Medical Practice Business Insurance

More Needed than Just Medical Malpractice Insurance

 By Staff Writers

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There are several insurance, risk management and related liability mattes that physicians face today. These include, but are not limited to the following issues:  

1. New Thoughts on Malpractice Liability Insurance: 

The Capitation Liability Theory of malpractice views liability management and premium costs in light of the managed care revolution.  For example, although the indemnity reimbursement model was the bedrock of healthcare financing, the incidence of litigation is believed to be the most frequent in this system.

Similarly, errors of commission, which may be more likely in a fee-based system, are easier to prove than errors of omission in a fixed system.  

Conversely, a capitated reimbursement system suggests the level of malpractice risk, and associated litigation, decreases as the volume of capitated care increases.  

 Therefore, since the future is unknown, choose a malpractice insurance company rated “A” or better by AM Best ( True indications of a strong company are often reflected in the firm’s net premium to surplus ratio, where a lower ratio is better and the industry average is about .81; net liability to surplus ratio, which the industry average is 4.1; net average ratio, where the industry average is 4.9; and reserve-to-surplus ratio, in which the industry average is about 3.6-4.1. (Physicians Insurers Association of America) 

2. Fire, Theft and Liability Insurance: 

Fire and theft insurance is used to cover office equipment and contents, while leasehold insurance protects against loss due to the termination of a favorable lease caused by the insured perils. 

3. Worker’s Compensation Insurance:  

Worker’s compensation is mandatory to cover a loss of income, medical expenses, and rehabilitation. Most states also have established second-injury funds which are designed to compensate employee’s who suffer a second disability injury and thus shield the employer physician from the increased costs associated with a second injury.

4. Business Interruption / Loss of Income Protection Insurance: 

This covers the ongoing medical offices expenses and income loss, because of office damage, and continues during the Period of Restoration.  Most business interruption is written on an indemnity basis, and consists of two broad types: Business Income Coverage Form (Add Extra Expense) and Business Income Coverage Form (Without Extra Expense).  

Either type requires co-insurance and both require a choice of three income coverage forms: (1) business income including rental value, (2) business income excluding rental value, and (3) rental value only. Consideration should also be made for man / woman insurance and account’s receivable insurance.  

5. Dishonesty Insurance: 

A Fidelity Insurance Bond protects the doctor employer against employee dishonesty and covers the loss of money, securities or other property resulting from acts by the bonded person.

In a Surety bond, one party (surety) agrees to be responsible to a second party (obligee) for the obligations of a third party (the principal).

In medicine, surety bonds are used in situations in which one of the parties insists on a guarantee of indemnity if the second party fails to perform a specific act. Such a requirement may arise in connection with professional medical employment contracts or other situations in which there may be doubt concerning the ability to perform medical or office related business tasks.

6. Billing Errors & Omissions Insurance

This coverage protects you against liability for unintentional billing errors when you bill a third party, including Medicare/Medicaid, or managed care organizations. This is usually a separate policy that provides limits of liability from $100,000/$100,000, up to $1 million/$1 million to cover both defense and indemnity costs. 

Other endorsements may also be obtained to pay civil fines, penalties, judgments and settlements, or increased limits of liability, up to $1 million/$1 million. All terms, conditions and limitations are outlined in the actual policy form


What other types of medical practice risks are out there, and how do you mitigate them; if at all?

For more related information:Risk Management and Insurance for Physicians and Advisors”

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2 Responses

  1. […] Read entire post at The Executive Post @ Healthcare […]


  2. Hello,
    This is a very useful article, especially for anyone new to the medical field in the United States.


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