Just like any organization, behavioral healthcare providers have assets they need to protect. When approaching risk management and liability coverage, common sense prevails. But it's also important to consult with your legal and insurance representatives to make sure one thing never changes: no matter what happens, you're covered.
According to Brad Storey, MSW, director of risk management for Irwin Siegel Agency Inc., the best way to do that is to enlist a proactive approach to risk management.
Storey notes that facilities that are able to stay ahead of potential risks are “able to make better decisions, identify potential problems and implement controls up front.” While the primary task of insurance providers is to “mitigate the chances that an exposure to risk actually turns into a claim,” they also must provide options when funding and resources are limited.
When money is tight, Storey suggests that providers adopt a “total cost” view of their coverage. “When you're looking at an insurance program, it's not just a matter of comparing bottom line premiums,” he says.
For example, providers may offer clients supplemental services like training and pre-employment screening, which will likely free up full-time staff and offer a valuable cost saving. However, such services could also generate liabilities, since the provider assumes responsibility for the quality and accuracy of the work.
This potential “needs to be understood as part of a total cost of risk calculation,” Storey urges, “rather than focusing on coverage alone.”
While managing risk relies heavily on common sense, there are also many factors of insurance coverage that have the potential to create problems if not properly understood. Ideally, the following suggestions will prompt valuable interaction with your insurance provider, ensuring that no repair, remodel or renovation in your facility introduces a level of risk that you didn't expect.
1. Update coverage for “green” renovations. Green design elements (recyclable, earth-friendly roofs, energy saving materials and equipment) are increasingly popular design options for behavioral health facilities, since they trade a higher upfront cost for long-term energy and operations savings.
But according to Rich Willetts, CPCU, ARM, program director at NSM Insurance Group, insurance policies often do not cover the added replacement cost of green items if they are damaged. They promise only to replace damaged equipment or materials with items of “like kind and quality.”
That means that if green materials are used in renovations (and no policy changes are made), any damaged property likely will be replaced with only what is regarded as “standard.”
“If you're going to upgrade or renovate with anything non-traditional, like solar panels or a new roof made of environmentally friendly material, it's definitely something to consider,” Willetts says. 2. Double-check limits after an upgrade. After an upgrade or renovation, ask if your policy's coverage limits are still adequate, Willetts advises. “If they're not, you could be subject to a co-insurance penalty.”
All insurance policies have a clause requiring policy holders to maintain insurance that matches the value of the property, Willetts explains. So, upgrading your property through renovation, remodeling, or an addition generally demands an increase to coverage and coverage limit.
Otherwise, he says, “you'll get pennies on the dollar when you have a claim.” Consult with your broker if you make a change, he adds, “especially something significant.” If you don't, it can turn into an “ugly surprise.”
3. Update coverage for new IT. As facilities follow the evolution of information technologies, including electronic health record (EHR) and telehealth systems, an important concern becomes how to provide the proper protection for these significant investments. “This equipment can be expensive property and needs to be properly secured and insured,” says Willetts. That creates another set of challenges.
For example, if your facility just installed a new server to support a state-of-the-art telehealth system, Willetts asks: “What happens if there's a lightning strike and it's destroyed?” Equipment breakdown is not covered under a typical property policy and requires the insured to buy “special coverage,” notes Willetts.
But how many people realize that? “Probably not many,” he says. That's why facilities need to consult their broker, who will explain that property coverage doesn't include flood, equipment breakdown or earthquake. “Most people think those things are already included, but they're not.”
4. Focus on simple maintenance. Willetts says that most claims in behavioral health facilities result from accidents, “simple slips and falls,” that are often attributed to breakdowns in facility management. “If you want to impact on your insurance costs, just keep your facility well maintained,” he suggests. While most facilities “probably know where their weaknesses are,” budgets also need to be taken into account.
“When budgets are tight, things tend not to get fixed,” he says, adding that insurance companies want to know that a policy holder will maintain his property and keep it safe. Of course, when a facility poses a lower risk, it can expect lower premiums.
“Underwriters look at all of that information and they assign discretionary credits based on that,” says Willetts. “It absolutely has an impact on your price and premiums.”
5. Understand the impact of bed bugs. According to Storey, the risk of bed bug infestation is another thing that behavioral health organizations need to watch. “Traditionally, it's believed that insurance coverage doesn't include bed bug infestation,” he says. “But that's not always the case.”