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Summer 2015

Page 2, left side

Sandra S. dreweS, Md Board Chair doctors direct Insurance, Inc.

Dear Physicians, Insurance is nothing more than a means by which

people finance risk. For physicians, especially those of

us who have hospital privileges, the purchase of liability

coverage is a practical necessity. However, I am certain that

many of us would buy the coverage even if there were no

hospital requirement. The reason we would make the

purchase is that we are not willing to “go it alone” in

the face of a potential devastating loss. Simply stated, we

choose to pool our risk with other physicians. We pay a

premium, which is a relatively small amount in relation

to the coverage limits, and that meets the need we have

for the coming year.

You may wonder, once you pay your malpractice premi-

um, what happens to it? The various medical malpractice

carriers — DDI and others who operate in Illinois —

follow very stringent accounting and regulatory rules in

the conduct of their business. All funds must be accounted

for, and each carrier must have an independent audit on

an annual basis and file a report of the auditor’s findings.

In addition, premium rates are set and loss reserves are

maintained according to actuarially sound principles.

The insurance regulators in Illinois and all other states

require an annual certification of the loss reserves by a

qualified actuary. Finally, the state insurance department

itself conducts an in-depth examination of each of the

carriers once every five years. Please note that we are quite

accustomed to these regulatory requirements, and DDI is

in full compliance with all rules and regulations.

an Illinois Insurance company created for and by Illinois Physicians

STraIGHT!TALK

doctors direct Insurance

Article continues on page 2

Be Careful What You Sign: 5 tipS for avoiding hoSpital emploYment nightmareSBy Cheryl Toth

three orthopaedic surgeons were offered what they called a “sweet deal” by the hospital. But the deal quickly soured after the practice opened its new doors. the hospital’s patient registration system was cumbersome and created hour-plus wait times. physicians were required to use clinical staff that had no orthopaedic training. a facility charge was tacked on to each visit by the hospital’s billing department, angering long-time patients. and because there was no plan for storing or retrieving thirty years of paper charts, the practice had to place a storage unit alongside the hospital. patients complained and started going elsewhere. Staff quit. the practice’s former manager was fired. and the physicians began interviewing former clinical staff and plotting how to get out of the hospital’s contract.

if these surgeons were my clients, i would have asked a lot more questions before they signed the deal. good counsel doesn’t only review terms. good counsel provides strategic advice to ensure a successful transition and an outcome that’s in the physicians’ best interest. — patricia hofstra, healthcare attorney with duane morris, llC, in Chicago, illinois.

unfortunately, these physicians didn’t consult with counsel about anything other than compensation and a non-compete clause. here are five tips that can help you avoid their nightmare.

don’t rush. ask a lot of questions. You are in the driver’s seat.hofstra says these physicians should have asked for concrete details about the transition plan, clinical staff experience, and computer system. “the hospital has a lot to gain if you decide to become an employee,” reminds hofstra. “Your best opportunity to negotiate a favorable deal is before you sign. it’s ok to take your time, and even to be a little pushy.” hofstra routinely asks hospital administration a series of detailed questions on behalf of clients. download the list at: www.karenzupko.com/downloads/33Questions-hospitalemploymentContract-July2015.pdf indeed, a 2013 merritt hawkins physician income/revenue Survey indicates that the revenue generated by physicians in all specialties is far more than what their affiliated hospitals pay the physicians in salary. according to the survey, the average physician earns

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Chairman letter continued

Be Careful What You Sign: 5 Tips for Avoiding Hospital Employment Nightmares

a hospital $1.5 million a year, with some specialties bringing in more. general surgery brings in $1,860,566. hematology/oncology brings in $1,761,029. these, over physician compensation of $343,000 and $360,000 respectively, according to the survey. So take your time. insist on answers and written timelines and to-do’s before you sign. the hospital needs you. the “sweet deal” will wait.

Think beyond the dollar sign.in our firm’s surveys of physicians and their experience with hospital employment, one thing is clear: the positive of a steady income must be balanced with the reality of giving up autonomy. hofstra agrees. “evaluate why you are exploring employ-ment. What is your goal? What are you willing to give up?” in our survey results, employed physicians lamented frustrations such as working for managers you can’t hire or fire, attending a lot of meetings, and having little or no authority to discipline, hire, or fire the clinical staff — especially if the hospital is unionized. respondents also said they had little or no decision-making authority over practice operations or billing, and had to obtain approvals for nearly everything. if you are salivating over the thought of a steady income, these realities may seem like small potatoes. But ultimately they can become big frustrations that can create tension and stress, and erode trust. Be sure the paycheck is worth the pivot.

Clarify operational and management essentials.Because they never asked, the three orthopaedists were surprised to learn that someone from oncology would be their interim manager, and that no one in billing understood orthopaedic coding. “operational details are not often specified in the

I relate all of these matters to you because it helps to

know that insurance is a highly-regulated industry insofar

as financial matters are concerned.

Where DDI does not face regulatory restrictions is in

the high level of service we provide to our policyholders.

As a physician, I know first-hand the pressures we all face

when it comes to billing, reimbursements and other bur-

dens placed upon us. In the past, lack of service from my

malpractice carrier often just became another headache

that I endured as a practicing physician. One of the reasons

I became associated with DDI — and invested in the

Company — was to ensure that the medical malpractice

insurance provided would not be just another nuisance in

the practice of medicine. That’s the “DDI Difference”— we

take the time to assess your specific risk, price your coverage

appropriately and, if a claim should occur, we undertake all

the right steps to defend you aggressively if at all possible.

When DDI commenced insuring Illinois physicians eight

years ago, other carriers predicted that we couldn’t last.

Our model — delivering coverage directly to the physicians

without the expense of an intermediary agent — was

criticized as being impractical. On the contrary, at this time

large numbers of Illinois physicians have caught wind of the

“DDI difference.” Many more have told us that they plan to

make the switch to us when their current coverage expires

later this year or in January of 2016. New business contin-

ues to flow into the Company, having met our underwriting

standards.

DDI remains the only Illinois-based direct writer of

medical malpractice insurance. Please consider the “DDI

difference” when the time for your coverage renewal draws

near. Our direct, cost-effective approach may be just what

your practice needs.

Sincerely,

Sandra S. Drewes, MDBoard ChairDoctors Direct Insurance

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VISIT doctorsdirectInsurance.comto Request a Quote, Report a Claim or get up-to-the-minute News and Events

Learn More

top 5 miStakeS to avoid When uSing a Coverdell eSaa Coverdell education Savings accounts (eSa) is a trust or custodial account designed to help families pay for education. Just like a 529 college savings plan, a Coverdell eSa offers tax-free earnings growth and tax-free withdrawals when the funds are spent on qualified expenses. But Coverdell eSas aren’t just for college — you can use your savings for k-12 expenses tax-free. these accounts also offer more invest-ment options and sometimes lower fees than 529 plans. their tax benefits were set to expire but became permanent with the american taxpayer relief act of 2012. We surveyed readers and found that over 84 percent are not familiar with Coverdell eSas, and less than half know that you can use a Coverdell eSa to pay for private schools. if you want to start saving for private elementary school, high school or college, a Coverdell is one of your best options. But before you decide to open an account, be sure to look out for these five common pitfalls:

1. not saving enough. 59.2% of our survey respondents weren’t sure if 529 plans or Coverdell eSas have annual contribution limits. While there is no limit to the amount you can deposit into a 529 plan each year, annual contributions to Coverdell eSas cannot exceed $2,000 per student per calendar year. this applies even when a student has more than one account. in this case, you can still only deposit a total of $2,000 across all of the accounts and according to the private School review, the average private elementary school tuition was over $10,000 per student in 2014-15. however, if you’re annual tuition is $10,000 that means you’ll be able to cover 20 percent tax-free with a Coverdell eSa. ideally, if you’re putting money away for elementary or high school, try and make contributions to a 529 plan at the same time

Summer 2015 | ddinewsletter.com | 3

contract,” hofstra explains, “but you still need to understand them.” for example:

• how, exactly, will the transition work? Who will notify patients? When will staff be trained? Which computer system will be used? how will medical records be integrated?

• Who will manage the practice? does he or she understand your specialty?

• What phone number will patients call to schedule an appointment and who will do the scheduling?

• What’s the process for getting physician office visits and services billed? procedures?

• Will physicians have any authority or participation in hiring or firing clinical staff?

Get the 411 on billing and collections.“physicians need to have as much rigor about the billing as they do about compensation,” hofstra advises, “and often the two are linked because of incentives.” Some hospitals insist the practice use their central billing office. others prefer physicians contract with a third party. either option is ripe for errors and lost revenue if you don’t plan properly. hofstra suggests a litany of questions, such as: Who is responsible for verifying eligibility and collecting unmet deductibles and coinsurance at the point of service? Who is doing the coding, and is that person is trained in your specialty? are you indemnified if untrained staff inaccurately code on your behalf?

Which reports will you receive monthly to ensure they are doing their job well? “this last question is especially important if part of your compensation is tied to collections,” she adds. the transition will also require you to re-credential all physicians with all plans. that can take months, so find out who is responsible and get them on task.

Know your exit strategy.as happy as some physicians are to dismiss the hassles of managing a private practice, years later, some will choose to return to independence some day. “Be sure to clarify all aspects of the hospital’s non-compete clause as well as your options for getting out of the deal, with or without cause,” advises hofstra. asking whether or not you can “take back” staff and patients is a no-brainer. But what happens to your contract if the hospital is acquired by or merges with another system? or, the hospital decides it doesn’t want to employ you anymore? don’t forget to include questions like these in your contract diligence. according to hofstra, the most important thing is for physicians to know exactly what they are getting in exchange for what they are giving up. “Both the hospital and the physician must have a meeting of the minds regarding the transaction,” she says. “that’s the best way to avoid a disconnect of expectations.”.........................................................................................................................Cheryl Toth is a writer and content developer for Chicago-based KarenZupko & Associates, Inc. She brings 23 years of consulting, training, software product and executive management experience to her projects.

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to save for college. even the smallest amounts deposited on a regular basis will grow over time.

2. Saving too much. Coverdell eSas are intended for students who are 18 or younger. if you make contributions to your account after the beneficiary turns 18, these deposits will be subject to a 6 percent excise tax, after the student turns 30, money must be withdrawn within 30 days or the earnings portion will be subject to income tax and a penalty tax.

3. Not understanding the effect your savings will have on financial aid eligibility. this is especially important if you’re using your Coverdell eSa to pay for college. these eSas do have a negative effect on aid eligibility, but the effect is minimal compared to other accounts. additionally, up to 5.64 percent of the value of a Coverdell eSa owned by a parent or student will be included in the student’s expected family Contribution (efC). if a grandparent or other relative owns the account, nothing will have to be reported until the funds are withdrawn. Withdrawals taken from parent- or student-owned accounts will be excluded from your federal income tax return, but if a grandparent or someone else owns the account the amount of the withdrawal will be “added back” and counted as student income on the following year’s fafSa. Student income is assessed at up to 50 percent. that means if a grandparent takes out $10,000 to pay for a grandchild’s college, that grandchild’s efC will be increased by $5,000. remember, higher efC means less financial aid!

4. not considering income limits. Coverdell eSas are not for everyone. in fact, if your adjusted gross income is $110,000 or more ($220,000 if

filing a joint return), you would not be eligible to use a Coverdell eSa at all. Your ability to contribute up to $2,000 for any child is reduced on a ratable basis as modified agi rises above $95,000. if your income is too high to make Coverdell eSa contributions, you can instead gift the money to someone who does qualify (even the child), and have that person make the contribution into their own Coverdell eSa.

5. Not spending withdrawals on qualified education expenses. the tax-free earnings growth and tax-free withdrawals offered by a Coverdell eSa only apply when the funds are used to pay for qualified elementary and secondary education expenses (QeSee) or qualified higher education expenses (Qhee). QeSee include:

• tuition, fees, academic tutoring, special needs services in the case of a special needs beneficiary, books, supplies, and other equipment which are incurred in connection with the enrollment or attendance of the designated beneficiary

• room and board, uniforms, transportation, and supplementary item and services (such as extended day programs) which are provided by the school in connection with such enrollment or attendance

• any computer technology or equipment or internet access and related services, if such technology, equipment, or services are to be used by the beneficiary and the beneficiary’s family during any of the years the beneficiary is in school.

the earnings portion of all non-qualified withdrawals will be subject to income tax as well as a 10 percent penalty tax.

In this IssueBe Careful What You Sign: 5 Tips for Avoiding Hospital Employment Nightmares

33 Questions to Answer About the Hospital Offer

Visit our NEW Website www.DoctorsDirectInsurance.com

At DDI, we defend physicians. Our in-house claims professionals work closely with you and top-flight Illinois defense counsel. Our goal is to get claims dismissed on your behalf and to send a message to the plaintiff’s bar that we will not go quietly. After all, it’s not just a legal action. It’s an attack on your reputation. We are here to defend you.

Here to defend You.

always.

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CLAIMS IN THE NEWS

On April 7, 2009, a 57-year-old male underwent an outpatient diagnostic coronary angiogram with catheterization performed by the defendant cardiologist. The patient was discharged from the hospital about two hours after the procedure, but experi-enced severe abdominal pain later that evening. He was transported to the hospital by ambulance and underwent emergency surgery. The patient was diagnosed with internal bleeding, which caused his death later that same night. He was survived by his wife and teenage daughter.

Attorneys for the estate contended that the defendant cardiologist negligently used the iliac artery as the catheter access site instead of the femoral artery. They added that he improperly punctured the iliac vein, resulting in a retroperitoneal hemorrhage which was not diagnosed by the doctor or hospital nursing staff prior to the patient’s discharge.

Attorneys for the defense argued that the catheter was properly placed. The internal bleeding was caused by a late failure of the Angioseal device used to close the artery at the end of the procedure. Attorneys contended that the patient was in stable condition when he was released from the hospital and showed no signs of internal bleeding. Rather, the bleed occurred six hours after he left the hospital; there were no violations of standard of care.

The jury deliberated for 11 hours over two days.

vein punCtured during angiogram reSultS in patient death

doctors direct Insurance1140 West Lake Street, Suite 500Oak Park, IL 60301

interested in a Quote? Have a Question regarding Your Insurance Policy? Contact hannah at ddi today:

Hannah Fronczak account executive 708-628-4595 (direct) hannah.fronczak@ddiimail.com

www.linkedin.com/in/hannahfronczak

Tried: August 4–19, 2014 Verdict: $5,852,000($5,200,000 wrongful death, with $3,200,000 to widow and $2,000,000 to daughter; $652,000 Survival Act count, with $300,000 pain and suffering, $300,000 emotional distress, $52,000 medical and funeral expenses); the hospital was found not guilty.

....................................................................................This is not an actual DDI claim, but that of another company. It was reprinted with permission of the Jury Verdict Reporter, a Division of the Law Bulletin Publishing Co.