Heartland case causes business, health-care concerns

By Amanda Robert | Nov 29, 2014

CHARLESTON, W.V. (Legal Newsline) - Three factors come into play when discussing the litigation environment in any state, says Evan Jenkins, a West Virginia state senator and executive director of the West Virginia State Medical Association.

The first two, Jenkins explains, are frequency of lawsuits and average settlement amounts. The final factor – and what he believes became most relevant in the Heartland of Charleston case – is shock losses. Jenkins describes these as jury verdicts that exceed $1 million.

“Now this case at $80 million in punitive damages and $11.5 million in compensatory, this is a big shock,” he said.

Legislators like Jenkins, as well as health-care providers, business leaders and industry experts, expect further shock waves if the state Supreme Court upholds the Heartland of Charleston verdict and jury award. They say the case could bring more instability to West Virginia, which already suffers from its reputation as a litigious, anti-business state.

The controversy began in August 2011, when a Kanawha County jury found that the 184-bed nursing and rehabilitation center, then owned by HCR Manorcare, failed to feed and care for Dorothy Douglas, who died after leaving the facility.

In April, Kanawha Circuit Judge Paul Zakaib Jr., denied a new trial in the case, saying the verdict was not unconstitutional or excessive. Defendants appealed to the state Supreme Court, contending that the Medical Professional Liability Act, which includes a $500,000 cap on non-economic damages in medical malpractice cases, applies to nursing homes.

Benjamin Bailey, a partner in Bailey & Glasser in Charleston, W.V., who was retained by Manorcare to handle the appeal, points out that the verdict surprised the health-care community since previous courts that faced the same issue held that MPLA caps applied.

“This court raised eyebrows when it ruled otherwise,” Bailey said. “I think most health-care providers are concerned that it will increase uncertainty and the costs of health-care services.”

Patrick Kelly, chief executive officer of the West Virginia Health Care Association, contends that no verdict in any other nursing home case in the state comes close to the verdict in the Heartland of Charleston case.

From his perspective, large verdicts like this one adversely affect the health-care community by driving the costs of insurance higher for all nursing homes. He says those costs eventually trickle down to consumers.

“Nursing care for seniors is already very expensive,” he said. “Big verdicts will only create greater access and affordability problems.”

Kelly adds that ultimately, the Heartland of Charleston case isn’t just a nursing home case.

“The dispute over ordinary negligence versus medical negligence impacts every West Virginia health-care provider covered under the MPLA,” he said.

Jenkins, who served in the state’s House of Delegates from 1994 to 2000, before joining the state Senate in 2002, explains that West Virginia historically experienced high numbers of lawsuits involving medical negligence. After legislators passed reforms in 2001 and 2003, the state saw a nearly 50 percent reduction in those lawsuits.

He argues that they originally intended for the MPLA to cover nursing homes. But, he adds, in April, to remove any doubt, they passed Senate Bill 101, which reiterates that the act applies to nursing homes.

Jenkins contends that it could still be too late for the Heartland of Charleston case, since SB 101 isn’t retroactive. If the verdict stands, it could reflect poorly on West Virginia and further discourage potential and current employers and investors.

“It can be a deterrent for a business that wants to grow and expand in our state, and tragically, even continue to do business in our state,” he said.

In July 2012, Aon Risk Solutions and the American Health Care Association released a study that identified national and state-specific trends in the cost of general liability and professional liability claims for long-term care.

The study pointed out that state laws and the state judiciary largely influence liability costs.

“The state laws set limits on damages that can be awarded in torts,” the study said. “They determine which health-care providers have limited liability and which do not. The state judiciary interprets the laws. A judiciary that is plaintiff-friendly can reduce the effectiveness of laws intended to reduce liability costs.”

The study focused on West Virginia since it showed an increase in its annual loss rate – or liability costs relative to occupied long-term care beds – despite tort limits. West Virginia’s projected loss rate for 2012 was the second highest of the states at $4,430 per occupied bed. Its projected claim severity, or claim size, was the highest at $326,000.

The study compared West Virginia, as well as Kentucky, the state with the highest loss rate, to Texas. As a result of Texas' successful tort reforms, the study said, it showed the lowest projected loss rate lowest projected loss rate at $320 per bed for 2012. Its projected claim severity also dropped to $73,000.

“Malpractice costs and the tort environment are often major considerations in the decision to locate and invest in long-term care beds and services in a specific state,” said Dom Colaizzo, chairman of Aon Risk Solutions’ National Health Care Practice, at the time of the study’s release. “This ultimately affects the supply of beds and cost to seniors and their families in a marketplace where demand is growing for senior care and constrained by reduced reimbursements.”

In July, Manorcare announced it would sell Heartland of Charleston to Stonerise Healthcare, the owner of four other nursing and rehabilitation centers in West Virginia.

When asked if the recent verdict played a role in his client’s move to sell, Bailey said he wasn’t involved in that decision. But, he says, from his perspective, Heartland is a good brand, and its employees add value to the business and the community.

“The legislature enacted and Governor Tomblin signed a law to make sure no future runaway cases like this happen, so I don’t think this is anything more than a local business decision,” he said.

As argued in the defendants’ brief, Bailey said he hopes the state Supreme Court will vacate the verdict and the jury award in the Heartland of Charleston case, and send it back for a new trial.

The court will consider the appeal in the coming months.


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