LACONIA — LRGHealthcare has joined with three other hospital systems to form Granite Shield Insurance Exchange, a reciprocal captive insurance company licensed in Vermont, which will insure the institutions and their employees against general and professional liability.
LRGH's partners are Concord Hospital, Eliot Health Systems of Manchester and Wentworth-Douglass Hospital of Dover. The hospitals invested equity capital in the enterprise and will pay annual premiums based their claims experience and risk exposure.
Granite Shield will provide both primary coverage and excess insurance for the hospitals as well as physicians, nurses, administrators and support staff. Captive insurance companies are established by parent firms or groups as subsidiaries to underwrite the risks associated with their operations. They are "captive" in the sense that the policyholders own their insurance carrier.
Granite Shield Insurance Exchange is among 911 captive insurance companies domiciled in Vermont, the most of any state and exceed only by Bermuda and the Cayman Islands. Dan Towle, director of financial service in Vermont, said that captive insurance companies formed by health care corporations are among the fastest growing sectors of the industry.
With the establishment of Granite Shield, LRGH ended its longstanding relationship with the New Hampshire Medical Malpractice Joint Underwriting Association (JUA). With annual premiums of more than $1-million, LRGH was the only hospital and largest policyholder of the JUA. LRGH led the coalition of policyholders that successfully challenged the effort of Governor John Lynch and his administration to transfer the JUA's surplus of $110-million to the general fund in order to balance the state budget.
Mitchell Jean, director of risk management at LRGH, stressed that the decision to leave the JUA for Granite Shield had "absolutely nothing to do with our experience with the JUA. I loved working with them," he continued. "They had great claim and underwriting services."
Instead, Granite Shield represents the first fruit of more than a year of growing collaboration between the four hospitals, along with the Southern New Hampshire Medical Center of Nashua. Henry Lipman, executive vice-president and chief financial officer of LRGH, said that because proliferation of medical sub-specialities require large population bases, hospitals have forged clinical relationships. For example, LRGH shares cardiology services with Concord Hospital and oncology services with several hospitals.
In anticipation of federal health care reform, the four hospitals began exploring ways to leverage their aggregate resources to enhance the quality of services and achieve operating efficiencies while maintaining their independent identities.
The hospitals engaged Marsh Risk Consulting, which after a comprehensive actuarial study recommended the group form a captive insurance company. Marsh will administer Granite Shield and another national firm specializing in malpractice will be contracted to manage claims.
Jean explained that Granite Shield provides its members with a framework for a collaborative approach to risk management. "We are working with our counterparts to reduce risk by introducing best practices throughout both Lakes Region General Hospital and Franklin General Hospital," he said. Risk managers from the member hospitals meet monthly, he said, often joined by clinical risk managers, who at LRGH are led by chief of staff Dr. Peter Walkley.
Walkley offered "CPOM" ¿ computerized physician order management ¿ as an example of minimizing risk in a clinical setting.
Traditionally a doctor wrote an order on a patient's chart, which was then transcribed, entered into a system and executed by nursing staff. "At each point of transmission, there is a risk of error," he said, "if only from handwriting." With "CPOM," orders are transmitted by computers, which check for inconsistencies, such as prescribing incompatible medications. "It's all about not harming patients," Walkley said.
"The quality of care and the safety of patients has always been our highest priority," Jean said. "We are just as committed to quality and safety today as yesterday." At the same time, he said that closer collaboration promises to strengthen and improve risk management practices, which with a common insurance carrier will be rewarded with lower insurance costs.
Lipman estimated the corporation will trim its annual premiums between $600,000 and $700,000 and actuaries project that aggressive risk management and sound claims experience will ultimately yield refunds in addition to savings.
