the initial term?
- Signing Bonus: Is an employee signing bonus offered? When is it paid? Do you have to pay it back if you leave before the initial term is completed? Are student loans paid back? Is there a forgiveness period for student loans?
- Medical Malpractice Insurance: What type of liability insurance (malpractice) is offered: claims made, occurrence, self-insurance?
- Tail Insurance: If tail insurance is necessary, who is responsible to pay for it when the Agreement is terminated?
- Without Cause Termination: How much notice is required for either party to terminate the Agreement without case?
- Practice Post Termination Payment Obligations: Will you receive production bonuses after the Agreement is terminated?
- Non-Compete: How long does the non-compete last and what is the prohibited geographic scope?
- Financial Retirement: Is a financial retirement plan offered?
- Non-Solicitation: How long does it last and does it cover employees, patients, and business associates?
- Notice: How is notice given? Via hand delivery, email, US mail, etc.? Does it have to be provided to the employer’s attorney?
- Practice Assignment: Can the Agreement be assigned by the employer?
- Alternative Dispute Resolution: If there is a conflict regarding the contract, will mediation or arbitration process be utilized? What is the standard attorney review process for conflict? Who decides which attorney oversees the process?
- J-1: Does the J-1 employment contract contain without cause termination?
If you have questions about arbitration or are interested in having your employment agreement reviewed by a lawyer contact Chelle Law today.
Other Blogs of Interest
- Can a Physician be an Independent Contractor?
- What to Know Before Signing Your First Physician Contract
- Consequences of Breaking an Employment Contract
Remedies for Breach of a Physician Contract | Breaches of Contract
What are the remedies for breach of a physician’s contract? Let’s kind of break it down into simple terms. First, what is a breach of contract? Well, the entire point of an employment contract is to delineate the responsibilities of both parties. How long does the contract last, or how it’s terminated? How do they get paid, and what are the restrictive covenants? There are plenty of things that both sides must provide to the other. If one of the parties is not following the contract, how is that fixed in this case? What I’m saying is, how is that remedied?
Let’s talk about the termination of any physician contract. Well, one, you can terminate the contract for-cause.
It means that if there’s a breach of contract, either party can usually terminate it with a certain amount of notice. We’ll get into the details of that, or there’s also without-cause termination, meaning either party can terminate the legal agreement with a certain amount of notice to the other and for any reason. Usually, it’s 60 to 90 days in most physician contracts.
Give an Adequate Notice
Let’s say a physician is unhappy at a job. All they have to do with without-cause termination is get the employer’s notice, okay, I’m giving you 60 days’ notice, and I plan to leave. It gives you enough time to work on continuity of care, move my patients to someone else, and maybe hire another provider. That’s one way of terminating the legal agreement. Now, for-cause, as I said before, is if there’s a breach of contract.
Breaches that Do Not Have Remedies
In any contract, there’s also going to be a long list of things for which the employer can fire the physician. And these are things that can and are unfixable:
- Physician loses their medical license
- DEA registration
- Maybe they’re uninsurable due to several malpractice settlements
- I can’t get licensed or credentialed with any of the insurance companies
- Excluded from Medicare or Medicaid
- CMS is on the office of the inspector general’s exclusion list.
Those things happen that, for the most part, can’t get remedied or at least not remedied quickly. That would give the employer justification to fire the physician immediately.
Contract Breach that Can Get Fixed
Now, things that can get addressed, usually, there’s also language about:
- The physician needs to follow the policies and procedures of the employer
- There’s a code of conduct
- Must get along with the other employees of practice or the hospital.
And in a case where one party thinks the other parties are in breach but can get fixed, that’s called a cure period. Every contract should contain language about how a party can cure any violation. And what that means is, for the most part, it’s usually 15 to 30 days.
Let’s say a physician isn’t getting paid on time or not receiving the bonus in the contract. The physician can give the employer written notice. They can say, look, this is what the contract states. You’re not following through, not paying me on time or enough. You are in breach of contract. And let’s say it’s a 15-day cure period. You have 15 days to cure this breach. If not, I can terminate the contract immediately.
So, on the employer’s side, if it’s true that they’re not paying in time or they’re not calculating it correctly. The way that they can remedy the breach is to fix whatever the problem is. Pay their obligation to the physician. And in that case, they have healed the breach. The physician can no longer terminate the contract for-cause because whatever the problem was is fixed. And then again, they can only terminate the contract without-cause.
When a Physician Commits a Breach
Using the example before, let’s say a physician is not following policy. The employer can then give the physician notice. Maybe it’s an excessive delay, or the contract states that the physician will work one weekend a month. They’re refusing to work on the weekend or something like that. Then, the same thing would happen. The employer would send the physician notice. They’re in breach of contract, and the physician would then have a period to fix the breach.
And let’s say the weekend example, they start working on the weekends, and then the employer can’t fire them for-cause anymore. They’d have to terminate the contract without-cause. It’s rare, honestly, for it gets to the point where one side would give the other side notice that they’re in breach of contract. And if this does happen, 95% of the time is due to some payment issue.
At least on the physician side, they’re not getting paid on time and not receiving the correct bonus. Suppose it’s a breach that the employer can remedy, a physician’s behavioral issue or productivity issue. That means the physician refuses to see the expected number of patients. They do not see the encounters. They’re refusing to speed up in any safe manner. I’d say that’s the typical reason an employer would decide to terminate a contract for-cause. And those are things that a physician can easily remedy. They fix whatever the issue is. Suppose there is a dispute over if someone is or is not in breach of contract. There’ll also be language in the contract stating how a dispute gets resolved.
More and more arbitration clauses are the standard. Suppose some dispute just couldn’t get fixed. Then, the parties would be required to go to arbitration. Arbitration is where an attorney, usually a retired judge, would hear both sides of the case. There’s limited discovery, and both sides would plead their case to the judge or attorney. And then, that person would render a binding decision. The benefit of arbitration is it’s generally cheaper and faster than litigation. Litigation is where you would sue someone in court.
Now, that would happen if there was no arbitration clause in the contract. There usually would be venue provision, meaning, if there is a dispute, this is where the lawsuit has to start. It is generally in the country where the physician is working. Then you would have to hire an attorney who would file a lawsuit against the employer to enforce whatever the issue was. Anyway, hopefully, that was helpful. That was kind of how to remedy a breach of contract.
What Can You Negotiate in a Physician Contract? | Doctors Contract Negotiations
What can a physician negotiate in an employment contract? The short answer is everything. It ultimately depends upon the willingness of the employer of whether they’re willing to negotiate terms or not. I find big hospital networks are less likely to make major changes in an employment agreement. Whereas if a physician is looking into a physician with a smaller physician-owned practice, there’s much more leeway for major changes. What are the things that are important to the physician, and then what are the things they can get changed? When I’m talking to a physician, I think the things that stick out as most important would be:
- Signing bonus
- Relocation assistance
- How to terminate the agreement
- Making certain there’s without-cause termination that’s a reasonable length.
- Productivity bonuses
- The non-compete
- Tail insurance
- Who pays for tail insurance if it’s a claims-made policy?
Physician Contract Negotiations
Let’s go through each of those and come up with some tips on negotiating. First, as far as compensation goes, the physician needs to know the value and their specialty’s value. Getting the MGMA data is helpful. It is helpful to talk to colleagues about what they’re being offered or what they’re currently making in different organizations. Sometimes, the associations for each specialty can provide information as far as what’s a normal salary in your specialty. That’s one way to look at it. As far as productivity goes, this is a little more difficult. It’s going to be completely based upon, I guess, the arrangement. Is it kind of a hybrid of a base salary and RVU production? Is it a base salary and net-collections? Or is it all RVU? Is it all net-collections?
This one is dependent upon what’s the type of structure. If it’s net collections, if it’s a hybrid model, meaning you’re getting a base plus a certain amount. Let’s say, for instance, the expectation was 20,000. Anything collected over 20,000 by the practice, the physician will then get 15 to 25% of that. That would be a normal percentage. If the physician is purely on net-collections, around 40 to 45% is standard. As far as RVUs go, there are two things you can negotiate. The threshold, meaning, how many RVUs you must generate to get a certain amount. Then the compensation factor is the monetary value associated with the RVUs. That has some leeway as well. Regarding signing bonuses and relocation assistance, the main things are the actual number and the repayment schedule.
Almost every contract is going to have a forgiveness period. Let’s say the physician gets a $20,000 signing bonus, and the initial term of the agreement is two years. Usually, they’ll have to stay for that initial two-year term to have the entire 20,000 amount forgiven, so they don’t have to pay anything back. The same goes for relocation assistance. Relocation assistance should be somewhere between 10,000 to 15,000. The signing bonus can vary widely from 10 up to 75. That one is specialty-dependent. As far as non-compete goes, this does vary state by state on what’s considered reasonable. There are a few states where it’s completely unenforceable, California and Mexico for instance. Normally, the non-compete shouldn’t be any longer than a year and the geographic restrictions should be somewhere between 5 to 15 miles from your primary practice location. Where to negotiate with this?
Terms That Matter for Physician Contracts
The length, you want to keep it one year or shorter. You want the non-compete to only apply to a few locations. Some employers will say the non-compete attaches to every facility we own in the entire city. Instead of having one office within 10 miles, you could have 30. So, that’s very important. And then specialty as well. Some specialties can do multiple things.
Let’s say you are internal medicine. You can be a hospitalist. You can go to family practice. Or you can do urgent care. If the non-compete states that you can’t practice medicine within that geographic restriction, you’re out of luck. Whereas if you just keep it to the specialty of what you’re providing to that employer, specifically, in this case, let’s say your hospitalist, then you could go in family practice or do urgent care for a year, and then when the non-compete ends, go back to being a hospitalist. That’s something to think about.
And then malpractice insurance is always a big discussion with the physicians I’m working with. First, you need to identify whether it is a claims-based or occurrence-based policy. If it’s a big hospital, they might be self-insured. And then, after you determine what type it is, if it is a claims-made policy, then tail insurance will need to be purchased after the contract terminates. And then who pays for that? Most of the time, if you’re in a small private physician-owned practice, the physician must pay for tail insurance when they leave. You rarely have to pay for tail insurance with a big hospital network. Now, tail insurance usually costs about twice what your annual premium is.
Physician Employment Contracts Negotiation Tips
Let’s just say you’re in family practice. Your annual malpractice premium is somewhere between $6,000 to $8,000. If you had to pay for tail insurance, it’s somewhere between 12,000 to 16,000. That’s one thing you can negotiate, who pays for tail insurance coverage? Sometimes an employer will put if you’ve been with us for one year, we’ll pay for a quarter and then two years, half, and then three years, 75%.
There are some ways of getting out of having to pay the entire amount, just depending on the situation. Now, the first thing that I talked about was, is the employer willing to negotiate or not. There will be some employers that simply say, this is a take-it or leave-it deal. I don’t think those employers will be great to work with. If an employer is unwilling to budge on anything, they will likely be difficult to work with.
Meaning that they’re not going to accommodate the physician in some way. So, I caution any physician who has been given a job offer, we ask for some clarification or certain concessions, and they simply say no. This is it. That’s usually a red flag. And I tell the physician that you may want to continue looking for a job because this might not be a good fit for you. Anything in the contract is negotiable. You need to figure out what’s most important to you. Sometimes, the non-compete is absolutely the number one thing. For others, it’s the compensation. For others, it’s not having to pay tail insurance. It really is dependent upon the physician’s wants and needs and then tailoring the negotiations to get them to that point.
What Is Considered Breach of a Physician Contract? | Physician Contracts
What are some reasons behind the breach of contract for a physician employment agreement? What are the things that an employer could terminate a physician? And then alternatively, what are some things the physician could terminate the contract?
How a Physician’s Contract Can Be Terminated?
First, let’s go through how an employer terminates a contract, and then we’ll go through the specifics. Rather, any agreement will usually be for a fixed term. Let’s say it was a two-year contract. If both parties decide not to renew the contract, the contract will terminate at the end of the two-year term. That’s one way a contract could end due to mutual agreement. Both parties decide it’s not working out, and we’re not going to wait till the end of the term. They will terminate the contract. Now, they can also terminate the contract without-cause.
Any physician’s contract will have language that says either party can terminate the agreement for any reason, with a certain amount of notice to the other party. In most cases, it’s usually either 60 or 90 days. And then finally, you can terminate the contract for-cause due to a breach of contract. And in this case, the employer will list a whole bunch of things they can terminate the contract for if the physician breaches the legal agreement in some way. There’s no language about how a physician can terminate the contract if the employer is in breach.
What Are Some Normal Reasons an Employer Could Terminate A Physician Contract?
First, let’s go through some usual reasons the employer could terminate the medical contract. If the physician loses their license, let’s say the medical board and their state decide they’re going to revoke the physician’s license. The contract will terminate. They can no longer practice medicine. It takes away their DEA registration, and almost every setting would not allow them to do their job effectively. Excluded from billing and included on the inspector general’s office’s ban list. CMS has a list that basically if a provider does certain things negatively. They can be on this list, which would exclude them from being able to bill under Medicare and Medicaid.
And that would, for the most part, make it impossible for the physician to practice. Most contracts state if the physician received a felony, usually convicted of a felony, that would be grounds for legal agreement termination. The physician is uninsurable. Maybe they have many malpractice claims or settlements. And then, no insurance company is willing to offer them malpractice insurance. In that scenario, employers just aren’t keeping the physician around ordinary things. There’s usually some moral clause that says the physician will present good character and get along with others. And then usually, there’s something at the end that says for other good causes or other good reasons, which is very broad, and they can kind of shoehorn that.
What Is a Physician Contract Cure Period?
Suppose the physician is in breach and there is some way to fix it. In that case, there’s usually language in the medical contract called a cure period. They’ll generally say, if one party is in breach of contract, the other party gives them a notice. They say, hey, you’re breaching the contract. And then there’s a period to fix the breach—usually between 15 to 30 days. Now, suppose you’re a physician and have your license revoked. In that case, you’re on the OIG list. They will take away your DEA registration. The employer will immediately terminate these things that are unfixable in 15 to 30 days. Now, some things are fixable. One is what I talked about before with the morals clause. So, they say, you’re not getting along with others and not presenting good character.
Legal Mistakes Physicians Make
Here are the things you can do to fix these. The physician can then attempt to fix them within that period. And then, the employer would then have no ability to terminate them for-cause. As I said, the physician can permanently receive termination without-cause in a certain amount of notice. Maybe the employer doesn’t have the grounds to end the physician for-cause after they’ve fixed a breach. However, they could still give them notice and give them out after that period. There is also usually language in the termination clause that if an employer offers, let’s say, a 60-day without-cause notice. The employer provides the physician 60 days, but they say, we don’t want you here anymore. Even though we must give you this notice, don’t come to work tomorrow.
The employer would still have to pay the physician for those 60 days because it was a termination without-cause. Still, they don’t have to provide the physician the entire period to work there.
Ways a Physician Can Assert an Employer be in Breach of Contract
On the physician side, usually, they can assert that the employers in breach of contract are, if they’re not getting paid in time, maybe they have some bonus. It’s not being calculated correctly or paid out on the contract’s time. Perhaps the physician is not being adequately supported via staffing. They don’t have the proper MAs, an office manager, or front office staff to work efficiently. Maybe they’re being asked to do things they believe are unethical or illegal.
In that scenario, I always suggest you must let the employer know that they’re in breach of the contract in writing so that you establish a record of what’s going on. Many times, I’ll talk to physicians who feel like they’ve agreed in some way. The employer is not providing them with a safe atmosphere, or they’re not following through on things written into the medical contract. And my first question is, have you given them written notice? Most of the time, it’s no. I’ve talked to them and spoken with the med director and my boss, but nothing’s happened. Well, you need to establish a record.
And in that case, you must provide them a written notice that they’re in breach of the contract. Most of the time, it’s unlikely that an employment relationship would end with a kind of for-cause termination due to a breach. Most of the time, in that case, the parties will agree to move on, or they’ll give them, as I said before, the without-cause notice. And then tell them to go home anyway, pay it out, and move on. Hopefully, that was helpful. I went through some examples of breach of contract for a physician employment agreement and then how each party can terminate the contract.
Should a Physician Choose Claims-Made or Occurrence Malpractice Insurance?
Malpractice insurance is professional liability coverage that helps protect physicians and other healthcare professionals from financial risks. Associated with lawsuits in which patients believe they were harmed due to an incident involving medical care. The coverage depends on how much the policy is worth (premium). Your specialty – personal injury attorneys are more likely to take cases against doctors working in hospitals than those who practice family medicine or internal medicine in private practice.
Most malpractice insurance carriers provide coverage with a deductible clause that can range between $0 -$100k per incident, with most doctors opting for higher deductibles due to lower premiums. A deductible clause in a malpractice policy stipulates that the insurance company will not provide coverage for any expenses incurred by the insured for injuries or damages up to an agreed-upon amount. A deductible clause in a malpractice policy stipulates that the insurance company will not cover any expenses incurred by the insured for injuries or damages up to an agreed-upon amount per incident. The typical carrier’s deductible is usually $5000. Still, it can be higher, sometimes as high as $50,000, depending on individual state requirements and claims history.
However, some states limit how much of a doctor’s income can be subject to such deductibles before buying additional coverage known as “excess” coverage.” The standard excess limit is 50 percent. The doctor will make an annual gross salary.
Malpractice policy provides legal defense coverage to the doctor from medical liability arising from clinical care that results in injury or death. Each policy period limits the maximum amount an insurance company will pay per event. Thus, if your insurance policy has a limit listed of $1,000,000 per occurrence if there is a settlement or judgment, that is the maximum amount your medical malpractice insurer will pay towards claims filed within the term outlined in your policy.
Medical Malpractice Claims
A claims-made policy will only provide insurance coverage if the policy is in effect when the incident first happened and when a lawsuit is filed against the doctor. Thus, there is a chance a case can be filed after a doctor leaves an employer. In situations like this, with claims-made medical malpractice insurance, a tail policy must be purchased by the medical provider. It covers the gap between when doctors leave an employer and when the statute of limitations on filing malpractice liability insurance claims ends.
Claims-made coverage is used in cases where there may be periods when coverage is unavailable, such as doctors changing jobs. In these situations, the tail policy will provide coverage from liability for up to three years after leaving an employer. The tail policy also has other limitations and exclusions, making it difficult for doctors who leave employers often. Or have a history of high liability claims against them to find and fund affordable medical liability insurance coverage.
Assuming claims-made coverage is in effect, a good rule of thumb is to tail insurance costs around two times your annual malpractice insurance premium. Thus, if your annual medical premium costs $6000 per year, your cost paid to the insurance carrier would be around $12,000. Your tail insurance cost to the carrier is a one-time payment; it is not an annual cost.
The physician’s employment agreement will specify whether employers or physicians should cover expenses for the tail insurance if it is claims-made.
Occurrence Coverage Liability Insurance
An occurrence policy differs from claims-made in that occurrence coverage provides coverage for any claim for an event that took place during the period of coverage, even if the claim is filed after the policy expires. Thus, an occurrence policy does not require tail insurance against new claims.
The permanence of an occurrence policy is the main advantage over a claims-made policy. The period of time you are protected under the policy lasts forever, and you do not need to renew or buy tail insurance when you leave the employer. You can also work in another state and still be covered by any claims.
Which Choice is Best for Physicians if there is a Paid Incident
Both policies offer the same policy limits issued by the same insurance carrier and endorsements against claims. The cost of occurrence based and claims-made coverage can factor into a doctor’s decision:
Claims-Made Cost: Suppose claims-made coverage is in effect. In that case, a good rule of thumb is that tail insurance costs around two times your annual malpractice insurance premium. Thus, if your annual medical premium costs $6000, your cost to the insurance carrier would be around $12,000. Your insurance cost is a one-time payment; it is not an annual cost. The American College of Physicians offers resources and information for multiple insurance options through AGIA Affinity for individual doctors and any practice.
Occurrence Cost: Tail insurance is not necessary under an occurrence-based insurance policy. The annual premium for an occurrence-based policy is approximately 35% more than a claims-made policy. So, if the average claims-made policy annual premium is $6000, an occurrence-based policy would cost $8100 in coverage. The cost of insurance coverage should be based upon the claims history of the provider and the number of individual and group clients seen per year. Providers with high annual visit counts (or the number of admitted seen if in-patient) will have a lower insurance premium since their claims are spread out over more people.
A retroactive date defines how far back in time claims can occur for your policy to cover your claim. If a claim happens before the date the insured’s policy is effective, the insured’s policy won’t provide retroactive benefits from the carriers for when the incident occurred. It’s a feature and form of claims-made professional liability coverage.
Occurrence Malpractice Resources for Doctors
The cost of insurance coverage is based upon the claims history of the provider and the number of individual and group patients seen per year. Providers with high annual visit counts will have a lower insurance premium since their claims are spread out over more people. Thus, the choice of claims-made or occurrence is essential.
Additionally, doctors who perform below average in malpractice insurance claims will pay less than those who incur higher claims. A doctor’s risk profile is also considered when determining the rate an insurance company will charge for the occurrence-based policy. Provider age is also factored into the equation, as younger doctors are considered to be at higher risk of committing acts that could lead to liability or making an error than older practitioners.
Claims Made Malpractice Advantages
- Ability to increase limits or buy new coverage with claims made by malpractice insurance
- Portable and can be moved from one insurance business to another
- Permanence of coverage to insure. They are protected forever for each year under the policy period.
- No need to renew or buy tail when your employment ends with the occurrence of malpractice insurance makes this an easy decision for many.
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