Hospitals consider moving physician liabilities into captives

SOUTHAMPTON, Bermuda—As hospitals adopt the employment model for physicians, some health systems are moving the associated liabilities into their captives.

Health care reform and compensation models that rely on productivity have spurred hospitals to integrate doctors into their systems, Mary Gutman, managing member of the Gutman Group L.L.C., in Dayton, Ohio, said Wednesday during a session at the 2012 Bermuda Captive Conference at the Fairmont Southampton Bermuda Resort.

“Health care reform based upon quality measures and patient outcomes is the key reason,” Ms. Gutman said. “Compensation models for physicians are now taking into account not only productivity, but also how well they play in the sandbox.”

Ms. Gutman said health care systems employing physicians need to consider compliance issues, employment agreements, accurate financials of the practice to be acquired, reputation in the community, and infrastructure to manage the volume of physicians that will join the health system.

Erin Eldridge, corporate director of physician risk management at Catholic Health Partners in Cincinnati said all physicians that join the program are placed in the captive.

“We're pretty draconian on that because it's important to us that we manage that risk,” she said during the session.

The health system includes 25 hospitals in Kentucky and Ohio and has moved 550 employee physicians into CHP's captive, Ms. Eldridge said.

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CHP spent a year enhancing the physician risk management program and engaged physicians early during the on-boarding process to make them comfortable with the captive arrangement, she said.

“We had a really good claims history with the physicians,” Ms. Eldridge said. “It made perfect sense.”

For health systems considering moving employee physician liabilities into their captive, the first thing to consider is the physician’s current coverage form and the health system’s captive domicile laws, said panelist Merry Robinson, client service team leader at Brower Insurance Agency L.L.C., in Dayton, Ohio.

“You need to make sure you have the appropriate licenser,” she said. “If you have a new captive, you may want to fund more conservatively,” Ms. Robinson said, noting that when funding physicians through an organization’s captive, different variances are available based on specialties.