President of the Kentucky Society for Healthcare Risk Management Melissa Updike has had a long career in risk management, including six years leading a captive insurance company. She told HRMR why a proactive approach has been vital to the captive’s success.
A simmering issue for risk managers in several areas of the US is the discoverability of data (the information protected by the privilege and confidentiality protections of the Patient Safety Act known as Patient Safety Work Product [PSWP] sent to patient safety organizations (PSOs). As president of the Kentucky Society for Healthcare Risk Management, Melissa Updike is well versed in the concerns surrounding the decision by the Supreme Court of Kentucky that is contrary to the intent of the Patient Safety and Quality Improvement Act (PSQIA) regarding the privilege of PSWP that is generated and shared with PSOs in the wake of a patient safety event.
“It’s a heavy issue for us. In Tibbs v Bunnell the involved parties are vigorously appealing decisions that are stripping Kentucky healthcare organizations the protections provided by the PSQIA. It’s certainly a hot topic for our members, and one that will be discussed in our annual meeting as we get a complete update on the status of ongoing cases and important Supreme Court rulings,” she says.
Updike’s own view on the issue is pragmatic and principled.
“Regardless of what’s going on at the Supreme Court level, it’s important for us to do the right thing. If we have a unexpected outcome and we learn that factors such as a process or behavior led to that event, we need to take ownership of it and get the matter resolved,” she says.
“I always say that whatever data we collect, we still have to do the right thing: yes, it’s unfortunate that the plaintiffs’ bar will take our efforts to identify quality issues or improve our process and use it against us, but the bottom line is that I wouldn’t change what we’re doing, whether its discoverable or not.
“Our goal is always patient safety first!”
A tailor-made approach
This issue also resonates through Updike’s day job as executive director of the Kentuckiana Medical Reciprocal Risk Retention Group (KMRRRG), a captive insurance company that provides the professional liability coverage and risk management consulting for a portion of the University of Louisville Hospital, plus the University of Louisville Physicians, Inc and the university’s residents and students. KMRRRG also provides services to a group of emergency physicians.
The company was set up in 2004 in the midst of the medical malpractice liability crisis during which professional liability rates doubled and tripled for some insureds. The formation of a captive insurance company was a logical solution, bringing insurance out of the hands of the commercial insurance market and putting it into a program that allowed much greater control and realistic pricing based on experience rating and not market conditions alone
The KMRRRG is domiciled in Kentucky—a decision that has served it well but was not easy to make at the outset.
“There was a lot of debate about where to domicile it,” says Updike. “Vermont is one of the larger and oldest captive domiciles, so there was some discussion about domiciling the captive there. South Carolina was also discussed because at the time it was a growing domicile.
“Kentucky was really just finding its feet from the standpoint of trying to form a captive industry, but two significant factors in the decision to domicile the captive in Kentucky were that the board didn’t want to set up anything offshore, and they also wanted to be able to have their meetings locally.”
This was a key point due to captive regulations requiring that a captive insurance company must have at least an annual board meeting in its domicile: by keeping it local, the company was able to keep operational costs low.
On the doorstep
There are other benefits to a local approach. The company finds it easy to maintain open lines of communication with its insureds, who say they appreciate the local service rather than having to contend with a call center when they need to report a case or discuss a risk management matter.
Insureds can visit Updike in her office which, for many insureds, is just blocks from where they practice. Local defense counsel is also able to keep up that personal touch as a case progresses, with the result that the insureds feel supported by, and properly connected with their insurer and their defense counsel.
This approach gives the company a competitive edge in an environment where it continually has to prove its worth against larger commercial insurers.
“We are always in competition with the commercial market, and keeping our insureds happy is a key part of this. In the current soft insurance market brokers in the commercial market can always come knocking on insureds’ doors offering a better premium, so you have to make sure you are keeping your pencil sharp, staying competitive and providing them with good service,” she says.
Updike believes that quality service and good, collaborative claims management are two of the most important factors in ensuring the company’s success: it’s about making sure matters are handled appropriately when a claim does arise and working to find a satisfactory resolution, whether that means settling or defending a case.
“It’s really about aligning with your insureds, and I think we’re very successful at that; it makes sure we’re all on the same page from the get-go. Here in Kentucky bad faith claims are an issue that the plaintiffs’ bar uses against insurance carriers to prompt insurers to manage cases differently.
“The threat of bad faith claims is one approach used to drive up the settlement value of claims. Proper response, collaboration with the insured and defense counsel along with close attention to the management of every claim is vital in avoiding this pitfall. We haven’t had any bad faith claims and I intend to keep it that way.”
After more than 25 years in the field of healthcare risk management, Updike speaks from wide and varied experience: she started out as an in-house risk manager, became director of risk management for a large healthcare organization and went on to clock up years of experience on the broker side of the business, including working with Marsh, during which time she consulted for large healthcare clients.
Her experiences have given her insight into both the risk financing and risk management/patient safety sides of the industry and add up to a good toolkit for managing a captive insurance program.
The proof of the pudding is in the fact that the company has gone from having total assets of $4 million in 2004 to approximately $50 million in 2015.
Besides offering competitive premiums and personal service, Updike says the company’s approach to joint representation has been vital to securing its success.
“When I came on board there were instances of shifting blame or shining a light on certain defendants in a claim instead of taking responsibility themselves. The way we structure our cases prevents this: we very much support a joint defense, joint representation model.
“For instance, in any lawsuit there could be five insureds’ policies triggered under my program. Where possible we would assign one counsel and we would have one lawyer representing all of the insured defendants in the case. Obviously, there can be difficult cases in which conflicts cannot be resolved and separate counsel may be assigned, but more often than not a joint defense strategy is successful.
“This helps align the claim, it helps all the defendants get focused on their care and it avoids any finger-pointing, which ultimately controls the value of the claim and eliminates runaway verdicts for the plaintiff.”
Also key to the company’s success is its close ties with the risk management departments in the medical facilities where its insureds work. There is a strongly proactive approach to managing risk, with an emphasis on identifying issues before they become problems and promoting early disclosure when events do occur.
Risk financing and early resolution are central issues for Updike, as is learning lessons when problems do occur and taking decisive steps to stop those problems occurring again.
“The proactive risk management side of it is about providing safe and quality care so that the insureds never even need to come to my office. That said, when they do have to come to me, the rewards of the job are about being successful in resolving issues, being able to look at the situation more broadly and saying, ‘ok, this may have happened but we are going to make sure it doesn’t happen again’.
“It’s about being able to collaborate with the risk management departments, staying proactive and making a difference.”
Kentucky Society for Healthcare, Melissa Updike, US, Crisis management