Medical indemnity
Your duty
Ensuring that you are properly indemnified for your work is essential. The GMC publication ‘Good Medical Practice’ clearly states that “you must make sure you have adequate insurance or indemnity cover so that your patients will not be disadvantaged if they make a claim about the clinical care you have provided in the UK.” In addition, The Health Care and Associated Professions (Indemnity Arrangements) Order 2014 came into force on 16 July 2014. This order introduces a legal requirement for all practitioners registered with UK healthcare regulators to have an indemnity arrangement that provides appropriate cover for their type of practice.
Before you start practising privately, you must therefore consider the various indemnity schemes available in the UK and ensure that you have in place an appropriate indemnity arrangement before you commence seeing patients.
The NHS
In the UK, most new consultants in private practice are also NHS consultants. Although NHS clinical work is typically indemnified by your NHS employer, through the Clinical Negligence Scheme for Trusts (CNST), there are important benefits of having access to the support of a medical indemnifier even if you are not yet practising privately. On occasions, the doctor’s interests may not coincide with the Trust’s, for example a doctor may need separate representation at an inquest or a Trust may be investigating concerns about an employed doctor. Without such support, the cost and stress of defending one’s reputation fall to the individual in such a scenario. Many indemnifiers and defence organisations can provide support for complaints within the NHS setting, as well as representing and defending you in GMC hearings.
Although extra NHS work carried out for the NHS within NHS premises is usually covered by CNST indemnity, it is essential you should check the nature of indemnity provided to ensure there are no gaps in your indemnity. It is particularly important to do this where NHS work is performed in private hospitals (e.g. waiting list initiative or extended choice network). If indemnity is not provided by your employer, you will need to arrange for indemnity through your own defence provider.
“It’s too expensive...”
... a commonly cited reason for not entering private practice is the cost of medical indemnity.
Consultants new to private practice are typically intrigued regarding how much their peers are earning, but are naturally reticent – often being British - about asking such a question. It is potentially considerably less rude to ask colleagues about their indemnity costs, but newcomers are often horrified at the answers, for example, £15,000 or more per year. Understandably, if one is not earning any private income, then such costs seem very steep.
Naturally, the private income associated with indemnity costs of £15,000 per annum is likely to be a healthy sum. Given that the indemnity costs themselves are a bona fide taxable expense, most private practice consultants still enjoy an attractive profit from their activities.
Like many reasons for not working privately, concerns around astronomical indemnity costs are typically unfounded, although there are exceptions. Many indemnifiers include a small amount of private income (in the order of £8,000 per annum) from clinical work at no extra cost, provided that the doctor has in place appropriate indemnity for their grade (e.g. NHS consultant). In addition, some also provide a first year discount for new consultants, meaning that for £8,000 of private earnings the costs involved are typically barely more than the costs of a senior trainee’s indemnity arrangement.
“But I don’t know how much I’ll earn”
This is true; without a crystal ball, there is no way of telling how much your annual earnings will be. However, one hallmark of a good medical indemnity organisation is flexibility and hence the ability to increase one’s cover when it becomes apparent that your practice has grown. Conversely, should you find that your income fails to reach its predicted (and notified) levels then you should be able to ask for a rebate without difficulty.
In practice, one has to estimate one’s earnings for the year ahead and it is this level of income that is indemnified. Best practice is surely to review your income periodically throughout the year and notify your insurer if your estimate proves to be significantly wrong. One provider states that you must notify them by the end of the membership year if your initial estimate is incorrect. The key danger of not doing so is that if you were to have a claim made after the end of your indemnified year – and it transpired that you had not paid the correct premium for your true earnings by this time – then it would be understandable for your provider to decline the claim, or at least pay only a proportion of any successful claim / costs. It is impossible to know what the final annual income figure will be in advance, however, being proactive and communicating with your provider offers excellent evidence that you have engaged with the process and helps guarantee your indemnity.
For these - and many other reasons - it is therefore highly important to know exactly what your earnings are and to be able to review them simply at various stages throughout the year. This typically requires administrative back up and is greatly facilitated by a database, or practice management software. For consultants in the first five years of practice, where growth is at likely to be at its greatest, understanding your newfound income in real time is especially crucial.
At the end of the financial year, if you find that you have not indemnified yourself to the correct level, your provider may ask you to make a declaration that you are unaware of any incidents that may give rise to a claim during the period in question – before they confirm your indemnity. Being proactive thus pays dividends.
What is a provider likely to ask me before I can be indemnified?
Whether an organisation is a corporation or a not-for-profit entity, it will want to understand the level of risk your practice poses. The exact questions that will be asked will vary between organisations, but are likely to include:
• Annual earnings from private practice (see above). Some organisations ask for your gross and net earnings, after deduction of allowable expenses. In this scenario, it is important to accurately describe the business vehicle of your private practice (e.g. partnership, sole trader etc.) so that you convey the costs appropriately.
• Your specialty (and sub-specialty)
• Your training, including in sub-specialty areas
• The scope of your practice, particularly whether you practice cosmetic or refractive surgery, or carry out cosmetic procedures such as the injection of botulinum toxin or dermal fillers
• Any previous claims
• Whether you are aware of any active complaints about your practice that may give rise to a claim
Some specialities are naturally more expensive than others to indemnify, private obstetrics typically topping the list. There is, of course, considerable overlap between specialities, for example, a cosmetic eyelid reduction procedure (blepharoplasty) may be performed by a plastic surgeon, an ophthalmologist, a maxillofacial surgeon, an ENT surgeon etc., and thus it is important to be honest about the scope of your practice.
If the scope of your practice is underpinned by your NHS practice, then you may find that your premiums are not as large as you had anticipated. For example, an ophthalmologist with a subspecialist interest in eyelid surgery carries out significant numbers of blepharoplasties in the NHS setting and is therefore likely to be a lower risk than a cosmetic practitioner with no formal accreditation in this area.
So what do medical indemnifiers offer?
Twenty years ago, there was very little in the way of choice of indemnifiers, but more recently there has been a growth in the provision of medical indemnity. Not all organisations offer the same range of services, experience, and cover; it is important to be aware of the potential limitations and drawbacks of some of the products on the market.
Services offered include:
• Medical indemnity for claims. The amount and duration of indemnity may vary dramatically between schemes.
• Medicolegal advice, representation and defence for negligence claims.
• Support with patient complaints, both within the NHS and private settings
• Support and legal representation at GMC and Trust disciplinary hearings
• Assistance with criminal investigations arising from your practice
• Indemnity for Good Samaritan acts
• Public liability cover
• Cover for loss of documents / breaches of the Data Protection Act
• Cover for HMRC tax investigations
What should I look for?
• Are there any limits to the indemnity and other benefits on offer – both in terms of time when I can report a claim and the level of indemnity and other benefits provided? For example, is there a cap on the indemnity and is there a cap on defence costs for GMC or Trust disciplinary investigations?
• Is it clear what happens after I retire / die?
• Support and medicolegal advice for all patient complaints, disciplinary hearings, civil or criminal actions, regardless of the chance of success.
• Value for money.
• Is it easy to change organisation if I become dissatisfied?
• Flexibility – the organisation should understand the uncertainty regarding my annual income and support you appropriately.
• Does a speciality-specific organisation provide all that I require? Potentially, costs may be lower.
• The relative merits of occurrence-based and claims-made insurance (see below).
• What is the track record of the provider in defending clinical negligence?
• What is the track record of the provider in assisting doctors with GMC investigations?
“Occurrence-based” or “claims-made”?
Providers are required by law to be clear about the type of indemnity offered. Usually information will be published on their websites and in leaflets: typically indemnity is either ‘”occurrence-based” or insured on a “claims-made” basis. The nomenclature is somewhat confusing, but these terms represent critically different products with long-term implications for policy-holders.
• Indemnity that is provided on an “occurrence” basis means once you have appropriately paid for a period of indemnity, you may report claims arising from that period of time at any point in the future (including extending after your death). Once you retire, no further subscriptions or premiums are necessary. This type of indemnity is provided by the three medical defence organisations and can be a little more expensive than its rival, because it provides the subscriber with the right to seek assistance at any time in the future for an incident that arose when the consultant was a member of that organisation.
• Insurance provided on a “claims-made” basis can be considerably less expensive, especially when part of a speciality-specific product, which can be very attractive. This type of insurance, however, only covers claims that arise during the period of insurance, although there are often transfer arrangements from other organisations that allow cover of previous work. Once you retire, or decide to leave your organisation for another, you need to be sure that your previous work is indemnified appropriately. This can be done through the inclusion or purchase of a “run-off” period of insurance, the cost of which may not be apparent at the outset and may potentially be time-limited.
It is vital to understand the potential advantages and disadvantages of these two fundamentally different types of indemnity. Occurrence-based providers are at pains to point out that claims for medical negligence are typically made a long time after an event or incident has occurred, with 40% of claims coming to light more than two years after the incident in question (Medical Defence Union (MDU) historical data).
“Discretionary” or “contractual”?
The issue of whether your indemnity is discretionary or contractual in nature goes to the heart of the differences between the current UK medical indemnifiers.
The overwhelming majority of UK consultants are members of three medical defence organisations, the MDU, Medical Protection Society and the Medical Defence and Dental Union of Scotland. These are not insurance companies, but not-for-profit mutual organisations, where benefits to members – such as medical indemnity – are available subject to the discretion of the organisation’s Board or Council.
The newer commercial medical insurance organisations typically offer contractual insurance to their policy-holders (not members); the ensuing insurance policy then clearly defines the limits of the indemnity provided, this contract being legally enforceable, subject to the terms and condition of the policy, which must be made clear. Contractual indemnity is typically limited in financial terms and such limits may vary widely between organisations.
The Financial Conduct Authority (FCA) regulates the activities of the insurance companies that provide medical indemnity, but not the medical defence organisations, which are mutual organisations. An exception to this rule is the MDU, whose subsidiary, MDU Services Limited, is regulated by the FCA.