Ways to shield your practice from emerging malpractice 'crisis'

June 1, 2005

We have never been as inundated with calls as we have in the last year regarding the malpractice insurance situation.

We have never been as inundated with calls as we have in the last year regarding the malpractice insurance situation.

Doctors from all specialties have called us looking for ways to reduce their malpractice premiums or to find alternatives to their traditional carriers.

The question on their minds, and perhaps on yours as well, is: What should I be doing to protect myself during this malpractice insurance crisis?

1. Make asset protection a priority Regardless of the state of the malpractice insurance market, physicians should always see asset protection as an important part of their business and personal financial plan. When we use the term "asset protection," we mean shielding the assets of the practice and personal assets from all potential lawsuits, including malpractice claims.

While this has certainly been a priority over the last decade, at no time has it been more important than in this malpractice insurance crisis. Because premiums have become so expensive, many physicians are considering reducing their coverage from traditional limits to lesser limits.

Even though this may make sense, it is only part of the equation. If you decide to reduce your malpractice insurance coverage, this goes hand-in-hand with implementing an asset protection plan - to protect all of your practice and family wealth.

An ideal solution is one that not only reduces your cost of malpractice insurance, but also provides the same level of protection for your assets. It makes no sense to reduce coverage limits because premiums are expensive and then leave your practice and personal assets exposed to lawsuits and creditors. That is why asset protection is so important.

While an in-depth discussion of the tools and strategies that asset protection professionals use is beyond the scope of this article, we will list a number of tactics here. However, as with insurance planning, these strategies and tools must be implemented before there is a problem. That is why one must engage in asset protection planning as early as possible.

Potential asset protection tactics Shield the practice's most valuable asset - its accounts receivable (AR) - through a leveraging or factoring strategy. Often, this can create significantly more after-tax retirement wealth, in addition to protecting the AR from medical malpractice claims. Your options: