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Legal Update
When Physicians Go Bare
Scott Becker
Publish Date: October 10, 2007

Scott Becker, Esq., CPA As malpractice insurance has become extremely expensive in certain states or almost impossible to obtain, physicians have started to play the risky game of operating their practices without malpractice insurance. Generally speaking, a surgery center or hospital isn't responsible for the negligent acts of a physician. But that's only generally speaking. You can be found at fault for malpractice under two conditions:

Scott Becker, Esq., CPA\

  • if the physician is your employee or presented to the public as such,
  • or if the hospital or surgery center is found to have negligently credentialed such a physician.

This means that, if you credential a physician for a procedure he isn't able to perform appropriately or you let him do procedures for which he doesn't have the appropriate practice skills, your facility can be held liable because it has negligently credentialed the physician. For example, one hospital was found liable for the acts of a physician when it should have known from the physician's record of malpractice and other mishaps that he shouldn't be allowed to practice or perform certain procedures.

Because you can be held liable, a physician's decision to go bare, so to speak, presents issues and concerns for surgery centers and hospitals. Here's how you can assess the risks and decide whether to let these physicians practice in your outpatient facility.

Find out why
A physician might decide to not maintain malpractice insurance for several reasons, and how you act should in part depend on why he's made this decision. Expense is of course the main factor, but malpractice insurance costs might be bankrupting the physician for two other fairly common reasons:

  • Geography and specialty. Malpractice insurance can be so expensive in your geographical area or in the physician's specialty that the cost of obtaining insurance isn't indicative of the skills of or the risks related to the physician. In such a case, you shouldn't view the fact a physician doesn't have malpractice insurance as evidence that you negligently credentialed the physician.
  • Previous claims. A physician might fail to obtain malpractice insurance at a reasonable cost because of his malpractice record (in this situation, you should be extremely cautious about granting the physician privileges at your center). It's possible that the physician's malpractice record might stem from a specific procedure or type of procedure. For example, a physician might have performed many Lasik procedures, which has given rise to a malpractice problem. In such an instance, you might not let the physician have refractive privileges. Of course, this would only work in a situation where the malpractice concern is limited to a specific type of high-risk procedure.

Assess your coverage and procedures
If a physician doesn't have malpractice coverage, the likelihood increases considerably that the surgical facility itself will become party to lawsuits brought with respect to a physician's actions. That's because the plaintiff's lawyer will be looking for some way to get his client a reward. The take-home point is this: If you're going to let bare physicians practice, take extra care to assure your facility has appropriate coverage and appropriate limits.

You'll also want to determine whether the coverage will be sufficient for the procedures you offer, because malpractice exposure, especially for surgery centers, appears to focus overwhelmingly on several types of cases, such as cosmetic and Lasik procedures. To help offset the risks, you might develop blanket policies that allow only certain, fully insured physicians to perform certain types of procedures. That way, physicians without malpractice coverage will gravitate away from the services that might heighten your risk and exposure.

Limit your exposure
One answer is to designate your facility a limited liability company (LLC), which means that if the facility faces a lawsuit, only the business assets - not the owners' assets - are at risk. But if the physician in question is also an owner in the LLC, this limitation does not apply. Because LLCs haven't been around very long, there's some concern that eventually a large liability reward from a malpractice case could lead to the liability of all individuals associated with the center.

Of course, you could always refuse to let insurance-less physicians practice at your facility unless they have the appropriate malpractice coverage. Many surgical facilities strictly enforce such provisions.

Be wary
As a general rule, be extremely cautious about letting physicians practice at your facility without appropriate malpractice insurance. Your best bet is to stay clear of the potential problems involved, however small the chances seem.