Lewis Sharps, M.D., says he believes the way to keep burgeoning medical malpractice premiums in check is to form specialty-specific med mal insurers. Sharps, a Paoli, Pa., orthopedic surgeon, is a founder of Positive Mutual Risk Retention Group in Exton, Pa. Licensed in Pennsylvania on Oct. 4, PMRRG already has signed up 75 Pennsylvania orthopedic surgeons, with applications from 60 more pending, he says.
Policyholders own the company and direct operations, which are handled by contracted professionals. Doctor-owners should be able to avert big rate increases by closely monitoring risk, overseeing rate-setting and devising legal strategies to lower costs.
"Nobody understands the risks of a specialty better than the doctors in that specialty," Sharps says.
Pennsylvania is a good testing ground. Sharps says only one commercial carrier, GE Medical Protective, Fort Wayne, Ind., still writes new policies in the state. Doctors in a variety of specialties can't find commercial coverage and have to turn to the Joint Underwriting Association, an insurer of last resort that sells coverage at much higher rates.
Orthopedic surgeons, who traditionally pay some of the highest med mal rates, are among the hardest hit. In a September survey by the Pennsylvania Orthopedic Society, 390 orthopedic surgeons said their coverage will not or may not be renewed for another term.
Sharps says it will be easy to expand operations to other states because, as a risk retention group domiciled in South Carolina, PMRRG does not have to undergo the complete licensing process in each state.
There is a downside to physician-owned start-ups warns Peter Achor, spokesperson for the Pennsylvania Medical Society. Risk retention carriers do not have financial backing from a state fund, the Pennsylvania Insurance Guarantee Association, should they get into financial difficulties.
"We're saying to physicians, `Just be careful,"' Achor says. "You've got to be aware of the consequences."
But at least one specialty-specific risk retention group has a proven track record. The Ophthalmic Mutual Insurance Co., San Francisco, has been insuring ophthalmologists exclusively nationwide for 15 years, says OMIC President and CEO Timothy Padovese.
Being specialty-specific, "you can form an absolute expertise all through your programs," says Padovese, whose Vermont-based company insures almost 3,000 ophthalmologists. "You can have a better idea on how to deal with risk within the specialty."
But Padovese hedges when asked if OMIC rates are lower than those of other carriers.
"In many states our premiums tend to be lower," he says, adding that some insurers lower rates to attract business, then enter financial difficulties.
Sharps says it will be easier to show lower rates in Pennsylvania, where many orthopedists' only other coverage choice is the JUA, where rates are 40% to 60% higher than PMRRG's.
Sharps says PMRRG plans to extend insurance to other specialties if it can find groups large enough to support a specialist-run operation within the company. The only groups the company cannot cover under its charter are neurosurgeons and OB/GYNS, he says.
In another innovation, Sharps says practices will closely follow "patients who are unhappy" and see to their needs, because unhappy patients are more likely to sue.
"No one is doing that anywhere," says Sharps.