The Story of Three Children‘s
Hospitals in Various Stages of
Captive Development
Moderated by:
Todd Hagemeier
Alliant Insurance Services, Inc.
Managing Director, Executive Vice President
Keith Lindloff
Children‘s Health
Director Insurance Services
Children‘s Health
Our transition to a Risk Bearing
Captive Story
Children’s Insurance Company
(CIC)
• Parent Organization: Children’s Medical Center of Dallas
• Independent pediatric hospital
• Two full service hospitals, total of 442 beds in operation
• 3 subsidiary physician organizations employing appx 100
physicians
• Level I Trauma Center; Level III NICU
• Affiliated with UT Southwestern Medical School
Children’s Insurance Company (CIC)
• Captive created in 1990 to provide access to
reinsurance markets, esp. Employers’ Reinsurance
• Domiciled in Vermont due to Board concerns about
public perception
• Issued policies for excess Professional & General
Liability, 100% reinsured
• Retained no risk for first 25 years
Children’s Insurance Company (CIC)
• Children’s Medical Center has been a very
conservative organization with regard to risk as well
as finance
• Children’s Medical Center has been a financially
strong organization – well-supported by community;
favorable reimbursement structure
• Successful tort reform in Texas lowered the
temperature regarding Professional Liability
Children’s Insurance Company (CIC)
• Challenge: Developing the organizational will to
assume more risk
• Elements that came together:
– New Strategies
– Continued increase in primary HPL premium despite
excellent loss history
– New CFO
– Desire to remove costs from Operations budget
Children’s Insurance Company (CIC)
• Jan. 1 2014 – Assumed primary Professional and
General Liability in CIC
• Near term plans:
– Add employed physicians
– Issue ‘deductibles’ policy to consolidate budgeting for all
losses within deductibles
– Review of all coverages with an eye to utilizing CIC
Karen A. Wardell
Cook Children‘s Health Care System
Associate General Counsel
Cook Children‘s
Our Captive Success Story
Cook Children‘s Health Care System
enter picture
Cook Children’s Health Care System is a not-for-profit, pediatric
health care organization based in Fort Worth, Texas
Cook Children’s Health Care System
W.I. Cook
Foundation,
Inc.
Rosedale
Office
Building, Inc.
501(c)(2)
Cook Children’s
Health Care
System
Cook Children’s
Home Health
Cook Children’s
Physician
Network
Cook Children’s
Medical Center
Cook Children’s
NE Hospital,
LLC
Cook Children’s
Health Plan
Cook Children’s
Surgical Center,
LLC [Plano]
Cook Children’s
Indemnity
Company
Cook Children’s
Health Services,
Inc.
Cook Children‘s Indemnity Company
•
•
•
•
•
•
•
CCIC was licensed & capitalized in 2002 in response to a hardening
insurance market
CCMC historically maintained a self-insured trust for its HPL and purchased
excess insurance
Its physician group purchased first dollar coverage
In the early 2000’s, we started seeing declining capacity for medical
malpractice
Carriers abandoned the market and/or refused to insure certain medical
specialties
In 2002, the cost of insuring our 200 employed physicians was over $5M
Primary purpose was to provide a vehicle to self-insure the medical
malpractice exposure of Cook Children’s Health Care System & its
employed physicians
Coverage and Limits
Hospital Professional Liability
•
claims-made policy with pre-paid tail coverage
•
$5M per claim/$20M aggregate limits
•
excess reinsured up to $70M
•
funding is actuarially determined at expected level or greater plus budgeted administrative expenses
•
retrospectively rated premiums
Physician Professional Liability
•
claims-made policy with pre-paid tail coverage
•
$1M/$3M limits per physician/mid-level provider
•
funding is actuarially determined and funded at the expected level or greater plus budgeted administrative
expenses
General Liability
•
occurrence policy
•
$1M per occurrence/$5M aggregate limits
•
retrospectively rated premiums
Managed Care E&O
•
claims-made policy
•
no claims in the 5 years it was there
•
removed from the captive in 2010
•
Premium paid to CCIC since December 2002 - $92M
•
Premium net of reinsurance - $80M
(Amount actuaries say we should have paid)
•
Total paid losses to date - $6.8M
•
Dividend/retrospective premium returned to System - $68M
HOW?
•
•
Medical malpractice tort reform enacted in Texas in 2003 made it easier to accurately
predict future costs

non-economic damages caps at $250,000 per occurrence for any and all noninstitutional health care providers (most commonly, physicians) with a second
$250,000 cap per occurrence for each health care institution with a limit of $500,000
total for all health care institutions

2 year statute of limitations

10 year statute of repose

all wrongful death damages remained capped at an indexed cap, which is about
$1.8M and includes punitive damages
Apology & disclosure policy developed and implemented
See Lee Taft, Apology & Medical Mistake: Opportunity or Foil?, 14 Annals of Health Law
55 (2005).
Melissa Murrah
Texas Children‘s Hospital
Director – Risk Management
Texas Children’s
Our Super Captive Insurance
Company Story
Overview of Texas Children‘s Hospital
• Groundbreaking ceremonies were held on May 23, 1951 for a three
story, 106 bed pediatric hospital
• Teaching affiliation established at that time with Baylor College of
Medicine that is still in place
• Neurological Research Institute, the world’s first basic research
institute dedicated to childhood neurological diseases, opened in
2010
• The Pavilion for Women, providing women, mothers and babies
with a full continuum of high quality healthcare, opened in 2011
• EPIC installed system wide in 2012
• In 2013, Texas Children’s had 3.2 million patient encounters and
performed 26,000 surgeries
• Today - 644 beds and 230 employed physicians
Overview of TCH Insurance Company, Ltd. (“TCHICO”)
• Licensed in Cayman in March of 1995
• Holds an Unrestricted Class B insurer’s license
• Currently writes:
– Professional / General Liability
– Umbrella / Excess Liability – Integrated Form
– Property and Business Interruption
• Property coverage has been written on a quota
share basis since 2012; no losses to date
• Over $350,000 of patient safety grants have been
awarded to date
Texas Children’s ERM Initiative
• Texas Children’s has a very robust and interactive ERM
initiative that started in 2012
• Board oversight of our ERM initiative is provided by the
Chairman of our Risk Management & Insurance Committee
• Our ERM protocol involves the use of a Risk Register, a Heat
Map and Aggregate Risk Scores that lead to a red, yellow or
green ranking for each enterprise risk that is identified
• We are tracking fifty-two enterprise risks, including a “Fine
Fifteen”
• TCHICO is an integral part of our Risk Mitigation Strategy
and Action Plan and the possible utilization is always a part
of our analysis
ERM Risk
Category
ERM Risk
Detail
ERM Risk
Definition
Individual Aggregated
Residual Risk Residual
Inherent
Risk
Risk
Score
Risk Score
ERM Risk Risk Score Management/Mitigation Management/Mitigation
Owner
Activities
Measurements
2014
2014
2014
What are the
key
applications of
people, process
or technology
used to manage
/ mitigate /
monitor the
risk?
What is the
objective
measurement
criteria used to
measure the
effectiveness of
each
management /
mitigation
activity?
Where
is the
actual
risk
today?
Activities/Tasks
What actions are needed to
enhance management,
mitigation or monitoring
efforts?
Heat Map
Sample ERM Risk Register
Heat Map
Likelihood of Occurrence
Almost
Certain
Likely
Moderate
Unlikely
Rare
Insignificant
Minor
Moderate
Major
Potential Impact to TCH
(Financial Value & Organizational Reputation/Regulatory Compliance/Operational Status)
Severe
Other Possible Risk Areas for TCHICO Being
Investigated
•
•
•
•
•
•
•
HMO Reinsurance
Medical Stop Loss
Biomedical Maintenance
Property and Casualty Deductibles
Regulatory (Billing E&O) Risk
Property (Higher Limits)
ROCIP Coverages
– Builder’s Risk
– Primary Casualty
– Excess Liability
Questions