Last spring, the Florida Orthopaedic Society (FOS) and the Bones Society of Florida (BSOF) embarked on an ambitious plan to create one of the largest risk purchasing groups for medical liability insurance in the nation. Today, the purchasing group is operational and has drastically altered the medical liability marketplace in the state.
Risk purchasing groups (RPGs) are recognized on both the state and federal level. They are specifically designed to enable professionals to join together to collectively negotiate insurance coverage for members of the group. RPGs also benefit insurance carriers, which can offer the RPG members discounted rates.
Matt Gracey, president of Danna-Gracey—a Delray Beach independent insurance agency with a team of specialists focused on medical liability coverage—first proposed the RPG concept to the FOS early last year. The FOS board approved the concept, and FOS and BSOF staff worked with Danna-Gracey to establish the Florida Orthopaedic Risk Purchasing Group (FORPG). By mid-July, approximately 400 orthopaedic surgeons had registered to participate.
Selecting a carrier
The selection of the carrier was one of the most critical decisions. For the program to succeed, the insurance carrier had to have the name recognition, resources, and corporate principles that would instill confidence among the membership.
Requests for proposals were sent to all medical liability carriers writing business in Florida. Four carriers emerged as finalists and were invited to make formal presentations. After some deliberation, First Professionals Insurance Company (FPIC) was selected as the carrier.
FPIC met the criteria on several levels. The company is domiciled in Florida and has a history of supporting organized medicine. FPIC also has substantial reserves and high quality risk management programs. Among the four finalists, FPIC also insured the highest number of the original FORPG members.
It is important to note that FPIC did not have the lowest bid. Ultimately, selecting FPIC signaled the commitment of the Florida Orthopaedic Risk Purchasing Group to its long-term mission, which goes far beyond lowering liability rates.
By October, proposals were disseminated to surgeons with looming policy renewals. The significant membership discount negotiated with FPIC made an immediate impression on the FOS membership and the marketplace. The response from the insurance industry was drastic.
Competition triggered changes
An extremely competitive marketplace emerged as other carriers tried to prevent surgeons from joining the new risk purchasing group. One carrier filed rates (effective Jan. 1, 2009) with an overall 5.5 percent rate decrease; rates for orthopaedic surgeons, however, dropped 20 percent to 24 percent, depending on the county.
Another competitor has launched “The Florida Orthopaedic Surgery Program” offering up to 25 percent rate credits for board-certified orthopaedic surgeons. The program has no connection to any organization and appears to be for marketing purposes only. Solid evidence indicates that the lowered competitors’ rates are not just the normal softening of the market but are a response to the new risk purchasing group.
Overcoming the response from industry has been a challenge. Clearly, the prospect of a unified orthopaedic community significantly concerns insurance carriers and independent agents throughout the state. Although some practices have decided to stay with their former insurers, the FORPG is working hard to distribute a message of the long-term benefits of unity versus the short-term reduction in rates. As a result, every orthopaedic surgeon in the state has experienced significant savings due to the formation of the Florida Orthopaedic Risk Purchasing Group.
Meeting goals and moving forward
Despite the competition, we are meeting our goals. As of January 31, just 4 months into the program, we had 193 members, and orthopaedic surgeons are continuing to join as their renewal dates arrive. We are well on the way to meeting the goal of finishing the first year with between 350 and 400 members.
With a critical mass of members, the organization can now focus on its long-term mission of controlling and transforming the risk profile of members. The key components of the program will be the risk management and claims review committees. The risk management committee will identify best practices and provide training and resources to the membership and their staffs. The claims review committee will work with FPIC and their defense firms to review all claims filed against members of the Florida Orthopaedic Risk Purchasing Group and provide expert advice on managing those claims including strategy and testimony.
The FOS and BSOF are also reaping benefits. Orthopaedic surgeons who join the new risk purchasing group must be members of the FOS. Out of the initial 193 members, 23 were not members of the FOS, and subsequently joined. Obviously, the risk purchasing group is an attractive member benefit for the FOS.
In addition, all members of the risk purchasing group are required to pay a $500 annual administrative fee that funds the operation of the program and development of marketing and educational materials. A portion of those proceeds will be reinvested in the sponsoring organizations to fund educational programs and legislative initiatives.
Medical liability insurance is just the beginning. We are already looking for additional opportunities to leverage our purchasing power. One option under consideration is group health insurance, which is a significant operational cost for orthopaedic practices.
Although the Florida Orthopaedic Risk Purchasing Group is still in its infancy, it promises to be a significant milestone in the histories of the Florida Orthopaedic Society and Bones Society of Florida. According to Brett Bolhofner, MD, president of the FOS, “There has probably never been a more critical time in our history as orthopaedists for us to be unified.”
Frasier Cobbe is executive director of the Florida Orthopaedic Society. He can be reached at firstname.lastname@example.org
Editor’s Note: Articles labeled Orthopaedic Risk Manager are presented by the Medical Liability Committee under the direction of contributing editor Douglas W. Lundy, MD. E-mail your comments to email@example.com or contact this issue’s contributors directly.