Management Liability for Healthcare

Protecting your leadership

Government regulations are increasingly complex, and compliance has become extremely complicated. The pressures of compliance coupled with shrinking profit margins and the need to control costs make it increasingly difficult for healthcare organizations to find efficient means to improve the quality of care and patient outcomes.

The COVID-19 pandemic has added further financial pressure to healthcare organizations’ balance sheets. The pandemic added an additional layer of concern that healthcare providers needed to address in addition to the ever-present anxiety caused by a changing reimbursement system and the higher cost of delivering quality care. These factors push executives to find cost-efficient ways to provide an increasingly large spectrum of care. The decisions made by a provider’s directors and officers are of critical importance and directly impact the financial viability of the organization. Directors & Officers (D&O) liability insurance enables the organization’s leadership to make incredibly difficult decisions regarding the delivery of care without putting their personal assets at risk.

Why healthcare firms need D&O insurance

Without regard to a provider’s status as a not-for-profit, private, or public entity, all healthcare organizations benefit from having a well-negotiated D&O insurance program. Firms may be sued by employees, patients, regulators, suppliers, and creditors. Without a proper program in place, the organization is left to bear the financial burden of defending itself and, in most cases, its directors and officers.

D&O vs. Professional liability insurance

D&O insurance should not be confused with Professional Liability coverage. Professional Liability (akin to malpractice insurance) addresses performance failures and negligence with respect to services provided, and not to the performance and duties of management. It is recommended that organizations carry both D&O and Professional Liability insurance policies.

FAQs

Directors and Officers Liability (D&O) insurance protects both the healthcare organization and its directors and officers from claims alleging wrongful acts related to breach of duty, violations of federal and state regulations, claims focusing on peer review, provider selection, and anti-trust. The government's regulatory regime is increasingly complex, and compliance is both compulsory and complicated. As directors and officers navigate the current regulatory environment, the need for a comprehensive management liability program is imperative. While each policy is unique, D&O insurance is intended to pay defense and investigation expenses of covered claims, as well as settlements and court awards. Policies include coverage for the directors and officers and the healthcare organization.

Healthcare organizations have unique D&O exposures and face novel litigation including:

Anti-trust litigation from continued consolidation and lack of competition
Allegations and regulatory actions brought by governmental agencies including the Office of Inspector General (OIG), Internal Revenue Service (IRS), Federal Trade Commission (FTC), and the Department of Health and Human Services (on both the state and federal level)
Health Care billing fraud and abuse, including False Claims Act allegations
Alleged breaches of fiduciary duty in the context of financial loss or insolvency
Employment-related matters including wrongful termination, failure to accommodate, workplace discrimination or harassment, and hostile work environment (although a full EPL policy is recommended)