Managed care and the infamous hold harmless clause

Hold harmless clauses may form the backbone of state and national health care reform since health insurers can effectively use them to pass off financial and liability risks to physicians. This is especially true in the TennCare proposal. Such clauses generally come in two forms, while a third type is often confused as a hold harmless clause, but is actually an indemnity provision. The first type involves a physician's agreement not to pursue a patient for fees in excess of those allowed in an HMO contract. The second type usually states that a physician will not look to an entity for a "contribution" to help pay off a claim for damages. The third type is not a hold harmless at all; rather, it requires a physician to "indemnify" an entity by paying its legal fees and any damages it is held liable for in a court judgment. Each clause holds increasingly dire consequences for physicians, and this should give them pause before they sign on the dotted line. Indemnity agreements are often excepted from professional liability coverage; therefore, a physician should consult with his carrier before agreeing to indemnify anyone. Finally, if such clauses must be included, a physician should demand extra consideration such as prompt payment and increased patient volume guarantees. This article examines some of the common types of hold harmless clauses the insurance industry expects physicians to sign under TennCare, and offers some negotiating points for physicians.