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Doctors Under Attack: New Challenges to Financial Security
The idea that physicians need
to protect their assets from aggressive litigants is not new, but the
rationale for the strategy has changed just in the last year. New causes
of action brought by the federal government targeting Medicare and
Medicaid fraud have netted an estimated $45 billion windfall.
Worse yet, at a time when malpractice insurance policies are becoming
smaller, plaintiffs' malpractice awards are growing. Never before has the
medical profession been so vulnerable.
One of the most costly and immediate challenges doctors now face is the
unavailability of reasonable medical malpractice insurance. Insurers are
clamping down by either not writing new policies or by not renewing
existing policies, and many jurisdictions have allowed insurers to
increase their premiums exponentially.
Policies can cost between $120,000 and $150,000 a year, yet most insurers
will not write policies of more than $1 million per claim despite the fact
that juries are returning close to nine-figure awards. Two recent
examples: A plaintiff was awarded $85 million dollars against a doctor in
New York; a Las Vegas trauma center closed down because the doctors were
unable to obtain coverage.
The second significant
challenge comes from the federal and state governments' crackdown on
Medicare and Medicaid fraud. Unfortunately, honest billing mistakes are
being treated as acts of fraud, with steep penalties and asset seizures in
store for the alleged violators.
Just as litigants can go after the personal assets of doctors above the
limits of their malpractice policies, so can the government attach
physicians' personal assets. There are, however, steps doctors can take to
protect themselves from losing their life savings.
To fend off the individual
plaintiff, the best strategy is to discourage the lawsuit in the first
place. Typical contingency lawyers start out with the expectation that
they are bringing an action against a wealthy, deep pocket physician.
The sooner they learn that the defendant has no attachable personal
assets, the sooner their strategy will change and the lawyers will take
whatever they can get from an insurance settlement.
The process brings malpractice insurance back to doing what it=s supposed
to do -- cover the doctor rather than invite the lawsuit.
Domestic asset protection (for example, a family limited partnership)
will, if done properly, be 100% effective against all future claims, and
should serve to discourage future lawsuits.
Asset protection is designed to give defendants a big club to force a
favorable settlement within the parameters of their malpractice coverage.
One caveat: it is imperative that physicians protect themselves before the
commencement of a lawsuit.
Unlike challenges from
individual plaintiffs, domestic asset protection offers no guarantees
against actions brought by the government.
Doctors who are concerned about unwarranted Medicare or Medicaid fraud
investigations must take a different approach and look to offshore asset
protection. This strategy entails physically moving one's assets out of
the jurisdiction of U.S. courts.
A recent example to
illustrate how innocent mistakes are being pursued as fraud: an individual
who owned an ambulance company was given a number of prescriptions to
transfer dialysis patients to a nearby treatment center.
Despite the fact that he was simply following instructions, he was
prosecuted for Medicare fraud because the facility was not on an approved
list of centers.
Doctors have a number of
potential jurisdictional options, including the Caribbean (Cayman Islands
and Belize), the Isle of Jersey, Liechtenstein, and Mauritius, among
others.
Despite shady
appearances in movies like The Firm, offshore asset protection done in a
tax-compliant manner is an extremely effective tool to protect physicians'
assets.
A key distinction between
domestic and offshore asset protection is who retains control of the
assets. With domestic asset protection the individual still controls the
assets, although he or she must give up title.
With offshore asset protection the individual is giving up all legal
control, although it is possible to maintain de facto control.
Typically a trustee or corporation controls the assets. In all cases,
physicians must be guided by someone who knows how to:
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Structure the vehicles in a
tax compliant manner;
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Do it in such a way that the
protections cannot be undone; and
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Choose an area with
political, economic and social stability.
Given the attacks on doctors
from both government and individual plaintiffs, it is more apparent than
ever that doctors need to protect their assets to the best of their
ability. The days of huge insurance policies serving as reliable umbrellas
are long gone, but there are viable alternatives available to those who
plan ahead.
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