Executive Q&A: Mary-Lou Misrahy, CEO, Physicians Insurance

Seattle-based Physicians Insurance was established in 1981 after many insurance companies stopped offering medical malpractice coverage. When Mary-Lou Misrahy was appointed CEO of the company in 2004, most of its policyholders, who are also owners of the mutual company, were small practices and the organization was struggling. Misrahy introduced professional management and new strategies that have helped the 109-employee organization adapt to rapid changes in the health care market. It now serves 7,000 members and had revenues in 2013 of $101 million.

GROWING UP: I was raised in Southern California, the eldest of four girls. Both my parents were physicians, but my mother never practiced until my father died when I was 12. My mother used to sit in the kitchen studying for the [medical] boards. I would make dinner for my younger sisters. I loved horseback riding and wanted to jump horses in the Olympics, but my mother reminded me that I could only afford to ride horses because she was a physician. She instilled in me the importance of having valuable skills. I still ride horses. Im probably the oldest competitor in Washington. My office is like a shrine to my children, which are my horses.

EDUCATION: I went to UC Davis because I wanted to be a veterinarian, but I would have been poverty stricken if I was a vet. At one point, I had in my home 13 cats that people had wanted to put to sleep. I ended up entering a training program at Liberty Mutual for claims adjustors. They needed to hire more women and had found that people with science backgrounds made good claims adjustors.

CAREER: My first assignment was in the Watts section of Los Angeles. They gave me a car and a checkbook and I had to go out and settle claims. I later worked for an insurance company with 3,000 employees and $1 billion in premiums that was going out of business. I created partnerships to offer new policies, and we leveraged the brand of our partners to mask some of the issues until we could fix them. We sold parts of the company and found a buyer for the ongoing business.

PHYSICIANS INSURANCE: I was just finishing that [previous job] when a recruiter called me about this one. The board [of directors] had the medical expertise but needed insurance expertise to take the company to the next level. Shortly before I started, they had paid a large claim when an anesthesiologist at Kadlec Medical Center [in Richland] proved to be working under the influence of drugs when he left a patient in a vegetative state. It turned out the doctors prior employer had known about his drug problem, but when Kadlec contacted them for a reference, they said [the anesthesiologist] was fine. We went after the [previous employer] and won, setting the important precedent that if an employer knows a doctor has problems, it has to be able to let others know. The judgments were against an anesthesiologists group and we collected their TVs and their cars. I knew then that the board really cared about patient safety.

CHALLENGES: Two weeks into the job, I was called into the Office of the Insurance Commissioner in Olympia because the company had been given a poor rating for not following all the rules. In the first two years, I hired a new executive team, including a new CFO, CIO, HR director and underwriting executive. Now we are a poster child for how to do things right. We have quadrupled our surplus to over $200 million. We added insurance and business expertise to the board. Our investment in IT helped us adapt to the changing business of medicine. As our policyholders became larger clinics, we needed different risk financing and better information systems. If you cant get data to tell you whats going on, youre in trouble. When you work with clients like the Polyclinic, which has 350 physicians, you need to look at the performance of the group. You are not writing policies for individual doctors.

SERVICES: When you buy insurance from us, we offer great claims management, but we also help doctors manage risk. Now we offer those services to hospitals on an unbundled basis. We have a great database [with information] about where things go wrong and what leads to claims. We do simulations for obstetricians on things like shoulder dystocia [in which the shoulder of the infant doesnt come smoothly out of the womb], which can result in poor outcomes. The doctors and nurses arent accustomed to dealing with these situations. One doctor said he had a shoulder dystocia situation soon after one of our simulations and would have had an adverse outcome if not for the training. Theres a lot more bariatric surgery for obese patients, as well as robotic surgery, and sometimes surgeons dont know how to deal with the complications in these situations.

CHANGE: There has been a migration of physicians to hospital employment. Its partly the changing reimbursement system but also because younger physicians dont want to be on call 24 hours a day. And women, who now represent 51 percent of medical school grads, like to do job sharing. But hospitals are often self-insured. If we didnt change, we would be a smaller, different company. We now offer risk management services and claims service to health providers across the country, so weve diversified our revenue. Providence [Health & Services] has in-house claims people. Well, if someone is on maternity leave, we can help them out.

REDUCING RISK: We are working with Dr. [Thomas] Gallagher at the University of Washington to see how to improve patient outcomes. Mistakes happen, but if claims arent large enough, attorneys wont take them. We want people who are hurt to be compensated. But if we need to defend someone, we will pay millions of dollars to defend. How do you make it a win for the patient and the doctor? It takes good analytics and a sense of whats right. We can reduce the cost from defensive medicine where doctors do tests to avoid getting sued. Turns out that ordering an MRI every time doesnt help because thats not where litigation is coming from. We also help doctors get through the litigation process. You dont want good physicians not to practice medicine.

OBAMACARE: I can sit here and tell you how horrible the Affordable Care Act is, but its law so we want to offer solutions to make things better for physicians and patients. There will be 30 million new insureds, many of whom will have language barriers, cultural barriers. They are more complex patients to take care of, many of whom havent sought medical care before. Physicians are going to be under pressure to see more people. We want to make sure it doesnt impact us with more claims.