Nursing Home Insurance Crunch

June 8, 2004
Faced with a wave of consumer lawsuits and rising liability insurance rates, nursing homes are pulling out of some states and cutting back or even eliminating their insurance coverage in others.

A nursing home trade group, the American Health Care Association (AHCA), says new consumer protection legislation is to blame. For example, the group noted that in California, an elder-abuse law permits nursing home patients to sue for abuse and neglect.

The study, paid for by AHCA, was conducted by Aon Corp., which surveyed 108 nursing homes. It found that the "liability cost per bed" -- a figure that includes both insurance and the costs of litigation -- climbed to $2,290 last year from $1,730 in 1999. In Florida, the figure was $8,170, more than three times the national average.

The liability costs are particularly high in states with large numbers of elderly residents, including Florida, Arkansas and Texas.

Nursing home chains are cutting back their operations in the states with the highest liability costs. Beverly Enterprises sold all of its 49 nursing homes and assisted-living centers in Florida and has another 140 in various states up for sale.

On the other hand, Beverly has had more than its share of lawsuits. Two years ago it agreed to return $170 million in improper Medicare payments and last year it pleaded no contest to two felony counts of elder abuse in California.

Some nursing homes are simply "going bare," carrying no liability insurance. It's a risky strategy because a single large award could bankrupt a nursing home; on the other hand, an uninsured business is a less attractive target since a huge settlement would most likely be uncollectable.

Some nursing homes are resorting to arbitration agreements, requiring patients to sign agreements saying that they will resolve any disputes through arbitration instead of going to court.

There has been a significant increase in lawsuits against nursing homes in recent years. A 2003 study by Harvard researchers found that more than half of lawsuits against nursing homes claimed wrongful death. Other common complaints were emotion distress and bed sores caused by abuse.

Consumers can check on quality of nursing homes in their area through "Nursing Home Compare," a Web site operated by the federal Medicare program.

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