If you own or operate one of the estimated 1,500 ketamine clinics in the U.S. that provides cutting-edge Ketamine-Assisted Psychotherapy (KAP) to treat patients suffering from PTSD, suicidal ideation, severe anxiety, and other mental health disorders, you are exposed to a myriad of liabilities that could put you at risk of a lawsuit. With regulations and federal oversight trailing far behind the demand for KAP, clinics are basically operating independently in what some consider to be the wild, wild west.
One of the most significant challenges that Ketamine clinics face today is securing the necessary insurance coverage to protect their business, medical professionals, and board/investors from costly litigation and HIPAA violations.
R&A PSYINS, an independent insurance broker that specializes in the psychedelic medicinal industry, provides answers below to the most pressing questions Ketamine clinics have about procuring the proper insurance:
- What are the biggest risks and liabilities for Ketamine clinics?
It’s not surprising that the number one risk — and a Ketamine clinic’s biggest fear — is being accused of medical malpractice. Malpractice occurs when a healthcare professional commits a negligent act or omission during the treatment of a patient that deviates from accepted norms of practice, i.e., the standard of care, and causes injury or harm to the patient. Given that KAP is a relatively new treatment, the profound issue is how this industry defines the “standard of care.” It’s largely a gray area that leaves practitioners very exposed to litigation, thus making it harder to access medical malpractice insurance.
In addition to the threat of malpractice claims, KAP practitioners need to understand other major risk factors, which include:
- Bodily and property damage incurred by a patient or employee while on the premises
- HIPPA violations resulting from data breaches & cybercrime
- Unlawful employment practices, including claims of sexual assault
- Securities litigation/wrongful acts in managing the company
- Product recalls
- False advertising
- What are the essential insurance policies Ketamine clinics need?
Despite Ketamine infusion therapies entering the mainstream, as with most new interventions, it’s considered high risk. Therefore, clinics and practitioners require specialized insurance policies. Below are the essential coverages your clinic needs to protect itself from costly and damaging litigation.
Professional Liability/Errors & Omissions (E&O) Insurance
Most licensed healthcare professionals have some type of malpractice policy, which from a technical standpoint is often referred to as Professional Liability/E&O insurance. However, be aware that if you are new to offering KAP through your private practice or a specialized clinic, your existing malpractice policy may not cover any claims associated with this emergent, “high-risk” treatment. It is recommended that you talk to an independent insurance broker with specialized knowledge of the psychedelic medicine industry to evaluate your policy and determine if you have or need additional coverage.
In an industry like psychedelic medicine, Professional Liability/E&O insurance is critical. Many licensed professionals provide their therapies either on-site or remotely through telemedicine and assist their patients throughout the course of their therapy. Patients require precise dosing and treatment, and there is no room for error. In the event of a claim, your policy will cover both court costs and settlements, up to the amount specified by the insurance contract. Professional Liability insurance policies can also be designed to include coverage for HIPAA violations, including expenses associated with legal proceedings, fines, and penalties.
General Liability Insurance
This type of policy is essential to protect clinics from a variety of claims including personal injury, bodily harm, property damage, and other situations that may arise including contractual obligations, slander, libel, copyright infringement, and more.
With a comprehensive, psychedelic medicine-specific General Liability insurance policy in place, the insurance company, not the clinic, will pay for medical expenses and property damage claims from third parties, in addition to hefty legal fees and fines.
Directors & Officers (D&O) Liability Insurance
Many officers and directors require a company to have D&O coverage, often with excess limits. It’s also a likely prerequisite if your clinic is looking to secure venture capital or funding from investors. D&O insurance protects your clinic’s C-suite and board, as well as their spouses and estates, from being personally liable in the event your clinic, or one of its healthcare practitioners, is sued by investors, employees, vendors, competitors, customers, or other parties, for actual or alleged wrongful acts in managing the company. In the event of litigation, a comprehensive D&O policy will cover legal fees, fines, settlements, and other related costs.
- What other coverages should Ketamine clinics consider?
In addition to the essential coverages outlined above, R&A PSYINS recommends Ketamine clinics speak to a qualified, independent insurance broker with specialized industry knowledge to determine if they need additional protection, such as:
Product Liability Insurance
This is a specialized coverage designed to protect your clinic from claims that can happen anywhere along the supply chain, including product contamination, mislabeled medicine, false advertising, or defective products/ingredients. Ketamine’s “off-label” status puts practitioners at high risk for legal claims for a variety of reasons. From an insurance perspective, the product risk exposure is great in this industry due to the possible side effects of Ketamine. With proper coverage, your insurance company – not your clinic – will pay for damages and legal expenses if you are sued, up to your policy limits. Your Product Liability policy will also cover any medical expenses for those who are harmed by the administered treatment. The need for different product liability coverage depends on the legality of the active ingredient in the state in which the clinic operates.
Cyber Defense and Data Breach Insurance
Given the vast amount of patient information and data that every healthcare practice is required to collect through an Electronic Health Records system, Ketamine clinics are prime targets for cybercrime and data breaches. Even an accidental breach like a software malfunction or a lost laptop could result in costly litigation. Furthermore, a data breach can be deemed a HIPAA violation – regardless of whether the clinic was responsible for the breach. Today, a single violation can result in fines up to $50,000, to a maximum of $1.5 million per year. These risk factors are why a cyber liability policy should be part of your overall risk management strategy.
- Does malpractice insurance cover HIPAA violations?
In some cases, HIPAA violations do not qualify as malpractice. For example, if your clinic did everything reasonably possible to protect a patient’s privacy and information still leaked, then it might not be considered malpractice. Yet, the end result could still lead to litigation. In these cases, your malpractice insurance carrier could deny the claim. However, other professional liability policies like E&O, Cyber Defense & Data Breach, and even D&O liability coverage could offer your clinic protection.
The way HIPAA and malpractice insurance work together can be complicated, which is why you should consult an insurance broker with specialized knowledge of the healthcare industry, and specifically psychedelic medicine, to determine if you need supplementary liability insurance to cover the exorbitant costs associated with HIPAA violations.
- How can Ketamine clinics secure the appropriate amount of insurance coverage?
While KAP is increasingly considered a game-changer for those seeking new mental health treatment options, many of the larger insurance companies argue that ketamine is experimental, risky, and, therefore, not covered under traditional medical malpractice policies. But fear not, there are options to secure the right amount of coverage to protect your clinic, practitioners and directors, and officers.
Independent insurance brokers, such as R&A PSYINS, offer multiple policy and product lines from a broad selection of insurance companies and perform all the tedious price and coverage comparisons in order to present you with your best options. Specialized insurance brokers also tend to be more knowledgeable and up-to-date on state regulations. They are often considered to be a collaborative partner and valuable resources for clinics as they build their practice.
A broker’s job is to analyze the business, expose and explain your potential risks and develop a customized plan that offers full protection and peace of mind. In the event of a complaint or lawsuit, a competent insurance broker will assist its clients with the claims process and negotiate on their behalf.
As an independent insurance broker that specifically caters to businesses operating in complex, highly regulated industries, such as the psychedelic medicinal industry, R&A PSYINS offers A-rated, competitively priced coverage that is tailored to your clinic’s unique needs. R&A PSYINS works with Ketamine clinics across the USA.
If you have any additional questions not covered in the topics above, R&A PSYINS encourages you to reach out to us so we may examine your current policies, help you understand what is and is not covered, and adjust your policy, as needed. For more information on R&A PSYINS, visit https://www.psy-ins.com. To schedule a consultation, click here.
R&A PSYINS is a division of Rahn & Associates, INC.