Most practitioners are familiar with State law requirements regarding the preparation and maintenance of patient medical records, and recognize that record retention not only is a function of malpractice exposure but also third party payor (managed plan) program requirements. Thus, a prudent medical records retention policy should take into account malpractice carrier and HMO policies and procedures as well as State law requirements.
However, an effective document
retention policy must also consider other business records, such as personnel
file information, including employee training, evaluation and disciplinary
actions, compensation/payroll records, fringe benefits data, I-9 forms and
retirement plan enrollment/election forms. The recommended retention or
“holding” period for any one category may differ, based on statutory
requirements or case law decisions. In the event of an agency audit or
litigation, the absence of such records may be as damaging to your defense as
loss of original patient medical charts in a malpractice action.
Post Payment (Retroactive) Audits by Third Party Payors
For many years, local health maintenance organizations (HMOs) have conducted audits of physician medical records and aggressively pursued reimbursement of amounts previously paid for medical services provided by the physician to his or her patients. Some HMOs have asserted an unqualified right to audit the physician records and demand refunds for claims paid three, four, five and six years before, extrapolating a large demand for payment from a relatively small sample of records examined. HMOs are known to target solo practitioners and small group practices that do not have the resources to contest the audit findings or reasoning.
These and other difficulties faced by physicians have led to reform efforts, culminating in recent New York State legislation that is said to limit the HMOs right to recover these “overpayments.” Under the new insurance law provision, HMOs will be barred from initiating recovery efforts if made more than 24 months after payment is received by the physician. Although the new legislation represents a good faith attempt to establish more reasonable audit guidelines, the reforms may effectively be negated by the statutory exception that will continue to allow HMOs to pursue recovery efforts, even if commenced more than 2 years after payment is received, if based upon a “reasonable” belief of fraud or “other intentional misconduct”, or a “pattern of abusive billing.” Given this statutory exception, it is reasonable to assume that HMO audit practices will be relatively unchanged in the near future.
Insureds Responsible to Ensuring Proper Coverage
On a bi-weekly basis, Hurwitz & Fine, P.C. publishes a newsletter reviewing insurance decisions rendered by New York appellate courts: Coverage Pointers. In its April 20th edition, the publication reviewed three recent decisions by the Appellate Division, Second Department. The Appellate Division is the intermediate appellate court in New York and its decisions are very important to follow.
We thought that it might be worth reviewing a trilogy of decisions dealing with the important question of the “responsibility” to make certain that an insured, any insured, has purchased and maintained the proper insurance coverage for either personal, corporate or professional obligations.
On April 10th, the appellate court announced three decisions involving commercial insurance, but the rules announced would be equally applicable for professionals. Fremont Realty, Inc. believed it had insurance for a particular risk and was surprised and disappointed to find out that it did not. Fremont was therefore faced with a substantial uninsured loss and commenced two different lawsuits to try to pass the blame - and the uninsured loss - to someone else.
First it sued the insurer, Zurich, claiming that it should have advised Fremont that the insured needed other coverage. “No,” replied the court. The insurance company has no duty to recommend coverage to an insured.
It also sued the insurance broker, USI Securities, claiming that the broker had an obligation to recommend other coverage and surely it was responsible if it did not do so and the insured faced a loss without available insurance coverage. “No, again” announces the court. There was no evidence establishing that the insured requested the agent that he or she secures that additional insurance coverage and the insured failed to establish a “special relationship” existed with the agent that would have required it to the agent to obtain that coverage.
What makes the relationship “special” enough to hold the agent responsible? It isn’t clear yet from the cases.
In another decision, handed down the same day and involving a construction company, the court made the point again:
Absent a specific request for coverage not already in a client’s policy, or the existence of a special relationship with the client, an insurance agent or broker has no continuing duty to advise, guide, or direct a client to obtain additional coverage.
Why do we bring these cases to your attention?
Insurance agents and brokers have an important role in assisting you in providing a safety net of coverages. However, the courts have made it quite clear that a business owner or professional may be sorely disappointed if there is an expectation that the agent or broker will be responsible if a loss goes uncovered.
Professionals should regularly review their insurance policies in light of changing legal obligations and requirements. Do not expect your agent or broker to know each and every need you may have, whether it be for “type” of coverage or liability limits. Meeting with your agent or broker on an annual basis, or whenever new professional obligations are presented to you (job change, partnership amendments, new services provided, new locations of practice) makes a great deal of sense and provide the prophylactic protection that may save you from financial challenges in the future.
What kind of coverage is needed? How much? How do you know? Sit down with an attorney, particularly one who understands the business and insurance risks you face as well, who can assist you in evaluating the legal challenges you may face in your personal life, your business and your profession. Understand the nature of the liabilities you face and the opportunities there are for those who may bring claim against you to interfere with your personal and professional assets. That kind of a meeting can assist you in being prepared for a consultation with your insurance agent or broker so that the protection you seek will best shield you from unfortunate consequences down the road.