The Worst Business in America

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At 38, Monica Meyer is the practice's youngest partner-- and the only one who has never been sued.

In addition, Meyer has discovered that because she's never been sued she can get her own policy from Princeton Insurance, a company that won't touch her colleagues. But like most insurers, Conventus prefers to cover an entire practice and might be reluctant to lose the practice's one doctor who has never been sued. Meyer is a small, intense woman and as she explains her worries about Conventus, there are tears in her eyes. She concludes that if Conventus insists on insuring all the doctors in the practice, she would have to leave the partnership--either sever her ties with Valley Center entirely or become an independent contractor. For her, she says, "Conventus is not an option."

A number of New Jersey medical practices have fractured under such strains. With the stakes so high, it's inevitable that medical concerns overlap with legal concerns. Earlier this year, the Valley Center doctors had to deal with a request from a high-strung expectant mother who had been bedridden in Valley Hospital for a month to prevent premature birth. The woman wanted to go home for a few days during Passover and some of the Valley Center doctors considered letting her go, provided she signed a release acknowledging the risks. But the woman was Meyer's patient, and Meyer prefers to treat difficult patients as if they are legal time bombs. "Some patients, you have to put the fear of God into them," Meyer told her colleagues at one Thursday-morning meeting. Let her go home, Meyer warned, and "if she has a bad baby, God forbid, she's the kind that will sue."

The woman spent Passover in the hospital.

By May, with less than 75 days left on their old policy, Faust and Levine have grown convinced that there is no white knight on the horizon, and that it could be risky not to lock in with Conventus. The company's demand for start-up capital may seem extortionate--but at least it will keep the practice open.

During a meeting the previous week with Conventus CEO Richard Augustyn, Faust and Levine had learned that Conventus was willing to go along with Meyer's desire to be insured separately by another carrier. Augustyn also seemed amenable to spreading Valley Center's $600,000 capitalization payments over five years rather than three. And, it turned out, there was a wrinkle that none of the doctors had understood--the $600,000 in funds would be at risk should the insurance company ever fail, but if Valley Center later chose to switch carriers, the money would not be lost, as the doctors had long assumed. Under New Jersey law, it would return to the practice. Roger Coven is at Valley Hospital, listening in on a speakerphone when this is explained. "Oh," comes his disembodied voice. "That's huge. That's so big I can't believe it."

Levine shrugs in agreement: "I was ready to tell them to take the company and shove it. We were offered this horrible deal, and now the deal is less horrible."

But Faust and Levine both point out that nothing is in writing, and there are risks in waiting. Conventus has a formula for its client base that allows room for only so many obstetricians and similarly high-risk specialists. Other obstetrics practices may want to sign up with Conventus, and if it fills those slots, Valley Center could be left uninsured. "He can't guarantee us a spot," says Faust, of Augustyn. "It's sort of used-car-dealer sales pressure."

Levine proposes that once they receive their official rejection by GE MedPro, as they suspect they will, they sign on with Conventus. "Are we all in agreement?" he asks.

"We don't have a choice," says Rooney.

"I know we don't," says Levine, again with that toothy grin. "But I thought we'd feel better if we took a vote."

To Mike Faust, a self-described optimist, there's one upside. "At least it's not like the other years," he notes brightly, "when it went down to the last days to see who would insure us."

He is speaking, it turns out, too soon.

One day in early July, everything changes. Levine takes a call from Conventus and discovers some new twists in their offer. Previously, the doctors had turned down an option to buy corporate malpractice insurance from Conventus, deeming it redundant. Now Conventus wants to require it at an additional cost of $15,000 per year plus another $60,000 in capitalization. Meanwhile, the total capitalization, now $560,000, can't be spread over four years as promised--Conventus wants the payments in just two years.

Furious, Levine tells Conventus to take a hike. The move is part pique, part strategy. Just that week, Levine had been intrigued to hear how a colleague had managed to pry an offer from another insurer after two prior rejections. The third application included a letter from the state insurance commissioner's office urging the insurer to reconsider. The same insurer, known as MIIX Advantage, has already rejected Valley Center, but now Levine is thinking of trying again.

Levine calls the firm's insurance broker, and asks her to resubmit Valley Center's application to MIIX Advantage. And within five days, MIIX responds with an offer. Though the MIIX premiums are somewhat higher, the capitalization costs are half what Conventus wants. But there's a catch: MIIX has extended the offer to only four of the Valley Center doctors. Levine and Faust, arguably the practice's most accomplished doctors, aren't included. This is when Levine starts talking about the pizza business.

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