Ohio’s tort reform law hasn’t lowered health-care costs

By Stephen Koff, The Cleveland Plain Dealer

March 20, 2010

WASHINGTON, D.C. – As the House of Representatives prepares to vote Sunday on a package that

Democrats say will make health care more affordable, critics insist the “big government

takeover of health care” is not only unwarranted, but that a part of the solution is so

obvious it’s a crime Democrats failed to embrace it.

It’s called tort reform, or putting the brakes on junk lawsuits. If doctors and hospitals

don’t need to worry about defending themselves against baseless malpractice lawsuits,

they’ll stop ordering needless, duplicative tests and halt the practice of defensive

medicine, Republican congressional leaders say. It’s an easy and necessary way to bring down

costs for all Americans, they say.

The problem is, Ohio has already taken that step, as have many other states. Yet five years

after a difficult but successful fight in Columbus to pass tort reform, health-care costs in

the state have not gone down. And health policy analysts say it may not be possible to say

whether costs would have spiked even higher had Ohio not passed lawsuit reform.

Costs climbed even after the legislature limited the size of jury verdicts for pain and

suffering to $250,000 except in catastrophic cases, restricted punitive damages, and made it

tougher to take a case to trial. In 2004, the year Ohio passed lawsuit liability reform,

average premiums for employer-based family health plans were $9,590, according to data from

the nonpartisan Kaiser Family Foundation. By 2008, average family premiums were $11,425.

This means that four years after the state passed reform, health insurance for Ohio families

in employer plans had gone up by 19 percent.

That compared with a national average rise of nearly 22 percent during that time.

While Ohio’s cost hike was smaller, too many other factors go into health-care spending to

conclude that the limits on lawsuits accounted for that difference, policy analysts say. The

American Association for Justice, a trade group that represents trial lawyers, notes with

the same data that while health insurance premiums in Ohio rose more slowly than the

national average, the Ohio pace still outstripped the hikes in neighboring Kentucky.

And Kentucky did not put caps in malpractice verdicts, so tort reform could not explain its

savings.

That’s not to say that by limiting lawsuits against doctors and hospitals, the Ohio

legislature did not make any dent. Malpractice insurance premiums for doctors have dropped

on average by 22 percent since 2006, according to the Ohio Department of Insurance.

Explanations for that vary. The trial lawyers’ lobby says the main reason liability premiums

spiked in the first place was because of a big downturn in the stock market, requiring high

premiums to shore up insurance reserves. The medical industry counters that a wave of

malpractice suits drove up the premiums.

Regardless, tort reform in Ohio has reduced the number and size of malpractice cases. In

2005, 5,051 claims were filed against doctors and hospitals. By 2008, the number dropped by

39 percent, a decline that the Ohio State Medical Association attributes to lawsuit reforms.

Doctors and hospitals have testified in Washington that when they fear being sued, they

practice “defensive medicine.” They say they order expensive diagnostic tests and

screenings, such as computed tomography or CT scans, when a simple x-ray might do because

they don’t want to risk a lawsuit.

So when they no longer have that fear, medical industry spokesmen say, doctors no longer

have to practice defensively.

“No one can argue that tort reform in Ohio hasn’t brought down the practice of defensive

medicine,” said Jason Koma, spokesman for the Ohio State Medical Association, which

represents doctors and other health care providers.

But health care costs nevertheless keep rising. Whether their growth rate has slowed — and

whether care in Ohio would cost more had it not been for liability reform — is difficult

for researchers to pinpoint.

“I’m not aware of any analysis or study or anything empirical that does that,” said Doug

Anderson, chief policy officer for the Ohio Department of Insurance. National organizations

that study health-care spending, including the Kaiser Family Foundation, say the same.

One reason for that is the lack of uniform, up-to-date data on private-sector health

spending in every state. Spending figures for Medicare, the government’s insurance program

for seniors, are available for as recently as 2006, and show that Ohio’s per-enrollee

reimbursement for medical care was $8,249, barely below the national average of $8,304.

But malpractice suits can take several years before verdicts are reached or judges dismiss

the claims, so the 2006 Medicare figures are believed to show little if any impact from

Ohio’s tort reforms.

One of the best examples of why it is so difficult to identify savings from tort reform –

and why blaming lawsuits misses other components of health spending — was cited by William

Hayes, president of the Health Policy Institute of Ohio. Hayes pointed to data from the

Dartmouth Institute for Health Policy and Clinical Practice, which found that Medicare

spending per-enrollee in 2006 was $8,377 in Cleveland, $8,153 in Akron, $7,930 in Dayton –

and a stunning $9,612 in Elyria.

How to account for that 15 percent difference over the course of the 30 miles separating

Cleveland and Elyria?

One theory cited in the New England Journal of Medicine is that in areas with a lot of

doctors, hospitals and testing equipment, patients are more likely to be referred for

treatment or tests, especially if their diagnoses fall within a gray area. The New York

Times noted earlier that in Elyria, an abnormally high number of angioplasty procedures,

which involve enlarging an artery with a balloon and inserting a stent to keep the artery

open, were being performed. And, said the Times, “nearly all the procedures at the Elyria

hospital are performed by a group of cardiologists who dominate coronary care in this city

and have an unabashed enthusiasm for angioplasties, the highly profitable procedure in which

they specialize.”

Similar theories for wild health-care spending have been cited in Texas, a state that had

tort reform similar to Ohio’s — and has some of the highest-cost cities in the country when

measured for Medicare spending.

“So states that set limits on suing may only be able to go so far,” said Hayes.

This is not to discount entirely the relationship between lawsuits and medical costs.

The nonpartisan Congressional Budget Office in October told U.S. Sen. Orrin Hatch, a Utah

Republican who favors tort reform, that if caps on civil damages were imposed nationwide, it

could reduce national health care spending by about $11 billion a year. Because the

government pays a large share of that, nationwide liability reform could cut the federal

deficit by $54 billion over 10 years, the CBO said.

“From our perspective, tort reforms do have an impact on lowering health insurance costs,

and should be a part of the discussion,” said Tim Maglione, senior director for government

relations at the Ohio State Medical Association. “And not according to us but according to

the CBO, it can result in savings of $54 billion over 10 years.”

But spending on health care is so much greater than that, and 35 states already limit

lawsuits in some way. So those billions, while substantial, would shave only about 0.5

percent off health-care spending nationwide, the CBO said.

That’s not enough to bring down spending anywhere near where economists say it should be.

Health-care spending already accounts for one sixth of the nation’s economy.

“Assuming that the CBO is accurate, or even if they’re off by 100 percent, it still is less

than 1 percent of the total cost of the health-care system,” said Dennis Mulvihill, a

Cleveland trial attorney and president-elect of the Ohio Association for Justice.

President Barack Obama, who came to Strongsville last week to promote his health-care reform

package, has already announced that $23 million in grants will be awarded “in the near

future” for states that want to work on alternatives to going to court over medical

disputes. Obama told bipartisan congressional leaders on March 2 that he would expand that

to $50 million if Congress will support it.

But he made clear that he does not believe nationwide tort reform will solve the cost

problem. Nor will it automatically make health insurance more affordable for Americans,

experts say.

“And that’s why I think tort reform is not a single panacea,” said Hayes. “I think it will

help on provider insurance rates more than consumer insurance rates.”

Nursing home residents often sign away rights to sue

By Jessica Fargen  |   Boston Herald – March 8, 2010

Many seniors entering nursing homes in Massachusetts are unwittingly signing away their rights to sue the facilities in the event of neglect or bad medical care, and officials in Washington are seeking to ban what they see as a “hidden” practice.

The seniors are being urged to sign contracts that put disputes in the hands of arbitrators. Advocates say vulnerable elderly patients fail to realize they are giving up their rights to bring cases of slipshod treatment before a judge and jury.

“It gives the nursing home carte blanche to abuse these elderly people because they won’t have to answer to it” in court, said Marlene Owens of South Easton, who successfully challenged an arbitration agreement signed by her “delusional” elderly stepfather in 2003.

She is now suing his former nursing home over bad care.

The Boston Sunday Herald reported yesterday that nearly 40 percent of the state’s nursing homes performed significantly below average, according to annual inspections, and that numerous residents suffer abuse and neglect or receive shoddy care. The Bay State nursing home population is about 45,000.

With nursing homes here and nationwide pressing residents to sign the arbitration agreements – often tucked away in thick and complex admission packages – lawmakers including U.S. Rep. Barney Frank (D-Newton) are weighing federal action.

“Most people don’t see it,” Boston attorney Rebecca Benson said of the arbitration agreements.

Bradley M. Henry, a Boston attorney, called the agreements a “nightmarish” form of trickery. “It is virtually stealing the right of trial by jury out of the hands of our most at-risk citizens,” he said.

Family members and residents are emotional at admission time and overwhelmed by paperwork, said Janet Wells, director of public policy at the National Citizens’ Coalition for Nursing Home Reform.

“They may not be aware the agreement is there. They may feel they don’t have a choice but to agree,” Wells said.

Studies show nursing home arbitration dramatically reduces payouts and attorney’s fees in cases where seniors have been wronged.

Payouts decline

The average nursing home claim amount in the United States shrank from $261,000 in 1998 to an estimated $116,000 in 2008, during a period when tort reform and arbitration increased, according to a 2009 Aon Corp. study for the American Health Care Association, which represents 11,000 senior living and rehabilitation centers.

Part of the decline is attributed to the arbitration agreements.

“Settlements are less costly,” with arbitration, said Chris Coleianne, an actuary with Aon.

A 2009 Aon analysis of data from 2004 to 2008, based on responses from 11 providers, representing about 5 percent of nursing home beds in the country, found:

The average payment in arbitrated cases was $91,000, compared to $138,000 in nonarbitrated cases, about 35 percent less.

The nursing homes’ legal costs were about $33,000, compared to $56,000 in nonarbitrated cases, about 41 percent less.

Patricia Tabloski, associate dean for graduate programs at the Connell School of Nursing at Boston College, said on the surface the agreements seem like a good idea, but she expressed caution.

“Sometimes there is gross negligence or there is something considered malpractice and then the person has really signed their rights away,” she said.

Nursing homes began offering arbitration agreements about nine years ago to rein in high jury awards and legal fees, and so far it’s working, said Susan Feeney, vice president of public affairs for the American Health Care Association. Payouts may be lower, but families pay a lot less in legal fees with arbitration, she said.

Arbitration “doesn’t affect the amount that truly ends up with the family, which is where these funds should go,” she said.

But Frank, who supports federal legislation to ban the agreements in nursing homes, said they have no place in the elder-care facilities.

“With older people you ought to be especially careful. This principle is a bad one,” said Frank.

He said that though arbitration can be a good way to handle disputes, it should be a choice.

“You shouldn’t have to sign one in advance in these one-sided contracts,” he said.

Frank and U.S. Rep. William Delahunt (D-Quincy) are among 28 sponsors of the legislation, which was filed by California Rep. Linda Sanchez. It is pending in front of a House subcommitee.

The nursing home industry has mobilized against the bill.

W. Scott Plumb, senior vice president at the Massachusetts Senior Care Association, which represents about 400 nursing homes, defended the use of the agreements and said the nursing home industry has been singled out.

“They are quicker, less costly and they are very attractive alternatives to expensive, time-consuming litigation,” Plumb said.

Arlene Germain, president of Massachusetts Advocates for Nursing Home Reform, said the agreements capitalize on vulnerable seniors.

“They should not lose the ability to hold nursing homes accountable in the event of abuse or neglect by signing away their constitutional right to have their cases heard by a judge and jury,” she said.

Many Indiana nursing homes understaffed

Associated Press

March 8, 2010

INDIANAPOLIS — Many of Indiana’s nursing homes employ fewer critical staff members than are needed to care for often-frail residents — and staffing levels are particularly low at the state’s for-profit nursing homes, a newspaper has found.

The Indianapolis Star reported Sunday that Indiana has among the nation’s highest percentages of for-profit chain nursing homes. And those for-profit homes dominate the ranks of the state’s most poorly performing homes — 35 out of 52.

The Star reviewed thousands of pages of nursing home documents and analyzed data compiled by regulators and provided by the industry. Its investigation found a system that tolerates nursing homes that skimp on quality to maintain profits.

It found that pay and benefits are low, especially in for-profit homes, for the grueling work of caring for elderly and other frail residents, and positions often sit empty.

In some cases, the result has been a lack of care, including the case of a South Bend nursing home where staff failed to keep a cut on a woman’s leg clean and it became so infected it had to be amputated. The woman later died from the infection.

The Star’s report comes after federal officials in August identified the state as having the most poor-quality nursing homes of any state in the U.S.

The Star said its investigation revealed the root cause of the state’s ranking: That the most critical caregivers are more scarce in Indiana nursing homes than anywhere else.

Indiana ranks 51st — lower than every other state and the District of Columbia — in the amount of time certified nursing assistants spend with residents. The number of hours registered nurses spend with residents ranks only slightly better and the Star said that profit appears to play a key role in the disparity.

“Overall, those statistics tell me that we’re in an acute state of crisis here, and this absolutely needs to be an emergency call to action,” said Robyn Grant of the state advocacy group United Senior Action. “Enough is enough. We can’t wait.”

Indiana’s nursing home industry ranges from homes owned by chains, some with CEOs that earn millions of dollars a year, to nonprofit homes operated by the Little Sisters of the Poor.

Certified nursing assistants are nursing homes’ front-line caregivers, the ones who help residents into wheelchairs, take them to the bathroom and generally watch over them.

The Star found understaffing is the norm in many Indiana homes where, on average, CNAs spend just less than 15 hours a week with each resident. The national average is 17 hours a week.

Residents get 1.27 hours less a week with CNAs in for-profit homes than in the state’s other homes — mainly nonprofits. And at for-profit homes that are part of regional or national chains, that difference is even greater — 1.55 hours.

Last year’s U.S. Government Accountability Office report named 580 U.S. nursing homes as the “most poorly performing,” with 52 of those in Indiana — about 10 percent of Indiana’s total number of nursing homes.

The GAO report concentrated on violations found by inspectors, but that report isn’t the only indicator of trouble.

The average number of violations state health inspectors found per facility increased 71 percent from 2003 to 2008, according to a November national analysis led by Charlene Harrington, a University of California researcher who is one of the nation’s top experts in the field of long-term care.

The national average rose by 8 percent during that time.

During the same period, the percentage of Indiana homes cited for problems that placed residents in jeopardy or resulted in actual harm grew from 32 percent to 45 percent.

Nationwide in 2008, only a quarter of all homes were cited for such severe problems.

There are about 40,000 Hoosiers in the state’s nursing homes — with taxpayers picking up the tab for about two-thirds of them at an annual cost of $1 billion. Both numbers are predicted to explode as aging baby boomers become infirm.

State officials hope changes to the Medicaid reimbursement plan in January will encourage nursing homes to improve, but the head of the state’s Medicaid oversight commission is still concerned.

“We’ve got to do something about it,” said state Rep. Bill Crawford, D-Indianapolis, who plans to bring up the quality issue when the commission meets this summer.

Nursing home industry officials acknowledge that many Indiana facilities struggle to maintain staffing and provide high-quality care, but they say operators face many challenges, including government reimbursement rates that are inadequate to cover costs.

They also say operators have stepped up efforts to improve quality.

“It (the GAO report) was telling us what we already suspected and what we were already dealing with,” said Robert Decker, president of the nursing home industry group Hoosier Owners & Providers for the Elderly.

Two Nursing Home Chains Pay $14M to Settle Kickback Probe

John Commins, for HealthLeaders Media, March 1, 2010 Atlanta-based Mariner Health Care Inc., subsidiary

SavaSeniorCare Administrative Services LLC, and their principals will pay the federal government and several states $14 million to settle kickback allegations, the Justice Department has announced. Federal prosecutors alleged that the defendants solicited kickback payments from pharmacy giant Omnicare in exchange for agreements by Mariner and Sava to continue using Omnicare’s pharmacy services for 15 years. In November, the federal government, several states, and Omnicare entered into a $98 million settlement that resolved Omnicare’s civil liability in the investigation, according to the Justice Department. “The allegations raised by the government concern a transaction that occurred before SavaSeniorCare commenced operations, and well before the current operations management team was in place,” said SavaSeniorCare in a statement. “SavaSeniorCare did not contribute to the settlement amount. The company remains committed to providing quality care and services to more than 18,000 individuals every day.”

Federal investigators alleged in a whistleblower suit filed last year that Omnicare, Mariner, Sava, and principals Leonard Grunstein, Murray Forman, and Rubin Schron arranged for Omnicare to pay Mariner and Sava $50 million in exchange for the right to continue providing pharmacy services to the nursing homes, which together constituted one of Omnicare’s largest customers, according to the government. They allegedly tried to disguise the kickback as a payment to acquire a small Mariner business that had two employees and was worth far less than $50 million. Investigators said Omnicare paid $40 million before acquiring the Mariner business. At the same time, Omnicare obtained 15-year pharmacy contracts from Mariner and from Sava, a new nursing home chain that Grunstein and Forman created from the Mariner chain, according to the Justice Department.

Prosecutors alleged that Grunstein and Forman illegally tied the new pharmacy contracts to Omnicare’s purchase of the small Mariner business unit, and that the total $50 million purchase price for the business unit actually was a kickback by Omnicare to keep the future business of Mariner and Sava, according to the feds. Approximately $7.84 million of the settlement will go to the federal government, while $6.16 million has been allocated to several state Medicaid programs that the federal government did not identify. Federal prosecutors also alleged that after the government issued subpoenas about the transaction in 2006, the defendants created backdated documents to hide the kickback. “Kickbacks in all forms are insidious because they distort medical decisions affecting Medicare and Medicaid beneficiaries,” said HHS Inspector General Daniel R. Levinson. “We will vigilantly scrutinize attempts to disguise kickbacks as legitimate business transactions and work to hold payers and recipients of kickbacks accountable.”

Mariner has entered into a corporate integrity agreement with HHS, which retains the authority to exclude Sava, Grunstein, Forman, and Schron from participating in Medicare, Medicaid, and other federal healthcare programs. wo Nursing Home Chains Pay $14M to Settle Kickback Probe John Commins, for HealthLeaders Media, March 1, 2010 Atlanta-based Mariner Health Care Inc., subsidiary SavaSeniorCare Administrative Services LLC, and their principals will pay the federal government and several states $14 million to settle kickback allegations, the Justice Department has announced.

Federal prosecutors alleged that the defendants solicited kickback payments from pharmacy giant Omnicare in exchange for agreements by Mariner and Sava to continue using Omnicare’s pharmacy services for 15 years. In November, the federal government, several states, and Omnicare entered into a $98 million settlement that resolved Omnicare’s civil liability in the investigation, according to the Justice Department. “The allegations raised by the government concern a transaction that occurred before SavaSeniorCare commenced operations, and well before the current operations management team was in place,” said SavaSeniorCare in a statement. “SavaSeniorCare did not contribute to the settlement amount. The company remains committed to providing quality care and services to more than 18,000 individuals every day.”

Federal investigators alleged in a whistleblower suit filed last year that Omnicare, Mariner, Sava, and principals Leonard Grunstein, Murray Forman, and Rubin Schron arranged for Omnicare to pay Mariner and Sava $50 million in exchange for the right to continue providing pharmacy services to the nursing homes, which together constituted one of Omnicare’s largest customers, according to the government. They allegedly tried to disguise the kickback as a payment to acquire a small Mariner business that had two employees and was worth far less than $50 million. Investigators said Omnicare paid $40 million before acquiring the Mariner business. At the same time, Omnicare obtained 15-year pharmacy contracts from Mariner and from Sava, a new nursing home chain that Grunstein and Forman created from the Mariner chain, according to the Justice Department. Prosecutors alleged that Grunstein and Forman illegally tied the new pharmacy contracts to Omnicare’s purchase of the small Mariner business unit, and that the total $50 million purchase price for the business unit actually was a kickback by Omnicare to keep the future business of Mariner and Sava, according to the feds.

Approximately $7.84 million of the settlement will go to the federal government, while $6.16 million has been allocated to several state Medicaid programs that the federal government did not identify. Federal prosecutors also alleged that after the government issued subpoenas about the transaction in 2006, the defendants created backdated documents to hide the kickback. “Kickbacks in all forms are insidious because they distort medical decisions affecting Medicare and Medicaid beneficiaries,” said HHS Inspector General Daniel R. Levinson. “We will vigilantly scrutinize attempts to disguise kickbacks as legitimate business transactions and work to hold payers and recipients of kickbacks accountable.” Mariner has entered into a corporate integrity agreement with HHS, which retains the authority to exclude Sava, Grunstein, Forman, and Schron from participating in Medicare, Medicaid, and other federal healthcare programs.