Patient Rights Laws and Patient Rights Laws and Nursing Home Professional Nursing Home Professional LiabilityLiability

Theresa W. Bourdon, FCAS, Theresa W. Bourdon, FCAS, MAAAMAAA

Aon Risk Consultants, Inc.Aon Risk Consultants, Inc.September 11, 2001September 11, 2001

Past Vs. PresentPast Vs. Present Pre - 1990Pre - 1990

• Allegations: limitedAllegations: limited– Personal injuryPersonal injury– Wrongful deathWrongful death

• Damages: minimalDamages: minimal– Below cost to litigateBelow cost to litigate– Low value attached to elderly lifeLow value attached to elderly life– Causation of injury difficult to identifyCausation of injury difficult to identify

Past Vs. PresentPast Vs. Present Post- 1990Post- 1990

• Allegations: expandedAllegations: expanded– Intentional fraudIntentional fraud– Breach of contract/deceptive trade practicesBreach of contract/deceptive trade practices– Negligent hiringNegligent hiring

• Damages: staggeringDamages: staggering– Litigation costs reimbursed in some statesLitigation costs reimbursed in some states– Punitive damagesPunitive damages– Patient rights emphasisPatient rights emphasis

Change CatalystsChange Catalysts Change to Medicare/Medicaid Change to Medicare/Medicaid

ReimbursementReimbursement Patient advocatesPatient advocates Increased state and federal regulationIncreased state and federal regulation Plaintiff lawyers new theories of Plaintiff lawyers new theories of

liabilityliability Bad public imageBad public image

Reimbursement ChangesReimbursement Changes Reduced Medicare Reduced Medicare

ReimbursementsReimbursements Effective July 1998Effective July 1998 Pre 7/98 - Actual cost Pre 7/98 - Actual cost

reimbursementreimbursement 7/98 - Transition to prospective 7/98 - Transition to prospective

pay systempay system

Prospective Pay SystemProspective Pay System Per diem reimbursementPer diem reimbursement 44 categories of patients44 categories of patients Drastic underpayment forDrastic underpayment for

• respiratory therapyrespiratory therapy• wound carewound care• prescription drugsprescription drugs• artificial limbsartificial limbs

Medicare & Medicaid in Medicare & Medicaid in LTCLTC 1,836,6571,836,657 Certified beds in U.S.Certified beds in U.S. 56,18356,183 Medicare only reim.Medicare only reim. 1,034,8821,034,882 Medicaid only reim.Medicaid only reim. 618,556618,556 BothBoth 1,709,6211,709,621 Some form of Gov’t aidSome form of Gov’t aid

Source: American Health Care Association (ahca.org)Source: American Health Care Association (ahca.org)

Government RegulationGovernment Regulation Nursing Home Reform ActNursing Home Reform Act False Claims ActFalse Claims Act State lawsState laws Federal reimbursement surveysFederal reimbursement surveys General Accounting Office reportGeneral Accounting Office report

False Claims ActFalse Claims Act Individuals with knowledge of Individuals with knowledge of

anyone taking federal money under anyone taking federal money under false pretenses can bring suit on false pretenses can bring suit on behalf of the governmentbehalf of the government

Plaintiff recovery up to 24-30% of Plaintiff recovery up to 24-30% of gov’t recoverygov’t recovery

Civil cases charging inadequate Civil cases charging inadequate carecare

Nursing Home Reform ActNursing Home Reform Act 19871987 U.S. CongressU.S. Congress Response to allegations of neglect & abuseResponse to allegations of neglect & abuse Applies to Medicare & Medicaid participantsApplies to Medicare & Medicaid participants Establishes minimum quality of care Establishes minimum quality of care

requirementsrequirements Violations apply at state and federal levelViolations apply at state and federal level

State LawsState Laws Elder lawsElder laws Protect against physical & emotional abuse & Protect against physical & emotional abuse &

neglectneglect Criminal penaltiesCriminal penalties

• ImprisonmentImprisonment• FinesFines

RecoveriesRecoveries• Pain & sufferingPain & suffering• Punitive damagesPunitive damages• Cost of investigation & attorney’s feesCost of investigation & attorney’s fees

FloridaFlorida Patients Bill of Rights - Statute 400.022Patients Bill of Rights - Statute 400.022 Guarantees the patients rights to be Guarantees the patients rights to be

• informedinformed• provided adequate careprovided adequate care• treated with dignitytreated with dignity

Violation remedies Violation remedies • actual damagesactual damages• punitive damagespunitive damages• attorney’s feesattorney’s fees

TexasTexas Texas’ Residents’ Bill of Rights (Chapter Texas’ Residents’ Bill of Rights (Chapter

247 of the Texas Health and Safety Code247 of the Texas Health and Safety Code 14 rights itemized14 rights itemized

• safe and decent living environmentsafe and decent living environment• considerate and respectful careconsiderate and respectful care• dignity and individualitydignity and individuality

1995 Texas tort reform punitive cap not 1995 Texas tort reform punitive cap not effective to claims against the elderlyeffective to claims against the elderly

CaliforniaCalifornia Elder Abuse and Dependent Adult Elder Abuse and Dependent Adult

Civil Protection ActCivil Protection Act

Reimbursement SurveysReimbursement Surveys HCFA cracking down on LTC HCFA cracking down on LTC

industryindustry March 1999 Internet siteMarch 1999 Internet site

• 170,000 facilities170,000 facilities• Results of surveys required for Results of surveys required for

reimbursement programreimbursement program• 1 in 4 nursing homes tagged with a 1 in 4 nursing homes tagged with a

deficiencydeficiency

Surveys Change Plaintiffs Surveys Change Plaintiffs StrategiesStrategies Causation of injury tough to proveCausation of injury tough to prove Earnings potential non-existentEarnings potential non-existent Surveys used to allege negligence Surveys used to allege negligence

per seper se Evidence of institutional negligenceEvidence of institutional negligence Support for punitive damagesSupport for punitive damages Plaintiff lawyers now interestedPlaintiff lawyers now interested

Image ProblemsImage Problems Medicare cuts: denying admissionsMedicare cuts: denying admissions Fraud & abuse allegationsFraud & abuse allegations

• Medicare & Medicaid inappropriate Medicare & Medicaid inappropriate billingsbillings

• Civil & criminalCivil & criminal Violation of patient rights allegationsViolation of patient rights allegations

• Multi-million dollar judgementsMulti-million dollar judgements• Focus on inappropriate careFocus on inappropriate care

Med Mal vs. LTC LiabilityMed Mal vs. LTC Liability

Expectation/Funding Expectation/Funding MismatchMismatch Government funding patient care Government funding patient care

systemsystem• per diem payment scheduleper diem payment schedule• limited resources to improve quality of carelimited resources to improve quality of care

Tort system driving quality of care Tort system driving quality of care expectationsexpectations• most jury verdicts favor plaintiffmost jury verdicts favor plaintiff• slips/falls, decubitus ulcers imply slips/falls, decubitus ulcers imply

negligencenegligence

Aon Long Term Care Aon Long Term Care DatabaseDatabase Operators of Skilled Nursing Operators of Skilled Nursing

FacilitiesFacilities• Multi-FacilityMulti-Facility• Multi-StateMulti-State• For-ProfitFor-Profit• Primarily Skilled Nursing BedsPrimarily Skilled Nursing Beds• 336,000 Licensed Beds Countrywide 336,000 Licensed Beds Countrywide

(20%)(20%)• 33,000 Licensed Beds in Florida (40%)33,000 Licensed Beds in Florida (40%)

Percentage of Losses Percentage of Losses Reported by StateReported by State

Long Term Care Long Term Care General and Professional General and Professional

LiabilityLiability

5.8%

43.8%

22.1%

28.3%

0.0%5.0%

10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%

CA FL TX Other thanFL, TX, & CA

Long Term CareLong Term CareProfessional Liability and General LiabilityProfessional Liability and General Liability

Loss Cost per Occupied Bed

12,700

5,190

1,390

7300

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1995 1996 1997 1998 1999 2000

Florida

Texas

California

All StatesExcl. FL,TX and CA

Long Term CareLong Term CareProfessional Liability and General LiabilityProfessional Liability and General Liability

Annual Number of Claims per 1,000 Occupied Beds

28.0

13.0

6.9

6.6

0.0

5.0

10.0

15.0

20.0

25.0

30.0

1995 1996 1997 1998 1999 2000

Florida Only

Texas Only

CaliforniaOnly

All StatesExcl. FL, TX,and CA

Long Term CareLong Term CareProfessional Liability and General LiabilityProfessional Liability and General Liability

Severity per Claim

455,000

399,000

202,000

111,000

050,000

100,000150,000200,000250,000300,000350,000400,000450,000500,000

1995 1996 1997 1998 1999 2000

FloridaOnly

Texas Only

CaliforniaOnly

All StatesExcl. FL,TX, and CA

Annual Increases by Annual Increases by StateState

Long Term Care Long Term Care General and Professional General and Professional

LiabilityLiability

18%23%

45%

8%

22%

14%

0%5%

10%15%20%25%30%35%40%45%50%

Frequency Severity Loss Cost

Florida Only

Texas Only

California Only

All States

All StatesExcluding Florida

Florida Tort Reform Florida Tort Reform InitiativesInitiatives FHCA funded an actuarial study on the rising FHCA funded an actuarial study on the rising

cost of patient care liabilitycost of patient care liability 1999-2000 Florida Legislative session resulted 1999-2000 Florida Legislative session resulted

in the creation of a Task Force to investigate in the creation of a Task Force to investigate the long term care industry crisisthe long term care industry crisis

Task Force issued a report in late 2000 with Task Force issued a report in late 2000 with draft language for proposed tort reformdraft language for proposed tort reform

2000-2001 Florida Legislative session passed 2000-2001 Florida Legislative session passed a nursing home reform bill including tort a nursing home reform bill including tort reformreform

Florida 2001 Legislative Florida 2001 Legislative ChangesChanges Punitive Damage CapsPunitive Damage Caps

• 1st tier: Greater of 3 x Compensatory or $1M1st tier: Greater of 3 x Compensatory or $1M• 2nd tier (primarily financially motivated): 2nd tier (primarily financially motivated):

Greater of 4 x Compensatory or $4MGreater of 4 x Compensatory or $4M• 3rd tier (intentional harm): no cap3rd tier (intentional harm): no cap

Statute 400 attorney fee provision Statute 400 attorney fee provision repealed for injury/death cases; capped repealed for injury/death cases; capped at $25K for resident rights casesat $25K for resident rights cases

Florida 2001 Legislative Florida 2001 Legislative ChangesChanges Statute of limitations reduced from 4 Statute of limitations reduced from 4

to 2 years (4 yrs for repose; 6 yrs for to 2 years (4 yrs for repose; 6 yrs for fraudulent)fraudulent)

Strict liability/negligence per se Strict liability/negligence per se replaced with negligence standardreplaced with negligence standard• reasonable person std for non-prof staffreasonable person std for non-prof staff• professional standard for nursing staffprofessional standard for nursing staff

No cap on non-economic damagesNo cap on non-economic damages

Florida 2001 Legislative Florida 2001 Legislative ChangesChanges $60M state funding for improved $60M state funding for improved

carecare• increase staff hours from 1.7 to 2.9 by increase staff hours from 1.7 to 2.9 by

20032003• internal RM departmentinternal RM department• state reporting of residents’ injuriesstate reporting of residents’ injuries

Texas 2001 Legislative Texas 2001 Legislative ChangesChanges Restricts use of survey documents Restricts use of survey documents

as evidence (direct testimony as evidence (direct testimony allowed)allowed)

For-profit homes eligible for JUA For-profit homes eligible for JUA coveragecoverage

Requires $1M/$3M of insuranceRequires $1M/$3M of insurance

Activity in Other StatesActivity in Other States Alabama deflected a Wilkes Alabama deflected a Wilkes

attempt to broaden patient rights attempt to broaden patient rights in 2000in 2000

MS, PA, CA Healthcare Associations MS, PA, CA Healthcare Associations are pro-actively taking steps to are pro-actively taking steps to avoid a Florida patients rights lawavoid a Florida patients rights law

Reserving IssuesReserving Issues Know the provider characteristicsKnow the provider characteristics

• State (affects freq & sev)State (affects freq & sev)• Profit Status (affects freq & sev)Profit Status (affects freq & sev)• Size/Single vs. Mutli-facility (affects freq)Size/Single vs. Mutli-facility (affects freq)• Medicaid funding (affects freq)Medicaid funding (affects freq)

Get your arms around frequencyGet your arms around frequency Severity less correlated to type of Severity less correlated to type of

provider than frequencyprovider than frequency