Result Driven Impact

Key Employee Accident & Critical Illness

Company Profile

West Coast Dermatology Associates is a single-owner professional dermatology practice on the West Coast, specializing in comprehensive dermatology and skin care services. With an annual revenue of approximately $2.8 million, the practice employs a dedicated team of 10 staff members. Recognizing the critical role of key employees, particularly the practice owner and primary physician, the company implemented an 831(b) Plan to financially safeguard the practice against unexpected absences due to accidents or serious illnesses

  • INDUSTRY- Healthcare
  • SPECIFIC- Dermatology and Skin Care Services
  • ANNUAL GROSS REVENUE- Approx. $2.8 Million
  • EMPLOYEES- 10
  • OWNER STRUCTURE- Professional Corporation; Single Owner Practice
medical case study

Risk Description

West Coast Dermatology Associates faced substantial financial risk related to the potential temporary loss of their key employee—the primary physician and practice owner—due to unforeseen accidents or critical illnesses. Traditional business interruption policies often exclude coverage specifically tied to the personal health and availability of key individuals, potentially leaving practices significantly exposed to revenue loss during extended absences.

Incident

The key physician and owner of West Coast Dermatology Associates received an unexpected and serious medical diagnosis, necessitating intensive treatment, including chemotherapy and immunosuppression therapy. This critical illness resulted in an inability to practice for approximately ten months. Initially, the estimated financial impact was anticipated to exceed $2 million due to the substantial loss of patient-care revenue typically generated by this key individual. After a detailed financial assessment, the actual loss was determined to be approximately $680,000.

Resolution

The practice swiftly filed a claim through their 831(b) Plan’s Key Employee Accident & Illness policy, specifically tailored to protect against financial disruptions caused by the temporary loss of key employees. The direct writer efficiently validated and processed the claim, providing financial coverage up to the policy’s maximum limit.

This immediate financial support significantly alleviated the financial strain, allowing the practice to maintain operational stability and ensure continuity of patient care during the key employee’s extended absence. The experience also prompted West Coast Dermatology Associates to reassess their overall risk management approach, ensuring future policy coverages were better aligned with their actual financial exposure.

Key Takeaways

By effectively leveraging an 831(b) Plan, West Coast Dermatology Associates mitigated the significant financial impact caused by the unexpected critical illness of a key employee. The incident highlighted the importance of specialized coverage to protect practices against operational and financial vulnerabilities associated with key personnel absences.

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