Malpractice Costs and IMPACT Act

President Obama has signed into law a bill that provides $11M in funding to improve the electronic collection of data for the Medicare star rating system. The Improving Medicare Post-Acute Care Transformation Act (IMPACT Act) will not impact the ratings families use to compare facilities but also affect the pricing provided by medical malpractice insurance underwriters.

After the hard market of the early 2000s sent premiums up double and triple digits, many insurers looked for ways to better underwrite nursing home and elder care facilities. Millions were invested in analytics that continue to be used and tweaked today. Nursing homes are priced with a rate multiplied by the number of licensed beds, with a credit put on for any deductibles.  How that rate is established is the art of underwriting – claims history, location and underwriter opinion of the quality of care are all taken into account.

The advent of the Medicare star system was a data bonanza for insurers. For the first time that had massive troves of collected quality data to analyze, however much of it was incomplete or not subject to independent verification. The IMPACT Act will collect more data and give Medicare the tools to verify it. This will likely push insurers to rely even more heavily on it.

Many insurers have found their own pricing bands closely matched the ones implied by the federal star ratings, many other insurance companies took the cheaper route and have used star ratings instead of investing in their own analytics. One thing is for sure – if the newer star ratings cause a drop for your facility it will correlate with an increase in liability insurance premiums.

Working with an expert insurance broker will ensure your facility is presented to the most competitive underwriters and your risk is put in the best light. The market continues to evolve and partnering with an expert can ensure cost containment in a difficult operating environment.

CA Supreme Court Rules Families Not Responsible for Caregivers Injuries

The California Supreme Court, in a divided opinion, ruled that Alzheimer patients and their families cannot be held liable for injuries caused to caregivers. The ruling is likely to make the market for workers compensation insurance for skilled nursing in California even more difficult. The ruling for Carolyn Gregory v. Lorraine Cott el al can be found here. Prior precedent held that institutionalized memory impaired patients could not be held liable for injuries inflicted this is the first ruling to hold the same standard to home care.

In 2008 the plaintiff was washing dishes in the defendants home, she had been hired as a home care aid in 2005. The defendant bumped into her from behind while she was washing a large knife, in an attempt to restrain the patient an injury occurred that left her without feeling in several of her fingers. The plaintiff care giver was receiving workers compensation when she brought a claim for battery, negligence and premises liability against the elderly couple. The court dismissed all these allegations.

An important cost containing measure in workers compensation is subrogation, which allows the insurer to sue the outside party who was partially negligent. In this case, the home care company could have paid it’s employees workers compensation claim and then gone after the couple to reduce their costs. This cost saving strategy is going to be less fruitful going forward for nursing homes who provide home care duties.

The market for workers compensation on elder care providers continues to be troublesome countrywide, contact the advisors at to discuss strategies to contain (and even reduce) your insurance expenses and manage your total cost of risk.

CA Antipsychotic Case Settled

The three year legal battle with Ventura Convalescent Hospital over the alleged use of anti-psychotic medications without consent has been settled. The original suit was filed in 2011 by Kathi Levine (the daughter of a former resident) and later had 305 other residents or their families join the action, which later received support from the AARP. The settlement included $183,000 to former residents and $472,000 to the plaintiff attorneys. Each former resident will receive $600 and Levine will get $10,000 as the lead plaintiff.

California law requires that each skilled nursing facility “verify informed consent prior to the administration of psychotherapeutic drugs in the SNF, use of physical restraints in the SNF, or the prolonged use of a device in the SNF that may lead to the inability to regain use of a normal bodily function”. The  case underscores the continuing need for facilities to carefully document both patient care the procedures the  caregivers are expected to adhere to. 

Coverage for the case like this under a malpractice insurance policy highlights two issues – what triggers a claims and how to deductibles apply. The standard terms offered by insurance companies and the modifications insurance brokers can negotiate are not standard, partnering with an expert broker ensures your facility can obtain the best terms possible.

Malpractice policies are generally triggered by an injury to a resident caused by a facilities negligence. If the complaint was filed as a violation of a residents rights or they did not assert a physical injury, coverage would likely not be triggered. This is an especially common structure under cheaper policies.

If a liability policy does provide coverage the question over how the deductible applies looms. Would the mentioned case be subject to one deductible or 306? With even smaller faculties commonly carrying deductibles over $10,000 it’s likely this entire $650,000 case could fall under the retention. “Batch coverage” is the ability to assign multiple plaintiffs under on retention if their claims are related, each carrier negotiates this differently.

Contact to discuss cost effective ways to increase insurance coverage for your elder care services. The expert intermediates can assist in analyzing coverage situations and negotiate improvements on their clients behalf.

New EEOC Enforcements

Two new EEOC (Equal Employment Opportunity Commission) lawsuits against nursing homes show that risk is continuing to increase for elder care providers. The first, EEOC v. Genesis Healthcare LLC, is over the alleged discrimination against a deaf application in the hiring process. The second, Araceli Cadenas v. Butterfield Health Care II, c/b/a Meadowbrook Manor of Naperville et al, involves the wrongful termination of a fifteen week pregnant woman.

In Genesis a deaf applicant with experience was informally offered a part time job in the nursing facility as a Dietary Aide/Assistant Cook. He was later asked to come in for a second interview and was explicitly quizzed on his communication skills, which the EEOC alleges violates the Americans with Disabilities Act. The EEOC has determined that in almost all cases deafness is a protected disability and an employer must make reasonable accommodations if the person is otherwise qualified. The interviewer could ask was accommodations the applicant would need to communicate in their work environment but could not make a hiring decision on that basis.

In Cadenas a 15 week along pregnant woman presented a note to her employer that once she reached 20 weeks she could no longer lift more than 20 pounds. She was fired immediately because her job entailed lifting patients she could no longer perform it. After bringing suit a Federal District Court determined that being fired at 15 weeks was solely because of her pregnancy, which is a protected condition. The ruling stated that if the employer had waited five weeks until she was unable to perform the duties she was hired for the termination would have been just. However, by letting her go early they were basing the decision exclusively on her pregnancy.

These cases show the increasing costs of regulation on the industry and the need for strong protections in defending employment decisions. Many employment practices liability insurance policies include free legal advice in this area and cover the defense costs related to defending personnel decisions. Contact to discuss creative strategies to manage the costs of increased regulation.

Florida Passes Bill to Protect Investors

SB 670 has passed the Florida House 109-7 after clearing the State Senate last week, the Governor is expected to signed the bill into law. The bill is written to protect passive nursing home investors from negligence lawsuits.

Not shockingly, plaintiff attorneys are against the bill as many have targeted deep pocketed investors to pay increasingly catastrophic judgements. Also against the bill is a collation of nursing home employees who fear increased exposure when investors cannot be targeted.

The laws likely outcome is an attempt to bring suit outside of Florida and reopen the investors in liability. Florida had become a venue of choice for attorneys looking to go after protected investors, with 49 other states in the union venue shopping will likely pick up as plaintiffs search for sympathetic courtrooms.

Contact us to discuss creating a comprehensive risk financing program to protect your employees, investors and the organizations assets in a changing legal environment.


Facility Sued for Not Hiring Deaf Applicant

The U.S. Equal Employment Opportunity Commission (EEOC) has brought suit against Genesis Health Care, the owner of Holly Manor Center nursing facility in Mendham, NJ. Stefan P. Denisiuk initially was offered two part-time positions at the facility.

However, before he was able to accept employment Denisiuk was called back in for further interviews and  “grilled about his ability to communicate” by senior managers. Denisiuk was later today they decided to pursue other candidates.

The EEOC has brought suit as deafness is a protected disability and the employer is required to make accommodations if the applicant is otherwise qualified.

As a reminder counsel should be involved in all hiring/dismissal situations where the individual carries a disability to ensure the process is completed legally. Contact to discuss better protecting your organization from increasing employment related litigation.


$23M Verdict Against California Assisted Living Facility

An Auburn CA assisted living facility owned by Emeritus Corp was punished with a $23M punitive damage award after allegedly turning down a $3.5M settlement offer last year.

The Sacramento jury also awarded $3.875 million for pain and suffering and another $250,000 for the loss of her companionship, the pain and suffering damages were reduced to $250,000 in accordance with CA law.

Contact to discuss protecting your organization against the continuation of large jury verdicts.

MS Supreme Court Upholds Deductible Lawsuit

The Mississippi Supreme Court has upheld a lower court’s decision that a nursing home operator is responsible for $701,153.54 in claims expenses under a high deductible nursing home malpractice insurance policy they purchased from Lloyds of London. It was also upheld that the first named insured on the policy, Southern Healthcare Services Inc, was responsible for the deductible on claims against the bankrupt companies who operated the nursing homes against whom the claims were brought. Daleson Enterprises, LLC operated Jones County Rest Home in Ellisvill and Medforce Management, LLC operated Willow Creek Retirement Center

The case brings to light the issues that come with not reading the fine print. The insured claims they believed they were purchasing a $25,000 deductible when they were actually delivered a policy with a $250,000 per claim retention eleven months after the effective date. is working with it’s carriers on “contract certainty” – making sure the terms of the contract are clear and in writing to all parties on the effective date of the policy.

$28M Fine in Whistleblower Case

A False Claims Act suit in filed 2004 against an Illinois nursing home has resulted in a $28M fine, with the whistle-blowing nurses receiving about $7M.

The jury in the case of United States of America et al. v. Momence Meadows Nursing Center Inc. et al. found that the former owner Jacob Graff “provided worthless services to the residents” and levied the stiffest penalty possible for fraudulently billing Medicare and Medicaid.

Contact today to discuss better protecting your organization from the costs of increasing regulatory actions.

Disaster Evacuations

widely published AP article has discussed the struggles and costs of evacuating nursing home patients in the midst of an impending disaster. has options available to include insurance for the costs of an emergency evacuation in a facilities liability insurance program for little or no cost. Underwriters see the coverage as a good way to reduce claims costs if utilized correctly.