UO > Feature > Rescuing Your Practice

Howard Beaton, MD, is reluctant to discuss the bodies he saw falling from the World Trade Center on September 11, 2001. As the chief of surgery of the NYU Downtown Hospital three blocks away, he will share that the ground shook so badly when the towers fell that he thought the hospital would collapse. But he gladly spreads his tale of how the terrorist attacks shut down his private practice and choked off income for nearly three months.

“The cloud of dust was horrible. You couldn’t see your hand in front of your face for days,” he says. They were without telephones, electricity, or air conditioning—conditions that shut down all but dire emergencies at the facility for more than three weeks. “The area was devastated by almost the equivalent of a nuclear attack,” he says, and since his private practice was located in one wing of the hospital, he had nowhere to divert his patients.

Even after lower Manhattan was reopened for business, security to the area was so tight—requiring passes for the military police carrying M-16s—that “there was no way in the world patients would cross that sort of line,” he says. “It was ‘normal’ in a very strange sense of the word.”

Today Beaton has a message for his colleagues: Don’t get comfortable because what happened to him could easily happen to any physician in the United States. Although terrorist attacks are a new reality, natural disasters are much more likely to disrupt your practice, and Mother Nature has a slew of business-stopping tools at her disposal: fires, floods, earthquakes, hurricanes, tornadoes, blizzards, and ice storms, for starters. Disaster management officials are quick to remind people that Hurricane Andrew—the costliest natural disaster on record—racked up $25 billion in damages across Florida and Louisiana. That was a Category 5 hurricane (with winds in excess of 155 mph). Risk modeling companies currently estimate a Category 3 hurricane (wind speeds 111-130 mph) striking the northeastern coastline could do twice the dollar damage.

Since 1900, 11 hurricanes have made a direct hit on the coastline between New Jersey and Maine, according to AIR Worldwide Corporation, the organization that pioneered the probability catastrophe model that insurers and financial institutions use today. Forget Hurricane Andrew. As a group, physicians are unprepared for even a mild interruption. For instance, when it comes to something as simple as a software back-up service, few physicians choose to invest, reports Ali Hashmat, the vice president of information technology for Cure MD, a medical software systems vendor in New York. “Until a year ago, people were interested in disaster recovery. We call it the September 11th effect—a lot of practices would discuss this angle. But now, the percentage is going back down. To tell you the truth, not many have it,” he says.

Among the businesses Vickie Malis works with, 90 percent of the large commercial clients have a disaster recovery plan in place. Of the mid-sized businesses, maybe two-thirds have this plan. Among small businesses—50 or fewer employees—less than 50 percent are prepared. “And it’s probably not even that high among physicians’ practices,” guesses the vice president of

marketing for Iron Mountain Consulting in Boston, based on her experience as a former nurse.

Of course, not everyone in the medical arena plays ‘possum. The managed care committee and the medical manager advisory group of the Kentucky Medical Association, for instance, recently published a simple model disaster plan for its physician members. Nor is the general apathy an odd phenomenon. Thanks to dissociation, human beings aren’t wired to think deeply about things that are uncomfortable or horrific, says Bruce Blythe, the CEO of Atlanta-based Crisis Management International (CMI), a consulting firm.

“It’s a psychological trick that keeps us from being anxiety-ridden,” says Blythe. “As a result, the more you have to lose, the more you hate to think about it.” Not to mention people in powerful positions tend to grow accustomed to being in control. “I’d say doctors are very vulnerable to believing they have their lives set—‘I have prestige, money, my own practice, and the world can’t touch me.’ Then whoosh, here comes that tornado and things change.”

Day trader Mark Barton made headlines when he killed nine employees at two Atlanta firms before committing suicide in July 1999. Blythe can tell you all the gory details because the second building the gunman entered was CMI’s headquarters. From his fourth-floor office, he watched the helicopters flying around while he waited for an official police escort to smuggle him past the second floor where the drama was playing out. “I’m a professional crisis manager. If there’s anything I do well, that would be it,” he says, yet he sat frozen until a colleague called to ensure that Blythe was throwing necessary papers into a box for the evacuation.

“When you’re inside that whirlwind, it’s hard to have perspective. The adrenaline’s running, you have thought fragmentation. If you’re not prepared ahead of time and have something to hang onto, like a checklist, you just forget stuff,” Blythe says.

Before you can outline a plan, however, you need to define what Blythe calls single points of failure—items or situations you can’t continue practicing without. The past week’s patient records and a way to track upcoming, immediate appointments probably fall into this category. Patient records dating back to 1982 are likely expendable in the short term. “Think in terms of the human body,” Blythe says. “If my brain and heart stop working, I’m dead. I’m able to do without my left arm. I can go maybe a month without food. I can’t go two days without water.” Knowing these failure points helps you prioritize what you need to get back to speed as quickly as possible.

And remember, receiving a $100,000 insurance check doesn’t address any of these failure points. The money doesn’t replace the medical records, it merely greases the skids. Solving the problem remains your responsibility. (See “Myth Understandings,”on next page.)

Now, get creative with the what-if scenarios and the survival strategies you dream up around these priority points. What if a disaster strikes the nuclear plant in the next town and the fallout prevents you from returning to your facility for a year?

Beaton admits he’s among the luckier World Trade Center victims. The hospital remained structurally intact, and his office fell under its protection when it came to clean-up, legal, and financial details. Still, the ins and outs opened his eyes to just how vulnerable physicians can be after a disaster. “I didn’t have anything else in place, and I don’t know of anybody on the medical staff who did have business interruption insurance,” he says. “They were devastated by this.”

Nor is he convinced his “let the hospital handle it” strategy was always the smartest. For example, the hospital’s non-profit status allowed it to submit claims for various governmental relief programs designed to replace lost income, including Beaton’s practice, but the cash never trickled down to him specifically. “The hospital will always do what’s best for itself, and if that happens to be best for me, good. But that’s not necessarily their priority,” he says.

So it was Beaton who personally struggled when the practice income took a nosedive that didn’t come up for air until after the new year. The only thing that saved him was the fact that collections on surgical billing tend to lag, so he subsisted on that cash trickle during those bleak three months. An internist, he says, would have seen the pay spigot completely shut off.

To make sure you have the right insurance coverage to avoid this pain, take some well-earned advice from John Marini, the vice president of sales and marketing at Utica, New York-based Adjusters International, the largest loss consulting firm in the world.

Without the rider, the insurance company only pays for what the building was one minute prior to the event—it’s on you to spring for new sprinklers, updated wiring, etc. to meet current code. During the 1994 Northridge earthquake in California, Marini worked with multiple business owners who refused to file a claim, as they couldn’t afford to pay for this gap. “They did a little putty and paint, made it what it ain’t and kept going. I’m not sure a physician would be in a position to bluff that one through,” he says.

In the real world, most physicians in Mother Nature’s path can use a hospital or colleague’s facilities until the situation returns to normal. They can’t replace the income stream as easily. But there’s a right and wrong choice here: Ask for extra expense coverage rather than expediting expenses, Marini says.

Under the expediting clause, insurance companies reimburse you 99 cents if you save a dollar. But what if you were J. Seaborn Blair III, MD, a general practitioner who had to row to his Hatteras Village, North Carolina, clinic after Hurricane Isabel last year? His physical building withstood the punch, but he had to order large quantities of medicines to replace the pharmacy’s loss. The insurance policy means that a physician must justify to the insurance company that overnighting drug supplies or air-freighting a new MRI machine saves money. Good luck.

“Anybody who bills by the hour is more likely to get a business up and running quicker in another location, so insurance companies are famous for saying ‘These are elective surgeries as you can still do them at another time, therefore you suffered no loss and don’t need speed,’” Marini says. Extra expense coverage, however, does not need an explanation, so you can make the decision without consulting the insurance company.

Marini also suggests his clients consider purchasing an extended period of indemnity to this policy. In most insurance situations, the rule is no harm, no foul: You must have physical damage in order for any policy to kick in. Yet when the World Trade Center came down, multiple blocks of perfectly good buildings were inaccessible. Check the fine print to see if a civil authority clause will step up to the plate to provide three weeks of business income coverage in a virtual quarantine like lower Manhattan suffered—and if you practice in a hurricane zone, or near an important government building, add a 30- to 90-day extension to that clause.

Can you afford to lose your physician assistants, nurses, office managers? If you can’t pay them, they’ll find another job. And although business owners typically take out this coverage against the death of a partner, major players like The Principal Financial Group in Des Moines, Iowa, assure clients that while the named employee is alive, the cash value of the policy is available for the business to use in a variety of ways. Stick with a year-to-year policy. “I wouldn’t go nutsy with the time frame, since you can get up and running a little faster than other businesses,” Marini cautions.

If your area is susceptible to floods, don’t blow off this coverage. Even in a federally declared flood disaster, Uncle Sam assumes you are covered for at least $500,000, so it won’t toss you a dime until expenses hit $500,001.

No matter which coverage you have when the world changes, remind employees to track all damage-related costs they incur, say the folks at the Kentucky Medical Association. As Marini says, he can’t go to bat without the right paperwork in place, so hoard the receipts for things like long-distance phone calls, equipment, mailings, leasing equipment, and mileage.

“My only advice is to think,” says Beaton. “When I started a practice, I met with a life insurance salesman, I bought disability coverage. Nobody ever seriously thinks about business interruption insurance. And no matter how smart we are, we will never anticipate everything; disasters will befall us that we can’t think about. If you have a stream of income you depend on, have an insurance plan to protect it.”