As California and other states prepare for the “Silver Tsunami” – a tidal wave of Baby Boomers who are reaching 65 – a national study on long-term care facilities sees liability expenses as an important driver of cost. An ongoing analysis conducted by Aon Global Risk Consulting for the American Health Care Association (AHCA), which tracks the liability costs for long-term care providers at a national level, shows these costs continue to increase annually at an average of five percent. According to the AHCA’s website, there are currently 15,655 skilled nursing centers in the United States with 1.7 million beds. The report analyzes the general liability and professional liability (GL/PL) claim costs for the long-term care profession in the United States.
An overview of the report posted on the AHCA’s website shows that for the period of 2010 to 2015, the national upward trend began increasing around 2011. Projections for 2011 indicated a GL/PL loss rate of $1,270 per bed with a severity of $135,000 per claim at a facility with 100 occupied beds. The 2015 report has now projected a national 2016 loss rate of $2,150 per occupied bed, which means that a nursing center with 100 occupied beds can expect approximately $217,000 in liability expenses in 2016. The dollar amounts represent a 5.9 percent increase in per bed loss rate and 6.2 percent increase in claims costs.
In California specifically, participants in the 2015 study represent approximately 12,600 occupied beds dedicated to long-term care — about 12 percent of the state‘s total beds. Looking at the eight-year period from 2007 to 2015, the loss rate per bed increased to a level above $2,700 in 2012. That same year, the claim severity climbed to $250,000 per claim and has been holding at that level, largely in part to the limits on awards imposed by California’s Medical Injury Compensation Reform Act (MICRA). The same holds true for other states that enforce similar tort legislation, according to the report.
California’s moderating effects notwithstanding, as a larger portion of the population continues to join the ranks of the elderly, long-term care facilities and their providers apparently will continue to struggle with increases in their liability costs.
Readers can view the AHCA Long Term Care GL/PL Actuarial Analysis at: http://www.ahcancal.org/research_data/liability/Pages/default.aspx.