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Hospitals and Large Groups Bet on Slot Coverage for Flexibility, Predictability and Savings
By David Johnson, CPCU
Underwriting Manager
The trend toward physician
employment has
significantly changed the
landscape of physician
practices and produced
two significant subtrends
that hospitals and large groups have had to come to
grips with. First, institutions and practices are increasingly relying
on part-time physicians to optimize service offerings. At
the same time, because more and more physicians are no
longer invested in the business of their practice, turnover of
employed physicians is a reality these organizations are facing
with increasing frequency.
In this light, it makes more sense than ever for hospitals and
large groups to take advantage of a unique option offered by
Medical Mutual: Slot Coverage. Slot coverage is unique because
it allows the employer to insure a position as opposed to a single
named physician. This provides significant benefits to the
practice group in flexibility, predictability and cost relative to
the traditional method of providing coverage.
All for One and One for All
As an illustration, we will use a Family Practice Slot that
accommodates the coverage needs of a group practice with several
clinics, all staffed by four part-time physicians. Because all
are family practice specialists, (the same specialty is a prerequisite
for a shared slot), they can be insured within a single “Slot,”
each working a set number of hours per week (in this example,
10 each) up to a maximum of 40.
As the table illustrates, the cost difference is dramatic in all
three states. And the one concern with slot coverage is very
manageable. With the traditional form of coverage, each
physician enjoys his or her own limit of coverage. With Slot
coverage, the physicians insured in a single Slot share a limit
of coverage.
If the providers work together frequently, there is a higher
likelihood that they will treat the same patient and be named
together in a suit. In this scenario, they would share the single
limit of $1 million. In contrast, were the group to pay the
higher premium for each physician under a traditional policy,
each would have $1 million of coverage for the claim. The solution
is to limit or avoid, if possible, situations where providers
covered by the same slot work at the same time.
Turnover and The Tail Advantage
Beyond the premium cost advantage noted above, a major benefit
of the slot policy structure is the manner in which it handles
an Extended Reporting Endorsement (Tail Coverage). Under the
Traditional form, every time a physician terminates coverage an
additional premium payment is required to secure the Tail Coverage.
The Slot coverage form alleviates this immediate need for
Tail Coverage. When a physician terminates his or her employment,
Medical Mutual maintains their retroactive and cancellation
dates within the Slot. This means, the departed physician is
still covered for the care they provided while employed by you
and there is no requirement to purchase Tail Coverage for this
physician as long as the slot remains open.
When a physician leaves a Slot, it creates a vacancy to be
filled by that provider’s replacement. The premium for the
coverage has already been paid, so the transaction is merely a
matter of approving the new physician for coverage and processing
the change to the policy by placing the new physician
within the Slot.
The Slot coverage treatment of Tails adds a significant cost
savings component, which is a direct advantage over the Traditional
structure. In our example the policyholder would save
$25,909 in Maine ($44,127 in New Hampshire and $27,499
in Vermont). The higher the turnover rate in a given Slot position,
the more the savings add up.
The only times a Tail is required under the Slot coverage
option are when the policy using the Slot coverage is cancelled,
or if a Slot cycles through an entire policy year unoccupied or
vacant. Based on our Family Practice example, the cost of a
mature Full FTE Slot Tail would be $10,281 in Maine
($17,510 in New Hampshire and $10,913 in Vermont).
It is important to note that beyond the cost savings themselves, this treatment of the Tail, when considering employee turnover, adds a significant measure of predictability of costs, a benefit any practice manager or business manager can appreciate.
| Traditional Coverage | Slot Coverage | |
|---|---|---|
| Physicians | 4 working <10 hr/wk each | 4 working <10 hr/wk each |
| Coverage Limits
Part-Time Discount |
$1million per claim/$3million annual aggregate
Likely |
$1million per claim/$3million annual aggregate Not applicable |
| Individual Premium including PT discount | - ME: $ 4,935 - NH: $ 8,405 - VT: $ 5,238 |
Not applicable Not applicable Not applicable For a full time slot covering |
| Total Premium | For all 4 physicians - ME: $ 19,740 - NH: $ 33,620 - VT: $ 20,952 |
For a full time slot covering 4 providers working 10 hrs/wk - ME: $ 8,225 - NH: $ 14,008 - VT: $ 8,730 Applies when a Tail |
| Tail Cost | Applies any time a physician leaves the practice: - ME: $ 6,169 per provider - NH: $ 10,506 per provider - VT: $ 6,548 per provider |
Applies when a Tail is closed:* - ME: $ 10,281 - NH: $ 17,510 - VT: $ 10,913 *NOTE: Employee turnover does not require purchase of a Tail |
Specialties and the Flexibility Advantage
Another key advantage of the Slot coverage form is flexibility.
If a new physician in a group is a specialist not currently represented
by a Slot, additional specialty Slots may be added for
capacity. A policyholder may establish as many Slots as it takes
to reach the desired coverage structure. The minimum FTE in a
slot is .25. A maximum of four occupants per slot is permissible,
with the maximum FTE being 1.00 in a single Slot. Slots
may be issued for any specialty including the higher risk surgical
specialties. Slots may be established with varying limits of
coverage. A Family Practice Slot may be issued with limits of $1
million per claim / $3 million annual aggregate, and an
OBGYN Slot may be established with higher limits if desired.
In conclusion, the Slot coverage form can help an organization
manage its professional liability exposure. This unique coverage
form can reduce annual premiums and eliminate
unpredictable and unanticipated Tail premiums. It is geared
toward operations that have larger staffing levels, experience
turnover or anticipate significant growth. It is frequently used
with Emergency Room Staff, Hospital Employed Physician
Groups, Residency Programs and other similar organizations.
It can be adapted to meet the needs of almost any multiple
Physician Practice setting. To determine if Slot Coverage is
right for your organization, contact your Medical Mutual
Underwriter and or your Independent Insurance Agent.