$2M Professional Liability (E&O) Insurance for Revenue Cycle Management Firms

For revenue cycle management firms asked by a hospital or health plan for $2M, the clause usually means $2M per claim and $2M total per year, so a $1M/$2M policy may fall short.

What does a $2M requirement mean for revenue cycle management firms?

It means your policy must pay up to $2M. Professional Liability (E&O, short for Errors and Omissions) covers claims that a mistake in your services caused a client a financial loss. For example (hypothetical), a wrong coding rule runs for a year at a hospital, and a payer audit leads to a large take-back. A $2M clause in an RCM agreement may read like this:

• Per claim: the most the policy pays for one claim. Here, $2M. A $1M/$2M policy pays only $1M per claim. See $1M Professional Liability for RCM firms.
• Aggregate: the most the policy pays for all claims in one policy year. Here, $2M, shared by every client you serve.
• Claims-made: the policy pays only for claims made and reported while it is active. It covers work done on or after the retroactive date (the earliest work date the policy covers).
• Cyber is separate: a data breach is usually a Cyber claim, not a Professional Liability claim.

Who asks revenue cycle management firms for $2M?

Hospital systems and health plans ask most often (see Professional Liability for healthcare vendors). $2M is on the higher side for small and mid-sized RCM firms, but it can come up in larger deals. You will often see it from:

• Hospital systems onboarding coding, denial or accounts receivable vendors.
• Health plans hiring claims, payment review or member billing vendors.
• Large multi-site physician groups and management services organizations.
• Larger RCM companies passing their client's $2M clause down to you as a subcontractor.

How is $2M built?

Most often, $2M is one primary policy (the policy that pays first) at $2M/$2M. Another way is a $1M primary plus a $1M excess layer (a policy that pays after the primary is used up). The excess should follow form, meaning it uses the same terms as the primary. If you use layers, confirm with the client that primary plus follow-form excess meets the clause. A commercial umbrella almost never covers Professional Liability, so it usually cannot fill the gap.

RCM firms often buy Miscellaneous Professional Liability, a form for service firms without their own policy type. If you mainly sell RCM software, Technology E&O may fit better. Licensed clinicians usually buy medical malpractice insurance instead. Morrow can help you find a policy that fits your contract.

What will underwriters ask for?

An underwriter is the person at the insurer who decides whether to offer coverage and on what terms. At $2M, they often ask for:

• Which parts of the cycle you handle, with a share of revenue from each.
• Yearly collections, your largest client's share of revenue, and how you charge.
• The contract asking for $2M, including any indemnity clause (a promise to cover the client's losses) and any limitation of liability clause (a contract term that caps what you owe the client).
• Coder certification, outside coding audit results, and how you track filing and appeal deadlines.
• Offshore staff, subcontractors, business associate agreements (contracts about how you handle patient data) and data security controls.
• Loss runs (a report of past claims), anything that could become a claim, and your current policy with its retroactive date.

What affects the cost?

• Service mix. Coding, audits and underpayment recovery may cost more to insure than front-end work.
• Client size. Hospital and health plan accounts can mean bigger possible losses.
• How the $2M is built. A single primary and a primary plus excess are priced differently.
• Claims history and controls. Prior claims, weak audits or heavy outside staffing can raise the price or narrow options.
• Retention and defense terms. Retention (the amount you pay on each claim before the policy pays) and defense outside the limit both change the price.

Frequently asked questions

Do I need $2M Professional Liability as an RCM firm?

Often, if the hospital or health plan contract names $2M, yes, you need to meet it. Check whether it asks for $2M per claim, aggregate, or both.

Is $1M/$2M enough if my hospital contract says $2M?

Often not. A $1M/$2M policy pays only $1M per claim, so it may miss a "$2M per claim" clause. Ask Morrow to request quotes for a $2M policy, or a $1M primary plus a $1M excess layer. Morrow can ask for your retroactive date and prior acts coverage (coverage for work done before the new policy starts) to carry over where the market allows. Report anything that could become a claim to your current carrier before that policy ends.

Can a hospital be added as an additional insured on my Professional Liability?

Usually not. Clients are not normally named on the policy. Many clients accept a certificate of insurance (a one-page summary of your coverage) instead.

What if my next RCM contract asks for more than $2M?

You may need excess layers. Some large systems and health plans ask for $3M or $5M. Those limits are rarely found online and often need a broker. Morrow can help you find them. See $3M Professional Liability for RCM firms.

This article is general information, not legal advice or a coverage determination. Coverage depends on the actual policy wording, carrier underwriting and your contract terms.