Insurance Study: Rising Liability Costs for Long Term Care Facilities
A recent study by the American Health Care Association (AHCA) and Aon Global Risk Consulting indicates that liability costs for long term care providers are expected to increase by five percent and claims frequency is also expected to rise. The annual study, Long Term Care General Liability and Professional Liability Actuarial Analysis, provides estimates of loss rates, or the cost of liability to the beds that care providers operate. According to the study, the projected national 2015 loss rate, which combines claim severity and frequency, is $2,030 per occupied bed. In other words, an operator with 100 beds can expect $203,000 in liability expenses in 2015.
“The need for long term and post-acute care is growing, and increasing liability costs impede our ability to serve those we care for and their families,” said Mark Parkinson, AHCA President and CEO. “This report underscores the importance of delivering solutions so we can continue to provide the highest quality care and improve lives.”
Where are costs the highest? The annual study cites Kentucky ranking the highest with a projected loss rate of $9,220 per occupied bed. What this means is that a nursing home operating 100 beds in the state should set aside $922,000 annually for liability costs. Texas, on the other hand, has a projected loss rate of $3,200. The states operate very differently with Kentucky’s constitution prohibiting limits on tort recoveries. In addition, there are no statutes regarding qualification of expert witnesses, certificates of merit, pre-trial alternative dispute resolution or limits on attorney’s fees. In contrast, since Texas enacted tort reform in 2003, there has been a dramatic loss rate reduction, which has continued in the years following the legislation.
In total, 17 states participated in the annual report, which also highlights an aggregate countrywide projection. Approximately 13,700 individual non-zero claims from long-term care facilities were aggregated. The 34 providers represented in the national study operate approximately 230,000 long-term care beds, consisting of skilled nursing facility beds and a number of independent living, assisted living, home health care and rehabilitation beds. They represent approximately 17% of these beds in the United States, and six of the 10 largest operators in the country.
These findings underscore the need for long-term care facilities to take increased steps to reduce their liability exposures. This means increasing investment in patient safety initiatives and looking at defense strategies that haven’t been previously considered. It also means identifying the emerging and existing risk areas and developing policies, procedures and protocols for reducing, preventing and managing risks.
Caitlin Morgan specializes in providing insurance and risk management for nursing homes and assisted living facilities. We can help you put together a program for your insureds that addresses their liability exposures and works toward reducing their risk. Give us a call at 877.226.1027.
Sources: AHCA, Aon