Riding out the rising tide of litigation: interview with Chicago healthcare attorney John J. Durso - Interview

Nursing Homes, Oct, 2003 by Linda Zinn

As if reimbursement shortfalls are not a sufficiently low blow, long-term care companies continue to be hit with lawsuits and sky-high insurance premiums. Some organizations are finding they cannot get back on their feet after being slammed with this triple whammy. Others are staggering, and many others are clinging to the ropes, hoping against hope that a lawsuit will not blindside them and take away their ability to stay in business and provide care to those they serve.

Nursing Homes/Long Term Care Management Editor Linda Zinn asked veteran healthcare attorney John J. Durso, partner and senior member of the Chicago law firm Michael Best & Friedrich, how the litigation trends in long-term care are shaping up in 2003 and how long-term care organizations can protect themselves against the continuing liability onslaught.

Zinn: What trends are you seeing so far in 2003 in terms of litigation against long-term care organizations?

Durso: Unfortunately, the plague that started in Florida is spreading throughout the United States. Now it is only a question of when it will reach your neighborhood; it is no longer a question of if. Plaintiffs' lawyers have discovered that they can play to the sympathies of a jury--many members of which have no understanding of nursing homes. Most jurors have never been in one and do not have any idea what goes on there. For example, let us say a resident falls. It could be that her hip gave out as a result osteoporosis and then she fell, or she might have simply fallen because she is 92 years old and not so steady on her feet. These two situations are certainly different from someone's falling and fracturing a hip because of neglect caused by a wet floor or faulty equipment. In some cases there is no way to know which is the case. That is not to say there is no malpractice, of course, but sometimes people are hurt merely because of aging and not because of neglect or abuse.

Plaintiffs' lawyers are spreading like locusts. It is no longer just a matter of lawyers opening additional offices in different parts of the country, which they are still doing, but other lawyers are also jumping onto the bandwagon. When these lawsuits come across my desk, they are starting to all read about the same. They start with "negligence" and "breach of contract" and go on from there. The complaints almost seem to be photocopied from each other.

Plaintiffs' attorneys started with nursing homes in Florida; now there have been large judgments in Texas, California, and other states. And these plaintiffs' attorneys do not discriminate between nursing homes versus assisted living residences versus CCRCs versus independent living apartments or retirement communities. They see them all as targets. Of course the higher the level of care provided, the more of a target a facility becomes. This trend is similar to what doctors and hospitals went through in the late 1970s and early 1980s, and it will not go away.

Of course, this trend makes it harder to get insurance at a reasonable price. An insurance company has to spread its losses from Florida and other places where suits are being filed to states that are not as high risk. Therefore, people in Nebraska essentially end up paying for judgments in Florida. And not only are premiums increased, but insurance companies also are offering less coverage for those higher premiums.

There was a time, when the stock market was booming, that insurance companies had a hedge. They were making money on their investments even if they were losing some to litigation. Now that the market is down, that hedge is gone. Insurance companies are no longer still turning a pro fit because their investments are bailing them out.

Because of the events of September 11th--which, by the way, was the worst catastrophe in insurance history when property, human, and business losses all are considered--and because of the poor state of the economy, the cost of liability insurance would be climbing now anyway, regardless of the trend toward more litigation.

In addition to the liability issues, long-term care facilities also must face the costs of over-regulation. The latest example is the Health Insurance Portability and Accountability Act of 1996 [HIPAA]. Once HIPAA really gets going, it will be a source of litigation, because people will sue for breach of privacy.

Zinn: How can long-term care organizations survive in the current legal and financial environment?

Durso: There are ways to respond to the negative trends. One is by creating alternative insurance options that are, in effect owned by providers, like hospitals did when they created "captive" insurance companies or group insurance plans or by "renting" a captive from an insurance company.

The "renting" approach works like this There is a "cell" of captives; your company rents the administrative end of it, but you assume all your oval risk. It is like renting an apartment: The landlord sets you up, but what subsequently happens in your apartment is your own problem. Under this approach, you and the others in your group (which would not necessarily be other healthcare organizations; they could be any types of companies) would pay for management, claims handling, and risk management. You would share those common expenses with the other companies in your "cell," but the cost of actual claims against your company would be your responsibility.