A Guide to Medical Practice Indemnity Insurance | Tego Insurance

Whether you are an owner or practice manager of a medical practice, clinic or day surgery, it is vital to understand what insurances you need to protect your staff and the business from a variety of risks and exposures inherent in running a practice.

This guide will help practice owners, practice managers and medical practitioners better understand the risks, exposures and their requirements and obligations in respect of medical indemnity insurance when it comes to running a medical practice, day surgery or clinic.

Every practice is different and has its own risk profile which can vary depending on:

  • The types of medical services being offered.
  • Whether cosmetic or beauty services are provided and if so, who are carrying out the procedures.
  • How you advertise your business on social media and in the community.
  • The structural set up of the medical practice.
  • Whether the practice has multiple partners including business partners or other medical practitioners working in the clinic.
  • Whether the practice is renting out rooms.
  • Whether the medical clinic is co-locating with another tenant.
  • Whether the practice has employed staff.

The answer to each of these questions will either increase or decrease your risk exposure. Needless to say, one of the most common questions asked is “why does a medical practice require medical malpractice insurance?”.

What if medical practitioners have their own insurance?

One the most common myths when it comes to practice insurance is that all the doctors and healthcare staff (e.g. physio therapists) have their own individual indemnity insurance, so why does the practice need one? If there is a claim which has to do with the individual practitioner, surely, they will be sued and the policy will respond as they are the doctor treating the patient.

The answer is generally yes, the medical practice needs its own cover. Anyone can bring a claim or complaint against anyone associated with the healthcare service. So even if the doctor has been responsible for the individual care, there is nothing stopping someone also bringing the legal practice entity into the claim. Without practice indemnity insurance, the cost of defending the claim or complaint will be borne by the entity on its own balance sheet. Why take the chance of spending hundreds of thousands on legal costs when you can transfer this risk under a low-cost insurance policy?

What type of claims could a medical practice be responsible for?

Don’t forget, medical practices also interact with patients and support the doctors working in the practice and ancillary services. So, what would happen if not only the practice had to spend legal costs defending a claim, but were also found a contributing factor to the injury or loss suffered by the patient?

How is that possible you ask? Well, practice protocols, staff errors or system failures can create or contribute to poor patient outcomes which exposes the GP surgery to being found wholly or partly responsible.

The practice may also supply the medical equipment used by doctors in clinic and may be responsible for the sterilising, maintenance and replacement.

Case Study Example

A patient visited a GP medical practice with a small lesion on her arm. A punch biopsy was performed and sent to the lab for testing on suspicion of being a melanoma.

A few days later, the patient developed swelling and pain on her arm. She returned to the medical practice and an infection was diagnosed and treatment provided by the doctor. The patient developed scarring and was unable to work for a few months. A claim was brought against the doctor and the GP medical practice on the basis that the equipment was not properly sterilised. The GP medical practice contributed to the majority of the settlement as they were responsible for the sterilisation process.

Accreditation and Regulation of Medical Practices

Obtaining accreditation has been cited by the Australian Council of Healthcare Standards (ACHS) as demonstrated by an independent external assessment, of the medical practice’s performance in relation to a number of set standards.

There are various levels of regulation and accreditation required when operating a medical practice and it is not sufficient to just rely on medical practice indemnity insurance in its place.

The Australian Health Practitioner Regulation Agency (AHPRA) is the body that supports the Medical Board of Australia. The Medical Board of Australia is supported by state-based boards.

These important organisations are responsible for regulating the medical profession through the setting of policies and standards that all medical practitioners must meet.

Who should I approach to provide medical practice accreditation?

Accreditation is an important step in ensuring your medical practice meets and maintain quality standards of healthcare. There are some medical practice insurers who also reward a clinic with discounted premiums where a practice has accreditation status.

There are a number of organisations including the Australian Council on Healthcare Standards who provide accreditation services. It is recommended to review the ACHS programs and their key accreditation principals.

A critical resource for any doctors’ practice is the Royal Australian College of General Practitioners (RACGP) Standards for General Practice. Currently in publication is the 4th Edition which provides a template for quality care and risk management in Australian general practice.

The Australian Commission on Safety and Quality in Health Care is also an important industry body. While they do not provide accreditation, they are the peak organisation providing leadership and coordination of improvement in quality in health care and safety throughout Australia.

The Australian General Practice Accreditation Limited AGPAL is a not-for-profit organisation which serves as a provider for general practice accreditation and quality improvement. Other accreditation organisations include Quality Practice Accreditation (QPA)

Importantly, while accreditation may be voluntary for GP medical practices, the Australian Medical Association (AMA) also strongly supports a profession led voluntary general practice accreditation system that encourages and supports practices to meet a minimum set of standards and to continuously strive for improvement.

Are there any other organisations I should join?

If you are a private hospital or day surgery facility, the Australian Private Hospitals Association (APHA) is a great member organisation that promotes the highest professional and ethical standards. APHA encourages a united front for members to foster and maintain a consultative and cooperative approach to dealing with industry stakeholders.

Deciding on a structure for your medical practice

In deciding which structure is best for your circumstances, we encourage all medical practice owners to engage their accountant and lawyer for specific advice. A financial planner is also a valuable resource when considering structures.

Some basic practice structures include:

Sole practitioner solo practice – in this structure you maintain complete control of your medical practice. Solo practices however can have different structures, some involving trusts.

Partnerships – A partnership model could be established through a new partnership or entering into an existing medical practice. Larger practices may have the advantage of providing access to multiple services or specialties on site. This structure can also share the risk and responsibilities of practice staff and support.

Other corporate structures – there are other corporate and business structures available offering varying levels of management involvement, risks and rewards.

To learn more about the options listed above, and which is best for you, we recommend you consult with a certified practicing accountant or a certified financial planner.

Is my practice covered under my individual medical indemnity insurance?

Each of these structures can have an implication on coverage under a doctors’ individual medical indemnity insurance policy versus cover under a medical practice policy.

If there are no other doctors at your practice and you are not renting out rooms or sharing staff, then you may be covered under your individual medical indemnity policy. You may also be covered if you own the medical practice jointly with a spouse or through a trust. Each medical indemnity insurer may have specific rules around this coverage, so you need to confirm coverage with your insurer.

If your medical indemnity insurer confirms cover then as a sole practitioner who also owns and controls the entity where you practice, you will have cover for that practice entity under your practitioner indemnity insurance for claims brought against the practice entity.

For example, if are carrying out cosmetic activities and have a nurse injector, you may find limited coverage under your individual medical indemnity policy.

Comparing medical indemnity practice insurance in Australia

Once you have decided that you need medical practice insurance, it is not simply a decision of going out and purchasing a policy. It is important that you take the time to compare medical practice quotes from a number of insurers in Australia. Some decisions you need to make include:

  • What limit should I buy?
  • What excess or deductible should be applied?
  • Do I need public liability insurance?
  • Should I buy cyber insurance?
  • Are there any other optional covers I should consider?

Comparing medical indemnity is not always about price. You don’t need to make this decision alone without expert advice. One way to help you in the process of comparing medical practice insurance is through an insurance broker.

What is the value of an insurance broker?

An insurance broker works on the behalf of their client (you) and is impartial in their dealings with insurers. They provide professional assistance to their clients by understanding all their clients’ needs, can obtain and compare quotations from any insurer which offers a suitable product, and will advise the client on which policy best suits them. The broker will help the client understand the differences between policies and handle the financial and administrative transactions on their behalf.

Thinking of purchasing an existing practice?

When purchasing an existing medical practice, there are several key aspects to consider as part of the decision-making process:

  • The practice’s location and reputation
  • Whether other allied or specialist services are offered
  • Skill set, tenure and experience of staff and healthcare practitioners
  • The intellectual property of the medical clinic
  • Plant and equipment
  • Property lease, equipment, loans, or outstanding debts
  • Insurance policies owned by the practice

A key factor you must address are the insurance arrangements. An independent insurance advisor should do a review of the existing practice insurance and help you decide:

  • Whether the existing practice has adequate insurance
  • What liabilities you may be taking on by purchasing the medical practice
  • Whether the previous practice owners have purchased insurance to cover the run-off exposure of the practice prior to your ownership
  • Whether new insurance arrangements will appropriately cover you for risks going forward

Final remarks

As you can see, there many facets to owning and running a practice. Whether you are setting up a new practice from scratch or have recently acquired a medical clinic, make sure you have a clear picture of your risks and ensure adequate insurance coverage to protect your business, reputation and livelihood. For more information on medical practice indemnity insurance, contact Tego Insurance on 1300 834 683.

This publication is general in nature and is not comprehensive or constitute legal or medical advice. You should seek legal, medical or other professional advice before relying on any content, and practice proper clinical decision making with regard to individual circumstances. Persons implementing any recommendations contained in this publication must exercise their own independent skill or judgment or seek appropriate professional advice relevant to their own particular practice. Compliance with any recommendations will not in any way guarantee discharge of the duty of care owed to patients and others coming into contact with the health professional or practice. Tego Insurance Pty Ltd is not responsible to you or anyone else for any loss su­ffered in connection with the use of this information.

By Eric Lowenstein on Thursday, May 7th, 2020 in General. No Comments

Eric Lowenstein

Eric is the CEO of Tego, an insurance agency offering specialist indemnity insurance solutions for the healthcare and life sciences sectors. His qualifications include a bachelor’s degree in business and law, a master’s degree from UNSW in law and management and an MBA from the AGSM.

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