Last week, Johns Hopkins Hospital in Baltimore (“Hopkins”) announced that it had reached a $190 million settlement (which had received preliminary court approval but still needed final court approval) with over 8,000 patients of the Johns Hopkins East Baltimore Medical Center who were secretly photographed by a former Hopkins gynecologist who allegedly admitted his outrageous conduct before he committed suicide ten days after being fired by Hopkins. The photos were found on the gynecologist’s computer at his home after his death; the photos allegedly depict the patients’ sex organs but did not show their faces.
At the time the matter was initially reported, Hopkins issued a statement in which it stated, in part, “… these events came to light on February 4, 2013 when a Johns Hopkins employee brought to our attention concerns she had regarding Dr. [Nikita A.] Levy. The Johns Hopkins employee advised that she had noticed that Dr. Levy had worn a device, which looked like a writing pen, around his neck while examining patients and she believed it was a camera. On February 5, 2013, Johns Hopkins security was contacted and went to Dr. Levy’s office to question him about the device. While interviewing Dr. Levy, similar appearing devices were seen in his office and on his person. The interview was suspended after asking Dr. Levy to voluntarily surrender the devices, which he did. Dr. Levy was advised that he was prohibited from any further patient contact and was encouraged to seek counseling services. Johns Hopkins Security then escorted Dr. Levy off the grounds of Johns Hopkins, and his upcoming appointments were cancelled.” Source
Hopkins stated at the time the settlement was announced last week, “All funds will come from insurance. This settlement, which has been formalized by the plaintiffs’ attorneys and the Health System and given preliminary approval by the judge, will not in any way compromise the ability of the Health System to serve its patients, staff and community.” Source
So, Who Pays The $190 Million Settlement?
As it turns out, Hopkins is one of many high-profile medical institutions on the East Coast that formed two captive insurance companies in the 1990s, one in Vermont (a risk retention group called MCIC Vermont) and the other in Bermuda (Medical Centre Insurance Company Ltd.), both of which were located based on regulatory and tax benefits for insurance companies, to share costs and spread the risk of claims while saving money when fewer and less costly claims are paid. These two insurance companies cover 16 hospitals with a combined 12,000 physicians and 50,000 total employees. Smaller and medium-sized claims are typically paid from funds pooled by the members while coverage for the larger claims are spread through the insurance and financial markets worldwide.
It has been reported that the Vermont company will pay $100,000 of the Hopkins settlement and the Bermuda company will pay approximately $25 million of the settlement. The remaining balance of the $190 million settlement will be paid by commercial insurers, whose liability is limited to a $200 million cap.
Nonetheless, the $190 million settlement payment is a massive hit for the two insurance companies: the settlement payment in the Hopkins matter is more than all claims paid by the two insurance companies in each of the last five years.
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