Why Going Bare Makes Sense August 9, 2004  By Marc Singer, MBA, CFP Hypothetically, going bare seems like a rational decision. By limiting the financial reward in a lawsuit, plaintiff attorneys would be less likely to sue doctors. The concept is that instead of expecting a $1 million plus verdict and working downwards, the bare doctor would start at zero and negotiate upwards. Lawyers need to evaluate the situation where there are no reachable assets, before investing significant time and money into a case that may pay nothing, even if they win. Of course, I must mention that it is essential that bare doctors adequately protect their professional and personal assets in advance of dropping their malpractice coverage.  I was first professionally consulted about the concept of physicians going bare in 1986 when their prior insurer, St. Paul, dropped most of the obstetricians at Baptist Hospital in Miami .This malpractice carrier had left the state, leaving the doctors unable to obtain or afford new policies. At that time, the annual premium for $250,000/$750,000 of coverage was quoted at $60,000. (This premium subsequently rose to $125,000 by 2003). Collectively, the OBs were able to convince the hospital to allow them to practice without carrying coverage, in compliance with Florida law. Virtually all doctors who have gone bare feel strongly that it was the correct decision. For example, we studied a group of five OBs that had been bare since 1986. They have saved $10.3 million in premiums through 2003. During this period, they had five lawsuits and paid out $433,000 in legal fees and settlements; only about 4% of saved premiums. Even if doctors end up spending 50% of their saved premiums for defense costs and settlements, they will have still saved 50% on the price of insurance. Is it ethical to go bare? Going bare can be more accurately described as self-insuring. In the event of an adverse outcome, doctors maintain the ability to compensate patients out of the saved premiums that have been invested. We have seen this happen numerous times. The difference is since there is no "the sky's the limit" philosophy on the plaintiff's side; cases are usually settled faster and for less money when there is no insurance involved. Empowerment Going bare has a positive psychological effect on doctors. Many doctors who carried liability insurance for years are now questioning the benefits of having done so. With $250,000 of coverage, doctors feel significantly under-insured; they feel frustrated about the high premiums paid for such limited protection. After overcoming the fear of going bare, doctors feel empowered and liberated about the decision. (My observation is that the nervous feeling lasts for 30 to 90 days after going bare, and then disappears.) What will patients think? Some doctors worry that dropping coverage may scare away patients.Upon seeing the lobby sign about not carrying insurance, some patients may ask "Does this mean if you do something wrong I can't sue you?" The doctor may be best off without these particular patients. What about Florida financial responsibility laws? In several cases, doctors have had multi-million dollar judgments discharged through voluntary bankruptcy.They did not lose their medical license for non-payment since, after bankruptcy, they no longer owed any money. Although bankruptcy is often mentioned in asset protection strategies, it is seldom used. The ideal scenario is to self-settle malpractice cases before bankruptcy is ever considered.   Will the trial bar try to make an example of a doctor? This has been a threat we have heard for over 15 years. Most trial attorneys will probably sue a bare doctor if they have determined that there is a "deep pocket" or "bull’s-eye target" whose assets are attainable. If the cardiologist, cardiac surgeon, and anesthesiologist have no insurance, where does that leave the insured radiologist or referring internist if there is a bad surgical outcome?  The important fact is that the bare doctor is usually more insulated than the insured doctor. Today's reality We estimate that there are currently over 5,000 self-insured doctors in Florida, with the number increasing daily. All South Florida hospitals and most managed care plans allow for bare physicians. Malpractice premiums have become unaffordable, or not worth the price. It is simply not wise to pay $80,000 or $100,000 for $250,000 of coverage. By employing a strategy of going bare after protecting personal assets and continuing to practice quality medicine, doctors can significantly lower their overall malpractice exposure. Going bare can be a rational decision in an irrational malpractice environment. Marc Singer, MBA, CFP is a founding partner of Singer Xenos Wealth Management. The firm manages $450 million of assets, specializing in investment portfolios and asset protection strategies for physicians. Offices in Coral Gables, Ft. Lauderdale and Tampa.      Reprinted from Florida Medical Business Singer Xenos does not provide legal advice. Please consult with your own legal counsel.