This long-term care legal trend is liable to upset you
James M. Berklan
It's almost a prerequisite to have a healthy reserve of stoicism if you're operating a nursing home in the United States today. How better to hold firm against the onslaught of regulatory pressures, payment problems and legal challenges?
In fact, given the most recent report from Aon's Actuarial & Analytical Practice, a few extra verses of “Always Look on the Bright Side Life” might be in order.
As we reported earlier this week, projected liability costs are rising for skilled nursing operators. They're expected to jump a robust 6% in 2017.
But tucked into researchers' findings is a more troubling stat that's … well, liable to be overlooked: The frequency of liability claims is forecast to increase 4% in the year ahead. Just a few years ago, the rate was 2%, which means that even as providers have ramped up efforts to improve quality care, plaintiffs and their attorneys have been running to the courthouse with ever increasing frequency.
At first blush, 4% might not seem like much. But it extrapolates to thousands of extra legal claims and millions of dollars nationally.
Aon's actuaries predict that the average severity for a successful general liability/professional liability claim in 2017 will be $218,000. That's a LOT of sunshine being taken away.
Put another way, the 2017 projected loss rate per occupied bed (for awards under $1 million) is $2,220 — or double the 2006 amount.
A “deteriorating claims environment” is how the restrained numbers-crunchers describe it in their report. No need to warn the American Health Care Association, though — it's a publishing partner of this 14th annual analysis.
Measuring and explaining these claims can be a slippery business. State courts are where cases like these are filed and adjudicated. As providers know from their varied experiences with state surveyors, uniformity is elusive.
Widely swinging variables can include volume, scope and severity of claims. Providers in Minnesota, for example, can hardly identify with the liability hell they experience in Kentucky, the most besieged of the 17 states profiled in the Aon study.
So why is the number of claims rising even when providers are claiming impressive caregiving gains on the national level? Simply put, trial attorneys are becoming more efficient at finding favorable jurisdictions in which to sue, believes Christian Coleianne, associate director and actuary with Aon Risk Solutions.
Worse, efforts to implement award caps have stalled or gone dormant in many places. Georgia is one example of a state where caps have been ruled unconstitutional, Coleianne noted.
The GOP's national upswing isn't necessarily an automatic bonus for providers since liability claims are dealt with in state, not federal, courts. On the other hand, if there were to be another Democratic administration, providers could have expected continuation “of an environment which was not looking favorable for providers for several years,” Coleianne told me Wednesday.
“With Republicans [in charge], there are a lot of unknowns,” he added. “It will be interesting to see with [future] judicial appointments the types of things that happen,” such as with the government's proposed ban on pre-dispute arbitration agreements.
Providers, led by the AHCA, which did some venue cherry-picking of its own, successfully filed for and received a temporary injunction n November against implementation of the arbitration ban.
Without Democrats in control of the White House or either chamber of Congress as of mid-January, providers face better odds fighting the arbitration ban, Coleianne agreed.
The rising frequency of liability claims, nonetheless, remains alarming. And while the majority of the Aon data stems from larger provider chains, the menacing implications extend to smaller mom-and-pop type operators too. Despite shallower pockets, they also are at greater risk of being sued.
“If a fire burns in the forest, it's not just the larger trees that will be impacted,” Coleianne observed. “All the trees will be impacted.”
Or, as it's usually more bluntly put, they're all more liable to get burned.
Follow James M. Berklan @JimBerklan.