Nursing homes facing limits on insurance for elder abuse.

A patients' rights attorney is seeking a court order that would prevent 10 of the state's largest nursing home operators from receiving insurance payments to settle charges of elder abuse.

Russell Balisok, who filed suit on June 22 in Los Angeles Superior Court, claims that the payouts have allowed elder abuse to flourish since insurance premiums are partially reimbursed by the state.

"The whole point of this is to put the cost of elder abuse on the doorstep of operators," said Balisok, who has played a role in appellate and Supreme Court decisions interpreting the state's elder abuse law. "It's still cheaper to give bad care because the taxpayers are paying the cost."

The lawsuit has been criticized not only by nursing home operators but by patients' rights advocates who say it would do more harm than good.

Chief among the worries is that preventing insurance payouts for elder abuse would discourage all but the most intrepid attorneys from taking abuse cases. There is also a fear that good operators could be put out of business by a single lawsuit.

"There may be some bad nursing homes that will close. There may be some not-so-bad nursing homes that will close. I don't know if that is a good thing," said Pat McGinnis, executive director of California Advocates for Nursing Home Reform, on whose board Balisok sits. "But what I think the primary result will be is that abused and neglected elders will not be able to get legal representation."

State contribution

Among the nursing home operators sued in the case are Beverly Enterprises Inc., Covenant Care Inc. and Ensign Group Inc.

A spokesman for Beverly called the case "a purely theoretical lawsuit" that does not have any merit.

But Greg Stapley, general counsel for Ensign Group, which owns 44 homes in California and other states, said it was worrisome given Balisok's track record. "No question what he does is second to none, but I don't think anything that prevents nursing homes from spreading the risk will be beneficial to families, health care providers or the people who rely on them," he said.

Even if successful, Balisok's suit is likely to be appealed. But it adds one more question mark to a troubled industry that has seen premiums skyrocket over the past three years, causing scores of operators to drop insurance coverage already.

Those who still buy coverage are partially repaid through a convoluted system in which the state picks up the cost of premiums for low-income Medi-Cal patients, about 65 percent of beds statewide.

Those repayments are handled on an average-cost basis. That means an operator with a history of elder abuse could pay far more for its individual premiums than it is compensated--a problem in a state where premiums have risen more than 10-fold since 1999.

Under the existing interpretation of the state's 13-year-old elder abuse act, operators are protected from large judgments through insurance as long as the case does not involve the intent to harm a patient.

Balisok is attempting to extend a prohibition on insurance coverage from cases involving "intent" to those in which only "recklessness" is alleged, the most common allegation and the easiest to prove.

The lawsuit follows a landmark elder-abuse decision this March by the state Supreme Court in which Balisok represented the plaintiff and the court made it easier to pursue punitive damages in elder-abuse cases.

Balisok maintains that the decision laid the legal groundwork for his latest lawsuit by equating reckless behavior with uninsurable behavior--a claim disputed by other attorneys representing both sides in nursing home cases.

Nevertheless, his critics concede the difficulty in predicting court decisions.

"Case law is clear that reckless conduct is insurable, but at the end of the day (if he were successful) what it would mean is that every long-term care facility would be one lawsuit away from closure," said Mark Reagan, general counsel for the California Association of Health Facilities, an industry trade association.

Stephen Garcia, another patients' rights attorney, was more worried that attorneys might be unwilling to take elder abuse cases if there were no clear avenue to satisfy a judgment.

Garcia also maintains that judgments won under the elder abuse act have improved care, noting he once received several calls a week involving egregious abuse but now only receives perhaps two every month.

Balisok disputes the notion that any success would make it impossible for abused elders to find legal representation and believes it's all right if operators who can't pay are forced into bankruptcy because other operators can pick up the homes. "We get what we pay for, and what we have been getting is bad care," he said.

Industry in Crisis

Patient advocates complain about the quality of care in nursing homes while operators complain about high costs and low reimbursements.

* Total homes: 1,400 licensed facilities caring for 250,000 seniors

* Biggest payor: 67 cents of every dollar comes from Medi-Cal

* Low rates: Medi-Cal pays $115 per day per patient for food, care, overhead and incidental costs

* Level of care: A 2001 Congressional report found that nearly one third of homes in California and elsewhere in the nation were cited by regulators for violations that had the potential to seriously harm residents

Sources: California Association of Health Facilities, California Advocates for Nursing Home Reform