Nursing Home Operators Face Uphill Battle Against Lawsuits in Kentucky

Kentucky took a tentative step toward tort reform by implementing a medical review panel law last year, but its most recent attempt faces a significant uphill battle in a state that has seen major skilled nursing operators blame lawsuits for struggles in recent months.

The goal of Senate Bill 2, sponsored by a group of Republican state senators, is to limit damages for noneconomic injuries in lawsuits. But to accomplish that, it’ll have to first amend the state constitution.

That could make it a long time before skilled nursing and long-term care providers see relief from the lawsuits that have already rumbled the sector in Kentucky, ranging from Signature HealthCARE’s troubles to Preferred Care’s bankruptcy last year.

“One of the things that makes Kentucky really challenging is that when the plaintiffs’ lawyers there had considerable power in the legislature, they were able to get the legislature to put in the constitution that there cannot be caps on personal injury claims,” American Health Care Association president and CEO Mark Parkinson told Skilled Nursing News. “So the constitution prevents the legislature from enacting laws that have caps. The only way the Kentucky situation is going to ultimately be fixed is through a constitutional amendment, which is much harder than just getting a law passed. So the tort challenge in Kentucky is really, really difficult.”

KY a liability outlier

Kentucky, along with West Virginia and Florida, is an outlier in terms of how much it costs a long-term care (LTC) facility to defend and settle liability claims, according to the Aon Risk Solutions’ 2017 LTC General Liability and Professional Liability Actuarial Analysis. The cost of defending and settling cases per bed, or the loss rate, has been growing in the state over the past decade. In 2007, Kentucky had a loss rate of $1,480 per occupied bed; in 2017, that number had risen to $6,410 per occupied bed.

From 2016 to 2017, insurance rates rose from about $2,300 per bed to more than $3,300 per bed, the Kentucky Association of Health Care Facilities (KAHCF) told SNN in an e-mail.

“We had one member tell us that premiums went up almost 200%, and he has no active claims against his facility,” KAHCF president Betsy Johnson told SNN.

With SNFs already facing razor-thin margins in the U.S. as a whole, the  cost of insurance premiums creates another hurdle for providers. The issue is exacerbated by the fact that many of the states that border Kentucky have passed tort reform, Lynn Fieldhouse, general counsel, litigation risk services at Louisville, Ky.-based Signature HealthCARE, told SNN.

Setting a cap on the damages that could be recovered for non-economic injuries allows providers to insure against a firm number, Parkinson said, citing Texas and Massachusetts as examples.

“When you have states that have no caps like Kentucky, it’s impossible to manage it,” he said. “You can’t insure against infinity.”

Large verdicts

Signature has been attempting to grapple with multiple lawsuits in this environment. The company recently sold a highly-rated SNF because of the lawsuits brought against the facility, and it has blamed its recent financial struggles in part on medical malpractice suits.

Fieldhouse pointed to the significant amounts recently awarded to those who have filed lawsuits against providers.

“If you look at other states who, for example, have caps for the amount of damages you can recover if you’re injured — those types of things would certainly help curtail some of the recent nursing home jury verdicts that we’ve seen in Kentucky,” she said.

She cited the $28 million verdict against the Preferred Care facility in Kentucky as an example.

LeadingAge Kentucky president and CEO Timothy Veno echoed those concerns.

“We’ve seen some pretty hefty jury awards in Kentucky over the past several years,” which have contributed to increased insurance rates for SNFs and long-term care facilities in the state, Veno noted.

In addition to the material hit, the lawsuits are demoralizing for everyone at a skilled nursing facility, Fieldhouse said. But the monetary impact is notable for its potential to be fatal for a nursing home.

“The industry… in my opinion is close to rock bottom,” she explained. “There are so many things that are going on that are making it tougher and tougher for providers to survive. Certainly not many providers I’m aware of could survive a hit like that.”

Written by Maggie Flynn

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Maggie Flynn
Business reporter at Aging Media Network
When she's not working, Maggie enjoys running, reading, writing and sports, in no particular order. Favorite things include murder mysteries, Lake Michigan and the Pittsburgh Penguins.

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