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Mergers & Acquisitions: 3 Things You Should Know


Examining Emerging Exposures


Before your practice decides to merge with another or sell the practice to a hospital or other practice, there are things to consider outside of the realm of malpractice insurance coverage. For example, mergers and acquisitions often lead to downsizing and layoffs, which can increase the risk of allegations for wrongful termination and other Employment Practice Liablity Insurance (EPLI)-related claims. The following is not a comprehnsive list, but just a few other considerations to discuss with your agent before your practice makes a change.


1. Some emerging implications in strategic practice growth and new risk sharing revenue strategies, such as the formation of specialty Super Groups, increased mergers, IPA risk development and ACOs include:

  • Increased patient population through expanded coverage:

>  Lack of medical Hx

>  Increasing patient flow with potential for increase in misdiagnosis

>  Managing within a population health framework

  • Blending of liability among MPL, Regulatory, Cyber Liability, D&O, Managed Care E&O:

>  Increasing RAC and HIPAA exposure and managing this at the individual

practice level

>  Cyber/Privacy and use of laptops/smart phones/home computers by

employed physicians – difficulty in adopting more stringent “corporate” use of

technology

  • Prior acts for former corporation, employees, and vicarious liability relationships

  • RAC and other billing audit exposures for prior billing, based on the type of acquisition being made and where prior liabilities may be assumed.

2. What are some of the best practices for effectively managing and coordinating these new blended organizational structures so as to minimize risk/exposure to liability? How does a hospital develop or access such services within constrained budgets and capital?

  • Aligning risk mitigation strategies with quality initiatives.

  • Creating a true enterprise risk model with evolving causes of action via integration, joint ventures, ACO(s) and pay for quality goals.

>  Develop an Enterprise Risk Management business model that brings together

underwriting/risk selection with RM/Patient Safety, claims staff and financial

staff responsible for Transfer of Balance Sheet risk.

  • Identifying revenue at risk and new standards through either bundled or capitation and determining if provider excess of loss is needed to protect the practice’s bottom line.

>  Managing new standards of care (e.g. Medicare 90 day care improvement

requirement which could impact you from a risk taking/bundled payment position).

  • EMR integration (unknown technology/altogether new to an EMR) and associated liability on merged/integrated entities

3. What are the latest tail coverage practices and strategies being utilized in the health care industry to help manage increasing physician employment?

  • “Earning” of tail over the term of the contract.

>  Example: 5 year contract, if a physician leaves after 1 year they must pay 80% of

tail; if the physician stays for 5+ years, they pay nothing and tail coverage is

provided by hospital.

  • Prior Acts Policy just for physicians added as employees to the captive and then physician begins year 1/occurrence coverage.

>  The policy can be structured as a “slot” type.

  • Determine the tax implications for purchasing tail of a newly recruited or departing physician.

How Professional Risk Can Help You Navigate Mergers/Acquisitions

Our dedicated team of agents can help your practice identify and isolate the risk of the prior and newly formed entity, ensure the newly formed structure has prior acts to manage growth, and manage departing physicians. Our agency can also ensure your insurance carrier provides coverage matched to your unique exposures and identify models to reward best practices for patient safety.