Strategies for specialty surgeons to minimize increasing insurance premiums

As medical malpractice rates rise, specialized surgeons are increasingly affected. Due to the inherently high-risk nature of surgical procedures, surgeons face a higher volume of malpractice claims compared to lower-risk medical service providers. This surge in claims results in increased payouts, leading insurance carriers to raise premiums significantly - even for surgeons with zero history of claims.

As an experienced medical malpractice insurance broker, I continually observe the effects of the growing frequency of substantial payouts and escalating legal defense fees paid by carriers for the defense of surgeons. However, there are options available. In this article, we'll explore how to select the right insurance carrier and emphasize the importance of implementing proactive strategies to mitigate risks and reduce premium impacts.

What makes a surgeon’s liability premiums so high?

Specialties categorized as high-risk experienced the most significant liability premium hikes. Orthopedics, neurosurgery, obstetrics, bariatrics, and general surgery are the frontrunners in 2024. Given the regularity and intricacy of their duties, these surgeons are more prone to litigation, thus posing a greater strain on insurance carriers' finances. For instance, data on neurosurgical malpractice underscores the intense relationship between specialty surgeons and insurers.

According to the Journal of Neurosurgery, nearly 81% of neurosurgeons have been sued at least once, 12.3% have been sued more than ten times, and 15% reported involvement in a lawsuit that awarded at least $1 million in damages to the plaintiff. These probabilities, compounded by the increasingly commonplace occurrence of socially inflated verdicts, prompt insurers to raise premiums to prevent insolvency.

Claim severity and legal fees significantly impact insurance rates

As claim severity continues to escalate and record-high verdicts become more widespread, insurers are growing more concerned. Record payouts influence premium rates by establishing a precedent for future claims. For instance, a family in Kansas City was awarded $25 million after a jury found that an OB-GYN and hospital failed to properly handle a delivery that resulted in brain damage for the infant. While not all claims result in significant payouts, even a small subset can impact premium costs by setting legal precedents and altering negotiation strategies for future cases.

Even if a malpractice claim is dropped or settled, malpractice insurance lawsuits generate major legal expenses. The 2024 Report on the State of the US Legal Market, published by Georgetown Law and the Thomson Reuters Institute, asserts that law firm rates have been steadily increasing for over a decade, with a particularly sharp rise of over 6% in 2023. Although insured surgeons aren’t directly responsible for paying most legal fees, they still face repercussions downstream.

If my client gets sued twice but can prove that no standards of care were breached then the plaintiff does not receive an indemnity payment from the insurance carrier. However, the entire process of refuting those claims is costly – often six figures in legal defense fees, paid for by the insurance carrier. As a result, my client is now vulnerable to a rate increase to offset those losses.

Best strategies to minimize liability premiums

1. Proactively prevent claims

Medical malpractice insurance rates take into account a physician’s previous claims history, regardless of their field specialization. While a surgeon with a clean record isn’t immune to rate hikes, they’re less affected than those with a history of claims. The single most effective way to minimize your premium increase is to maintain or strive for a claims-free record.

• Stay up-to-date on current standards
  Practice within the scope of training and expand on that expertise through accredited continuing education credits. Sometimes, malpractice insurance carriers offer discounts for completing risk mitigation courses.
  
• Establish effective communication protocols
  Effective communication matters.The most frequent complaint against doctors facing lawsuits is poor communication. Strengthen your rapport with patients by going the extra mile—whether it's educating them, making follow-up calls, dedicating additional time to discuss diagnoses, or simply listening attentively. These efforts can potentially decrease the possibility of malpractice claims.
  
• Get it in writing
  Improving documentation minimizes liability. Inaccurate or insufficient records play a role in 10-20% of medical malpractice suits and undermine a physician’s defense. Fully documented patient records can deter medical malpractice lawyers from pursuing claims.
  

2. Document safety and quality improvements

• Implement safety initiatives backed by data
  In my experience, medical professional liability underwriters appreciate when a doctor provides a data-driven statement about a patient safety project that successfully mitigated risk at their practice. Citing specific examples about a new safety protocol or an infection prevention program, for example, can impact your insurance premium.
  
• Leverage your broker’s expertise
  Make sure your broker highlights any safety and quality improvements during the application process. An underwriter’s positive response to this information relies heavily upon proactive communication and an experienced broker can help navigate this relationship on your behalf.

3. Optimize staff and services

• Thoroughly screen new hires
  Fully vet any new hires for a history of bad claims. One rotten track record increases liability and will affect the entire group’s rate.
  
• Track surgical volume and insurance rates
  Examine which procedures are performed, how often, and by whom. Surgical volume affects rates, but carriers don’t often give discounts for part-time surgeons because underwriting data contends that someone who operates once a week is just as likely to be sued as someone in the groove of operating five days a week. 
• Maximize expertise
  Several of my clients have chosen to reduce their scope of practice in response to higher rates. An OB-GYN now focuses solely on gynecology because delivering babies carries the most risk. An orthopedic surgeon opted out of spinal surgery due to its higher insurance costs compared to knee or hip replacements. While this approach may cut expenses, clients also lament the subsequent loss of revenue from the high demand services that are also high-risk.

4. Know your options before you select a carrier

• Work with an independent broker with market expertise
  Before selecting a policy, thoroughly assess all viable A carriers. A reliable broker that specializes in medical professional liability insurance can conduct extensive research and secure the most favorable terms for your current scenario.Given the wide range of changes that occur over a 30-year surgical career, it's crucial to maintain open communication with your broker to express your changing practice needs.Seek strong coverage that fits your unique practice.
• Understand geographical disparities
  Premiums vary widely from state to state and from within the state itself. These variances can equate to tens of thousands of dollars a year which adds up significantly throughout a career. For surgeons looking to establish or relocate a private practice, talk to your broker about which geographical regions provide a favorable balance between surgical demand and reasonable premiums.

In conclusion

Implementing these measures can present you and your practice as a lower-risk client to insurers –yielding potentially more-favorable premiums and preferred coverage terms. Demonstrating the steps taken to reduce risk aids in reducing premiums across all surgical specialties. Alongside thorough research, prioritizing claim prevention is the most effective response to present or future trends. Regardless of your claims history, you can take proactive measures to reduce your future costs for liability premiums.

Max Schloemann is CEO of MEDPLI Insurance Services.