Younger physicians forsaking private practice for hospital employment have become a source of competition for Arizona's leading writer of medical professional liability coverage.
Physicians seeking contracted employment status, as opposed to an independent practitioner who carries individual coverage, is being driven by a desire for less demanding work conditions, according to Dr. James Carland, chairman, president and chief executive of the Mutual Insurance Company of Arizona. That also includes the lure of security, the ability to off-load back-office operations and time off.
"Right now, in terms of drawing physicians in, our biggest competitor is the hospital systems," Carland said. "The largest single segment that we have leaving us goes to hospitals, not the other carriers."
Carland, who is in Chicago for the Physician Insurers Association of America annual meeting, said another trend involves physicians assistants taking on a more active role in primary care. Specialists are also utilizing more of these health care professionals in pre- and post-op care, which has developed into a growth category for coverage and could intensify as more insureds are added under national health care reform.
Carland, the current chairman of the PIAA, said MICA lost 4% of its market share during recent soft market conditions but was not "going to chase it down with premium, credits or special deals."
MICA held a 58% market share in Arizona in 2008 based on $158.9 million in direct premium written, according to BestLink which provides online access to A.M. Best's Global Insurance & Banking Database. In 2009, direct premium written declined almost 9% to $144.7 million.
Carland said MICA has cut rates in each of the past three years and paid out $128 million in dividends since 2005.
"So that's what we do with our capital," Carland said.
MICA is trying to develop products that can address the growing number of physician employees. He said MICA is sorting through the discrepancies or potential areas of contention between who has coverage for particular acts.
"What we're trying to do is do that prospectively and see of we can develop a partnership without insuring the hospital per se," Carland said.
Carland said a significant number of physicians withdrawing from coverage leave Arizona, but the larger number affiliate with hospitals.
"They are looking for a lifestyle that for physicians didn't exist 40 years ago, but now it's expected," Carland said.
Carland said the effect of this trend on medical professional liability markets could evolve on three fronts. He said it will get interesting for hospitals when they are faced with the potential verdicts ranging from $5 million or $10 million and only their limits come into play. Vicarious liability may also pose an exposure for hospitals that utilize employer-contracted physicians, and those legal definitions vary across state lines.
Carland also said there's an argument being made that correlates budget cuts with the quality of care and medical errors. He said tensions could result if physicians or groups of doctors face pressure to provide more care at the same quality level.
Competition for physicians in his home state of Arizona comes in part from Banner Health, a nonprofit health care system that describes itself as the state's second-largest private employer. In 2008, the company reported $4 billion in revenue and $5 billion in assets, according to its website. The majority of its 6,000 physicians work in a private practice setting and the company touts malpractice insurance as a benefit alongside fringe benefits such as health and dental insurance and even a 401K plan.
"They are hiring physicians and expect to hire more in this coming year," Carland said.
Mutual Insurance Company of Arizona currently has a Best's Financial Strength Rating of A (Excellent).
(By Al Slavin, senior associate editor, BestWeek)
