Tar Heel Tattler - July 2007

Health-care system puts a premium on its physicians
By Edward Martin

Novant Health Inc. is sick of medical malpractice. The health-care system, based in Winston-Salem, paid more than $10.8 million last year to insure its hospitals and doctors, more than twice what it paid in 2001. “Costs have doubled during a time in which we’ve had less risk and less coverage,” spokesman Jim Tobalski says.

Now it is trying what it hopes will be a partial cure — do-it-yourself malpractice insurance. It started New Star Inc. to insure its doctors and others who practice at its hospitals. Novant owns or operates eight, along with clinics and practices. Combined, they employed 691 doctors as of June. Doctors who are members of Novant-owned physician groups must get coverage from New Star. It’s optional for others who practice at its hospitals.

Tobalski says the system’s motives are pure. “The sole purpose of this company is so we’ll have better control over our expenses.” It hopes to limit claims by pushing doctors to practice better medicine, mostly by following accepted best practices. If it works, New Star’s model likely will spread.

That concerns competitors, including the state’s largest malpractice insurer, Raleigh-based Medical Mutual Insurance Co. Formed more than 30 years ago when commercial malpractice insurers began abandoning the state, it covers more than 6,300 doctors. “I’m not sure this is a benevolent gesture on the part of the hospital to do good for the doctors,” says David Sousa, Medical Mutual general counsel. “It’s no secret hospitals are the thousand-pound gorillas trying to gobble up the entire health-care delivery system. We think it’s all about protection of their revenue streams.”

Sousa says health-care systems have failed at other ventures into insurance. He also worries that doctors could end up losing out. That’s because hospitals often settle claims to avoid bad publicity and some legal expenses. But, he says, “any penny paid out on behalf of a physician is required by federal law to be reported to the National Practitioner Databank. It can impact a physician’s ability to get and keep patients or to be accepted by managed-care companies. Let’s not kid ourselves that this is for the good of the doctors.”

Novant admits that premiums — doctors in some specialties pay $50,000 a year or more — might not fall, though Tobalski says New Star hopes to slow the rate of increases. Even so, medical authorities say they’re glad Novant is taking the plunge. If nothing else, they say, it might turn up the competitive heat on malpractice insurance.

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