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ILM Covers 4Q 2017 FINAL USE_Layout 1 10/27/17 11:41 AM Page 2 A PIAA PUBLICATION FOR THE MEDICAL PROFESSIONAL LIABILITY COMMUNITY Inside Medical Liability WWW.PIAA.US 2017 FOURTH QUARTER Will InsurTech revolutionize MPL?
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IML 4Q 2017 FRONT _Layout 1 10/27/17 12:02 PM Page 2 PERSPECTIVE “ Rest assured, as we approach 2018, PIAA is working diligently to P R E S I D E N T, B R I A N AT C H I N S O N prepare for the future. ” CHANGE AND DISRUPTION– . RESPONDING TO A NEW ENVIRONMENT T hese are challenging—but in some respects, exhilarating— ance sector, relates the evolving saga of this growing niche market. times for medical liability insurers and indemnifiers. The These developments have the potential to significantly change the changing healthcare delivery system and liability environ- manner in which insurers cover risk and do business. ment are creating uncertainty and the need for innovation Another feature in these pages discusses the complex issues at like never before. Each organization must ensure it has optimal func- stake in dental imaging, and in particular those that involve the stan- tionality today in its claims handling, underwriting, technology, and dard of care in a dental professional liability case. While this stan- other key operations, knowing full well that external circumstances dard, like so much in healthcare, may be evolving, the author provides may compel a new approach tomorrow. important guidance to help insurers and indemnifiers The products and services these companies offer consider this critical component of any claim. may need to evolve as well. This requires regularly You will also learn in this issue how one PIAA updated information regarding customers’ preferences member, KaMMCO, offers a prime example of how to and needs for their liability protections and risk take the initiative and embrace the changes in the management. healthcare delivery system and the growing need for Fortunately, there are opportunities for like-mind- more and better data. KaMMCO Health Solutions strat- ed organizations to explore these issues, such as the egy is to innovate in the field of healthcare informatics recently concluded PIAA International Conference in and quality reporting—and their experiences are prov- London that focused on the theme of “Change and ing to be both fascinating and inspiring. Disruption.” Attendees from 24 countries around the Finally, this issue features an analysis of recent world heard that change and disruption are not unique to one loca- MPL claims. The data used in this analysis is derived from the 2016 tion; they are everywhere. The issues for insurers and indemnifiers PIAA Closed Claim Comparative, which summarizes data submitted across the globe have become similar. We have found that what is by participating members in conjunction with PIAA’s Data Sharing happening in one part of the world may well have already occurred Project. In addition to other key findings, the article identifies two somewhere else—or may happen very soon. Consequently, the shar- salient trends: both the proportion of large claims and the cost per ing of information and experiences among participants is among the large claim are increasing. The impact of these developments could best ways for companies to learn and adapt in order to prosper. well be increases in premiums, as needed to cover the rising costs. This issue of Inside Medical Liability focuses on a number of As this year draws to a close, we can look back on 2017 as a topics that illustrate the power of change and disruption, and the year whose theme was “change and disruption” in the U. S. and imaginative and successful ways that PIAA members and others have around the world. The worlds of healthcare and medical profession- been responding to challenges and embracing change. al liability are exciting and challenging. Rest assured, as we The cover story of this issue, about the rapidly evolving dynam- approach 2018, PIAA is working diligently to prepare for the future ic of InsurTech products—innovations, business models, and apps and to help ensure that our members are well positioned for the being created to revolutionize traditional business—for the insur- challenges ahead. I N S I D E M E D I C A L L I A B I L I T Y 1 F O U R T H Q U A R T E R 2 0 1 7
IML 4Q 2017 FRONT _Layout 1 10/27/17 12:02 PM Page 3 Inside Medical Liability A PIAA PUBLICATION FOR THE MEDICAL PROFESSIONAL LIABILITY COMMUNITY 2017 FOURTH QUARTER contents 22 33 Up 1 4 8 11 Front Perspective Events & Calendar Observer PIAA DSP Data Snapshot Departments 12 Tech Talk Planning for Data Conversions By Martin Lippiett 17 Legislative Update 20 Case and Comment When Do Claims Expire? By Sarah Morse 46 International Perspective Addressing Unsafe Rotas 29 36 By Liz Price 49 Interview with… Pascale Carayon, PhD 54 As I See It Carole Hemmelgarn Features 57 By the Numbers 22 Cover story: InsurTech—Catching the Next Wave Has Fortune Turned Its Back on MPL Insurers? By Dr. Dietmar Kottmann and Dr. Nikolai Doerdrechter By Stephen J. Koca and Richard B. Lord 29 Feature: Dental Imaging and the Standard of Care 61 The Asset Side The Shifting Sands of Central Bank By Craig Fontaine Monetary Policy By Peter Cramer, CFA 33 Feature: Evolution of a PIAA Company 64 Last Word By Kurt Scott 36 Feature: Short-Duration Contracts—Loss Disclosures By Magali Welch, Katie Glover, and Steve Merz 40 Feature: Will Severity Increases Finally Drive Premiums Higher? By Timothy C. Mosler “But behind the bright and shiny digital future, there are some lingering questions for the industry. When it comes to MPL cover, how far is too far in the individualization and real-time adaptation of policies?” —Cover story I N S I D E M E D I C A L L I A B I L I T Y 2 F O U R T H Q U A R T E R 2 0 1 7
IML 4Q 2017 FRONT _Layout 1 10/27/17 12:02 PM Page 4 CHANGE IS COMING D O YO U H AV E T H E R I G H T TO O L S TO S U C C E S S F U L LY M A K E T H E L E A P ? Delphi Medical Professional Liability provides insurance carriers with the most advanced software solutions available today giving them the power to: • Significantly improve operational efficiencies • Enhance levels of customer service • A c h i e v e e n d - t o - e n d p r o c e s s i n g f o r t h e e n t i r e p o l i c y, c l a i m s , a n d f i n a n c i a l l i f e c y c l e • A c h i e v e r e a l - t i m e a u t o m a t i o n , v i s i b i l i t y, a n d c o n t r o l o v e r o p e r a t i o n a l p r o c e s s e s • Collaborate across the organization by providing timely and accurate information W h a t ’s i n i t f o r y o u ? • The flexibility to more quickly respond to changing market conditions • The ability to link your business more directly to your customers’ needs • A system platform built on modern technology and open architecture providing the optimal environment for acquisition integration L e t D e l p h i Te c h n o l o g y s h o w y o u h o w w e c a n t r a n s f o r m y o u r critical business challenges into measurable business results. F o r m o r e i n f o r m a t i o n , c o n t a c t u s a t D e l p h i - Te c h . c o m .
IML 4Q 2017 FRONT _Layout 1 10/27/17 12:02 PM Page 5 COMING ATTRACTIONS EVENTS & CALENDAR ■ 2018 Board Governance ■ 2018 Dental Workshop Roundtable An Actuarial Look at Loss, The Role of the Board in Mergers Premium, Expense, and Other Data and Acquisitions Trends in Dentistry/Oral Surgery When a company becomes involved in the In this session, Susan J. Forray, FCAS, MAAA, mergers and acquisitions (M&A) market, its Principal and Consulting Actuary, board of directors faces a unique set of chal- Milliman, will provide an overview of the lenges and considerations through every stage of dental professional liability insurance market- a potential transaction—from inception and place, as seen through the eyes of an industry evaluation to execution and through integration. actuary. She will use data compiled from PIAA What can board members do to ensure their carriers as the basis for an analysis and discus- role in the deal process is optimized? And how can boards add value to sion of claims trends, including both frequency and severity. minimize a deal’s risk? In this session, Victor Lopez-Balboa, Vice Ms.Forray will also provide key comparisons of loss experience Chairman of the Global Financial Institutions Group and Global between dental and other medical professional liability coverages. In Co-Head of Insurance, Goldman Sachs, will discuss why and how addition, other key data trends in dentistry/oral surgery will be deals take place, and the different cycles that impact M&A activity. He discussed, including premiums and expenses. will provide an overview of what is important to know, as a board member, when it comes to M&A, and share a case study about a recent deal that took place in the insurance sector. In addition, he will provide key information on critical board responsibilities, how to evaluate M&A opportunities, and the crucial questions directors need to ask, as a board member, when it comes to M&A activity. April 11-13, 2018 July 25-27, 2018 October 11-12, 2018 Marketing Workshop Underwriting Workshop Corporate Counsel Loews Santa Monica Beach Hotel Westin Portland Harborview Workshop Santa Monica, CA Portland, ME Portland Regency Hotel Portland, ME April 11-13, 2018 September 12-14, 2018 Dental Workshop Claims and Risk Loews Santa Monica Beach Hotel Management/Patient Safety Future PIAA Medical Santa Monica, CA Workshop Liability Conferences March 14-17, 2018 Swissotel Chicago, Chicago, IL May 16, 2018 May 15-17, 2019 CEO/COO Meeting Leadership Camp September 26-28, 2018 Marriott Portland Waterfront Hyatt Regency at Gainey Ranch Waldorf Astoria/Hilton Bonnet Creek Technology, Human Portland, OR Scottsdale, AZ Orlando, FL Resources, and Finance (THRF) Workshop May 6-8, 2020 March 15-17, 2018 May 16-18, 2018 Omni Shoreham Hotel Board Governance Grand Hyatt Washington Medical Liability Washington, D.C. Roundtable Washington, D.C. Conference Hyatt Regency at Gainey Ranch Waldorf Astoria/Hilton Bonnet Creek Scottsdale, AZ Orlando, FL I N S I D E M E D I C A L L I A B I L I T Y 4 F O U R T H Q U A R T E R 2 0 1 7
IML 4Q 2017 FRONT _Layout 1 10/27/17 12:03 PM Page 6 I WON’T STEAL YOUR DATA. Ransomware is rampant, affecting businesses in every industry. And cyber criminals are increasingly targeting small-to-midsize businesses as they know that many lack the privacy controls and IT support of larger organizations. While state-of-the-art cyber insurance is an essential component of your clients’ data security strategy, a strong policy is only part of the solution. Cyber Liability coverage from NAS Insurance includes expert pre and post-breach services to help them prepare for, and defend against, the criminals seeking to hold their business hostage. Visit the cyber experts at nasinsurance.com/cyber
IML 4Q 2017 FRONT _Layout 1 10/27/17 12:03 PM Page 7 Aon Benfield The POWER PARTNERSHIP of When you seek new paths to success, you need a partner that has a firm grasp of your business. At Aon Benfield, we build the close relationships required to propel your firm forward and gain a foothold in profitable environments. Find out more at aonbenfield.com.
IML 4Q 2017 FRONT _Layout 1 10/27/17 12:03 PM Page 8 A Achieve chieve h healthy ealth hy an and d sust sustainable ainable gr growth owth Medical Pr Professional ofessional Liability insur insurers ers oper operate ate in a challenging en environment vironment wit with h rrising ising litig litigation, ation, managing capit capital, al, and g growing rowing ttheir ness. Aon Benfield’s heir business. Benfield’’s Healt hcare team Healthcare team has the the experience experience and resources resources to to help our clients achieve achieve new and pr new ofitable g profitable rowth in evolving growth evolving areas. areas. To lear To learnn more, cont more, act Da contact vid Sulliv David an at da Sullivan vid.sullivan@aonbenfield.com david.sullivan@aonbenfield.com or visit aonbenfield.com.
IML 4Q 2017 FRONT _Layout 1 10/27/17 12:03 PM Page 9 NOTABLE NEWS AND TRENDS OBSERVER ‘It’s All in How You Define It,’ Pennsylvania-Style L ike so many states, Pennsylvania is between a rock and a hard place, budget-wise. But Democratic Pennsylvania Governor Tom Wolf has said he’s optimistic that the Republican-con- trolled legislature can produce a deal to patch a projected $2.2 billion budget gap. Wolf said he’s cutting “over $2 billion to streamline govern- ment.” This includes hundreds of millions of dollars in “cost avoid- ances” that might have materialized anyway, such as hundreds of millions of dollars in transfers from a workers’ compensation fund and a nonprofit organization created by state law in 2002 to offer MPL insurance (this is the Medical Care Availability and Reduction of Error Fund, otherwise known as “MCARE”). MCARE, controversial from the get-go, has been providing a reliable stream of news for years now. But every two years, the Pennsylvania Department of Especially toothsome in all this, though, is Governor Wolf’s Insurance is required to reassess the need for it, as Pennsylvania euphemism for “tax increases”— the term “recurring revenue” is the law mandates that the fund be closed at some point in the future, preferred usage; this refers to “a new source of money that provides when market conditions permit. The news floodgate could close a reliable cash infusion every year”—in other words, tax increases. at any moment. Source: The (Harrisburg) Sentinel, September 19, 2017 Remedies for Dull Lawyer Videos Learn from the Texas Law Hawk! F or several years now, lawyers on the law firm’s practice page and cre- have been bombarded by legal- ating separate versions for Facebook. marketing companies assuring But obviously, that doesn’t solve the them that video is the next big dullness problem. thing. And yet, video hasn’t really yield- The best answer may be to crank ed results for most lawyers. Even one of up the volume, and the hysteria, some- the pioneers of the lawyer video, New what like Crazy Eddie with his famous York MPL attorney Gerry Oginski, with “blow-outs” commercials for audio his extensive video library, typically stereos, in the heady days of the 1980s. attracts hundreds, rather than thou- For MPL, the current exemplar of this sands, of viewers. tactic is Bryan Wilson, the self- But maybe lawyers can maximize proclaimed “Texas Law Hawk.” L AW HAWK viewership of videos, by posting items like explanation videos (more popular Visit YouTube to get a taste of Wilson’s dynamic. BRYAN E. WILSON ★ ATTORNEY AT LAW than commercials), or putting videos Source: Above the Law, September 2017 I N S I D E M E D I C A L L I A B I L I T Y 8 F O U R T H Q U A R T E R 2 0 1 7
IML 4Q 2017 FRONT _Layout 1 10/27/17 12:03 PM Page 10 Who(m) Do You Trust? A credit-rating enterprise, Experian, is offering patient identifiers T he idea of unique patient identifiers is not new. But cred- claims that it-rating firm Experian says it’s ready to take it beyond combination just the idea phase. It’s offering to fix a years-long makes the patient-safety problem by leveraging its expertise from match more the financial sector. accurate than Dan Johnson, Vice President of Strategy for Experian Health, deterministic matching. notes, “If the payer uses the same unique identifier to identify Experian has worked with Congress on the Ensuring Patient Dan Johnson, and a hospital is sending them a claim, it ensures Access to Healthcare Records Act, which removes the business the accurate linking of the correct patient across enterprises.” associate status from clearinghouses, thereby allowing them to Johnson said Experian’s wealth of credit bureau data makes use protected health information under HIPAA. it the perfect private-sector innovator for patient IDs. “The credit To which we, with all due respect, would like to respond bureau is really good at matching identity,” he said. The compa- with one rather troubling word about the putative safety of the ny’s Universal Identity Manager, first released in 2016, relies on a Experian identifier system: Equifax. combination of probabilistic and referential matching. Experian Source: Modern Healthcare, September 8, 2017 They’ve Already Got Room Service Should hospitals be more like hotels? A ccording to Horst Schultze, a staff reasonable target. writer at Medical Economics, “to Here’s what healthcare pro- build trust with patients, physicians fessionals should be taking careful need to take a page out of the hos- note of, Schultze says: “Ritz-Carlton pitality industry’s playbook and do three things.” employees never greet guests with First, Schultze says, doctors need to priori- ‘hi.’ Within nine feet of a guest tize customer service and the patient experi- approaching, they smile, look the ence. Like all customers, patients have some guest in the eye, and say, ‘good fundamental expectations: Customers expect afternoon, Mr. Smith.’ This is not the product to be free of defects. They expect only welcoming; it shows all guests they are Good medicine requires more physician face- timeliness. And they expect their interaction to individually respected and valued. This warmth time with patients.” be pleasant. Indeed, a satisfied customer, says permeates all interactions.” But just like every other hypothesis, we Schultze, is one who walks away from an inter- Schultze asserts, “For doctors, that’s the say this one needs proof. And by the gold stan- action that meets these expectations. But a key. The skills of diagnosing symptoms and dard: a randomized, double-blind study. loyal customer is one who walks away from an offering treatments are not enough. Doctors Incoming patients enrolled in this (proposed) in- interaction that exceeds these expectations, should also make patients feel cared for, which depth research would be randomly assigned to because “their interaction was not just nice, it would make diagnosis and treatment easier.” a (group one) silver-tongued former employee of was caring.” And, flying in the face of the notoriously New York’s Waldorf-Astoria hotel (MD degree Schultze points out that (and this is not tight confines of what’s allowed by most health via an online med school) or (group two) a tire- exactly news to most of us) “first impressions insurance policies, there’s this, “That’s why it’s somely nasty House, MD, clone. matter.” After that, the benchmark for compar- unconscionable that the average time primary Clearly, this rigorous-type project isons is set vertiginously high: It’s the Ritz- care doctors spend face-to-face with patients is deserves funding. Perhaps Ritz-Carlton has a Carlton that’s invoked. Something like a 21 minutes annually. How can patients trust foundation? Marriott, for example, might have made a more someone they only see for a few minutes? Source: Medical Economics, September 11, 2017 I N S I D E M E D I C A L L I A B I L I T Y 9 F O U R T H Q U A R T E R 2 0 1 7
IML 4Q 2017 FRONT _Layout 1 10/27/17 12:03 PM Page 11 That flash of brilliance you see? It’s doctors and health care innovators uniting as a powerful source for good. Here, the dream eam of healing the sick is as pure pur as it ever was. Here, e, the champions of the healers know they they, too, have a champion. Constellation is a growing growing partnership of mutual liability insur insurers ers and health service companies. ogether w To Together we’re stronger.. And together we’re we’re embarking on a mission to change the futur future of health care. e about our vision, visit Constellatio To learn more ellationMutual.com.
IML 4Q 2017 FRONT _Layout 1 10/27/17 12:03 PM Page 12 FORESIGHT PIAA DSP PIAA DATA SHARING PROJECT CARDIOVASCULAR DISEASE In the PIAA Data Sharing Project, cardiovascular disease continues to be cited frequently among patient outcomes leading to a claim or lawsuit. Approximately 7,000 claims and lawsuits closed between 2011 and 2015 were identified, of which 26% paid $416 million in total indemnity, with an average indemnity payment of $391,059. For more detailed information, see the PIAA MPL Specialty Specific Series reports or contact P. Divya Parikh at dparikh@piaa.us. © 2017 PIAA. All rights reserved. This page may not be reproduced or distributed without express written consent from PIAA. I N S I D E M E D I C A L L I A B I L I T Y 11 F O U R T H Q U A R T E R 2 0 1 7
IML 4Q 2017 FRONT _Layout 1 10/27/17 12:03 PM Page 13 TECH TALK With the best of intentions, some BY MARTIN LIPPIETT changes to the new Planning for Data system will likely occur throughout Conversions the life of the project. possible, and it will usually be on the critical path of procedures needed prior to going live with the new system. The plan should be realistic about access to information on the source of the data: Is it well documented (it rarely is) and, if not, are IT staff available to help out with understanding the con- tents and functionality of the legacy system? For initiation of the work, the target software must be in a fixed state. If the new system is being designed or customized, the conversion cannot be started fully, because the work being done makes the destination of W the data a moving target. With hen an insurance company the old system may be looser, and the entity the best of intentions, some changes to the new sets about the implementation relationship definitions in the new system may system will likely occur throughout the life of of a new enterprise software not be compatible with those in the older lega- the project; the project plan should address application, the question of cy application. But to the business users, how they will be coordinated with the how to approach the transfer of data from the the data stored in the legacy system remains conversion. old to the new software arises. In fact, a “data critical to their business functions and The method of balancing and validating conversion” has to be planned as a separate decision-making. the conversion should be documented. In and parallel exercise to the implementation of The planning process will need to identify, effect, this is a test plan. A common issue the new software. among other things, the staffing requirements, occurs when reports from the legacy system Data conversions are often the most com- the hardware and software that will be used, are used to balance against the new system; plex and expensive components of a new sys- the test plan and test criteria, risk factors, and but they have filtering or other calculations tem project, and almost without exception the change control. embedded in them, which means that they are most risky and unpredictable task. The data not a 100% accurate representation of the structure and complexity of the legacy system Steps in the process database. are likely quite different from the new applica- It should be assumed that the process will be Is the data to be converted at a specified tion being implemented, the type of database iterative, with each conversion revealing prob- point in time, so that the new software can be may be different, the data integrity checks in lems and issues that must be dealt with before the system of record from that point forward? another pass is made. For that reason—and This is the preferable way to do it—phasing Martin Lippiett is Vice President of Business because every conversion has unknowns in the conversion is itself more complex, and Consulting, Delphi Technology, Inc. it—the conversion should begin as early as requires that the company work with and I N S I D E M E D I C A L L I A B I L I T Y 12 F O U R T H Q U A R T E R 2 0 1 7
IML 4Q 2017 FRONT _Layout 1 10/27/17 12:03 PM Page 14 merge data from two systems until the process ■ Data is in the legacy system, but there is when the conversion is run. is completed—not an ideal situation. no place for it in the new system. Perhaps the most critical decision con- The plan must consider the various ■ Data is needed in the new system but is cerns which of the data should be converted, dependencies within the insurance business. not available in the legacy database. Can the and this is where the business users’ opinion Claims are events that happen under a policy, data be derived, or must it be entered? becomes important. Just because the data so the policy conversion should be done before ■ The “same” data is present in more than exists doesn’t mean that it should be moved to the data pertaining to claims. Name-and- one place in the legacy system. Which should the new system. There is a belief that if you address records will be needed for creating be used? can convert one year of data, you can convert policies, so they should be completed before ■ The usage and code structure of a particu- 20—the only difference is machine time. This the policy conversion. If there is more than lar field is different in each system; for exam- is a fallacy; the more data there are and the one source for the data, that adds complexity to ple, the legacy system may employ 80 codes for older it is, the greater the likelihood of anom- the mapping and converting process, and it the various specialties, but the new system alies and errors that can bog down the process. also has a bearing on dependencies. And if uses 120. In thinking about what to convert, consider the there are plans to make other infrastructure These and many more questions will arise following questions: changes (e.g., new hardware, new operating that cannot be answered by IT. Then, once the system, or a new database) during the time question has been answered, the next decision ■ Is the legacy data consistent, going back window of the conversion, the chain of will be about how to correct the data. There are through the years? If, for example, a prior con- dependencies can become even more complex, generally two options: make corrections in the version was done 10 years ago, is the data prior and also a risk factor. legacy system if that is possible (this is the pre- to that point in the same format and quality as The user should be consulted throughout ferred approach), or do it in an outside source. the data after it? the conversion project, for testing and for deal- An “outside source” might be an Excel spread- ■ What is the business- and regulatory- ing with questions as they arise. As data is sheet generated by IT wherein the anomalous based- need to retain the data? Paid receiv- mapped from the legacy system to the new records are listed with enough information that ables have very little value after the few software, many decisions will be needed to they can be identified and with sufficient space months, when they may be required to support address what should be done in the event of to enter the required data. These spreadsheets an inquiry. Perhaps the company had a line of scenarios like these: are then merged with the other incoming data business that was discontinued some years MPL Expert Over 5,000 attorneys, paralegals, and claims professionals accessed the EWD in 2016 Witness Database The MPL Industry’s First Choice for Their Defense Attorneys Examination of Plaintiff Experts Features include: • Testimony on over 4,000 experts • Over 7,000 transcripts • Not just a transcript repository but focused analysis on the experts past testimony • Analytics reports of the expert’s testimony “opinion” across all transcripts to compare past testimony to the case you are working on right now • Online access for all authorized users • Order as many transcripts as needed at no additional cost • Flat monthly fee which covers all of your defense attorneys, paralegals, and claims professionals for access to the database What participating members have said: • Paralegal – “It was wonderful and so easy to use. Thanks for the help.” • SVP Claims – “This is well on its way to becoming the premier medical malpractice defense expert witness database in the world.” • Attorney – “Thank you so much. I really appreciate your help.” • Paralegal – “Wow, thank you.” For an online Internet demo which takes only 30 minutes, contact dcostello@secondchair.com or call 239 410 5797 I N S I D E M E D I C A L L I A B I L I T Y 13 F O U R T H Q U A R T E R 2 0 1 7
IML 4Q 2017 FRONT _Layout 1 10/27/17 12:03 PM Page 15 TECH TALK Just because ago. Is that data needed? the data ■ How far into the future do policy records exists doesn’t need to be preserved to support late-reported claims and other transactions? And is there a mean that it way to add policy data for the rare late claim should be that may come in instances when there is no converted policy for it? moved to the ■ Does the business require separate records new system. for each and every claim payment and reserve transaction, or can they be aggregated by month, by quarter, or by year—depending on Migration occurs at a point in time when weeks; that underscores the need for a thor- what reporting needs they have to support? all of the testing has been completed and the ough job of data mapping and cleansing, and ■ Is there a data warehouse that can be used conversion process is deemed ready for placing making a committed go/no-go decision when to preserve some of the legacy data for which the the data into production. If the volume of data the conversion is done. It is also recommended business cycle has been completed and is unlike- makes it possible, the ideal would be to freeze that a test migration be done beforehand to ly to be needed for a transaction or an inquiry? input to the legacy system, say, on the Friday check everything as if it were being done for If the data needed for reporting only can be evening of a three-day weekend, run the con- go-live, and also to get an idea of the timing of warehoused, that generally is a simpler process versions, and balance the data in time for the the conversion process. And even with a well- than converting it for doing a transaction. return to work. If this cannot be done, and the done conversion, it should not be surprising if ■ Is it more cost-effective to “convert” some legacy system must still be used, the data some data cleanups are needed during the first data by manual entry? For example, for rate entered into it since the point of the conversion few months of using the new system. tables or name-and-address records for some will need to be recorded and then reentered in entities, it may be cheaper to manually enter the new system—a risky process. Few compa- nies can revert to the old system after the con- For related information, see the data than to write software for what is a www.Delphi-Tech.com. relatively small volume of records. verted data has been in production for days or SOLUTIONS TO MEET YOUR NEEDS SOLUTIO US Premium Finance hospitals of all sizes, just your premium fin We are committed t • Increased flexi your clients alm credit cards, AC • Hard cost elim and collecting p related issues re • Competitive ra Paul Lunney Lunney, y, SVP Director Dire of Programs and National Accounts PLunney@USPremiumFinance.com PLunney@USPr emiumF | 215.498.2888 William J. V Villari, illari, Pr President BVillari@USPremiumFinance.com BVillari@USPremiumFin esi | 678.985.5960 US PREMIUM F I N A N C E ® I N S I D E M E D I C A L L I A B I L I T Y 14 F O U R T H Q U A R T E R 2 0 1 7
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IML 4Q 2017 FRONT _Layout 1 10/27/17 12:03 PM Page 18 LEGISLATIVE UPDATE BY MICHAEL C. STINSON PIAA Public Policy: It’s Not All about Congress A t times, it must seem to some PIAA members that the Association's advocacy activities focus exclusively on Congress. After all, as I noted in a previous article about our Government Relations Survey (“Helping PIAA to Help You: The Biannual Government Relations Survey,” Inside Medical Liability, Second Quarter 2017, page 25), that's the number-one thing our members say they expect from our public policy efforts—to interact with Congress. As a result, we are your eyes and ears on Capitol Hill, with a full-time focus on making sure that federal policies benefit your company, or at the very least, don’t harm it. “Full-time, ” however, doesn’t mean exclusive, and so we work on many issues that are outside of the congressional purview. discussed. Through our newsletters and con- and revising the briefs to strengthen their State legislation ference calls, we provide updates on hearings legal arguments, to simply providing a Recently, PIAA has substantially increased its held on specific legislation, committee activi- national presence on a critical liability issue. state legislative activity, recognizing that state ties, and votes. We also compile annual lists Once decisions are handed down, we review legislatures play a more significant role in of relevant state legislation that has been and analyze the opinions, to help you deter- insurance issues than Congress. One enacted, to help you keep up with what is mine how best to defend similar cases, approach we take is to track and report on happening in other states. should they arise in the state(s) where you legislative initiatives that could have implica- Once bills become law, however, we also do business. tions beyond the state in which they are being track state judicial activities, to monitor the Beyond analysis, we also provide more status of state tort reforms and other medical direct support, when requested, on behalf of Michael C. Stinson is professional liability (MPL) related statutes. individual states’ legislative advocacy efforts. Vice President of When invited by a member company, we also In recent years, we’ve coordinated with PIAA Government Relations participate in amicus briefs. PIAA engage- members’ efforts to defeat no-fault-style leg- and Public Policy at ment ranges from providing data to support islation, provided data to help enact damage PIAA; mstinson@piaa.us. arguments made in the brief, to reviewing caps and other tort reforms, and created I N S I D E M E D I C A L L I A B I L I T Y 17 F O U R T H Q U A R T E R 2 0 1 7
IML 4Q 2017 FRONT _Layout 1 10/27/17 12:03 PM Page 19 LEGISLATIVE UPDATE model legislation (most recently, to promote of our industry are protected. “apology” protections and support prohibi- While the Federal The National Practitioner Data Bank tions on “phantom damage” collections) to (NPDB) has long been a concern to many provide a starting point for those looking to Insurance Office does not PIAA members, and thus PIAA has main- enact new MPL laws in their state(s). tained close ties to the NPDB leadership. For have any regulatory many years, PIAA served on the NPDB’s NAIC/state regulation authority, it has been board (until the board was disbanded in favor As any insurer knows, however, states’ regula- of a less formal, open communication process tors can have a greater impact than their leg- charged with monitoring for NPDB stakeholders). Since then, PIAA has islatures on MPL companies. PIAA regularly stayed in regular contact with NPDB—sub- the insurance sector. As engages with the National Association of mitting formal comments on proposed rule Insurance Commissioners (NAIC) to stay on such, PIAA monitors the changes, inviting NPDB leaders to speak at top of all the latest developments in the insur- workshops, and arranging meetings between ance regulatory world. Some of this engage- agency and cultivates ties PIAA members and the NPDB hierarchy. ment involves having a presence at NAIC to its staff to ensure that Other agencies have, only more recently, meetings; monitoring committees, working begun work on issues relevant to PIAA mem- groups, and task forces; and interacting regu- the inevitable mission bers, and PIAA has responded by engaging larly with regulators and their staffs. them directly. The Agency for Healthcare At other times, however, it’s critical for creep will not encroach Research and Quality (AHRQ) was in the PIAA to go deeper. One recent example of onto MPL issues. process of developing a Communication and this is the NAIC’s MPL Working Group. Optimal Resolution (CANDOR) program to As of late, the MPL Working Group has address MPL claims when PIAA intervened to focused on state closed-claim reporting with the working group to develop a survey of address a number of concerns. Among PIAA’s requirements. PIAA has utilized its expertise states with reporting requirements. We are recommendations were these: that insurers in claims reporting (thanks to the PIAA Data hopeful that the results will help regulators should always be consulted when such a pro- Sharing Project) to help advise the working gain a better understanding of whether or not gram is developed and/or implemented, and group on key areas that need to be considered these reporting requirements actually result that flexibility was a key requisite to accom- when addressing this issue. We’ve stressed in useful information for the states. modate local and regional differences in the We also help address state-specific regu- delivery of healthcare. The final “tool kit” for latory matters. Earlier this year, the Virginia such programs, as released by AHRQ, includ- PIAA engagement ranges State Corporation Commission issued pro- ed those important concepts. posed new rules regarding unfair claims-set- While the Federal Insurance Office does from providing data to tlement practices. While the impetus for the not have any regulatory authority, it has been change was allegedly to align the rules more charged with monitoring the insurance sector. support arguments made closely with NAIC model acts, in reality, the As such, PIAA monitors the agency and new proposal deviated from the models in cultivates ties to its staff to ensure that the in the brief, to reviewing numerous ways. Working with some of our inevitable mission creep will not encroach and revising the briefs to companies in the state, we developed a set of onto MPL issues. recommended changes to the proposed rules. strengthen their legal In the end, the commission accepted several Conclusion of our recommendations, thus changing Government relations extends well beyond arguments, to simply pro- requirements for occurrence policies, provid- Congress; it encompasses the entire gamut of viding a national presence ing more time to respond to a claim, and loos- governmental entities. For this reason, PIAA ening the requirements for explaining a remains committed to interacting with gov- on a critical liability issue. claim denial. ernmental organizations in all varieties and at all levels of government. If there’s an aspect of Federal regulations government that could affect your business, that, before taking any action, the NAIC needs While the federal government doesn’t directly we are committed to addressing it, whether to have a thorough understanding of what regulate the insurance industry, it can have a that means acting on your behalf directly, or states are already doing in this regard, and significant impact on those providing MPL supporting your own strategic public policy Superintendent Franchini of New Mexico (the coverage. Because of this, PIAA engages fed- initiatives. PIAA’s Government Relations working group chair) has agreed. eral agencies in a variety of ways to ensure objectives are designed to reflect your needs, With that in mind, we’ve worked closely that your voice is heard, and that the interests and we look forward to doing that. I N S I D E M E D I C A L L I A B I L I T Y 18 F O U R T H Q U A R T E R 2 0 1 7
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IML 4Q 2017 FRONT _Layout 1 10/27/17 12:03 PM Page 21 CASE AND COMMENT BY SARAH MORSE When Do Claims Expire? D espite your policyholders’ best efforts to provide conscientious care, they may at some point find themselves the defendant in a lawsuit. Even if they have been involved in litigation before, they will likely have many questions for their attorney. One of the first they should ask, and one of the first elements of a case every lawyer will evaluate, is, “Has the statute of limitations expired?” Statutes of limitations are passed by legis- latures and are written laws that establish a time limit for a claimant to file a civil lawsuit. If a claimant does not file suit before the expira- tion of that time limit, he will be barred from bringing the claim. The time limit for filing suit depends upon: (1) the nature of the claim, and (2) the date when the claim accrued, or came into existence. The nature of a claim is impor- tant because there are different time limitations the rendering or failure to render professional arises, or, in other words, on the date a for different types of claims. The person bring- services by a health care provider” must be claimant sustains an injury, when the ing suit, however, is not allowed to frame a per- brought within two years. (K.S.A. 60-514(c)) claimant learns of the injury, or when a sonal injury claim as a contract claim merely to In Minnesota, however, a claim must be claimant should have discovered the injury. avoid the time limitation. brought within four years. (M.S.A. § (See, for example, K.S.A. 60-513(c) (statute of In the context of medical professional 541.076(b)) Some jurisdictions also have sep- limitations commences when “the fact of liability (MPL), arate deadlines for filing wrongful death injury becomes reasonably ascertainable to claims are frequently claims. In Maine, for example, a claim for the injured party.”); Fla. Stat. Ann. § 95.11 brought under theo- wrongful death must be brought within two (action must be commenced “within two ries of medical negli- years, whereas claimants have three years to years from the time the incident. . .should gence or wrongful make a claim for MPL, or professional negli- have been discovered with the exercise of death. Statutes of gence. (Me. Rev. Stat. tit. 18-A, § 2-804 cf. Me. due diligence.”) limitations for med- Rev. Stat. tit. 24, § 2902) ical negligence and Determining the second element of the Exceptions—longer Sarah Morse is wrongful death vary statute of limitations—the date when the time limits with Goodell, by jurisdiction. For claim accrued—is not always a straightfor- There are circumstances, however, where the Stratton, Edmonds example, in Kansas, a ward exercise. A cause of action accrues as statute of limitations time period may be & Palmer, LLP. case “arising out of soon as the right to maintain a legal action tolled, or held in abeyance, meaning that a I N S I D E M E D I C A L L I A B I L I T Y 20 F O U R T H Q U A R T E R 2 0 1 7
IML 4Q 2017 FRONT _Layout 1 10/27/17 12:04 PM Page 22 plaintiff may file suit outside of the initial gence should have known, or received notice plaintiff filed suit contending that a doctor deadline discussed above. There are three in writing of the existence of the injury or failed to diagnose her scoliosis at age 3, her major instances where the statute of limita- death for which damages are sought in the case was dismissed pursuant to the statute of tions may be tolled. action, whichever of such date occurs first, repose. (Bonin v. Vannaman, 261 Kan. 199, First, the time limit for minors to file but in no event shall such action be brought 929 P.2d 754 (1996)). suit is typically extended. If a claimant is a more than 4 years after the date on which Unfortunately, it is not always a straight- minor when the injury occurs, he is typically occurred the act or omission or occurrence forward exercise to figure out when the allowed to bring suit within some specified alleged in such action to have been the cause of statute of limitations will expire in any partic- period of time after reaching the age of such injury or death. (735 Ill. Comp. Stat. Ann. ular situation. If healthcare professionals majority. Second, fraudulent actions taken to 5/13-212) practice in a state that has a statute of repose, deceive the patient from discovering the they may have some peace of mind to know physician’s malpractice may also result in a Similarly, although Georgia’s MPL statute of that there is indeed a final end date after tolling of the statute of limitations so the limitations is two years “after the date on which a claim may not be brought. If they action does not accrue until the patient dis- which an injury or death arising from a negli- have questions about their state’s laws with covers the fraud. Finally, if the statute begins gent or wrongful act or omission occurred,” it regard to statutes of limitation, they should to run when the injury is reasonably ascer- is also true that, “in no event may an action contact their MPL insurer’s risk tainable, it does not necessarily mean actual for medical malpractice be brought more manager or attorney to find out what the knowledge of injury, but, rather, can mean than five years after the date on which the state’s limitations are. when the claimant has the obligation to rea- negligent or wrongful act or omission Even if they know their state’s limita- sonably investigate available sources to dis- occurred.” Ga. Code Ann. § 9-3-71. tions, physicians should always contact their cover an injury. Unsurprisingly, there may For an MPL cause of action, the statute risk manager or insurer as soon as possible if well be conflicting evidence as to when the of repose begins to run from the time the sued; they shouldn’t rely upon their own cal- fact of injury became reasonably ascertaina- adverse event occurs, regardless of the negli- culations. An attorney will undoubtedly eval- ble. In some instances, if there is conflicting gent doctor’s continued treatment of the uate whether the statute of limitations has evidence about when the injury was ascer- patient. For example, although minors are expired, but will only have a short window tainable, the question is submitted to a jury allowed to bring a cause of action for MPL of time for filing an answer to the petition to determine when the cause of action within a certain time after reaching the age of and raising the issue on the healthcare accrued. majority, the statute of repose bars an action professional’s behalf. Healthcare professionals may feel that for MPL by or on behalf of a minor that is with all of these exceptions, particularly with commenced more than eight years after the the knowledge aspect, there is potentially no time of the act giving rise to the cause of For related information, see www.gseplaw.com. end to when a claimant may bring suit. Some action. Thus, in a case where an 18-year-old legislatures have addressed this uncertainty through laws known as “statutes of repose.” A statute of repose is not related to the accrual outtakes of (knowledge of) a cause of action. Instead, a Value of Patient-Reported Outcomes statute of repose bars a litigant from bringing A “ suit a fixed number of years after a particular s comfort action by the defendant, even if the time with period ends before the plaintiff has actually patient- suffered any injury or knows about the reported out- claim. For example, Illinois’ statute of repose comes (PROs) reads: has grown, feed- back has [N]o action for damages for injury or death increasingly underscored that clinicians find collecting PROs against any physician, dentist, registered to be beneficial rather than burdensome. Evidence from nurse or hospital duly licensed under the laws of this State, whether based upon tort, or experienced users suggests PRO collection is not only feasi- breach of contract, or otherwise, arising out of ble and good for clinical care but also may enhance physician patient care shall be brought more than 2 satisfaction and prevent burnout.” years after the date on which the claimant — New England Journal of Medicine, October 5, 2017 knew, or through the use of reasonable dili- I N S I D E M E D I C A L L I A B I L I T Y 21 F O U R T H Q U A R T E R 2 0 1 7
ILM 4Q 2017 Features _Layout 1 10/27/17 1:00 PM Page 1 C O V E R S T O R Y BY DR. DIETMAR KOT T M A N N A N D DR . N I KOL A I DOERDRECHTER InsurTech– Catching the Next Wave As insurers, we are no strangers to a tightly competitive marketplace. But the upside to intense competition is that, in many instances, it motivates a culture of innovation, as players scramble to turn fresh thinking into ways they can improve their business models. N owadays, a great deal of business transformation is fueled try merely experiencing a bump in the road? And if InsurTech players are by technology advancements, known in our sector as going through a major shakeout, surely more successful new models are “InsurTech.” This is the term used to describe the blending waiting in the wings? For medical professional liability (MPL) profession- of new and multi-faceted digital technology with the insur- als, there are several clues that could help them stay ahead of the curve. ance industry. At first glance, there is a myriad of InsurTech players, clambering As expected, there has been a considerable buzz about InsurTech for market share and boasting of an enormous array of products and among founders, investors, and incumbents. After a slower start, as services. This can be daunting for insurance professionals and their compared with other industries, the InsurTech sector has seen some customers as well. To address this, in 2017 Oliver Wyman published a serious investment since 2014, both financial and strategic. 2015 was report, “InsurTech Caught on the Radar: Hype or the Next Frontier?” in the year of peak investment volumes and jaw-dropping “Z” mega-deals partnership with InsurTech investor Policen-Direkt. (namely, ZhongAn and Zenefits), with deal numbers still rising well We took a structured and logical approach to assessing the global into 2016 and 2017. InsurTech landscape, identifying a number of emerging industry pat- Yet, there are distinct signs of the end of the honeymoon period, terns. This was achieved by painstakingly gathering data from more with cracks starting to show. This year, several InsurTech players have fall- than 1,000 InsurTechs and other relevant players, such as FinTechs, en short of their original plans, and others have found themselves strug- that are currently active within the insurance space. Some of our key gling to gain traction. Is this the end of InsurTech hype—or is the indus- findings could offer some valuable insights for MPL practitioners. Dr. Dietmar Kottmann is a Partner, Oliver Wyman, and Dr. Understanding the InsurTech universe Nikolai Doerdrechter is Managing Director of Policen Direkt. Within the fast-moving world of InsurTech, there is no magic formula I N S I D E M E D I C A L L I A B I L I T Y 22 F O U R T H Q U A R T E R 2 0 1 7
ILM 4Q 2017 Features _Layout 1 10/27/17 1:00 PM Page 2 that will guarantee survival or success. The first wave of InsurTechs gen- Segment 3—“Operations.” In this segment, we looked at how players erated a lot of activity, but little real disruption. This initial wave now have developed innovative offerings to operate insurance-based products appears to be coming to an end. and services, covering new ways to enable and run insurance businesses. We now anticipate a second wave of InsurTechs, which are savvier, Here we broke our findings down into five business model categories. more creative, and no doubt more ambitious. They have the potential to Covering approximately 40% of InsurTech players in our database, truly change the way insurers cover risk. The question is: how will the the activity level and strategic assessment of the companies in the insurance industry respond? In our report we mapped players’ activity, Operations space are relatively well matched. Digital Sales Enablers and organized them into 19 business model categories, within three appears to be the most overcrowded category in this segment. In con- segments: Proposition, Distribution, and Operations. trast, the category “Underwriting” has more white space, and, therefore, far less competition. Segment One—“Proposition.” Today, as never before, organizations are developing innovative offerings of insurance-based products and Movements in the InsurTech universe services. Table 1 shows six business-model categories, and examples of InsurTech has fueled widespread change across the entire insurance players that use these models. industry, but if you look at the results in context, some interesting pat- When we crunched the numbers in our database, we found that terns emerge. In the overcrowded areas, one common factor is that about a fifth of the total field of players are active within this segment. these resemble digital models that have worked in other industries. Comparing activity level with strategic assessment, two categories Examples include e-commerce (intercepting customer searches), (Situational and Community Based) appear to be overcrowded. launching digital versions of existing businesses, cutting large tradition- Here, we expect to see a shakeout of players, possibly including the al businesses into digital pieces, or using digital communities. demise of some well-known names. This represents the end of the These models clearly have their limitations for insurance, as insur- first wave. ance typically offers low-interest products. Hence, business models that Conversely, in the other three categories, From Insured to require active engagement from customers—known as “pull”—will Protected, Risk Partner, and Digital Risk, we see a lot of white space experience challenges. This is a core problem for many of the models remaining. This offers ideal ground for the new and ambitious con- copied from other industries, as they only work in the areas with active tenders from the second InsurTech wave to gain traction. pull. Auto insurance is a good example of this. Some similarities can also be seen in the areas with “white space,” i.e., Segment Two—“Distribution.” Reinventing how insurance-based room for growth. Here, they benefit from one of the most basic develop- products and services are sold in the future will no doubt impact the ments associated with the digital revolution, namely, the evolution of suc- bottom line. In this segment, we examined those business models that cessful business models from offering a product, to providing a function, are taking advantage of new ways to sell products and services to con- and one step further to solving a real need. Take life insurance, for example. sumers. Here we identified eight business model categories. While most of us are worried about risks in life, many people have a nag- Players within the Distribution segment account for approximately ging doubt about whether these insurance products will really deliver what 40% of all the InsurTechs listed on our global database. Here, two cate- they need, in times of loss. Closing that gap in perception is a major preoc- gories (Price Comparison Websites and Business to Consumer Online cupation for the second wave of enterprising models, which are now emerg- Brokers/Value Comparison Websites) appear to be overcrowded. Again, ing. Their primary focus will be uncovering new ways to engage with their we anticipate that a number of players will drop off the radar, as part of clients, thus evolving away from merely offering the classic insurance a shakeout. In three categories (Affiliate Integration, Corporate “product.” Up to now, such high-engagement models have tended to be very Platform, and Financial Partner), we believe there is still ample white employee intensive and hence very costly. Consequently, they were only space; in other words, growth potential. available at the high end of the market. Through digitalization, these could be opened up to the mass market. Figure 1 Table 1. Business Models: Proposition shows some examples. Current Strategic Risk Model Tagline Example Low Cost “We are the price leader for our target Microinsure; BIMA Activity Level Assessment What does customers” this mean for Situational “We provide instantaneous short-term Cuvva, MPL? cover for your current needs” insuremyrentalcar.com Community “We use community mechanisms to Teambrella, Banmahz, As a market sector, it is Based lower the cost of sales or risk” Baobaoji well understood that From Insured to “We not only insure you but also protect Oscar, Biovotion, eKincare Protected you” MPL is a type of insur- Risk Partner “We not only provide insurance products, Getsurance, TikkR ance cover, with higher but ensure you have exactly the right than average levels of cover for your individual situation” Digital Risk “We cover risks that come with digital Assurely, Cloudsurance customer engagement, technology or digitally enabled models” as compared with I N S I D E M E D I C A L L I A B I L I T Y 23 F O U R T H Q U A R T E R 2 0 1 7
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