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Best practices in medical professional claim handling Many of our clients manage their own medical professional claims in-house. They are typically self-insured for a large portion of their medical professional exposure. We are often asked to help develop, organize or standardize the claim management functions of the organization. The goal of the organization is to provide efficient, quality claim management that produces great results and demonstrates to the carriers that the organization has developed state-of-the-art claim management practices.

Typically claim management falls within the risk management department or the legal department. These departments are not usually accustomed to managing claims according to standards that an insurance company uses. To that end, it is difficult to articulate to a carrier the claim management process and document specifics of value to the underwriters.

Jacqueline Bezaire RN, JD, of the Willis Towers Watson Health Care practice, has 35 years of claim handling experience with various professional liability carriers. In her experience, here are some of the key components an insurance carrier will want to see in an in-house claim management department.

Medical professional claims best practices guidelinesEstablishing best practices for claim handling is a function of formulating the most efficient way to resolve a claim within the

organization’s claim philosophy. For most organizations, this involves a goal to pay liability claims fairly and efficiently as well as providing a method to resolve the claims at the earliest point in time for the least amount of expenditure to the organization. The specific steps in attaining this goal will be somewhat specific to each organization. The following are general recommendations.

Report and contact — 24 hours1. Establish a method for reporting potential claims from the field

to the claim handling department within 24 hours of notice of the claim or potential claim. All lawsuits should be reported immediately to the claim handler. This should be done in a consistent manner on a report form that contains:

�� A short description of the incident claim or lawsuit, including the current condition of the patient, if known

�� Demographic information of patient involved, full name, address, medical record number etc.

�� Facility-related information, such as admission date, date of incident, witnesses, equipment information

�� Information should be readily found in the claim file

2. Claim department will acknowledge receipt of claim information from field within 24 hours by emailing the field regarding receipt of the information.

3. Reporting to excess carrier should be considered if the claim has the potential to reach the excess insurance layer.

4. If the claim has become a lawsuit, the summons and complaint should be faxed to defense counsel immediately.

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Claim file set-up — 36 hoursClaim files should be set up in a well-organized fashion and contain information pertaining to that file only. Each file should contain the following categories:�� Correspondance and claim notes

�� Expenses

�� Legal documents

�� Investigation and expert reviews

�� Medical records

�� Reserve information

�� Diary

Coverage determination — 10 daysA determination should be made as to whether or not the claim is covered under the captive/self-insured policy or documents. Employment practices claims are typically excluded under these policies and should be tendered to the appropriate carriers.

Investigation — initial completed within 30 daysAll claims must be investigated and a liability evaluation documented in the file. The investigative process is composed of:1. Discovery of the facts — Review of medical records, interviews

with involved parties or witnesses if possible, any information on equipment if applicable.

2. Determination of the standard of care — This may be done by use of an expert or by accepted policy and procedure in the profession .

3. Assessment of liability — A clear analysis of the liability issues should be performed and documented. This should include the following elements:

�� Duty

�� Breach

�� Causation

�� Damages

4. An investigative report should be written and documented in the file that clearly assesses the extent of liability, including the potential value of the case. This should be done independent of defense counsel’s analysis.

5. Resolution plan — The investigative report should include a plan for resolution. Is this a case that will be dismissed, settled or tried and why.

Reserves – initial reserve within 30 days with every 60-day reviewA consistent reserve philosophy should exist in the claim department policy and procedure documents. Reserves should represent the

amount that is expected to be paid out both in indemnity and expense on each claim. There should be separate reserves established for each of these categories. Initial reserves should be established within 30 days of opening a claim file. If this is not possible due to an unclear liability picture, the file should be well documented in the claim notes section and the reserve documents explaining the reasons. At no time should a claim not be reserved at 180 days of the claim file set-up. Reserves should not be stair-stepped but should be as accurate as possible at the earliest point in time.

�� Consistent reserve philosophy

�� Reserve represents philosophy

�� Appropriate supervisory authorization for reserve is documented

�� Reserve represents liability analysis

�� Separate expense reserve and indemnity reserve categories should be established and maintained

�� Initial reserves established within 30 days

�� No stair-stepping

�� Accurate reserves established at earliest possible time

�� All claims must have accurate reserve by 180 days

�� Reserve document present in file or on computer claim program

�� Ability to track and trend all reserves

Diary — every 30 to 60 daysAll claim files should be reviewed periodically to assure that they are progressing towards resolution and closure. The most efficient way is by use of a diary system that assigns dates for periodic review. Upon each review, the following issues should be considered:

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1. Status of investigation

2. Assessment of liability

3. Documentation of damages

4. Adequacy of reserves

5. Information on expert reviews

6. Status of settlements demands or negotiations

Claim notes — ongoingClaim notes should be an internal document used to track the status of the case. The notes should include basic summary of correspondence from defense counsel if important to the liability or legal analysis of the case.

Claim status summary — ongoingUse of a claim status summary document should be considered to readily visualize the claim development.

Defense counsel selection Careful selection and effective use of defense counsel is key to successful claim management that results in good claim resolutions. There should be more than one law firm on the panel in the event that the firm has a conflict or there is a need for a particular expertise in a certain type of lawsuit.

The defense firm should have:�� Significant experience litigating medical malpractice cases as

evidenced by the number of years litigating in this field, the number of health care clients and the number of trials and the results

�� More than one attorney capable of litigating medical professional liability cases

�� Competitive billing rates

�� Reasonable geographic proximity

�� Prior experience with the subject matter and the allegations raised in the cases

�� A willingness to be bound by any guidelines developed by the client for litigation management

Litigation managementLitigation management should be a cooperative effort between the claim handler and defense counsel. This process is most easily managed by the use of a document setting forth the expectations in defending and communicating on the case. Litigation management guidelines take many forms and are usually tailored by the claim department for their specific needs. Litigation management guidelines should include:

�� Acknowledgement of assignment of case by defense counsel within a reasonable period of time

�� An agreement by defense counsel to be bound by the guidelines

�� Initial evaluation report, including liability picture and plan for resolution

�� Reporting timelines or requirements

�� Fee agreement

�� Requirements for investigation, discovery, medical reviews, counter claims, or third-party actions

�� Agreement that settlement discussions will be done only with the agreement of the claim handler

�� Resolution strategy will be set by both claim handler and defense counsel

�� Pretrial litigation strategy report

NegotiationsNegotiations should be a cooperative effort between defense counsel and the claim handler. The claim handler should be involved in all negotiations, and the proper authority for settlement should be obtained and documented prior to entering into negotiations. The claim handler should be familiar with the facts, case development and should participate in all negotiations.

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Controlling legal feesAll fees for defense legal work should be pre-negotiated and the parameters for billing should be clearly delineated in the litigation management guidelines. Agreed-upon activities, such as expert selection and engagement, should be pre-approved by the claim handler. Adherence to the litigation guidelines will also reduce costs.

�� Hourly rates for all individuals working on the case should appear on the bill

�� A running total of fees and expenses paid to date as well as the current amount owed should appear on the bill

�� All legal bills should be reviewed for compliance with the litigation guidelines before approving

�� All costs must be supported by adequate documentation

�� Consider other fee arrangements, such as a capped fee per file

Evaluating defense firm performanceThe performance of each law firm should be reviewed each year. The review should consider:�� Firm’s compliance with the litigation guidelines and specific

instructions to defense counsel in defending the case

�� The degree of responsiveness and cooperation with the claim handler in resolving the case

�� The firm’s track record in litigation over the previous year

�� The appropriateness of the legal bills over the year

�� The firm’s ability to understand the underlying medical issues involved in the case

�� The firm’s ability to obtain good expert witnesses

Claim file closure�� All legal documents necessary for closure should appear in the file

�� Closing documents include, settlement agreements, dismissals, minor compromise or equivalent, releases, final attorney bills

�� Excess carriers should be notified of resolution

�� Final bills should be requested from defense counsel as soon as final documents are received

�� The file should not remain open more than three months following settlement

�� Loss runs should be checked for accuracy of final total incurred amounts

�� File should remain on site for at least six months for easy access to information as needed

Collaborative and joint defense agreementsConsolidation through mergers and acquisitions and the development of integrated delivery systems in the health care industry have impacted many areas of the medical professional liability industry. Hospital mergers and acquisitions as well as those in other industry segments, such as managed care, ambulatory care and long-term care, along with the creation of ACOs (accountable care organizations), CINs (clinically integrated networks) and CIOs (clinically integrated organization) have created interesting bedfellows, when malpractice litigation has been brought.

A claim may involve any combination of the network partners/participants or system and these relationships create overlapping and competing issues when defending the claim. Infighting and finger pointing only exacerbate the claim and attempts to minimize this type of behavior have taken many forms. While recognizing that an attorney’s primary duty is the defense of the client, various defense coordination and collaboration techniques are possible.

According to Paul Greve JD, RPLU, of the Willis Towers Watson health care practice, the need to coordinate the defense of a claim with these complicated organizations has increased. In an article that will be published in October in the PLUS journal, Greve describes a “collaborative defense” as an informal coordination of efforts and information to promote the defense of a claim. He distinguishes this from a more formal agreement known as a “joint defense agreement.” He defines the joint defense agreement as “… an agreement among attorneys representing different defendants in a case, who agree to share confidential information that would otherwise be protected by the attorney-client privilege to further a common defense goal. Either of these techniques can assist all codefendants with the defense of a claim and minimize infighting.”

There can be risks to these types of collaborative defense arrangements if there is not a clear understanding of the purpose and methods to be utilized. It is important to define the scope of any collaborative defense agreement and discuss the expectations of the parties. The goal is to create an atmosphere of coordination and collaboration to achieve the best possible outcome for all codefenants as well as to reduce defense costs.

Collaborative and joint defense agreements can have an impact on the outcome of the claim as well as decrease defense expenses. For more information, look for Paul Greve’s article in the PLUS journal in October 2016.

Reference “Collaborative Defense in MPL: New Era” ., Paul Greve JD, RPLU. Plus Journal October 2016 XXIX Number 10

The observations, comments and suggestions we have made in this report are advisory and are not intended nor should they be taken as medical/legal advice. Please contact your own medical/legal advisor for an analysis of your specific facts and circumstance.

ContactJackie Bezaire, RN, JD 213 607 6343 jacqueline.bezaire@willistowerswatson.com

Ken Felton, RN, MS, CPHRM, DFASHRM 860 756 7338 kenneth.felton@willistowerswatson.com

Paul Greve, JD, RPLU 260 348 5873 paul.greve@willistowerswatson.com

Deana Allen, RN, MBA, AIC, ARM, CPHRM 404 302 3807 deana.allen@willistowerswatson.com

Copyright © 2016 Willis Towers Watson. All rights reserved.WTW-NA-2016-16439

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About Willis Towers WatsonWillis Towers Watson (NASDAQ: WLTW ) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 39,000 employees in more than 120 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.