As hospitals seek to more fully integrate with their physicians, whether through employment or partnerships, they should also consider the costs of malpractice insurance associated with increased liability exposure. Many hospitals purchase medical malpractice insurance for their organizations and/or their physicians on a claims-made basis, which in turn creates a tail liability for late-reported claims that the entity may need to record in its financial statements. Tail liability occurs when an incident giving rise to a claim occurs during the insurance policy period, but is not reported until after the policy expires, when it is not covered by the current insurance policy. It is important that hospitals holding claims-made malpractice policies determine their level of tail liability exposure and implement strategies to reduce or control their exposure—and, thus, related expenses.
Tail liability coverage presents unique issues for healthcare leaders and can be a significant item on the balance sheet. However, like other types of insurance liabilities, tail liability may be reduced and controlled using simple tactics.
This article was first published in HFM magazine, November 2013.