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By Arlene Furlong

While hurricanes and floods were the disasters with the greatest impact on U.S. dental practices last year, tornadoes, earthquakes, fires and even lightning strikes pose a threat to dental offices every year.

This is the first article of an ADA News series on what loss prevention specialists have to say about emergency and disaster preparedness for the dental practice. Business interruption insurance, protecting patient records and developing a practice continuity plan are featured here.

Look to future ADA News issues for topics including defining practice value, developing mutual aid groups, back-up and storage methods for patient records and data, evacuation and temporary relocation plans and claims reporting. For more specific information on any of these subjects, also contact your insurance carrier.

"Disasters only happen to other people."

Some dentists report that's exactly how they felt before their dental practices and their livelihoods were reduced beyond their imaginations by natural disasters.

"Once the disaster has already struck your practice, there's often not much you can do," comments Dr. John Vaselaney, director of risk management for CNA HealthPro. "Each dentist has to be adequately prepared in advance for what could happen in their area."

Dr. Vaselaney, an ADA member dentist, recommends that dentists become more diligent in understanding and managing their risks, "become better insurance consumers," to be sure they get the coverage they want and need.

He says that sometimes there's a large gap in the amount of coverage purchased by the practice and the amount of losses dentists incur. Dentists should purchase coverage to the proper value, as well as understand the limitations of their policies, he says.

The financial stability of the carrier is another major factor dentists should consider, according to Mark Buczko, vice president of the Dentists Advantage Program.

"Don't send your money to a carrier that won't be able to provide coverage when you need it," Mr. Buczko warns. "Check the A.M. Best's insurance ratings. There are plenty of companies that used to be in the marketplace and aren't any longer."

Business interruption insurance

Business interruption insurance provides compensation for lost or reduced income resulting from suspension of a dentist's practice due to damage by a covered peril (such as an earthquake). It also may provide compensation for the extra expenses of setting up a new or temporary office following loss or damage. Business interruption insurance is a feature of property insurance. The business interruption concept of a deductible is based on elapsed time, say 24 to 48 hours varying by policy, rather than a fixed dollar amount.

"It's one of the most important, yet least understood coverages a dentist buys," says Michael Peterman, associate program director, Insurance Program for Dentists of the Redwoods Group Inc. "Many dentists don't understand that if there's not a loss to the property, it's likely the business interruption insurance won't be triggered."

Typically, there has to be damage to the actual property for business interruption insurance to kick in, according to Mr. Peterman. For example, if the dental office is closed because nobody can get there due to flooding in the streets but there isn't any physical damage to the property, there would be no claim for lost income under business interruption insurance.

"It's extremely important for dentists to sit down with their insurance advisors so they know in advance what is and isn't covered and understand what they're purchasing," advises Mr. Peterman, who believes dentists have some unique risks compared to other businesses.

For one example, a dentist can't practice without water unless the office has a closed system.

Mr. Peterman's recommendations?

• Make sure the insurance agent understands the practice of dentistry and understands issues specific to dentistry.
• Understand how coverage responds to certain incidents unique to a dental office.

Some policies in the marketplace only pay for actual losses sustained. What this means is that business interruption compensation is based on a calculation of the estimated income, not on the actual amount a dentist may bill out.

In many cases, dentists have deferred income, rather than lost income. For example, if the practice is closed due to a minor fire or windstorm damage, typically what happens is dentists reschedule patients they can't see while the damage is being repaired. This is defined as deferred income, not lost income.

However, if there is a major fire and it will take six months to rebuild, some patients with critical needs will go to another dentist. The income loss is limited to those patients who can't be rescheduled. Under certain policies, the income loss is calculated by analyzing past net income—of last year or last week, which highlights the importance of recordkeeping.

"When there's a business income loss, we end up getting into forensic accounting. We look at all the records for the prior year, such items as the scheduling book, to learn what the billings were," says Mr. Peterman. "Then we look at the date of the loss going forward."

Mr. Buczko says insurers may offer dentists a valued business interruption policy. This allows dentists to select a certain dollar amount of compensation necessary to cover daily ongoing expenses and lost net income.

"In a standard off-the-shelf policy, the policy requires the dentist to prove a loss of a certain dollar amount," says Mr. Buczko. "Ok, so you've had a fire. When you have a valued business interruption policy, it eases the claim settlement because there's no requirement to prove the actual loss sustained through working with accountants and patient records."

CNA's Dr. Vaselaney says a dentist should be certain to have enough business interruption insurance to be able to run his or her office on a daily basis, including payroll, overhead and other incidental expenses while waiting to reopen.

Protecting patient records

"Dentists have to understand that in many cases, if they don't have any records, they can't prove their losses," says Dr. Philip Barbell. The ADA member dentist and risk manager for The Redwoods Group Inc. recommends dentists keep electronic patient and financial records. "Why not take advantage of the technology? Electronic records are easy to back up and store, both in the office and at an offsite location."

Although storing paper records in fire and waterproof containers is a huge challenge, both administratively and physically, Dr. Barbell says it's essential.

Dr. Vaselaney says even with electronic records, dentists should keep a patient roster offsite and in a secure location.

"If something happens, such as lightning strike, and the computer goes down, a back-up that's kept in a place separate from the office is essential to rebuilding your data base," Dr. Vaselaney says.

While computerized records pose less of a storage issue than paper records, storing any records at home may not be the best option, experts say.

Kathleen Roman, vice president of the Medical Protective Co., says some dentists learned from the Gulf Coast hurricanes that you might not lose just your office, but also your home in a disaster.

Practice continuity planning

Risk management experts say all dental offices need a plan to cope with unforeseen incidents to avoid lengthy business interruptions.

With proactive planning, dentists can mitigate their losses and get their practices up and running as quickly as possible, according to Vincent Mr. Keene, risk management analyst at The Dentists Insurance Co.

The plan doesn't have to be long and complicated, Mr. Keene reports. But it should list procedures that are necessary for a dentist to follow to efficiently resume business. Mr. Keene reports those procedures can be customized for each dental practice by taking four initial steps:

• analyzing the practice;
• assessing the risks;
• developing a plan;
• rehearsing the plan.

Analyzing the practice is the step that reveals where the dental practice is the most vulnerable.

"Ask yourself which types of emergencies are most likely to strike in your specific area," advises Robin Crimmins, TDIC's vice president of risk management. "Is it a tornado, an earthquake, a flood?"

After risks are rated on a scale from one to five, procedures can be developed to follow at each risk level, says Ms. Crimmins.

Even incidents as unforeseeable as fire can be rated for risk, she believes.

"Is the practice near an area frequented by brush fires or is it near the beach?" Ms. Crimmins offers as a sample analysis for fire. "The creation of the measurement tool is subjective, customizable by the dentist for his or her individual practice."

In assessing the risks, loss prevention specialists recommend dentists evaluate in terms of cost.

How much can the practice afford to lose if it's out of commission for days, weeks, months?

TDIC's Mr. Keene says asking "what if" questions helps dentists figure this out. What if the air conditioning unit stopped working in the middle of summer? What if the computers went down? Which employees are essential to function during and after a disaster? What is the worst case scenario?

Although each dentist's plan will look different, most plans will share some important features, such as:

• an outline of which employees should do what during a disaster and which should be back at work first, following the disaster (it might not be the dentist);
• the location of valuable documents, building records, contact numbers, insurance policies and a receipt folder for miscellaneous charges made during the recovery process.

Include how and when the plan should be updated to make sure it is a "living document."

Because the business continuity plan is a dynamic document, weaknesses may be discovered when it's put into action, reports TDIC's Mr. Keene. Rehearsing the plan helps confirm it will be ready when you need it.

For more information about disaster planning and recovery, visit www.ada.org/goto/disaster.