Tennessee's nursing homes are in the cross-hairs of a Florida law firm that has single-handedly created a new industry: personal injury lawsuits against nursing homes.

Starting in Florida and then advancing through Alabama, Texas, Arkansas and now Tennessee and California, the Tampa-based firm of Wilkes & McHugh has been compared by critics to the Borg, a sci-fi race that consumes everything in its path and then moves on.

Typically retaining 40% of any settlement, Wilkes & McHugh has generated more than $100 million in contingency fees in the past five years, but officials with the firm say it's not about the money -- it's about putting the nursing home industry out of business.

And driving their liability rates sky high is part of the plan.

Beverly Enterprises, Inc., of Fort Smith, Ark., cried uncle in February and said its 49 nursing homes in Florida are all for sale, citing rising liability costs and vulnerability to lawsuits. The company has 534 nursing homes nationwide.

"Most people think of nursing homes as an assortment of mom-and-pops, but the industry is dominated by large, for-profit chains," says Steven J. Vancore, spokesman for the law firm. "These chains have driven the industry into a state of chaos, and they've gotten caught stealing millions of dollars."

He cites a 1995 report by the federal General Accounting Office that alleged widespread fraud in the nursing home and home health industries. That report led to the Balanced Budget Act of 1997, which cut payments to health care entities. Cuts turned out to be twice the projections, wiping out two-thirds of home health jobs, bankrupting nursing home operators and starving hospitals.

Wilkes & McHugh started in Florida because that's where it's based and has followed a Southern strategy of expanding into states where its services are most in need, Vancore says. California only comes in because founder Jim Wilkes knows an attorney there.

Vancore is quick to list a string of examples of egregious situations: patients starving in their beds, open bedsores lacking clean dressings, people lying in their own waste on soiled beds.

"There are some fine nursing homes, but there's some that aren't," says Memphis attorney Rebecca Adelman, who focuses on health care defense law and has represented several nursing homes against Wilkes & McHugh.

"Beverly puts tens of thousands of people to bed every night, and the percentage of events that are negligent is minuscule," she says. "What doesn't get seen is the excellent care that happens day in and day out, with people who stay at a minimum level of pay as long as they can stand to be there."

She doubts the benevolence of Wilkes & McHugh, noting that in the quest to wipe out nursing homes, they offer no alternatives.

Some award money has been used to fund the Coalition to Protect Elders, which the law firms says is dedicated to educating older people about nursing home abuses. That could also be a source of new lawsuit business.

"This isn't about nursing home reform, it's about nursing home litigation," Adelman says. "There are some wrongs that need to be righted, and there are attorneys out there who approach nursing home litigation who do it right and try to make a difference.

"The Wilkes & McHugh guys pretty much started it, and they found it was going to be lucrative," she says.

The alternative, Vancore says, is to force a crisis and break the Medicaid monopoly of nursing homes. That would open the door to alternative elder care as is used in Oregon and Wisconsin.

In many cases, Adelman says, a single incident -- say a fall -- will lead to filing a suit. During the discovery phase the plaintiff attorney will request a nursing home's records, from staffing reports to budgets, to incident reports that record all adverse events. With all that material it's possible to list accidents and create the appearance of a pattern of neglect.

"They take a single incident and turn it into an indictment of the whole nursing home," she says.

She believes the sequence of states targeted by Wilkes & McHugh has been based on their burden of proof requirements, and the lack of limits on awards for pain and suffering.

Tennessee is coming to the game later than others because the state's burden of proof on punitive damages is especially high. Wilkes & McHugh lost interest in Alabama when that state's legislature limited discovery to the individual patient, she says.

Vancore says his firm still has cases in Alabama, but they're managed from Little Rock, and that Alabama is a success story for the firm. The legislation was shepherded by Wilkes himself, who acted as an intermediary between trial lawyers and the nursing home industry.

Non-profit nursing homes have mostly avoided the onslaught of suits, but their liability coverage is still rising in response. A number of carriers have bailed out of writing such coverage, while others have stopped taking on new nursing home business.

Some non-profit homes have dropped liability coverage altogether, both because of the cost, and to make themselves a less savory target of lawyers.

"It's been very common over the last year in many states, where people have had no losses to get a 30%-70% increase," says Dale Menard, a partner in Menard, Gates & Mathis, Inc., a Memphis property and casualty insurance broker. Menard handles the firm's assisted living and nursing home policies across the Southeast.

"If they've had losses, whether legitimate or not, increases can easily go to 100%-200%," he says.

Just two years ago a nursing home outside of Florida or Texas, with a good claims record, might pay $50 a year per bed. Today, Menard says, that same facility is paying $200, for lower coverage and a much higher deductible.

The spread of suits and their growing awards has created turmoil because carriers cannot predict future losses. So, the ones who write nursing home liability coverage underwrite it from a worst-case perspective.

What rates will do in Tennessee isn't known, in part because no case in the state has yet gone all the way to a verdict, and instead have been settled. A jury verdict would set a standard, or more likely a starting point, for future awards.

"The crisis isn't in Tennessee yet," Menard says.

But Florida is instructive, where the average cost per $1 million in coverage has risen from $300 a year ago to $1,400 today.

Because Wilkes & McHugh has focused on for-profit nursing homes, Menard says some carriers have switched to writing coverage only for non-profits.

"Whether that's based on any assessment of care, I don't know," he says. "Part of this is based on well-publicized cases of absolute abuse. The publicity has led to the exploitation of even small mistakes. The expectation of perfect care cannot be met."

Vancore believes that insurance carriers that raise rates across-the-board are not performing appropriate underwriting.

"They should raise the rates of the facility so it's reflective of the kind of care they provide; we're not suing good homes," he says.

Wilkes & Hughes settles 40 cases for every one that goes to trial, Vancore says, because the burden of proof is difficult.

"Most jurors come to the table, thinking the person is old, already sick, already dying, and they're pre-disposed against us," he says. "The ironic part about it: The most egregious cases never go to trial."

 

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