Hahnemann won’t pay residents’ medical malpractice insurance, so they find their own way

Hahnemann University Hospital. (Emma Lee/WHYY)

Hahnemann University Hospital. (Emma Lee/WHYY)

Former residents and fellows at Hahnemann University Hospital, after receiving word that their old employer would be unlikely to provide costly medical malpractice insurance, have banded together to find a solution. And with the insurance set to expire next month, everyone’s chipping in.

The American Medical Association is taking on the cost of a lawyer to represent the doctors in bankruptcy and other court proceedings. The Pennsylvania Medical Society is trying to reach anyone who worked at Hahnemann while American Academic Health System owned the now-shuttered hospital, to let them know they’ll be losing their coverage. And the Pennsylvania Professional Liability Joint Underwriting Association is asking the state Insurance Department to authorize paying half the coverage costs — up to $25 million.

None of this was supposed to happen.

American Academic Health System insured the residents and fellows while they worked at Hahnemann through a claims-made policy. Those policies are usually accompanied by what is known as “tail insurance” — an extension that covers the doctor for the time worked at the hospital once he or she leaves. That’s important because medical malpractice complaints can be brought months or years after the fact. When Hahnemann filed for Chapter 11 bankruptcy and announced it would close over the summer, its owner’s ability to pay the residents’ tail coverage was jeopardized.

The residents thought the funding would come out of the $55 million sale of Hahnemann’s residency programs, which was authorized by U.S. Bankruptcy Judge Kevin Gross in Wilmington. But the Centers for Medicare and Medicaid objected to that sale, and it is on hold while the federal government’s appeal moves through the courts.

Meanwhile, the residents’ tail insurance is set to expire in January. And not just coverage for the 550 or so residents and fellows that were employed at Hahnemann when it closed, but also for any who had worked there since American Academic Health bought the hospital in January 2018. That amounts to 960 people. Many of those doctors are employed elsewhere around the country and may not know their tail coverage is set to disappear.

“We’ve been talking about this for a long time,” said Mark Austerberry, Executive Director of the Philadelphia County Medical Society, which is working with the Pennsylvania Medical Society and former residency program directors to track down all of the former residents and fellows and let them know what’s going on. “This day was coming, hopefully it was going to get addressed. It never got addressed, now it’s almost here.”

The cost of tail coverage varies, depending on the physician’s specialty and how long he or she worked at the hospital. For example, a low-risk discipline such as pathology might incur a tail coverage cost of $2,000, while coverage for a doctor with a specialty like OB-GYN might be upwards of $70,000.

Because of those costs, some residents have filed a petition with the U.S. Trustee Program, asking that they are added as creditors in the bankruptcy case.

Sukhdeep Singh finished his residency at Hahnemann just before it closed and now works at a private OB-GYN practice in New Jersey. He said tail insurance to cover the 18 months that American Academic owned Hahnemann would run him at least $60,000, which he cannot afford. The former residents were not listed as creditors in the bankruptcy case before because they weren’t owed any money, he said. Now, they feel they are.

“This was something that was promised in our employment contracts, and this was not something any of us thought we’d have to go out on our own and find,” Singh said.

The residents estimate that, all together, they could be owed more than $20 million.

A representative for the American Academic Health System did not immediately respond to a request for comment.

One former Hahnemann trainee who has not been able to find a new job said he got a quote of $5,000 for tail insurance.

“I’m shocked, I didn’t expect this,” he said, calling the additional cost of tail coverage on top of losing his job a “nightmare.” WHYY is withholding his name because he is afraid that revealing his situation would affect his ability to be hired. The doctor and his family are currently living on unemployment compensation — he and his wife and kids are all on Medicaid. He said that to pay for tail insurance, he’d have to dip into his savings, which would jeopardize his ability to provide for his family in the new year. But going without coverage is incredibly risky, too. He and his wife haven’t decided yet what they’ll do.

“At this point, that’s the big question,” he said. “If I don’t have any hope to get a new job over the next month, I would prefer to take the risk. I have to provide for my family.”

The local organizations are doing their best to help.

The Pennsylvania Professional Liability Joint Underwriting Association, or JUA, established by the state as a last-resort fund for doctors’ insurance, has asked the state Insurance Department to authorize half the tail coverage costs, up to $25 million, for the displaced residents and fellows, as well as 10% of the insurance for former attending doctors. Attending doctors have a bit more flexibility to buy their own tail coverage since they earn more money than physicians in training.

In a letter to the Insurance Department, the JUA described the issue as a time-sensitive public health crisis.

“Not having insurance is going to be everybody’s loss, not just the doctors,” said Austerberry. He explained that the Philadelphia County Medical Society has heard from 18 states that having a gap in coverage could cause issues for physicians, such as making them unable to provide care under Medicaid and other critical services for poor patients.

“Then the community loses out,” he said. “We’re losing that service.”

If physicians without medical malpractice insurance are sued and can’t pay on their own, that leaves injured patients holding the bag. If patients know they can’t win, they could, in turn, be less likely to file claims, placing the burden of this dynamic largely on the poorest and worst-represented patients.

Fallout like this is exactly what Philadelphia City Councilmember Helen Gym hoped to avoid with her new bill, which was unanimously approved by the council on Thursday. It would require that any closing hospital give 90 days’ advance warning to the city Department of Public Health, as well as a detailed plan for closure, to be approved by the Health Department, that includes continuity of care for patients, ongoing management of medical records, and assistance for staff transitioning to other jobs.

Under the new law, if a hospital does not cooperate, the city solicitor can bring a lawsuit and have the court appoint a special manager.

But those keeping an eye on the Hahnemann residents’ tail coverage have been doing so for months — and on this issue, it’s not clear whether more time would have made a difference.

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