AGENTS and brokers interested in creating a specialty in the medical field don't have to confine themselves to such high-profile, litigation-prone risks as doctors and hospitals. Medical labs constitute another possibility. They can be found in a range of settings, including hospitals, public health facilities and nursing homes. There also are many independent medical labs, which tend to perform relatively routine tests. That doesn't mean that it's always easy to place coverage for them. Indeed, much of it is placed with nonadmitted carriers.
To learn more about this niche, we recently spoke with Debbie Anglin, vice president of product development at Thomco, a program administrator. Following are edited excerpts of our conversation.
Q: Could you describe the independent medical laboratory market?
Debbie Anglin: First, it's a $32.5 billion industry, as of 2003. There are 175,000 medical testing labs in the U.S. Each state certifies them, in accordance with the type of testing they do. They also issue Clinical Laboratory Improvement Amendment of 1988 waivers of certification to laboratories that are doing no diagnoses. Such labs may do only general, simple testing, such as routine blood and urine tests. They often use prepackaged materials, typically sold in drug stores, so there is little chance they could make an error. Administering a pregnancy test is another good example. They generally have nurses who obtain the samples by drawing blood, using swabs, etc.
Q: Are there many of these CLIA-waiver medical labs?
Debbie Anglin: Yes, about 109,000 of them.
Q: What other sorts of labs are you involved with?
Debbie Anglin: Small and midsize labs–those with less than $40 million in annual revenue–that derive no more than 10% of their revenue from cytology or pathology work and that do not perform diagnoses.
Q: Who are their customers?
Debbie Anglin: Mainly independent doctors' offices. When you get blood drawn by your family doctor for your annual physical, the sample is typically sent to such a lab, and you get a separate bill for that.
Q: How are these labs staffed? Do they have medical doctors–e.g., pathologists–or medical technologists and technicians only?
Debbie Anglin: Just medical technologists and technicians. They may have a medical director who may have an established protocol with an outside doctor who functions as an independent contractor.
Q: How are these labs regulated?
Debbie Anglin: They're federally regulated and also subject to state inspections. They also must conduct a quality review of themselves and submit the results to the Centers for Medicaid and Medicare Services, an agency of the U.S. Department of Health and Human Services.
Q: Has the number of these labs changed in the past few years?
Debbie Anglin: It's a growing niche. According to one report, growth in this field through 2008 is expected to exceed growth in the gross domestic product.
Q: Where can agents and brokers find prospects in this niche?
Debbie Anglin: One of the best lists I have found is on the Web site for the Centers for Medicaid and Medicare Services (www.cms.hss.gov). Ninety percent of these facilities are Medicaid- or Medicare-reimbursed. The site has a database from which anyone can download a list of names, addresses, phone numbers, contact names, etc. It's quite a complete mailing list.
Q: Are there associations that represent these types of medical labs–groups with which agents and brokers could become involved for prospecting and marketing purposes?
Debbie Anglin: There are associations that serve individuals who work in such labs, like medical directors and cytologists, but I'm not aware of any that represent labs per se.
Q: Are there any other useful prospecting sources that agents and brokers might check?
Debbie Anglin: Again, I believe the best source is the Centers for Medicaid and Medicare Services. You also could check the phone directory. They may not separate independent labs, however, from those based in hospitals or doctors' offices.
Q: Are there centers of influence that agents might find helpful in this niche?
Debbie Anglin: Pharmacists, possibly. People in the pharmaceutical industry who are involved in the manufacturing and packaging of test kits would be great sources.
Q: How should one qualify accounts in this niche?
Debbie Anglin: Make sure the lab is licensed and certified in its state of operation, that it has the correct license or the CLIA waiver. Check the staff's credentials and qualifications.
Q: What sort of qualifications should the staff have?
Debbie Anglin: The nurses must be trained and certified for whatever function they are performing. The cytologists have to be state-licensed and have American Society for Clinical Pathology (AFCP) certification. Employees who screen pap smears must be enrolled in a proficiency-testing program. If the lab sends out any tests to other facilities, they should have the same certifications and meet the same criteria that the prospect does.
Q: What are the most important coverage lines in this niche?
Debbie Anglin: General liability and professional liability.
Q: What are the chief professional liability exposures?
Debbie Anglin: One would be errors in handling samples–for example, inadvertently switching labels on samples from two different patients. Errors in reading tests results or in informing patients of test results would be others.
Q: Is special coverage needed for medical or lab equipment?
Debbie Anglin: Property coverage for such equipment is readily available. Professional liability is the main coverage concern.
Q: How would you characterize the professional liability insurance market for this niche?
Debbie Anglin: It's a specialty coverage, and you'll find maybe a handful of players writing it.
Q: To what degree does the market vary by state, perhaps in regard to duties imposed by law, the judicial climate or anything else?
Debbie Anglin: There are variations, which are reflected by differences in rates. California is one state that is more challenging than others. Texas is another.
Q: On what basis is coverage typically offered?
Debbie Anglin: We write the professional liability on a claims-made basis, using a surplus-lines market. General liability, available at the client's option, is occurrence-based.
Q: What sort of risk management procedures do insurers in this niche require?
Debbie Anglin: Independent medical labs operate under strict guidelines; there's not much we could do from a risk-management standpoint to improve upon them. They are required to conduct proficiency testing and to submit the results to federal regulators. They are also required to perform self-assessments as part of the proficiency testing. Where an insurance company or agent might be able to lend support would be on the non-clinical side–assessing parking-lot conditions, addressing slip-and-fall exposures, etc., although not many medical labs have much walk-in traffic.
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