Volume 7

Healthcare Reform is Reality … What Now? 

Frontline Lessons: Risk Reduction Strategies That Work 

Brant Couch, Diane Carter and Eric Weaver 

Brant Couch: new president at HealthSure

 

HealthSure, the only specialty insurance agency and consulting firm solely dedicated to serving the healthcare industry in Texas, announced the promotion of Brant Couch to president on January 31, 2013.

 

“Brant has developed the skills, gained the experience and shown the desire to take on an expanded leadership role,” says CEO and company founder Barry Couch.

 

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Healthcare organizations have unique
D & O coverage risks

(Excerpted from article written by Larry Goanos, CEO of Andros Risk Services)    

 

 

Mark Twain once said that the difference between the right word and the almost right word is akin to the difference between a lightning bug and lightning. It wouldn’t be totally correct to say that the difference between Directors and Officers Liability (D&O) insurance for healthcare organizations and non-healthcare organizations is as different as lightning bugs and lightning, but it wouldn’t be all that much of an exaggeration either.

 

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Brant Couch, CPA, CIC, joined HealthSure in 2004 and has worked closely with healthcare clients and important groups such as the Texas Organization of Rural and Community Hospitals (TORCH), the Texas Hospital Association (THA) and Texas Medical Group Administrators (TMGMA), to develop new and better ways to ensure the success of Texas healthcare providers. 

 
Frequently published and a popular speaker, Brant previously was a recognized business development leader and auditor with Ernst & Young where he specialized in working with emerging growth companies across the country. Prior to that he held positions with Central Texas Medical Center and the Texas State Senate. He’s active in his community serving on boards such as Concordia University’s Healthcare Administration Program and Seton Health System’s – The Fifty, a select group of community leaders dedicated to changing the healthcare and economic future of central Texas.

As president, Brant’s responsibilities include HR, sales, service, brand management and technology.

Barry Couch moves from president to Chairman/CEO and as such will focus on market development, strategic partnerships, carrier relationships,  finance, training, and recruiting.

The main reason that healthcare organizations need to have more specifically-tailored D&O insurance than non-healthcare entities is because they’re highly regulated and face a plethora of exposures unique to their field. Additionally, they must manage a potentially serious exposure that’s not unique to healthcare, but nonetheless is more prevalent in the healthcare field than in most segments of the economy: antitrust violations.

Antitrust Violations: 

For example, if there is only one company offering MRI services in a state, there is a possibility that the company could be charged with monopolizing the MRI market unfairly. This is due to the potential of higher prices and more unfavorable terms that wouldn’t exist if there were a competitive marketplace. This is just one of many possible examples of how a healthcare organization can be accused of antitrust violations, especially when dealing with more specialized services and products that are not widely available.

These monopoly-like conditions chiefly come about when an organization grows organically through its own expansion or when it merges with, or acquires, other organizations. It can also be a result of a combination of both. Mergers have always occurred to some extent in the healthcare field, but M&A activity in healthcare has increased substantially in recent years. This can be attributed to a number of factors, including recent cuts in Medicare and Medicaid reimbursements (thus making businesses less profitable and in need of business partners) and passage of the Patient Protection and Affordable Care Act of 2010 (“PPACA” also known as “Obamacare”). The PPACA encourages economies of scale and, consequently, has spurred health insurers, hospitals, doctors’ groups and other healthcare organizations to merge.

Unlike in earlier years, most healthcare-specific D&O policies no longer contain antitrust exclusions. However, many have provisions that may limit or exclude coverage for antitrust claims, including sub-limits on coverage and higher retentions and/or coinsurance features.

Purchasing one of the healthcare-specific D&O policies available on the market today is your best option when dealing with a healthcare client. These policies generally provide coverage for antitrust claims against all insureds, including the entity, which is especially important. Further, these forms explicitly define what constitutes an antitrust claim (usually in broad language) and they identify some specific laws whose alleged violations are covered, including federal laws such as the Sherman Act, Clayton Act, Robinson-Patman Act, Federal Trade Commission Act and Hart-Scott Rodino Antitrust Improvements Act.

It should be noted that states have their own antitrust laws as well, and alleged violations of those will generally be eligible for coverage under a healthcare-specific D&O insurance policy as well.

However, as mentioned above, some healthcare-specific D&O policies contain an antitrust claim sub-limit, while others will offer coverage up to the policy’s full-limit. If for some reason your client accepts an antitrust sub-limit, you must ensure that any excess layers drop down to provide coverage for antitrust claims at the point of the sub-limit’s exhaustion.

Antitrust claims have the potential to be very large and can threaten a healthcare organization’s very existence. The penalties for violating antitrust laws vary according to the specific law(s) involved, but they can include fines of up to $10 million per violation and, in some cases, civil penalties of up to three times the actual compensatory damages. Clearly, it’s critical to make sure that your healthcare client’s antitrust coverage is adequate.

HIPPA is a federal law that was passed in 1996 to protect the medical information of patients in the United States. Virtually every American healthcare provider of any size which transmits certain individually identifiable health information (known as “Protected Health Information” or “PHI”), in connection with specified transactions is subject to HIPAA’s requirements.

• Payment for healthcare services provided to a patient, whether past, present or future
• The actual provision of healthcare services to a patient
• The patient’s physical or mental health or condition, whether past, present or future

This information, however, is only subject to the strictures of HIPAA if it is individually identifiable, meaning that it must contain things such as the patient’s name, address, date of birth, social security number, etc. More generalized information, such as the results of a study on the effects of a drug used by a large group of anonymous patients, would not qualify as PHI.

HIPAA applies to all PHI transmissions in any form, including electronically (e.g. via email, disc or external hard drive, on paper or verbally).

The U.S. Department of Health and Human Services’ Office of Civil Rights (OCR) is charged with enforcing the HIPAA rules and may conduct investigations of complaints and compliance reviews. The penalties can be steep for non-compliance, up to $50,000 or more for each violation with a calendar year cap of
$1,500,000. As with antitrust laws, major violations of HIPAA could put a healthcare provider out of business, especially a smaller entity. [NOTE: With the passage of HB 300 Texas now has even stiffer penalties associated with HIPPA violations.]

A standard D&O insurance policy does not adequately provide coverage for HIPAA violations for a number of reasons. Generally, no entity coverage is extended to publicly traded companies for anything other than security claims. Coverage for regulatory actions, fines and penalties may be totally excluded or severely restricted. By purchasing a healthcare organization-specific D&O insurance policy, you can obtain explicit coverage for HIPAA violations albeit limited in most cases. For example, one carrier’s Directors, Officers and Trustees Liability Wrap Policy specifically defines a “HIPAA Violation” as:

“Any actual or alleged error, misstatement, misleading statement, act, omission, neglect, or breach of duty by an Insured in violation of Title II of the Health
Insurance Portability and Accountability Act of 1996, amendments to such law, or regulations promulgated under such law concerning privacy of health information.”