May 10, 2017
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$104 Million in Medicaid Dollars Spent on Liability-Related Costs

Because of lax tort laws, long-term care facilities remain a target of out-of-state lawyers who file frivolous lawsuits for huge cash payouts

HARRISBURG — More than $104 million of Pennsylvania Medicaid dollars was spent on liability related costs in 2015, much of it on contingency fees to out-of-state lawyers who are taking advantage of the state’s lax tort laws by filing frivolous lawsuits in search of huge settlements against skilled nursing facilities.

“Let’s be clear: These lawsuits have nothing to do with the quality of care in these facilities,” according to W. Russell McDaid, President and CEO of the Pennsylvania Health Care Association. “Instead, it has everything to do with predatory lawyers taking advantage of the system to line their own pockets.”

Since 2002, Pennsylvania’s physicians have been protected from frivolous lawsuits by the MCARE Act, which (among other things) limited punitive damage awards in a trial to twice the amount of compensatory damages. Because skilled nursing and other long-term care facilities do not enjoy the same protections, they are left vulnerable to frivolous lawsuits and baseless claims.

Without protections, providers and their insurers are more likely to settle a weak case than risk a runaway jury that could bankrupt their business.

Physicians now litigate 80 percent of malpractice cases because they believe the case will be judged fairly on the merits without the risk of unpredictable punitive damage awards by runaway juries. Nursing homes, on the other hand, currently settle virtually 100 percent of their cases for fear of the very same unpredictable punitive damage awards that existed for physicians before MCARE.

“Enacting the same limits for long-term care providers will help to reduce frivolous litigation and shift some resources back where they belong: to patient care,” said state Rep. Warren Kampf (R-Chester/Montgomery).

Kampf has introduced legislation (H.B. 1037) to limit punitive damages against long-term care provides to 250 percent of the amount of compensatory damages for skilled nursing facilities, assisted living residences and personal care homes, giving them the same protections physicians have had in Pennsylvania for the last 15 years.

Kampf and McDaid discussed the bill during a Capitol event that marked National Nurses Week, May 6–12 and National Nursing Home Week, May 14-20.

More than 30,000 nurses provide daily care to 125,000 residents in Pennsylvania’s skilled nursing facilities, assisted living residences and personal care homes. Long-term care facilities employ, directly and indirectly, nearly 283,000 individuals. Skilled nursing facilities alone employ roughly 193,000 people.

HCR ManorCare Director of Admissions and Marketing Andrew Diehl defended the work of these caregivers and pointed to newspaper ads that target the families of loved ones in nursing facilities with misleading statements and prey on caregivers who go above and beyond their job descriptions daily.

A facility he previously managed in Camp Hill, Cumberland County, was among those targeted.

Since 2011, nursing homes across Pennsylvania have been attacked in more than 150 full-page newspaper advertisements, all purchased by predatory, out-of-state law firms. With each frivolous case being settled, rather than going to court, the ad buys increase. In 2016 alone, 37 full-page advertisements appeared, attacking 62 nursing homes throughout the state.

“Caregivers do everything they can to ensure residents enjoy compassionate, quality care, so they take these newspaper attack ads personally,” Diehl said. “They also fully recognize that every dollar spent defending against frivolous lawsuit is a dollar taken away from patient care.”

Liability costs have skyrocketed for Pennsylvania’s nursing homes due to these advertisements. According to a recent actuarial analysis on liability costs, the liability cost per Medicaid day in Pennsylvania is $5.39. Given that Medicaid paid for about 19.35 million days of care in 2015, Pennsylvania’s Medicaid program spent more than $104 million on liability-related costs.

In a state where the Medicaid program chronically under funds skilled nursing facilities, the costs to defend and settle frivolous cases compounds the problem of inadequate resources needed to provide care. Pennsylvania’s skilled nursing facilities lose about $25.43 each day, or $9,300 annually, for each Medicaid resident in their care. About two-thirds of all skilled care residents rely on Medicaid.

“Every nursing home administrator I speak with expresses the same frustration — the time, resources and money being spent on these cases could be going to resident care instead,” McDaid said. “They tell me that better wages and benefits for staff, or improvements to their buildings, or even equipment and activities for residents all take a backseat to the price tag for defending frivolous lawsuits.”

Kampf’s legislation has been referred to the House Judiciary Committee.

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