Liability Costs Continue to Rise for Pennsylvania Skilled Nursing Facilities

Harrisburg–The costs associated with Pennsylvania’s out of control tort climate continue to increase for Pennsylvania skilled nursing facilities, according to the findings of an analysis released recently by Aon Global Risk Consulting. The 14th published edition of the Aon/AHCA 2016 Long-Term Care General Liability and Professional Liability Actuarial Analysis provides estimates of loss rates, or the cost to skilled nursing facilities to defend, settle or litigate claims on a per-bed basis.

Over the past year Pennsylvania’s skilled nursing facilities have seen the long-term care loss rate grow by 9.4 percent, due to a 9.6 percent annual increase in the number of claims. The projected Pennsylvania 2016 loss rate, which is a combination of the severity and frequency of claims, is expected to increase from $1,970 in 2015 to $2,090 per occupied bed. This means that a nursing center with 100 occupied beds can expect approximately $209,000 in liability expenses in 2017.

According to the 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 2015, much of this in contingency fees to out-of-state predatory lawyers. This is an increase of more than $9 million over previous expenditures. Most of the $104 million could have been used to improve the quality of care and the quality of life for nursing home residents.

“This is primarily the result of predatory out-of-state law firms who advertise heavily in newspapers throughout Pennsylvania, trolling for plaintiffs,” said W. Russell McDaid, President and CEO, Pennsylvania Health Care Association (PHCA). “In 2016 alone, their advertisements have appeared almost 40 times in Pennsylvania newspapers with full page advertisements attacking more than 62 nursing facilities. Since 2011, there have been almost 200 ads. The ads have brought public mistrust and anger against an industry that cares for the frail elderly of our commonwealth”. McDaid added, “Perhaps the biggest tragedy is that many of the hard-working women and men caring for our seniors in nursing homes are often embarrassed to go to their local grocery store, little league game, or church, when these ads appear in their local papers. They are true heroes for the compassionate care they provide, and yet these ads vilify them and are forcing many to reconsider their calling to care for our seniors”.

Despite these funding pressures and the current legal environment, these lawsuits contradict trends in quality as Pennsylvania’s nursing centers continue to exceed major milestones in quality. With a focus on enhancing treatment services and improving overall experience, Pennsylvania nursing homes are continually improving clinical outcomes, with reductions of urinary tract infections, pressure ulcers in long stay residents and the use of antipsychotic medication. Over the past four years Pennsylvania’s nursing homes slowed the decline in Activities of Daily Living in long stay residents by 10 percent, despite the increasing acuity level of residents.

To help ensure that these Medicaid funds continue to support Pennsylvania’s most vulnerable citizens, PHCA strongly supports affording skilled nursing facilities the same protections as other health care providers in Pennsylvania. Lawsuit abuse reform is crucial for Pennsylvania’s most vulnerable citizens.

“Punitive damage reform is crucial for Pennsylvania’s long-term care providers in order to continue to provide quality care to our most vulnerable citizens, as excessive litigation and damage awards result in higher consumer costs and decreased availability of care,” said Mr. McDaid.

Without lawsuit abuse reform, Pennsylvania’s skilled nursing facilities, assisted living residences and personal care homes will continue to face excessive litigation from lawsuits brought by out-of-state, predatory law firms, resulting in higher consumer prices and decreased availability of services. The high legal costs paid by Pennsylvania health care providers, employers and governments inhibit job growth, increase health care costs and limit access to medical care.

Prior to the punitive damages protections enacted for physicians (MCARE, 2002), physicians had been facing large numbers of frivolous lawsuits and most cases were settled for fear of unpredictable jury verdicts on punitive damages. Many doctors felt blackmailed by lawyers into settlements, and many physicians were fleeing Pennsylvania. Once the limits on punitive damages (but not on compensatory damages) were enacted, lawyers stopped filing frivolous lawsuits, the number of suits fell dramatically and physicians felt comfortable fighting cases and allowing them to be decided on the merits. The physician flight stopped almost overnight and insurance rates stabilized.