August 05, 2014

krwlogosmlResponse by Monte Jahnke, a Legal Expert from Kerr, Russell and Weber, PLC:

Some open their captive programs to directly employed physician staff members. Direct employment obviates several legal and regulatory issues otherwise applicable to a hospital captive covering physician risks. Non-employed independent staff physicians can access hospital captive programs but important structural and legal characteristics should be in place.

Ideally, physician risks should not be pooled with hospital risks. That can not only compound insurance difficulties within the captive but may also implicate unlawful inurement from the hospital to the physicians, and it may raise issues under federal fraud and abuse and anti-kickback laws. This is a particular concern where the program covers part time or non-employed independent staff physicians.

Some hospital programs reorganize to provide segregated accounts or cells within their licensed structures. Some merely begin maintaining separate accounts absent formal reorganization. Hospital risks are then segregated from physician risks but are part of an overall insurance strategy available to the affiliated health care providers under the captive’s licensure.

Hospital captives writing physician risks either directly write the policies or utilize a fronting carrier. This is typically a function of fronting carrier availability and pricing, and of the insureds’ ability to oversee and manage claims. Fronting carriers often provide for claims administration and defense whereas insureds in directly written programs contract with third party claim administrators.