When Hahnemann hospital announced it would close, Marc Katz was one of the lucky ones.

He had just finished his internal medicine residency at Hahnemann and had already accepted a cardiology fellowship position in Bethlehem, Pennsylvania. He was in the process of moving to the Lehigh Valley when he saw his former classmates posting that the hospital would close, and looking frantically for new jobs. He felt for them and knew he’d dodged a bullet.

“This hasn’t affected me directly that much, until now,” he said.

Katz just got word from the former director of his residency program at Hahnemann that the hospital’s owner is unlikely to provide costly medical malpractice insurance for its former physicians and medical residents to cover their time at Hahnemann as they continue to work elsewhere.

“This is something that no resident should have to worry about,” Katz said. “It’s just unbelievable that all this happened just because someone cared more about the bottom line than the people who are working in the hospital and the patients walking through the doors.”

About 100 attending physicians were employed directly by Philadelphia Academic Health System, (PAHS), which bought Hahnemann in January 2018 and filed for Chapter 11 bankruptcy in June 2019. All the residents and fellows were also employed by PAHS.

The attending doctors were notified in August that they would not be receiving continued malpractice insurance from their former employer. Now, the more than 550 residents and fellows are worried they won’t get that coverage either.

The order authorizing the $55 million sale of Hahnemann’s residency program in bankruptcy court would have guaranteed the money to pay for their continued malpractice coverage, but with that case tied up in court, it’s not clear where the funds would come from.

With the sale looking increasingly like a long-shot, many, including former residency program officials and professional organizations, worry the coverage will never come through. Hahnemann’s former internal medical residency program director David Aizenberg is preparing his former residents to buy it on their own.

“I foresee this to be a significant challenge for them to afford individually,” Aizenberg said, “if not impossible.”

‘The twisted catch-22’

There are two types of medical malpractice insurance, and both of them account for the time after a physician is employed at a hospital since it’s common for medical malpractice suits to be filed some time after a surgery or procedure.

Occurrence policies extend after the doctor leaves the hospital. Claims-made policies cover incidents that happen while the doctor is employed at the hospital, and are usually accompanied by “tail insurance,” an add-on to cover the doctor once he or she leaves the hospital.

Hahnemann employees were covered under a claims-made policy, but PAHS told its attending physicians in August that as of Jan. 10, 2020, the company will not offer tail coverage.

In an effort to require their employer to pay their tail insurance, the PAHS-employed doctors filed an objection in federal bankruptcy court, supported by the Pennsylvania Medical Society and the Philadelphia County Medical Society. They requested that the sale of St. Christopher’s Children’s Hospital be blocked until their tail coverage was included as a contingency of the sale. That objection failed and the sale went through.

PAHS declined to comment, but a source familiar with the matter said until the net profit from the $50 million St. Christopher sale comes through, it is unclear whether the doctors will get their insurance, and that it is unlikely the doctors will receive coverage.

As for the residents, they did manage to secure a promise of tail coverage in the bankruptcy proceedings. However, the provision guaranteeing that insurance was included in the deal to sell Hahnemann’s residency programs as a bankruptcy asset. The federal Centers for Medicaid and Medicare Services objected to that deal, and the $55 million sale is on hold while it moves through the federal appeals process.

“That’s sort of the twisted catch-22 in this,” said Aizenberg, who is also an associate professor of medicine at Drexel University. “A lot of us, especially in academic medicine, really feel that auctioning off fellowship and residency slots like this is not the precedent to set for the future. But at the same time, this would have paid for this particular problem.”

It’s unclear why the former residents were offered a claims-made policy to begin with. The most recent residency contract between medical residents and Hahnemann’s parent company states that the “hospital shall provide occurrence-based professional liability insurance coverage for House Staff’s acts and omissions, within the scope of the Program.”

This calls into question why the residents were offered claims-made policies, which necessitate tail insurance. PAHS declined to explain this.

The cost of tail malpractice insurance depends on a doctor’s specialty. For a practicing obstetrician in Philadelphia, tail coverage could be as much as $150,000. The less experience one has, the less time there is to cover and the lower the cost. The residents who had just started working at Hahnemann when the hospital’s owner announced it would close would only need coverage for a few weeks. Others would need the entire period covered, beginning in January 2018 when PAHS bought the hospital, which could amount to thousands of dollars, plus the cost of a defense attorney.

Tail coverage for anyone employed before PAHS bought Hahnemann would continue to be covered by Tenet, the hospital’s previous owner, which offered an occurrence policy.

Lack of tail coverage as a public health issue

Without tail coverage, doctors, especially those in training, can face barriers to providing care.

Many employers won’t hire doctors without proof of tail insurance from former employers.

In Pennsylvania, doctors are required to carry tail malpractice insurance up to $500,000 from their previous employers to qualify for supplemental, state-provided malpractice coverage MCARE, which covers another $500,000. If the base layer coverage lapses, the doctor is ineligible for MCARE. In 2018, the average malpractice payment made in Pennsylvania was $405,978.

While it might just seem like a way to protect doctors, state governments cover some medical malpractice insurance as a public health issue.

MCARE and its predecessor, The Healthcare Services Malpractice Act, were established in Pennsylvania in 1975 after a medical malpractice crisis pushed insurance carriers out of the state and left many doctors without coverage. But doctors losing insurance meant they couldn’t pay out claims, and that patients wouldn’t make them because they knew it would be in vain. Injured patients were more likely to go without compensation and suffer long-term implications of the malpractice. The insurance programs were set up to make coverage affordable for doctors and ultimately ensure patient safety.

Some hospitals pick up the tail coverage for a physician when they hire them, relieving the former employer of the burden. But Aizenberg said that would be a lot to ask of the institutions taking on doctors in training. Many of the residents were already at the mercy of their accepting institutions because PAHS only released them from Hahnemann with 80% of the funding that travels with them.

“Our residents and fellows are not in any position to negotiate,” said Aizenberg, adding that they are in significant medical school debt already. Many of them had to pay to leave Philadelphia to find new positions.

Aizenberg is not optimistic but hasn’t given up. He contacted Congressman Dwight Evans, who he hopes can pressure the company to pay. A handful of groups involved, including the Accreditation Council for Graduate Medical Education, American Medical Association, Philadelphia County Medical Society, and others, will discuss options on a conference call later this week.

Aizenberg is also working with several insurance brokers to get a competitive price for former residents to purchase the insurance at a group rate, or individually.