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See you in court? Settling 'frivolous' suits has other costs.

An 84-year-old woman was giving a deposition to a defense attorney regarding alleged violations of her 102-year-old mother's rights in a nursing home. The defense attorney handed her a copy of the complaint lodged against her mother's nursing home, the woman turned to her lawyer and asked, "We filed a lawsuit in this case?"

Another case involved a nursing home that was sued for $3 million after an elderly man fell out of bed and hurt himself--four hours after being admitted to the facility--then died at home 10 days later from non-injury-related dehydration and malnutrition.

To attorney Scott Mager these claims sound frivolous or perhaps the punch lines to bad jokes. "You wouldn't believe how many of these cases I see," said Mager, national coordinating panel counsel for Fort Lauderdale, Fla.-based CNA HealthPro, a leading provider of long term care insurance for companies. "Everybody is trying to cash in on this perceived lottery ticket. ... The feeling is, if I champion the rights of the elderly, I'm going to get my money no matter what."

And they often do, Mager said, which means a variety of problems for long term care facilities, from major legal fees to loss of liability insurance.

Mager, who has worked as a plaintiff's attorney and defense lawyer, said not all lawsuits are unwarranted. "But, the majority out there are garbage," he said. "These are the ones you need to take note of."

Such cases carry a high price tag in terms of dollars and damaged company reputation. For example, to resolve a wrongful death suit against a nursing home in southern California, the facility settled for $1 million in February 2004, according to Sylvia Taylor, executive director of Long Term Care Services of Ventura County. LTCSVC investigates facilities that have received complaints.

The facility, with a history of staffing problems, now has public relations issues to contend with, Taylor said.

Legal experts offered a handful of reasons why long term care facility owners should do everything they can to avoid being sued, including:

They're expensive. According to Mager, plaintiffs normally sue for millions. The defendants--insurance companies and long term care facilities--want out as soon as possible. "They end up settling these things for crazy amounts of money," he said.

In general, a facility getting sued might expect at least a six-figure claim, according to a recent study by Chicago-based Aon Risk Consultants Inc. As of 2003, the average claim was $149,000, up from $65,000 in 1992, according to the report.

The study also noted that 42 percent of the claims filed against long term care facilities from 1995 to 2001 were for more than $50,000; roughly 5 percent were for more than $500,000.

But the report added that many of the claims studied had not yet gone to trial or been settled out of court. By that time, "the number expected to exceed $1 million will increase significantly," the study's authors concluded.

Prescott Cole, an attorney for the California Advocates for Nursing Home Reform in San Francisco, said it's not hard for a company to spend $20,000 or more to collect statements from witnesses and physicians, and to gather medical records.

The monetary cost of such lawsuits goes beyond attorney's fees and settlement charges, experts noted. The Aon study reported that annual commercial insurance premiums rose by 51 percent from 2002 to 2003, the third consecutive year of "dramatic" increases. Rates went up 143 percent from 2001 to 2002 and 131 percent from 2000 to 2001, according to the report.

Most of the increases affected long term care facility operators with 250 or fewer beds, the report indicated. For smaller facilities, annual premiums went up an average of 77 percent, according to the Aon study.

They're bad for business. Nothing soils a facility's image like a wrongful death or negligence lawsuit. Even if the facility settles out of court--meaning the terms will most likely never make it into the public's eye, according to Cole--there's a smear on what might have been a spotless reputation.

While some facility owners place their hopes in denying what did or did not happen, saying "no comment" is not that simple in states like California. A new law that took effect in January allows California courts to disclose the nature and terms of wrongful death and abuse settlements. The law won't make life easier for facilities that end up being served, according to Cole.

"Traditionally, there's been a nondisclosure requirement in these cases, which means 'no harm, no foul' as far as the public is concerned," he said. "But now, if there has been a lawsuit and a settlement, you can not say 'we won't talk about what happened there.'"

Civil lawsuits can lead to worse problems. In 1999, Guardian of the North Bay Inc. in San Jose, Calif., faced a handful of lawsuits from allegations of resident abuse and neglect at several of its convalescent homes. Those lawsuits turned into something worse: a criminal indictment by the Santa Clara County District Attorney's office.

Through a May 2000 plea bargain, Guardian ultimately pleaded no contest to the charges and agreed to close or sell two of its convalescent homes, according to Cole. The company could have been forced to sell or close all 16 of its facilities, he said.

The company changed its name to Ocadian after meeting the federal requirements, he said. "It was a very dramatic case for the industry," Cole said. "Before, you only had to contend with civil lawsuits. Moving it to the criminal side was pretty shocking."

There are other fiscal woes, however. As long as a successful litigation attitude exists, long term care will suffer, according to officials from the American Health Care Association and the National Center for Assisted Living (AHCA/NCAL)in Washington, D.C.

General liability costs per skilled nursing bed have increased from $310 per bed in 1992 to $2,290 in 2003, a 638 percent increase, according to the Aon study. This means $6.27 per day, per long term care resident, needs to be set aside to cover the cost of patient care litigation, the report noted.

This expense comes on top of an average $11.54 loss per day in Medicaid reimbursement rates experienced by nursing homes nationwide, according to Chicago-based accounting firm BDO Seidman LLP.

In addition, since 1995, $5 billion in Medicaid resources has been diverted away from patient care to cover nursing home litigation costs, according to AHCA. The association has called the situation" an irrational, upside-down policy dilemma."

"This is a major, major problem, especially at a time when Medicaid reimbursements are not covering the costs of providing care," said Jeff Smokier, AHCA's director of communications.

Impact of reform

Ironically, high litigation costs may ultimately help cut the size of victims' awards, according to the Aon study. The authors noted that multi-state long term care insurance providers--traditionally the hardest-hit by liability claims and awards--are aggressively exiting high-cost states. This could mean reduced liability claims in those states because facilities can't acquire higher-liability policies.

"If you only have $250,000 in insurance now, compared to having a $1 million policy before, you're not going to be sued for as much," Cole said. "People are only going to get what's available, dollar-wise. It also won't be as easy to find attorneys who want to handle these lower-dollar-amount cases."

Tort reform laws are also helping, somewhat. In several states, such as California, Florida, Mississippi and Texas, lawmakers placed liability award caps of $250,000 to $500,000. While this initially increased the number of big-dollar claims as persons tried to file before the laws went into effect, the eventual impact should be smaller claims and awards, according to the study.

Meanwhile, federal legislation by Rep. Jim Greenwood, R-Pa., would limit punitive damages on lawsuits and limits filing of lawsuit claims to three years after the event. This legislation was incorporated into bill H.R. 4279 and passed by the House of Representatives this past May. The U.S. Senate has taken no action at this point, according to Stephanie Fisher, Greenwood's press secretary in Washington, D.C.

In addition, improved claims management processes by providers has sped up investigations and claims resolutions, the Aon report noted. While this hasn't slowed the number of claims, it has led to smaller settlements, according to the Aon study.
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Article Details
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Title Annotation:Legal
Author:Naditz, Alan
Publication:Contemporary Long Term Care
Geographic Code:1USA
Date:Nov 1, 2004
Previous Article:Adult day care.
Next Article:Seven deadly sins nonprofits need to avoid.

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