Two dozen West Virginia hospitals are studying a do-it-yourself solution to at least part of their medical malpractice problems.
The West Virginia Hospital Association is conducting a feasibility study on forming a captive insurer for the 24 hospitals, which range from 15 to 300 beds, said association President Steven Summer.
At least 10 of the hospital-owners would have to choose the captive insurer for it to work, he said.
All members of the state association would be eligible to participate if they choose.
"The issue is not as much the pricing as it is the stability and the predictability that you get from this," Summer said. "This is not being looked at as a short-term dollar savings. It's a long-term dollar savings, and it takes out the uncertainty of not knowing whether you'll have insurance next year."
While other such provider-owned insurance companies have had a mixed track record, West Virginia isn't the only state to try it.
Four Alabama hospitals recently formed Coastal Insurance Risk Retention Group, Montgomery, Ala., in the wake of the collapse of Reciprocal of America, Glen Allen, Va., which provided coverage for 46 hospitals and 800 physicians in Alabama (May 19, p. 34). Hospital-owned PHICO Insurance Co., Harrisburg, Pa., was doomed to liquidation in 2001 because of financial insolvency (Aug. 27, 2001, p. 5).
The MIIX Group, founded by the Medical Society of New Jersey but set up as a separate, publicly traded company, phased out operations a year ago, but is making a return as a private insurer owned by its 5,000 physician policy holders.
West Virginia physicians are doing much the same in forming a mutual insurance company to underwrite malpractice policies, Summer said.
West Virginia was hit hard by the loss of two major insurers in 2001-PHICO and the St. Paul Cos., which stopped underwriting medical malpractice claims (Dec. 17, 2001, p. 8).
"There's not a single (insurance) company that looks at West Virginia as a serious market today," Summer said.
To Summer, who headed the American Hospital Association's national panel on liability reform, the captive insurer is only one part of a three-part plan, each part of which must be implemented to solve the problem.
The first part was the state tort reform signed into law in March. The new law set noneconomic damage caps of $250,000, and without those caps, Summer said, the hospital-owners wouldn't stand a chance of finding the reinsurance policy or policies needed to mitigate some of the risk.
Once the captive insurance company is established-it could write its first policy as soon as late summer-the association will focus on the plan's third part, patient-safety and risk-management initiatives, Summer said.