Common risks facing medical practices — and what to do about them

Pete Reilly: ©HUB International

Risk is always a part of practicing medicine, and 2024 has no shortage of challenges practices must face to succeed. Medical Economics spoke with Peter Reilly, North American health care practice leader at HUB International and an insurance and risk management expert about what practices need to think about. The transcript below has been edited for length and clarity.

Medical Economics (ME): What are some challenges medical practices are facing in 2024?

Peter Reilly: The practice of medicine continues to evolve and faces [several] challenges and opportunities at the same time. [The issue of] reimbursements and how that is going to impact the financial health of any practice is always top of mind and needs to be considered. From a traditional risk management and insurance standpoint, practices need to be mindful of theinflation and other challenges that are impacting nearly all sorts of medical practices all the way through the largest health care institutions. And so, they need to be having some candid and more frequent dialogue with trusted advisers to the medical practice, from insurance professionals like me to legal counsel and accountants. They’re all facing a real interplay of some of the wave of changes facing health care [including] how patients want to interact via virtual care, in-person care, or are we potentially going to see some other pandemic, flu outbreak or other type of infectious disease that is going to have everybody dusting off some of those disaster plans.

I would be remiss if I didn’t mention that one of the big challenges is going to continue to [involve] data security and privacy. Medical practices need to seek both legal and risk management advice on how to handle those, because that’s not going to go away.

ME: When looking at revenue streams, what does a practice need to consider before adding something new?

Reilly: That’s a great question because it’s like some of the others: It’s really multifaceted. Before just adding a new line of service or something like that within a practice or looking to invest in a related type of venture — something like a med spa — the first thing that physicians and medical practices really need to do is talk to an attorney about what they can do legally.

The United States and even into parts of Canada are a real patchwork of legal and regulatory issues that need to be carefully considered. I have sadly seen a handful of times when that was not done, and what was seen as a new line of revenue and financial stability became an illegal pothole, unfortunately. And so, this is really a case of measure twice, cut once, when going down that path. But at the same time … I don’t know that 2024 is going to be the year for this. At least in the U.S., with the move to value-based care and downside risk contracts, those are complex financial arrangements that can be remarkably rewarding for the practices and other health care providers. I would encourage those who feel they can do that to explore those. Because if it’s done well — and there are certain protections that can be created both, again, legally and financially, from an insurance standpoint — that could be a real lifesaver for many medical practices.

But the key is to talk to the advisers first, and really the first ones you need to speak to are the attorneys and have them look into this because those are binding contracts with CMS [Centers for Medicare & Medicaid Services] or other payers, and they’re complicated and the devil is in the details. But if you’re comfortable with that, that’s going to be one of the biggest opportunities for new growth.

ME: With so many payers pushing more of the shared-risk, value-based care models, what questions do practices need to be asking before they sign on the dotted line?

Reilly: Every one of those contracts is almost going to be a thing in and of itself. The medical practices need to be very mindful of exactly what are those metrics by which they are going to be measured, because the contract can be very detailed sometimes. I’ve seen organizations … gloss over exactly what … the expectations [are]. What is the reimbursement amount going to be? And how and when, if there’s a disagreement about that downside risk and the shared risk, is there any sort of appeal to where a middle ground can be found, because there may be different interpretations of the contract.

So that’s really number one in those types of arrangements. Taking nothing away from an intelligent group of individuals, but medical providers are not trained in this type of contractual arrangement; they should consult with experts, really consider what the worst-case scenario can be, and can they really afford the potential penalties that come with this. Everybody loves the upside, and that’s an easier discussion, but looking at that downside, and what it would do — I call it a generational decision because depending on the size of it, that can carry over across multiple fiscal years. Take the time to understand what that means. There are now insurance contracts and other protections that can be purchased to help with that additional shared risk of contract. Those should be explored and really looked at in a careful and calculated economic model so that these practices and providers can make an informed decision.

ME: Insurance costs can be a big expense for practices. How can a practice save money?

Reilly: It is always a challenge for medical practices when it comes to insurance, because — in addition to the standard business insurance of protecting your property, your workers’ compensation, and those basic business insurance coverages — employee benefits and the other things that go with retaining staff are important. But often, the single largest expense is that of medical professional liability [MPL]. And that’s a challenge in a marketplace that is seeing deteriorating results for that underwriting group. You will hear a lot of people say that it’s just marketing and going out for the lowest cost is one way to save money, and it is, but it’s often short term and ineffective. There are really two things to be done before a decision is made about purchasing insurance. Number one, really know what your loss history looks like. And by that, I mean it’s not just a liability payment to a third party. Even if the allegations are completely bogus, you need to consider third-party liability payments, the defense costs that are incurred by the insurance company — because they count those numbers — and then any additional cost to you as a practice. Understanding that will give any medical purchaser of MPL a better sense of where and how profitable they are. Because risk and insurance are like a market, just like if you buy stocks — risk capital can be rented or purchased with an insurance contract. So, knowing what your profile looks like is critically important at the outset. Don’t just throw it to the market and expect that’s going to do it for you. Secondly, take a hard look at your risk practices, your protocols, your checklist to make sure that your delivery of care is optimal, because … if you do have some issues with losses, that is a way to mitigate those costs, because bad outcomes happen. No human body is the same and bad outcomes are not reflective necessarily of bad medicine. If you can demonstrate you’ve got good practices, good procedures, good protocols, all throughout your practice, that is meaningfully different than just getting quotes in the marketplace. It’s also the way to save money over the long haul, like five- to 10-year periods, because better-practicing clinics and practitioners almost always have better outcomes, both clinically and from an insurance standpoint. You can always look at raising deductibles and things like that, which may be meaningful. But in this marketplace, the best way to do it is to take the time to understand the numbers and the data, and then what you can reasonably expect to do, and take the time to meet with some underwriters because every now and again you’ll click with an underwriter and that underwriter is going to want to do business with the medical practice for as long as they can.

ME: Staffing shortages are often a major problem identified by medical practices as hindering their growth. How should practices approach this problem?

Reilly: This is one of a handful of generational issues that practices are facing. Retaining staff is critical and attracting new staff has become equally as important because burnout happens and continues to happen. It’s really a threefold answer to how you do that, and depending on where you’re located, this may be easier [for some practices] than others. But if as a medical practice you haven’t aligned yourself with some local medical schools or other pipelines for talent, be [it] that your nursing programs are sending up internships, all the way through to the administrative staff, I would encourage that. Maybe it’s only one or two people a year who come through with something like that, but that’s where you’re going to find folks who will either like what you’re doing, or, equally as important, find those who are probably not a good fit, so you don’t have a recurring turnover problem. That’s not been germane to medical practices traditionally, but that’s one where a number of these schools, particularly in light of that very unfortunate nursing licensing challenge that went on earlier this year, it’s important to vet these people early. Number two, the employee experience, how they feel about things beyond just their work, has become something that medical practices and the health care industry really need to begin to embrace more consistently. It’s not just about having nice medical benefits or paying for them in a particular way. What I as a 55-plus individual value in my employee experience is going to vary a great deal from someone who’s 25. What is important to them may be pet insurance or access to a couple of extra days of personal time; having that flexibility to really tailor to that employee experience is more important for practices, no matter the size, to retain those folks. And lastly, and this is taught in almost every business school, or certainly within every HR department, it does matter to listen to what your staff and employees say, listen to your partners. And if there are serious issues, trying to do things to correct them is important. Often, it is perception. When staff don’t hear from the medical leadership in any clinic or facility, rumors start, and particularly in health care, the burnout and the difficulty of irrational patients is challenging. I was in a medical office recently where someone showed up almost 90 minutes early for their appointment and they demanded to be seen now. It was disruptive and they were loud. This wasn’t from waiting; they were there early. And the poor staff had an incredibly difficult time dealing with this. When it was over, one of the doctors came out and gave this person a hug and you could see the tension melt away. That human characteristic of medicine, which is still such a human trait in business, matters. I know that sounds like soft advice, but it does matter. That employee experience is becoming more important.

ME: With so many challenges this year, what specific risks
do practices need to consider? And how can they reduce
their exposure?

Reilly: The easy one we see too many medical providers still try to avoid is that of data security. We in the insurance industry and risk management tend to talk about it as cyber liability insurance. Even if you’re just reading a patient record that was sent to you by a hospital or something, if you touch it and you return it, you offer an opinion on it, it’s your record, no matter what you tell yourself. But that issue around data security is one that I think too many practices still do not take seriously enough. They don’t buy adequate protection and they don’t avail themselves of the resources that are there. Have a good counsel review your contracts with your cloud-based provider of your information or what you’re doing with it. There are also employment practices, allegations of “Oh, I was let go,” or “I wasn’t hired,” or there was some sort of harassment — those types of issues remain in what I’ll call a distressed work environment. And by that, I mean health care is stressful. People talk about being in the post-COVID[-19] world, but I’m not convinced we’re there yet in terms of how people treat medicine.

People are questioning the legitimacy of the science behind medicine.Having that risk addressed, and again, insurance is one tool to deal with it, should be explored. There’s always the granddaddy of them all: medical professional liability. Having a review, not just of your insurance policies but of your protocols and procedures, at least once a year if not twice, is going to carry the day. Because as I alluded to a little earlier, the medical professional liability insurance world is still losing money on insurance premiums. And they’re going to want to deploy their capital and give the best pricing to the most cost-effective programs, to those practices that do engage in even a modicum of risk management. That is, unfortunately, a broad topic. Partner with people who can help explain it to you, and prioritize what is important for your particular practice — and it’s very different if you’re practicing in Los Angeles, Orange County, or Cook County, Illinois, or now even parts of Georgia, which has become a very challenging litigation spot, versus practicing in Wyoming or even parts of Virginia. The time it takes to do that … takes away from the practice of medicine, but that is the single best thing that medical practices can do.

Lastly, working with competent insurance brokers, counsel, advisers, those who really understand health care, is going to become more critical. Having your lawyer be the person you went to high school with who lives down the street may or may not be the best person to avail yourself of for that type of need. Working with professionals who specialize in this space matters. Education and knowing what’s going on in the marketplace is critical, because it is dynamic, it is changing, and if and when value-based care truly goes fully live, that’s going to be a seismic change to how health care financing will work. It all adds more to the plate of practitioners, and I know that’s tough, but the practice of medicine is only going to be more complicated, not less so, for the foreseeable future.