Having to pay a major medical malpractice award out of pocket is the obvious downside to foregoing malpractice insurance, but it is far from the only one, says R. Stephen Trosty, JD, MHA, CPHRM, president of Risk Management Consulting in Haslett, MI.
Trosty lists these potential risks with foregoing medical malpractice insurance:
• Bankruptcy is a real possibility. The hospital might not be able to provide adequate care under bankruptcy conditions, and it might cease to exist.
• Loans might be difficult to obtain. If the hospital is in difficult financial trouble, especially bankruptcy, because of going bare, banks might be reluctant to loan money. If they do, they might insist on exorbitant interest rates. Obtaining annuities to pay out a malpractice award might be similarly difficult.
• Attracting and maintaining physicians and staff can become a challenge. Going bare can signal financial struggles, so physicians and staff might be reluctant to work with a hospital that might not be able to provide adequate equipment, staffing, quality of care, and liability protection. Physicians, in particular, might fear that plaintiffs will look for a deeper pocket if the hospital lacks adequate insurance.
• Certification by The Joint Commission and Medicare can be threatened. Providing adequate liability protection is a factor considered by both groups, so the exact structure or self-insurance and cash reserves for a payout will be studied.
• The hospital’s reputation and brand can be damaged. Publicity about the hospital going without insurance, particularly if it is unable to pay a malpractice award, will signal to the community that the organization is in deep trouble and that care might be substandard.
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