Health Care Delivery Is Rapidly Transforming. Can Underwriters React in Time?

COVID-19 could permanently change the way care is delivered. Underwriters will watch how health systems manage ongoing safety concerns and pandemic-induced financial strain.
By: | October 7, 2020

Health care has always been a dynamic industry with complicated risk exposures, but the effects of the COVID-19 pandemic will undoubtedly force underwriters to react more quickly and think more creatively than they’ve had to in the past.


Outsized health and safety risks will eventually subside once vaccines and improved treatments help to minimize the dangers of infection, but the damage will already be done to health systems’ operating models.  

The financial impacts of COVID-19 could potentially accelerate the ongoing trends of consolidation and decentralization of services, creating risk management challenges. Meanwhile, the massive shift to telemedicine could amplify medical malpractice and privacy risks.   

Though the effects of the pandemic will take many more months or years to unfold, health care’s risk landscape is sure to look different.

Here’s a look at how some key exposures will change, and how underwriters plan to adjust their approach to risk assessment.  

A Closer Look at Reactions to Financial Instability  

As of July, the American Hospital Association is projecting that hospitals will suffer $323.1 billion in COVID-related losses by the end of 2020. Underwriters will be looking more closely at their clients’ balance sheets, and how they plan to maintain high standards of care amid financial constraints.  

Tom Warsop, CEO, One Call

“Financially strapped facilities could cut corners on the way they are providing care. The other concern is the extent to which facilities are retaining risk through large deductibles or self-insured retentions. We want to make sure they are able to pay. There’s definitely going to be increased emphasis on evaluating the financial position of customers going forward,” said Brandon Mezick, chief operating officer at IronHealth, a Liberty Mutual company. 

More specifically, there will be increased focus on the strategies hospitals choose to bolster their battered bottom lines. Particularly strained organizations may seek new revenue streams through expansion of services or partnerships with larger, more stable companies.

In these cases, underwriters will be looking for a slow and sustainable approach to growth, and specific plans for enforcing risk management practices consistently across platforms and locations.  

“When you decentralize any operating model, you have to place a premium on establishing and enforcing consistent operating procedures, including staffing adequacy, credentialing and licensing verification, billing and coding practices, data security, training and communication, among others,” said Tim Vlazny, assistant vice president, healthcare , CNA Insurance 

“There has to be a way to manage these exposures across multiple platforms.” 

Scrutinizing Risk Management Consistency 

There are a few ways to ensure consistent risk management: one is through continual reinforcement of a clear and well-defined organizational mission.   

“Evaluation starts at the corporate level. Who are they? Who do they serve? What do they want to be? When an organization overreaches on different types of services and looks for scale right out of the gate, that’s probably more troubling to me as an underwriter than pure financial analysis. Performing a service and performing it well — thereby limiting the scope — is a better indicator that you’re taking a cautious approach to how you build and manage your business,” said Terry Dreyer, senior vice president and underwriting team leader, North American health care division, ‎Allied World.

Previous mergers and acquisitions may also be analyzed to see how well an organization was able to integrate cultures and standards.  

We look for specific examples of how a system meaningfully included newly acquired entities in their management culture and operational systems, including electronic medical records. Where did they succeed or fail? Where did they have to make changes?said Jeff Duncan, senior vice president and chief underwriting officer, healthcare, at Liberty Mutual.  

If they are selfaware of the factors that drove success or failure, it shows they are paying attention to the integration of cultures and trying to create a single risk management approach.”  

According to Tom Warsop, CEO of One Call, decentralized health care organizations should focus on creating technology-driven tools that enable lower-level managers to enforce risk management protocols simply.  

Decentralized organizations need to be thinking about how to create a tool that allows people who don’t manage risk for a living to do it easily. It could be something as simple as checklists that a lay person can use to enforce risk management in a standard way across all locations. But it has to be that easy and it has to be auditable,” Warsop said.  

The Risk Mitigation Advantages of Telemedicine 

One of the greatest pandemic-driven changes in health care delivery has been the massive shift to digital medicine. Though telehealth platforms have existed in one form or another for more than a decade, they have never been so widely adopted so quickly. And they are performing better than most expected.


In some ways, telehealth has reduced exposures.  “Underwriting a telemedicine-related risk is mostly going to be favorable for workers’ comp because health care professionals are less likely to be injured or contract an infectious disease. Virtual care creates a safer environment for both patient and provider,” said Matt Zender, senior vice president, workers’ compensation product manager, AmTrust Financial Services. 

Because they are often integrated with established Electronic Medical Record (EMR) systems, many telehealth platforms also come equipped with strong cybersecurity controls. Despite fears of increased cybersecurity risk, telehealth platforms haven’t been major targets of attacks 

A Need for New Approaches to Medical Malpractice 

The biggest risks associated with the sudden shift to digital medicine care have to do with verification of provider qualifications and adherence to standards of care.

Alice Epstein, national risk control director of allied healthcare facilities, ‎CNA

“Every state has the right and responsibility to independently license healthcare providers to their standards. With technological advances, does it really matter where the practitioner is licensed, and are we implying that a clinician in one state is less qualified than a clinician in another?” said Alice Epstein, national risk control director of allied healthcare facilities, ‎CNA. 

“Government needs to figure this out; however, the industry and insurance companies also need to figure out how to manage this as well. If a provider is in a different state from the patient, does that present a coverage issue?” 

Eliminating geographical barriers also presents challenges to traditional medical malpractice underwriting, which quantifies risk in part by the number of states an organization operates in.  

“If I treat 100 patients in California, does my risk change if I instead treat 100 patients across all 50 states? Today when you get malpractice coverage, the price goes up significantly when you add a new state to your coverage, but with telehealth the exposure doesn’t actually change, unless the risk profile of the state I am entering is significantly different,” said David Lupinsky, vice president, medical review services, CorVel.  

These providers are not adding 100 new patients in every state, they are just expanding their geographical reach so I think there needs to be a better way to evaluate risk profile of a telehealth providers practicing across multiple state lines.” 

With virtual visits, malpractice risk can also arise out of technology failure — poor connections, pixelated visual displays, or choppy audio that result in low-quality evaluations or inaccurate advice from a provider. To that end, underwriters will be looking for investments in updated technology infrastructure.


“In a perfect world, funding would be funneled into improving and providing greater access to care for the masses. There is a lack of technology hardware and without the widespread adoption of 5G technology, there could still be complications in virtual exams, such as poor camera quality and sound,” said Timothy Boyce, health care team leader, CFC Underwriting.  

Relevance of Loss History 

If models of care delivery change permanently post-COVID, it raises the question: is loss history still a reliable indicator of exposure to future losses?

Is past experience still relevant in a rapidly changing world? Most underwriters agree that a retrospective view of risk alone is insufficient and must be supplemented with real-time data and improved modeling.

But the underwriting process won’t be overhauled overnight.  

Loss history is still the best we have for right now, but we are wary of its credibility going forward,” IronHealth’s Mezick said.

Katie Dwyer is a freelance editor and writer based out of Philadelphia. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Scenario

The Betrayal of Elizabeth

In this Risk Scenario, Risk & Insurance explores what might happen in the event a telemedicine or similar home health visit violates a patient's privacy. What consequences await when a young girl's tele visit goes viral?
By: | October 12, 2020
Risk Scenarios are created by Risk & Insurance editors along with leading industry partners. The hypothetical, yet realistic stories, showcase emerging risks that can result in significant losses if not properly addressed.

Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.


Elizabeth Cunningham seemingly had it all. The daughter of two well-established professionals — her father was a personal injury attorney, her mother, also an attorney, had her own estate planning practice — she grew up in a house in Maryland horse country with lots of love and the financial security that can iron out at least some of life’s problems.

Tall, good-looking and talented, Elizabeth was moving through her junior year at the University of Pennsylvania in seemingly good order; check that, very good order, by all appearances.

Her pre-med grades were outstanding. Despite the heavy load of her course work, she’d even managed to place in the Penn Relays in the mile, in the spring of her sophomore season, in May of 2019.

But the winter of 2019/2020 brought challenges, challenges that festered below the surface, known only to her and a couple of close friends.

First came betrayal at the hands of her boyfriend, Tom, right around Thanksgiving. She saw a message pop up on his phone from Rebecca, a young woman she thought was their friend. As it turned out, Rebecca and Tom had been intimate together, and both seemed game to do it again.

Reeling, her holiday mood shattered and her relationship with Tom fractured, Elizabeth was beset by deep feelings of anxiety. As the winter gray became more dense and forbidding, the anxiety grew.

Fed up, she broke up with Tom just after Christmas. What looked like a promising start to 2020 now didn’t feel as joyous.

Right around the end of the year, she plucked a copy of her father’s New York Times from the table in his study. A budding physician, her eyes were drawn to a piece about an outbreak of a highly contagious virus in Wuhan, China.

“Sounds dreadful,” she said to herself.

Within three months, anxiety gnawed at Elizabeth daily as she sat cloistered in her family’s house in Bel Air, Maryland.

It didn’t help matters that her brother, Billy, a high school senior and a constant thorn in her side, was cloistered with her.

She felt like she was suffocating.

One night in early May, feeling shutdown and unable to bring herself to tell her parents about her true condition, Elizabeth reached out to her family physician for help.

Dr. Johnson had been Elizabeth’s doctor for a number of years and, being from a small town, Elizabeth had grown up and gone to school with Dr. Johnson’s son Evan. In fact, back in high school, Evan had asked Elizabeth out once. Not interested, Elizabeth had declined Evan’s advances and did not give this a second thought.

Dr. Johnson’s practice had recently been acquired by a Virginia-based hospital system, Medwell, so when Elizabeth called the office, she was first patched through to Medwell’s receptionist/scheduling service. Within 30 minutes, an online Telehealth consult had been arranged for her to speak directly with Dr. Johnson.

Due to the pandemic, Dr. Johnson called from the office in her home. The doctor was kind. She was practiced.

“So can you tell me what’s going on?” she said.

Elizabeth took a deep breath. She tried to fight what was happening. But she could not. Tears started streaming down her face.

“It’s just… It’s just…” she managed to stammer.

The doctor waited patiently. “It’s okay,” she said. “Just take your time.”

Elizabeth took a deep breath. “It’s like I can’t manage my own mind anymore. It’s nonstop. It won’t turn off…”

More tears streamed down her face.

Patiently, with compassion, the doctor walked Elizabeth through what she might be experiencing. The doctor recommended a follow-up with Medwell’s psychology department.

“Okay,” Elizabeth said, some semblance of relief passing through her.

Unbeknownst to Dr. Johnson, her office door had not been completely closed. During the telehealth call, Evan stopped by his mother’s office to ask her a question. Before knocking he overheard Elizabeth talking and decided to listen in.


As Elizabeth was finding the courage to open up to Dr. Johnson about her psychological condition, Evan was recording her with his smartphone through a crack in the doorway.

Spurred by who knows what — his attraction to her, his irritation at being rejected, the idleness of the COVID quarantine — it really didn’t matter. Evan posted his recording of Elizabeth to his Instagram feed.

#CantManageMyMind, #CrazyGirl, #HelpMeDoctorImBeautiful is just some of what followed.

Elizabeth and Evan were both well-liked and very well connected on social media. The posts, shares and reactions that followed Evan’s digital betrayal numbered in the hundreds. Each one of them a knife into the already troubled soul of Elizabeth Cunningham.

By noon of the following day, her well-connected father unleashed the dogs of war.

Rand Davis, the risk manager for the Medwell Health System, a 15-hospital health care company based in Alexandria, Virginia was just finishing lunch when he got a call from the company’s general counsel, Emily Vittorio.

“Yes?” Rand said. He and Emily were accustomed to being quick and blunt with each other. They didn’t have time for much else.

“I just picked up a notice of intent to sue from a personal injury attorney in Bel Air, Maryland. It seems his daughter was in a teleconference with one of our docs. She was experiencing anxiety, the daughter that is. The doctor’s son recorded the call and posted it to social media.”

“Great. Thanks, kid,” Rand said.

“His attorneys want to initiate a discovery dialogue on Monday,” Emily said.

It was Thursday. Rand’s dreams of slipping onto his fishing boat over the weekend evaporated, just like that. He closed his eyes and tilted his face up to the heavens.

Wasn’t it enough that he and the other members of the C-suite fought tooth and nail to keep thousands of people safe and treat them during the COVID-crisis?

He’d watched the explosion in the use of telemedicine with a mixture of awe and alarm. On the one hand, they were saving lives. On the other hand, they were opening themselves to exposures under the Health Insurance Portability and Accountability Act. He just knew it.

He and his colleagues tried to do the right thing. But what they were doing, overwhelmed as they were, was simply not enough.


Within the space of two weeks, the torture suffered by Elizabeth Cunningham grew into a class action against Medwell.

In addition to the violation of her privacy, the investigation by Mr. Cunningham’s attorneys revealed the following:

Medwell’s telemedicine component, as needed and well-intended as it was, lacked a viable informed consent protocol.

The consultation with Elizabeth, and as it turned out, hundreds of additional patients in Maryland, Pennsylvania and West Virginia, violated telemedicine regulations in all three states.

Numerous practitioners in the system took part in teleconferences with patients in states in which they were not credentialed to provide that service.

Even if Evan hadn’t cracked open Dr. Johnson’s door and surreptitiously recorded her conversation with Elizabeth, the Medwell telehealth system was found to be insecure — yet another violation of HIPAA.

The amount sought in the class action was $100 million. In an era of social inflation, with jury awards that were once unthinkable becoming commonplace, Medwell was standing squarely in the crosshairs of a liability jury decision that was going to devour entire towers of its insurance program.

Adding another layer of certain pain to the equation was that the case would be heard in Baltimore, a jurisdiction where plaintiffs’ attorneys tended to dance out of courtrooms with millions in their pockets.

That fall, Rand sat with his broker on a call with a specialty insurer, talking about renewals of the group’s general liability, cyber and professional liability programs.

“Yeah, we were kind of hoping to keep the increases on all three at less than 25%,” the broker said breezily.

There was a long silence from the underwriters at the other end of the phone.

“To be honest, we’re borderline about being able to offer you any cover at all,” one of the lead underwriters said.

Rand just sat silently and waited for another shoe to drop.

“Well, what can you do?” the broker said, with hope draining from his voice.

The conversation that followed would propel Rand and his broker on the difficult, next to impossible path of trying to find coverage, with general liability underwriters in full retreat, professional liability underwriters looking for double digit increases and cyber underwriters asking very pointed questions about the health system’s risk management.

Elizabeth, a strong young woman with a good support network, would eventually recover from the damage done to her.

Medwell’s relationships with the insurance markets looked like it almost never would. &


Risk & Insurance® partnered with Allied World to produce this scenario. Below are Allied World’s recommendations on how to prevent the losses presented in the scenario. This perspective is not an editorial opinion of Risk & Insurance.®.

The use of telehealth has exponentially accelerated with the advent of COVID-19. Few health care providers were prepared for this shift. Health care organizations should confirm that Telehealth coverage is included in their Medical Professional, General Liability and Cyber policies, and to what extent. Concerns around Telehealth focus on HIPAA compliance and the internal policies in place to meet the federal and state standards and best practices for privacy and quality care. As states open businesses and the crisis abates, will pre-COVID-19 telehealth policies and regulations once again be enforced?

Risk Management Considerations:

The same ethical and standard of care issues around caring for patients face-to-face in an office apply in telehealth settings:

  • maintain a strong patient-physician relationship;
  • protect patient privacy; and
  • seek the best possible outcome.

Telehealth can create challenges around “informed consent.” It is critical to inform patients of the potential benefits and risks of telehealth (including privacy and security), ensure the use of HIPAA compliant platforms and make sure there is a good level of understanding of the scope of telehealth. Providers must be aware of the regulatory and licensure requirements in the state where the patient is located, as well as those of the state in which they are licensed.

A professional and private environment should be maintained for patient privacy and confidentiality. Best practices must be in place and followed. Medical professionals who engage in telehealth should be fully trained in operating the technology. Patients must also be instructed in its use and provided instructions on what to do if there are technical difficulties.

This case study is for illustrative purposes only and is not intended to be a summary of, and does not in any way vary, the actual coverage available to a policyholder under any insurance policy. Actual coverage for specific claims will be determined by the actual policy language and will be based on the specific facts and circumstances of the claim. Consult your insurance advisors or legal counsel for guidance on your organization’s policies and coverage matters and other issues specific to your organization.

This information is provided as a general overview for agents and brokers. Coverage will be underwritten by an insurance subsidiary of Allied World Assurance Company Holdings, Ltd, a Fairfax company (“Allied World”). Such subsidiaries currently carry an A.M. Best rating of “A” (Excellent), a Moody’s rating of “A3” (Good) and a Standard & Poor’s rating of “A-” (Strong), as applicable. Coverage is offered only through licensed agents and brokers. Actual coverage may vary and is subject to policy language as issued. Coverage may not be available in all jurisdictions. Risk management services are provided or arranged through AWAC Services Company, a member company of Allied World. © 2020 Allied World Assurance Company Holdings, Ltd. All rights reserved.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]