LONG TAIL INSURANCE. thecompass setting direction for risk management and insurance for the healthcare industry Fall Melvin L.

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1 setting direction for risk management and insurance for the healthcare industry Fall 2005 a publication of the Coatal Insurance Risk Retention Group, Inc. and Healthcare Workers Compensation Fund LONG TAIL INSURANCE Melvin L. Capell, CEO M edical Malpractice and Workers Compensation insurance are Long Tail lines of insurance business. What is that? What impact does it have on the operation, price and availability of these lines of insurance? Long Tail refers to the length of time between a claim causing incident and the settlement of the resultant claim. Property insurance is Short Tail. Example, it is typically only a matter of days or weeks between the time of fire or tornado damage and the resultant claim being paid. On the other hand, Medical Malpractice and Workers Compensation claims often continue for years before they are settled. Studies have shown that the average Medical Malpractice claim takes four to five years from the time of the alleged negligent medical care until the claim is settled or closed. This is broken as follows: (a) from the day of alleged negligent medical care until the claim is filed is typically 18 months; (b) from the time the claim is filed until it is settled or closed, if it does not go to trial, will be 2 to 3 years; and (c) if the claim goes to trial, it will be 4 plus years before it is settled. That is Long Tail. known for several years. What will be the impact of economic inflation? What will be the impact of social inflation? Assumptions about the future must be made in answering these questions. But, answers must be in place before pricing can be prepared. Insurance Company Financial Condition When an insurance company does not know what their claims will ultimately cost, they run the risk of having insufficient claim reserves to pay all the claims. The longer the tail, the more of a factor this becomes. If the reserves are not sufficient, then the insurance company may be in poor financial condition and not even be aware of their vulnerable condition. CIRRG and HWCF write Medical Malpractice and Workers Compensation business almost exclusively thus, they operate in Long Tail environments. Their financials show that they have been successful in their operations. This speaks clearly about the professional strength of these companies. Being Long Tail has several implications on the operations of insurance. Let s look at a few: Loss Trending Identification of emerging loss trends is difficult to do on a timely basis. It is long after the trend starts that anyone can see that the trend has started. Thus, new risk management activities based on the identification of loss trends is often delayed. Pricing Insurance premiums are determined by the total cost of settled claims. The ultimate cost of settling claims is very difficult to predict when the actual cost will not be

2 RISK MANAGEMENT REVIEW EMTALA Investigation - Are you ready? Aleta Smithson, RN, BSN, Risk Management Consultant T his article is written in response to the endless EMTALA investigations in our state. First of all, remember that all it takes is a complaint from anyone to bring a state surveyor to your hospital, unscheduled, to investigate a potential EMTALA violation. Once the surveyor(s) arrive and identify themselves, you need to make them comfortable and verify their credentials. Once you have verified their credentials, they will ask you to provide them with many things. You should cooperate with them fully on what they have asked for and remember to always be courteous to them. Below is a list of things that each hospital should already have in place for EMTALA compliance. This list includes but is not limited to: Written hospital-wide EMTALA policies and procedures supporting EMTALA compliance. This means one overall policy to replace any other policies that address what patients are treated, patient triage policies, methods of payment, etc. that may conflict with EMTALA regulations. In this policy it is necessary to address in the Medical Screening (MSE) Requirement at a minimum the following: Identify all dedicated emergency departments (DED) of the hospital and the requirement for all DED s to comply with EMTALA. Designate qualified medical personnel who may perform a MSE. Maintain a central log of each person who presents to the hospital DED seeking medical care, whether or not the person is actually seen in the DED. Caution: If labor & delivery is used to evaluate women having contractions, then labor & delivery must also maintain the exact same log as the DED. This applies to all DED s of the hospital if they have been determined that they have to comply with EMTALA. Define the hospital s standard screening process including utilizing necessary test, ancillary services, and on-call specialists when necessary to determine if an emergency medical condition exists. Triage should be well defined (including categories, assessments, reassessments and repeat vital signs of waiting patients and ongoing monitoring), as well as a statement that triage does not constitute a MSE. If the hospital has a Labor and Delivery and it is used to perform MSE s, the process should be spelled out completely and be uniform for all women who present having contractions. All patients who present get the exact same care (MSE) based on their chief complaint, regardless of their means to pay. Stabilization requirement No delay on account of insurance information Patient refusal of MSE, treatment, or transfer including written informed consent, refusal form or signed statement from a hospital staff member. Also addressing (documenting) the process to demonstrate patients who leave AMA or LWBS did so voluntarily and that the hospital did not deny them a MSE. On-Call Physician requirement in detail and requirement to respond in a timely manner and differentiate between phone response and physical presence response. Create a system for transferring patients out of the hospital or DED, including using transfer packets and arrangements for appropriate transfers. Including but not limited to the ED physician responsibility for ordering equipment needed and personnel to accompany the patient during transfer, ordering the appropriate vehicle for transport and explaining/documenting the specific risks and benefits of the transfer. Procedures for when the hospital is on diversionary status. Education of all appropriate staff: (All ED personnel and all ED and on-call physicians, administration, board members, compliance page 2 volume 2, number 3

3 officers, risk managers, hospital legal counsel, all physicians who transfer and accept patient transfers, OB and Psychiatric staff). Hospital by laws or rules and regulations must formally identify which hospital personnel with what qualifications may perform the MSE and the hospital s governing board must formally approve this delegation of personnel. Required EMTALA signs and appropriate size in any area meeting the definition of a DED. QA review for EMTALA compliance. Procedure to report suspected EMTALA violations to CMS. In summary, it is of the utmost importance in all hospitals to have hospital and medical staff cooperation and leadership. Policies and procedures should be drafted very carefully and education should be ongoing. Penalties for non-compliance can be severe. Hospitals and physicians can be penalized. If you have any questions about this article please call or and dial 0 at any time during the recording to get an operator and ask for risk management. Lab Safety Jack Posey, CHSP Assistant Vice President, Risk Management During a recent Safety System Evaluation the Safety Officer was showing me around the lab as part of the survey. The manager of the lab had a good safety program in place, but wanted to do better. Several ideas were discussed about safety improvement, but we kept getting back to core competencies as they relate to a safe work environment. At the risk of sounding elementary let s take a look at some of the basics. Remember the basics: Always wear gloves, Always wear eye protection, Always wear appropriate safety clothing such as chemically resistant lab coats or aprons, Always use chemicals when there is adequate ventilation, Use chemicals only for their intended purpose, Never use mouth suction for pipettes or suctioning, Handle all sharps with utmost care, Most chemical disposal should be done as hazardous waste, not simply poured down the drain, Secure all compressed gas cylinders. Emergency procedures: Know all the exits, Know where the emergency eyewash and shower are and how to use them, Know your evacuation procedure, Practice a spill drill on all HazMats. Know the location of and how to read an MSDS. Good housekeeping is not just a magazine: Never eat, drink, or chew gum while working with chemicals, Avoid direct, unprotected contact with chemicals or specimens, Do not pick up broken glass with your bare hands, Always wash your hands with soap and water prior to leaving the lab, Remove all personal protective equipment prior to leaving the lab, Keep all work areas clean and uncluttered. Since the lab in your facility has the potential for many different types of accidents and injuries, please give your lab manager an extra helping of assistance when it comes to the safety effort. Fall 2005 page 3

4 IMPORTANT NOTICE Ginnie Richardson, Accounting Department We have changed banks. Please make sure you are sending your payments to the following addresses: Workers Compensation Policies: Healthcare Workers Compensation Self Insurance Fund P.O. Box Birmingham, AL Hospital Professional Liability, Hospital General Liability and Hospital Umbrella Liability Policies: Coastal Insurance RRG, Inc. P O Box Birmingham, AL Physician Professional Liability Policies: Coastal Insurance RRG, Inc. P.O. Box Birmingham, AL If you do not use our return envelope be sure to include the complete zip code the last four digits designate the proper account. 2. Please DO NOT combine Workers Compensation, Physician, or Hospital payments. 3. Please include one copy of the invoice (s) with your payment to insure that your payment is credited to the proper policy (ies). 4. If your accounting department has vendors set up to automatically print the address please be sure the address is changed in your computer system. 5. DO NOT send stock payments to the Lockboxes. They should go directly to our Birmingham Street Address. Coastal Insurance RRG, Inc. 200 Chase Park South, Suite 200 Birmingham, AL If you have any questions please call and we will be happy to assist you or and dial 0 to get an operator and ask for the Accounting Department. page 4 volume 2, number 3

5 HWCF 2006 Renewal Wayne Averrett, Fund Administrator All HWCF members will soon receive a request for estimated payrolls by employee classification for the period January 1, 2006 through December 31, This information will be part of the base used to develop the workers compensation cost for HWCF members for the 2006 HWCF year. If you have any questions about the classification of employees, please contact Wayne Averrett or Dana Logal at or in Montgomery. Workers Comp Corner Wayne Averrett, Fund Administrator Mileage Rate Change For mileage associated with a workers compensation claim, the rate of reimbursement effective September 1, 2005 will be 48.5 cents per mile. Code of Alabama, 1975, Section (f) states, The employer shall pay mileage cost to and from medical and rehabilitation providers at the same rate as provided by law for official state travel. Act , which became effective October 1, 1999, changed the mileage rate paid to persons traveling on official state business to the amount allowed by the Internal Revenue Code for income tax deductions. The current rate allowed by the Internal Revenue Code for business miles has been increased to 48.5 cents per mile effective September 1, If you have any questions about mileage reimbursement, call Wayne Averrett, ext 107 or ext 107 in Montgomery. Fall 2005 page 5

6 CEO Mel Capell 102 Accounting Mark Killingsworth 103 Cathy Thomason 123 Andrea Arant 111 Betty Gooden 114 Ginnie Richardson 140 Administrative Support Services Wanda Cox 118 Ginnie Calloway 117 Underwriting Wray Smith 137 Jeanette Bailey 126 Yada King 142 IT Donald Eagen 134 George McGeehan 122 Diana Ford 113 Claims Frank Parsons 108 Wayne Smithson 136 Cathy Coggin 138 Kim Robinson 120 CIRRG GENERAL AND PROFESSIONAL LIABILITY INSURANCE OFFICE EMPLOYEE NAMES AND PHONE EXTENSIONS MONTGOMERY OFFICE Birmingham or or Always operator assistance Risk Management Jack Posey 151 Emily Windham 144 Aleta Smithson 145 Angie Chandler 127 HWCF Underwriting Wayne Averrett 107 Dana Logel 132 Loss Control Jack Posey 151 Claims Dawn Adams 131 Shannon Cox 124 Joy Kilpatrick 115 JC Minter 125 Debbie Moser 133 Debbie Pharr 121 Carol Seamon 109 Sharon Wyatt 119 VP/Secretary Bill Green Administrative Assistant Denae Whatley Marketing Mike Smith- Director Malcolm Johnsey Claims Attorney Pat Shaw Physician Underwriting Joyce O Daniel- Director Karen Spann Jason Cobb Receptionist Deborah McNamee Workers Comp. Case Manager Elaine Freeman OUR NEWS IS YOUR NEWS LET US HEAR FROM YOU Our goal is to stay informed and keep you informed. If you have any suggestions or topics for The Compass, please address to: Aleta Smithson Editor The Compass PO Box Montgomery, AL Or asmithson@coastalins.org Prsrt. Std. U.S. Postage PAID Montgomery, AL Permit #548 P.O. Box Montgomery, AL thecompass