Some Legal and Insurance Issues Regarding Retirement

By Linda Radigan

Argus, April, 1993

After giving years of medical service to the community, many physicians start thinking about slowing down and practicing fewer hours or even retiring completely. Early retirement is gaining in popularity among ophthalmologists in particular as third party reimbursement and managed care arrangements becoming increasingly complex. Whether an ophthalmologist decides to scale down to part-time practice or to retire completely, careful planning makes good financial, legal and risk management sense.

Professional Liability Issues

Once you have addressed the financial arrangements related to retirement, notify your professional liability insurance carrier and ask about their retirement requirements. Do not cancel your liability insurance until you stop practicing completely and have arranged for tail coverage. Many insurers offer part-time coverage at reduced premiums for policyholders who meet certain criteria. OMIC, for example, offers a 50% reduction in premiums to insureds who limit their practice to medical ophthalmology (no surgical procedures) and who practice no more than 20 hours a week. The reduction increases to 65% if the practice is limited to 10 hours a week.

The most common form of malpractice insurance, including that offered by OMIC, is claims-made coverage. Claims-made policies cover only those claims that arise during the policy period. If a claim is filed after the policy period had ended-even if the incident occurred during the policy period-it will not be covered by a claims-made contract unless the insured had an extended reporting period endorsement placed on the policy, commonly called “tail” coverage.

Many insurers, including OMIC, provide free tail coverage to retiring policyholders age 55 or older after five years of continuous coverage with the company. Some will discount the tail premium if the policyholder meets the other retirement criteria but has not been insured by the company at least five years. OMIC offers a 20% discount on tail premiums for each full year of coverage with OMIC. A free or discounted tail can result in significant savings since this coverage usually costs between 150% and 200% of the mature rate premium.

Notify Your Patients

Insurance aside, one of the most important risk management aspects of discontinuing a practice is proper notification of patients. Simply posting handwritten signs in your office or informing patients verbally is not enough. Such approaches leave the retiring physician open to charges of abandoning patients who were not notified or simply forgot the conversation.

To help avoid charges of abandonment, send a letter to all patients you have seen in the last two years stating exactly when the practice will close. Give at least three months’ notice. Regular mail is usually sufficient for most patients; however, consider registered mail with return receipt requested for high-risk patients or for those you are actively treating for chronic problems. Keep a copy of these letters and receipts in each patient’s file.

Encourage patients to begin looking for a new ophthalmologist immediately. If you have been practicing with an associate or are selling the practice to another ophthalmologist, send a letter of introduction to all patients and try to give your regular patients an opportunity to meet the new physician. But avoid making unsubstantiated representations about the associate’s competence because it could be interpreted as warranting the care provided by that physician. Instead, refer patients to the local medical or ophthalmologic society for the names of other ophthalmologists.

Explain in your letter the need for the patient’s written authorization to transfer medical records, and request that the patient return the written authorization form you provide by a specified date. In most states, a patient’s medical record is considered the physician’s property, subject in almost all instances to the patient’s right to copies of the record, while the information contained in the medical record is the patient’s personal property. Patient records can never be sold to another physician, but copies or summaries of the record may be transferred with the patient’s written consent.

Retain and safely store all original records. You may need them at some point to defend against malpractice or abandonment claims. Consult with your attorney or state medical society regarding the statute of limitations for professional liability in your state to determine how long to keep patient records.

For questions on part-time or tail coverage, or other risk management aspects of retirement, please call OMIC at 1-800-562-OMIC (6642).

Thinking About Retirement? Read This.

By Daniel R. Evans, MD

Argus, April, 1993

In addition to risk management, you need to consider a myriad of issues when planning your retirement, including the contract of sale, pension plans and tax obligations.

The following are a few financial and legal suggestions for retiring ophthalmologists who are selling their practice.

Hire an attorney who is knowledgeable about medical practice buy/sell contracts as well as a CPA or other tax adviser competent to advise you about applicable federal and state tax implications of your sale.

Begin with an asking price that reflects last year’s gross income for the value of the practice itself. Add to that the market value of the depreciable assets and inventory and the accounts receivable. The medical and other equipment is typically sold at appraised value and a physical inventory of drugs, supplies, glasses, frames, contacts, etc. is usually taken at cost as of the closing date.

Keep in mind that as managed care and capitation become increasingly common, future projections for income may not be the same as in the past.

Remember that practice good will is personal to you and that the buyer will not view it as transferable to the buyer. Sometimes a value will be assigned to patient lists, which also may be amortizable.

Include a non-compete clause for the buyer, but tie that in with a consulting contract for the seller so you have the option of continuing to practice part time, if you choose. But be aware that federal safe harbor regulations do not protect the sale or purchase of a medical practice from the sanctions under the Medicare anti-kickback provisions if the seller practices in the same practice more than one year from the date of the agreement of sale.

Do whatever you can to collect your accounts receivable before selling the practice. After the sale, allow the buyer to collect remaining receivables for several months before paying you so that the buyer has use of these funds. This free use of the receivables should offset the buyer’s cost of collection.

If you own your building, include an option in the contract allowing the buyer of your practice to purchase the building in the future. Couple it with a right of first refusal should someone else make an offer on the building.

If you roll your pension plan account directly into an IRA, you will avoid the 20% federal withholding tax imposed on pension plan distributions. However, this withholding tax can be avoided only if you do not receive the distribution yourself and then transfer it to an IRA. If any part of your pension plan account represents a 401(k) plan, you will need to roll that amount into a new rather than an existing IRA.

If you retire to another state, you may be required to pay tax on active income earned in the state in which you practiced and in the state of residence at the time of your receipt of that income, subject to your right ordinarily to a credit against your tax in the state of your residence.

Payments to you that are considered to be practice income may reduce the amount of Social Security benefits you may draw, beginning as early as age 62.

Request honorary staff membership from those hospitals where you have privileges.

Notify all professional organizations in which you hold membership of your retirement. Most including the Academy, waive or reduce dues for members who are fully retired.

Collegial Criticism Could Land You in Court

By Paul Weber, JD

Argus, September, 1993

One of the most common catalysts of medical malpractice lawsuits is an inadvertent or deliberate critical comment by a health care professional about a colleague’s actions. Many defense attorneys estimate that 25% of all claims against physicians may be triggered by a comment made by another physician or the physician’s staff.

Sometimes a plaintiff’s counsel takes a shotgun approach when naming defendants in a medical malpractice lawsuit either because the plaintiff is uncertain who actually caused or is responsible for the alleged injury, or as part of an overall “divide and conquer” strategy. OMIC often manages claims against its insureds in which other physicians, hospitals, nurses and HMOs are named as co-defendants. When physicians communicate with patients who have suffered an iatrogenic injury, factual and tactful documentation with discretion can help avert, or avoid encouraging, claims of alleged medical malpractice.

According to the Physician Insurers Association of America, almost 70% of all claims reported against physicians arise in a hospital, and one half of those occur in the operating room. Hospital records are often the first to be reviewed by the plaintiff’s attorney when evaluating a potential claim.

For example, OMIC defended a claim against an insured-ophthalmologist who performed cataract surgery using phacoemulsification. During surgery, the phacoemulsification unit became hot very quickly and burned the patient’s cornea. It was later discovered that the irrigation line had not been hooked up when the phaco unit was handed to the ophthalmologist. It is tempting in this type of situation for the surgeon to blame the hospital staff or the equipment when documenting the incident in the operative report. To this insured’s credit, she accurately and factually described the steps in the procedure, including the burn by the phaco tip, omitting any comments that placed blame or described an equipment malfunction.

In this case, prudent charting by the ophthalmologist did not prevent a claim from being brought against the ophthalmologist and the hospital. However, by not blaming someone else, the ophthalmologist reduced the plaintiff attorney’s ability to exploit a conflict between the defendants themselves.

Cases often arise when one or more treating physicians allegedly miss a diagnosis. The strongest defense in multiparty lawsuits is generally a unified one. In cases of a missed diagnosis, however, co-defendants often find their interests in conflict, particularly if different liability insurance companies are involved.

Another OMIC case involved a general ophthalmologist who was called in as a consultant by an internist to examine a patient in the hospital. The patient had a history of acute sinusitis and was experiencing visual disturbances in her left eye subsequent to an ethmoidectomy. Visual acuity was 20/80 OU and IOP was 15mm Hg OU. A dilated fundus exam revealed macula edema, which the ophthalmologist attributed to an inflammatory reaction secondary to sinusitis. The ophthalmologist next saw the patient four days later in his office for a full eye exam. By then, the patient’s vision had greatly deteriorated, and the ophthalmologist diagnosed giant cell temporal arteritis. He prescribed steroids and referred the patient to a neuro-ophthalmologist. Unfortunately, the patient eventually lost vision in both eyes and subsequently sued the general ophthalmologist, the internist and the hospital.

During depositions, the patient’s husband stated the first indication that anyone might have done something wrong was when the neuro-ophthalmologist, who was insured by another carrier, commented that “this should never have happened.” The neuro-ophthalmologist made this statement before he had reviewed all the records or discussed the examination and treatment of the patient with her internist and the general ophthalmologist. Criticism by the neuro-ophthalmologist clearly was a factor in precipitating a lawsuit. Since he did not have all the records and was not present at the initial treatment, it was improper and premature for him to have commented on the care rendered by his colleagues. Ordinarily, a patient outcome like this can be defended. But this case was difficult to resolve because the defendants were unable to mount a unified defense and each accused the other of missing the diagnosis. This case was finally settled on the courthouse steps.

It is morally and legally wrong for physicians to conceal information or to keep the truth from their patients. However, a subsequent treating physician should refrain from coming to conclusions or implying carelessness or negligence before knowing all the facts. Such comments only aggravate already unfortunate situations and may precipitate lawsuits against colleagues.

Practicing Beyond One’s Expertise: The Road to a Lawsuit

By Richard A. Deutsche, MD

Argus, November, 1993

Practicing beyond one’s experience and expertise is a not uncommon cause of medical malpractice lawsuits. Prior to performing a surgical procedure for the first time, an ophthalmologist has an ethical obligation and a legal duty to possess the necessary skill to safely perform the procedure.

The Academy’s Code of Ethics states: “An ophthalmologist should perform only those procedures in which the ophthalmologist is competent by virtue of specific training or experience or is assisted by one who is.” (Emphasis added.) The legal duty is set forth in jury instructions, which state that a physician must “use care and skill ordinarily exercised in like cases by reputable members of the profession.” Careful preparation and forethought prior to performing new surgical procedures is necessary in order not to breach either of these standards.

To gain the necessary expertise, most surgeons first acquire the relevant scientific and technical information by attending oral (didactic style) presentations, studying the scientific literature, and using interactive videotapes, which are becoming a popular and effective learning method. The second step is to attend courses offering hands-on laboratory practice. The number of wet lab courses a physician should take depends on the complexity of the procedure and the surgeon’s prior experience. The lab course should be designed to give each ophthalmologist sufficient time to learn the necessary surgical skills while in the laboratory under the instructor’s direction.

The next step is to observe and assist a surgeon experienced in the procedure. After the ophthalmologist has assisted a few times, it is strongly recommended that the physician be proctored on the first few procedures he or she performs. Studies have shown that beginning surgeons who operate under an experienced surgeon’s supervision can obtain excellent results with their first few procedures.

Certain procedures lend themselves to learning in steps. For example, phacoemulsification can be learned in several stages, making one change at a time. An ophthalmologist accustomed to performing extracapsular cataract extraction (ECCE) who wishes to convert to phacoemulsification should perform 10 cases of capsulorhexis prior to ECCE, progressing to 10 cases of phaco sculpting only, followed by ECCE. The physician can continue adding one system change at a time until he or she has mastered the entire procedure.

Many surgical procedures are now performed in the ophthalmologist’s office. Patient safety requires that before an ophthalmologist performs a new surgical procedure in the office, he or she conduct a careful analysis and inventory of necessary medical equipment and medication. Certain surgical procedures may require that the physician be trained and certified in CPR and have access to a crash cart. Sterilization equipment in the office may need to be upgraded to comply with regulatory standards. Office personnel may need to take additional training to improve their skills and obtain certification demonstrating they can assist during the new procedure.

Eventually, the ophthalmologist will be ready to perform the surgical procedure without a proctor. Physicians should bear in mind that ethical and legal issues may be evolving concerning the informed consent process when the surgeon is performing new procedures. Ophthalmologists should stay alert to any new legal requirements in their states concerning what information, if any, should be disclosed to patients about a surgeon’s limited experience with a procedure.

We need to remember how we learned new techniques during our residency. The same principles apply when we are in practice and are learning new techniques. By approaching new procedures carefully, complications can be decreased, and both the patient and the ophthalmologist will benefit.

Nonmedical Issues in Claims Against Ophthalmologists

By Jerome W. Bettman Sr., MD, and Monica L. Monica, MD, PhD

 Digest, Winter, 1994

An analysis of 83,510 closed malpractice claims and lawsuits tallied by the Physician Insurers Association of America (PIAA) shows that three-fourths of all claims (62,633) brought against physicians allege a “medical misadventure” (a principal departure from accepted practice). The remaining 25% (20,877 claims) allege nonmedical issues as the basis for the claim against the physician.

It has been the experience of OMIC and other physician-owned insurance companies that nonmedical issues often prompt meritless claims and frequently exacerbate claims that otherwise would present only a minimal loss. This article examines common nonmedical reasons why patients sue physicians for malpractice and suggests steps to be taken by ophthalmologists to reduce their risk and minimize losses arising from these types of malpractice claims.

Lack of Informed Consent

Not surprisingly, topping the list of nonmedical factors prompting lawsuits is the allegation by a patient of lack of informed consent. Lack of informed consent accounts for more than one-third (7,000) of the PIAA claims involving a nonmedical issue as the basis for the claim. The following non-OMIC case study highlights how lack of informed consent can catalyze a claim and introduces two other nonmedical issues that aggravated this claim.

Dr. Jackson was a highly respected board-certified ophthalmologist who had received special training in oculoplastics. Mrs. Adams presented to Dr. Jackson’s office with ptosis and a cicatricial entropion of the right upper eyelid. She had sustained trauma to the right eye during an automobile accident 25 years earlier and had undergone plastic reconstructive surgery of the upper eyelid. Initially, the result was good, but with time the eyelid had begun to droop and later showed signs of entropion development. Mrs. Adams was bothered by the scratchy sensation, tearing and overall appearance of her right eye and sought Dr. Jackson’s help. Dr. Jackson told Mrs. Adams that the lashes were rubbing against the cornea of the eye and could cause damage, and that a blepharotomy could correct the problem. Mrs. Adams consented to the procedure.

After surgery, Mrs. Adams developed eversion of the right upper eyelid. Dr. Jackson told Mrs. Adams that this could be repaired by another surgery, which he performed. The second surgery left Mrs. Adams with ptosis and a recurrence of the entropion problem. Dr. Jackson referred Mrs. Adams to a local ophthalmic plastic surgeon. Three additional operations were performed by the plastic surgeon, including one involving skin grafting, after which Mrs. Adams’ right upper eyelid appeared normal in height and contour without the entropion problem.

Mrs. Adams sued Dr. Jackson for lack of informed consent, alleging she had no idea that multiple procedures and skin grafting would be necessary to successfully repair her upper eyelid condition. She maintained that Dr. Jackson had emphasized the simplicity of the procedure and her return to normal activities within two weeks. Instead, she spent the next five months undergoing a total of five surgical procedures.

The written informed consent form signed by Mrs. Adams listed such possible complications as hemorrhage, infection, exposure and dryness of the cornea, and even blindness. However, there was no indication in the patient record or in the signed consent form that multiple procedures might be necessary to correct the problem. Mrs. Adams’ claim against Dr. Jackson is typical of lack of informed consent claims. The patient alleges that the doctor only emphasized the benefits of the procedure. When these benefits fail to occur, as in this case, the patient is unpleasantly surprised and becomes angry. Often, it is this anger that causes the patient to seek the advice of an attorney and not necessarily the medical complication itself.

Informed consent should be thought of as a continuous process beginning with the first patient encounter and continuing throughout the patient’s care. It is necessary to document the actions taken by the ophthalmologist and office staff to inform the patient of the risks, benefits and alternatives regarding the proposed surgical procedure. This educational process can begin with patient information materials such as those available through the American Academy of Ophthalmology. A note in the chart stating that the patient received a brochure or saw a video regarding the proposed procedure shows that the patient was given a general overview of the procedure. However, the ophthalmologist must personally conduct an informed consent discussion with the patient that includes the possibility of multiple surgical procedures, especially when the problem involves retinal, strabismus or plastic procedures.

Poor Record Keeping

Mrs. Adams’ case was further strengthened by Dr. Jackson’s poor record keeping. On more than one occasion, the wrong date had been entered into the medical record. The file included only a few before and after photographs of the patient. Jurors and others reviewing a claim three to five years after the procedure rely heavily on the medical record when making an evaluation of the plaintiff’s claim and the doctor’s defense. If a case ends up in a jury trial, incomplete, inaccurate and illegible records can persuade jurors that the doctor did not care enough about this patient to take a few extra minutes to properly document the patient’s course of treatment. The admiration and respect that the average juror has for physicians is seriously diminished when a physician testifies that he or she was “too busy” to take the time to write legibly and/or completely. Perhaps, the plaintiff’s attorney will argue, the doctor also was “too busy” to adequately care for the patient.

Aggressive Billing Procedures

Another nonmedical issue complicating the case against Dr. Jackson involved a billing procedure. During testimony, Mrs. Adams commented that Dr. Jackson had demanded a deposit before the second surgery, a fact that later angered her. Juries tend to give enormous rewards if medical care has been compromised in any way because of monetary considerations. Unfortunately, OMIC experienced this fact firsthand in a case in which a patient accused an OMIC insured of demanding payment prior to performing retinal detachment surgery. A jury awarded the plaintiff in that case more than half a million dollars despite the fact that the patient achieved a good surgical result. Apparently, jurors were inflamed by what they perceived as a surgeon who cared more about the fee than the health of the patient.

In Mrs. Adams’s case, where she was surprised by the poor outcome of the first surgery, it would have been appropriate for Dr. Jackson to consider adjusting the fee for the second surgery. In situations where there is a poor result or maloccurrence, it generally is not an admission of guilt for the physician to discount or even to waive a fee if done properly. Rather, it demonstrates the physician’s concern and compassion for the patient. Even if the physician does not feel it necessary to discount the bill for an unanticipated second procedure, simply acknowledging the issue of additional costs and working with the patient to set up a reasonable payment schedule goes a long way to reassure the patient that the physician is more concerned with the patient’s medical problem than with collecting the fee.

Equipment Malfunctions

Often a claim against a doctor will involve allegations of equipment malfunction or utilization problems. In these cases, the physician may be brought into the case as a co-defendant along with or by the manufacturer of the equipment. A physician owes a duty of care to patients to properly select, inspect, maintain and use the medical office equipment and supplies. The manufacturer or the plaintiff will try to prove that the physician breached the standard of care by failing in one of these four duties.

Because it is often difficult to prove what transpired three or five years earlier when the patient’s injury occurred, it is important for the ophthalmologist to have in place a system of selection, inspection, maintenance and use of medical equipment and to document compliance with this system. The “SERUM” approach, which stresses appropriate documentation of the following factors is an effective risk management practice:

• Selection of equipment, i.e., ensuring that the type of equipment or supplies purchased is appropriate to do the desired clinical task;
• Education and training of equipment users;
• Recognition of product hazards and limitations of equipment;
• Use of equipment in a reasonable manner; and
• Maintenance and servicing of equipment.

A simple notebook with a page for each piece of equipment briefly setting forth the selection rationale, listing the appropriate users and their training, and setting up a reasonable inspection and maintenance schedule should be all that is needed to document compliance with the system. It is generally wise to have one or two people responsible for ensuring that the SERUM approach is actually implemented. This person does not necessarily have to be the one to maintain and inspect all the equipment, but should have sufficient authority in the office to make sure that the proper people follow through on these items.

Medication Errors

Medication errors account for a significant number of claims against physicians and can be attributed to both medical misadventures and nonmedical problems such as failure to read the medical record. The PIAA data cited at the beginning of this article included 6,646 claims resulting from prescription errors. Payments to plaintiffs were made in 2,195 of these claims, making prescription errors the second most frequent and second most expensive type of claim brought against physicians.

PIAA analyzed 393 medication error claims in which indemnity payments were made. The following nonmedical errors were cited: communication failure between physician and patient (6.7%); inadequate medical history (4.7%); failure to note previously listed allergy (3.7%); communication failure between physician and other provider (3.0%); and error in writing the prescription (2.3%). These five nonmedical factors accounted for approximately 20% of all claims involving a medication error.

The PIAA study indicates several loss prevention initiatives to improve patient care and minimize malpractice losses when prescribing medication. These include the following:

Educate patients about their medications using such resources as the AMA’s Patient Medication Instructions or the United States Pharmacopeia leaflet program.

Obtain and document informed consent for the prescription of medications with potentially significant drug complications and side effects.Obtain specific drug allergy information for antibiotics (penicillin and sulfa), nonsteroidal anti-inflammatories, anti-convulsants and diuretics.

Closely monitor for drug-related side effects.

Read the medical record for contraindications to medications, excessive number of refills and allergies.

Post medication allergies on the chart in a consistent and conspicuous manner. 

Abandonment and Noncompliance

Abandonment and the related issue of the noncompliant patient are two other serious nonmedical issues that can trigger medical malpractice claims. These issues may come together when a doctor who has exhausted all options in dealing with an uncooperative patient believes it best to terminate the relationship. The decision to terminate the patient relationship may have developed over the course of several months or years and may involve a patient who is not only uncooperative, but who has been verbally abusive or overtly hostile toward the doctor and the staff. Sometimes these situations are emotionally charged and present serious liability concerns since there is potential for the doctor or staff to act precipitously in these highly volatile circumstances and to terminate the relationship improperly. Having a system in place to handle such situations as they occur goes a long way toward avoiding charges of abandonment.

Unfortunately, many ophthalmologists lack a system to deal with terminating the doctor-patient relationship. A tabulation of data from 436 ophthalmologists who have participated in OMIC’s office self-assessment survey shows that more than 40% do not have a written procedure for terminating the doctor-patient relationship. OMIC’s risk management department frequently receives calls from insureds or their staff concerning the proper procedure for terminating care of a patient. During the course of these calls, it often becomes apparent that the office does not have a system or checklist in place to make sure the proper steps are carried out, thereby increasing the likelihood that the relationship may be terminated improperly.

The doctor and all office staff who deal with patients should be apprised of the fact that the doctor-patient relationship is not properly concluded until one of the following occurs:

• It is ended by the parties’ consent.
• It is revoked by the patient.
• The doctor’s services are no longer needed.
• The physician withdraws from the case after reasonable notice to the patient.

All staff should understand that it is usually held to be malpractice for a physician to unilaterally terminate the doctor-patient relationship without reasonable notice, at a time when there is still a need for continuing medical attention. Although the ophthalmologist is the only one in the office who can terminate the patient relationship, other staff members will be involved in helping draft letters, calling the patient and forwarding records, and need to understand the importance of carrying out these responsibilities properly.

Conclusion

As witnessed in the case against Dr. Jackson, nonmedical issues often are a significant factor in prompting and aggravating a malpractice suit. It is important that ophthalmologists and their staff recognize the role that nonmedical issues may play in a patient’s decision to sue. Incorporating the risk management principles suggested in this article into an ophthalmology practice may help reduce the risks and minimize the losses associated with these types of claims.