Two of Spokanes largest medical practices, Rockwood Clinic PS and Physicians Clinic of Spokane, are exploring joining forces with several other large physician groups in the state to self-insure by forming their own malpractice insurance company.


As envisioned, the practices would pool their money by paying premiums to the new company, called AlliaCo Inc., which then would cover malpractice judgments or settlements incurred by any of them up to $250,000 per claim. A reinsurance policy provided by a Lloyds of London affiliate would cover the difference on any claims exceeding that amount.


As the Journal reported recently, Inland Northwest hospitals have begun adopting a similar self-insurance approach, and even are outsourcing some high-risk operations, in response to spiraling malpractice premiums.


The other practices that are considering participating in the physician-group venture are the Walla Walla Clinic, in Walla Walla; The Polyclinic, a multispecialty practice based in Seattle; and Puget Sound Family Physicians, a network of family-practice doctors serving King and Snohomish counties.


Altogether, the five practices include about 450 doctors. They all belong to the Washington Medical Group Alliance, which is owned by 15 of the states larger clinics and physician groups and provides a range of support services to them. Alliance members first began looking into the feasibility of self-insuring a couple of years ago, and a pretty intensive analysis of the idea was completed in December, says Larry Thompson, the Alliances executive director.


Were in the process basically of startup of the new plan. Were putting together the contracts and legal documents, and have set a tentative start date of July 1, Thompson says.


Theres been a lot of detailed business planning and actuarial work that has gone into this, he says. One of the really important things is, it really creates a strategic alternative so they have much more control of their destiny.


Neither Rockwood Clinic nor Physicians Group of Spokane has committed formally yet to join the self-insurance venture, representatives of the two groups say, but both appear to be leaning in that direction.


Rockwood Clinic must make a decision by May 1, when its current malpractice coverage expires, says Dr. Kevin Sweeney, its board president.


We think there are savings in going with a self-insured model, but we dont have that determined yet, and Rockwood is continuing to evaluate the data that has been gathered, he says.


Rockwood Clinic has about 110 doctors and employs 700 people in all. For its current May-to-May insured period, its paying The Doctors Co., a California-based physician-owned insurer and one of just three medical-malpractice insurers now doing business in Washington, more than $1.7 million for such coverage, Sweeny says. Thats up about $250,000 from last year, and Rockwood Clinic is looking at a potential increase of more than $750,000 if it renews its coverage, despite a good claims history, he says.


A key advantage of having a limited number of physician groups in Washington own a malpractice insurance company is, We would control the cost of the insurance, we would control the groups that are participating, he says. To not have an option other than a full-insurance model gives us no ability to respond to the market changing rapidly.


Physicians Clinic, located in the Medical Center Building, at 820 S. McClellan, has the equivalent of about 18 full-time physicians and employs about 100 people in all. Its paying its insurance carrier, the Washington State Physicians Insurance Exchange, about $224,000 for malpractice insurance this year, up from $140,000 in 2003 and $94,000 in 2002, with really no adverse (claims) experience in that period, says Dr. Scott Baumgartner, its board president.


Physicians Clinics insurance coverage is based on the calendar year, so it just recently renewed, but it nevertheless will take a close look at switching to the proposed new plan, Baumgartner says.


Im not sure the cost initially is much less, but what it does offer is better ability to control the cost and really rate ourself according to our experience, and I think thats worth a lot, he says.


Representatives for both Spokane clinics say they believe that medical liability reformspecifically, setting caps on non-economic damages in medical-malpractice cases in Washingtonis crucial to bringing runaway insurance premiums under control. They say theyre pessimistic, though, about the chances that the Legislature will take any such action.