Good Morning...Your Hospital Has Closed

Can you imagine this happening to you?  

It could.

On November 30, The Little River Healthcare system notified it's employees at two hospitals and several medical clinics, that very thing.  They would be shutting down services about a week later, because of financial insolvency and Chapter 7 bankruptcy.

So why is this important in regards to risk management?  Especially physician focused services?  It simple, but may not be obvious....

First, physicians may or may not be employed by the system.  If they are employees, then their paychecks may stop very quickly.  If they are independent contractors and do their own billing, then they may be fortunate enough to be able to continue cash flow while their accounts receivables come in.  But that doesn't last forever.

But there is another significant issue that may not be so obvious.  Medical liability.  Who carries the insurance for the physicians?  If it's the hospital, then what will happen to the coverage that the physicians have?   Can they continue on with the existing coverage?  What will they pay?  Will they have immediate cancellations?   What about hospitals that have self-insurance coverage?  Will the reserves be there to cover future claims?  Or will the physicians be "hung out to dry" without coverage for their prior acts?

Coverage of your malpractice by a hospital may sound attractive, however, there are risks in such an arrangement.  This is the kind of issue you would rather not have to deal with, especially when you are also facing the loss of your livelihood and income source.

So what's the solution?

Such a situation may have a variety of different solutions, but perhaps prevention is the best solution.  Even though you may become a hospital employee, it may be prudent to ensure that you have independent coverage for your medical malpractice.  Having your own policy can eliminate the disruption of your coverage when such a catastrophic event happens. It can also have other benefits such as the elimination of the need for tail or prior acts coverage if you change positions.  Keeping your malpractice insurance with you may solve, or reduce, many of these potential issues.

Such coverage may be a supplemental policy that "wraps around" your existing hospital policy, or simply your own coverage that you purchase.  You may ask the hospital to provide you with a malpractice stipend for your coverage, or other financial remuneration.  

In summary, there are many hidden and unintended consequences that may impact you when such catastrophic events occur.  It may be in your best interest to review these potential consequences when entering into such arrangements and work to help reduce or eliminate the negative effects on you.

Update:  A recently reported analysis by Morgan Stanley on 6000 hospitals found that 10% were found to have "weak" financials based on earnings (before interest and other items), occupancy and revenue (Bloomberg).  Furthermore, Business Insider reported that another 450 hospitals were at risk of potential closures.  Most of the at-risk hospitals were in Texas, Oklahoma, Louisiana, Kansas, Tennessee, and Pennsylvania.  

If you work in a hospital setting....keep your eyes and ears open regarding your hospital's financial health.

Periodic update: 
If you think your hospital is immune to this...think again...

7-19-19  Drexel lays off 40% of medical staff: Read more here.

8/12/19
      Another TX hospital closes: Read more here. 
      Here is an IL hospital: Read more here.
      Hahnemann University Hospital in PA: Read more here.
      Indiana: Read more here

And the list just keeps on growing....

WhiteCoat Risk Management is not responsible for any actions you take or fail to take regarding any aspect of your financial planning.  This article is provided for information purposes and is not intended to provide individualized advice. You alone are responsible for your financial decisions.