It probably wouldn’t go over too well with most people if their auto insurance company informed them that they had to double their coverage limits in order to maintain their policy. Many would likely switch auto insurers. But what if your auto insurer was the only one in your area, and you had to keep your coverage with them to continue driving?

That’s the example that Dr. Peter Sokolove, California ACEP president, used to demonstrate what was happening with Dignity Health (formerly Catholic Healthcare West) in San Francisco. The regional health care system, with hospitals in California, Arizona, and Nevada, recently issued proposed requirements that emergency physician groups with which it contracts maintain medical professional liability insurance (MPLI) limits of $2 million/$6 million – double the $1 million/$3 million previous limits. In addition, Dignity Health added a new indemnification clause whereby the physician groups must agree to indemnify the hospital from any claims or costs arising from a variety of circumstances, including physician negligence (malpractice).

“It’s estimated that these new MPLI limits would raise premiums between 30% and 40%, so that immediately increases the cost of providing emergency care and, thus, increases costs for patients,” said Dr. Sokolove. “In addition, with larger policy limits, emergency physicians now become a bigger target for additional lawsuits and larger settlement demands.”

According to California Medical Association data, the potentially increased MPLI limits are largely unnecessary. Those data confirm the average physician claim payout is less than $200,000, and very few claims result in a settlement or verdict in excess of $1 million.

The proposed mpli limit change ‘just adds gasoline onto the fire of spiraling expenses. it really is the bad idea of the year.’

Dr. Paul Kivela, an ACEP Board member, said that hospitals are under tremendous pressure, especially considering the number of people losing their health care coverage, the aging and often sicker population, and more expensive health care advances. “This may seem like a good idea from a microscopic level, but when you step back, it’s not going to save anybody any money,” Dr. Kivela said. “What it will do is increase health care costs for individuals and possibly decrease access to care. And while it may start with emergency physicians, ultimately it’s going to extend to other practice providers as well.”

Dr. Kivela agreed with Dr. Sokolove’s estimate, and said that such a policy limit requirement would likely mean a 40% MPLI increase in the first year alone, resulting in higher patient costs. “This is a time when health care costs are crucial,” said Dr. Kivela. “State budgets are failing and emergency care is already underfunded. And now you’re going to raise the cost of providing that care? I don’t believe this is a well-thought-out idea.”

Indemnification clauses such as the one that Dignity Health proposed are especially dangerous for emergency physicians. “There are indemnification clauses, and there are indemnification clauses,” said Dr. Sokolove. “Depending on the way the clause is written, it can be so broad that suddenly an emergency physician group can be responsible for things that, frankly, may be completely out of their control. It is critical that qualified legal counsel with experience in this area provide guidance regarding these clauses.”

Such indemnification clauses expose emergency physicians to an unacceptably high level of uninsured risk, according to ACEP Immediate Past President Dr. Sandra Schneider. “The indemnification clause, which is not typically included in physician contracts across the country, is grossly unfair to physicians and contributes to an increase in the cost of care by encouraging physicians to limit risk through the practice of defensive medicine,” she said in a letter to Dignity Health. Dr. Schneider encouraged Dignity Health to remove the indemnification clause, as well as eliminate the increased minimum liability coverage limits, from its physician contract in a September 2011 letter on behalf of ACEP to Lloyd H. Dean, Dignity Health’s president and CEO.

Dr. Schneider immediately sent the letter on behalf of ACEP upon being alerted of the situation by California ACEP. ACEP has also been in contact with the Arizona and Nevada chapters (where Dignity Health also has locations) and the American Medical Association to discuss this issue.

ACEP’s Medical-Legal Committee is developing a policy statement on appropriate levels of liability insurance coverage and resources regarding indemnification clauses and potential alternative insurance arrangements that groups can explore to meet stricter hospital requirements for liability coverage.

While the MPLI issues may have been addressed to the satisfaction of both parties in recent contract agreements reached between some physician groups and individual Dignity Health hospitals, details of those agreements remain private and Dignity has not indicated that it will retract these contract requirements. Meanwhile, at least one other major health system has followed Dignity’s lead. In May 2012, Adventist Health System proposed raising its MPLI limits as well.

“ACEP’s priority is patient access and the delivery of quality emergency medical care. I don’t see how increasing liability costs to providers is going to improve patient access and decrease patient costs,” said Dr. Kivela. “It’s a disturbing new trend that’s going to raise the cost of health care.

Hospitals need to consider the ramifications of their actions in light of the actual data,” he continued. “The important thing here is what’s in the best interests of the patient. Asking the hospital administrators who are requesting these clauses to point out where these incidents have actually occurred rather than in theory is an important thing to do.”

Dr. Sokolove hates to think where such changes will steer the future of health care. “Everybody is talking about how we can deliver more health care to patients for fewer dollars, and this not only does absolutely nothing to help that, but it just adds gasoline onto the fire of spiraling expenses,” he said. “It really is the bad idea of the year.”