Long Term Care Facility Liability
Theresa W. Bourdon, FCAS, MAAA
Jeffrey Smith
Past Vs. Present
 Pre - 1990
• Allegations: limited
– Personal injury
– Wrongful death
• Damages: minimal
– Below cost to litigate
– Low value attached to elderly life
– Causation of injury difficult to identify
Past Vs. Present
 Post- 1990
• Allegations: expanded
– Intentional fraud
– Breach of contract/deceptive trade practices
– Negligent hiring
• Damages: staggering
– Litigation costs reimbursed in some states
– Punitive damages
– Patient rights emphasis
Change Catalysts
 Change to Medicare/Medicaid
Reimbursement
 Patient advocates
 Increased state and federal regulation
 Plaintiff lawyers new theories of liability
 Bad public image
Reimbursement Changes
 Reduced Medicare Reimbursements
 Effective July 1998
 Pre 7/98 - Actual cost reimbursement
 7/98 - Transition to prospective pay system
Prospective Pay System
 Per diem reimbursement
 44 categories of patients
 Drastic underpayment for
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respiratory therapy
wound care
prescription drugs
artificial limbs
Medicare & Medicaid in LTC
 2,000,000
53,000
 1,031,000
 880,000
 1,964,000

Certified beds in U.S.
Medicare only reim.
Medicaid only reim.
Both
Some form of Gov’t aid
Government Regulation
 Nursing Home Reform Act
 False Claims Act
 State laws
 Federal reimbursement surveys
 General Accounting Office report
Nursing Home Reform Act
1987
 U.S. Congress
 Response to allegations of neglect & abuse
 Applies to Medicare & Medicaid participants
 Establishes minimum quality of care
requirements
 Violations apply at state and federal level

False Claims Act
 Individuals with knowledge of anyone
taking federal money under false
pretenses can bring suit on behalf of the
government
 Plaintiff recovery up to 24-30% of gov’t
recovery
 Civil cases charging inadequate care
State Laws
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Elder laws
Protect against physical & emotional abuse & neglect
Criminal penalties
• Imprisonment
• Fines
Recoveries
• Pain & suffering
• Punitive damages
• Cost of investigation & attorney’s fees
Florida
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
Patients Bill of Rights - Statute 400.022
Guarantees the patients rights to be
• informed
• provided adequate care
• treated with dignity
Violation remedies
• actual damages
• punitive damages
• attorney’s fees
California
 Elder Abuse and Dependent Adult Civil
Protection Act
Reimbursement Surveys
 HCFA cracking down on LTC industry
 March 1999 Internet site
• 170,000 facilities
• Results of surveys required for reimbursement
program
• 1 in 4 nursing homes tagged with a deficiency
Surveys Change Plaintiffs
Strategies
 Causation of injury tough to prove
 Earnings potential non-existent
 Surveys used to allege negligence per se
 Evidence of institutional negligence
 Support for punitive damages
 Plaintiff lawyers now interested
Image Problems
 Medicare cuts: denying admissions
 Fraud & abuse allegations
• Medicare & Medicaid inappropriate billings
• Civil & criminal
 Violation of patient rights allegations
• Multi-million dollar judgements
• Focus on inappropriate care
Med Mal vs. LTC Liability
Med Mal
LTC Liability
Breach of standard of
care
Standard specifically
defined by state stature
Violation of resident
rights
Standard general:
“adequate and
appropriate”
Awards without injury
Must have an injury
Limited recoveries (e.g.
pain & suffering)
Multi-faceted violations
Critical Information for Actuarial
Projections
 Exposure by state
 Historical changes to exposure
 Data on sold and acquired operations
 Reserving changes
 Closed claim development
 ALAE changes
Exposure by State
 Know about problem areas: Florida, Texas
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Severity higher
Frequency higher
Loss development different
ALAE higher
 Monitor loss cost trends
Historical Exposure Changes
 Active selling/acquiring in problem areas
 Need historical data to evaluate
• losses
• exposures
 Impact substantial
 Sold operations tend to have bad
experience
Reserving Changes
 Case reserves dramatically increasing
• Reserve strengthening?
• Loss trend?
 Analysis
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Client loss development vs. industry
Current loss development vs. historical
Closed claim development
Loss cost trends (freq., severity, combined)
Closed Claim Development
 Size of loss by age closed
• To measure trend independent of reserve
changes
• To estimate severity independent of reserve
changes
 Rate of closure (closed to ultimate) by age
• To determine if claims are closing faster
ALAE
 Monitor average ALAE per claim
 50% recovery rate from LTC litigation
 New strategies for settling claims
 Recognition of cost savings from early
settlement
 Should impact average ALAE (and
indemnity) in the future