Accounting for the Challenges and Opportunities for Health Care Liability Captives Friday, January 31, 2014 9:00 AM 10:00 AM
Moderator: Nick Dove, R&Q Quest Janeanne Lubin-Szafranski, Esq. President and Chief Executive Officer Saint Raphael Healthcare System Georgia Camilleri, CPHRM Director of Risk Management Saint Francis Hospital and Medical Center Michael Maglaras, CIC Principal Michael Maglaras & Company 2
Where Have We Come From?
The Evolution of Health Care Liability Captives: From the Beginning to the Present Stage 1: Capacity; Stage 2: Panic; Stage 3: Market Dominance Stage 1: 1976 to 2000 Stage 2: 2000 to 2007 Stage 3: 2007 to Present Early years dominated by academic medical centers Captive growth driven by movement away from Medicare trusts Insistence by reinsurers on deeper retentions beginning in the early 1990 s Nationwide claim severity increases provoke rapid captive expansion St. Paul closes its doors Increased faculty practice and similar usage spurs growth Increasing claim severity provokes deeper retentions Commercial market abandons certain physician specialties In some states, captives dominate the market Consolidations of PIAA companies New emphasis on quality and improved outcomes positively affects captive financial results Increase in employed physician exposures through ACOs, etc., drives captive growth 4
Where Are We Going?
The Evolution of Health Care Liability Captives: From the Beginning to the Present Stage 4: The Age of Accountable Care PIAA companies lose market share to hospital hiring of physicians Hospital liability exposure growth increases through physician employment Increased use of professional liability claim data to improve quality Liability captives enter the health insurance arena through capitation programs Captive budgets increase exponentially to meet risk management/quality objectives The types of coverage offered through captives will diversify to meet market demand 6
Defining Accountable Care Accountable Care: Term first used by Elliott Fisher, Director of the Center for Health Policy at Dartmouth Medical School in 2006 Term was embraced in 2009 in the Patient Protection and Affordable Care Act Strong definitional resemblance to the early definition of a Health Maintenance Organization A provider-led organization with a strong primary care base collectively responsible for cost and quality within a fixed population A Pay for Performance mindset measured by quality and cost A program architecture resting on a data-driven, continuously evolving performance measurement foundation 7
The Old Captive Insurance Architecture
ACCOUNTABLE CARE HEALTH CARE LIABILITY CAPTIVES The Changing Structure of Health Care Liability Captives Umbrella Liability Insurance/Reinsurance Excess Strong Captive Market Presence Commercial Auto Employer s Liability Heliport or N/O Aviation Professional Liability General Liability Strong Captive Market Presence Commercial Insurance 9
The New Architecture of Accountable Care
ACCOUNTABLE CARE HEALTH CARE LIABILITY CAPTIVES The Changing Structure of Health Care Liability Captives Umbrella Liability Insurance/Reinsurance Excess Strong Captive Market Presence Strong Captive Market Presence Commercial Auto Employer s Liability Heliport or N/O Aviation Professional Liability General Liability ACO Liability Affiliated Physician/ Hospital Liability Capitation Exposure Commercial Insurance 11
Accounting for the Challenges and Opportunities for Health Care Liability Captives Finding Common Definitional Agreement: 1. An ACO will always be a separate legal entity with a prescribed methodology to distribute shared risk/shared savings. 2. An ACO will always have clinical and administrative persons jointly responsible for leadership. 3. An ACO will agree to be paid on a fee-for-service basis for Medicare Parts A and B (for participation in Medicare Shared Savings Plans). 4. An ACO will agree to CMS-mandated cost and quality reporting standards. 12 5. An ACO will agree to full coordination of care within a fixed population. 6. An ACO will have identifiable professional and miscellaneous liability insurance risks, including medical professional liability.
Quantifying Risk...Establishing Risk Transfer...What Are the Givens? ACOs will require a stable, low-cost, but fully-integrated insurance structure with elements of risk transfer and risk assumption. Success in asset protection will depend upon: a robust information pathway between risk management and quality improvement a data-driven pre-screening model establishing risk (claims) factors per patient encounter a shared savings (loss) architecture within the insurance program mirroring the potential results of the reimbursement program a legal structure clearly identifying how risk is transferred or selfassumed 13
What We Used to Manage
Community Physicians Hospital Physician Hospital Organization - Separate professional liability - Separate general liability - Separate cyber breach and liability - Separate D&O/EPLI - D&O/EPLI - Errors and omissions liability - Professional liability - General liability - Separate professional liability - Separate general liability - Separate cyber breach and liability - Separate D&O/EPLI 15
What We re Starting to Manage
Hospital Risk Management Department Community Physicians Hospital ACO - Separate professional liability - Separate general liability - Separate cyber breach and liability - Separate D&O/EPLI 17 - D&O/EPLI - Errors and omissions liability - Professional liability - General liability - Capitation/stop loss - All-risk property - Crime and employee fidelity - Cyber breach and liability - Risk management - Claims management - Separate professional liability - Separate general liability - Separate cyber breach and liability - Separate D&O/EPLI
Captive Health Care Liability: Underwriting Where We re Comfortable General liability Directors & Officers Liability Professional liability All-risk Property ACO Crime & Fidelity Breach/Cyber liability Capitation/stop loss Employment practices liability 18
Captive Health Care Liability: Underwriting Where We re Not General liability Directors & Officers Liability Professional liability All-risk Property ACO Crime & Fidelity Breach/Cyber liability Capitation/stop loss Employment practices liability 19
Accountable Care Organizations...Leaping the Wall Hospitals Community Physicians Adversarial claim relationship No risk management coordination No quality improvement coordination Limited shared clinical and business goals and objectives 20
Captive Liability Underwriting: The Model We re Used To
Medical Staff Community Employed Community Physicians Hospital Employed Physicians Insurance Source: Commercial, Etc. Insurance Source: Hospital-Owned Captive Reinsurance Market Reinsurance Market 22
Captive Liability Underwriting: The Model We re Going to Get
Hospital System ACO Physicians Hospital Captive The Challenges to Health Care Liability Captives Will Be: - Increased surplus needs - Significant increases in G&A budgets Reinsurance Market - Greater reliance on unbundled services - Increased need to data-mine claims and exposures 24
Accountable Care Has Forced Enterprise Risk Management Following the money...reimbursement is based on fewer mistakes, the result: the captive s performance must be fully integrated The captive as a source of data...the secret to the improvement of quality lies in the claims on captive balance sheets The elevation of the risk manager...accountable Care forces everyone to be a team player The ultimate evolution of the captive program...using what claims teach you to improve the health and safety of the public 25