Mark Parkinson, AHCA/NCAL President and CEO

Long-term care providers should prepare for higher liability costs. They are anticipated to increase by 5% on a national basis in 2015, according to a new analysis from the American Health Care Association/National Center for Assisted Living and Aon Global Risk Consulting, an arm of insurer Aon plc.

“The need for long-term and post-acute care is growing, and increasing liability costs impede our ability to serve those we care for and their families,” stated Mark Parkinson, president and CEO of AHCA/NCAL.

The 2015 projected loss rate is $2,030 per occupied bed, up from $1,940 this year, according to the actuarial analysis of general and professional liability (GL/PL) claim costs.

A long-term care operator with 100 beds, therefore, can expect $203,000 in annual liability expenses, but this might differ significantly from state to state, the report authors emphasize.

In addition to reimbursement challenges, states’ tort laws also pose a significant challenge to providers. For example, Kentucky — which has no limit on tort damages — remains the costliest state for providers, with a projected loss rate of $9,220 per occupied bed. This is because claim frequency and severity are both among the highest in the nation, the report explains. 

“The state constitution prohibits limits on non-economic damages and there are no statutes concerning qualification of expert witnesses, certificates of merit, pre-trial alternative dispute resolution or limits on attorney’s fees,” the report notes.

West Virginia and Florida also have very high liability costs, while Texas has the lowest of the states profiled in the report. The Lone Star State has constitutionally affirmed tort reform and a loss rate of $320 per bed.

The analysis is based on about 13,700 claims from 34 providers, mostly skilled nursing facilities.