Chapter 2: How Insurance Can Save Your Medical or Healthcare Practice Millions
Part 1: Malpractice Insurance for Healthcare Professionals
As a healthcare practitioner, you're probably all too aware of the horror stories and devastating payouts that can result from medical malpractice suits. For example, take the case of a Florida woman who was given too many drugs to stimulate labor. Her unborn son was starved of oxygen, and as a result, was born with cerebral palsy. In 2012, a Florida House of Representatives panel approved the boy's $31 million claim , making the landmark case the largest payout in the state's history.
Though the case is exceptional for its staggering price tag, it's a perfect example of just how high the stakes are when you're responsible for a person's health. A study funded by the RAND Institute of Civil Justice found that the average amount paid on a malpractice claim by the defendant was about $275,000. For a pediatric claim, the average was more than $520,000.
$275,000 = average payout on a malpractice claim.
When you're a sole proprietor or the head of an LLC, that amount can be enough to shut down your practice for good if you don't have adequate Malpractice Insurance. Malpractice Insurance, also known as Professional Liability Insurance and Errors & Omissions Insurance, protects you when you're sued for mistakes or errors in your work. It covers legal defense costs, settlements or judgments, expert witness fees, and more.
Malpractice Insurance can cover lawsuits alleging your practice…
- Failed to adhere to accepted standards of care.
- Made mistakes or oversights while delivering services.
- Provided shoddy or incomplete work.
- Failed to obtain informed consent.
- Was professionally negligent.
Say, for example, you own an optometry practice. You evaluate a child during a routine eye exam and prescribe a pair of corrective lenses. But down the road, the girl's pupil turns white, and after the child's parents consult a specialist, they find the cause of the ailment is retinoblastoma. Turns out, you missed a few opportunities to properly diagnose her condition. You could have performed a dilated fundus examination using binocular indirect ophthalmoscopy. And because she was a new patient, the accepted standard of care is to perform a routine dilation. The parents decide to sue your practice for $1 million for the ongoing medical treatments their daughter will have to undergo due to your misdiagnosis.
According to a study by Johns Hopkins University School of Medicine , such a scenario could happen to your practice. The researchers found that the most common allegations associated with malpractice payouts were diagnosis-related, clocking in at 34.2 percent of the cases they reviewed.
34.2% of malpractice payouts are diagnosis-related.
And although medical malpractice claims are among the least common tort cases (according to the National Center for State Courts (NCSC), only 2.8 percent of all civil torts are medical negligence cases), they are the most costly. (For a full rundown of the cost of malpractice cases by profession, be sure to check out the National Practitioner Data Bank's website .) That's why it's imperative to protect your practice with adequate coverage as soon as its doors open so you don't have to face the high cost of litigation on your own.
Medical malpractice cases are the most expensive civil torts.
Next: Malpractice Insurance and Claims-Made Coverage: Special Notes