Business Shift

Business Shift

Trial lawyers file fewer nursing home negligence complaints. Are residents getting better care?

By David R. Corder

Associate Editor

Thomas Harmon tells horrific stories about nursing home care. The Tampa attorney represented an elderly woman who lost a leg when a wound turned gangrenous. Caregivers failed to change her bandages. Not long after the amputation she died. Then there was an elderly man admitted to a nursing home for short-term antibiotic treatment of a leg wound. But the man didn't get the medicine because of an error. While he survived, he lost the leg. Harmon settled both lawsuits out of court.

Since 1995, Harmon has built a practice, first, defending nursing home owners as a member at Fowler White Boggs Banker PA and now going after them as a partner at Davis & Harmon PA. It's equal parts righteous indignation and profit motive that fuel him as a litigator.

Perhaps it's not odd that Harmon doesn't lament a noticeable decrease the past couple of years in his nursing home litigation practice. He's not alone. This trend is happening at practices throughout the state. Some lawyers, such as Harmon, attribute the decline in complaints to better care due to the state mandate, enacted three years ago, for increased nursing home staffing.

"And that's OK," Harmon says. "Certainly, suits have been on the decline, and I've had to do other areas of law. That's OK, because the quality of care has improved."

There appears to be statistical evidence of this trend in a legislative report prepared by the state Agency for Health Care Administration. Three years ago, the May report states, Florida nursing homes advised the agency that residents had filed 1,090 notices of intent to sue. With the staffing legislation in full force the next year, those nursing homes reported only 886 notices of intent. Last year, that number dropped by about 12% to 778.

"There's a trend that bodes well for the nursing home industry," says Alexander "Zander" Clem, president of the Academy of Florida Trial Lawyers and a nursing home litigator at Morgan Colling & Gilbert PA, Orlando. "The trend is they're giving better care to their nursing home residents. That's the trend I see. So, if there is a contraction in trial lawyers involvement in negligent nursing home litigation, it's due to provisions requiring better staffing requirements in the 2001 nursing home laws."

Differing views

Tallahassee attorney Brian D. Ballard sees it differently. He disagrees with Harmon and Clem's assertions. Any contraction among nursing home trial lawyers may be attributed to the nursing home industry's long-standing problems over the availability and affordability of adequate liability insurance coverage in Florida, says the Smith & Ballard Inc. lawyer and a Florida lobbyist for Boston-based Alliance for Quality Nursing Home Care Inc. That group represents many of the nation's largest publicly traded nursing home care providers.

Most Florida nursing homes can't afford what Ballard calls skyrocketing premiums for liability insurance. In other instances, he says, the insurance is unavailable in Florida because insurers are reluctant to do business in what they consider a hostile business environment. He says diminished insurance coverage makes lawsuits less attractive for lawyers.

"There are very few entities in Florida left that have meaningful insurance," Ballard says. "What's happened as a result is that those few companies I represent, which have insurance, are being sued far more frequently.

"If there's blood in the turnip, the trial lawyers turn up and suck every bit of blood out of it, and then the turnip leaves Florida," he adds. "That's what has happened to all the national companies, with the exception of Manor Care (Inc.). It's the only major nursing home corporation still in Florida."

It appears the Toledo, Ohio-based nursing home provider has large enough economies of scale to offset its liability exposure in Florida, according to SEC documents. But most economists would say that's not an ideal operating strategy for profit-minded board of directors at publicly traded corporations such as Manor Care.

Last year the company reported that general and professional liability claims, premiums and administrative fees accounted for about 2.9% of its in $3 billion revenue for the year ended Dec. 31. That compares with claims, premiums and fees amounting to 2.82% in 2002 and 3.7% in 2001.

"We do see an improving trend in terms of patient liability costs," the company states in its 2003 annual report. "The number of new claims in 2003 is similar to 2002, despite some acceleration around tort-related legislative activity in Texas and to some degree in Florida. Our average settlement cost per claim has decreased in comparison to the prior year."

Shell game

There's yet another possible reason why the number of nursing home lawsuits has decreased, says Steven Vancore, a spokesman for one of the nation's most prolific nursing home litigation practices, Tampa's Wilkes & McHugh PA. He says Florida nursing homes are shielding real property and equipment through complicated asset transfers to limited liability companies.

Vancore, who help draft Florida's 2001 nursing home tort reform, says asset transfers create obstacles not only for litigators but also federal and state regulators.

"Nursing home corporations have fractionalized," Vancore says. "They're creating shell and sub-shell corporations as a way to shield their assets not just from injured residents but from the state. It affects lawsuits that (Florida Attorney General) Charlie Crist might take against them. These suits are much more difficult to bring even when there is egregious harm because of the shell corporations hiding of the assets and the lack of transparency."

Clem says such policies compound the problem by increasing the cost of litigation.

"Each nursing home facility now sets up a limited liability corporation," Clem says. "Then they'll have a management company that helps manage the facility. Then they'll allocate costs to another company upstream that many times is a parent corporation.

"The trick (for litigators) is showing the relationship between a large parent corporation with plenty of assets and a limited liability corporation that owns this one nursing home facility," he says. "They're trying to gain by using legal protections available in the state of Florida. It does make it a little harder to prosecute our claims."

Ballard acknowledges Vancore and Clem are accurate to an extent. He says the decision by nursing home owners to shield assets from litigation boils down to basic economic survival. These companies must protect assets in lieu of being forced into bankruptcy court.

"If you look closely at this issue, it's absolutely what's going on," Ballard says. "It's a struggle among the nursing home profession. Many in the industry say, 'We would rather have no insurance and go bare.' Until we can reach some level of tort reform ¦ the status quo will be toward more and more limited liability companies and more and more times when a rightful claim can't be brought."

But the use of shells games, or the decision to forego insurance coverage, is not an ideal situation for the nursing home industry or its residents, Ballard says.

"We believe it is a sign of a healthy business and industry that you're able to have insurance; that a market can be attained where meaningful insurance can be acquired," he says. "If you don't have that insurance, and either negligence or some other problem occurs at a nursing home, it's not right for the resident or the resident's family to not to be able to bring a claim. I'm in a weird position of agreeing with the trial lawyers on this point."

Dissatisfaction

Each side left the 2001 legislative session with a sense of satisfaction over the enactment of Senate bills 1200 and 1202. Those bills defined nursing home resident rights. For instance, the legislation required a 75-day pre-lawsuit notification period and mandatory mediation as a precursor to a lawsuit.

"The legislation is a clear victory for elder Floridians and for all caregivers across the state," John Overton, former president of the Florida Health Care Association, a nursing home industry trade group, said in a 2001 prepared statement. "It will stand as a national model for improving elder care."

Those provisions helped reduce litigation costs, Harmon adds.

"As a practical standpoint pre-notice and mediation is useful for both sides," he says. "Now thanks to Senate Bill 1202, if the nursing homes will agree to it, both sides can sit down before significant expenses are incurred and discuss the case and a possible resolution. That's a practical measure."

The legislation also called for incremental increases in the number of hours that certified nursing assistants (CNAs) devote each day per nursing home resident. Instead of 1.7 CNA hours prior to 2001, the new law mandated 2.3 CNA hours beginning in 2002. There were legislative promises to increase the number to 2.6 CNA hours in 2003 and 2.9 CNA hours beginning this year.

However, the state Legislature, yielding to the nursing home industry, balked at the incremental increases promised for this year and last year. Vanacore contends that inaction hurt nursing home residents.

"At 2.0 CNA hours, that's the red-line danger level," Vancore says, citing a federal study. "At less than 2.0 CNA hours, residents will, not may, suffer needless pain and death. Two point nine is the optimum minimal; 2.9 is not a grand number. That's where people stop dying needlessly."

Despite the gains made in 2001, the nursing home industry still is dissatisfied with the progress of tort reform. Much discontent is expressed in a study published in June by AON Risk Consultants, a subsidiary of Chicago-based AON Corp., a publicly traded insurance and risk management company.

"These bills (SB 1200 and 1202) were passed with the intention of providing some tort reform to the nursing home patient care liability crises," the report states. "Based on our current study it appears that the bills have had little to no effect on reducing claim frequency in Florida."

The study claims the impact of the 2001 tort reform is inconclusive.

"Most importantly, the Florida tort reform did not provide any caps on non-economic damages, which actuarially are the most effective tort reform policy provision for reducing long-term care patient care liability claim severity," the report states.

Because evidence is inconclusive, Ballard says, the industry probably will push next year for a cap on liability claims similar to those enacted by the Legislature on medical malpractice claims.

"We're working with AARP and the governor's office to put together a plan that the senior lobby can support that makes sense and treats us like every other health care provider in a broad package," he says. "We're hopeful we'll have something ready by the next session.

"We have some guiding principles," he adds. "One, insurance is important. Some level of insurance needs to be obtained if it can be acquired. We also need to be treated much the same way as other medical professions as far as possible. I refer to the medical malpractice statutes. If that applies to nursing homes, that solves 90% of our problems."

Who's right?

Earlier this year, the state Legislature's Joint Select Committee on Nursing Homes gathered considerable testimony and data about the liability issue. In a report published in March, the committee reached a consensus on the following conclusions:

Any comprehensive tort reform in Florida must provide residents access to the courts.

State agency data shows the quality of care in Florida nursing homes is improving.

Lawsuit and recovery data still is insufficient.

Nursing home costs are impacted by a combination of factors, including insurance liability costs, competition for labor and limitations on state Medicaid reimbursements.

There was no change in the availability of private insurance in 2003.

General and professional liability insurance is virtually unavailable in Florida.

Legitimate claims may have no hope for recovery because of the minimum amount of insurance nursing homes carry and nursing home corporate structures designed to limit liability.

These issues are similar to what David G. Stevenson, an assistant professor in the Health Care Policy Department at Harvard Medical School, found about two years ago in a national survey of 278 plaintiff and defense lawyers. He testified about those findings at a July 15 hearing of the U.S. Senate Special Committee on Aging in Washington, D.C.

"Although fewer than one in 10 nursing home claims went to trial (8%), almost nine out of 10 recovered some damages for the plaintiff," he testified. "This is around three times the payout rate for medical malpractice claims."

In general, he added, plaintiff and defense lawyers estimated the average payout per claim at $400,000.

"Considered as a whole, these data imply total compensation payments of $2.3 billion plaintiffs nationwide," he added. "Florida and Texas again account for a very significant proportion - three-quarters of the total compensation payments identified in our survey."

It's difficult to explain the decrease in litigation claims reported by the Agency for Health Care Administration's in its May legislative report, Stevenson tells GCBR.

"On the one hand, individuals might point to improved quality of care as being the basis for the perceived decline in litigation claims," Stevenson says. "On the other hand litigation claims could be declining because of the changing liability insurance market. It's impossible to tell now which of these is driving the recent trends. I just don't know of any data that would help you sort out between the two explanations."

Because of the decrease, however, attorneys such as Harmon and Clem have refocused energies on general personal liability work. Vancore says Wilkes & McHugh has not been affected.

"I can't speak to the profitability of other firms," he says. "Here's what's sad. There is no lack of horrible care being delivered in Florida. There is no lack of clients coming into our office with stories that would make the average citizen just break down and cry."

At Morgan Colling & Gilbert, the firm has redirected some of its nursing home litigation resources to offices elsewhere, Clem says.

"In other states, we're seeing it as bad as it was in Florida back in the early to late '90s," he says "These national chains just don't get it. We finally got their attention in Florida.

"But this is the message I send to nursing homes that want to conduct business with limited to no insurance and try to hide behind a shield of a limited liability corporation," he says. "We're not going away. We're not going to cut and run. And when you have a nursing home resident abused and neglected that person will still have representation."

Negligence Litigation

Notices of intent to sue, by year

County 200120022003

Broward724540

Duval564250

Hillsborough1139062

Manatee282319

Miami-Dade897775

Orange654238

Pasco303126

Pinellas111130110

Sarasota292618

Statewide1,090886778

Notices of intent to sue, by facility

Average

CountyTotalProfitNonprofitper home

Broward157135225.61

Duval148135135.69

Hillsborough265194719.81

Manatee6046146.0

Miami-Dade241195465.13

Orange145117284.83

Pasco8763245.80

Pinellas338291475.37

Sarasota7361123.65

Statewide2,7542,3024525.03

*May 15, 2001 to May 14, 2004

Source: Florida Agency for Health Care Administration