In a disturbing new twist to the closure of Hahnemann University Hospital in Philadelphia last summer, the 572 residents and approximately 100 attending physicians displaced by the closure — plus about 300 additional residents who previously trained at the hospital — now find that the professional liability insurance they had during their time at Hahnemann is about to expire.
Teaching hospitals typically provide medical liability insurance to cover episodes that may have occurred during training or other times when care was provided. Occurrence-based insurance covers the physician for any medical liability for the care provided during this period. This insurance provides physicians with liability protection and it extends in perpetuity, even for claims that are filed long after a physician leaves the hospital.
Instead, the private-equity firm that owned Hahnemann, the Philadelphia Academic Health System (PAHS), LLC, purchased a claims-made insurance policy for its residents and attending physicians, which only covered physicians for claims made during a specific time period. That policy is now set to expire on Feb. 10, 2020, and once the policy expires, the coverage will lapse except for those claims that have already been filed.
Tail insurance coverage to cover future claims had been a key component of the Sept. 2019 sale of Hahnemann in bankruptcy court. However, the Department of Health and Human Services appealed the bankruptcy court’s approval of the sale and the U.S. District Court postponed the sale’s closing until the appeal is decided. With the sale on hold and the insurance lapse deadline looming, the Pennsylvania Department of Health and an ad hoc resident committee filed motions on Dec. 11 asking the bankruptcy court to order PAHS to obtain tail insurance. The resident committee’s motion warned that failure to have continuous liability coverage in some states, including Pennsylvania, can result in the revocation of or the inability to obtain a physician’s medical license.
Here’s what you need to know about tail insurance and Hahnemann:
- In the absence of occurrence-based coverage, tail insurance is critical.
Because PAHS purchased claims-made rather than occurrence-based insurance, tail insurance is needed to cover any claims filed after Feb. 10, 2020, the current expiration date of the Hahnemann policy. For example, if a resident is named in a lawsuit filed on or after Feb. 11, 2020, for alleged malpractice that occurred, say, in the spring of 2019, the claims-made policy would not be available and tail insurance would be necessary.
- Tail insurance is prohibitively expensive, particularly for residents.
The resident committee motion stated that one resident received a quote of more than $65,000 for tail insurance. The quote is based on individual companies’ policies, so you have to shop around. But it’s also based on your specialty. We know that OB medical malpractice insurance is more expensive across the United States because of the overall experience or rate that certain types of physicians are sued.
- The liability risk for a resident is typically low — but Hahnemann could complicate matters.
Residents are not usually in charge of a case and are often dismissed when a claim is filed. Usually, it’s the attending physician and the hospital that would take on any potential liability. But in this case, it is concerning that there is no hospital left to take on that liability — Hahnemann is closed and the company that owned it is bankrupt.
- The bankruptcy court is aware of the insurance debacle.
There are now two pending motions asking the bankruptcy court to order PAHS to purchase tail insurance. The court has set a hearing date of Jan. 31, 2020, at 10 a.m. at the U.S. Bankruptcy Court for the District of Delaware, in Wilmington.
- Residents need to explore other options.
While the AAMC, AMA, and ECFMG have been meeting to discuss the problem, residents should also be taking action. In addition to obtaining quotes from insurers (the Pennsylvania Medical Society has a list of potential insurers), residents should also explore other options, including obtaining insurance from the institutions where they are currently training. Called nose insurance, this would provide liability coverage for the time period they were at Hahnemann. While a few institutions have agreed to provide this nose insurance, others have indicated that their insurance providers are unwilling to take on that added risk because of the uncertainty of the liability risk with Hahnemann now closed.
The Pennsylvania Medical Society has additional information about the insurance requirements for displaced residents on its website.