(April 2021) – Chris Conrade, Conrade Insurance Group
The risk of a disrupted revenue stream to any Kansas hospital is a real and ever-present concern. We know all too well that just a few minutes of Kansas severe weather can significantly disrupt hospital revenues for a year or even longer. That's why property insurance, including a correctly calculated business income and extra expense limit, is essential for your hospital's recovery and continuation.
Unfortunately, the last 12 months have taught us that building damage is not always a prerequisite for revenue cycle disruption. I do not need to remind any Kansas hospital administrator of the anxiety we all faced in March, April and May of 2020 when revenues fell sharply due to COVID-19 precautions. Unlike a fire or tornado, there was no building damage event that could trigger the business income insurance coverage. Fortunately, Midwestern grit and some CARES Act assistance meant most Kansas hospitals were able to survive this disruption and continue to operate today.
This leads us to the revenue disruptor we mostly do not talk about … but should. That is the risk posed to your hospital's revenue stream by the sudden death or incapacitation of a "Rainmaking" provider. The Cambridge Business English Dictionary defines a rainmaker as "Someone who makes a lot of money for a company or who helps someone or something to succeed." In the post-Affordable Care Act world of hospital management, it has become increasingly common for highly productive providers to be employees of the hospital. Most Kansas hospital administrators will tell you that without some combination of supplemental income (sales and property tax and/or investment income) contractually adjusted revenues struggle to meet and exceed the expense line. So, in this reality of thin or non-existent margins, a provider that is directly or indirectly responsible for a significant portion of your hospital's adjusted revenue presents a significant enterprise risk. Considerable effort is made to ensure we are attracting providers that are the right cultural fit for the hospital. Hours are spent poring over contracts to safeguard both the provider and hospital during employment and potentially following employment. But how are we planning for the sudden loss of a key provider due to death or disability? Sadly, I believe most of us are not. However, we can.
Key-person life and disability insurance is unique because it is a product designed to protect the hospital's ongoing business and assets following the death or disability of an essential provider; the rainmaker if you will. The proceeds of a key-person policy can be used to cover the ongoing expenses from the provider's practice such as payroll and debt service. Or the hospital could even use the proceeds to expedite a recruiting project to quickly resume an important medical service to the community. Regardless of how the policy proceeds would be used, it is clear every hospital with a high-performing provider has this risk.
Key-person life and disability insurance could be your solution for the untimely loss of a rainmaker provider. If you have any questions about how this strategy could benefit your hospital, please don't hesitate to reach out.
Chris Conrade is the vice president of Conrade Insurance Group and specializes in providing risk consultation and insurance to Kansas hospitals. Conrade Insurance Group serves more than 60 Kansas hospitals and partners with the Kansas Hospital Association by providing the KHSC-endorsed Chubb Hospital Property Insurance Program and the Cincinnati Management Liability Insurance Program.