Paul Willging Says…


Litigation is everyone’s problem

Thank God for the lawyers! Or so they would have us believe. After all, they’re only doing what they do “for the good of our residents,” of course, and certainly not for the money. Such legal altruism notwithstanding, during the 1970s and 1980s, juries started awarding very large amounts of money in response to professional malpractice suits, much larger than those typically awarded for automobile accidents and other incidents. And the amounts awarded seemed increasingly to have little relationship to the actual professional transgression or harm caused.

You might have noticed this trend. Indeed, some would argue that long-term care is a specially chosen target. This does not apply only to nursing homes. It has become increasingly difficult, for example, to refer to assisted living as a “housing” or “social” model and, by definition, immune from medical malpractice litigation. Assisted living communities are really hybrids, including medical care (e.g., medication assistance, incontinence care) in addition to social and housing services. Even within the independent senior housing sector, of all places, expectations for the provision of healthcare services are escalating (e.g., the widespread demand for and use of cardiac defibrillators) and, with that, exposure to liability prosecution.

Nor are the legal attacks being mounted solely from the private sector. The increasing involvement of the Federal Bureau of Investigation and the U.S. Department of Health & Human Services’ Office of Inspector General reflects enhanced and continuing federal government scrutiny of seniors’ housing and its liability potential. State governments are taking an active interest, too. For example, Alterra was forced by Minnesota’s attorney general some years ago into a widely publicized settlement regarding staffing and other issues in one of its assisted living facilities.

A variety of new tools has surfaced in the hands of prosecutors and claimants in recent years, including the use of false advertising statutes. More than one facility has discovered to its detriment that advertising (in any form) can provoke litigation if it makes unrealistic promises. Such statements as “allowing aging in place” or “providing above-average quality of care” can put a facility at risk of “false advertising” litigation, including class-action suits by groups of claimants alleging injury.

Among the tools employed relatively recently by federal and state governments against healthcare providers are the qui tam provisions of the federal False Claims Act of 1863. (Qui tam is shorthand for the Latin phrase qui tam pro domino rege quam pro se ipso: “He who as much for the king as for himself.”) In these actions, a plaintiff sues on behalf of the government to secure damages for illegal acts. Such litigation, as applied to publicly funded healthcare, operates on the assumption that a provider must meet a minimum threshold of quality in order to legitimately seek reimbursement under federal or state funding programs. During a specified period of time, the government examines the claim and decides or declines to proceed with recovery. Should the government decide to take over the claim, the plaintiff receives a percentage of the recovery. Should the government choose not to intervene, the litigant (under certain circumstances) has the right to continue the action independently. Facilities in several states have lost multi-million-dollar judgments this way and have been placed under close government supervision in rectifying their operations.

Novel techniques for attacking providers have been accompanied by equally novel methods of redress. One of the more ominous sounding is the “CIA” or corporate integrity agreement. CIAs entail extremely close federal monitoring of the provider, often by a contracted independent agency or individual, and can cover everything from a company’s internal operations to the quality of its services to the nature and integrity of its claims submission practices.

Clearly, though, the type of litigation that keeps most providers awake nights is the private-sector lawsuit alleging negligence. The impact of such litigation on profit and loss can be staggering-as much as hundreds of millions of dollars. Such expenditures have had obvious impact on the already financially troubled chains, which have had to increase reserves just to stay in business.

The damage occasioned by increasing amounts of litigation and prosecutorial oversight is by no means limited to the facility involved and the financial damages incurred. The effects of heavy media coverage can be as damaging as the lawsuit itself-and that goes for all providers in the community, not just those immediately involved.

So, how do you avoid this increasingly menacing situation? We start by understanding the risks involved so as to better avoid them (and be prepared for legal challenge if it comes). In tort litigation, for example, four conditions need to be present for successful action by a plaintiff: “duty,” “breach,” “damages,” and “causation.” (Some have argued for a fifth: a malleable jury that can be persuaded by plaintiff’s counsel to ignore the first four.)

The first prerequisite for successful litigation is an assumption that the actions taken by a provider were unreasonable, in view of community expectations. Here the landscape is increasingly fluid. The definition of “community,” for example, is becoming broader; sometimes the community is national in scope. And expectations, particularly for long-term care providers, are becoming increasingly rigorous. The plaintiff then has the responsibility to prove that the defendant violated the “duty” that these parameters imply-that the plaintiff was in fact damaged, and that this breach of duty was a substantial factor in causing the alleged damages.

This liability can be “vicarious,” i.e., the facility is liable for acts of its employees that are related to their employment. Even when these “employees” turn out to be physicians or pharmacists, the facility can still be deemed liable for the actions of professionals it did not select and who have no formal connection to it.

It gets worse. Juries often find that the long-term care provider is liable for more than the obvious consequences of the negligent act and can be assessed damages for subsequent care, even when intervening events and factors outside the facility’s control might have been causal. When certain criteria are met, violation of a statute, rule, or regulation may result in the presumption of negligence (or negligence per se). Since the enactment of the nursing home reform provisions of OBRA ’87, for example, the question has been raised as to whether violation of its requirements can establish a presumption of negligence per se.

A number of arguments have been raised refuting such assertions. These arguments assert that OBRA ’87 established contractual, not liability, standards; that imputing to its violation negligence per se would impose a burden on facilities of “perfect compliance”; that the regulations are subjective; and that facilities, in their day-to-day operations, often depend on outside contractors over whom they have limited control. But these remain arguments, not definitive conclusions.

As for “damages,” there are several types to which a plaintiff may be entitled in long-term care negligence actions. Actual or compensatory damages are meant to pay for real losses incurred by the plaintiff. In long-term care cases, there is rarely a claim for lost income, since the typical resident is physically or mentally incapable of generating income through employment. This notwithstanding, juries have been known to award damages having only a limited relationship to the actual expenses incurred by the plaintiff.

Punitive or exemplary damages are designed to punish. Most of the high judgments in long-term care appear to be the result of a jury’s desire to “send a message” rather than to compensate plaintiffs equitably. Punitive damages usually require a finding of malice, fraud, wanton or willful activity, or a gross disregard for the rights of others. The concept of vicarious liability can apply to the award of punitive damages, too, if the act committed was within the scope of employment. Punitive damages, which can be astronomical, are typically not covered by the defendant’s insurance.

What if, heaven forbid, you do end up in court? What will your adversaries be looking for? How will they attempt to prove the allegations against you?

Let’s start with the obvious. Survey documents are often a treasure trove for plaintiff’s counsel. While their use can be limited (Florida, for example, prohibits state licensure evaluations and reports from being used as discoverable evidence), they are often cited as proof of a facility’s “history” of negligence. For example, if a nursing facility has been repeatedly cited for understaffing, the plaintiff’s lawyers will attempt to establish the facility’s culpability through direct use of the official federal survey form (the “2567”).

Beyond this, there is ongoing debate as to which of a facility’s internal documents (e.g., quality assurance files) are “discoverable.” A good rule of thumb is that anything can make its way into a judicial proceeding; that means care must be exercised as to how much of a facility’s operations are actually committed to paper.

There is one rule about which there is no dispute-the rule against falsifying documents or making inappropriate or improperly documented corrections. Breaking this rule can be disastrous. Staff should be thoroughly trained and admonished as to the proper method of correcting documentation errors, and no deviations should be tolerated. Staff who improperly correct records should be disciplined immediately, and the discipline itself documented.

As has frequently been discussed in recent years, some facilities have experienced difficulties even finding a willing insurer because of this environment. This not only puts them at risk for financial judgments, but it also can adversely affect their ability to get loans. The result may be an increase in the number of facilities in violation of their lending covenants, perhaps even leading to a bankruptcy filing. How many of us can forget Florida, where there used to be 40 long-term care insurers which, prior to tort reform, had dropped to 20, only 4 of which were actively writing policies. Those few companies continuing to write policies were imposing annual premiums as high as $7,000 per bed. In Ohio, some facilities are incurring insurance costs as high as $300,000 per year.

What coverage remains is more limited, with decreasing numbers of policies being written on an “occurrence” rather than a “claims made” basis; this means higher deductibles, significant need for self-insurance retentions, and much more stringent underwriting criteria. (Occurrence insurance is a type of policy in which the insured is covered for any incident that occurs while the policy is in force, regardless of when the incident is reported or when it becomes a claim. Occurrence insurance for medical liability coverage is rarely offered today because of the difficulty in projecting long-term claims costs under this type of policy. Claims-made insurance, on the other hand, is a form of insurance in which coverage is limited to liability only for those claims that arise from incidents or events that both happen and are reported to the insurance company while the policy is in force. As premiums for claims-made insurance reflect ongoing claims experience, they can be readily adjusted up or down as experience changes.)

As a result of all this, long-term care providers are struggling within unprecedented fiscal constraints to maintain reasonable levels of insurance coverage and implement effective risk-control strategies, while still providing good basic care and avoiding going broke. If anyone wonders why long-term care management is “aging in place” more rapidly than its counterparts elsewhere, here lies a big part of the explanation.

To send your comments to Dr. Willging and the editors, e-mail To order reprints in quantities of 100 or more, call (866) 377-6454.
Paul R. Willging, PhD, was involved in long-term care policy development at the highest levels for more than 20 years. For 16 years as president/CEO of the American Health Care Association, Dr. Willging went on to cofound the successful Johns Hopkins Seniors Housing and Care postgraduate program (cosponsored by the National Investment Center for the Seniors Housing & Care Industries), and later served as president/CEO of the Assisted Living Federation of America. He has enjoyed an equally long-lived reputation for offering outspoken, often provocative views on long-term care.

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