key person disability insurance.

Key person disability insurance helps you prepare for the unexpected at your medical practice

According to a recent survey by the American Medical Association, AMA’s 2012 Physician Practice Benchmark Survey, as reported by the AAFP, 60 percent of physicians work in practices wholly owned by physicians, 39.8 percent own their own practice, and 18.8 percent are in a practice on their own. Overall, 57.7 percent of all physicians are self-employed.

Small practices are thriving in America, says the report. Small group practices work well for doctors who want to create a practice that’s big enough to pool resources and get the benefits of partnership without growing to an unmanageable size.

The realities of partnership

These medical practices can do very well, but the success of the partnership is often very much dependent on the health and well-being of all of the key partners. Lose one partner for even a few weeks to illness or a broken bone, and suddenly the entire practice is disrupted. After all, in most cases it’s safe to assume that a key partner in a group of 10 is shouldering about 10 percent of the workload.

Some key partners may have multiple roles in a practice where multiple disciplines are required, so if a one partner who also oversees billing or technology at your firm is suddenly laid up with a broken leg near a ski slope far away, your office might have to kick into high gear to figure out how to handle the partner’s job for a few weeks, or make some tough decisions about cancelling appointments.

Lost revenue and bad reviews

Cancelled appointments can lead to lost business. Patients in need of immediate care will go to another practice and may never return to yours. Even worse, word might get around that your office turned patients away. As social media reviews become more and more important to not only your reputation in the community, but also to your ability to be found more easily in web searches, it’s easy to see how even the temporary loss of a single employee can snowball into a bigger problem.

Planning is key to strong partnerships

When you’re launching a business and things are going well, it’s not easy to imagine a rainy day scenario. But medical practitioners who want to have a strong and thriving practice in the long-term should make contingency plans for what to do when a member of the practice becomes ill suddenly. Some practical advice includes networking with doctors who could jump in as temps when things go wrong, and making sure no key functions in the practice are overseen by only one team member – make sure at least two team members know enough about the important things like billing, technology, appointment-setting, and taxes to take over in a pinch.

Depending on the size of your practice, and how it’s structured, it may be wise to consider key person disability insurance. This insurance will kick in and cover the costs of hiring temps to cover for a partner who can’t be there, or will cover the loss a practice suffers if the person is “irreplaceable” for a period of time. Doctors who perform highly specialized surgeries may not be easy to replace in a hurry, so key person disability insurance can cover the loss of their absence.

These policies are sometimes hard to come by for practices – they may not be offered by insurance providers in your area, or they may have deductibles that are so high that they aren’t really a feasible option. If this is the case, consider an enterprise risk captive as an alternative. We can help you figure out how a captive might help your practice – contact us for more information.