A captive for healthcare


A captive for healthcare

From adjusting to quality-linked reimbursement to achieving robust, keenly-priced insurance arrangements, these are interesting times for Bob Reilly, CFO at Anne Arundel Health System in Annapolis, Maryland. He told HRMR how his organization is keeping pace with healthcare reform.

As health care providers across the US struggle with the financial and quality implications of healthcare reform, chief financial officer (CFO) Bob Reilly and his team at Anne Arundel Medical Center, a regional health system headquartered in Annapolis, Maryland, have been one step ahead of the game.

“For us the linkage between quality and finance began earlier than the rest of the country,” says Reilly, whose medical center serves an area of more than one million people. “Our focus on quality outcomes and patient satisfaction has helped us achieve financial rewards under the state regulatory system. This change in regulation has certainly created an interdependency between the clinicians and the finance team in working to understand how to effectively move the dial in patient care and outcomes.”

Anne Arundel’s system of quality is designed to identify and minimize any risk to be managed. Reilly works very closely with the system’s director of risk management along with the chief medical officer and chief nursing officer to manage medical risk.

“We have a well-developed proactive process to identify incidents that could lead to claims that includes a regular review by a large group of physician service directors. During these meetings, we thoroughly discuss the incidents to understand our risk, learn from the experiences in real time and initiate steps to intercede where appropriate.

“In between meetings, we have a process to immediately address incidents as they occur in an open fashion with the staff, patient and patient’s family. Through this very transparent process, we have been very successful over the past several years at reducing our malpractice exposure and more importantly, continuously improving the quality of care to our patients.

“Transparency and consistent communication are keys to a successful relationship with our director of risk management. Our goal is no surprises—should an incident develop into a claim, the facts should have been known and well discussed.”

Creating a captive

When it comes to insurance, Reilly and his team have worked hard to ensure that they (1) have a strong process of reporting and vetting of claims, (2) that they capture all of the information about the claims, (3) that they have a consistently applied process for setting reserves that is supportable and reflective of the current legal environment, and (4) that they are proactive in communications with their carriers.

Anne Arundel is self-insured through a Cayman Island captive and reinsure its risk through Lloyd’s Partners in London.

“With the good work we have accomplished in managing the care of our patients and the corresponding low claims experience that has resulted, we have been able to maintain a level premium experience for reinsurance for the last four years,” says Reilly.

Anne Arundel chose to start its captive nine years ago to better manage the cost of insurance and to reduce its dependency on US-based carriers.

“Establishment of a captive in the Cayman Islands offered advantages in overall cost management of a plan with more supportive regulatory requirements for our insurance needs. We consider our relationship with Cayman Island Monetary Authority very successful and plan to continue our business there,” says Reilly.

“For our reinsurance buying decisions, we obviously look for financial strong partners that have histories of consistently supporting customers through times when claims experience may not be as successful as we have realized. We are looking for a long-term partnership where both parties know each other well and we have found that the Lloyd’s Partners syndicate model supports that type of relationship.”

Future plans

One of the unintended consequences of healthcare reform and the insurance exchanges is individuals enrolling in high deductible plans without fully preparing for paying that deductible, so Reilly expects to see an increase in Anne Arundel’s bad debt expense.

“However, on a very positive note, we have seen individuals seeking more primary care where previously they were unable to afford and simply did not get the basic care they needed,” he adds.

As Reilly looks to the future he is aware that there have been significant jury awards in recent years.

“While we have been fortunate not to see these types of awards arise in our jurisdiction, these awards add an element of risk that needs to be understood,” he says.

“We also have to continuously monitor the changes in regulation relative to our foreign corporation, both in the US and in Cayman. And we need to monitor the evolution of healthcare reform to ensure we make any necessary adjustments in our quality of care process or related insurance planning.”

Like many health systems, Anne Arundel is now placing a focus on improving care for patients in non-hospital settings. Reilly anticipates that challenge will be to invest in systems of care that engage patients in managing their chronic care needs before they have an emergency event. This will be a key goal over the coming year.

“Developing the right care in the right place at the right time is our goal for our community,” he says.

Bob Reilly, Anne Arundel Health System, US