Healthcare News & Insights

Financial constraints causing some hospitals to bypass malpractice insurance

Malpractice insurance is considered a standard safeguard for hospitals nationwide. The problem is, not all states require it, so some city hospitals struggling financially are choosing to drop their malpractice coverage.

While saving a few million in insurance costs may seem to make sense in the short term, it’s financially dangerous for the hospital and socially irresponsible, according to industry experts.

Reason: No hospital is perfect. Even the best hospitals, like the ones in the U.S. News Best Hospitals report, are going to have some malpractice claims. It’s inevitable.

A large judgment could force a hospital with little or no malpractice insurance into bankruptcy. Not to mention the fact that to take in people and treat them, knowing that if anything happens the hospital can’t compensate them, is irresponsible, Tom Baker, a law professor at the University of Pennsylvania, said in a New York Times article.

What’s a facility to do?

Many of the hospitals that have partial coverage or no coverage at all are located in low-income city neighborhoods in, for instance, New York City, Chicago Cook County, Florida Dade County and Philadelphia, which are also known for their juries handing out big judgments.

Some of these hospitals are choosing to buy cheaper insurance to cover lower-dollar/primary claims, while others are using the money they save by not buying malpractice insurance to pay their current liabilities. Still others are choosing to shut down certain high-liability areas such as obstetrics.

In the Times story, some of the hospital executives said their physicians had their own insurance which their facilities subsidized or reimbursed the docs for.

To solve the malpractice insurance dilemma, financially stable hospitals are creating their own insurance groups. They set premiums and reserves, and share risks.

Where the money is

While nearly all hospital executives know how dangerous it is for their facilities to go without coverage, some still believe it is their best bet because lawyers go where the money is.

One former hospital administrator, who wished not to be named in the Times story, said malpractice insurance is basically a lawsuit magnet.

If a hospital is known by the legal community to not have malpractice insurance, the belief is, the lawyers won’t pursue claims against them since you can’t get blood from a stone.

 

 

 

 

 

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