A Guide to Medical Director Insurance and the Costs

February 24, 2021 •

Medical directors play an important role in the management, coordination, and operational oversight of health-related facilities. Their goal? Ensure the delivery of quality healthcare, treatment and compliance. Yet, governing a medical facility carries significant responsibilities and risks that greatly differ from the typical liabilities medical practitioners would encounter. As a result, many of the present risks aren’t covered by a standard medical liability insurance policy.

In which case, as a medical director, to protect your administrative duties performed on behalf of the facility, you need a medical director’s insurance policy.

But what does that policy entail, and how much does it cost? Let’s review.

A Guide to Medical Director Insurance and the Costs

A medical director plays an important supervisory role at a medical facility or clinical practice. These include:

  • Hospital
  • EMS agency
  • Surgery Centers
  • Nursing home
  • Weight Loss Centers
  • Chiropractic Clinics
  • Clinics

Many physicians automatically assume that their liability risk is covered by a medical professional liability insurance policy. Unfortunately, that’s not always the case. Instead, most of these policies explicitly prohibit medical director’s responsibilities, regardless of their interaction with patients. As a director who oversees medical physicians, they can be held responsible for policies implemented, healthcare plans and regulatory compliance.

But why is that?

As the representative of the care facility, the risks they face are more involved. Every decision they make could have far reaching impacts on dozens if not hundreds of patients. Put simply, by taking on the role, a medical director assumes a greater level of responsibility and accountability.

To better understand the inherent liabilities of the job, it’s crucial to understand exactly what a medical director does.

The Responsibilities of a Medical Director

A medical director is usually not a direct employee; rather, the candidate is a licensed and certified physician that’s been hired as an independent contractor. Unlike their normal activities as a doctor, a medical director provides little to no direct care to patients. Instead, their administrative post is primarily focused on supporting and managing the hospital staff. A secondary part of functioning as a medical director is working closely with medical staffing companies to ensure top candidates are properly sourced.

Everyday tasks of a medical director include:

  • Enacting hiring best practices and protocols
  • Making sure that new employees are properly onboarded, trained, and credentialed
  • Reviewing and implementing clinical, patient care, and risk management policies and procedures
  • Creating health care plans
  • Managing and organizing clinicians, staff, and ancillary personnel
  • Ensuring regulatory compliance (HIPAA & Medicare)
  • Approving marketing materials

As the head of a medical facility’s governing body, medical directors are in unique positions of accountability and responsibility. Per the Clinical Journal of the American Society of Nephrology:

The medical director is accountable by regulation to federal and state agencies (e.g., state surveyors) that enforce the CMS Conditions for Coverage and, in some locales, state-specific regulations. Accordingly, the medical director’s professional purview extends to safety of the facility as a whole, including patient outcomes, staff training, documentation, and quality of care.

The decisions a medical director makes can impact each patient in the facility. Should a medical director underperform in their duties, the ramifications can be dire. According to healthcare consultant, Nick Hernandez, “Failure to provide the appropriate supervision can trigger not only contractual breach notifications, but may also result in allegations of false claims being made to the Medicare or Medicaid programs. Indeed, many times governmental regulators seek to hold medical directors accountable for administrative, civil, or criminal damages.”

In addition to this, there are tangential issues of professional liability and medical malpractice tied to creating healthcare plans and the management of all facility personnel.

What Does Medical Director Insurance Cover?

Although it depends upon the medical director insurance company offering the coverage, typically, a policy provides personal protection when your professional services come into question. In a word, it’s a specialized form of errors and omissions (E&O) insurance that protects the individual from the decisions they make as director.

A policy can help cover:

  • Court costs
  • Settlements and damages
  • Legal fees

For instance, let’s say that you are a medical director at a hospital. As the person overseeing hiring, the performance of the staff falls on you. Should a family claim that your staff was incompetent, and their behavior was in line with facility policies, they could hold you liable for both the medical fees as well as pain and suffering. In one such case, the medical director of a nursing facility was sued by families after 11 people died from a viral outbreak. Federal inspectors claimed “system failures” directly contributed to the spread of the virus.

A medical director policy could help protect you from a costly legal suit.

Note: Most policies only provide coverage for work that falls under the definition of medical director. Physician work that is done outside the facility or that involves direct patient care will likely not be included; instead, it would fall under the category of medical malpractice. 

The Three Primary Types of Exposure

When it comes to insurance, medical directors face three general exposure categories. They are:

  • Administrative duties – This is the most common and basic form of medical director coverage. It spans across all of the typical administrative tasks, from hiring and managing staff to enacting protocols and procedures. Although some medical care facility policies will automatically include administrative duties coverage, it’s wise for individuals to obtain their own policies since those duties are often vaguely defined.
  • Vicarious Liability – Some policies will include an additional tier of coverage that involves the supervision of staff. While the medical director doesn’t interact with patients, their staff does, which exposes them to secondary liability. This type of policy must explicitly state that the exposure coverage surpasses administrative duties and includes supervision or “indirect patient care.”
  • Direct patient care – Although it’s exceedingly rare, there are some instances when a medical director may provide direct care to patients as well. In such cases, the policy will need to combine both medical director coverage as well as malpractice insurance.

What is the Cost of Medical Director Insurance?

Due to high demand, the average cost of medical director insurance has risen substantially in recent years. The reason for the increase in demand is due to the escalation of legal liability suits. According to the Electronic Health Initiative’s (EHIDC) Medical Cost Trend: Behind the Numbers 2019, the average cost of a policy with $1 million in coverage ranges from $2,500 to $4,000 annually.

Costs depend on several factors, including:

  • The state and county the practice is located in
  • Estimated revenue
  • Patient load
  • Type of policy and liability exposure
  • Type of facility

Generally speaking, the more risk faced, the higher the medical director liability insurance costs. Despite this, the potential costs of just a single lawsuit can far outweigh the relatively small upfront investment needed to maintain the insurance coverage. Costs and coverage can and should be negotiated by the two parties for best results.

What Other Types of Insurance Protection Should a Medical Director Have?

For medical care facilities, there are several areas of liability exposure that simply won’t be covered by a medical director or medical malpractice insurance policy. As a result, there are other forms of insurance coverage that should be also considered, including:

  • Workplace Liability Insurance – A workplace liability policy protects the medical director from the various risks of interacting with third parties. It is similar to general liability, but instead of providing coverage for a facility, it applies to single practitioners who might be held personally liable for injuries related to the practitioner’s actions. It responds to allegations of negligence when the individual is named at fault as opposed to the company. Workplace liability provides coverage against third-party claims of:
    • Bodily injury
    • Personal and advertising injury
    • Medical expenses
    • Property damage
    • Attorney fees
    • Court costs
  • Cyber liability – The digitization of health records has put patient’s personally identifiable or sensitive information at risk. A cyber liability policy protects a business from the financial fallout of a cyber breach, data theft, or network failure. Claims covered include:
    • Customer notification
    • Restoring personal identities
    • Recovering compromised data
    • Repairing damaged systems

For example, a care facility stores troves of electronic health records. Should a hacker manage to breach the facilities cyber defenses and steals that personal information, the health center could face both legal suits from upset patients and federal regulators.

How do you get this additional insurance coverage?

Right here, with us.

NOW Insurance

NOW Insurance is known for providing affordable, flexible insurance policies to healthcare practitioners, medical facilities, and medical schools across the country. We specialize in professional and general liability commercial insurance and cyber insurance policies.

Interested in receiving a free quote? Simply fill out our quick and easy online application. Input a few brief details and you’ll be on your way towards getting the coverage you need to protect your profession.

Medical Director Insurance

Medical directors have great responsibilities. As such, they face significant personal and professional risks. In order to succeed, a medical director must be able to operate confidently and freely without allowing fear of a possible lawsuit clouding their judgment. Medical Director Insurance was created to give them peace of mind by providing protection from negligence claims arising from their decisions and actions as a facility supervisor.

By investing in this type of policy, a medical facility can ensure that the person they choose to lead their company forward is protected from the various liabilities inherent to the job.