[Senate Hearing 108-726]
[From the U.S. Government Publishing Office]
S. Hrg. 108-726
MEDICAL LIABILITY IN LONG TERM CARE:
IS ESCALATING LITIGATION A THREAT TO QUALITY AND ACCESS?
=======================================================================
HEARING
before the
SPECIAL COMMITTEE ON AGING
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
WASHINGTON, DC
__________
July 15, 2004
__________
Serial No. 108-39
Printed for the use of the Special Committee on Aging
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96-737 PDF WASHINGTON : 2004
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SPECIAL COMMITTEE ON AGING
LARRY CRAIG, Idaho, Chairman
RICHARD SHELBY, Alabama JOHN B. BREAUX, Louisiana, Ranking
SUSAN COLLINS, Maine Member
MIKE ENZI, Wyoming HARRY REID, Nevada
GORDON SMITH, Oregon HERB KOHL, Wisconsin
JAMES M. TALENT, Missouri JAMES M. JEFFORDS, Vermont
PETER G. FITZGERALD, Illinois RUSSELL D. FEINGOLD, Wisconsin
ORRIN G. HATCH, Utah RON WYDEN, Oregon
ELIZABETH DOLE, North Carolina BLANCHE L. LINCOLN, Arkansas
TED STEVENS, Alaska EVAN BAYH, Indiana
RICK SANTORUM, Pennsylvania THOMAS R. CARPER, Delaware
DEBBIE STABENOW, Michigan
Lupe Wissel, Staff Director
Michelle Easton, Ranking Member Staff Director
(ii)
C O N T E N T S
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Page
Opening Statement of Senator Larry E. Craig...................... 1
Statement of Senator Richard Shelby.............................. 2
Statement of Senator Herb Kohl................................... 3
Statement of Senator Elizabeth Dole.............................. 4
Panel of Witnesses
David Stevenson, Ph.D., assistant professor, Harvard University,
Cambridge, MA.................................................. 6
Theresa Bourdon, FCAS, MAAA, managing director and actuarial, Aon
Risk Consultants, Inc., Columbia, MD........................... 19
J. Norman Estes, president and chief executive officer, NHS
Management, Tuscaloosa, AL..................................... 29
Mashall B. Kapp, J.D., M.P.H., FCLM, distinguished professor of
Law and Medicine, Southern Illinois University, School of Law,
Carbondale, IL................................................. 37
Lawrence M. Cutchin, M.D., president, North Carolina Medical
Society, Raleigh, NC........................................... 44
James E. Lett, II, M.D., C.M.D., immediate past president,
American Medical Directors Association, Carmichael, CA......... 48
APPENDIX
Prepared Statement of Senator John Breaux........................ 73
Study submitted by Center for Medicare Advocacy.................. 74
Statement submitted by the American Medical Association.......... 101
Testimony of William L. Minnix, Jr., D. Min., CEO and president,
The American Association of Homes and Services for the Aging... 118
Information submitted by the National Citizens' Coalition for
Nursing Home Reform............................................ 128
(iii)
MEDICAL LIABILITY IN LONG TERM CARE: IS ESCALATING LITIGATION A THREAT
TO QUALITY AND ACCESS?
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THURSDAY, JULY 15, 2004
U.S. Senate,
Special Committee on Aging,
Washington, DC.
The committee met, pursuant to notice, at 2 p.m., in room
SD-628, Dirksen Senate Office Building, Hon. Larry E. Craig
(chairman of the committee) presiding.
Present: Senators Craig, Shelby, Dole, Kohl, Lincoln, and
Carper.
OPENING STATEMENT OF SENATOR LARRY E. CRAIG, CHAIRMAN
The Chairman. Good afternoon, everyone. The U.S. Senate
Special Committee on Aging will be convened. I welcome all of
you.
Over this committee's history, we have explored numerous
issues related to the future of long term care. It is well-
known that as our Nation ages, the pressure on the long term
care system will be enormous in the coming years. Clearly,
nursing homes are a valid and essential component of the long
term care system. When we receive care at home or in other
community settings, there are options. But as we grow more
frail, sometimes our elderly have no option, but to have stays
in the nursing home setting.
Recently released studies now show that escalating medical
liability is beginning to present challenges to access and
quality of care for nursing home residents. Tort claims against
long term care providers nationwide are the fastest-growing
area of health care litigation. The cost of claims over the
last 3 years is estimated at over $2 billion, and the average
medical insurance premium cost is over 200-percent higher than
it was in 2001. These rapidly escalating costs are a massive
challenge, especially for smaller providers serving the elderly
in rural communities.
Our investigation is based on the latest-available data on
the effects of liability costs on quality care and access for
our most vulnerable seniors. It is therefore important to
remain objective, ask difficult questions and explore solutions
to this emerging problem.
The effects of unprecedented increases in long term care
litigation costs are twofold:
First, excessive litigation is forcing many doctors to quit
serving patients in nursing homes.
Second, the situation is draining resources that should be
used to provide quality patient care to nursing home residents.
These trends cannot be allowed to continue. We must ensure that
quality long term care services are available to the vulnerable
elderly when they are in their greatest need and require their
greatest care.
In a recent survey, one out of every five doctors in
nursing homes said that they had problems obtaining or renewing
their medical liability insurance in this past year. Ten
percent said they have already stopped caring for the elderly
in these facilities. In addition, medical doctors are leaving
the industry due to rising liability costs. This is having a
negative impact on people who need the care most.
Before we proceed with today's hearings, I want to make one
point clear. Those people who abuse or neglect or intentionally
cause harm to our seniors must be held accountable and should
be prosecuted to the fullest extent of the law. This hearing is
not about that. This hearing is making sure that elderly
receive quality care and that resources are not drained
unintentionally by the cost of insurance.
We have our colleagues joining at this moment. So, before I
introduce our panel of witnesses, let me turn to Senator
Shelby, who is here today. One of his constituents is with us.
He may want to visit about him and make any opening comments
you would wish to make.
Richard?
STATEMENT SENATOR RICHARD SHELBY
Senator Shelby. Mr. Chairman, thank you very much. First of
all, thank you for calling this hearing. I appreciate the work
that you are doing as far as leading this committee. I have
been tied up all day on Banking. I have got to go right back to
another hearing.
So, if you would bear with me just a minute, I do not have
this opportunity every day here, but, Mr. Chairman, I am
honored to have the opportunity to just tell you a little bit
about one of the panelists here, and that is Mr. Norman Estes,
who will provide testimony today. Norman Estes is president and
CEO of Northport Health Services, Inc., and a representative of
the American Health Care Association, and as such will be able
to speak directly to the issues being discussed today.
As a fellow native of Tuscaloosa County, AL, I have known
Norman and his family for many, many years. He is a friend. I
have the highest regard for his intellect, his integrity and
his business ability. Norman is a veteran of the long term care
industry and has been associated with nursing facilities all of
his life. In fact, the company he owns today is a continuation
of a tradition of service to the elderly that began more than
40 years ago by his grandmother who cared for residents in her
own home.
Later, Norman's father expanded this commitment to caring
through a series of nursing facilities throughout Alabama. Upon
his father's retirement, Norman purchased three of his
facilities and formed what is now known as Northport Health
Services, Inc.
Building upon his successes here, Mr. Chairman, Norman
Estes has grown Northport Health Services from three nursing
facilities in Alabama, my State and his, to 39 nursing
facilities throughout the Southeast. He is also involved with
other long term care-related ventures, including pharmacies,
therapy companies and a medical supply company. He has been a
leader in numerous trade associations throughout the Southeast,
including the Alabama Nursing Home Association, the Missouri
Health Care Association, the Florida Health Care Association
and the Arkansas Health Care Association.
He has also been an active member of the American Health
Care Association, in whose capacity, as I said, he appears
today. He served on its Regional Multi-Facility CEO Committee,
the Policy Council and the Steering Committee to Save Long term
Care, where he was chairman of the Tort Reform Subcommittee.
Mr. Chairman, I want to thank you again for holding this
timely committee hearing, and I hope you will excuse me because
I have got to chair another committee.
Thank you very much.
The Chairman. Richard, thank you very much for coming by to
introduce one of your constituents, and certainly a very
valuable spokesman for the American Health Care Association.
Now, let me turn to our colleague on the committee, Senator
Herb Kohl. Herb, do you have any opening comments you would
like to make?
STATEMENT OF SENATOR HERB KOHL
Senator Kohl. I do, Mr. Chairman. I appreciate your holding
this hearing today, at which we will consider the important
issue of medical liability reform and how it affects long term
care providers and, in particular, nursing homes.
Those of who serve on the Judiciary Committee have some
experience with this issue, as we held a hearing on the broader
topic of medical malpractice reform last year. We heard then,
and we will surely hear today, that we are experiencing a
medical malpractice crisis. The number of nursing home beds is
declining and doctors are quitting. Unfortunately, legislation
we have considered in this Congress that simply cap damage
awards, in my judgment, is the wrong approach in addressing
this issue. Therefore, I have opposed those bills, and I will
continue to do so until we address liability reform with some
fresh ideas that I believe would enjoy broad, bipartisan
support.
Perhaps we could look to those States that have responded
successfully to the pressure of high insurance premiums.
Wisconsin is one of those States, and it has a system in place
that works well for doctors and patients alike. As a result, we
do not have a crisis of insurance premiums or doctors closing
their practices or moving out of my State.
Although Wisconsin enacted damage cap awards, in 1995, it
also maintains a Patients Compensation Fund and backs a risk-
sharing plan for those physicians in nursing homes who cannot
obtain insurance in the private market. Not surprisingly,
Wisconsin's medical malpractice insurance premiums are below
the Nation's average.
Unfortunately, Wisconsin's success is not universal. A so-
called reform based on arbitrarily capping pain and suffering
awards, in my opinion, is not the answer. Studies show that
passing a Federal medical malpractice law, with damage caps,
might have no impact at all on runaway insurance premiums.
Further, there is no promise that any savings insurance
companies realize from such a law would be passed on to doctors
and ultimately to patients. We would expect the same
uncertainty when it comes to caps for long term care.
A full and fair debate on the issue of medical malpractice
must look at all facets of this issue. For example, some argue
that many of the most serious cases, cases of serious injury or
death, are brought against a handful of facilities. Perhaps we
should focus more of our attention on cleaning up these bad
actors if we want to decrease the litigation faced by the
nursing home industry.
As a member of the Appropriations Committee, I have worked
for several years to increase funding for State survey agencies
so that they can better inspect nursing homes, respond to
complaints and help to improve the quality of care. Focusing on
improving care at the front end, rather than flatly denying
legal rights to people who have been harmed is a far more
productive effort.
Finally, it is worth mentioning that while we spend a few
hours today focusing on the costs of litigation, we need to
remember that this committee has spent countless hours focusing
on abuse and neglect in nursing homes. While a vast majority of
nursing homes work hard to provide good care to their
residents, all of us on this committee know that there are
serious problems in nursing homes today.
Over the years, we have heard stories of people with bed
sores that go to the bone, people left in their own waste, and
people with severe malnutrition and dehydration. We have also
heard stories of people who have been beaten and sexually
assaulted. So, as we hear today about so-called frivolous
lawsuits, let us not forget that there are real people who are
being abused, starved and neglected, and the safety of those
vulnerable residents must, and I am sure always will be, Mr.
Chairman, our top priority.
Thank you.
The Chairman. Herb, thank you very much for that opening
statement.
Now, let me turn to our colleague from North Carolina,
Senator Elizabeth Dole. I believe you have a constituent on the
panel today that you might like to introduce in your opening
comments.
STATEMENT OF SENATOR ELIZABETH DOLE
Senator Dole. Thank you.
Dr. Larry Cutchin, from North Carolina. Dr. Cutchin, I am
very pleased to have you here today. Thank you so much. Mr.
Chairman, thank you for holding this hearing today.
Few issues are as important to Americans right now as the
rising cost of health care. While the ever-increasing costs
concern millions of Americans, there is a way to address the
crisis. Passage of real, responsible medical liability reform
is one effective answer to the dilemma of growing health care
expenses. The broken medical liability system drives up costs
for patients and for taxpayers, at least $28 billion each year
for the Federal Government alone. According to a 2003 Joint
Economic Committee report, meaningful medical liability reform
could lower health care costs significantly and enable an
estimated 3.9 million Americans to afford health insurance.
A recent survey found that 8 out of 10 doctors say they
have ordered more tests than they need as a defensive measure
to avoid litigation. I can remember hearing that from many
doctors as I have traveled North Carolina. Three out of 4 refer
patients to specialists more often than they believe is
medically necessary.
America is in the midst of a crisis. Those who need health
care, the most vulnerable and sickest among us, are the real
victims. We have all heard their stories. Too many of our
patients cannot get doctors, cannot get specialists, cannot get
health care.
In my home State of North Carolina, rural residents have
been among the hardest hit. In fact, North Carolina is included
on a list of 20 States that the American Medical Association
says are suffering from a medical liability crisis. According
to the AMA, some North Carolina hospitals have seen their
liability insurance premiums rise 3 to 5 times in the last few
years. Specialists, like our obstetricians, emergency doctors
and anesthesiologists, are seeing even higher increases. The
level 3 trauma center in Cabarrus County, NC, which is right
down the road from my hometown of Salisbury, serves more than
68,000 patients per year, and it is facing the possibility of
closure because a 17-member emergency medical group experienced
increased premiums of 88 percent with reduced coverage.
I have heard from many doctors, as I have said, in my
State, and this crisis is having a detrimental effect on our
medical providers. Too many of them cannot afford rising
malpractice insurance rates. They have had to curb their
medical practices, stop taking some patients, move to another
State, perhaps the most painful, leave the profession
altogether.
Dr. Jack Schmidt, of Raleigh, NC, says his insurance
premiums went from $18,000 a year to $45,000 a year. I talked
to him recently here in Washington. He eventually decided to
leave his practice in Raleigh, and he is teaching at the
University of Virginia Medical School.
Dr. Mary-Emma Beres, of Sparta, NC, had to stop delivering
babies altogether after facing a 300-percent increase in her
malpractice premiums. Now, there is only one obstetrician in
the town of Sparta, which is a person capable of handling high-
risk cases, and that is forcing some women who need C-sections
to endure a 40-minute ambulance ride to another hospital. It is
wrong to deny access to adequate health care. Let me be clear,
there are many cases where going to court over a medical
mistake is certainly legitimate.
What we are talking about today, however, are frivolous
lawsuits and an abused system. This hearing is about the need
to pass responsible medical liability reform to curb the trend
of multi-million-dollar payouts, 40 percent of which go
directly to the patient's attorney.
During a visit to North Carolina in 2002, President Bush
spoke in High Point, home of a regional health care system
that, like so many others in our country, is feeling the strain
of medical liability concerns. While in town, he spoke about
why Congress must play a role in this battle. He said the
Federal Government uses taxpayers' money to fund health care
programs--Medicare, Medicaid, Children's Health Care, veterans'
health care, military health care and long term care. Any time
a frivolous lawsuit drives up the cost of health care, it
affects the taxpayers. It is a Federal issue.
I believe the President is right, Mr. Chairman. This is not
an issue where the Senate can afford to sit idly by. The House
has passed a bill. It is time for the Senate to do the same.
I appreciate the presence of every witness here today, and
I look forward to a candid discussion on how best to prevent
our health care system from spiraling downward. We owe it to
our doctors, we owe it to the patients, and we owe it to our
country.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Dole.
I think, as all of you panelists know, the Special
Committee on Aging is not an authorizing committee. We are an
information-gathering, spotlight-pointing committee to build a
record for the whole of the Congress to analyze these critical
issues from and ultimately to make decisions. So your input
today is going to be extremely valuable, as we continue to
struggle with the issue of liability and class action-type
lawsuits.
So let me introduce the balance of our panelists, and we
will start then with you all.
David Stevenson, assistant professor, Harvard University;
Theresa Bourdon, managing director and actuarial, Aon Risk
Consultants, Columbia, MD. Mr. Estes has already been
introduced by Richard Shelby--president and CEO of NHS
Management in Tuscaloosa, AL; and representing the national
organizations, Marshall Kapp, distinguished professor of law
and medicine, Southern Illinois University, School of Law in
Carbondale, IL; Lawrence Cutchin, Dr. Cutchin has already been
introduced--president, North Carolina Medical Association,
Raleigh; and James Lett, immediate past president, American
Medical Directors Association, Carmel, CA.
David? Panelists, all thank you. David, we will start with
you.
STATEMENT OF DAVID STEVENSON, PH.D., ASSISTANT PROFESSOR,
HARVARD UNIVERSITY, CAMBRIDGE, MA
Mr. Stevenson. Thank you very much.
Chairman Craig, committee members, thank you for the
opportunity to speak at the hearing today. It is my pleasure to
be here to discuss this important topic. My remarks today are
from the perspective of the long term care researcher and
someone who has done recent work in the area of nursing home
litigation, in particular.
Today, I will focus on three key questions:
First, what is known about the nature and impact of nursing
home litigation?
Second, what factors have contributed to recent litigation
trends?
Third, what traits of this litigation are important to
consider in crafting a policy response?
As will be described by this panel, nursing home claims and
liability insurance premiums have soared in recent years,
especially in States such as Florida and Texas, yet few details
are known about these lawsuits. To address this gap, we
conducted a national survey of plaintiff and defense attorneys
who litigate in this area. The empirical evidence I present
today is from this study.
We found that nursing home litigation is a new and growing
industry that is heavily concentrated in a handful of States.
Our data suggests that attorneys mobilized into this area in
the mid 1990's and that claims and the size of recoveries have
grown substantially in recent years. More than half of the
8,000 claims identified in our survey were in Florida and Texas
alone.
Claimants look like your typical nursing home resident,
often elderly Medicaid recipients, often with dementia or
Alzheimer's disease. The claims themselves typically involve
serious allegations. More than half involved deaths and
allegations of pressure sores, malnutrition and emotional
distress featured prominently.
While few nursing home claims went to trial, almost 9 in 10
recovered some damages for the plaintiff. This is almost 3
times the payout rate for medical malpractice claims. With
average payments of almost $400,000 per claim, these data imply
total compensation to plaintiffs of $2.3 billion nationwide.
The factors driving recent trends in nursing home
litigation are unclear. The bottom line is that we do not
currently know how accurate nursing home claims are. In
particular, we do not know the extent to which nursing home
litigation, (A) reliably tracks negligence; (B) deters poor
quality care; or, (C) compensates residents with meritorious
claims. One can speculate about each of these points. To the
best of my knowledge, though, no studies have addressed these
questions in a convincing way.
Still, the overall scale of the litigation is cause for
concern. Total compensation payments in Florida were around 20
percent of the State's total nursing home spending. In Texas,
this proportion was 15 percent. In addition, failures in the
liability insurance market can make it difficult for nursing
homes to protect themselves against the risk of large
settlements, leaving them, and ultimately residents, exposed to
this risk.
Some have argued that the recent litigation trends bolster
the case for relying on conventional tort reforms. Several
States have recently passed legislation treating nursing home
and medical malpractice claims with the same broad brush. I
would caution against such an approach. Compared to medical
malpractice, nursing home claims have distinctive features that
raise questions about using generic reforms across the care
continuum. I will focus on three:
First, nursing home awards are disproportionately made up
of noneconomic damages. Our results indicate that noneconomic
damages accounted for 80 percent of nursing home awards,
roughly double the proportion in medical malpractice. The
implication of this is that caps on noneconomic damages, one of
the more prominent tort reform strategies, would have a more
severe impact in the nursing home sector, raising potential
questions of equity.
Second, punitive damages are relatively common in nursing
home litigation. While punitive damages play a very small role
in medical malpractice, they figure in almost 20 percent of
nursing home payments. For policymakers seeking to control
high-end verdicts, punitive damages are a potentially effective
target in the nursing home sector. In addition, limiting
punitive, rather than noneconomic damages, is less restrictive
of residents' ability to be compensated for their losses.
Finally, a third distinct feature of nursing home claims is
their injury profile. In nursing homes, the usual focus of
malpractice suits, like missed diagnoses and surgical errors,
give way to allegations of neglected bed sores and emotional
abuse. More than half of nursing home claims involve deaths
compared to 1 in 5 medical malpractice claims. For policymakers
who feel exceptions should be made in egregious cases, the
nature of alleged nursing home injuries may provide a ready
supply of such cases, potentially undercutting the
effectiveness of reforms.
In conclusion, lawsuits against nursing homes have grown
substantially in the past several years. At this point, it is
unclear whether nursing home litigation has reliably tracked
negligent care, deterred substandard care or compensated
residents with worthy claims.
As policymakers seek to address the recent liability
crisis, distinct features of nursing home litigation should be
recognized and their implications treated seriously. If they
are not, reforms face the danger of being unfair and
ineffective.
Thanks very much.
[The prepared statement of Mr. Stevenson follows:]
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The Chairman. David, thank you very much for that
testimony.
Now, we will go to Theresa Bourdon.
Theresa?
STATEMENT OF THERESA BOURDON, FCAS, MAAA, MANAGING DIRECTOR AND
ACTUARY, AON RISK CONSULTANTS, INC., COLUMBIA, MD
Ms. Bourdon. Good afternoon, Chairman Craig, Senator Dole.
My name is Theresa Bourdon, and I am a fellow of the
Casualty Actuarial Society and a member of the American Academy
of Actuaries. In addition, I am the managing director of Aon
Corporation's Property and Casualty Actuarial Consulting
Practice. Aon is the leading actuarial consultant to the long
term care industry with respect to the evaluation of the cost
of patient care liability claims.
I would like to thank the Senate's Special Committee on
Aging for giving me the opportunity to testify today. I feel
that it is important for members of this committee to
understand that I do not work for an insurance company. I
provide consulting services to entities, including nursing
homes, to assist them in financing their exposure to liability.
Most of my clients are self-insured. In this context, my
testimony is largely focused on the litigation activity of
nursing homes, as opposed to the insurance availability and
affordability. Because, regardless of whether a nursing home
buys insurance or self-insures, it is an increase in litigation
that is the driving cause of the above-average increases in the
cost of risk per bed occurring in a multitude of States
throughout this country.
Legislative changes that will reduce the cost of risk and
provide greater predictability in the number and size of claims
will directly impact the litigation trends. By reducing the
litigation trends, you will also be responding to the issue of
insurance availability and affordability. The correlation
between the two is not 1-to-1 due to a number of other
variables that influence insurance pricing. However, it is very
high.
To help you understand the magnitude of the litigation
trends, let me share some statistics with you. Aon has recently
completed its fifth annual study of the rising cost of
professional and general liability claims asserted against long
term care operators. In the study, which includes 24 percent of
the beds in the United States, which is approximately 470,000
nursing home beds, costs are projected to reach almost 2,300
per occupied nursing home bed for incidents alleged to have
occurred in calendar year 2003. Nationally, these costs are now
7 times higher than they were in the early 1990's.
On a cost-of-care basis, this means that $6.27 per day
needs to be set aside per long term care resident just to cover
the cost of litigation. This is equal to 5 percent of the
countrywide average per diem reimbursement rate for Medicaid,
the Government source of funding for approximately two-thirds
of all nursing home residents.
The providers represented in our study are expected to
incur $1 billion in liability claims in 2004 alone.
Extrapolated to a national basis, this exposure is a multi-
billion-dollar-a-year cost to the nursing home industry, and
almost half of the total cost is going directly to attorneys.
The number of claims against nursing home operators is
increasing by approximately 13 percent annually, with a current
rate of 15 claims per thousand nursing home beds per year. If
you consider that the size of a typical nursing home is about
100 beds, that is roughly 1.5 claims per facility per year. The
rate of increase in the number of claims in the long term care
industry is unprecedented, both in terms of this industry's
history and the rate of increase in the number of liability
claims incurred by other health care providers.
In addition to the growth in the number or frequency of
claims, there has been a significant increase in the size or
severity of the average award. The average size of long term
care liability claims, which includes indemnification paid to
the plaintiff and all related attorney fees has almost tripled
from 65,000 per claim in the early 1990's to between 150,000
and 200,000 in more recent years.
Florida and Texas were leaders in driving forward the
increase in long term care liability costs. Our 2003 projected
loss cost is $8,200 in Florida and $5,500 for Texas. Numerous
other States across the country are now experiencing increasing
cost trends and appear to be headed toward loss costs per bed
similar to those in Florida and Texas. Most notable on this
chart is Arkansas.
These rising litigation costs are already beginning to
impact the industry in the following ways:
First, there is a lack of expansion in the nursing home
sector of elder care services. In fact, the number of available
nursing home beds is on the decline. Between December 2001 and
December 2003, the number of certified nursing home beds in the
United States dropped 20,000 according to CMS OSCAR Data
surveys. Large multi-state providers are choosing to leave the
States like Florida and Texas, where the cost of care has
exceeded the funding available to pay for it. In addition,
there is very little expansion into other States.
Second, smaller providers and those that have not
diversified into multiple geographic regions are, in many
cases, choosing to go uninsured or underinsured. Additionally,
the organizations that are buying the facilities being divested
by larger multi-state operators are often doing so with
materially reduced limits of liability from the levels
traditionally available from divesting operators. All of this
has the effect of reducing the average compensation for
patients who truly have suffered a patient care violation.
Last, lending institutions are restricting capital
investments by more strictly underwriting this industry. Where
loans are available, the cost of borrowing has gone up due to
the litigation risk, further adding to the cost of delivering
health care to the elderly.
The long term outlook, if reforms are not implemented, is a
continued contraction of available nursing home beds,
particularly for those Americans who depend on Medicaid funding
to provide these services. One does not have to be an actuary
to figure out the ramifications of such a contraction as the
baby boom generation approaches retirement age.
Thank you for the opportunity to provide this testimony,
and I would be pleased to answer any questions you may have.
[The prepared statement of Ms. Bourdon follows:]
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The Chairman. Theresa, thank you for that testimony. Those
are startling statistics.
Before we move to Mr. Estes, we have been joined by our
colleague, Senator Blanche Lincoln. Blanche, do you have any
opening comments you would like to make?
Senator Lincoln. No.
The Chairman. Well, we appreciate your presence with the
committee today.
Now, let me turn to Norm Estes, president and CEO of NHS
Management. He has already been introduced at length by Senator
Shelby, and we do appreciate that.
Norm, welcome before the committee.
STATEMENT OF J. NORMAN ESTES, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NHS MANAGEMENT, TUSCALOOSA, AL
Mr. Estes. Good afternoon, Chairman Craig and members of
the committee. My name is Norman Estes, and I am the president
and CEO of NHS Management, LLC.
The Chairman. Is your microphone on?
Mr. Estes. I do not know. I think so.
The Chairman. Is there a button to be pushed on that one?
Mr. Estes. Maybe it needs to be a little closer. I was
trying to keep from being too loud, which is my tendency. Is
that better?
The Chairman. That is better. Thank you.
Mr. Estes. Good.
The Chairman. I am also 58 years of age. [Laughter.]
Mr. Estes. Thank you. As I was saying, I am the CEO of NHS
Management, LLC, and affiliated companies. Our companies
operate, manage and provide services to 39 nursing facilities
throughout the Southeast. The Southeast, by the way, is one of
the hardest-hit regions of the country from the standpoint of
today's topic.
Today, Mr. Chairman, I speak on behalf of the American
Health Care Association. We are a national organization
representing more than 10,000 providers of long term care who
serve, on average, 1.5 million elderly and disabled people per
year and employing more than 1 million caregivers nationally.
I have worked in and around nursing homes all my life and
am proud to continue a family tradition started three
generations ago. I care deeply about this profession and care
deeply for the frail, elderly and disabled who trust us to
provide quality care that they can depend on.
I would like to use my time today to discuss the following
three items:
One, the budgetary challenges that we currently face and
you face today as legislators here in Washington;
Two, the demographic challenges that we all face and how
that affects our need to attract capital to our profession;
Third, how elderly patients are being victimized by the
crowding out or the diversion of funds away from our ability to
improve patient care so that we can allocate those funds to the
higher cost of lawsuits.
Every way you look at it, Mr. Chairman, the litigation
status quo, as we have it today, benefits the few at the
expense of our elderly, our taxpayers and our Nation's future
and strikes directly at the credibility of our system of
justice, fairness, and our basic sense of right and wrong. With
so many competing demands on the Federal budget, we must ensure
Federal dollars are used efficiently to serve the specific
intended purposes. Unfortunately, because of this problem
today, that is not always the case with our Medicaid program.
In a stark and statistically undeniable manner, the
Nation's plaintiff lawyer community has targeted the Medicaid
program and the dollars meant to pay for seniors' long term
care services. Research shows that in the last 3 years more
than $2 billion have been diverted away from Medicaid to pay
for the cost of lawsuits.
In many States, like Texas, Florida and Arkansas, nearly
half of the Medicaid rate increases from 1995 until 2003 have
not even reached the elderly Medicaid residents they intended
to benefit because of this diversion issue that I raised today.
While the Nation's health care system is serving greater
numbers of seniors under mounting Federal and State budgetary
pressures, failure to bring more accountability to the way
these Medicaid expenditures are made, through common-sense
legal reforms, is a disservice to every senior and taxpayer in
America.
The very funds necessary to help improve care are being
systematically removed from the health care system. The number
of Americans requiring long term care will double to 7 million
by the year 2020 and double again to 14 million by the year
2040. In the face of growing demand for facility care, the
number of available nursing home beds is on the decline. To the
detriment of patients, some of the larger multi-state providers
are choosing to simply leave States because they can no longer
afford liability insurance.
Access to capital continues to be a critical problem for
our sector, and while there are a variety of causes, the
litigation crisis has exacerbated the situation. Bank loans,
bonds and other forms of capital that fund day-to-day
operations for most nursing facilities are an absolute
necessity to maintaining and improving quality care.
With much of the current discussion about the Federal
health care policy centered upon the need to improve quality
care in our hospitals, nursing homes and other settings, it is
significant and timely that Government and professionwide
initiatives to improve the quality of nursing home care are
beginning to receive a great deal of national attention. Those
of us in long term care are enormously excited about the
Federal Government's National Home Quality Initiative or what
we call, NHQI, and our profession has started its own quality
initiative that we call Quality First.
There is no question that an honest and reliable
performance measurement system, coupled with a system of public
disclosure, provides consumers with the best-possible
information for comparing quality and basing their long term
care choices and decisions.
But while we move forward on the quality front, we are once
again confronted by the fact that resources that could be
utilized to help improve care are being crowded out or diverted
to pay for non-productive legal expenditures. Every dollar
spent on defense attorneys and legal settlements is a dollar
directed away from staffing needs, therapies, and programs that
make a real difference in quality care for seniors and for the
very quality of life that they have in our facilities.
Today, Mr. Chairman, we can say that there has never been a
broader recognition by Government and the provider community
about the importance of quality care nor a broader commitment
to work cooperatively to improve it.
We look forward to working with this committee, this
Congress and this administration to help restore balance to the
legal system and where Federal resources designated to care for
the frail, vulnerable and disabled Americans is utilized for
this noble purpose.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Estes follows:]
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The Chairman. Thank you very much.
Now, let us turn to Marshall Kapp, a distinguished
professor of law and medicine, Southern Illinois University.
STATEMENT OF MARSHALL B. KAPP, J.D., M.P.H., FCLM,
DISTINGUISHED PROFESSOR OF LAW AND MEDICINE, SOUTHERN ILLINOIS
UNIVERSITY SCHOOL OF LAW, CARBONDALE, IL
Mr. Kapp. Thank you. Good afternoon and thank you for the
opportunity to address the committee today. I come at today's
subject from the perspective of a health law academic.
You have heard from others the results of several
quantitative studies. I have done extensive qualitative
research, including conducting numerous extensive discussions
with physicians and other health care providers, particularly
in geriatrics and long term care, regarding providers'
perceptions of the legal climate in which they live and the
ways in which those perceptions affect providers' behavior,
with consequences for the quality of care and quality of life
of older consumers of long term care.
Based on my research, I would like to share several
conclusions regarding the impact of the current litigation and
liability climate on long term care providers and their
behavior and the consequences of that behavior for older
consumers.
First, long term care providers' anxieties about
functioning in what is perceived to be a perpetual, pervasive,
highly adversarial legal environment are, whether factually
based or sometimes exaggerated, real, sincere and powerful. As
one provider explained to me, the fear is everywhere. It is in
the ether.
Providers' legal apprehensions emanate from the cumulative
effect of a variety of sources, including not just civil
litigation brought against providers by or on behalf of long
term care consumers, but also enormous increases in
professional liability insurance premiums, when such insurance
even is available in one's geographic locale; the energetic and
relentless media attack on long term care providers; a
combination of Federal and State governmental quality assurance
and fiscal integrity mechanisms that several providers have
described to me as, in their perception, virtually a
``regulatory jihad,'' including most notably Medicare and
Medicaid certification requirements and surveys, State
licensure inspections and potential criminal prosecutions or
civil penalties for elder abuse and neglect or other clinical
crimes and for program fraud and abuse; the growing role of
private accreditation agencies and third-party payers in
overseeing long term care activities; and the proliferation and
enlarged presence of private organizations purporting to
advocate for older long term care consumers against long term
care providers.
In many respects, apprehension about potential litigation
and liability has exerted the expected, desired, positive
effect on providers' behavior and the resulting quality of
care. We have to acknowledge that sometimes tort law actually
does work as intended. Areas in which long term care quality
has improved in the past decade, at least in part because of
the deterrent impact of the tort system, include a drastic
reduction in the use of physical and chemical restraints, more
vigorous attempts and efforts to protect against medication
errors and enhanced respect for residents' rights.
However, to a significant extent, the constant, virtually
universally perceived frightening legal environment acts on the
provider community to incentivize behavior carrying the risk of
negative, counterproductive effects on consumers' quality of
care and quality of life. Just a few specific examples of the
negative impact of excessively defensive long term care
practice would include:
A reluctance to openly identify, disclose, discuss, and
remedy treatment errors because of fear that such error-
addressing activity will harm providers in subsequent
litigation;
The devastating impact on staff morale at all levels that
makes it much more difficult to attract and retain adequate
people, let alone the best and the brightest who are
desperately needed to work in long term care, thereby
jeopardizing quality and continuity of care for consumers;
Overtreatment, for example, excessive infliction of life-
prolonging medical technology, premature or unnecessary
transfer to acute care hospitals, reluctance to honor consumer
and/or family wishes to limit treatment, and undertreatment--
mainly inadequate administration of pain medications--in many
end-of-life situations that unfold in long term care
facilities; Efforts by long term care providers to avoid
entering into professional relationships with individuals who
are anticipated or whose families are anticipated to be
potential ``litigation magnets,'' to use the term that I have
heard frequently, thereby impairing access to needed services
for some older persons.
Certainly, forms of external oversight and possible
intervention, including legal oversight and intervention, have,
and should continue to have, an important salutary role to play
on behalf of the interests of long term care consumers. At the
same time, it is not in anyone's best interests for long term
care providers to continuously live and work in fear that legal
sanctions will be imposed against them for providing care that
they honestly and conscientiously believe is clinically sound
and ethically correct. The challenge is to review and revise
the long term care system in ways that optimize the positive
role of external oversight and possible intervention, while
encouraging more open, honest and nonadversarial relationships
among all of the involved parties.
Thank you.
[The prepared statement of Mr. Kapp follows:]
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The Chairman. Professor, thank you very much.
Now, let us turn to Dr. Lawrence Cutchin, president of the
North Carolina Medical Association in Raleigh.
Doctor, welcome before the committee.
STATEMENT OF LAWRENCE M. CUTCHIN, M.D., PRESIDENT, NORTH
CAROLINA MEDICAL SOCIETY, RALEIGH, NC
Dr. Cutchin. Good afternoon, Chairman Craig, Senator Dole,
Senator Lincoln. I am Lawrence Cutchin, M.D., president of the
North Carolina Medical Society and an internist from Tarboro.
On behalf of the physicians of the North Carolina Medical
Society, I would like to extend to you my appreciation, and to
the members of the committee, for allowing me to be here this
afternoon before you to comment on the ways that our Nation's
medical liability crisis is seriously threatening access to
health care for all of us, and in particular the medical care
for patients in long term care facilities.
Long term care is an indispensable part of our health care
system. The continued productivity of our work force and
quality of life for their families depends, in many ways, on
the availability of long term care. In the past, we have
perhaps taken for granted that liability insurance would be
available and affordable so that patients could be compensated
in legitimate cases of negligent care. Today, however, the
status of medical liability in North Carolina's long term care
facilities has reached crisis proportions.
Insurance costs, as you have already heard, have
skyrocketed. This has been well-documented by private actuaries
whose work has been made available to the members of this
committee. North Carolina has not escaped these problems.
Premiums for some North Carolina nursing homes have skyrocketed
by as much as 1,800 percent since 1995.
North Carolina Medical Mutual Insurance Company, which is
the largest insurer of physicians in North Carolina, has
determined that many long term care facilities have taken
drastic steps to compensate for this escalating cost. Among the
steps is a negotiation of contracts with their part-time
medical directors to shift liability to them for purely
administrative functions of the nursing home; that is,
liability that is totally unrelated to the actual medical care
the doctors are providing.
Most professional liability policies, and in particular
policies by North Carolina Medical Mutual, do not cover this
contractually assumed liability. Additionally, some large
nursing home chains now share one single annual limit of
liability insurance of a million dollars or so and other much
smaller companies just do not have insurance at all. They
cannot afford it.
The physicians serving as medical director for one of these
nursing homes faces extraordinary additional risk exposure in
the event of a lawsuit, where the underinsured or uninsured
nursing home is a codefendant. To address this problem, some
insurance companies have canceled, not renewed or refused to
cover physicians who spend a significant portion, for example,
15 percent or more, of their professional time serving as
medical director for nursing homes.
In North Carolina, we have four malpractice insurance
companies still active. Two of those are not actively pursuing
new insureds, as a matter of fact. One had significant loss on
payouts last year, with resulting decrease in its surplus. It
is still solvent.
Medical Mutual Insurance Company, which I said again is the
largest in the State, will no longer insure any physician,
either a new policy or renew an old policy on a physician who
has at least 15 percent of his practice involved with nursing
home care.
The resulting lack of doctors to fill these roles has left
some nursing homes without a medical director, placing them in
violation of Federal certification standards. This is an
untenable situation, to say the least, that can lead to
problems with access and quality of medical care for long term
patients.
Other nursing home responses to the liability crisis
include reduction in staff hours, freezing wages and reducing
residents' activities. These adaptations, together with the
loss of available medical directors, escalates the professional
risk associated with the medical care of nursing home
residents, making already reluctant physicians think twice
about taking on the care of nursing home patients as part of
their practice.
In North Carolina, nursing homes, physicians and hospitals
formed a coalition in late 2002 to address the medical
liability crisis. Among the reforms that we sought together,
through this coalition at the State level, were the
establishment peer-review privilege to protect proceedings,
records, and materials produced by or considered by a Quality
Assurance or Medical Review Committee from discovery or use in
a civil action against a nursing home; and, two, liability
limitations for nursing home medical directors who might
otherwise be named as a defendant in an action against a
nursing home.
We believe there are solutions to this crisis, and we
believe the long term care system is worth saving. It has to
be. We believe the U.S. Senate should act to reduce the
excessive burden of our broken liability system on our Nation's
long term care providers.
Thank you for the opportunity to be with you, and I will be
glad to answer any questions.
[The prepared statement of Dr. Cutchin follows:]
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The Chairman. Doctor, thank you for that testimony.
Now, let us turn to James Lett, immediate past president,
American Medical Directors Association. I said ``Carmel.'' That
is Carmichael.
Dr. Lett. Carmichael, yes, sir.
The Chairman. California.
Dr. Lett. Correct.
The Chairman. Excuse me.
Thank you.
STATEMENT OF JAMES E. LETT, II, M.D., C.M.D., IMMEDIATE PAST
PRESIDENT, AMERICAN MEDICAL DIRECTORS ASSOCIATION, CARMICHAEL,
CA
Dr. Lett. Good afternoon, Mr. Chairman, esteemed panel
members. Thank you for this opportunity.
I am Dr. James Lett. I am the immediate past president of
the American Medical Directors Asian or AMDA. It is a greater
than 7,000-member organization dedicated to the care of frail
elders and others who inhabit America's long term care
facilities. More importantly, I am a full-time geriatric
physician in Sacramento, CA, spending my days in nursing
facilities in the care of those frail elders. I have learned
one thing; that the best way to provide excellent care to this
vulnerable population is having available, committed,
knowledgeable physicians who compete to provide that care. The
winners are our patients.
Thank goodness, due to efforts by dedicated groups like
AMDA, the body of knowledge about this unique population has
greatly expanded. Even better news is that the pool of
physicians who can apply this information and meet those needs
has greatly expanded, that is, until recently.
At a stunningly increasing pace, physicians are leaving
long term care not of their choice, but because they cannot
afford or, in many cases, cannot attain professional liability
insurance at any price. I am seeing the effects. Locally, I am
assuming care of residents for a physician who cannot obtain
professional liability insurance and one who is retiring for a
similar reason.
Statewide in California, I have one colleague who is a
professor of geriatrics at UCLA. After 13 years, his coverage
was canceled. What was his sin? He marked ``yes'' in the box,
``Do you see nursing home patients?''
For another colleague, an acknowledged statewide leader in
long term care whose group sees 8,000 visits a month in nursing
homes in Southern California, the only professional liability
insurance she can obtain for her group is a month-to-month
policy. So, on July 31 of this month, Chris will sit by her fax
machine hoping to receive the letter of renewal from her
insurance company so she can see patients August 1, as she does
each month. Helpfully, her insurance broker suggested that she
fire the four most experienced physicians in her group to
``reduce their liability exposure.'' So not only would she lose
physicians who want to practice, but those residents lose
experienced physicians who want to see them.
Nationally, AMDA was stunned by calls around the country
from members about the magnitude and widespread nature of the
crisis. In order to learn more, we conducted some surveys,
which are to my left on the easel.
In 2002, we found about 1 out of 5 of those respondents had
difficulty obtaining or renewing their liability coverage. More
importantly and worrisome, 27 percent of the respondents said
they modified their practices because of liability concerns.
Just over 5 percent of them resigned their roles at one or
more, I should point out, nursing facilities in this country,
which is, as has been described by Dr. Cutchin, a federally
prescribed role to oversee quality of care in long term care
facilities.
Nearly 9 percent reduced patient care hours. They began
turning complex cases over to others.
We asked the question whether this was a bad year, a bad
survey or an impending crisis. We got our answer the next year.
About the same number of respondents reported they could not
get medical liability coverage or had difficulty renewing it,
but the number that jumped out at us is now over a third of
them directly were told they could not renew or get insurance
because they work in nursing facilities. The number that
reported that insurance companies pulled out of the market
doubled over the course of that survey.
Even more importantly, again, nearly 1 in 5 physicians said
they significantly modified their practices due to liability
concerns. What concerned us even more was that it was double
the number this year--10 percent who stopped being medical
directors, and the 10 percent stopped providing care in nursing
homes, 3 times as many reduced patient care hours in nursing
homes, and 3 times as many began referring complex cases.
Another terrible number not up there: 10 percent of the
respondents in this group simply locked their doors and turned
out the lights in their offices, on their medical practices.
While this trend continues to decimate the pool of available
physicians, the same barriers that forced the current exodus
limit potential physician entrants into long term care, even
though they wish to enter.
Ultimately, access to care will simply be overwhelmed, as
the shrinking pool of long term care physicians collides with
the need for access, as some 76-million baby boomers explode
upon our Nation.
The dedicated long term care physicians of America,
specialists in the care of frail elders, implore you to ensure
a pipeline of committed, knowledgeable and, above all,
available physicians to the frail elders of long term care.
Please enable, not disable, access, for only access will assure
quality to the vulnerable elders in America's nursing homes.
Thank you, Mr. Chairman.
[The prepared statement of Dr. Lett follows:]
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The Chairman. Well, Doctor, thank you very much. I guess my
first reaction to most all of the information you have provided
this afternoon is the reaction of being alarmed that the care
that our seniors need may, in many ways, be diminished
dramatically by the information that you have provided to us.
Let me, in prefacing that, say that this really is about
providers and doctors and not about attorneys. It is about the
vulnerable, frail elderly who are in need of nursing home care.
And it is in that context that I will begin my questioning
starting with you, David.
As an academician--academic, I should say--looking at the
statistics and the facts and gathering that information that
you have supplied to us in part, in your view, what information
or more information is needed to better understand the
relationship between quality care and litigation?
Mr. Stevenson. Thanks for the question. This is an
important question and one whose answer affects the appropriate
policy response.
Professor Kapp talked about the positive and the negative
influences of the tort system on quality of care. As I said in
my remarks, we do not yet know what the relationship between
quality and litigation is. We do not know if the net effect has
been bad or good, despite the alarming trends we have heard
about and despite the alarming stories.
Ultimately, what is needed in this area is more research
that is done at the level of the nursing facility and also at
the level of the individual nursing home litigation claim.
Now, if I could just clarify for one moment why this is
such an important question. If the relationship between
litigation and quality were essentially random, if it were not
there, that would imply one sort of situation that might
emphasize tort reforms aimed at reducing the nonmeritorious
claims. However, if it were shown that litigation was tapping
into a reservoir of substandard care, you might take another
approach to the problem, and in fact you might look outside of
the litigation and the legal system more generally.
So I should say that it is an important question, but a
very important question.
The Chairman. Is there any study that has been done that
links quality indicators with survey deficiencies to the
likelihood of a facility being sued?
Mr. Stevenson. I know of four studies that have looked at
this question, all of which have focused on State-specific
data. Three of these have been done in the State of Florida,
and one of them has been done in the State of California. The
three in Florida were done by academics. The one in California
was done by an advocacy group. These studies have reached mixed
results.
I should also point out that they face limitations in their
interpretation not only because they are State-specific
studies, but also because there is a challenge in obtaining
data on all litigation claims. It is simply hard to get access
to those data, so it is hard to do national studies, on this
question.
The Chairman. The GAO found that one-fourth of the nursing
homes studied had deficiencies causing harm to residents,
replacing them at risk of injury. Forty percent of these
facilities were repeat offenders. Could liability cost issues
be effectively addressed by simply cracking down on the 40
percent to improve safety?
Mr. Stevenson. If the litigation claims were concentrated
among the worst facilities, which I would say is an open
question, but if they were, one could imagine that having some
major impact.
Perhaps Professor Kapp can speak to the relationship
between tort law and regulation, between which there are
different but complementary purposes. But if one were to
magically remove the repeat offenders from the universe of
nursing homes, perhaps this would help mitigate the problem,
but there still could be serious problems that could come up in
the other nursing homes, I would argue.
The Chairman. Now, as I ask these questions, and as we move
down the line, if you wish to respond in part to a question
already asked or believe you can offer additional information
to it, please feel free to do so as we visit with you this
afternoon.
Theresa, you mention in your testimony factors that affect
insurance availability and cost of premiums other than
litigation. What are those factors?
Ms. Bourdon. There has been a very thorough discussion of
these factors provided by the American Academy of Actuaries,
last March 2003 to the Senate Committee on Appropriations when
they conducted a hearing on the medical malpractice liability
crisis.
In summary, the key factors:
One is the lag effect in recognizing changes in trends.
Another is investment yields, as premium dollars can be
invested between the time they are collected and the time they
are needed to pay for claims.
A third is reinsurance capacity--the insurance insurers buy
to help them spread the risk of the risks they are insuring.
Fourth would be competitive pricing, particularly during
periods of expansion into new markets. The mismatch between
premium increases and current loss cost trends that may be
occurring now in the nursing home industry is really the result
of a period back in the late 1980's, early 1990's of unexpected
low trend, very favorable investment yields, extensive
reinsurance capacity and aggressive expansion into new markets
because at that time health care was considered a profitable
line of business to be in.
This period was then followed by a period of worsening
trends, lower investment returns and increased insurance costs,
creating the ``Perfect Storm'' that is resulting in the huge
premium increases now.
There was a great quote from the American Academy's
statement that said, ``While one can debate whether companies
were prudent in their actions, today's rate increases reflect a
reconciliation of rates and current loss levels given available
interest yields. There is no added cost for past mispricing.
Thus, although there was some delay in reconciling rates and
loss levels, the current problem reflects current data.''
The Chairman. How does the rate of increase and the size of
the claims in nursing home care compare with the liability
claims incurred by other health care providers?
Ms. Bourdon. Based on research that we have done at Aon,
both on the nursing home industry and hospital and physician
liability claims, we see a material difference in the overall
trend in total losses. Hospitals have been trending, based on
research we have been doing for the last 4 years or so, at
about 10 percent per year.
We look back 10 years every time we do our study, and the
trends have been fairly consistent for the last decade in our
research. Nursing homes in total, as reported in the study that
we have made available to this committee, are incurring an
average annual trend of about 17 percent over the last 9 years.
It was greater in the earlier years of that period of study,
and it has tapered off a little due to Florida and Texas and
effects there that we expand on in our study.
If you exclude Florida and Texas, the rest of the country
is incurring about a 27-percent year-over-year trend, compared
to hospital and physician data that we have analyzed. If you
break it down between the number of claims and the size of
awards, our research on hospitals and physicians indicates that
frequency really is not an issue. There is maybe a 3-percent
year-over-year increase in the number of claims against
physicians and hospitals. The growth is in the size of the
awards, which are growing at about 6.5 percent year-over-year.
Contrary to that, on the nursing home side, if we ignore
the effect of Florida and Texas and the corresponding
withdrawal of much of the industry from those States, and look
at the rest of the country, claims are increasing at about 15
percent year-over year, and the size of the awards are
increasing 10 percent. So you have the double effect of claims
increasing in number and the size of the awards growing.
The Chairman. As I turn to my colleague for her time for
questioning, you used the phrase once or twice, if you ignore
Florida and Texas. How do you ignore them? Are they not lead
indicators in the public pool?
Ms. Bourdon. They are lead indicators, but there have been
a lot of factors that have occurred in the industry in the last
few years that are causing some distortion in the actual
trendlines. One of the largest factors is that many of the
nursing home providers, particularly the multistate providers,
are leaving Texas. They have left. Let us put it in the past
tense. They have left Florida, they have left Texas. They
cannot do business there. When you leave a State with an
average cost per bed of $8,000 or $5,000, you lower the
average. So when you looked at the first graph we put up, the
trendline appears to be tapering off, but there are other
factors that are causing that besides just getting this issue
litigation under control.
In addition, in those States Florida and Texas it is very
hard to buy insurance. So a lot of providers do not even have
insurance, and therefore, the claims are not coming in any
more, or they are coming in with very low limit claims because
providers are purchasing a minimal amount of coverage, $25,000
per claim, for example, whereas the larger providers used to
provide unlimited amounts of recovery for plaintiffs.
The Chairman. When you were talking about 8,000 or 10,000
per bed annually, you were talking about that against the
average figure that you gave us of 2,000; is that correct?
Ms. Bourdon. Exactly. So when you take out the 8's and the
10's and the 5's it drops the average.
The Chairman. That would drop averages, you bet it would.
Let me turn to my colleague, Senator Lincoln.
Senator Lincoln. Thank you, Mr. Chairman, for certainly
bringing up this hearing on a very important topic of liability
concern in the long term care setting. It is certainly clear to
many of us this country is at a crossroads in regards to the
process by which a patient seeks the compensation for harm
occurring in the medical setting, and at this crossroads we
have to make some decisions, because clearly, I think, to many
of us, it has become quite an issue of patient access.
Skyrocketing insurance costs are driving our physicians from
the practice of medicine. They are closing the doors of our
long term care facilities, and affecting the overall access to
affordable and available health care.
It is especially true in some of our more rural areas of
the country, such as my State in Arkansas which you have
mentioned a couple of times, and something has to be done.
States like Arkansas, we are a snapshot of where the rest of
the country is going to be in the next 15 years. We rank No. 6
in this country as a percentage of our population that is over
65. So we rank up there with California, Florida, Pennsylvania,
Arizona and other States, and unfortunately, our population of
elderly tend to be more disproportionately low-income and
disproportionately in those rural areas, so they are more
difficult to serve.
But being that snapshot, we also recognize that the rest of
the country is soon to follow where we are in the
circumstances, and we really have got to work at solving this
problem and cannot become locked into one solution. Oftentimes
that is our problem here in Washington, becoming locked into
one solution to the detriment of others, and I am afraid that
some of what has happened in the Senate, while our constituents
are driving long distances just to find a physician that will
treat them or visit their parents in a long term care facility,
the Senate has been debating the same solution in different
forms with the same results, and that is why we are glad you
are here today to help us look from many perspectives of what
the solution must be in order to eliminate that detriment to
the access of care.
We have seen in most of these proposals a $250,000 cap on
the non-economic damages, which really has not politically been
a viable solution in Congress, and I am not sure that it will
be in the near future. Our hope is, is that we can look at
multiple areas of places where we can bring together a
consensus. Certainly our constituents do not need to suffer
because of what we do up here, treading water, instead of
getting something done. My hope is, is that we will look at
some alternative forms and approaches to tort reform.
One of the ones in one of my working groups--and, Dr.
Cutchin, my husband did his residency in North Carolina, so I
come from it from all perspectives--but really looking at some
of the alternative forms. One of those has been medical review
boards, which can lower some of the liability costs for
providers and help maintain I think some of the current levels
of access to care, or increase that level of access if we can
bring down some of those liability costs, and would like to
certainly hear any of your thoughts on the panel about that
solution to tort reform or at least as being a part of that
overall solution that we need, in bringing together hopefully a
comprehensive package of tort reform that is going to help make
more availability of liability insurance, but more importantly,
bring down those costs that are detrimental to our physicians
and to our medical facilities, our hospitals and everything
else.
Without a doubt, we cannot delay much longer on this
matter, certainly not indefinitely and I hope that we will not.
So I thank the Chairman for bringing this up.
Dr. Stevenson, you mentioned in your testimony that the
caps on non-economic damages could have a disproportionate and
unfair effect on the plaintiffs in long term care malpractice
actions. To some degree that seems to be one of our biggest
sticking points in the Senate. Do you have any other solutions,
or maybe others on the panel may out there, that we could
address in terms of the rising liability costs other than those
caps or maybe looking at how we redistribute those caps on non-
economic damages or at least take a different perspective?
Mr. Stevenson. I should start off by saying I am not a
health lawyer, and so I am treading on thin ice with some of
these points. I should also point out by way of clarification
that in detailing the differences and talking about the large
role of non-economic damages for claims that nursing home
residents tend to be involved in, I am not arguing one way or
another about tort reform more generally. What I am arguing is
if tort reforms move forward they should pay attention to the
distinct characteristics of nursing home claims, rather than
assuming these differences away by imposing generic reforms.
But I would cede the floor to other people who know a great
deal more about health law and tort reform.
Senator Lincoln. I think we too want to cover all the
bases. We do not want to just focus on one area of tort reform
that is going to only help one section of the medical
community. Anybody else? Dr. Kapp?
Mr. Kapp. Tort reform encompasses several things. It could
encompass things like damage caps which essentially take the
existing system and try to make it work better. Essentially
damage caps, when one advocates damage caps, one is saying we
have a good basic tort system. We need to tinker with it. We
need to make some changes in it to make it work better.
The other approach, of course, is to say that resolving
claims of substandard medical care that injure a patient ought
to be dealt with in a different kind of system, that the tort
system, as it currently exists in its adversarial environment,
is not the best way to accomplish the two goals of compensating
injured victims and improving the quality of care, and that
perhaps administrative systems, and you mentioned one, that
would substitute for the existing mechanism of resolving
disputes about quality of care would be a more viable and
positive way to address the issue. My own view is that
discussions about damage caps and other tinkering mechanisms
with the existing system are mistaken in taking as viable the
existing system that can be made better by tinkering at the
edges.
Senator Lincoln. So explain that. You are saying that you
do not think tinkering is the way to go, that we need a
complete overhaul, or are you saying that the current system
through some modifications is still a viable system?
Mr. Kapp. I would argue for the former, for the replacement
of the existing system or some administrative mechanisms. I
understand the problems of political viability, but I would
argue in favor of the more radical approach, the more systemic
approach.
Senator Lincoln. You do not mean in terms of the due
process that individuals have, your feeling that that can be
done with every confidence that people's right to due process
can be preserved?
Mr. Kapp. I think it can be. Obviously, the devil is in the
details----
Senator Lincoln. It usually is around here.
Mr. Kapp. I do believe that that is the approach that ought
to be pursued.
The Chairman. Could I follow up on that? Are you suggesting
that in certain instances a review board or a board that can
make a determination of findings and therefore a potential of a
reward for damages, versus, if you will, the threat of a
lawsuit that would take one to a trial setting, and therefore
settling out of court, and all of those kinds of things that
hold down expenses, if you will, and do not argue the issue may
be in detail, to lessen the potential impact of a deep pocket
jury finding? Is that part of what you are suggesting? I am
putting words in your mouth to a degree to explain what I am
trying to say, but is that the kind of significant reform you
are talking about?
Mr. Kapp. Correctly so, and certainly there are problems
with that. The total cost of an administrative system may be
more because the current tort system, for all its problems,
filters out many potential claims where an individual cannot
prove negligence or cannot prove causation, and in an
administrative system, particularly a no-fault kind of
administrative system, you would have many more claims being
filed and paid at lower rates than the current system often
compensates victims, but the total cost might be more, but I
would suggest that the results certainly might be more
efficient and might be fairer, likely would be fairer, and
certainly in terms of perceptions of providers of fairness. I
think there would be some valuable benefits that would then
improve their behavior with ramifications for quality of care.
The Chairman. Senator Lincoln, I interrupted you. Please
proceed.
Senator Lincoln. Thank you, sir. I appreciate it.
Just a couple of more questions to follow up. I do not know
if any of you all have had any experience with medical review
boards, but it is something certainly that I have encouraged
some of my colleagues for us to look into the States that do
have medical review boards in conjunction with their medical
malpractice and their tort system there in the States. There
are a lot of different unanswered questions there in terms of
the admission of a verdict from a panel that is not bound by
the rules of evidence. I am not a lawyer, but I learn to talk
it occasionally up here. But certainly looking at all of those.
I would certainly be interested to hear any of your
comments about that if any of you all have come in contact with
that. Mr. Estes?
Mr. Estes. I have spent some time studying the States'
medical review panels. I do not have data with me, did not come
prepared to discuss the data. But the trends in the States that
have utilized medical review panels have been positive, and
they have found to be effective, in my view. I want to say, as
you did, I am not an attorney. I operate nursing homes. That is
the limit of my involvement here. But I would answer your
question by saying that some combination of medical review
panels or some other administrative process. We have got the
Federal Tort Claims Act that is an effort to take an existing
process and deal with similar problems that involve the
Government as an option.
In some States we have tried to deal with these things
through the actual rules of evidence. Punitive damages,
according to David, are a big problem in nursing homes. There
is a lot of evidence that comes in against nursing homes
because we are nursing home. The regulatory record that we have
is three miles long. A good nursing home has a lengthy,
lengthy, regulatory record, that when you bring it into court
and use it to put the nursing home on trial, sometimes it
results in the jury getting aggressive in their desire to
punish this nursing home, and we end up I think, with some of
the punitive damage awards because of the amount of regulatory
history and the amount of things that come in against us.
So there are a variety of things out there that are
options, and it may very well be that some combination of some
of those fixes with different caps than those who have been
unsuccessful thus far that are being debated here could be a
viable fix, and I wanted to give you my thoughts.
Senator Lincoln. I am glad you brought that up, because it
is important I think for us to look at all of the options of
how we can comprehensively craft something that will provide
the kind of relief that you need, and obviously be consistent
with the important things that we enjoy in this country. So I
appreciate. We would love to have any more of your comments on
those that you find.
I would just like to ask Ms. Bourdon, in your loss cost per
bed, I am assuming that that has only to do with litigation
costs. Does that have anything to do with regulatory liability?
I mean I hear these horror stories from my nursing homes, and I
am sure Mr. Estes can concur, but I mean getting written up for
a $10,000 fine for a dent in the can, or some of these crazy
rules that are out there that----
Ms. Bourdon. No, this is just the cost for the professional
liability and the general liability claims against nursing
homes. It is the amount paid in compensation to the plaintiff,
their attorney's fees, and the defense costs that the provider
incurs.
Senator Lincoln. It is not any kind of regulatory liability
or regulatory fee liability?
Ms. Bourdon. Does not include those costs.
Senator Lincoln. I am glad the Chairman has had the
foresight to draw you together, and I hope that we can continue
to call on you for good suggestions, and certainly your input
as we tangle with this issue.
I visited with a nursing home owner, a multi-state nursing
home owner not too long ago, who indicated that they had sold,
not sold, but closed down eight of their nursing homes, and
every one of those nursing homes was operating at 85 to 90
percent capacity. They are not closing their doors because they
are not needed. They are closing their doors because they
cannot keep them open. That is a real problem when we realize
that in the next 15 to 20 years we are going to double the
number of seniors in this country, and we are just not making
sure that as a Nation we are prepared. The geriatricians is an
issue that I am enormously involved in. We are training less
and less, unfortunately, geriatricians to deal with that
problem. I am hoping that through the Aging Committee and the
great leadership of our chairman, we will face many of these
issues on behalf of our constituents.
Thank you, Mr. Chairman.
The Chairman. Senator Lincoln, thank you for your presence
here today and your knowledge and contribution. That is greatly
appreciated.
Professor Kapp, what can be done to improve long term care
providers' perception about the legal environment in a way that
would change their behavior to improve quality of care and
quality of life for our long term consumers?
Mr. Kapp. I think it is important for the Congress and for
the State legislatures to do something that sends a signal,
that sends a symbol to long term care providers that their work
is valued and important and supported. Data is important, but
symbols are important as well, and I think providers are
looking for symbols that those in positions of authority and
influence value their contributions.
The biggest complaint that I have heard from providers is a
perception, which I think is in many cases well grounded, of
inconsistency, unpredictability and arbitrariness in the
enforcement of standards to which they are going to be held by
regulators, juries and prosecutors, mixed signals.
There was discussion before about the regulation litigation
synergy, and providers tell me that a great deal of their
frustration is that the signals they get from regulators and
from the legal system are often mixed and inconsistent and
unpredictable. To the extent that providers can be better
convinced that they will be held in a fair and consistent way
to specific, knowable standards of care, that would go far in
improving their perceptions of the legal environment and the
behavior that is driven by those perceptions.
The Chairman. Thank you.
Dr. Cutchin, what would be the consequence if steps are not
taken to correct the liability problem that is impacting
nursing homes and long term care facilities in North Carolina?
Dr. Cutchin. I think just some clarity on what we had said
a moment ago. First of all, if nursing homes cannot secure
medical directors, they have to close by Federal law. If
nursing homes cannot----
The Chairman. Repeat that.
Dr. Cutchin. If they cannot secure medical directors, they
have to close.
The Chairman. In other words, the Federal law says you
have----
Dr. Cutchin. By regulations they have to have a medical
director available. By the same token, if they cannot pay for a
PLI or professional liability insurance, they probably have to
close, not necessarily, but they are at great risk.
The Chairman. Because they cannot get the medical director.
Dr. Cutchin. They cannot get the medical director, correct.
The Chairman. So you are suggesting one creates the other
problem or vice versa.
Dr. Cutchin. Makes it more difficult to get the medical
director, of course. If primary care physicians cannot get
professional liability insurance because of their relationship
with nursing homes, they will cease to care for those patients
in nursing homes, they will cease to serve as medical
directors, and again, you cannot operate nursing homes without
them. So we think all of those things together will happen if
the process continues in the direction that it is moving.
The Chairman. The ultimate Catch-22, in essence.
Dr. Lett, what does long term care seem to be--why does
long term care seem to be a focal point for this litigation? We
have heard a variety of reactions. Is there a problem with care
in these settings, or are we simply catching up after it being
ignored for a time?
Dr. Lett. Senator, certainly long-term care is administered
by humans, and humans most certainly are capable of errors.
That we freely have to understand and admit, but there
certainly are special circumstances around long term care. It
is a very highly emotional transition in life, and I can speak
to it very directly, having put my mother in a nursing home
some 5 months ago.
Memories of the patients clouded by illness and medicines,
anger over the loss of independence, anger over being placed by
your family and the family feeling very guilty about that as
well, leads to a great number of unmet expectations which often
leads to anger which appears to be, in my understanding, one of
the chief causes of lawsuits.
Second, we are dealing with a very elderly, vulnerable,
fragile population with a high probability for decline, and in
fact, the reason they are in a nursing facility is they have
recently had a decline and no longer could care for themselves,
so it becomes very difficult to differentiate between an
expected decline and an inappropriate decline, even among the
best of experts.
Certainly, I think there are some assumptions in our
culture at this point in time that nursing homes are not good.
One of the things I hear most from our patients is my family
promised me they would never put me in a nursing home. There is
kind of a perception that it is a negative environment to begin
with, which is added to in the media. I have to tell you that
upon checking into my hotel room yesterday, I turned on the TV
and the first commercial I saw was from a plaintiff attorney
advertising, has your loved one been abused or neglected in the
nursing home? Free consultation.
I think there is a negative media barrage, and an
assumption that, yes, there may be a problem and we should look
into it.
Last but not least, there are States, and California is one
of them, that has laws in place that not only make it easy to
sue physicians and other nursing facilities, other entities
around the care of elders, it actually is a very good business
decision to do so.
The Chairman. Like Senator Lincoln, I represent a rural
State with a good many small nursing homes in smaller
communities. What effect does these kinds of costs have on a
one or two-home operator, or a single home operator, versus a
multi-home, multi-state operator?
Dr. Lett. I think it is going to be horrendous for smaller
markets. The availability of----
The Chairman. The costs are the same, are they not, in many
instances, the liability costs?
Dr. Lett. Theresa can probably speak to this more directly
than I can, but, yes, the costs are high relatively speaking
especially in a small market. That is, even if costs are lower
in Idaho for the premiums than they are in California, the cost
of living is different, the income is different, et cetera. So
the economic pressures for not entering into the long term care
market by a physician are the same in rural markets, since you
start out with fewer physicians, you probably will have just
statistically fewer physicians who have been trained in long
term care and elder care by a responsible organization such as
AMDA, so you have a very small pool to begin with that gets
drained very quickly when you add in the high cost of trying to
be involved either as a medical director, at an administrative
level, or as a practicing physician in long term care.
The Chairman. Ms. Bourdon, you wish to make additional
comment on that?
Ms. Bourdon. Yes. I would just add to that that in our
study we separately analyzed 13 States and we selected those
States based upon two criteria. One was that there was enough
data, there was a credible sample of claims data in order to
get a sense of the trends. Second, we did consider these to be
some of the States with the higher trends, and wanted to take a
look at them.
But we took the remainder of the States, which would
include the rural States, that independently by themselves, if
there is less than 5,000 beds in the data, could not give us a
statistically significant indicator, and we aggregated them all
together and put them in what we call ``the all other States''
category. That category, I would say, represents a lot of the
rural States. That category, while it has a lower relative cost
per bed--and it was on one of the charts we threw up--still
indicates and annual double digit increase, double digit at 20
percent a year, year over year in the costs in those other
States.
In addition, in our study there is a section in which we
specifically address the insurance premium and coverage changes
that some of the smaller providers are reporting, because
again, independently, if they are only operating one or two
facilities, their own data is not statistically significant,
and we tracked the premium increases that they were incurring,
and then they are highlighted in the report, and it is what
indicates 200 percent, 300 percent increases over the last 3 to
4 years.
The Chairman. Thank you.
We have just been joined by another one of our colleagues,
Senator Carper. Tom, would you wish to make any comment and/or
question of these panelists?
Senator Carper. Thanks, Mr. Chairman. I sort of joined you
in mid-flight.
The Chairman. Well, we appreciate the touchdown.
Senator Carper. It is my pleasure. We just had a sort of
losing battle last week in the Senate on the issue of class
action litigation reform, and the concern there, as you may
recall, has been the emergence of something called magnet
courts, where oftentimes county courts with locally elected
judges who end up hearing a national class action litigation
that really in many cases belongs in a Federal court. You have
a defendant from one State, plaintiffs from many other places.
I literally have not read your testimony, and I really do
sort of join you in mid flight. If you could use as a basis of
reference we have been working on that, we are working on
asbestos litigation reform, to try to ensure that people who
are sick and dying from mesothelioma or asbestosis actually get
money soon that they need for their pain and suffering, for
their families, and to make sure that people who maybe have an
exposure but do not have the symptoms, that they do not get
anything, at least for now, until they ultimately become
impaired, and to reduce the amount of money that goes in
transactions costs on the legal side from 40, 50 percent, where
it is now, to something far less than that. Those are two that
we actually are debating on.
Just discussed with one of our leaders the next steps on
asbestos, so those are issues I think that are alive and well,
despite what happened last week on class action.
The issue that is before us now, my mom lives in a nursing
home, lives in a wonderful nursing home in Ashland, KY just
across the line from Huntington, WV, lives not far from her
sister, not far from my sister, and so we are very mindful of
the kind of care that she gets, and want to make sure she gets
the very best care.
By virtue of having said all of that and my personal
involvement with my mom and our family, my involvement on class
action litigation and legislation and asbestos legislation, if
you would each take a little bit of time and tell me what I
should know about the issue that you bring to the table? These
are issues that I care about, have a personal interest in, and
have a professional interest in. Dr. Lett?
Dr. Lett. I am smiling because I was raised in Ashland, KY,
and my grandparents were both in a nursing facility in my
hometown there for many years, so I certainly can relate.
Senator Carper. No kidding. I do not remember where I was,
but I stopped someplace. Maybe it was, happened to be at--there
is a YMCA there, and I try to work out every day, and I went
there to work out. I remember seeing like inscribed on one of
the lockers there, ``For a good time call James Lett.'' I
remember wondering, who is---- [Laughter.]
Dr. Lett. I was certainly glad you erased all those, sir.
Senator Carper. Who is this guy? [Laughter.]
Dr. Lett. I am sorry. I could not help the personal note,
hearing about my hometown.
Senator Carper. I still visit it every month. I am going to
be there this coming weekend to see my mom.
Dr. Lett. My thumbnail is that at this point in time
liability insurance problems are no longer a threat. They are a
fact in terms of limiting access to frail elders of the
physicians who are most experienced and best positioned to care
for them, and it is getting worse, and we must do something
immediately.
Senator Carper. Mr. Cutchin?
Dr. Cutchin. Dr. Cutchin, yes, Larry Cutchin. At the risk
of being repetitive, what we----
Senator Carper. You grew up in Ashland, KY too? [Laughter.]
Dr. Cutchin. No, I live in North Carolina.
Senator Carper. Where?
Dr. Cutchin. Tarboro.
Senator Carper. My wife is from Boone up in the mountains.
Dr. Cutchin. That is the other end of the State, but we
like both of them, sir. Nice place to be.
The issue of course that we are concerned with is the fact
that nursing homes are under stress because of the liability
insurance costs, and the issue I brought to the table and Dr.
Lett brought to the table as well is the fact that they are
having problems securing and maintaining medical directors, and
other physicians to see patients in the nursing homes because
of the fact that those physicians cannot get liability
insurance if they have a certain percentage, a large portion of
their practice is in nursing home care. That is a big issue.
I can give you a personal example. A friend of mine in
Greensboro, NC, a retired physician, who is the board chairman
for a nursing home organization in that county, that is a
nonprofit organization that takes care of about 500 elderly
people in the nursing home. He was notified out of the blue the
first of March that the 10-physician group, they had provided
medical director services as well as patient care services in
that home would no longer be able to do it because they could
not get malpractice insurance or medical liability insurance.
They negotiated over a month and finally did get a policy,
but it was with a 120 percent increase in the premium from
before. They do not know what it is going to be next year. That
is the example of what we are dealing with.
Senator Carper. Thank you.
Mr. Kapp?
Mr. Kapp. In a sentence my message was that health care
providers, long term care providers today have a strong
pervasive anxiety, or apprehension about the scary adversarial
legal climate in which they function, and that perception,
those apprehensions or anxieties, often translate into behavior
that has negative consequences for the care of consumers.
Senator Carper. Thank you, sir.
Mr. Estes?
Mr. Estes. In direct response to your questions of the
relationship between the situation we are talking about here
today and the other issues that you raised, I would respond
that it is different but yet similar to both, and that from a
State perspective, we are seeing certain States have a much
more significant problem with liability costs than we are other
States. We do not know exactly why. We know from a data
standpoint that it is a fact and we believe it to be related to
the State laws and the way the courts work in the individual
States, and that is one of the reasons, quite frankly, we think
that there needs to be some Federal method to address this
problem.
The second thing I would say to you relates to the asbestos
situation that you raised. We are already starting to see,
because nursing homes can no longer buy insurance in certain
markets, we are starting to see what I consider to be the
ultimate bad circumstance for our residents, and that is when
one of our employees makes a mistake or when one of our
employees does something bad, there are legitimate claims that
are not going to be compensated because there is simply no
insurance available to compensate these victims.
So I would tell you that those are the two things that come
to my mind that would kind of get you up to speed on how what
we are talking about relates to the things that you discussed.
Senator Carper. Thank you.
Ms. Bourdon?
Ms. Bourdon. As an actuary to the nursing home industry, I
have been tracking these lawsuits for the last 6 to 7 years,
and we do an annual survey every year of the industry, which
represents about a quarter of the industry. From the response
to our survey, we have watched this issue grow from a $50
million a year cost to a $1 billion a year cost in a 10-year
timeframe.
Senator Carper. The cost of what? I am sorry.
Ms. Bourdon. Cost of lawsuits against nursing homes
alleging patient care violations.
As this has occurred, I have watched our clients go into
bankruptcy, get out of nursing home facilities in certain
States, and completely contract their operations. I have not
seen any growth, per se, other than those acquiring the homes
being sold off, but not new licenses being established in
States.
This is probably the main reason why the number of beds in
this country is down from 3 years ago, which is a serious issue
when you consider the baby-boom generation aging and
approaching retirement age.
Senator Carper. Thank you.
Mr. Stevenson?
Mr. Stevenson. I come to this issue as an academic health
policy researcher, and the reason I am here in particular is
that I and a colleague did a national survey of defense and
plaintiff attorneys who see these types of claims.
In brief, what I said today was that first there is a large
number of claims, and there has been a substantial increase in
the number and the size of the compensation over the past
several years.
Second, I said that there is an unclear relationship
between litigation and quality, it is simply unclear how
accurate the tort system is in compensating and deterring poor
quality care at this point.
Then the last thing that I said was that there are a number
of distinct features about nursing home litigation claims that
might give one pause if they were to think about using
conventional tort reforms such as limiting non-economic damages
to control the cost of these claims.
In direct relation to the point you made at the outset
about class action suits and the magnet courts, I should just
add from our study that the vast majority, 92 percent, of
nursing home litigation claims are settled out of court. Only
about 7 or 8 percent actually go to trial. Then, 9 out of 10
result in some dollars going to the plaintiff, and we found
that is a large amount of total dollars. In large part the high
settlement rate has been out of concern, we would posit, of
going to court.
Senator Carper. Thank you. Could I ask one more?
The Chairman. Sure. Please do. Tom.
Senator Carper. Thanks, Mr. Chairman.
When Senator Craig and I, and some of our other colleagues,
who support class action reform and also asbestos litigation
reform, when we approach those issues I always say I do not
know that the States have the ability to fix those problems,
and my view is it takes some intervention by the Federal
Government, by the Congress and by the executive branch. I used
to be a Governor for 8 years, and I am mindful of the
prerogatives of the States and respectful of the prerogatives
of the States. There is a question I would ask you. The States
cannot fix action. States cannot fix asbestos, at least not in
my view. I am not so sure, I just do not know, do States have
the ability, whether it is Delaware or Idaho or any other
State, if they have the problem, malpractice costs or whatever
revolving around long term care, do States have the ability to
fix those problems? Are there some examples of States who are?
Mr. Estes. Yes, sir. I am stepping forward because nobody
else did. There are some examples of State reforms that have
been passed. It is my view that some of those reforms will be
successful, although it is still very early to say that they
are successful.
Senator Carper. Do you recall any States that have done so?
Mr. Estes. The State of Texas has passed medical
malpractice tort reform in the last year. The State of
Mississippi has passed tort reform. There are two or three
others that have done things to a lesser degree, and I believe
they will be effective.
The reason that I am not sure we can leave it to the States
to figure out is two thing. No. 1, it is the Federal
Government's money that is being spent in this process, and the
diversion of Federal money, whether it be from Medicare or
Medicaid, into this process is wasteful to the taxpayers and
needs to be addressed from a Federal standpoint.
The other problem I would tell you is that as we have been
able to successfully pass measures that we think will curb the
lawsuit abuse problem in these States, the problem just crops
up in another State, literally. So those two reasons are the
reason we think that there needs to be a Federal fix, rather
than it be left up to the States.
Senator Carper. Dr. Lett?
Dr. Lett. Thank you, sir. After having been raised in
Kentucky, I took Horace Greeley's advice and went West, and I
am now practicing in California. California has a very
successful tort reform act called MICRA, Medical Injury
Compensation Reform Act, passed in the mid 1970's. It has
without a question held down insurance premiums for physicians.
They have risen only about 170 percent, while in other States--
--
Senator Carper. Since the 1970's?
Dr. Lett. I believe it is since the 1970's, while in other
States like Florida they have gone up 2,300 percent in that
same period of time. However, as well as MICRA works, one
reason why I would think--if you will forgive me for putting
this in--that a Federal solution is better, is that in
California, what has happened is there is a specific law, the
Elder Abuse Statutes, under which MICRA can be circumvented.
This is why even a State with a marvelous, marvelous tort
reform system in place still is on the endangered list for long
term care and the care of elders, is because it can be
circumvented through this legal loophole. Certainly a Federal
fix of that would be greatly appreciated by the long term care
geriatric physicians of California and the frail elders we
serve.
Senator Carper. Thank you.
Dr. Cutchin. I would agree with that, that there is
evidence that States can fix that, fix it, but a Federal effort
would certainly be a big improvement, and we would not then
have a patchwork across the country on this.
Senator Carper. Thanks.
Mr. Chairman, thanks for being so generous with your time.
To our witnesses today, thanks for your testimony and for
letting a guy come in mid flight and asking a couple of
questions. Thank you.
The Chairman. Tom, thank you.
Let me thank you all very much for the time you have spent
with the committee today, and the record you have helped us
shape, and I think that will be valuable to our colleagues as
we again continue to work at this issue. Tom has spelled it out
well, and has certainly been a leader in the area of tort
reform here and class action. We worked mightily on the floor
last week to try to make that happen, and it did not quite make
the hurdle. We are going to get there. We have to get there.
I do believe, Mr. Estes, that in the end--you said
something that sometimes is misunderstood or not remembered,
that a fair amount of Federal tax dollars goes into the care of
a good many of these elderly patients. I believe nearly 80
percent of them in the nursing homes across America receive
some direct Federal tax and State tax dollar benefit through
Medicaid. If in fact, and it appears there is growing evidence
that there is a diversion of funds, if you will, to keep these
homes open by paying these very high premiums.
The average cost, Tom, is now nearly $2,000 per bed per
year, that is $6.27 a day. That is a significant cost, and
there appears to also be growing evidence that it impacts care.
If that is certainly the case, then that is all the more reason
for us to look at some approach toward beginning to shape and
control this issue. Clearly, this industry cannot sustain, nor
can the health care profession sustain the hundreds of percent
per year increases in these kinds of premium costs. Of course,
the great tragedy is that, and as you said it or you said
others have said it, we are not seeing any new nursing homes.
Bed numbers are dropping at a time when we are coming upon an
age of citizens in our country where by all evidence bed
numbers ought to be going up or preparing to go up, and that,
based on what I hear from you and other materials I read, will
not be a fact unless we resolve some of these problems or
stabilize some of the environments in which these numbers are
now declining.
We thank you very much for your time and your presence here
today, and rest assured your time here was valuable to us, and
that you have helped us establish an important record. Thank
you.
The committee will stand adjourned.
[Whereupon, at 3:44 p.m., the committee was adjourned.]
A P P E N D I X
----------
The Prepared Statement of Senator John Breaux
Thank you Mr. Chairman. Today's hearing allows us to
examine how the long-term care industry--specifically the
nursing home industry--is affected by rising costs of liability
insurance and litigation.
Clearly, there will always be a demand for nursing home
care because there are elders who require around the clock
care. With the pending age wave of 77 million baby boomers that
demand will only increase. Today's hearing is an opportunity to
examine how rising medical liability insurance costs and
increased litigation is affecting this industry. Will seniors
have access to quality care? Are nursing homes really going out
of business due to rising medical liability costs?
While we examine these important questions today we must
also do so within the context of two points. First, as the
author of the Elder Justice Bill, I must point out that elder
abuse and neglect are serious problems in our society that have
not been adequately addressed. While most nursing homes work
hard to provide quality care for residents, there are some
``bad apples'' out there. Some of the litigation in this area
is a result of family members who bring lawsuits against
nursing homes who have abused or neglected their family
members. Nursing home residents and family members should have
legal recourse when they have been harmed.
Second, there is a growing demand in this country for more
home and community based long-term care options. When asked,
seniors and baby boomers want to remain independent and live at
home for as long as possible. I believe that nursing home
executives who hope to prosper and flourish in the coming
decades as baby boomers age should act quickly to diversify
into home and community based services.
The bottom line is that as we look at tort reform and long-
term care we want to ensure that people have choices. I look
forward to hearing from today's witnesses. Thank you Mr.
Chairman.
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