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State legislatures across the nation are moving to cap damage awards in suits against nursing homes in an attempt to cut health care costs and tackle what they perceive as “runaway verdicts.” In the past year, lawmakers in nearly a dozen states have introduced legislation to limit noneconomic damages in nursing home suits. In some cases, they have proposed or adopted obstacles to a resident’s right to sue, such as limiting the admissibility of certain types of evidence. Louisiana, Texas and West Virginia have capped noneconomic damages. In these states, the most a plaintiff can receive from a nursing home for pain and suffering is $250,000. Mississippi capped damages at $500,000. Arkansas this spring raised its punitive damages standard in civil suits, requiring the claimant to prove by “clear and convincing” evidence that the facility either intentionally or negligently caused the injury. Bills limiting the use of nursing home inspection records in lawsuits are pending in Arkansas and North Carolina. Oklahoma banned the recovery of attorney fees in nursing home cases early last month. A similar proposition was considered in Louisiana but failed, though the state approved caps on noneconomic damages. The Alabama Senate unanimously approved a bill last week that places a monetary cap on wrongful death suits filed against nursing homes. The legislation is pending in the Alabama House. THE CROSSFIRE Trial attorneys charge that the move to limit nursing home suits robs plaintiffs of their right to hold the facilities accountable. Supporters counter that caps are needed to contain the skyrocketing costs of health care and to protect the nursing home industry from the relentless growth of lawsuits. In 2001 and 2002, several nursing home verdicts were among The National Law Journal‘s Top 100 Verdicts nationally, including a $312.7 million verdict in Fuqua v. Horizon/CMS Healthcare Corp., No. 4-98CV1087Y (N.D. Texas Feb. 9, 2001), and an $82 million award in Ernst v. Horizon/CMS Healthcare Corp., No. 99-CI-08116 (Bexar Co., Texas, Dist. Ct. Feb. 23, 2001). According to a survey conducted for the American Health Care Association, a nonprofit federation of state health organizations that represents long-term care providers, the number of lawsuits per nursing home bed has been increasing at an annual rate of 14 percent since 1995, with 14.5 claims for every 1,000 occupied beds last year. However, only about 8 percent of nursing home suits actually went to trial in 2001. Of that total, 46 percent resulted in plaintiffs’ verdicts, and averaged $406,000, according to a Harvard University study published in the policy journal Health Affairs. The vast majority settled before reaching a jury. Few states have capped punitive damages, because they are awarded in only about 10 percent of nursing home suits that go to trial, according to Nathan Childs, director of legislative affairs at the American Health Care Association. And there is a likelihood of further litigation as the population ages. By 2020, the number of people aged 85 and older will increase by almost 60 percent; in 2040, by more than 200 percent, according to Childs, based on U.S. Census Bureau data. The U.S. nursing home population is currently about 1.6 million. Late last month, Louisiana became the latest state to jump on the bandwagon when Republican Governor Murphy James “Mike” Foster Jr. signed Act 479 into law, capping noneconomic damages against nursing homes at $500,000, a cap already in place for medical malpractice cases. Another bill, Act 506, which cuts the statute of limitations from 10 years to three years and limits the plaintiff to injunctive actions, was also enacted. State Sen. John Hainkel, R-New Orleans, who sponsored both bills in the Senate, was unavailable for comment. “The nursing homes have had tremendous difficulty in obtaining liability insurance,” said state Senator Tom Schedler, the Republican chairman of the Louisiana Senate Health and Welfare Committee who voted for the bills. Schedler said that the purpose of the new law was to “put nursing homes in line with other health care providers” and to curb “ever-escalating premiums.” Keith Richards, a plaintiffs’ attorney at the Richards Law Firm in Baton Rouge, La., said that the new law guts the state nursing home resident’s rights statute by depriving society’s most vulnerable sector of a legal remedy. A prior version of Act 506, which was amended before enactment, prohibited recovery of attorney fees. That, Richards said, would have limited “the interest talented lawyers will have in these cases.” Also, nursing homes do not seem to be as financially vulnerable as they claim. A state audit of 210 Louisiana facilities reveals an overall profit margin of 15.4 percent for the 2001-02 fiscal year. The audit was obtained under a public records request by the Baton Rouge Advocate. The study was performed by an accounting firm for the Louisiana Department of Health and Hospitals. Louisiana follows Texas and West Virginia in stripping away remedies previously afforded by law. Signed by Republican Governor Rick Perry on June 11, Texas House Bill 4 is the most comprehensive state tort reform measure since 1977, when the Medical Liability and Insurance Improvement Act, which capped damages in malpractice suits, was enacted. In 1988, the cap was struck down by the Texas Supreme Court. Lucas v. U.S., 757 S.W.2d 687 (Texas 1988). The new Texas law limits noneconomic damages to $250,000 per defendant, with a maximum of three. The bill also limits the admissibility of inspection reports at trial. Joe Nixon, a Republican representative who co-sponsored the new bill, wanted to extend governmental protection to nursing homes “because they’re getting sued out of existence.” He said the 1977 bill was enacted to reduce the fear of doctors “getting squeezed out of state like a wet watermelon.” In recent years, he said, the state’s nursing home industry has become just as vulnerable. “The medical care providers are unable to pass on the rising cost to the residents,” said Nixon. Consequently, he added, many nursing homes are shutting down or operating without insurance. But critics of the bill say that state legislators have gone too far. To avoid a fate similar to Lucas, the new law also calls for amending the Texas Constitution to confer on the Legislature the authority to set damage caps. “I don’t think the Founding Fathers ever intended for the legislature to have the authority to limit the power of the judiciary and the jury, which is what the current legislators are trying to do,” asserted George Mauze, a plaintiffs’ attorney at the Law Offices of George W. Mauze II in San Antonio. “If you have 12 impartial persons listen to all evidence from both sides and determine a fair verdict in what may be an egregious case in the nursing home, that verdict is rendered meaningless” by a damage cap, he said. Mauze said that the bill “sets a value on their lives, no matter how much they were abused, at $250,000″ and would make intentional conduct affordable by multinational nursing homes. Before West Virginia’s recent enactment of the Medical Liability Reform Bill, noneconomic damages were capped at $1 million. The new law lowered the cap to $250,000 per nursing home. According to Christopher Regan, whose client, Tony Meredith, died as a result of a nursing home’s alleged failure to treat a nonfatal condition, the recent legislation would have shortchanged the surviving family. Meredith v. Health Care and Retirement Corp. of America, No. 01-C-358-2 (Harrison Co., W.Va., Cir. Ct.). The law is “highly discriminatory,” charged Regan of Bordas & Bordas in Wheeling, W.Va. “A woman who chooses to raise a family is totally limited to 250,000, whereas her husband can recover far more. It’s not a statement that we want to make that our wives, our daughters and our elderly are not worth as much. I think it’s the wrong message to send.” Stephen M. Houghton, an attorney with Pittsburgh’s Dickie, McCamey & Chilcote who has defended health care providers, points out that economic damages — which compensate lost wages and medical expenses — are not capped at present. “Certainly, nobody is talking about caps that wouldn’t take care of the injured person,” he said. “If we can uphold it in the workers’ compensation arena, I think it’s applicable here as well. Money can never wholly compensate you, anyway. “Capping will help to spread the risk [and] would make health care more affordable to everybody. Health care delivery is litigation-determinative, and I’m in favor of some caps, but it should be negotiable,” he said. Despite the small percentage of claims that reach the jury, advocates of caps blame unpredictably large jury awards for the declining state of health care. “The reality for our members and insurance companies is that without some predictability, these rates aren’t going to change,” said Marsha R. Greenfield, senior attorney for the American Association of Homes and Services for the Aging, which represents nonprofit providers of services to the elderly. “The impact that we’re having now would not abate without reasonable caps through legislation.” ‘RAW NUMBER’ IS A CONCERN According to Childs of the American Health Care Association, caps are necessary to keep settlements reasonable, since they are based on likely outcomes in court. “It’s not just the high verdicts, but also the explosion in the raw number of lawsuits” that contribute to rising insurance premiums, he said. Trial lawyers say nursing homes aren’t threatened by litigation. “What affects insurance rates are the bad investments of the insurance and nursing home industries, and the best way to prevent lawsuits is to avoid causing injury,” said Carlton Carl, spokesman for the Association of Trial Lawyers of America in Washington. The estimated worth of open claims involving nursing homes in 2001 represented only 2.3 percent of the $99 billion spent on nursing home care nationwide, according to the Health Affairs study. Some nursing home bills would ban plaintiffs from introducing facility inspection records as trial evidence. One such bill is pending in a North Carolina House committee, which would also cap noneconomic damages at $250,000 and would limit recovery of contingency fees. Donna Lenhoff, executive director of the National Citizens’ Coalition for Nursing Home Reform, a Washington group representing nursing home patients, said she is shocked by the bill. “It’s such a blatantly unlawful provision, since the inspection reports are public records,” Lenhoff said. “To try to hide them from the jury seems cynical at best.” Lenhoff believes it is a basic question of fairness: “How can a resident or his representative make the best possible legal case if they can’t even explain to the jury how” alleged misconduct occurred?

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